COT update: dollar buying eases; grains in demand; metals slump attracts muted response

The latest COT report, covering the week to Tuesday, 24 March, showed another week of strong buying despite a 2.1% setback in the Bloomberg Commodity Index. The decline was driven primarily by heavy losses in precious and industrial metals, while energy, grains, and softs all recorded gains.

The overall net long across the 25 major futures contracts tracked rose to 1.8 million contracts—a four-year high—representing a nominal value of USD 175 billion. Of this, USD 80 billion is concentrated in energy, a reduced USD 50 billion in metals, and USD 27 billion in grains, with the balance spread across softs and livestock.

Beyond the developments in energy and grains highlighted below, it is notable that the double-digit slump in gold, silver, and platinum has had only a limited impact on positioning. There has been little appetite for fresh short selling, indicating the correction has so far been driven by long liquidation rather than a broader shift in sentiment.

As the Middle East war extends to a fifth week, markets appear to be transitioning from an inflation shock caused by surging energy prices - previously weighing on bonds and gold - to a more pronounced growth shock. This shift is increasingly pressuring equities, while beginning to lend support to both bonds and gold as investors reassess the balance between inflation risks and slowing economic activity.

In energy, managed money reduced its net long in Brent by 5% to 407,000 contracts, while modest buying was seen across the two WTI contracts. The pullback in Brent positioning from an eight-year high followed a temporary price setback early in the week, after Trump delayed potential strikes and signalled talks with Iran—comments that were subsequently denied by Tehran.

Outside energy, the grains sector has staged a strong revival. This move is being driven by a combination of deteriorating US winter wheat conditions—following prolonged heat and drought across the Plains—and escalating geopolitical disruption. The Iran war has impeded both energy flows and fertilizer trade, prompting farmers globally to secure critical inputs.

Year-to-date, a 12% gain in the Bloomberg Grains Subindex has triggered a covering of entrenched short positions in wheat, while long positions in corn, soybean meal, and soybean oil have climbed to fresh 12-month highs. This has driven a sharp reversal in managed money positioning across six key contracts—from a net short of 258,000 in late January to a four-year high net long of 720,000 in the latest reporting week.

At the same time, the surge in input costs—particularly diesel and fertilizers—raises the risk of reduced planting or lower yields, increasing the likelihood of tighter supply and higher global food prices.