Index funds may have been buying thousands of contracts of wheat, corn and soybeans during the second week of January, but because it was known well in advance, it produced little to no price response. "Open interest swelled tremendously ahead of the rebalancing, as other speculators bought with the hope of selling at higher prices as the Index buying came in,” explains Justin Kelly president of eHedger.
"Now we have a bunch of people holding long positions scrambling to get out. When you have 300,000 longs in the contract all heading out the door at the same time, things can't help but to look bearish,” he says.
"USDA's reports didn't help, forcing those who wanted to sell to take 50¢ less. We'll see some pressure as farmers move some inventory to raise cash as well, and soybeans will feel the pressure of the big South American crop coming into the market. So for now, we'll consider selling aggressively on any two or three day rally.”