(The opinions expressed here are those of the author, a marketanalyst for Reuters.)
By Karen Braun
FORT COLLINS, Colo., Sept 15 (Reuters) - Speculators remainsteadfastly bearish toward Chicago-traded grains and oilseeds,but the selling likely paused late last week on friendlyU.S.-China trade developments and relatively neutral data fromthe U.S. government.
The corn market has generally been in sell mode since lateJune as confirmation began trickling in that earlier doomsdaycrop predictions were highly overblown. Although the U.S. cropwas planted historically late, the weather has been largelysupportive of yields ever since.
Aggressively low market predictions and investors' longpositions set up two notorious crashes in corn futures on June28 and Aug. 12 after the U.S. Department of Agriculturepublished heavier figures for domestic acres and yields.
Analysts were again too low with U.S. corn production onThursday when USDA issued its latest outlook, but the marketreaction was very different as corn futures rose both that dayand the next.
Money managers had expanded their net short position in CBOTcorn futures and options to 136,399 contracts through Sept. 10versus 119,371 in the previous week, according to data from theU.S. Commodity Futures Trading Commission. (https://tmsnrt.rs/31oY2xG)
Aside from the fact that funds were safely short going intothe USDA report, the agency's new peg of U.S. corn yield wassmaller than in August, and that perhaps gave traders a bit ofconfidence in their general conviction that USDA's numbersneeded to come down.
Trade sources indicate that commodity funds likely boughtaround 14,500 corn futures contracts between Wednesday andFriday.
SOYBEANS AND PORK
Money managers had boosted their bearish bets in soybeanfutures and options ahead of the USDA publication, moving to anet short of 91,737 contracts through Sept. 10 from 73,127 inthe prior week. (https://tmsnrt.rs/2ZThqp3)
USDA's U.S. soybean yield also came in lighter than theAugust forecast, though it was still a larger number than thetrade predicted. U.S. 2019-20 ending stocks came in belowexpectations at 640 million bushels, which would be down 36% onthe year. It was the smallest domestic soy supply projected byUSDA in over a year.
However, increasing optimism on the U.S.-China trade frontstole the spotlight late in the week. China reportedly bought atleast 600,000 tonnes of U.S. soybeans on Thursday after reportsthat Beijing would likely make goodwill purchases ahead of thenext round of trade talks next month. USDA confirmed some204,000 tonnes of that sale on Friday.
China’s Xinhua News Agency on Friday reported that Beijingwill exempt some U.S. agricultural products from additionaltariffs, including pork and soybeans. As of Friday, it was notimmediately clear exactly which tariffs were the focal point ofthe announcement.
U.S. President Donald Trump had talked tough on China inrecent weeks and months but seemed to lighten his stance latelast week. Although he said he prefers a "whole deal," he didnot rule out the possibility of an interim pact. Inthe meantime, traders are remaining cautious on these prospectsas they have been misled by U.S.-China trade optimism in thepast.
Soybean futures surged on Thursday, closing at thehighest levels since late July, and funds are presumed to havebought around 18,000 futures contracts over the last threesessions.
Both the corn and soybean markets have also been watchingthe historically dry conditions in Brazil, which is just nowstarting to sow its soybean crop. The situation is notforecasted to ease anytime soon, and this could be trouble forboth its soybean and second corn crop.
However, analysts polled by Reuters on Friday see Brazil’s2019-20 soybean crop at a record-large 122.62 million tonnes.
The rosier trade outlook with China, which is suffering apork shortage due to a massive outbreak of African swine feverthat began a year ago, also lifted CME lean hog futureslate last week. The four nearby contracts had their largest-evertwo-day percentage gain on Thursday and Friday.
Speculators have been bullish on hogs since mid-March, butoptimism has faded in recent months. In the week ended Sept. 10,money managers reduced their net long to 19,426 futures andoptions contracts from 28,133 a week earlier. (https://tmsnrt.rs/31x2Qks)
WHEAT AND SOY PRODUCTS
Chicago wheat futures continue to move in the shadows ofcorn and wheat, but dryness in Australia and Argentina hasrecently offered support. USDA on Thursday trimmed the harvestsin top exporters Russia and Ukraine, but the export outlook wasunchanged.
Generally speaking, the world wheat supply is comfortableand speculators are bearish, but not aggressively. Through Sept.10, money managers cut their net short in CBOT wheat futures andoptions to 14,389 contracts from 21,037 in the previous week.The new stance is much less pessimistic than at the same time inmost recent years. (https://tmsnrt.rs/3011lO0)
Funds remain staunchly bearish on Kansas City wheat futuresand options, though they trimmed their net short to 41,566futures and options contracts through Sept. 10 from 45,029 aweek earlier. They also established another record short inMinneapolis wheat futures and options of 22,805 contracts versus21,148 a week prior.
Money managers were sellers in the soy products in the weekended Sept. 10. They increased their net short in soybean mealfutures and options to 47,606 contracts from 43,528 a weekearlier, and they also boosted their net short in soybean oil to19,106 futures and options contracts from 12,731 a week earlier.
The easing trade tensions between the United States andChina also lifted the soy products late last week, especiallysoybean oil futures, which rose more than 3%. Funds wereestimated to have bought nearly 12,000 bean oil futurescontracts over the last three sessions but only 1,000 contractsof soybean meal.
(Editing by Matthew Lewis)