Friday’s Commitment of Traders report showed that Funds were net buyers of roughly 40.8k futures/options contracts, 37.5k of that being short covering. That trims their net short position to 255,928 contracts. For those wondering where prices are when Funds were that short on the way down, May corn was at 453 3/4 and Dec was at 477 1/4.
As mentioned in previous reports, video updates, and interview, the Funds holding such a large net short position this time of year is what gives the market the short-term upside potential. If funds were “flat” during this time of year with the current fundamental landscape, that would likely be a headwind. Looking at historically large net short position, most recently in 2019 and 2020 we can see the impact of “overextended funds” who look to cover for whatever reason it may be. We believe that there could be a few reasons this time around, mainly technicals and uncertainty in the US as we inch into spring and summer. From a technical perspective we’ve seen the market start to Over the last carve out higher lows and higher high over the last two weeks. Looking ahead to this week’s trade, the Bulls will want to defend previous resistance (now support) from 430-433 in this week’s trade. On the resistance side, a close above 440-443 could spark another wave of short covering which could help mark another higher high.
From a seasonal perspective, the market tends to chop around this time of year before firming into the early parts of the summer (past performance is not necessarily indicative of future results). The seasonal chart from SeasonAlgo below shows seasonal price averages for the December corn contract on a 5, 10, 15, 20, and 30 year average timeline.
| Red | Green | Blue | Orange | Pink |
| 5 yr. avg. | 10 yr. avg. | 15 yr. avg | 20 yr. avg. | 30 yr. avg. |
Outside of Fund positioning and seasonal tendencies, there are some questionable conditions for some top producing areas, most notably Iowa. We know it’s early in the year and this is not fear mongering, but the uncertainty here coupled with an extensive short position could encourage some shorts to cover, which we believe would ultimately set up for a great opportunity to Producers to lay off some risk. If weather conditions do end up aiding a trendline yield with close to 93 million acres planted, it could bring the sellers back in in a meaningful way. Long story short, have a marketing plan mapped out ahead of time to avoid the FOMO. Our team is here to help with that, offering daily technical and fundamental insight, text alerts, and recommendations. Learn more here: Services – Blue Line Ag Hedge
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