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Below is some current grain complex COT analysis. Multi-year bull market developing. You need to look at the stocks to use ratios with and without China over a multi-decade period to pick up on the changing dynamics.
RUNNING WEEKLY SOY COMPLEX COMMENTARY:
The Consolidation/Correction Has Arrived
THE GREAT COT REVERSAL: Pause for Cause
After MM (Managed Money) accumulated a near record net short position of -463,000 contracts (disaggregated futures & options short format) during late May of 2017, grains took off. After the funds reversed and went long to the tune of +315,000 in late July, the grain complex topped and prices reversed sharply.
After accumulating an even larger net short position of -481,000 in January of 2018, the grain complex took off again. While the funds have not yet fully committed to the long side of the complex, the huge net short complex position of -481,000 has been reversed to a net long position of +443,000 as of the 3/6/18 report, up +190,000 from the prior week.
The net long MM position represents the first time the funds have been long the grain complex in six months, primarily beans, meal and now corn. Betting on US Plains/Argentine weather, the battle for acreage and the outlook for exports, the funds have clearly decided to up the ante.
Unlike the 2017 rally, bean oil and Minneapolis HRS wheat have not participated in the rally. Indeed, the 2017 rally was fueled by the drought driven HRS wheat market while the current rally is being driven by meal and weather conditions in Argentina. Led by a surge in Kansas Wheat prices, winter wheat weather in the U.S. and Europe is also kicking in.
As noted, the funds reversed their 1/16/18 net short complex position of -481,000 to a net long position of +443,000 over the last seven reporting periods by purchasing +924,000 contracts. The short covering and long reversal included +391,000 in the bean complex, +390,000 in corn and +150,000 in the wheat complex.
The bean complex short covering and reversal included +287,000 in beans and +107,000 in meal while the small net short position in bean oil of -5,832 increased to -27,135 before dropping to -9,046 over the seven reporting periods.
GRAIN COMPLEX COT FOR WEEK ENDING 3/6/18
The MM net long increase of 190,000 during the week of 3/6 included the purchase of +104,414 in corn, +36,331 in beans, +9,220 in meal, +301 in oil and +40,160 in the wheat complex.
As of 3/6, the funds were net long +184,000 in beans, +116,000 in meal and short -9,046 in bean oil. While the funds have a big long position of +164,000 in corn, they are still short
-11,000 in the wheat complex. Unlike beans, meal and corn, the current bean oil and wheat positions are small.
RECORD/NEAR RECORD MM LONGS & COMMERCIAL SHORTS
The MM net long positions in beans and meal are the largest since the 2017 rally. The commercial net short positions are also near a record high along with the bean and corn open interest.
Similar to the summer wheat rally of 2017, it is unlikely that the record net short commercials will be pressured out of these margin rich positions, a dynamic that will weigh on prices over time. However, give the uncertain outlook, some feel new farmer selling has slowed. Others are looking at old crop and new crop quite differently.
The bean complex is in a strong period of seasonal strength thru May and while the complex bull market may or may not be over, the consolidation and/or correction has arrived.
Worth noting that the record MM long positions coupled with record open interest and record commercial short positions are the same conditions that sparked the recent cotton correction.
Looking at the big picture, including the 18/19 dynamics, the grain complex rally may not peak until the net long managed money position of +443,000 corrects and then makes a new high.
The grain complex net long MM position has exceeded 500,000 numerous times over the last decade. Assuming no trade retaliation, the MM net long positon and could approach new all-time highs around the 800,000 level before the rally is over. This of course assumes no tariff retaliation.