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Market Sentiment
Neutral
Based on the latest 13 weeks of non-commercial positioning data. ℹ️

BLACK SEA WHEAT FINANCIAL (Non-Commercial)

13-Wk Max 8,547 3,162 715 300 5,439
13-Wk Min 3,620 2,696 -1,940 -462 701
13-Wk Avg 6,751 2,904 -393 13 3,847
Report Date Long Short Change Long Change Short Net Position Rate of Change (ROC) ℹ️ Open Int.
February 22, 2022 3,990 2,919 370 0 1,071 52.78% 10,811
February 15, 2022 3,620 2,919 -975 0 701 -58.17% 10,519
February 8, 2022 4,595 2,919 -925 -63 1,676 -33.96% 10,847
February 1, 2022 5,520 2,982 -1,940 247 2,538 -46.29% 12,046
January 25, 2022 7,460 2,735 715 35 4,725 16.81% 13,139
January 18, 2022 6,745 2,700 -1,030 -462 4,045 -12.31% 12,848
January 11, 2022 7,775 3,162 -772 54 4,613 -15.19% 13,427
January 4, 2022 8,547 3,108 352 87 5,439 5.12% 17,372
December 28, 2021 8,195 3,021 234 -50 5,174 5.81% 17,807
December 21, 2021 7,961 3,071 317 300 4,890 0.35% 18,552
December 14, 2021 7,644 2,771 54 75 4,873 -0.43% 17,859
December 7, 2021 7,590 2,696 -532 -50 4,894 -8.97% 17,886
November 30, 2021 8,122 2,746 -977 0 5,376 -15.38% 18,339

Net Position (13 Weeks) - Non-Commercial

Change in Long and Short Positions (13 Weeks) - Non-Commercial

COT Interpretation for WHEAT

Comprehensive Guide to COT Reports for Agricultural Markets

Table of Contents

Introduction

The Commitment of Traders (COT) reports are particularly valuable for agricultural commodity markets, where a complex mix of producers, processors, speculators, and index funds creates unique market dynamics. This specialized guide focuses on applying COT analysis specifically to agricultural futures markets to gain trading and hedging advantages.

Agricultural markets present distinct characteristics in COT reports due to their seasonal production cycles, weather dependencies, global supply chain factors, and the essential nature of these commodities in the food supply chain. Understanding these nuances can provide significant analytical advantages.

Agricultural COT Reports: Key Characteristics

The CFTC provides specialized report formats that are particularly relevant for agricultural markets:

  1. Supplemental COT Report

    Created specifically for agricultural commodities to address the growing influence of index traders. This report separates index traders from the traditional commercial category, providing greater visibility into true commercial hedging versus passive long-only index investment.

  2. Disaggregated COT Report

    Particularly useful for agricultural markets as it separates:

    • Producer/Merchant/Processor/User: Actual agricultural industry participants
    • Swap Dealers: Often representing index exposure
    • Managed Money: Speculative funds and commodity trading advisors
    • Other Reportables: Other large traders
    • Non-Reportable Positions: Smaller traders
  3. Combined Futures and Options Report

    Important for agricultural markets where options strategies are frequently used by producers and processors for hedging.

Agricultural Markets Covered

The COT reports cover the following major agricultural futures markets:

Grains and Oilseeds

  • Corn (CBOT)
  • Soybeans (CBOT)
  • Wheat (CBOT, KCBT, MGEX)
  • Soybean Oil (CBOT)
  • Soybean Meal (CBOT)
  • Oats (CBOT)
  • Rough Rice (CBOT)
  • Canola (ICE)

Softs

  • Cotton (ICE)
  • Coffee (ICE)
  • Sugar (ICE)
  • Cocoa (ICE)
  • Orange Juice (ICE)

Livestock

  • Live Cattle (CME)
  • Feeder Cattle (CME)
  • Lean Hogs (CME)

Dairy

  • Class III Milk (CME)

Special Considerations for Agricultural Markets

  1. Seasonality

    Agricultural COT data must be interpreted within the context of seasonal production cycles:

    • Planting Seasons: Typically see increased hedging by producers
    • Growing Seasons: Weather concerns can drive speculative activity
    • Harvest Periods: Often see peak short hedging by producers
    • Storage Periods: Commercial positions shift from producers to processors and merchants
  2. USDA Reports Impact

