COT: Speculators wrongfooted by grains surge  COT: Speculators wrongfooted by grains surge  COT: Speculators wrongfooted by grains surge

COT: Speculators wrongfooted by grains surge

Ole Hansen

Head of Commodity Strategy

Summary:  Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities and forex during the week to Tuesday, June 13. A week that saw US bond yields rise ahead of the FOMC meeting, while in in forex, another week of fresh dollar weakness did not prevent a continued reduction in bearish dollar bets to a three-month. In commodities, broad gains supported a 20% jump in bullish bets, primarily driven by short covering across grains and industrial metals

Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities while in forex we use the broader measure called non-commercial.

What is the Commitments of Traders report?

The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class.

Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and other
Financials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and other
Forex: A broad breakdown between commercial and non-commercial (speculators)

The reasons why we focus primarily on the behavior of the highlighted groups are:

  • They are likely to have tight stops and no underlying exposure that is being hedged
  • This makes them most reactive to changes in fundamental or technical price developments
  • It provides views about major trends but also helps to decipher when a reversal is looming


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Commodity Weekly: Best month in over a year

This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to last Tuesday, June 13. A week that saw continued strong gains across global stock markets and US bond yields rising ahead of last week’s FOMC meeting. In forex, another week of fresh dollar weakness did not prevent a continued reduction in bearish dollar bets to a three-month low while broad commodity gains supported a 20% jump in bullish commodity bets, primarily driven by rising demand for grains and industrial metal market.   

Commodity sector:

Money managers which include leveraged traders such as hedge funds and trend-following CTA’s remain key actors across the commodity market, and on a weekly basis the US CFTC (Commodity Futures Trading Commission) through its Commitment of Traders Report give insight to the positioning among this group of traders. Instead of causing them, this group tends to anticipate, accelerate, and amplify price changes that have been set in motion by fundamentals. Being followers of momentum, this strategy often 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. 

In the week to June 13, the Bloomberg Commodity Index climbed 0.7% as May weakness continued to be replaced by June strength driven by a softer dollar, speculation that the Chinese government may step up its support for the economy, hot and dry weather raising concerns across the agriculture sector and Saudi Arabia’s latest attempt to prop up the oil market. Gains were primarily focusing on the grains (+2.4%) and industrial metal sector (2.1%) while precious metals (-0.8%) and energy (-0.9%) traded softer. 

Speculators, responding to these latest developments by lifting their combined net long across 24 major commodity futures by 153k contracts, or 20% to 928k contracts. Primarily driven by short covering in the grains market and copper and fresh longs being added to the softs sector. Energy was mixed with crude oil selling being offset by demand for gasoil and natural gas while precious metals, led by gold, saw net selling ahead of the FOMC meeting. 

Strong buying of ags led by grains (+105k to 9.5k) and softs (+27k to 308k). Energy mixed with selling of crude being offset by demand for products and natgas. Rate jitters triggered net selling of gold and PGM's while China simulus supported copper and silver
Crude oil, fuel products and natural gas: A 3% drop in crude oil drove a 23k contract reduction in the combined WTI and Brent net long to 278.5k contracts. In line with the average length held during the past seven weeks, highlighting the current rangebound behaviour and lack of direction.
Gold, silver, platinum and HG copper: Ahead of last Wednesday's FOMC meeting speculators had cut their gold length by 18% to 93.3k contracts, a 3-month low. China stimulus focus helped flip the copper position back to a net long (+18k to 7k) for the first time in two months. Silver (+27% to 14.6k) and platinum (-26% to 13.9k)
Corn, soybeans and wheat: Large specs have traded the sector with a short bias for months and as a result were caught woefully unprepared when prices recently started to rally.. By last Tuesday they had just managed to flip back to a small net long in soybean oil (+27k to 9k) and corn (+47k to 2k). The wheat (+6k to -113k) short remained elevated while the soybeans long jumped 34k to 48k
Softs and livestock
IMM currency futures and Dollar index: Despite continued dollar weakness, the dollar short versus nine IMM forex futures and the Dollar index was nevertheless cut by 30% to $5.4 billion, a three-month low. Led by selling of EUR, CHF, GBP and AUD

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