Headlines:

  • Hedge funds turn net short on softs for first time in two years
    Speculators turned net short in soft commodities for the first time in two years, raising hopes of an easing in selling pressure on the complex as speculators mull whether they have already staked enough on this bet. Managed money, a proxy for speculators, trimmed its net long position in futures and options in the top 13 US-traded agricultural commodities overall, including the likes of grains and livestock, by 4,806 contracts in the week to last Tuesday, analysis of data from the Commodity Futures Trading Commission regulator shows. However, the decline in the net short -– the extent to which short holdings, which profit when values fall, exceed long bets, which benefit when prices gain – disguised substantial differences in sentiment towards the ag subsectors. While in grains, hedge funds cut their net short of the first time in four weeks, and in livestock raised their betting on price rises to a three-year high, in soft commodities they turned their positioning the most bearish in two years
  • Cotton prices may face a ‘lot of downside risk’
    Cotton producers should consider forward sales of the fiber “while they still can” at elevated values, a leading academic said, as investors mulled the impact to price prospects from raised US stocks prospects. The forecast US cotton balance sheet for 2017-18 suggests “a lot of downside price risk” for this year’s crop, said Dr. John Robinson, cotton marketing expert at Texas A&M University, flagging the potential for the new crop December lot to weaken from its current price of 72.42 cents a pound in New York. It is “possible… that Ice cotton futures could slip into the mid-to-lower 50s cents per pound by harvest time,” he said, suggesting the potential for a multi-year low in values. While futures touched 55.66 cents a pound last year, on a spot contract basis, they have not been below that level since 2009.

Summary:

It did not take much to squelch the upside moves from Corn, Wheat and Soybean all collapsed with concern about US weather dissipating. The bark of the forecasted weekend weather proved to have not bite. Additionally, weather forecasts for this week are calling for beneficial rain throughout much of the Corn belt. Temperature is expected to be a bit cooler this week as well. The weather threat is not quite behind us but the time of this “news” that has caused this big drop is interestingly in line with market projections that we made for a rally into the middle of June. July Corn and Wheat fell 11 and 11.75 cents respectively. Soybean was not far behind falling 9.50 cents.

The WASDE report last week left us with no changes to the estimates for the current US marketing year for Corn. Additionally, no changes occurred for production projections and consumption for the 2017-18 marketing year. For Soybeans, ending stocks projections for the current marketing year increased 15 million bushels to 450 million bushels. Projections for the 2017-18 US marketing year carried this 15 MB increase into beginning stocks, which increased the projected ending stocks for the 2017-18 marketing year to 495 MB.