    Major USDA reports cause significant position adjustments:

    • Prospective Plantings (March)
    • Acreage Report (June)
    • Crop Production Reports (Monthly)
    • WASDE Reports (Monthly)
    • Grain Stocks Reports (Quarterly)
  3. Weather Sensitivity

    Weather events can drive rapid position changes:

    • Drought conditions
    • Excessive rainfall
    • Early/late frosts
    • Global weather patterns (El Niño/La Niña)
  4. Global Production Cycles

    Unlike financial markets, agricultural markets must account for different hemispheric growing seasons:

    • North American harvest vs. South American harvest
    • Northern vs. Southern Hemisphere production windows

Understanding Trader Categories in Agricultural Markets

Producer/Merchant/Processor/User

Who they are: Farmers, grain elevators, food companies, feed manufacturers

Trading behavior:

  • Producers typically hedge by selling futures (short)
  • Processors typically hedge by buying futures (long)
  • Net position often reflects current point in seasonal cycle

Interpretation keys:

  • Increasing short positions ahead of harvest indicates producer hedging
  • Increasing long positions indicates processor price risk management
  • Extreme positions relative to seasonal norms may signal price turning points

Swap Dealers in Agricultural Markets

Who they are: Banks and dealers who provide commodity index exposure to clients

Trading behavior:

  • Predominantly long-biased due to index composition
  • Position changes often reflect fund flows rather than price views
  • Less responsive to short-term price movements

Interpretation keys:

  • Significant position changes may reflect institutional money flows
  • Generally less predictive for short-term price movements
  • Important for understanding overall market structure

Managed Money in Agricultural Markets

Who they are: Commodity Trading Advisors (CTAs), hedge funds, commodity pools

Trading behavior:

  • Typically trend-following
  • Responsive to technical signals and fundamental data
  • More volatile position changes than other categories

Interpretation keys:

  • Extreme positions often signal potential market turning points
  • Rapid position changes may precede significant price movements
  • Divergences between positions and price can be powerful signals

Seasonal Patterns in Agricultural COT Data

Corn

  • January-March: Processors often increase long positions
  • April-June: Producer short hedging increases with planting progress
  • July-August: Weather markets drive speculative positioning
  • September-November: Peak producer short hedging during harvest
  • December: Year-end position squaring

Soybeans

  • February-April: South American harvest impacts positioning
  • May-July: U.S. growing season uncertainty drives speculative activity
  • August-October: Producer hedging increases ahead of U.S. harvest
  • November-January: Processor buying often increases post-harvest

Wheat

  • March-May: Winter wheat condition reports impact positioning
  • June-August: Northern Hemisphere harvest creates heavy commercial short positioning
  • September-October: Planting intentions for new crop influence positions
  • November-February: Southern Hemisphere harvest impacts

Cotton

  • February-April: Planting intentions drive positioning
  • May-July: Growing season uncertainties
  • August-October: Harvest hedging peaks
  • November-January: Mill buying often increases

Live Cattle

Demonstrates less pronounced seasonality than crops

  • Feedlot placement cycles influence commercial hedging patterns
  • Seasonal demand patterns (grilling season, holidays) affect processor hedging

Index Fund Impact on Agricultural Markets

Understanding Index Involvement

  • Commodity indices like the S&P GSCI and Bloomberg Commodity Index maintain significant agricultural exposure
  • Index funds maintain predominantly long positions with periodic rebalancing
  • The Supplemental COT Report specifically identifies index trader positions

Key Considerations

  • Index positions tend to be less responsive to short-term price movements
  • "Roll periods" when indices shift positions between contract months can create temporary price pressure
  • Index participation has grown significantly since early 2000s, altering traditional market dynamics

How to Use Index Data

  • Major changes in index positions may signal institutional asset allocation shifts
  • Divergences between index positioning and price can identify potential opportunities
  • Understanding index roll schedules helps anticipate potential market impacts

Case Studies: Major Agricultural Markets

Corn Market

Commercial Positioning: Typically net short, with seasonal variation

Key COT Signals:

  • Commercials reducing short positions during price declines often precedes rallies
  • Managed Money net position extremes frequently coincide with price turning points
  • Commercial vs. Managed Money position gaps widening signals potential reversals

Soybean Market

Commercial Positioning: Varies greatly with global supply dynamics

Key COT Signals:

