Soft Commodities

Archive for Soft Commodities – Page 8

Soft Commodities: Cotton Speculators boost their bullish bets

Here are the latest charts and statistics for the Commitment of Traders (COT) reports data published by the Commodities Futures Trading Commission (CFTC).

The latest COT data is updated through Tuesday May 23rd and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets.

Weekly Speculator Changes led by Cotton & Sugar

The COT soft commodities markets speculator bets were lower this week as five out of the eleven softs markets we cover had higher positioning while the other six markets had lower speculator contracts.

Leading the gains for the softs markets was Cotton (20,764 contracts) with Sugar (2,981 contracts), Coffee (1,713 contracts), Soybean Oil (1,620 contracts) and Cocoa (1,319 contracts) also showing positive weeks.

The markets with the declines in speculator bets this week were Corn (-13,808 contracts) with Soybeans (-8,949 contracts), Soybean Meal (-2,319 contracts), Wheat (-4,907 contracts), Live Cattle (-469 contracts) and Lean Hogs (-5,118 contracts) also registering lower bets on the week.

Highlights of Weekly positions:

Cotton speculative bets this week (+20,764 contracts) jumped by the highest weekly amount in over a year. This has brought the current speculator standing to the most bullish level (+22,319 contracts) since October of 2021. Cotton prices have had a big downfall since their highs in May of 2022 with a peak-to-trough drop of over 50 percent but looked to have bottomed for the time being.

Soybeans bets have dropped sharply over the past two months with speculator positions falling for seven straight weeks. The current net position for Soybeans is at the lowest level since November of 2021 due to an expectation of a record crop in the United States.

Wheat speculator bets dipped again this week and have declined in ten out of the past fourteen weeks. Wheat prices have cooled off markedly since screaming higher at the onset of the Russian invasion of Ukraine. The futures price has fallen over 50 percent from the highest levels of 2022 and has recently crossed below the 200-week moving average.

Corn speculator positions declined this week and have now fallen by a total of -167,903 contracts over the past 5-week period. This recent bearishness has brought the speculator positioning into an overall bearish level for the first time since August of 2020. Like many of the other agriculture soft commodities, Corn prices are down from their 2022 highs with the current Corn level lower by about 25 percent from May 2022.

Data Snapshot of Commodity Market Traders | Columns Legend

May-23-2023	OI	OI-Index	Spec-Net	Spec-Index	Com-Net	COM-Index	Smalls-Net	Smalls-Index
WTI Crude	1,847,901	40	193,119	9	-217,386	91	24,267	28
Gold	479,080	26	160,732	48	-187,023	52	26,291	46
Silver	135,740	21	21,958	50	-34,972	52	13,014	39
Copper	215,394	55	-29,808	2	27,496	97	2,312	33
Palladium	11,138	71	-5,289	17	5,669	85	-380	19
Platinum	73,079	82	27,479	79	-32,157	27	4,678	31
Natural Gas	1,338,868	76	-112,278	27	80,837	72	31,441	55
Brent	146,776	19	-47,806	10	45,210	92	2,596	44
Heating Oil	306,360	39	9,097	43	-16,705	80	7,608	25
Soybeans	651,248	17	29,205	1	-2,404	96	-26,801	28
Corn	1,299,841	14	-62,267	22	115,832	88	-53,565	23
Coffee	198,683	11	32,748	61	-33,373	43	625	20
Sugar	983,887	67	273,810	88	-323,323	11	49,513	67
Wheat	379,453	54	-86,319	3	80,586	98	5,733	93

Strength Scores led by Cocoa & Live Cattle

COT Strength Scores (a normalized measure of Speculator positions over a 3-Year range, from 0 to 100 where above 80 is Extreme-Bullish and below 20 is Extreme-Bearish) showed that Cocoa (100 percent) and Live Cattle (92 percent) lead the softs markets this week. Sugar (88 percent), Soybean Meal (65 percent) and Coffee (61 percent) come in as the next highest in the weekly strength scores.

