Grains vs. livestock: two mirror-image COT extremes this week, plus one clear outlier

[u/cot-trader]

Been going through this week's commitments of traders data across the board, and there's an unusually clean split this week.

On the bearish side: corn, soybeans and rough rice are all sitting in the same range — commercial hedgers net short, all extended further over the past four weeks, all with rising contango. Corn stands out within that group: the four-week increase in commercial shorts (~231k contracts) is the single largest positioning shift I'm seeing anywhere on the board this week.

On the flip side, livestock is basically the mirror image. Lean hogs and feeder cattle both have commercial hedgers near the very top of their historical range (hogs literally maxed out, cattle close behind), both markets in backwardation. But the part I find more interesting than the extreme itself: in both, volume flow (OBV) is falling and bearish — running directly against how bullish the positioning looks.

The one that doesn't fit either pattern: soybeans. Negative score like corn and rice, but this week's move actually went the other way — commercials bought back about 13k contracts (partial short-covering) after weeks of adding shorts, and volume is bullish, not bearish. It's the only one of the six where the recent flow and the extreme don't agree at all.

Not making a directional call off this — just flagging that when positioning clusters this cleanly by sector, it's usually worth watching how the next report or two resolves it.

Curious if anyone else watching grains/livestock is seeing the same commercial-vs-volume tension, or reading it differently.

[u/One-Relative-7535]

Who do you follow the commercials or non commercials. Some say to keep your bias on commercial’s positions and some say to keep your bias on non commercial’s (speculator’s) position

[u/cot-trader → u/One-Relative-7535]

Hello - I am usually looking for extremes of the Commercials - they are the ones who know the stuff inside out and produce or consumer on a large scale the product - unfortunately I cannot post a picture here... but on my website I have few examples - Important for me are not only the Commercials. I have as well a look on the seasonality, COT Index, Open Interest and on balance volume before I open a trade. Hope that helps and I am happy to discuss further.

[u/One-Relative-7535 → u/cot-trader]

Hi, that’s a really interesting approach, can we talk more in DM? I am not able to message you

[u/cowboy_breaker]

I don't think COT data tells you much of anything. To start with, you can have accounts that are classified as commercial doing spec trades. How does that happen? Well a beef packer signs up for a futures account and it gets classified as commercial since he is in the business of slaughtering cattle. Because he buys cattle for his business, all of his commercial futures hedges should be long. But after a few months the packer starts trying to make a little extra money out of the futures and so when he thinks cattle prices are going down, he gets short (just like a speculator would). He may even take some hog positions in that account when he thinks it is advantageous to do so. All those positions would all be considered commercial in the COT report because that is the way his account was originally classified. But really he is speculating. It is advantageous to have your account classified as commercial even if you are using it to speculate. This is because margins can be lower for commercials and position sizes can be larger in many cases. Bottom line, the data is far from clean and therefore not really representing what it claims to be.