  • South American harvest periods create unique positioning patterns
  • Processor long positions increasing can signal anticipated demand strength
  • Spread positions between soybeans and products (meal, oil) provide crush margin insights

Live Cattle Market

Commercial Positioning: Processors often net short, feedlots net long

Key COT Signals:

  • Pack
  • Packer short coverage often precedes price rallies
  • Extreme speculative long positions frequently signal potential tops
  • Divergences between feeder and live cattle positioning provide spread opportunities

Trading Strategies for Agricultural Markets

  1. Harvest Pressure Strategy

    Setup: Monitor producer short hedging building before/during harvest

    Entry: Look for commercial short position peaks coinciding with price lows

    Exit: When commercial shorts begin covering and prices stabilize

    Markets: Particularly effective in grains and cotton

  2. Weather Premium Fade

    Setup: Identify extreme speculative positions during weather scares

    Entry: When managed money reaches historical position extremes

    Exit: As weather concerns normalize and positions revert

    Markets: Particularly effective in growing-season grain markets

  3. Commercial Signal Strategy

    Setup: Track commercial position changes relative to price

    Entry: When commercials significantly reduce net short positions during price declines

    Exit: When commercials begin increasing short positions again as prices rise

    Markets: Works across most agricultural commodities

  4. Processor Demand Strategy

    Setup: Monitor processor long positions for signs of anticipated demand

    Entry: When processor longs increase significantly during price weakness

    Exit: When prices rise to reflect the improved demand outlook

    Markets: Particularly effective in processing crops like soybeans, cotton, and cattle

  5. Commercial/Speculator Divergence Strategy

    Setup: Identify growing gaps between commercial and speculative positioning

    Entry: When the gap reaches historical extremes

    Exit: When the gap begins to narrow and price confirms

    Markets: Applicable across all agricultural markets

Combining COT Data with Fundamental Analysis

USDA Reports

  • Compare COT positioning changes before and after major USDA reports
  • Look for confirmation or divergence between report data and position adjustments
  • Monitor commercial reaction to reports for insight into industry interpretation

Crop Progress and Condition

  • Weekly crop condition reports often drive speculative positioning
  • Commercial reaction to condition changes can provide valuable trading signals
  • Divergences between conditions and positioning may identify mispriced markets

Global Supply and Demand Factors

  • International crop production changes drive positioning in globally traded markets
  • Export sales reports influence commercial hedging activities
  • Currency movements impact relative positioning in internationally traded commodities

Integrating Seasonal Fundamentals

  • Compare current positioning to historical seasonal patterns
  • Identify when positions are abnormal for the current point in the season
  • Use seasonal tendencies to anticipate upcoming position changes

Common Pitfalls and How to Avoid Them

  1. Ignoring Seasonality

    Pitfall: Interpreting position levels without seasonal context

    Solution: Always compare current positions to historical seasonal norms

    Example: Producer short positions naturally increase during harvest, not necessarily bearish

  2. Overlooking Contract Roll Impacts

    Pitfall: Misinterpreting position changes during index roll periods

    Solution: Be aware of standard roll schedules for major indices

    Example: Apparent commercial selling during roll periods may be temporary technical flows

  3. Misunderstanding Report Categories

    Pitfall: Not recognizing the nuances between different COT report formats

    Solution: Use the Supplemental and Disaggregated reports for better clarity

    Example: Index fund positions in Legacy reports can distort true commercial hedger activity

  4. Reacting to Single-Week Changes

    Pitfall: Overemphasizing one week's position changes

    Solution: Focus on multi-week trends and significant position changes

    Example: Weather-driven temporary position adjustments vs. fundamental trend changes

  5. Neglecting Spread Positions

    Pitfall: Focusing only on outright positions, missing spread implications

    Solution: Monitor spreading activity, especially in related markets

    Example: Soybean/corn spread positions can provide insight into acreage competition

Resources for Agricultural COT Analysis

Specialized Data Services

  • AgResource Company: Provides COT analysis specific to agricultural markets
  • Hightower Report: Offers regular COT commentary for agricultural commodities
  • Brugler Marketing: Features agricultural-focused COT interpretation

Software Tools

  • Commodity Research Bureau (CRB): Offers historical COT data visualization for agricultural markets
  • DTN ProphetX: Includes agricultural COT analysis tools
  • AgriCharts: Provides specialized agricultural market data including COT information