On the downside, Lean Hogs (0 percent), Soybean Oil (1 percent), Soybeans (1 percent) and the Wheat (3 percent) come in at the lowest strength levels currently and are in Extreme-Bearish territory (below 20 percent).

Strength Statistics:
Corn (22.1 percent) vs Corn previous week (23.8 percent)
Sugar (87.7 percent) vs Sugar previous week (86.7 percent)
Coffee (61.0 percent) vs Coffee previous week (59.3 percent)
Soybeans (0.6 percent) vs Soybeans previous week (4.2 percent)
Soybean Oil (0.9 percent) vs Soybean Oil previous week (0.0 percent)
Soybean Meal (65.1 percent) vs Soybean Meal previous week (66.3 percent)
Live Cattle (92.1 percent) vs Live Cattle previous week (92.6 percent)
Lean Hogs (0.0 percent) vs Lean Hogs previous week (4.3 percent)
Cotton (25.5 percent) vs Cotton previous week (9.9 percent)
Cocoa (100.0 percent) vs Cocoa previous week (98.4 percent)
Wheat (2.8 percent) vs Wheat previous week (6.4 percent)

Cotton & Coffee top the 6-Week Strength Trends

COT Strength Score Trends (or move index, calculates the 6-week changes in strength scores) showed that Cotton (19 percent) and Coffee (8 percent) lead the past six weeks trends for soft commodities. Live Cattle (8 percent), Cocoa (7 percent) and Sugar (5 percent) are the next highest positive movers in the latest trends data.

Soybeans (-59 percent) leads the downside trend scores currently with Corn (-21 percent), Wheat (-14 percent) and Soybean Oil (-13 percent) following next with lower trend scores.

Strength Trend Statistics:
Corn (-21.2 percent) vs Corn previous week (-17.1 percent)
Sugar (5.0 percent) vs Sugar previous week (8.6 percent)
Coffee (8.1 percent) vs Coffee previous week (18.9 percent)
Soybeans (-59.0 percent) vs Soybeans previous week (-57.4 percent)
Soybean Oil (-12.6 percent) vs Soybean Oil previous week (-11.8 percent)
Soybean Meal (-3.1 percent) vs Soybean Meal previous week (-0.4 percent)
Live Cattle (7.9 percent) vs Live Cattle previous week (17.9 percent)
Lean Hogs (-8.2 percent) vs Lean Hogs previous week (-7.5 percent)
Cotton (19.3 percent) vs Cotton previous week (6.2 percent)
Cocoa (6.6 percent) vs Cocoa previous week (4.6 percent)
Wheat (-14.3 percent) vs Wheat previous week (-15.0 percent)

Individual Soft Commodities Markets:

CORN Futures:

The CORN large speculator standing this week equaled a net position of -62,267 contracts in the data reported through Tuesday. This was a weekly lowering of -13,808 contracts from the previous week which had a total of -48,459 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 22.1 percent. The commercials are Bullish-Extreme with a score of 88.4 percent and the small traders (not shown in chart) are Bearish with a score of 22.6 percent.

CORN Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	21.8	52.5	9.0
– Percent of Open Interest Shorts:	26.6	43.6	13.1
– Net Position:	-62,267	115,832	-53,565
– Gross Longs:	282,880	682,886	116,884
– Gross Shorts:	345,147	567,054	170,449
– Long to Short Ratio:	0.8 to 1	1.2 to 1	0.7 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	22.1	88.4	22.6
– Strength Index Reading (3 Year Range):	Bearish	Bullish-Extreme	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-21.2	22.9	3.7

SUGAR Futures:

The SUGAR large speculator standing this week equaled a net position of 273,810 contracts in the data reported through Tuesday. This was a weekly increase of 2,981 contracts from the previous week which had a total of 270,829 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 87.7 percent. The commercials are Bearish-Extreme with a score of 11.0 percent and the small traders (not shown in chart) are Bullish with a score of 67.1 percent.

