It was nothing less than a brutal week for the grain and soy markets last week, with July corn hitting contract lows and soybeans and wheat at multi-month lows. Favorable early growing weather was a spark, but fund liquidation was the fuel as Commitments of Traders data from the Commodity Futures Trading Commission showed large speculators exiting long positions built up in the earlier days of the Iran war en masse.
The Friday report, which reflected positions as of last Tuesday, marked the biggest weekly bear move on record for Chicago SRW wheat futures and options, according to Barchart. The data showed managed money adding 39165 contracts to their net short at 57,781 contracts. Kansas City HRW wheat futures and options saw speculators reduce their net long position by 13, 393 contracts to 13,477 contracts.
Ole Hansen, head of commodity strategy at Saxo Bank, noted that since hitting a four-year high last month, the combined net long across 13 major agricultural futures contracts has almost halved, driven primarily by a two-thirds reduction in bullish positions across corn, soybeans, and wheat, led by corn (see chart below).
After reaching a two-and-a-half-year high last month, the Bloomberg Grains Index has fallen around 12% amid incoming harvest pressure on wheat and generally favorable US growing conditions that have improved production prospects for both corn and soybeans, he said.
The selloff has left markets technically oversold. Corn and wheat futures saw a dead-cat bounce in Monday’s session. Bulls will need to see some followthrough buying early this week to build hopes for a near-term bottom.