Note: Using the z-score in the tables below as a coefficient of variation for standard error helps us flag the relative market positioning of the commodities in the CRB Index. It is not intended as a predictive signal for the reversion to trailing twelve month historical averages. For week-end price data, please refer to “Commodities: Weekly Quant” published at the end of the previous week. Feel free to ping us for additional color.
1. CFTC Net Futures and Options Positioning CRB Index: The Commodities Futures Trading Commission (CFTC) releases “Commitments of Traders Reports” at 3:30 p.m. Eastern Time on Friday. The release usually includes data from the previous Tuesday (Net Positions as of Tuesday Close), and includes the net positions of “non-commercial” futures and options participants. A “Non-Commercial” market participant is defined as a “speculator.” We observe the weekly marginal changes in the overall positioning of “non-commercial” futures and options positions to assess the directionally-biased capitulation risk among those with large, speculative positions.
The SOYBEANS, COTTON, AND GOLD markets experienced the most BULLISH relative positioning change in the CRB week-over-week
The ORANGE JUICE, SILVER, AND COPPER markets experienced the most BEARISH relative positioning change in the CRB week-over-week
- Note that we are currently bearish on both copper and oil. On oil, we outlined our bearish case on in a few recent notes. Please see the links below for color:
- To summarize, we consider formal production cuts out of OPEC’s November 27th meeting highly unlikely and think this expectation will disappoint as a bull catalyst.
- The expectation for a supply/demand floor is not a near-term catalyst to backstop volatility-induced, real-time market moves.
We’ll be hosting a call tomorrow with an analysis of production costs for North American shale plays. In short, we believe consensus underestimates the rapid technological advancement in oil and gas extraction from shale resources. See the link below or email for access to the call:
2. Spot – Second Month Basis Differential: Measures the market expectation for forward looking prices in the near-term.
- The CORN, WHEAT, AND COFFEE markets are positioned for HIGHER PRICES near-term
- The COTTON, RBOB GASOLINE, AND LEAN HOGS markets are positioned for LOWER PRICES near-term
3. Spot – 1 Year Basis Differential: Measures the market expectation for forward-looking prices between spot and the respective contract expiring 1-year later.
- The CORN, SUGAR, AND WHEAT markets are positioned for HIGHER PRICES in 1-year
- The LEAN HOGS, LIVE CATTLE, AND COCOA markets are positioned for LOWER PRICES in 1-year
4. Open Interest: Aggregate open interest measures the amount of opened positions in all actively traded futures contract months. Open interest can be thought of as “naked” or “directionally-biased” contracts as opposed to hedgers scalping and providing liquidity. Most of the open interest is created from large speculators or participants who are either: 1) Producers/sellers of the physical commodity hedging their cash market exposure or 2) Large speculators who are directionally-biased on price.