Bearish traders got religion this week about buying back short positions in agriculture across the board.
Here’s what funds were up to through Tuesday, October 15, when the CFTC collected data for its latest Commitment of Traders released Friday.
Big speculators are still short crops and livestock futures on a net basis, but they trimmed that short position aggressively last week following surprising USDA reports and the beginnings of a trade deal with China. In all these hedge funds bought a net 117,357 contracts, adding in every category. Investors wanting to own commodities through index funds were also buying, boosting their net long position by 24,599 lots.
Plenty of fuel
Big speculators were only light buyers of corn this week, trimming just 1,879 contracts off their bearish bets following USDA reports that disappointed bulls. The hedge funds are still net short 118,516 contracts – nearly 600 million bushels – providing plenty of fuel for short-covering rally if bullish news emerges.
What trade war?
Big speculators turned bullish on soybeans for the first time since June 2018, when the first salvos in the trade war were fired. Hedge funds bought a net 40,324 contracts to move to a modest net long position of 21,309 contracts following the trade deal and back-to-back bullish USDA reports.
Follow the leader
Soybean oil was the first leg of the soy complex to attract some love from big speculators, who added 17,223 contracts to their net long position this week.
Big speculators are still short soybean meal, but not quite as short after buying back 9,369 contracts of their bearish bets this week.
Soft red winter wheat led buying in the complex this week with help from big speculators. They covered 10,815 contracts of their bearish bets, sparking futures rally to three-month highs.
Hard red winter wheat traded at a steep discount to other classes this year. But big speculators found interest in the contract this week, cutting their modest net short position almost in half by buying a net 10,117 contracts.
Large traders bought back more of their bearish bets in spring wheat after snow blanketed much of the growing region on the northern Plains. The funds covered a net 1,976 contracts while traders tried to assess damage to crops still in the field.
Energy markets have been rocked in recent weeks. Money managers got the hint and were fairly light – for them – sellers last week, taking $440 million off the value of their net long position in crude oil.