Bulled-up funds: friend or foe of Chicago corn and soybeans? -Braun

(Repeats item published earlier in the global day)

NAPERVILLE, Illinois, Jan 21 (Reuters) – “Stairs up, elevator down.”

The phrase may strike nerves for bullish speculators as it can take weeks or months for prices to build, but the gains can be wiped out much more quickly whenever sufficiently bearish hurdles surface.

Luckily for corn bulls, their foundation is somewhat sturdy with global corn stocks set to reach decade-lows this year. However, newly bullish soybean speculators are battling record supplies plus uncertain demand from top buyer China.

Most-active Chicago futures have had a healthy start to 2025. Through Tuesday, corn had risen 6.9% in the new year while soybeans were up 5.6%.

This strength is somewhat rare, as there are only two other years in the last two decades that featured equal or larger gains by this same date: 2021 and 2008 for corn, and 2022 and 2017 for soybeans.

But do funds’ bullish bets either pose or signal risks for the near-term price outlook, especially for new-crop futures? Three simple comparisons can be used to examine the historical range of outcomes, all starting with money managers’ mid-January positions.

The first two look at how new-crop futures trend throughout February and whether February prices were stronger than January ones, or vice versa. The third shows funds’ positioning in late March, just before the pivotal U.S. stocks and planting reports.

February is important for new-crop CBOT futures, December corn and November soybeans, because the average prices during the month set insurance guarantees for U.S. farmers, possibly impacting planting decisions.

As of Jan. 14, money managers held a net long in CBOT corn futures and options of 292,228 contracts, and their CBOT soybean net long stood at 34,833 contracts. Trade estimates suggest funds made moderately strong increases to these positions through Jan. 21.

In the past, whenever funds held 200,000-contract-plus corn net longs in mid-January, new-crop corn futures rose during February. The positions exceeding 268,000 contracts also featured stronger prices in February versus January.

Funds were moderately bullish corn in mid-January 2012, 2013 and 2023, and new-crop corn in those years both eased in February and featured lower average February prices versus January. However, prices started out the year at record-high levels in all three cases.

Fast forward to late March, funds remained bullish corn in six of the seven years where their mid-January net long exceeded 200,000 contracts, and they came up flat in the seventh. For the most part, the more bullish they were in January, the more bullish they remained in late March.

Since 2007, funds were bullish corn to any degree during mid-January 12 times, and they only twice (2019 and 2023) turned bearish by late March. The 2023 event was largely undetected by the market amid a data blackout that spanned February and March.

The soybean study offers slightly less insight as money managers have held a mid-January net long in CBOT soybean futures and options in 14 of the last 18 years.

November soybeans strengthened throughout February in nine of those 14 years, though unlike in corn, the degree does not correlate that well with funds’ January bullishness.

Funds were only modestly bullish as of last week, which could signal downside risk. The managed money net long was under 100,000 contracts in seven other Januarys, and new-crop soybeans were weaker in February versus January in five of those cases.

Funds’ bullish soybean bets as of late March, including the degree, correlate well with those as of mid-January. They remained bullish in five of the seven Marches following a January net long below 100,000 contracts. The other two times they were near flat by late March (2020) and bearish (2015).

Interestingly, money managers in late March held a firm net short position in CBOT soybeans in just three of the last 18 years, including 2024. However, November soybeans are averaging nearly 15% lower so far this month versus last January, which might be a mildly friendly factor for bulls. Karen Braun is a market analyst for Reuters. Views expressed above are her own.

(By Karen Braun; Editing by Christopher Cushing)