Corn Managed Money Net Long Falls Before October WASDE

Funds cut a quarter of their corn long before the WASDE landed

Managed Money reduced its net long corn by 109,483 contracts over three weeks, finishing 16 percent lower the week before a report that proved bearish for corn. Feeder cattle commercials went the other way and doubled their hedge.

• Corn funds were heading for the exit before the report. Managed Money trimmed its net long three weeks in a row, from 426,842 contracts to 317,359. The last week alone was down 16 percent. Then Friday’s WASDE put carryout at 1.849 billion bushels.
• Corn commercials covered too. Their net short shrank 92,147 contracts over the same three weeks, from 727,117 to 634,970. Both sides reduced, which usually means the overall position is shrinking rather than one side winning.
• Soybeans went the other way. Managed Money added back to its net long in the latest week while commercials increased their net short. The two sides are building against each other.
• Wheat is the clearest divergence on the board. Commercials have covered shorts for three weeks running, while Managed Money has pressed shorts for three weeks running. They are directly opposed.
• Feeder cattle commercials nearly doubled their net short in two weeks, from 3,370 to 6,826 contracts, while funds kept buying. That is the sharpest positioning change in the livestock complex.

The Commitments of Traders report is a snapshot of Tuesday, October 6, published the following Friday. The October WASDE was released on Friday, October 9. The positioning below therefore shows where traders stood three days before the report and captures none of the trading that followed.

That gap is usually a limitation. This week it is the story. These figures are a record of how the market was positioned walking into a scheduled report, which is a different and, in our opinion, more useful thing than a reaction. The positions held after Friday will not be visible until the next release.

Commercial shows only the Producer, Merchant, Processor, and User net position. Managed Money is the Managed Money net position only. We do not fold Swap Dealers or Other Reportables into either figure, which means our numbers will not match providers who do.

The ‡ symbol marks a week-over-week change larger than 10 percent of the prior week’s net position, calculated as the absolute change divided by the absolute prior net. It flags the size of the move relative to where the position started, not the size of the position.

No 52-week ranks this edition. A rank requires a full year of weekly data and only four weeks were available for this update. Ranks are an Ag Optimus calculation, not a figure the Commodity Futures Trading Commission publishes, and we would rather omit them than estimate them.

Funds reduced a large long for three consecutive weeks going into a scheduled report, and the report was bearish for corn. Reducing exposure ahead of a known date is a documented pattern, and we have written about it at length. This data cannot tell you whether that was foresight, routine risk management before a calendar event, or coincidence. No published research establishes that pre-report positioning predicts the direction or size of the move that follows.

What it does tell you is more practical: the long that would have had to be liquidated on a bearish number was already a quarter smaller by Tuesday. In our opinion, that matters more for what comes next than for what already happened, because a smaller crowded long has less fuel left in it.

Two separate things moved against corn in the same week: a looser balance sheet and a shrinking fund long. Neither one is a price forecast, and neither changes what your elevator is bidding today.

The practical question is the one we raised in the scorecard. With stocks-to-use up from 9.7 percent to 11.3 percent, pull the December-to-July spread and compare it against what storage actually costs you, including drying. If the carry doesn’t cover the cost, holding unpriced bushels is a decision to speculate on a rally rather than to market. That is a legitimate choice, but it should be deliberate.

Soybeans came out of this report in better shape than corn, mostly by avoiding corn’s problem. Stocks-to-use near 6.9 percent is still tight, and the price forecast did not move.

The caution is on the positioning side rather than the balance sheet. Funds are carrying a large net long, and commercials are hedging against it, a configuration that can unwind quickly if something changes. That is not a prediction that it will. It is a reason to know in advance what you would do if beans moved 50 cents against you, rather than deciding in the moment.

Read those wheat percentages carefully. Managed Money started the period nearly flat, net short 4,706 contracts. When the starting position is that small, any change looks enormous as a percentage — which is why the Sept 22 figure reads 179.3 percent. The contract changes themselves are steady and ordinary: 8,438, then 8,526, then 7,873. Three weeks of consistent selling totaling 24,837 contracts, not a panic.

The all-wheat number is the wrong number for your marketing decision. Hard red winter stocks rose 14 million bushels and absorbed most of the export cut. Hard red spring tightened 8 million. White wheat loosened 12 million but was the one class whose exports USDA raised. Find your class before you talk to your buyer.

