The Money Managers Turn Bullish On The Most Important Agricultural Commodities

| About: Teucrium Soybean (SOYB)

Summary

Over the last week, the money managers bought almost a record number of wheat contracts. The total market volume continues to grow.

The money managers seek to take the neutral position in corn.

They maintain a long position in soybeans in anticipation of the increase in oil price.

According to the updated COT report for the week ending October 18, the money managers increased bullish commodity bets in wheat, corn and soybeans.

They were especially actively buying wheat, which indicated continued bullish potential of this market.

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Wheat

Over the specified period, the money managers reduced their net short position in wheat futures (CBOT) by 33,155 contracts (-24.5% WOW). It is noteworthy that the money managers were not only actively closing the sold contracts (-20,596), but also actively buying the new ones (+12,559).

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Source of data: CFTC

It also should be added that the weekly rate of change of the net money managers' position in wheat was close to the current year's record:

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Interestingly enough, in spite of the fact that they clearly take profit on the sold contracts, the total number of the open contracts on the market increased by 5,258 over the specified week, amounting to 585,472 contracts, which is also close to the annual maximum:

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So, in respect to wheat, we witness not only profit-taking on the sold contracts on the part of money managers, which is already positive by itself, but also the influx of the new money into the market, which indicates the new investors' desire to purchase at the current price level.

Earlier, I have suggested that the four-year bearish period on this market has ended, and the COT report reinforces my confidence.

Corn

Over the last week, the net short position of the money managers in corn (CBOT) reduced by 46.6%. The total size of the net position amounted to 69,978 sold contracts, which can be compared to the neutral position:

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Source of data: CFTC

In comparison with the wheat market, the money managers were more actively closing the sold contracts (-42,068) than buying the new ones (+18,927). It is also worth noting that the weekly changes in the money managers' position are on the positive side for the third week in a row:

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In general, in my opinion, the actions of the money managers on the corn market indicate their desire to take the neutral position, which reflects a relatively low bullish potential of this market.

On the other hand, given the seasonality of the corn futures price, there are no preconditions to significant reductions by the end of the year.

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Soybeans

As for the soybean market, in the last week, the money managers continued to moderately increase their long position.

In a week's time, they bought 11,103 contracts and closed 3,479 sold soybean contracts. The current long money managers' position on this market totaled 87,651 contracts, having increased by 20% within the week.

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Source of data: CFTC

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Source of data: CFTC

In my opinion, the soybean market, which is significantly correlated with the oil market, awaits the breakthrough of oil prices to the level of $55. The fact that the money managers retain, and even increase, their long position in soybean indicates that they still have these expectations and the soybean market still has a very strong support, which could potentially develop into an uptrend.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.