Bearish funds face dilemma early in US corn growing cycle -Braun

NAPERVILLE, Illinois, June 2 (Reuters) - Large speculators have been more willing in recent years to enter June with bearish bets against the young, unpredictable U.S. corn crop, but they may have to reduce corn shorts over the next several weeks due to the high potential for weather scares.

In the week ended May 28, money managers expanded their net short position in CBOT corn futures and options to 133,477 contracts from 121,162 a week earlier, well off their record net short of 340,732 contracts set back in February.

Since 2007, money managers have held a net short in corn at the end of May only five other times, but all instances were within the past decade. Four of those five cases featured net buying in the following four weeks.

That four-week period cuts off just before the volatile end-of-June reports on U.S. stocks and acres, since that data can send sentiment in a completely new direction.

In the fifth instance, 2020, money managers were equally as bearish toward the end of June as they were four weeks prior, meaning there is no precedent for bearish funds to become even more pessimistic on corn throughout June.

U.S. crop conditions and weather are watched very carefully throughout June as corn heads toward July’s precarious pollination period, and the market is extra sensitive to changes in weather forecasts, likely explaining the reduction in fund exposure during June.

Funds are unlikely to extend already bullish corn views throughout June, doing so in just four of the 12 years in which they held net longs at the end of May. However, they remained bullish near the end of June in all but one of those years, 2018, infamous for the U.S.-China trade war.

Most-active CBOT corn futures had gained 1% in the week ended May 28. Although funds were net sellers, there were a handful of new gross longs. Futures fell 3.5% between Wednesday and Friday, possibly owing to end-of-month positioning and the normal U.S. corn planting pace.

Traders will be watching after Monday’s close for the U.S. Department of Agriculture’s crop progress report, which will feature this season’s first look at U.S. corn conditions.

SOYBEANS, WHEAT

CBOT soybeans and soybean oil fell fractionally in the week ended May 28, though soybean meal jumped more than 1%, and speculators were net buyers across the soy complex.

Money managers cut their net short in CBOT soybean futures and options to 14,218 contracts, the lowest since early January, from 26,426 a week earlier. They both added gross longs and covered gross shorts, though the former was more prominent.

Money managers through May 28 were net buyers of CBOT soybean meal futures and options for an eighth consecutive week, extending their net long to 118,282 contracts from 100,944 a week earlier, primarily on new longs. That is funds’ most bullish-ever meal stance for the date, passing 2018 in the latest week.

In CBOT soybean oil futures and options, money managers were net buyers for a fourth consecutive week, trimming their net short to 41,844 contracts from 46,521 a week earlier. The new stance is very similar to a year ago.

Soybean oil futures were unchanged in the last three sessions, but soybeans fell 2% and meal dropped more than 3%, as did CBOT wheat. Wheat hit 10-month highs in the week ended May 28 as Russian crop estimates plunged, but cumulative gains were fractional during the period.

The managed money net short in CBOT wheat futures and options grew by less than 1,000 contracts through May 28, and the resulting position of 25,431 contracts compares with a net short of 127,000 a year ago, when futures were trading 12% lower versus now.

Money managers through May 28 were net buyers of Minneapolis wheat futures and options for an eighth consecutive week, extending their net long to 5,740 contracts versus 4,179 a week earlier. They were net buyers of Kansas City wheat futures and options for a sixth straight week, cutting their net short to 9,748 contracts as of May 28, funds’ least bearish view since August. Karen Braun is a market analyst for Reuters. Views expressed above are her own.

(Editing by Lisa Shumaker)