Cherries

Managed money, often referred to as “the smart money” in the US Wheat & Corn market has become increasingly pessimistic since the start of October, selling off wheat and corn in spades, even as the future of the black sea grain corridor began to look doubtful- a strong bullish signal.

Long time readers will recognise that the activities of managed money on agricultural commodity markets are something we regularly track here on Mecardo, as who is participating in the futures markets, and to what degree can have a significant bearing on price outcomes. Managed funds also invest a lot of money, and hire many eyes to analyse the marketplace because of their huge vested interests, so taking notice of what they are up to can help.

The latest commitment of traders report issued for last week revealed a strong week on week increase in the net short position in CBOT SRW wheat futures held by reporting managed money traders. The net short position increased by 15% in a single week to the largest short position seen since June 2020. The change was driven by both an increase in short selling; and a reduction in long positions. This trend is not isolated either, as the net short held overall by money managers has existed since July, reaching an interim peak in late August, before receding, then intensifying substantially in the last six weeks or so. (figure 1) Oddly, despite the bullish looking shenanigans in the black sea recently, where the grain corridor’s future looked under threat, money managers kept on selling into the uncertain market.

It is a similar story for US corn- which we know, as part of the global feedgrain complex, has an influence upon wheat prices, including here in Australia. While Money managers have, on aggregate, been holding a net long (bought) position in US corn since 2020, to varying extents, recently, we have seen a turn in the tide emerge, with the net long position plunge 15% in a week, driven primarily by a sharp 31% increase in the amount of short contracts sold.

Since the start of November, nearby CBOT SRW wheat prices have come off around $US30/mt (10%) and corn $US16/mt. (figure 3) Overall, US wheat and corn prices have generally trended downwards since the start of October also, meaning that the sell trade made recently by the funds landed squarely in profit.

What does it mean?

Speculative pressure from managed money interests is a sizable force to be reckoned with. While admittedly, hedge and superannuation fund influence on the market isn’t strong enough to move whole mountains, it can, and will support, or pressure price. At present, the selling pressure on feed grains in the international marketplace being exerted by fund managers is likely suppressing prices. However, if a market event like the black sea deal spectacularly unravelling occurs, depending on the significance, expect prices to bounce strongly, as the funds reverse their short positions and go long.

Have any questions or comments?

We love to hear from you!

Print This Post

Key Points

  • CBOT wheat managed money short position up 48% in 6 weeks
  • Managed money has doubled corn shorts since the start of October.
  • Building short positions create risk of increased volatility in the event of a sudden position reversal into long.

Click on figure to expand

Click on figure to expand

Data sources: Reuters

Have any questions or comments?

We love to hear from you!
Grains & Oilseeds

US plantings respond to price

The latest United States Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates (WASDE) report was released last week, but being at the end

Read More »
Soybean field
Grains & Oilseeds

Day after Liberation Day

This week, commodity markets held its breath as the White House unveiled its reciprocal tariffs. The list of countries impacted by the tariffs was expansive

Read More »

Want market insights delivered straight to your inbox?

Sign up to the mailing list to get regular updates to new analysis and market outlooks

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
Listen to the podcast

Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.

Photo of a farmer surrounded by Merino sheep in dusty yards
MEET THE TEAM

Our team of market analysts are recognised as leaders in Australian Ag market analysis, providing invaluable insights to help you navigate the ever-changing commodity landscape. 

Image of harvested grain pouring into a chaser bin
SERVICES AND CAPABILITIES STATEMENT BROCHURE

We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.