SUGAR Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	35.6	39.2	9.4
– Percent of Open Interest Shorts:	7.8	72.1	4.3
– Net Position:	273,810	-323,323	49,513
– Gross Longs:	350,244	386,150	92,284
– Gross Shorts:	76,434	709,473	42,771
– Long to Short Ratio:	4.6 to 1	0.5 to 1	2.2 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	87.7	11.0	67.1
– Strength Index Reading (3 Year Range):	Bullish-Extreme	Bearish-Extreme	Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	5.0	-1.8	-10.5

COFFEE Futures:

The COFFEE large speculator standing this week equaled a net position of 32,748 contracts in the data reported through Tuesday. This was a weekly gain of 1,713 contracts from the previous week which had a total of 31,035 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 61.0 percent. The commercials are Bearish with a score of 42.7 percent and the small traders (not shown in chart) are Bearish with a score of 20.2 percent.

COFFEE Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	27.0	44.6	3.7
– Percent of Open Interest Shorts:	10.5	61.4	3.3
– Net Position:	32,748	-33,373	625
– Gross Longs:	53,687	88,628	7,267
– Gross Shorts:	20,939	122,001	6,642
– Long to Short Ratio:	2.6 to 1	0.7 to 1	1.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	61.0	42.7	20.2
– Strength Index Reading (3 Year Range):	Bullish	Bearish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	8.1	-8.1	3.2

SOYBEANS Futures:

The SOYBEANS large speculator standing this week equaled a net position of 29,205 contracts in the data reported through Tuesday. This was a weekly lowering of -8,949 contracts from the previous week which had a total of 38,154 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.6 percent. The commercials are Bullish-Extreme with a score of 96.0 percent and the small traders (not shown in chart) are Bearish with a score of 28.4 percent.

SOYBEANS Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	21.3	53.9	6.8
– Percent of Open Interest Shorts:	16.8	54.3	11.0
– Net Position:	29,205	-2,404	-26,801
– Gross Longs:	138,687	351,024	44,581
– Gross Shorts:	109,482	353,428	71,382
– Long to Short Ratio:	1.3 to 1	1.0 to 1	0.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	0.6	96.0	28.4
– Strength Index Reading (3 Year Range):	Bearish-Extreme	Bullish-Extreme	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-59.0	50.6	7.0

SOYBEAN OIL Futures:

The SOYBEAN OIL large speculator standing this week equaled a net position of -27,863 contracts in the data reported through Tuesday. This was a weekly lift of 1,620 contracts from the previous week which had a total of -29,483 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.9 percent. The commercials are Bullish-Extreme with a score of 99.3 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 5.6 percent.

SOYBEAN OIL Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	16.0	55.8	5.6
– Percent of Open Interest Shorts:	21.2	50.5	5.8
– Net Position:	-27,863	28,911	-1,048
– Gross Longs:	86,842	302,248	30,161
– Gross Shorts:	114,705	273,337	31,209
– Long to Short Ratio:	0.8 to 1	1.1 to 1	1.0 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	0.9	99.3	5.6
– Strength Index Reading (3 Year Range):	Bearish-Extreme	Bullish-Extreme	Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-12.6	10.9	3.0

SOYBEAN MEAL Futures:

The SOYBEAN MEAL large speculator standing this week equaled a net position of 110,022 contracts in the data reported through Tuesday. This was a weekly decline of -2,319 contracts from the previous week which had a total of 112,341 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 65.1 percent. The commercials are Bearish with a score of 40.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 0.0 percent.

SOYBEAN MEAL Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	28.5	38.4	9.1
– Percent of Open Interest Shorts:	5.5	63.4	7.0
– Net Position:	110,022	-119,902	9,880
– Gross Longs:	136,546	184,271	43,425
– Gross Shorts:	26,524	304,173	33,545
– Long to Short Ratio:	5.1 to 1	0.6 to 1	1.3 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	65.1	40.0	0.0
– Strength Index Reading (3 Year Range):	Bullish	Bearish	Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-3.1	7.4	-36.9

LIVE CATTLE Futures:

The LIVE CATTLE large speculator standing this week equaled a net position of 101,647 contracts in the data reported through Tuesday. This was a weekly fall of -469 contracts from the previous week which had a total of 102,116 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 92.1 percent. The commercials are Bearish-Extreme with a score of 12.2 percent and the small traders (not shown in chart) are Bearish with a score of 24.0 percent.

