Tidbits, Big Spec Funds 2/9/25
- Wright team
- Feb 9
- 5 min read
Tidbits
President Trump has paused the imposition of tariffs on small-value packages arriving from China to give federal agencies time to sort out how to process millions of such shipments that have come through the U.S. border every day without paying tariffs. The executive order, dated Wednesday, didn’t say when the pause would end but said it would cease when the Department of Commerce could put in place “adequate systems” to “fully and expediently process and collect tariff revenue.” Earlier this week, the U.S. Postal Service had announced it would not accept parcels from mainland China and Hong Kong, only to reverse the decision the next day.
President Donald Trump said on Friday he plans to announce reciprocal tariffs on many countries by Monday or Tuesday of next week, a major escalation of his offensive to tear up and reshape global trade relationships in the U.S.' favor.
Trump did not identify which countries would be hit but suggested it would be a broad effort that could also help solve U.S. budget problems.
"I'll be announcing that, next week, reciprocal trade, so that we're treated evenly with other countries," Trump said. "We don't want any more, any less."
Note that the U.S. Trade balance was negative $98 billion in December, meaning we buy much more in value then we sell to the world. For the whole 2024, the trade deficit was $918 billion and export-to-import ratio was 3 to 4.
Big Spec Funds Net Corn Position: How Important Is It?
The big spec funds (aka managed money) have bought a very large number of corn futures contracts the past six months and still hold a very large long position (make money if price goes up). As a result, “everyone” was anxious to see Friday afternoon’s Commitment of Traders (COT) report.
The COT reports the number of futures contracts traded on the futures markets in the U.S. for the week ending the close of business the previous Tuesday. That includes the number of contracts bought, sold, and currently held by the big specs, commercial traders (aka hedgers), index funds, and small traders. There are about 300 big spec funds trading corn according to the COT report.
The long corn position held by the big spec funds is larger than it has been for years. It was assumed they added to their long position this past reporting week, but more importantly, how many contracts did they add? How close are they to the largest long position they have ever held? From a technical analysis standpoint, that is a very important piece of information.
Reuters News Service’s Global Ag Report, Karen Braun, reported on “X” (formerly Twitter) Friday afternoon (paraphrased):
“Money managers' massive gross long position in CBOT corn futures & options positions which, at 447,897 contracts as of Feb. 4, is RECORD large in dating back to 2006.”
Most people, when they read that, including Roger, misunderstood what Karen wrote. The initial thought was the big specs added more than 140,000 contracts to their net position and had a record large net position. That was not the case.
Karen also reported:
"Money managers increased their net long in CBOT corn futures & options to 364,217 contracts in the week ended Feb. 4. That is on par with the same weeks in 2021 & 2022 and is funds' most bullish corn view since April 2022."
The key words are “gross long position” in the first sentence and “net long” in the second sentence.
The COT reports how many long contracts and how many short contracts each of the four trader groups hold. If the number of contracts long is more than the number of contracts short, that trader group is net long.
Karen first wrote that the gross long position was a record large, while that may be true and is interesting, it is not very important. What is very important is how large the net position is. Karen correctly stated the net corn position is long 364,217 contracts.
The last week in September 2010, the record big spec net long to date was set at 372,756 contracts. December corn traded to $5.28 that week, but the first week in November 2010, December corn traded to $6.05 with the big specs net long 349,813 contracts.
The current record net long was made 15 January 2021 at 435,357 contracts. March corn traded to $5.79 on 4 February that year after making a low of $3.31 on 12 August 2020. December 2020 corn traded to $3.20 on the 4th of August 2020. The big spec funds were net short 200,842 corn contracts that week.
On 10 August 2012, December corn traded to $8.49. The big spec funds net long position that week was 227,605 contracts.
In March 2007, the Commodity Futures Trading Commission (CFTC) separated the big spec funds and the index funds. We have tracked corn and bean open interest of those two funds ever since. In October 2020, we began recording the commercial traders open interest position as well.
When the net position of any trading group approaches the all-time record large number of contracts, the price trend is highly likely to change just before or just after, because there is not much buying or selling power left. Records were made to be broken and every decade or so the record large long or short position is expanded because the number of contracts a trader can hold is expended every few years, there is more money to invest every year, and the size of the crop grows over the years.
The above information confirms the size of the net position of the big spec funds is not the “holy grail” of picking the top or bottom on the price cycle.
To learn more about big spec funds and index funds, go to:
Audio Version
Market Data
Corn futures in China is ¥2,285 per mt, it's $7.96 per bu., +0¢ for the week.
Soybean futures in China is ¥4,066 per mt, it's $15.18 per bu., +5¢ for the week.
Rain Days Update
The 6 to 10 day forecast updated every day at: https://www.cpc.ncep.noaa.gov/products/predictions/610day/
Explanation of Rain Days
Every day, every place in the world has a ten day weather forecast issued many weather services.
By a "place", we mean a Findlay, Ohio; Arcadia, Minnesota; Atlantic, Iowa; Fullerton, Nebraska; Cordoba, Argentina; Craig, Colorado, Saratov, Russia and ten million localities we have never heard of.
The ten day forecast predicts the high and low temperature for each day as well as whether or not rain is predicted for each of the ten days, likewise cloudy, partly cloudy, sunny, etc.
We look at the ten-day forecast and if we see rain is predicted for 4 of the next 10 days, we record a "4" for that location on the chart for the today. It does not matter whether it is one-hundredth of an inch or 5 inches. We realize about half the days expected to receive rain never get rain that day, but we must be consistent in what we report each day and every day because rain makes grain a few key weeks of the growing season. Of course, we scan the temperatures and the amounts of rain just to see if anything is getting way out of the norm.
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