Funds stage record exit of CBOT soyoil and sell most corn since 2019 -Braun

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NAPERVILLE — Speculators have been extremely bullish toward Chicago-traded soybean oil futures for much of the past two years, largely based on ideas that biofuel policies would greatly expand the vegetable oil’s use in the immediate future.

But earlier this month, the U.S. Environmental Protection Agency’s proposed biofuel blending mandates through 2025 fell short of expectations, and investors found themselves far too optimistic on both soyoil and its relative strength versus soybean meal.

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Most-active CBOT soybean oil futures plunged 15.6% in the week ended Dec. 6, and money managers axed nearly 43,000 futures and options contracts from their net long position, which fell to 62,584 contracts.

That included a record-large weekly exit of more than 34,000 gross soyoil longs. The net reduction was only the second largest ever because it featured a more modest addition of gross shorts, and those remained relatively low as of Dec. 6.

The U.S. Department of Agriculture on Friday reduced its 2022-23 estimate of U.S. soyoil used for biofuels, confirming the trade’s fear that the volume mandates were not up to prior expectations. Some market participants think there may be additional cuts coming.

Funds have been bullish soybean meal all year, but the disappointing U.S. biofuel policy and poor crop conditions in top soybean meal exporter Argentina had investors unwinding oilshare positions at a near-record rate. Oilshare measures soyoil’s share of value in the soy products.

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Most-active CBOT soybean meal climbed 10% in the week ended Dec. 6, and money managers increased their net long to 98,509 futures and options contracts from 74,861 a week earlier. Gross longs were added at the highest rate since May 2018.

Soymeal futures rose 5% between Wednesday and Friday, and average daily trading volume was among the highest in recent years for any three-day period. Friday’s settle of $471.60 per short ton is record high for the date, and the recent rally is meal’s strongest by percentage since mid-2017.

Selling eased but continued over the last three sessions in soybean oil futures, which fell 2.6% and settled Friday at 60.01 cents per pound, the lowest since July.

CBOT soybean futures were little changed in the week ended Dec. 6, and money managers cut their net long to 99,454 futures and options contracts from 102,104 a week earlier. It is interesting to note that both new longs and new shorts were prominent in the move.

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Soybeans rose 2% between Wednesday and Friday, hitting a three-month high Friday of $14.92-3/4 per bushel.

CORN AND WHEAT

Money managers’ net long in CBOT corn futures and options is now the smallest since the early days of the recent rally in September 2020. Most-active futures shed 5% through Dec. 6 and funds slashed their position to 120,213 contracts from 191,631 a week earlier.

That was the largest weekly net reduction in corn since August 2019. Gross corn shorts remain historically light, but they rose last week by the biggest degree since August 2020.

Corn futures rose 1% late last week, though on Wednesday they hit the lowest price since August at $6.35 per bushel. U.S. corn export demand is very poor and USDA recognized that Friday, reducing 2022-23 exports to a three-year low, down 16% on the year.

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Most-active CBOT wheat futures lost nearly 7% in the week ended Dec. 6, reaching their lowest level since October 2021. Money managers increased their net short by more than 9,000 to 63,382 futures and options contracts, the most bearish since May 2019.

Gross CBOT wheat shorts were also the most plentiful since May 2019, having nearly doubled since early October, increasing each week since then.

CBOT wheat rose fractionally over the last three sessions, though volumes were modest. U.S. wheat remains uncompetitive on the global market, overtaken by plentiful, cheaper Russian supplies.

Money managers’ net long in Kansas City wheat futures and options dropped below 10,000 contracts through Dec. 6 as the most-active contract touched its lowest price since August. Funds have held bullish views in K.C. wheat since September 2020.

March Minneapolis wheat also notched four-month lows on Dec. 6, and money managers pushed their net short position past 3,000 futures and options contracts. That is their most bearish since October 2020 and their third consecutive week holding a net short. Karen Braun is a market analyst for Reuters. Views expressed above are her own.

(Editing by Diane Craft)