Funds exit bearish corn bets due to Black Sea tensions
Funds exit bearish corn bets due to Black Sea tensions
Corn and Wheat Futures Soar Amid Ukrainian Conflict
In an unexpected turn of events, speculators in the Chicago-traded corn market have shifted from bearish to bullish territory due to damage inflicted on Ukrainian river ports by Russian missiles. This has been further compounded by the soaring prices of Chicago wheat futures. The Ukrainian ports, which handle a significant portion of the country’s grain exports, have suffered severe setbacks after Russia’s withdrawal from a year-old grain export deal.
Money managers, who were previously betting against corn futures and options, have now established a net long position of 26,603 contracts. This is the first time in four weeks that they have taken a bullish stance on corn. Two-thirds of this shift can be attributed to short-covering, reflecting the shift in sentiment caused by the Ukrainian conflict.
Meanwhile, the prices of CBOT wheat futures have surged by over 13%, including a limit-up move on July 24. Open interest in wheat futures and options has also seen a significant increase of over 7%. Money managers have reduced their net short position in CBOT wheat to 40,332 contracts from 54,418 in the previous week, marking their least bearish stance in 38 weeks.
Despite this initial surge, grain futures were unable to sustain their strength in the following week, and commodity funds started selling their positions. Corn, which had risen almost 6% during the previous week, dropped by over 6% in the subsequent three sessions. Commodity funds sold around 33,000 futures contracts. CBOT wheat futures, although still maintaining some of the recent Ukraine war premium, lost 7.4% between Wednesday and Friday. Funds were seen as sellers of 24,000 wheat futures during this period.
The decline in grain futures prices came as a surprise, considering the additional Russian attacks on Ukraine’s Odesa port. Traders remain hopeful that the European Union can step in to assist with most of Ukraine’s exports if the grain deal is not restored.
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In the midst of these developments, hot and dry weather in the U.S. Corn Belt provided some support to corn futures. However, forecasters predict a return to more favorable weather conditions in early August, potentially alleviating any weather-related concerns in the market.
Soybean and Soy Product Market Remains Bullish
Unlike corn and wheat, the money managers in the CBOT soybean market have maintained a net long position since April 2020. Their optimism reached new heights in late July as they established their most bullish stance since 2016, increasing their net long to 120,739 contracts. This jump from 95,814 contracts just a week earlier signifies the confidence among market participants in the soybean market.
Most-active soybean futures experienced a modest gain of 1.8% during the week ended July 25, while soybean oil witnessed a significant surge of 7.5%. Money managers also increased their net long position in CBOT soyoil futures and options to a 28-week high of 54,190 contracts from 44,914 the previous week.
Soybean meal futures remained unchanged during the week but showed a potential for growth with a 2% increase. Funds, buoyed by this upward trend, increased their net long in CBOT soymeal futures and options to a nine-week high of 70,174 contracts from 58,949 contracts.
The market for soy products has been primarily driven by new gross longs, with two-thirds of speculators’ net buying in soybeans attributed to new long positions. However, as the week progressed, most-active November soybeans fell by 2.6%. Nevertheless, the losses were mitigated to some extent by fresh U.S. export news. Soybean meal fell by 2.5% and soyoil shed 2.9%.
The U.S. Department of Agriculture reported six separate sales of U.S. soybeans for export in 2023-24, totaling 1.67 million metric tons. These sales were primarily to unknown destinations (70%), China (19%), and Mexico (10%). This indicates that U.S. soybeans for future shipments have become competitive with supplies in Brazil, where limited export capacity has strained the country’s record harvests.
Overall, the corn and wheat markets have experienced significant fluctuations due to the conflict between Russia and Ukraine, while the soybean and soy product market has remained bullish despite some temporary setbacks. These market dynamics reflect the continuous interplay of geopolitical factors, weather conditions, and global demand, which drive the commodities market.
About the Author: Karen Braun is a market analyst for ANBLE. With years of experience in the industry, she provides valuable insights into commodity markets and trends. The opinions expressed in this article are solely her own.
