Canada Markets

Investors Lacking in Bullish Enthusiasm

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The exuberance which has seen the noncommercial net position of combined corn, soybeans and soft red winter wheat futures move from a net-short of 257,165 contracts, as of March 1, to a net-long of 564,929 contracts the week, as of June 14, has ended quickly. This group held a net-long of just 105,141 contracts, as of August 2. (DTN graphic by Nick Scalise)

The net-futures position held by noncommercial traders or investors, as determined by Weekly CFTC data, is just one of the six criteria which makes up DTN's six-factor approach to market analysis, although plays a major role in defining the trend of the market.

As seen on the attached chart, overall bullish enthusiasm for these three commodities has declined for more than five years. As of Feb. 8 2011, the bullish net-long position for combined corn, soybeans and soft red winter wheat totaled 760,115 contracts, the highest level seen since April 1996. Since then, the downward-sloping trendline highlights the decline seen in this total since 2011. While the combined long position held in these three commodities broke above this trendline in late-May/early June, the move was short-lived after reaching the highest level since October 2012 at 564,929 contracts, as of June 14.

By commodity, investors have held a net-short futures position of soft red winter wheat since August 2015. While this position has been pared slightly to 98,776 contracts net-short in the recent Aug. 2 data, this position continues to remain near the record net-short realized as of April 12 data. The net-short position held by investors of corn has fallen from a net-long of 362,525 contracts, as of June 14, to just 39,216 contracts in just seven weeks, a drop of 89.2%. The net-short position in soybeans has fallen from a net long of 252,074 contracts, as of June 28, and has fallen to a net-long of 164,701 contracts, or a drop of 34.7%.

Even though stochastic momentum indicators for both wheat and corn are in over-sold territory (below 20, not shown) while the soybean indicators are close to being oversold on their respective weekly charts, this has not prevented continued selling by noncommercial traders. Commercial buying interest is helping support prices in their current sideways ranges. The question is how long can this last?

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

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