Hedge funds continued their bullish stance on Chicago Board of Trade (CBOT) corn futures, extending their net long positions for the seventh straight week. However, recent market signals suggest that this streak could soon lose steam.
Corn Rally Faces Resistance
In the week ending February 4, money managers increased their net long positions in CBOT corn to 364,217 contracts, up from 350,721 the previous week, marking the most bullish outlook since April 2022. This persistent buying streak—seen only once in the last four years—has driven corn prices higher, with futures reaching their strongest levels since October 2023 on February 5.
Despite this, recent price declines and signs of short covering suggest the rally could be nearing a peak. Corn futures have dipped 1.4% in the last three sessions, while export demand and ethanol production remain strong. Meanwhile, improved weather in Argentina and faster planting in Brazil’s key corn-growing state of Mato Grosso could ease supply concerns, potentially dampening the bullish momentum.
Wheat Rebounds Amid Fund Short Covering
Funds also made a sharp move in CBOT wheat, cutting their net short positions by more than 20,000 contracts, bringing their total short positions to 90,442. This shift was driven by short covering, fueling a nearly 6% rise in wheat futures during the week, followed by an additional 1% gain over the next three sessions.
The Black Sea region’s unpredictable weather and the possibility of reduced Russian wheat exports have added uncertainty to the market, making wheat a key commodity to watch in the coming weeks.
Soybean Markets See Mixed Fund Activity
CBOT soybeans gained nearly 3% in the week ending February 4, though fund managers took a more cautious approach, making small adjustments to their net long positions, which increased by just 533 contracts to 57,029.
In soybean meal, funds sharply reduced their net short positions, cutting them from 52,291 contracts to 33,460, aligning with the market’s 4% weekly gain. Meanwhile, soybean oil funds extended their net long positions to an 11-week high of 42,215 contracts, reflecting a turnaround after holding a net short position of 31,999 contracts in early January.
Despite the earlier gains, soybean futures have lost more than 2% in the past three sessions, highlighting uncertainty ahead of upcoming USDA reports.
Cotton and Cattle Markets Shift
In the cotton market, funds pushed their net short positions in ICE No. 2 cotton to a new record, signaling bearish sentiment. Meanwhile, CME live cattle futures saw funds reduce their holdings after hitting a record net long position the previous week.
Outlook: Tariffs and USDA Reports in Focus
Traders are closely monitoring potential new tariffs, with President Donald Trump signaling the possibility of reciprocal duties on countries imposing tariffs on U.S. goods. Additionally, the U.S. Department of Agriculture (USDA) will release its monthly supply and demand reports on Tuesday, with analysts expecting:
- Lower corn production estimates for Argentina
- Slightly higher output projections for Brazil
- Continued scrutiny on U.S. demand trends
With key economic and policy developments ahead, fund positioning across the grain and livestock markets could shift rapidly in the coming weeks.
