Canada Markets

Bullish Noncommercial Activity Wanes in the Grains

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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This chart shows the percent change in the noncommercial net-long futures position from the 2022 high for each crop or product to the size reported as of May 31. Of the commodities shown, the noncommercial net-long position for canola reached an all-time high in January, while falling by 53.6% since. (DTN graphic by Cliff Jamieson)

The noncommercial net futures position is just one of six factors followed by DTN in the six-factor market analysis methodology. The actions of this group of traders can often play a role in price movement in the market and their actions are often tied closely to the market trend.

Of the commodities shown on the attached chart, the noncommercial net-long position fell during the week ending May 31 for all, as reported in the latest CFTC report, released on June 3. While this noncommercial net-long position fell for both soybeans and soymeal, the size of this position fell for a second week for canola, soft red winter wheat, corn and hard red winter wheat, while for a third straight week for soybean oil and hard red spring wheat.

This is despite the growing uncertainty seen in global markets, and while the Russia-Ukraine war passes 100 days. The speculative trade has faced wild swings in expensive futures, traders may be fighting to access credit, which is growing more expensive with recent rate hikes, and has clearly been swayed by last week's wishful thinking that Russia's government would bow to demands of the western countries to allow Ukraine grain exports to flow through the Black Sea. A certain volume of Ukraine grain is being shipped illegally by Russia, which may also temper concerns, although this flow still remains far short of what is required.

It is interesting to note that the noncommercial net-long futures position reached an all-time high in January of 74,055 contracts net-long, while the size of this position has since fallen by 53.6% to the most recent 34,380 contracts, or the smallest bullish position seen in 36 weeks. This is also despite the bullish fundamentals seen in the canola market, with 2021-22 ending stocks expected to be extremely tight at 400,000 metric tons or a 2.8% stocks/use ratio.

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