Headlines:
- HEDGE FUNDS‘ SHORT–COVERING SPREE IN CORN ‘MAY HAVE FURTHER TO GO‘
Hedge funds took – timely – profits on bets on corn and wheat price falls, but many threw in the towel too early on soft commodities, selling long bets on cocoa and sugar just before price rallies. Managed money, a proxy for speculators, raised by a modest 6,450 contracts its net long position in futures and options in the main 13 US-traded agricultural commodities in the week to last Tuesday, according to data from the Commodity Futures Trading Commission (CFTC) regulator. However, the small change in the net long – the extent to which long positions, which benefit when prices rise, outnumber short bets, which profit when values fall – disguised notable shifts in underlying strategy, and in particular a reversal of betting on grain price falls but rises in soft commodity values. Indeed, the gap between speculators’ bullish bets on softs and bearish holdings in grains notably reversed, having hit an eight-month high early this month. - TIGHTER PURSE STRINGS PUSH EU POULTRY OUTPUT TO RECORD LEVELS
European poultry production will hit record levels in 2017, as cash strapped consumers favor chicken over other meat, US officials said. The US Department of Agriculture’s Paris bureau saw broiler meat production in the European Union rising 2.1% to 11.30m tonnes, helped by steady consumer demand and rising exports. The USDA bureau saw EU meat consumption down, due to the economic downturn, but consumption of poultry is increasing, as it is cheaper than other sources of protein.
Summary:
The trade is looking for Corn condition to have a small drop in ratings and Beans to remain unchanged. The grains were up on early trading but much of the day’s gains proved to be unsustainable. December Corn finished the day up 1 tick at 337.25 after posting a watermark high of 340. November Beans rose 8 cents but gave up half of it days gains and Wheat keeps moving along with a 1.75 cent gain of its own.
The USDA reported new demand for Corn but that was not enough. Price was up in overnight trading because of wetness concerns but the supply narrative is still bearing down on the market. Steady short covering and harvest wetness has perhaps been the dominating factor the past 3 trading days. Once that news is past we will likely get back to record harvest projections that have dominated the headlines.
Corn planting in Brazil is underway. According to the Department of Rural Economics (DERAL), farmers in the state have planted 19% of their intended full-season corn acreage and according to EMATER, farmers in Rio Grande do Sul have planted approximately 30% of their 2016-17 full-season Corn. Interruptions in South American could serve to help prices stay afloat in the US but for now looking for a continued decline through the end of October for both Corn and Beans. We are on the fence regarding Wheat as cycles may point to some price support for it in the coming weeks.
