Volatility has lit up the commodity complex, attracting the interest of money managers. Precious metals appear to be in the ninth inning of an epic rally, while energy markets are whipsawing on fears of Middle East conflict. That has led funds to look toward alternative investments.
President Donald Trump earlier this month said China was considering buying another 8 MMT of soybeans for the 2025-26 marketing year, spurring funds to buy a near record amount of contracts in the week ended Feb. 10. Managed money bought a net 94,316 contracts, according to Commitments of Traders data from the Commodity Futures Trading Commission. Funds followed that up with another week of strong buying, adding 40,463 net contracts, leading to a net long of 163,611 contracts through the week ended Feb. 17. Trade turned choppy after the Supreme Court on Friday struck down Trump’s use of emergency powers to enact sweeping tariffs. Trump quickly removed to put a 10% global levy in place under a different trade authority and has said he would increase that tariff to 15%. China’s Commerce Ministry cried foul, but Beijing has offered no indication on its intentions when it comes to further soybean purchases.
Meanwhile, expectations for China to buy 8 MMT more soybeans hasn’t been reflected by the cash market. If China were to follow through on purchases, it would have a big impact on the 2025-26 balance sheet and price would eventually have to ration demand, likely spurring additional 2026 acres.
Funds have been active buyers in corn for five consecutive weeks. Fund managers were heavy sellers following the January USDA reports but have added each week since. Still, funds are short a net 27,415 contracts, and recent uncertainty could stifle additional buying. Exports remain the biggest question mark, and while recent pacing could warrant an increase in the USDA export estimate, heightening tensions with top importers could be a speed bump in shipments.
Positioning in wheat remains comfortably bearish at a net 68,037 contracts. Funds have been net buyers in four out of the last six weeks. Funds have been net short since mid-July 2022.
Funds continue to hold a sizable long position in cattle at a net 116,717 contracts. Funds have held a net long since April 2020. Positioning is not far off from record long, but the market seems tired and traders are wary of adding additional length.
Managed money has been active in hogs as well. Since the start of the year, funds have added a net long of nearly 40,000 contracts, bringing the total to a net long of 116,461 contracts. That is nearly a record, which could limit fund interest in continuing to add to longs.