Hedge funds have their highest net long contracts for the past 52 weeks for Soybean Oil and Lean Hogs. Live Cattle is near its highest level.
Spread Edge Capital specializes in seasonal spread trading across a wide variety of commodity markets. A spread trade is the simultaneous purchase and sale of the same commodity with different delivery dates. SpreadEdge publishes a weekly Newsletter that provides several seasonal spread trade opportunities every week.
Overview
Each week the SpreadEdge Newsletter documents an extensive list of seasonal, technical and fundamental indicators for the various commodity markets. This article will focus on Soybean Oil, Live Cattle and Lean Hogs and review current hedge fund position estimates, % carry yield, and the current technical market action.
Hedge Fund Position Estimates
The Commitment of Traders (COT) report, issued by the Commodity Futures Trading Commission (CFTC), offers a weekly snapshot of the positions taken by different market participants in the U.S. futures markets. Published every Friday at 3:30 PM Eastern Time, the COT report reflects positions held as of the previous Tuesday's closing business hours. Peak Trading Research assesses the latest COT report, examining alterations in price and open interest to provide an appraisal of net fund positioning daily.
- Hedge funds have a net long position of 41,610 contracts of Soybean Oil which is the highest level over the past 52 weeks. Funds have added over 131,000 contracts in the past 11 weeks.
- Hedge funds have a net long position of 87,878 contracts of Live Cattle which is just off the high of 90,748 contracts from the previous week.
- Hedge funds have a net long position of 97,473 contracts of Lean Hogs which is the highest level over the past 52 weeks. Hedge funds have added over 134,000 contracts since mid-July
% Carry Yield
Futures calendar curves vary in shape over time. Some often invert, with front-month contract prices exceeding those of later contracts, resulting in positive carry. Conversely, some curves exhibit contango, leading to a negative carry. % Carry yield is the one-year calendar curve yield as a percentage of contract notional value. Markets tend to reverse when they get at or near their highest or lowest levels over the past 52 weeks.
- Live Cattle is typically a negative carry market but currently has a +3.3% carry which is the highest over the past 52 weeks.
- Lean Hogs is also at its highest carry yield for the past 52 weeks. Last week the carry yield increased from 9.3% to 13.3%
Technical Analysis
- Soybean Oil has poked through the top of the downward trendline after gaining just over 4% for the week (at the time of this writing).
- Live Cattle looks to be running out of steam and has started to retreat from the top of the wedge.
- December Lean Hogs made new highs on Monday through Wednesday before closing lower on Thursday. Lean Hogs was up 15.1% for the month as of the Wednesday close and is the biggest gainer across all commodities.
Summary
Soybean Oil and Lean Hogs are at 52-week highs for hedge fund position estimates and are currently experiencing technical break outs. Live Cattle is also at extreme levels for hedge fund positions and carry yield but appears to be running out of steam.
More Information
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The SpreadEdge Weekly Newsletter is published every weekend and provides a broad overview of the important seasonal, technical, and fundamental indicators within the Energy, Grains, Meats, Softs, Metals and Currency markets. In addition, spread trade recommendations and follow-up on open trades is also provided. For a free copy of the Weekly Newsletter, please send an email to info@SpreadEdgeCapital.com
Darren Carlat
SpreadEdge Capital, LLC
(214) 636-3133
Darren@SpreadEdgeCapital.com
Disclaimer
SpreadEdge Capital, LLC is registered as a Commodity Trading Advisor with the Commodity Futures Trading Commission and is an NFA member. Past performance is not indicative of future results. Futures trading is not suitable for all investors, The risk associated with futures trading is substantial. Only risk capital should be used for these investments because you can lose more than your original investment. This is not a solicitation.
On the date of publication, Darren Carlat did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.