LIVE CATTLE Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	45.6	27.0	9.7
– Percent of Open Interest Shorts:	15.0	54.1	13.3
– Net Position:	101,647	-89,891	-11,756
– Gross Longs:	151,178	89,344	32,235
– Gross Shorts:	49,531	179,235	43,991
– Long to Short Ratio:	3.1 to 1	0.5 to 1	0.7 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	92.1	12.2	24.0
– Strength Index Reading (3 Year Range):	Bullish-Extreme	Bearish-Extreme	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	7.9	-2.6	-27.2

LEAN HOGS Futures:

The LEAN HOGS large speculator standing this week equaled a net position of -33,852 contracts in the data reported through Tuesday. This was a weekly fall of -5,118 contracts from the previous week which had a total of -28,734 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.0 percent. The commercials are Bullish-Extreme with a score of 100.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 98.8 percent.

LEAN HOGS Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	25.8	37.8	10.6
– Percent of Open Interest Shorts:	40.3	24.7	9.1
– Net Position:	-33,852	30,405	3,447
– Gross Longs:	60,033	88,003	24,705
– Gross Shorts:	93,885	57,598	21,258
– Long to Short Ratio:	0.6 to 1	1.5 to 1	1.2 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	0.0	100.0	98.8
– Strength Index Reading (3 Year Range):	Bearish-Extreme	Bullish-Extreme	Bullish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-8.2	8.0	4.4

COTTON Futures:

The COTTON large speculator standing this week equaled a net position of 22,319 contracts in the data reported through Tuesday. This was a weekly rise of 20,764 contracts from the previous week which had a total of 1,555 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 25.5 percent. The commercials are Bullish with a score of 72.7 percent and the small traders (not shown in chart) are Bearish with a score of 38.5 percent.

COTTON Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	32.9	46.0	6.7
– Percent of Open Interest Shorts:	21.4	59.5	4.8
– Net Position:	22,319	-26,017	3,698
– Gross Longs:	63,540	88,722	13,024
– Gross Shorts:	41,221	114,739	9,326
– Long to Short Ratio:	1.5 to 1	0.8 to 1	1.4 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	25.5	72.7	38.5
– Strength Index Reading (3 Year Range):	Bearish	Bullish	Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	19.3	-19.7	21.1

COCOA Futures:

The COCOA large speculator standing this week equaled a net position of 65,374 contracts in the data reported through Tuesday. This was a weekly increase of 1,319 contracts from the previous week which had a total of 64,055 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bullish with a score of 50.3 percent.

COCOA Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	42.4	29.0	4.7
– Percent of Open Interest Shorts:	23.0	50.1	3.1
– Net Position:	65,374	-70,745	5,371
– Gross Longs:	142,438	97,452	15,901
– Gross Shorts:	77,064	168,197	10,530
– Long to Short Ratio:	1.8 to 1	0.6 to 1	1.5 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	100.0	0.0	50.3
– Strength Index Reading (3 Year Range):	Bullish-Extreme	Bearish-Extreme	Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	6.6	-6.8	2.1

WHEAT Futures:

The WHEAT large speculator standing this week equaled a net position of -86,319 contracts in the data reported through Tuesday. This was a weekly reduction of -4,907 contracts from the previous week which had a total of -81,412 net contracts.

This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 2.8 percent. The commercials are Bullish-Extreme with a score of 97.7 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 92.8 percent.

WHEAT Futures Statistics	SPECULATORS	COMMERCIALS	SMALL TRADERS
– Percent of Open Interest Longs:	29.6	37.2	9.8
– Percent of Open Interest Shorts:	52.4	16.0	8.3
– Net Position:	-86,319	80,586	5,733
– Gross Longs:	112,390	141,282	37,340
– Gross Shorts:	198,709	60,696	31,607
– Long to Short Ratio:	0.6 to 1	2.3 to 1	1.2 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):	2.8	97.7	92.8
– Strength Index Reading (3 Year Range):	Bearish-Extreme	Bullish-Extreme	Bullish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:	-14.3	15.3	4.7

Article By InvestMacro – Receive our weekly COT Newsletter

*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets.

