Corn took a battering, attracting its biggest selldown in three years from hedge funds worried about US biofuel and export demand, as managed money sold down in grains, with arabica coffee in their sights too.

Managed money, a proxy for speculators, sold down in Chicago corn futures and options by 71,418 contracts in the week to last Tuesday, GrainPriceNews analysis of Commodity Futures Trading Commission data shows.

That represented the biggest selldown since August 2019, and cut to a two-year low of 120,213 contracts the net long position – ie the number of long positions, which profit when prices rise, minus the tally of short bets, which benefit when values fall.

The selling came in a week in which the best-traded March corn contract fell by 4.2% to a two-month low, undermined by disappointment at blending targets in the latest US biofuels mandate, and at the slow pace of US exports of the grain.

‘Very weak tone’

“A combination of weaker export demand and disappointment over the proposed biofuel mandates helped to drive the market lower,” ADM Investor Services said.

Biofuels targets over the next three years “were below market expectations”, while “the export tone remains very weak and this has left the market in a long liquidation selling mode”.

US Census data for October showed US exports for October sinking to 82m bushels, down by 21% month on month and 48% year on year, prompting Futures international at the time to say that “we think USDA may shave off 50m bushels to their corn export projection” in its December Wasde report.

In fact, the Wasde, on Friday, cut the forecast for US corn shipments in 2022-23, as started in September, by 75m bushels to 2.08bn bushels, saying that “competition from other exporters and relatively high US prices have resulted in slow sales and shipments through early December”.

Brazil factor

US corn export prices have been sent soaring by low Mississippi River levels, which have hampered barge delivery of crops from the Midwest to Gulf ports, with merchants focusing what capacity there is on soybeans.

US soybean exports have a limited period in the export limelight, before the Brazilian harvest, as accelerates in January, brings the South America country’s supplies to the world market.

However, the US faces increasing competition in corn shipments too with Brazil, which has opened up the Chinese market thanks to a deal lowering phytosanitary hurdles on cargos of the grain.

Shipping agency Alphamar Agencia Maritima reported early last week that four vessels loaded with Brazilian corn were sailing to China, with five further shipments pending.

Nonetheless, separate CFTC data on commercial positions shows many trader buyers taking advantage of weakened US corn prices, with the commercial gross long position soaring by 57,480 lots, the biggest such spree since May last year.

Soyoil, wheat selling

Disappointment at the US biofuels announcement spurred a marked exit too from soyoil, the main feedstock for the country’s biodiesel producers, with hedge funds selling a net 42,919 contracts in Chicago futures and options, the biggest selldown in five years.

The US Environmental Protection Agency “announced a modest increase for their proposed total mandate for 2023,” while “traders were looking for a 1.0bn-1.5bn-gallon increase”, Mr Reilly said.

Chicago soft red winter wheat, meanwhile, suffered a ninth successive week of net selling, as managed money lifted its net short in the contact to 63,382 lots, the most since May 2019.

Market sentiment was undermined by continued Ukrainian exports and a poor pace of US shipments, besides an upgrade by Australia to its 2022 wheat harvest to a record high.

Demand worries

Among soft commodities, New York arabica coffee futures and options net selling of 3,259 lots, lifting the hedge fund net short to 22,491 contracts, the biggest in more than two years.

During the week, “lukewarm global risk sentiment following US and Canadian jobs data weighed on coffee as that could weaken coffee’s near-term demand outlook,” ADM Investor Services said.

Arabica stocks certified for delivery against Ice futures also rose above 600,000 bags during the week for the first time since September, led by Brazilian origin, an increase many investors are taking as a sign of surplus supplies.

However, hedge funds proved modest buyers in cocoa, cotton and raw sugar to prove net buyers in the main New York-traded soft commodities overall in the week to last Tuesday.

Short shrift

Managed money bought into livestock too, after data showed US hog slaughter falling below year-ago levels, diminishing concerns of an excess of pork supplies.

Feeder cattle attracted, at a net 4,990 contracts, its third biggest buying spree ever, as a plethora of short bets taken out the previous week proved unprofitable, with January futures in fact rising to two-month highs.

US cattle slaughter also ran below the year-ago pace, with the US believed poised for a longer-term shortfall in beef output, after producers shrank their herds this year thanks to drought in the key southern Plains ranching area.