COT Report: Agricultural demand in focus; Traders continue to lift bets against the Euro

Commodities

Ole Hansen

Head of Commodity Strategy

Key points:

Our weekly Commitment of Traders update highlights futures positions and changes made by hedge funds across forex and commodities during the week to last Tuesday, 10 December 2024.
Speculators continued to pile into USD, mostly driven by euro selling, resulting in the biggest EUR net short since March 2020
Broad strength across the commodities sector, except energy saw fresh demand for precious metals and several agriculture commodities, led by corn and wheat.
Gold and silver both saw fresh longs being added before end-of-week long liquidation driven by a stronger USD and the biggest jump in US 10-year yields in 14 months.

Forex:

In forex, flows across the major IMM futures during a week that saw the Dollar Index trade near unchanged were mixed and rather large. Overall, the USD saw a net increase in demand, lifting the gross long to USD 24.1 billion, with the most significant contributors being continued sales of the euro, which saw the net short jump by 31% to 75.6k contracts or USD 10 billion equivalent — the highest since March 2020. Further selling of CAD, AUD, and NZD — the latter short reaching a five-year high — helped offset demand for CHF, GBP, and, not least, the JPY.

Non-commercial IMM futures positions versus the dollar in week to 10 December

Commodities:

In the latest reporting week, the Bloomberg Commodity Index rose 1.5%, with the biggest contributors being the agriculture sector, which rose by 4.6% on broad gains across grains and softs — most notably cocoa and coffee, the latter hitting a fresh record. Corn received a boost as US exporters posted strong sales volumes, forcing the US Department of Agriculture last Tuesday to slash corn ending stocks for the 2024/25 season by 10%. Elsewhere, the precious metal sector also contributed positively, with silver rising 4% and gold 2%, while the energy sector was mixed, with losses across crude and fuel being offset by natural gas strength.

Managed money accounts, such as hedge funds and CTAs, responded to these developments by net buying across all sectors except energy, with buyers concentrating on gold, silver, soybeans, and corn. Net selling was most notable in WTI crude oil, gas oil, ULSD (both diesel), and platinum.

Managed money commodities long, short and net positions, as well as changes in the week to 10 December

Energy: Range-bound crude oil saw a mixed week, with WTI selling offsetting demand for Brent. Both diesel contracts saw net selling, with the NY Harbor ULSD contract net short hitting an 18-year high

Metals: Gold and silver both saw fresh longs being added before end-of-week long liquidation driven by a stronger USD and the biggest jump in US 10-year yields since October 2023. The platinum long was cut in half, while speculators maintained a lukewarm approach to copper.

Grains: Three weeks of net selling were partly reversed, supported by strong gains in wheat and corn — the latter seeing its net long jump to 166k contracts, a 22-month high. Overall, a small 51k net short was held across the six US grain and oilseed contracts covered in this report.

Softs and livestock: A second week of cocoa and coffee strength did little to attract fresh demand from speculators. The record high in Arabica coffee did, in fact, attract a small amount of both long and short liquidation, leaving the net long unchanged, highlighting some hesitancy to engage at current elevated levels. Fresh multi-year highs were seen in the two cattle contracts.

What is the Commitments of Traders report?

The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class.

Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and other
Financials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and other
Forex: A broad breakdown between commercial and non-commercial (speculators)

The main reasons why we focus primarily on the behavior of speculators, such as hedge funds and trend-following CTA's are:

They are likely to have tight stops and no underlying exposure that is being hedged
This makes them most reactive to changes in fundamental or technical price developments
It provides views about major trends but also helps to decipher when a reversal is looming

Do note that this group tends to anticipate, accelerate, and amplify price changes that have been set in motion by fundamentals. Being followers of momentum, this strategy often sees this group of traders buy into strength and sell into weakness, meaning that they are often found holding the biggest long near the peak of a cycle or the biggest short position ahead of a through in the market.

Recent commodity articles:

22 Nov 2024: Commodity weekly: Strongest performance since April
19 Nov 2024: Gold and silver rise on Russia-US tensions
18 Nov 2024: COT: Limited dollar demand despite strength; Acclerated metals selling
11 Nov 2024: COT: Speculators bought energy and grains, sold gold ahead of elections
8 Nov 2024: Commodity weekly: Mixed response to Trump 2.0
6 Nov 2024: Podcast: US election and the market reactions, including commodities
6 Nov 2024: Trump and Republican victories spark commodity decline
4 Nov 2024: COT: Speculators flock to dollars, exit commodities ahead of US election
1 Nov 2024: Commodity weekly: Some weakness seen ahead of critical week
31 Oct 2024: Crude prices seek stability ahead of key support and US elections
30 Oct 2024: Will the US election result spark a gold correction?
29 Oct 2024: Podcast: Electrification's surge impact on commodities and equities
28 Oct 2024: COT: Crude length cut; silver and platinum see strong demand
25 Oct 2024: Commodity weekly: Market jitters on the rise ahead of U.S. elections
23 Oct 2024: Crude prices stalled by two-sided market risks
22 Oct 2024: Gold and silver's remarkable run in four charts
22 Oct 2024: Podcast: The Trump trade enters the metal market
21 Oct 2024: COT: Dollar shorts squeezed; Shift in commodity exposure from energy to metals
18 Oct 2024: Commodity weekly: Gold's record-breaking run continues
17 Oct 2024: Copper prices decline amid doubts about China stimulus impact
16 Oct 2024: How high can gold and silver rally?
8 Oct 2024: Podcast: Navigating market shifts: Fed rate cuts, commodities and rising food prices
8 Oct 2024: Video: These commodities might be impacted by the US election
7 Oct 2024: Crude oil surge caps strong four-week rally for commodities
7 Oct 2024: COT: Broad buying momentum persists, led by Brent, copper and grains
2 Oct 2024: Q3 2024 Commodity Outlook: Gold and silver continue to shine bright

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