Key points:

  • Traders’ net short position in soybean futures on the Chicago Board of Trade reached a record high.
  • Reasons include uncertain demand from China and a high soybean harvest in Brazil.
  • Wheat showed the largest decline among all agricultural assets.

The week ending March 5 saw a significant increase in the net short position of traders in soybean futures and options on the Chicago Board of Trade. The indicator reached a record level of 171,999 contracts, increasing from 160,653 contracts in the previous week.

This record is the first since May 2019, when the net short position reached 168,835 contracts.

Traders increased their net short position in soybeans again

Despite the modest gains in soybean futures, which included more than three-year lows, there was an increase in traders’ net short position on the Chicago Board of Trade. This marks the 16th straight week that funds have been net sellers of soybeans, significantly exceeding the previous record of 10 weeks.

Such a large-scale sale of soybeans by traders has not been observed since May-June 2018, when the trade war between the United States and China began. However, in 2018 the sale occurred much faster.

The funds have been net sellers of soybean meal in 14 of the last 15 weeks. The net short position in soybean meal futures and options contracts increased by nearly 2,000 contracts to 49,526, the most bearish trader sentiment since June 2020.

Reasons for the prolonged decline in soybeans

Soybean prices have been under pressure for months from rising global crop supplies and uncertain demand from China.

Leading exporter Brazil’s soybean harvest is expected to be strong despite significant weather challenges early in the growing season.

Corn in small growth

Brazil is just beginning to plant its second corn crop, but corn supplies to the United States by the end of this year are projected to be significantly higher than last year.

The week ending March 5 saw a slight increase in CBOT corn futures. At the same time, money managers acted as small net sellers of yellow grain, increasing their net short positions from 295,258 to 296,795 futures and options contracts.

Wheat in sharp decline

Wheat showed the largest decline among all agricultural assets at the end of the week, with the most active futures falling by almost 6%.

Traders increased their net short position in wheat to 65,539 futures and options contracts.

Wheat performed weaker overall, falling 2.4% from Wednesday to Friday. Despite a slight increase on Friday, the price of wheat fell to its lowest since August 2020.