As mentioned, December has started on a slightly more cautious note with profit taking seen in most futures contracts with the exception of wheat, cattle and sugar. Soybeans trade lower on the prospect for improving crop weather in portions of Brazil, the world’s biggest exporter while wheat futures bounced after falling to a two-month low.
In the week to November 24 commodity funds held a net-long across 13 major agriculture futures of 1.1 million lots, the highest since 2014. The grains sector accounts for 63% of that exposure with the bulk of those bets being placed on soybeans and corn. With this in mind these two crops could, just like we seen recently in wheat, be exposed should price weakness extend further into December. Especially considering the time of year when liquidity begins to dry up as more and more traders turn their attention other and some would say more important matters such as time with the family ahead of the holiday season.
Overall however we still see a threat of elevated prices into 2021 supporting the emerging inflation narrative. Weather worries, among others caused by the current La Ninã, and continued demand from China are two major forces that will require continued attention in 2021.