On the positioning side, a market where commercials are covering while funds press shorts is one where a short-covering move can happen quickly if the news changes — that is a description of how the position is built, not a forecast that it will unwind. The Russian export reduction is the kind of news that could do it, and it is worth watching for that reason rather than for the tonnage itself.

A tighter forward supply picture and softer current wholesale beef can be true at the same time, and this week they were. The production cuts are about 2027 marketings. The boxed beef number is about this week. Do not let the first one talk you out of acting on the second.

If you have cattle to sell in the near term, negotiated cash trade, slaughter pace and the cutout tell you more about that decision than a 2027 production forecast does. The forward outlook is the right input for a decision about retained ownership or forward contracting, which is a different decision on a different timeline.

Cheaper corn does not automatically make expensive feeders pencil. The feeding margin has three parts — what you pay for the animal, what you spend to feed it, and what you sell it for — and this week only the middle one improved. If the feed saving simply gets bid into the purchase price, it has moved from your pocket to the seller’s.

Run the margin on delivered corn at your own location rather than on the futures price, and run it against a realistic fed-cattle sale value rather than today’s board. If commercials are putting on hedges at this pace, someone with cattle to deliver is finding these levels worth locking in. That matters when you are the one buying.

That combination is worth sitting with. USDA reduced the supply forecast and reduced the price forecast in the same report. Smaller supply would normally support price. It did not here, because the cutout and export side weakened at least as much. A supply number on its own does not set a price.

Funds reduced a large short in the latest week. When a heavily shorted market sees that kind of covering, it can produce a bounce, but a bounce off a low is not the same as a change in trend, and this one came in a week when the price forecast was being cut.

The things that would confirm something real are the cash hog price, the cutout, slaughter pace, and carcass weights. Those are weekly and public. Watch whether the cutout firms rather than whether the futures bounce, because USDA has told you plainly that the cutout is what is holding its forecast down.

This data doesn’t show that, and we wouldn’t claim it. Managed Money reduced its net long corn position for three consecutive weeks before the report, finishing 25.6 percent below where it started, and the report was bearish for corn. Reducing exposure ahead of a scheduled report is a documented behavior pattern. No published research establishes that pre-report positioning predicts the direction or size of the move that follows a report.

The Commitments of Traders report is a snapshot of positions held on Tuesday, published the following Friday. This edition reflects Tuesday, October 6. The WASDE was released Friday, October 9. The positioning therefore predates the report by three days and excludes any trading that followed. The first snapshot taken after the report covers Tuesday, October 13.

It marks a week-over-week change larger than 10 percent of the prior week’s net position, calculated as the absolute change divided by the absolute prior net. It measures a move’s size relative to where the position started. In smaller markets such as feeder cattle, or when a position starts near zero, as wheat did, modest contract changes can produce very large percentages, so read the contract figures alongside the percentage.

Commercial means the Producer, Merchant, Processor, and User net position only. Non-commercial means the Managed Money net position only. We do not combine Swap Dealers or Other Reportables into either category. Some providers do, so our figures will not always match theirs, even though both draw from the same Commodity Futures Trading Commission release.

A 52-week rank requires a full year of weekly data, and this update had only four weeks available. The rank is an Ag Optimus calculation rather than a figure the Commodity Futures Trading Commission publishes, so we omit it rather than estimate it. When we do publish ranks, rank 1 is the largest net long over the past 52 weeks and rank 52 the smallest, the opposite of the convention some other providers use.

Our brokers farm and feed too, so the conversation starts with your operation rather than with a chart. Have your expected production or placements, what is already priced or hedged, and your storage or feeding costs handy.

Call (800) 944-3850 or (712) 545-0182.

Disclosure: This material is for general educational and informational purposes only. It is the opinion of Ag Optimus where marked, and it is not a recommendation to buy or sell any futures contract, option, cash contract, or other financial product, nor individualized marketing, hedging, tax, or legal advice. Trading futures, options, and swaps involves substantial risk of loss and is not suitable for all investors; losses can exceed funds deposited. Past performance is not necessarily indicative of future results. USDA does not endorse, certify or approve this analysis, Ag Optimus, or Optimus Futures LLC, and the use of USDA data here does not imply any such endorsement. Optimus Futures does not maintain a research department as defined in CFTC Rule 1.71. Ag Optimus is a registered DBA of Optimus Futures LLC [NFA ID 0481133]. All marketing and trading decisions remain yours.