<\/p>\n<\/a>Grains<\/u> –
\nOn tap today we of course have the weekly COT report.\u00a0 Keep one thing in mind, however, that the major March option expiration will likely make this week\u2019s data look a bit more volatile than usual.\u00a0 Those groups that produce guesses on this sort of thing should probably take the week off.\u00a0 Then again, I\u2019m not sure why anyone bothers to try and guess these COT positions… but that is a discussion we can have over drinks.<\/p>\n
Arguably the key focus in ag markets so far in 2017 has been fund flows.\u00a0 I\u2019d argue that this has been a much bigger influence on price action than weather and export demand.\u00a0 With that in mind and in preparation for today\u2019s COT report, let\u2019s look at some few charts on the spec positioning.<\/p>\n
The first chart is nothing special, it simply totals the managed money net position in the key ag futures markets we track here.\u00a0 As you can see from the chart, the net position has grown sharply since the start of the year and one could argue it is looking a bit stretched at the moment, especially with no immediate weather threats to be found.<\/p>\n
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That said, we have to understand that not all players look at this in terms of number of contracts but rather the total notional exposure of the position.\u00a0 With that in mind, please see the next chart which attempts to look at the combined index and managed money net positions in corn and soybeans in notional terms.\u00a0 This is simply taking the number of contracts times the actual value of the contract.\u00a0 This chart shows that in the grand scheme of things, the total fund value of the their positions here are not especially stretched yet.\u00a0 However, considering the stretched nature of the first chart one would have to think that it will take some sort of fundamental upside catalyst to push these notional values sharply higher from here.\u00a0 With South American weather and conditions seemingly on cruise control for now, it\u2019ll likely take some sort of US spring\/summer issue to develop.\u00a0 Will these new longs remain that patient?<\/p>\n
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The bottom line is that at some point it will take more than just \u201cfund buying\u201d to keep pushing prices higher.\u00a0 I\u2019m not saying I believe we\u2019re at that point right now…I honestly don\u2019t know.\u00a0 What I am saying is that as I look around the fundamental backdrop I don\u2019t see any near term catalyst for the fundamental support right now.\u00a0 If you\u2019re buying CZ at $4, you\u2019re essentially betting on a US weather problem that is months away from materializing.<\/p>\n
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