Thursday, October 20, 2016

If You've Noticed A Perma-Bid In Commodities, You're Not Imagining It

The buying has been relentless. Not aggressive but each day taking what hits the bid and then upping the bid.
And it's not just agricultural commods. Except for copper.*
(and cattle, and hogs)

From Agrimoney:

AM markets: grains extend headway, amid talk of fund buying
The idea that funds are getting back into grain markets, as flagged last week, is beginning to find a bit more of an echo.
In fact, it is not just grains that appear to be getting more attractive to investors, but commodities as a whole.
Benson Quinn Commodities, for instance, saying that gains in soybean prices "seemed to be more macro in nature", flagged signs of "funds coming to the commodity sector as signs of rising US inflation along with China hitting its growth target in third quarter reporting GDP of 6.7%".
The CRB commodities index closed the last session above 190 points for the first time in more than three months.
Open interest clue
Meanwhile, there is circumstantial evidence too that there is more than short covering in the rally in corn and wheat derivatives in Chicago, the benchmark market.
If the rise in prices was just down to funds closing the substantial short bets that funds held in futures and options (a level which hit a record two weeks ago), that would be reflected in a drop in open interest, ie the number of live contracts.
But in wheat, while open interest in futures has fallen a bit, the decline is of a modest 5,000 lots or so over the week to last night's close, while for wheat options, opening interest has seen a gain of more than 20,000 contracts.
For corn, open interest in futures has risen by some 7,000 lots over the week, with that in options soaring by more than 70,000 contracts.
In soybeans, for the record, in which hedge funds already had a substantial net long position, open interest in futures is up some 25,000 contracts, and in options by a little over 5,000 lots.
'Buying agenda of funds'
And this despite the ideas of ample world supplies of wheat, and of record US corn and soybean harvests, with the latter proving particularly impressive.
"Harvest reports continue to talk of huge soybean yields," said Joe Lardy at CHS Hedging, adding that "records are being broken across the country".
However, futures in soybeans and grains have continued to recover.
The reason? "Hedge funds remain good buyers," persuaded to buy in part by technical factors.
"Over the past week, soybean futures have traded through the 10-, 20-, 50-, and 200-day moving averages, helping to support the buying agenda of the funds."
'Snap up as much as they can'
In early deals on Thursday, corn futures boosted their own technical credentials by - in rising 0.2% to $3.58 ¼ a bushel for December delivery, as of 09:30 UK time (03:30 Chicago time) - trading above their 100-day moving average for the first time in more than three months....MORE
 *Copper via FinViz: