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Derrick Helmesh Times Columnist
The February 23 Commitment of Traders report revealed a shortfall in management funds of 340,732 corn. This marks a new record for short positions for the fund, surpassing the previous record of 322,215 units set in late April 2019.
The following Monday, the corn market hit a new low, then rebounded and fell just short of closing above the previous business day’s high. Monday’s rally also consisted of a sharp decline in open interest, which generally means more short positions were closed out, followed by the addition of new long positions, i.e. short covering from fund positions. .
Funds and traders typically exit winning trades for one of two reasons. One is the fear of losing profits after fundamental changes in the market, and the other is the greed to lock in profits and return later at a better price. This week’s trades would suggest that greed won out this week.
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May corn futures hit a low of $4.09 on Monday, but rebounded $0.23 to Thursday’s high of $4.32. It was an impressive rally in a short period of time with little fundamental news.
On Friday, two days after the first notice date (FND), the May futures price fell $0.07, returning to $4.22 by midday. For now, greed seems to be a good thing, with no plans to slaughter the pigs and they are still being fed.
However, although the decrease in open interest seems to be mainly due to short covering, there was definitely a large amount of longs in March that were sold without rolling into May. If new longs decide to enter the market, the exit window for shorts could become even narrower as the number of old longs dwindles.
Have comments or questions? Contact derrick.hermesch@pinionglobal.com or call 785-338-9605.
Opinions are solely those of the author. Derrick Helmesh is a Commodity Futures Broker at Pinion. Contact him at 785-338-9605. This is not a solicitation of market buy or sell orders.
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