Money managers which include leveraged traders such as hedge funds and trend-following CTA’s remain key actors in the grain market, and on a weekly basis the US CFTC through its Commitment of Traders Report give insight to the positioning among this group of traders. Instead of causing them, this group tend to anticipate, accelerate and amplify price changes that has been set in motion by fundamentals. Being followers of momentum, this strategy more often than not sees this group of traders buy into strength and sell into weakness, meaning that they are often found holding the biggest long near the peak of a cycle or the biggest short position ahead of a through in the market.
The latest COT report covering the week to May 30 saw major short covering in corn, and after recently hitting a 118,000-contract short, the biggest since August 2020, it was reduced to 51,000 contracts during the latest reporting week. A net short has been held in CBOT wheat since last July, and last week it reached a five-year high 127,000 contracts, an elevated exposure that was only partly offset by a 10,000-contract net long in the Kansas HRW wheat contract. Soybeans meanwhile has seen its position being cut to neutral for the first time in three years amid exporters struggling to compete with those from South American.
Overall, the net position across the three major crops was a net short of 178,000 contracts, some 627,000 contracts below the level seen this time last year, and 329,000 below the five-year average for this time of year. Developments which highlight the potential upside risk to positioning should the technical and/or fundamental outlook turn more price supportive.