Headlines:

  • Hedge funds pile out of grains, leaving room for short-covering
    Managed money, a proxy for speculators, reduced the size of its net long position in the most commonwealth grain futures and options by 158,058 contracts in the week to last Tuesday, analysis of data from the Commodity Futures Trading Commission regulator shows. The size of the net-short position, or the extent to which bearish bets outstrip bullish ones, now stands at 245,717. This is the most bearish speculators have been on grains since March last year. The size of the net-short position in wheat, and the rapid increase in the size of the corn short-position, could give prices some support, as it leaves plenty of room for short covering. The size of the net-short position in wheat is now at its second highest level on record. The only time funds have been more bearish was back in October 2016. “Funds are huge shorts in Chicago which should provide price support moving forward,”
  • Louis Dreyfus sales, profits, slump on lower ag-prices
    Sales and pre-tax profits at Louis Dreyfus Company, the agricultural trading giant, fell sharply in 2016, thanks to falling prices for grains and oilseeds. And the privately-owned company warned that conditions are unlikely to improve in 2017.  Net sales fell by 10.6% year-on-year, to $49.8bn, due to lower prices, in the year to December 21 2016, Dreyfus said. The company reported sales by volume “remaining stable compared to 2015”.  The company reported consolidated pre-tax profits down 12.3% year-on-year, at $365m. But consolidated net income rose by 45%, to $305m.

Summary:

The move today was simply follow through from the USDA reports on Friday. Like the close on Friday Corn and Wheat finished in positive territory and Soybean closed lower. Wheat was only different by about a penny across its 2017 contracts. Corn was up about 3 cents and nearby Beans was down 6.50 cents. There was not any new data released today outside of strong Corn export inspection data. The Bean data was weak and Wheat was reasonable.

The fall in Beans today pushed price to levels last seen last year. Managed Money is in the midst of unwinding the long Beans/short Corn spread so the bearish data from the Friday report has compiled the pressure on Beans. Additionally, the Brazilian harvest seems to want to just keep growing. Near term forecasts for parts of Argentina do have heavy rainfall, but medium and long term outlooks are more conducive for development and harvest.