No Fear for Record Fund Grain Shorts

The Commitments of Traders report from last Friday, Feb. 23 revealed that managed money was short 340,732 contracts of corn. This was a new record short position for the funds, passing the old record of 322,215 contracts set back in late-April 2019. The following Monday, the corn market made new lows and reversed higher, falling just short of closing above the previous trading day’s highs. Monday’s move higher also consisted of a steep decline in open interest, generally meaning that more short positions were exiting than new longs were being added, i.e., short covering from the fund position.

Funds and traders generally exit winning trades for two reasons: fear of losing profits after a fundamental shift in the marketplace, or greed creating a want to book profits and perhaps get back in again at a better price later. This week of trade would suggest that greed is winning the week.

May Corn futures on Monday put in a low of $4.09 and rallied 23 cents to Thursday’s high of $4.32. A nice rally in a quick amount of time with little-to-no fundamental news. Today, Friday, March 1, two days after First Notice Day (FND), May futures were down seven cents and back to $4.22 by noon. For now, it seems that greed is good, and the pigs are still getting fed with no slaughter of hogs in sight.

However, while the decline in open interest seems mostly due to short covering, there was surely an amount of March longs that threw in the towel and exited without rolling to May. Fewer old longs could make the exit door for the shorts even smaller if/when the time comes new longs decide to enter the market.

Have a comment or question? Please reach out to derrick.hermesch@pinionglobal.com or call at 785-338-9605.