The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting). See CFTC criteria here.

25 May

Farmers face a soaring risk of flash droughts in every major food-growing region in coming decades, new research shows

By Jeff Basara, University of Oklahoma and Jordan Christian, University of Oklahoma

Flash droughts develop fast, and when they hit at the wrong time, they can devastate a region’s agriculture.

They’re also becoming increasingly common as the planet warms.

In a new study published May 25, 2023, we found that the risk of flash droughts, which can develop in the span of a few weeks, is on pace to rise in every major agriculture region around the world in the coming decades.

In North America and Europe, cropland that had a 32% annual chance of a flash drought a few years ago could have as much as a 53% annual chance of a flash drought by the final decades of this century. The result would put food production, energy and water supplies under increasing pressure. The cost of damage will also rise. A flash drought in the Dakotas and Montana in 2017 caused US$2.6 billion in agricultural damage in the U.S. alone.

How flash droughts develop

All droughts begin when precipitation stops. What’s interesting about flash droughts is how fast they reinforce themselves, with some help from the warming climate.

When the weather is hot and dry, soil loses moisture rapidly. Dry air extracts moisture from the land, and rising temperatures can increase this “evaporative demand.” The lack of rain during a flash drought can further contribute to the feedback processes.

Under these conditions, crops and vegetation begin to die much more quickly than they do during typical long-term droughts.

Global warming and flash droughts

In our new study, we used climate models and data from the past 170 years to gauge the drought risks ahead under three scenarios for how quickly the world takes action to slow global warming.

If greenhouse gas emissions from vehicles, power plants and other human sources continue at a high rate, we found that cropland in much of North America and Europe would have a 49% and 53% annual chance of flash droughts, respectively, by the final decades of this century. Globally, the largest projected increases would be in Europe and the Amazon.

Slowing emissions can reduce the risk significantly, but we found flash droughts would still increase by about 6% worldwide under a low-emissions scenario.

Charts show the amount of cropland experiencing flash droughts today in Africa, Asia, Australia, North America, South America and Europe, and project how flash drought exposure will increase based on greenhouse gas emissions that drive global warming. — Climate models indicate that more land will be in flash drought in every region in the coming decades. Three scenarios show how low (SSP126), medium (SSP245) and high (SSP585) emissions are likely to affect the amount of land in flash drought. In some regions, rising global emissions will bring more extreme rainfall, offsetting drought.
Jordan Christian

Timing is everything for agriculture

We’ve lived through a number of flash drought events, and they’re not pleasant. People suffer. Farmers lose crops. Ranchers may have to sell off cattle. In 2022, a flash drought slowed barge traffic on the Mississippi River, which carries more than 90% of U.S. agriculture exports.

If a flash drought occurs at a critical point in the growing season, it could devastate an entire crop.

Corn, for example, is most vulnerable during its flowering phase, called silking. That typically happens in the heat of summer. If a flash drought occurs then, it’s likely to have extreme consequences. However, a flash drought closer to harvest can actually help farmers, as they can get their equipment into the fields more easily.

In the southern Great Plains, winter wheat is at its highest risk during seeding, in September to October the year before the crop’s spring harvest. When we looked at flash droughts in that region during that fall seeding period, we found greatly reduced yields the following year.

Looking globally, paddy rice, a staple for more than half the global population, is at risk in northeast China and other parts of Asia. Other crops are at risk in Europe.

Ranches can also be hit hard by flash droughts. During the huge flash drought in 2012 in the central U.S., cattle ran out of forage and water became scarcer. If rain doesn’t fall during the growing season for natural grasses, cattle don’t have food, and ranchers may have little choice but to sell off part of their herds. Again, timing is everything.

It’s not just agriculture. Energy and water supplies can be at risk, too. Europe’s intense summer drought in 2022 started as a flash drought that became a larger event as a heat wave settled in. Water levels fell so low in some rivers that power plants shut down because they couldn’t get water for cooling, compounding the region’s problems. Events like those are a window into what countries are already facing and could see more of in the future.

