Is that it for the short-covering wave in wheat?
Chicago soft red winter wheat futures managed three positive sessions in a row (in line with grain market ideas that changes in money flows take three sessions, initially at least, to work their way through).But then the key December contract lost a bit of ground in the last session, and stood a further 0.2% lower, at $4.19 ¼ a bushel, in Chicago as of 07:50 UK time (01:50 Chicago time).
That looks a sign of the end of the initial phase, at least, of covering of the hedge fund net short position which two weeks ago reached a record high.Indeed, the extent of the net short position had raised ideas that it looked a little "crowded", and vulnerable to a reversal which would send prices spiking – especially given that futures were already not that far above 10-year lows, so potentially limiting the opportunity for short bets to come good.'Worrisome shorts'As to whether more short bets are covered, there is potential, with Richard Feltes at RJ O'Brien say that the size of the fund short positions in Chicago wheat, and corn, "are still sizeable, and worrisome" for holders.He cited the "upturn in the charts", offering a positive price signal to investors.However, Brian Henry at Benson Quinn Commodities was more cautious, saying that Tuesday's "price action followed by a lower close on Wednesday, would be a very strong sign that the funds have covered enough of their respective short positions in the winter wheat contracts and the recent [price] recovery is coming to an end.In fact, "it feels like the trade is getting ready to gang up these markets from the sell side."But I wouldn't be surprised to see them wait for confirmation that the short-covering is over."'Large amount of wheat'And, after all, one of the main spurs of the short-covering wave - the appreciation, thanks to offers to an Egyptian tender last week, of just how competitive US wheat has come – is now looking a little historical."The globe has purchased a large amount of wheat with the US missing out on the bulk of the higher profile activity," Benson Quinn Commodities said....MORE