Major short in the grain market: Positioning 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 reasons as we slowly move into Spring 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 correct we could see a significant move higher in the weeks and months to come.
I would be a buyer on any dip from 15 to 18 cents under on the Calendar spread here. Stop loss placed at 22 cents under. Risking no more than 7 cents upon entry. Call or email me with questions. 888 391 7894 or slusk@walshtrading.com.