Not every flash drought will be as severe as what the U.S. and Europe saw in 2012 and 2022, but we’re concerned about what may be ahead.

A flash drought developed in the span of a few weeks in 2019. NASA Earth Observatory

Can agriculture adapt?

One way to help agriculture adapt to the rising risk is to improve forecasts for rainfall and temperature, which can help farmers as they make crucial decisions, such as whether they’ll plant or not.

When we talk with farmers and ranchers, they want to know what the weather will look like over the next one to six months. Meteorology is pretty adept at short-term forecasts that look out a couple of weeks, and at longer-term climate forecasts using computer models. But flash droughts evolve in a midrange window of time that is difficult to forecast.

We’re tackling the challenge of monitoring and improving the lead time and accuracy of forecasts for flash droughts, as are other scientists. For example, the United States Drought Monitor has developed an experimental short-term map that can display developing flash droughts. As scientists learn more about the conditions that cause flash droughts and about their frequency and intensity, forecasts and monitoring tools will improve.

Increasing awareness can also help. If short-term forecasts show that an area is not likely to get its usual precipitation, that should immediately set off alarm bells. If forecasters are also seeing the potential for increased temperatures, that heightens the risk for a flash drought’s developing.

Nothing is getting easier for farmers and ranchers as global temperatures rise. Understanding the risk from flash droughts will help them, and anyone concerned with water resources, manage yet another challenge of the future.

About the Author:

Jeff Basara, Associate Professor of Meteorology, University of Oklahoma and Jordan Christian, Postdoctoral Researcher in Meteorology, University of Oklahoma

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Opinions Soft Commodities

29 Apr

Speculators boost Cocoa bullish bets to highest since March 2020

By InvestMacro

Here are the latest charts and statistics for the Commitment of Traders (COT) reports data published by the Commodities Futures Trading Commission (CFTC).

The latest COT data is updated through Tuesday April 25th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets.

Weekly Speculator Changes led by Cocoa & Sugar

The COT soft commodities markets speculator bets were lower this week as three out of the eleven softs markets we cover had higher positioning while the other eight markets had lower speculator contracts.

Leading the gains for the softs markets was Sugar (10,356 contracts) with Cocoa (2,359 contracts) and Lean Hogs (135 contracts) also showing positive weeks.

The markets with the declines in speculator bets this week were Corn (-80,988 contracts), Soybeans (-73,414 contracts), Wheat (-12,652 contracts), Soybean Meal (-19,017 contracts), Cotton (-9,883 contracts), Soybean Oil (-8,806 contracts), Coffee (-409 contracts) and Live Cattle (-38 contracts).

Cocoa bullish bets hit highest since March 2020

Highlighting the COT soft commodities data this week is the multi-year high in bullish bets of the Cocoa speculator’s positioning. The large speculator bets for Cocoa rose this week for the first time in the past four weeks but the boost pushed the overall net position to its highest level since 2020. This week’s gain brought the Cocoa speculator net position to a total of +61,714 contracts which marks the most bullish level of the past 164 weeks, dating back to March 10th of 2020.

Cocoa trader sentiment and futures prices have been pushed higher recently due to increased demand and because of supply issues arising out of Africa. Nigeria’s exports as well as the Ivory Coast’s exports have been on the decline while dryer weather conditions have also hampered production on the continent. Meanwhile, the demand for Cocoa is being forecast to grow approximately 5 percent annually for the next decade.

The Cocoa futures price fell modestly this week but has been on a strong bullish trend since hitting a recent low in September. Last week, the futures price hit its highest level since 2016 right around the 2995 price before retreating this week to 2937.

