If you have spent any time around commodity markets the phrase money flowis one that often is thrown around. In my experience most of the time it is an attempt to explain a move in a market that seems to have no other explanation.
In general, the phrase money flow refers to the position of the Money Managers or Funds. It seems like everyone has an opinion on Funds or Money managers being involved in the commodity markets, and they are all a little different. My belief is that they are here to stay right, wrong, or indifferent, so we are better served trying to understand their position and what that means for the markets.
In my opinion there is one thing that is true about The Funds, they can push a market Too High or Too Low.
Lets take a look at the current positions of the funds by market. Keep in mind that these positions are as of last Tuesday (February 1, 2022) as reported last Friday on the CFTC Commitment of Traders report.
Corn
Last week the funds added 6,906 contracts brining their current position to 372,511. Over the last 10 years the largest long position the funds have carried is 429,189, and the largest short position was (322,215) since the middle of July the fund position has bounced between 208,713 and 373,345. Perhaps the least active in the markets we will examine today, but the funds are carrying a sizable position, nonetheless.
Soybeans
The funds tacked on 39,593 contracts brining their position to 154,488 as of 2/1/22. Over the last 10 years the largest long position they have had was 253,889 and the largest short position was (168,835). Since the middle of July, the funds have had a little more of range in the Soybeans getting all the way down to 10,291 (11/16/2021) and currently at the highest for that time range. I would consider the funds position middle of the road and if the weather continues to be an issue, they have room to add.
Chicago Wheat
The only negative position in the markets that I pay close attention to is in the CHI Wheat. Last week they sold 13,025 contracts bringing their short position to (26,452). The largest short position they have carried was (162,327) with the largest long position pegged at 80,827. Since the middle of July, the funds have carried both short and long positions with a range of (27,764) – 58,823. It has been my experience with the topic of inflation on the horizon that the funds have not liked to remain short a commodity market for too long. As I see it, the problem has been that they have not been given a reason to get out quite yet.
Live Cattle
Funds last week tacked on 19,951 contracts of Live Cattle brining their position to 69,272 contracts. Over the last 10 years the most longs they have carried is 108,778 while their largest short position was (47,428). Looking at the range of positions they have carried since mid-July 25,157 – 92,649 their current position is really middle of the road. Depending on the fundamental development they could push one way or another.
Lean Hogs
To me the most interesting development of the week was in Lean Hogs. Funds last week added 3,061 contracts brining their long position to 69,968. Since the middle of JAN, APR LH have tacked on more then 18 dollars from their lows, with more then 5 dollars of that move coming last week. Personally, I thought the addition by the funds would be more then that, that is the downside of delayed data. Over the last 10 years the funds have carried a long position as large as 108,778 and a short position as large as (47,428). There is no denying that the fundamentals in the hogs have been strong with National Cash tacking on 22.62 since the beginning of the year and Cutout picking up 13.12 in that same timeframe. It will be interesting to see if the fundamentals continue to trend that way and if the funds feel inclined to push their position; of if they run out of steam.
As I referred earlier there are limitations when it comes to monitoring the funds position, namely the fact that the data is delayed, but I believe it is still a useful tool. After this brief rundown of current positions everyone should have a better understanding of what someone is talking about when they hear the phrase money flow.
Looking to Trade or Hedge Commodities Please reach out and let’s chat…
David Ericson
712.435.7402
Receive Relevant and Timely Grain Market Reports that Matter!
Get updated twice a week with concise, direct information that you can use in grain trading, marketing, and farm management
Better yet, become a customer and get DAILY updates, fundamental, and technical, sent straight to your Inbox! Contact Us now to get started.
RISK DISCLAIMER: Trading in commodity interest products such as futures, options and otc swaps entails significant risks of loss which must be understood prior to trading and may not be appropriate for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time. The placement of contingent orders by you or broker, or trading advisor, such as a stop-lossor stop-limitorder, will not necessarily limit your losses to the intended amounts, since market conditions may make it impossible to execute such orders. Long options strategies could lose their entire premium plus transactional costs. Short options strategies entail unlimited risk of loss plus transactional costs. The information presented represents the opinion of Ag Optimus. Past performance of actual trades or strategies cited herein is not necessarily indicative of future performance. Futures prices factor in the seasonal aspects of supply and demand. This communication may cite historic data and should not be taken to mean certain trades can produce dramatic profits year in and year out. This information does not imply customers have or will experience profits based on seasonal trades or trade data. All information, communications, publications, and reports, including this specific material, used and distributed by Optimus Futures, LLC (“Optimus”) shall be construed as, or is in the nature of, a solicitation for entering into a derivatives transaction. Optimus does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71. This email may include information produced by third parties. Material not labelled Optimus Futures should be considered to be third-party, and is provided for informational purposes only. Third-party material is from sources believed to be reliable, but its accuracy is not guaranteed by Optimus Futures. Optimus Ag and Ag Optimus are registered dbas of Optimus Futures LLC [NFA ID 0481133] CONFIDENTIALITY NOTICE: Privileged/Confidential information may be contained in this message. If you are not the intended recipient, please notify the sender immediately and you must not use the message for any purpose nor disclose it to anyone. Communications on all mediums may be recorded.