Funds tire of soybean futures amid commodity sell-off

30.11.2016

Funds could only drive the soy complex so high, and markets fell back, after data out from the Commodity Futures Trading Commission showed the scale of fund buying.

CGTC data, released after markets closed on Monday, showed managed money funds raised their net-long position, the extent to which long positions outweigh short, by the fastest rate in five months, over the week to last Tuesday.

And given the strong performance over the last week, it is likely that the position has grown significantly since then.

Profit taking

So few commentators evidenced surprise by a rash of profit taking on Tuesday, traditionally a day when sharp reversals of fortune are looked for in the market.

"January soybeans have been on a seven day rally most of the support coming from oil based demand," said Stephen Pridal at Benson Quinn Commodities.

"From a technical perspective soybeans are in the overbought territory and a correction would be justifiable," Mr Pridal said.

Paul Georgy, at Allendale, likewise saw "turn-around-Tuesday type of trade after seven sessions of gains".

Opec deal hopes grow fainter

Soybean has been supported by evidence of brisk buying from China, but that seems to have now dried up.

"There are indications in the industry that China has purchased 11 cargoes recently, but only one from the US," said Darrell Holaday at Country Futures, with the other cargoes reported to be from South America.

Support from energy markets also ebbed away, as hopes that this week's Opec meeting will deliver a deal to cut production grew more distant.

The main sticking point remains a delicate negotiation between Saudi Arabia and Iran, with the former apparently still demanding the latter's participation, a position that scuppered any chance of deal being reached at the Opec meeting in April.

January Brent crude oil futures were down some 3.8% as Chicago markets closed, at $46.42 a barrel.

Corn sowings seen down

The USDA issued their baseline assumptions for crop acreage over the next ten years.

"This is generally an exercise in futility, but the industry is always interested in something new," said Mr Holaday

The USDA's Office of the Chief Economist estimated next season's sowings at 90.0m acres of corn, down 4.5m acres from 2016-17.

Soybean acreage was seen rising to 85.5m, from 83.7m.

'Misleading' projections

Mr Holaday downplayed the importance of the numbers, given their historical low levels of accuracy.                                                                               

"The acreage projections are really misleading, he said.

"Last year they projected corn acres at 90.0m, and they ended up at 94.5m" Mr Holaday noted. "Enough said, move on."

January soybean futures settled down 1.2%, at $10.43 Ѕ a bushel.

In Chicago corn succumbed to a wave of technical selling.

The most-traded March corn contract fell through tis 20-day, 30-day, 40-day, 50-day and 100-day moving averages, to settle down 2.9%, at $3.48 a bushel.

Gasc buys big

Gasc, the Egyptian state grain buyer, made a big purchase at its latest wheat tender.

The Egyptian buyer purchased 240,000 tonnes of Russian wheat, despite higher prices.

Gasc bought four 60,000 tonne cargoes from Louis Dreyfus, Olam, Alegrow, and Grainbow, priced at between $188.74 a tonne and $189.46 a tonne, excluding freight.

All cargoes were booked at $13.50 a tonne shipping costs.

March Chicago wheat futures settled at 4.08 ј a bushel, down 2.0% on the day.

Sugar extends losses

Sugar futures got some early support from the news that managed money is selling down its long positions in sugar even faster than thought.

This is supportive as the size of the net-long position has been a mill-stone around the neck of the markets, leaving investors wary of a rapid sell-off.

But the sweetener succumbed to a general commodity sell-off led by energy.

And data from Unica, the Brazilian crop body, was also not supportive, showing the tail end of the cane belt crop strong than expected, at 1.36m tonnes of sugar.

And Sucden forecast a global sugar surplus of about 2m tonnes in the 2017-18 season, the latest trade house to see production outstripping demand next year.

March raw sugar futures settled down 1.4%, at 19.66 cents a pound.


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