Data Snapshot of Commodity Market Traders | Columns Legend

Apr-25-2023	OI	OI-Index	Spec-Net	Spec-Index	Com-Net	COM-Index	Smalls-Net	Smalls-Index
WTI Crude	1,826,195	38	236,438	20	-271,197	79	34,759	53
Gold	473,209	24	185,264	59	-211,928	42	26,664	47
Silver	149,692	37	30,603	62	-41,523	44	10,920	27
Copper	202,422	44	-17,042	13	8,304	80	8,738	74
Palladium	12,270	88	-5,877	11	6,309	90	-432	16
Platinum	72,125	79	29,617	84	-34,316	23	4,699	31
Natural Gas	1,274,536	63	-136,150	18	105,774	82	30,376	52
Brent	140,321	6	-40,564	26	36,713	73	3,851	61
Heating Oil	268,225	23	7,593	40	-16,018	81	8,425	28
Soybeans	630,935	12	104,096	30	-76,491	70	-27,605	26
Corn	1,242,943	7	24,648	33	34,700	77	-59,348	18
Coffee	192,927	7	36,592	65	-37,705	38	1,113	26
Sugar	959,708	61	279,528	90	-335,640	7	56,112	76
Wheat	366,390	47	-83,188	0	75,369	100	7,819	100

Strength Scores led by Cocoa & Live Cattle

COT Strength Scores (a normalized measure of Speculator positions over a 3-Year range, from 0 to 100 where above 80 is Extreme-Bullish and below 20 is Extreme-Bearish) showed that Cocoa (100 percent) and Live Cattle (93 percent) lead the softs markets this week. Sugar (90 percent), Soybean Meal (66 percent) and Coffee (65 percent) come in as the next highest in the weekly strength scores.

On the downside, Lean Hogs (0 percent), Soybean Oil (0 percent), Wheat (0 percent) and the Cotton (5 percent) come in at the lowest strength levels currently and are in Extreme-Bearish territory (below 20 percent).

Strength Statistics:
Corn (33.2 percent) vs Corn previous week (43.5 percent)
Sugar (89.8 percent) vs Sugar previous week (86.1 percent)
Coffee (64.9 percent) vs Coffee previous week (65.4 percent)
Soybeans (30.1 percent) vs Soybeans previous week (58.9 percent)
Soybean Oil (0.0 percent) vs Soybean Oil previous week (5.5 percent)
Soybean Meal (65.7 percent) vs Soybean Meal previous week (75.6 percent)
Live Cattle (92.5 percent) vs Live Cattle previous week (92.5 percent)
Lean Hogs (0.1 percent) vs Lean Hogs previous week (0.0 percent)
Cotton (4.6 percent) vs Cotton previous week (12.1 percent)
Cocoa (100.0 percent) vs Cocoa previous week (97.0 percent)
Wheat (0.0 percent) vs Wheat previous week (9.7 percent)

Cocoa & Coffee top the 6-Week Strength Trends

COT Strength Score Trends (or move index, calculates the 6-week changes in strength scores) showed that Cocoa (38 percent) and Coffee (25 percent) lead the past six weeks trends for soft commodities. Sugar (17 percent) and Live Cattle (7 percent) are the next highest positive movers in the latest trends data.

Soybeans (-25 percent) leads the downside trend scores currently with Soybean Meal (-24 percent), Lean Hogs (-19 percent) and Wheat (-14 percent) following next with lower trend scores.

Strength Trend Statistics:
Corn (-2.4 percent) vs Corn previous week (0.3 percent)
Sugar (17.1 percent) vs Sugar previous week (10.1 percent)
Coffee (24.9 percent) vs Coffee previous week (22.5 percent)
Soybeans (-25.1 percent) vs Soybeans previous week (-1.1 percent)
Soybean Oil (-12.0 percent) vs Soybean Oil previous week (-19.5 percent)
Soybean Meal (-24.2 percent) vs Soybean Meal previous week (-24.4 percent)
Live Cattle (7.4 percent) vs Live Cattle previous week (-7.5 percent)
Lean Hogs (-18.9 percent) vs Lean Hogs previous week (-17.5 percent)
Cotton (-2.0 percent) vs Cotton previous week (-1.1 percent)
Cocoa (37.7 percent) vs Cocoa previous week (5.9 percent)
Wheat (-13.8 percent) vs Wheat previous week (2.1 percent)