Boat Heavily Leaning To One Side in Grains

Posted on 03/09/2017 10:25 AM

Hello Pro Farmer Members!


Professional trading funds hold record or near-record short positions in corn, soybeans and wheat. With funds aggressively short and showing no signs of letting up on their strong short grip, it appears "everyone" is piling into one side of the boat. Of course, commodity trading is a zero-sum business, so not everyone is on one side of the boat -- it just seems that way. The flip side is that commercial traders have amassed a record long position in grain and soy futures.

Funds’ massive short position doesn’t guarantee grain and soy futures are close to putting in lows. Funds could continue to amass short positions given bearish attitudes and building macroeconomic concerns. But we’ve seen in the past that when funds get too heavily weighted to one side of the market, a sharp correction can happen for no apparent “reason.” While “everything” indicates corn, soybean and wheat futures will remain under pressure, a short-covering rally can’t be ruled out.

USDA's Jan. 12 reports could be what triggers a corrective rebound. If that's going to be the case, the Quarterly Grain Stocks Report likely has to be bullish. Expectations are decidedly bearish going into the quarterly stocks report. Dec. 1 corn and soybean stocks are expected to be the highest ever for that date. Dec. 1 wheat stocks are expected to be the highest since 2010. With widespread expectations for a bearish report, it may increase the odds for a bullish reaction. Still, Dec. 1 stocks need to imply quarterly use was greater than anticipated to be price-supportive. But even if that were to happen, there's no guarantee traders would react bullishly. And even if there's a short-covering rally, it's likely to be short-lived as traders' attitudes are bearish and there's a lot of corn sitting on farms waiting to be priced.


That's it for now...

... have a great weekend!

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