Major short in the grain market: Positioning into this week below. Funds continue to sell rallies in the grain complex amid weak demand and excess supply. That can change moving forward with weather being the key reason as we slowly move into Spring planting in the weeks to come.
The catch up CFTC Commitment of Traders report (CoT) showed that Managed Money was short 59,000 contacts of Chi wheat (up 17,000 contracts), net short 42,000 contracts of KC wheat (up 12,000), net short 105,000 contracts of corn (up 19,000), net short 36,000 contracts of soybeans (down 13,000 contracts), and 49,000 contracts of soymeal (up 9,000 contracts). The only long managed money position was in soyoil where fund managers were net long 23,000 contracts of soyoil (down 7,000 contracts). Funds have modestly added to their short corn and wheat positions since last week. The CFTC should be caught up to release a current report this Friday.
The question then becomes, what it will take for funds to cover, or do they simply rinse and repeat and continue to sell rallies into planting and growing season? Corn to me could have a bullish story with or without a trade deal in the weeks and months to come, and I continue to contemplate what the best way forward is regarding initiating a static long position in the market if at all. The chart below is the Dec 19/Dec 20 corn chart. In my view, if this market rallies, the Dec 19/Dec 20 corn spread should tighten meaning Dec 19 corn will gain on next years crop. Throw China in buying on a deal and the path of least resistance is higher. Its a tight bet, but if corn nears a bottom we could see a significant move higher in corn and this calendar spread in my view. Two levels to buy this spread. First is at 18 cents and then 20 cents under. Stop loss under 22 cents. Again a tight bet here with the premise that we are closer to a bottom than a top in our opinion. If one would rather use options look to buy the June 385 call for 7.4 cents plus commissions and fees. Option expirary is late May.
WASDE Report Corn-some bullish and bearish tidbits in the report. Funds will ask what report going forward and switch focus on planting, demand, and of course weather in both hemispheres. For today’s report US 2018/19 corn stocks were raised by 100 Mil Bu to 1,835 Mil Bu. US corn exports trimmed 75 Mil Bu to 2,375 Mil Bu with ethanol use cut 25 Mil Bu. The reduced demand flowed directly to the balance sheet. The average farmgate cash price was lowered a nickel to $3.55. US corn export trimming was anticipated. World 2018/19 corn end stocks were lowered 1 (million metric tons) to 308.5 MMTs with non Chinese world corn stocks falling to just 103.7 MMTs. China’s corn end stocks fell 3 MMTs to 204.8 MMTs due to expanded domestic use. China’s Gov’t pushed the feeding of more corn in its livestock rations last autumn, and the less hot rations are being used – with more corn and less soy meal – being fed. Ukraine corn exports were reduced 500,000 MTs to 6.4 MMTs, while Argentine corn exports were raised to 30.0 MMTs amid larger carry-in stocks.
Please join me every Thursday at 3 pm for a free grain and livestock webinar. Signup is free and a recording link will be sent your email. Supply, Demand, Trade ideas, and weather are discussed along with speculative and hedge ideas. 888 391 7894 or email me at slusk@walshtrading.com