Educational Resources

  • Agricultural Extension Services: Many offer educational materials on hedging and market analysis
  • CME Group: Provides educational content specific to agricultural markets
  • ICE Exchange: Offers resources for soft commodity trading and analysis

Government Resources

  • USDA ERS (Economic Research Service): Provides contextual market analysis
  • CFTC Agricultural Advisory Committee: Publishes recommendations and analysis
  • USDA AMS (Agricultural Marketing Service): Offers complementary market data

© 2025 - This guide is for educational purposes only and does not constitute financial advice. Agricultural markets involve significant risk, and positions should be managed according to individual risk tolerance and objectives.

Market Neutral
Based on the latest 13 weeks of non-commercial positioning data.
📊 COT Sentiment Analysis Guide

This guide helps traders understand how to interpret Commitments of Traders (COT) reports to generate potential Buy, Sell, or Neutral signals using market positioning data.

🧠 How It Works
  • Recent Trend Detection: Tracks net position and rate of change (ROC) over the last 13 weeks.
  • Overbought/Oversold Check: Compares current net positions to a 1-year range using percentiles.
  • Strength Confirmation: Validates if long or short positions are dominant enough for a signal.
✅ Signal Criteria
Condition Signal
Net ↑ for 13+ weeks AND ROC ↑ for 13+ weeks AND strong long dominance Buy
Net ↓ for 13+ weeks AND ROC ↓ for 13+ weeks AND strong short dominance Sell
Net in top 20% of 1-year range AND net uptrend ≥ 3 Neutral (Overbought)
Net in bottom 20% of 1-year range AND net downtrend ≥ 3 Neutral (Oversold)
None of the above conditions met Neutral
🧭 Trader Tips
  • Trend traders: Follow Buy/Sell signals when all trend and strength conditions align.
  • Contrarian traders: Use Neutral (Overbought/Oversold) flags to anticipate reversals.
  • Swing traders: Use sentiment as a filter to increase trade confidence.
Example:
Net positions rising, strong long dominance, in top 20% of historical range.
Result: Neutral (Overbought) — uptrend may be too crowded.
  • COT data is delayed (released on Friday, based on Tuesday's positions) - it's not real-time.
  • Combine with price action, FVG, liquidity, or technical indicators for best results.
  • Use percentile filters to avoid buying at extreme highs or selling at extreme lows.

Okay, let's craft a comprehensive trading strategy for the Black Sea Wheat Financial contract (traded on the Chicago Board of Trade - CBT) using the Commitment of Traders (COT) report. This strategy is designed for both retail traders and market investors, keeping in mind the nuances of this particular contract.

Understanding the Black Sea Wheat Financial Contract

Before diving into the COT-based strategy, it's crucial to understand this contract:

  • Reference Point: The Black Sea Wheat Financial contract is derived from prices of physical wheat traded in the Black Sea region (Russia and Ukraine).
  • Purpose: It allows participants to manage price risk associated with Black Sea wheat, even if they don't physically handle the commodity.
  • Volatility: The Black Sea region is prone to geopolitical risks, weather-related disruptions, and trade policy changes, making this contract potentially more volatile than traditional wheat futures.
  • Liquidity: Compare the liquidity of this contract to other wheat futures contracts (like those on the Chicago Board of Trade) before trading. Lower liquidity can lead to wider bid-ask spreads and greater slippage.

Trading Strategy using COT Report

The COT report provides insights into the positions held by different market participants. We'll focus on:

  • Commercial Traders (Hedgers): These are entities directly involved in the physical wheat market (e.g., exporters, importers, millers). They use futures to hedge their price risk. Their positions are considered the "smart money".
  • Non-Commercial Traders (Large Speculators): These are large entities like hedge funds and commodity trading advisors (CTAs). They trade for profit and are generally trend-following.
  • Non-Reportable Positions (Small Speculators): These represent the positions of smaller traders and are the residual after the commercial and non-commercial positions are accounted for.

COT Data Interpretation

  1. Data Source:

    • Obtain the COT report from the CFTC website (https://www.cftc.gov/). Look for the "Supplemental" or "Disaggregated" COT reports that break down positions in more detail.
    • Many financial websites and data providers also offer COT data, often in a more easily digestible format.

