Updated on: December 21, 2024
- Legacy COT net positions: Large Speculators
- Historical non-commercial net positioning in agricultural commodities
- CFTC net-positions in 2024 versus historic seasonality: Parametric weekly estimate of seasonality (Method 1)
- CFTC net-positions in 2024 versus historic seasonality: Non-parametric monthly estimate of seasonality (Method 2)
- CFTC net-positions in 2024 versus historic seasonality: parametric monthly estimate of seasonality (Method 3)
- 5-Minute Takeaways:
- Price- CFTC Position Correlation: Changes in commodity futures prices often move in tandem with shifts in fund positions reported by the CFTC. This correlation is a key factor in market analysis.
- Seasonal Patterns: Just as futures prices show seasonal trends, CFTC positions typically follow similar patterns. These patterns are largely driven by global production cycles, which vary by commodity. For example, soybeans, soybean meal and corn futures show similar seasonal trends compared to wheat or soybean oil, reflecting their distinct production and consumption cycles. In particula demand for soybean oil depends on energy demand cycle.
- Predictability of Seasonal Components: Three conceptualy similar but technically distinct methods were applied to estimate seasonal effects. Our analysis shows that seasonal factors account for 60-70% of the variance in CFTC positions within a year. This means that a significant portion of position changes can be anticipated based on historical seasonal trends.
- Deviations from the Norm: While seasonal patterns are strong, they're not absolute. Production cycles can shift from year to year due to various factors (weather, geopolitics, etc.).
- Practical Application: Monitor CFTC reports in conjunction with seasonal analysis of futures prices. Look for instances where positions are significantly different from what seasonal patterns would suggest β these could indicate potential market turning points or continuation of strong trends.
The figure below shows a model-based estimate of the average seasonal pattern in CFTC net positions (light blue), while the solid line represents the current fund positioning. Low points in the chart reflect bearish sentiment and potential for price decreases. However, extremely low speculative positions may also signal a potential for reversal, as they are sometimes viewed as a contrarian indicator, suggesting the market might be oversold.
When the solid line is above the seasonal trend, it can indicate stronger demand or weaker supply conditions relative to the seasonal average. Conversely, when the solid line is below the seasonal trend, it may suggest better-than-average supply conditions or weaker demand relative to expectations.