Canada Markets

One of the factors analyzed by DTN analysts in their Six-Factor approach to market analysis is the study of the futures positions held by noncommercial traders or investors. Given this group's ability to shift significant capital in an out of the market, the actions taken by these investors can have a large bearing on the trend in the market.

Weekly Commodity Futures Trading Commission data for the week ending April 14 indicated a significant week-over-week change in the positions held by this group. This clearly indicates noncommercial traders or investors either 1) significantly reducing their net-long positions (reducing bullish bets) or 2) significantly increasing their net-short positions (increasing bearish bets). Without a change in sentiment, chances of a sustained move higher may be limited.

Looking at this by commodity:

Investors increased their net-short position in soft red winter wheat (futures only) by 15,528 contracts or by 35.9% to 58,739 contracts. This is the seventh increase in the net-short position held in the past nine weeks and represents the largest net-short position held since Sept. 23, 2014.

Investors also substantially increased their net-short position of hard red winter wheat over the same week, increasing by 7,551 contracts or 166% to a net-short position of 12,091 contracts, the largest net-short held in four weeks. This was despite concerns of dry conditions affecting the southern HRW wheat growing areas of the U.S. over this period. The net-short position for March 3 was reported at 13,533, which is the largest net-short position held since February 2005.

Investors have flopped back and forth from a net-long position to a net-short position and back to a net-long position since late February in the hard red spring market; the most recent data indicated a paring of the net-long position held by 233 contracts, or a week-over-week reduction of 20.5% to 903 contracts, as shown by the red bar on the attached chart. This weekly data is down from a net-long high of 19,799 contracts in May 2014. The high-protein wheat market is continuing to see investors hold bullish bets although investor trade in the winter wheat markets is apt to spill over into HRS wheat and result in a bearish trend.

The net-long position held by investors in the corn market dropped by 43,870 contracts, or 48.8%, to a net-long position of 46,025 contracts, as shown by the red bar on the attached chart. This is down from the recent high in the net-long position held of 286,756 contracts in late December and is the smallest net-long position held since February 2014, when investors switched from holding a net-short to a net-long position.

Noncommercial traders held a fairly steady net-short position over the past five weeks although the April 14 data shows a significant 26,177 contracts, or 237%, jump in the net-short position held to 37,215 contracts. This represents a significant change in sentiment since this group held a net-long position of 211,816 contracts in February 2014, while represents the largest net-short position held since Feb. 10. Should the net-short position exceed the 41,113 contracts held in February, this would represent the largest net-short held since September 2006.

Weekly data released by the CFTC also suggested a significant easing of the bullish sentiment seen in the soymeal market by noncommercial traders, which has been the driving force for soybean prices for some time. As of the week ending April 14, investors reduced their net-long position by 19,311 contracts, or 67.8%, as shown by the red bar on the attached chart. This is down significantly from the net-long of 85,862 contracts reported in November and the smallest net-long position held since February 2012 as the non-commercial position switched from a net-short to a net-long position.

In other markets, not shown in the attached chart, the net-short position held in the Canadian dollar has seen investors increase their bearish bets for the second straight week by 559 contracts, or 1.9%, to a net-short of 30,587 contracts. The net-short held by investors reached 39,030 contracts in March, the largest net-short position held since March 2014. Last week's move in the Canadian dollar to a 12-week high may have resulted in a paring of these bearish bets.

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Cliff Jamieson can be reached at cliff.jamieson@dtn.com

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