Headlines:
- Corn prices ‘may rally’ – thanks to hedge funds’ record selldown
Investors were cautioned over the potential for a rally in corn prices, after hedge funds raised bearish betting on the grain to a record high, while taking a less negative view on sugar and wheat prices. Managed money, a proxy for speculators, cut its net short position in futures and options in the top 13 US-traded agricultural commodities, from hogs to cocoa, by 37,346 contracts in the week to last Tuesday, analysis of data from the Commodity Futures Trading Commission regulator shows. However, not all contracts saw a shift more bullish in positioning, with hedge funds raising their net short in Chicago corn futures and options by nearly 25,000 contracts to 230,556 lots, the highest on data going back to 2006. Indeed, the extent of the net short – the extent to which short holdings, which profit when values fall, exceed long bets, which benefit when prices gain – exceeded a previous record which had held for 20 months. The selling came in a week in which the US Department of Agriculture raised its estimate for this year’s US corn harvest yield to a record high, enhancing ideas of strong world supplies of the grain, and touch rivalry between export sellers. Societe Generale said: “Fundamentally, US corn remains uncompetitive in the export market, and record inventories continue to weigh on prices,” which last week set a contract low of $3.36 ¼ a bushel for Chicago’s December lot. However, extreme short, or long, holdings on AGs also provoke concerns of a sharp reversal in prices, should hedge funds be prompted to close these bets for reasons such as a change in the weather outlook, or an unexpected demand surge.
Summary:
Soybean futures rallied back from overnight losses that were result of news of favorable growing conditions in south America. After making a low of 983, the Jan Beans contract managed to settle at 990.25 when the final bell rang. Beans ranged from 1-2 ticks down on the day. Weekly export inspections for Soybeans came in 2.131 million metric tons reaching the high end of side of trade estimates. Short covering was perhaps the catalyst behind the rise in Corn today. It finished the day ranging from 0.75 to 1.75 cents in gains. Weekly export inspections for corn came in 632,793 metric tons which was in the middle of trade estimates. Wheat was weaker today with the March and December contracts losing 5.25 and 5.75 respectively. Export inspections for Wheat came in at 259,264 metric tons which was on the lower end of trade expectations. Trading will be shortened this week given the Thanksgiving holiday. We anticipate that trading volume and volatility will be muted for the balance of the week.
