Funds extend bullish soybean views with trade deal in sight

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    By Karen Braun

    FORT COLLINS, Colo. – Speculators boosted bullish views on Chicago-traded soybeans last week as it appears that an official trade deal between the United States and its top buyer China is just weeks away.

    Meanwhile, market participants are still unsure on the size of the US soybean harvest, which is underway now. The US Department of Agriculture predicts it will be the smallest crop in six years, down 20 percent on the year, though some believe the decline could be sharper.

    In the week ended Oct. 15, hedge funds and other money managers expanded their net long position in CBOT soybean futures and options to 49,029 contracts from 6,501 a week prior, according to data from the US Commodity Futures Trading Commission.

    On the net, funds bought nearly 141,000 soybean futures and options contracts in the five weeks ended Oct. 15, the most in such a period since the Argentine soybean crop was succumbing to drought in March 2018.

    Trade estimates suggest that commodity funds continued buying soybean futures over the previous three sessions, and Friday’s settle in the November contract of $9.34 per bushel is only a few cents below the recent five-year average for the date.

    But there are some hurdles for soybean bulls to clear in the coming weeks. US President Donald Trump on Friday said he expects to sign a trade deal with China by the time the Asia-Pacific Economic Cooperation meetings take place in Chile on Nov. 16 and 17. Soybeans are likely to face setbacks if those plans are disrupted.

    USDA will also publish fresh outlooks for the US soybean crop on Nov. 8, and as always, price is vulnerable if the numbers are larger than the trade estimate. USDA said last week that it plans to resurvey for harvested acres in snowstorm-hit North Dakota and Minnesota, and some analysts took this as a sign that the crop would shrink further.

    This reevaluation may also have implications for US corn, though the corn yield has gotten bigger over the last couple of months while the soybean yield has gotten smaller. This has made for a larger-than-predicted US corn crop, which along with horrendous US export demand, has provided some headwind for the corn market.

    Still, December corn futures finished at $3.91 per bushel on Friday, the highest for the date in six years. And speculators have recently eased their bearish views.

    Money managers cut their net short position in CBOT corn futures and options to 66,141 contracts through Oct. 15. That compares with a net short of 90,668 contracts a week earlier.

    Funds were likely net sellers of corn futures between Wednesday and Friday, but overall, investors may be a little hesitant in general to place big short bets in agriculture given the uncertainty around US-China trade.

    Earlier this month, it was reported that China had agreed to buy $40 billion to $50 billion worth of US agricultural products as part of a phase 1 trade deal. White House economic adviser Larry Kudlow said on Thursday that this commitment would depend in part on private companies and market conditions. – Reuters