  2. Key Metrics to Track:

    • Net Positions: Calculate the net position for each group (Commercials, Non-Commercials) by subtracting their short positions from their long positions.
    • Changes in Net Positions: Monitor the week-over-week or month-over-month changes in net positions. This indicates whether a group is becoming more bullish or bearish.
    • Percentage of Open Interest: Calculate the percentage of open interest held by each group. This helps assess the relative influence of each group on the market.
    • Historical Context: Compare the current COT data to historical data (e.g., over the past 1-3 years) to identify extremes.

Trading Rules & Strategy

Here's a strategy combining COT data analysis with technical analysis:

  1. Trend Identification (Technical Analysis):

    • Long-Term Trend: Use weekly or monthly charts to identify the overall trend in Black Sea Wheat Financial prices. Employ moving averages (e.g., 50-week, 200-week) or trendlines.
    • Short-Term Trend: Use daily charts to identify shorter-term trends and potential entry/exit points.
    • Support and Resistance: Identify key support and resistance levels.

  2. COT Signal Generation:

    • Commercials as Leading Indicator: The general principle is that Commercials are the "smart money," and their actions often foreshadow future price movements.
      • Bullish Signal: If Commercials are increasing their net long positions (or decreasing their net short positions) while prices are in an uptrend or consolidating near support, this is a bullish signal.
      • Bearish Signal: If Commercials are increasing their net short positions (or decreasing their net long positions) while prices are in a downtrend or consolidating near resistance, this is a bearish signal.
    • Non-Commercials as Confirmation (or Contrarian Indicator):
      • Confirmation: If Non-Commercials are moving in the same direction as Commercials, it strengthens the signal.
      • Contrarian: If Non-Commercials are at extreme long or short positions (relative to their historical range), and Commercials are positioned in the opposite direction, this can be a contrarian signal. For example, if Non-Commercials are heavily long and Commercials are heavily short, a price reversal is possible.
    • COT Index/Oscillator: Some traders create a COT index or oscillator (e.g., using the difference between Commercial and Non-Commercial net positions) to identify overbought and oversold conditions.

  3. Entry and Exit Points:

    • Entry:
      • Look for entry points that align with both the technical trend and the COT signals.
      • Use price action (e.g., bullish/bearish candlestick patterns) or technical indicators (e.g., RSI, MACD) to fine-tune your entry.
      • Consider entering on pullbacks to support in an uptrend or rallies to resistance in a downtrend.
    • Exit (Profit Target and Stop-Loss):
      • Profit Target: Set profit targets based on technical levels (resistance/support) or a multiple of your risk (e.g., 2:1 or 3:1 risk-reward ratio).
      • Stop-Loss: Place stop-loss orders below recent swing lows (for long positions) or above recent swing highs (for short positions). Adjust stop-losses as the trade moves in your favor (trailing stops).

  4. Risk Management:

    • Position Sizing: Never risk more than 1-2% of your trading capital on a single trade.
    • Diversification: Don't put all your eggs in one basket. Diversify your portfolio across different commodities or asset classes.
    • Leverage: Use leverage cautiously. The Black Sea Wheat Financial contract can be volatile, and excessive leverage can lead to significant losses.
    • Monitor Geopolitical Risks: Stay informed about developments in the Black Sea region (political tensions, weather forecasts, trade policies) as they can have a significant impact on prices.

Example Scenario:

  1. Trend: Weekly chart shows an uptrend in Black Sea Wheat Financial prices.
  2. COT: Commercials are steadily increasing their net long positions over the past few weeks. Non-Commercials are also long, but not at extreme levels.
  3. Technicals: Price is pulling back to a key support level, and a bullish candlestick pattern forms.
  4. Trade: Enter a long position near the support level, with a stop-loss just below the support and a profit target at the next resistance level.

Important Considerations:

  • Data Lag: The COT report is released with a delay (usually on Fridays, reflecting positions as of the previous Tuesday). By the time you receive the data, market conditions may have changed.
  • Correlation, Not Causation: The COT report shows correlations between positions and price movements, but it doesn't necessarily prove causation. Other factors also influence prices.
  • Contract Rollover: Be aware of contract rollover dates. As the expiration date of a contract approaches, volume will shift to the next contract month.
  • Market Sentiment: Consider overall market sentiment toward commodities and agriculture. Factors like inflation expectations, global economic growth, and currency movements can influence commodity prices.
  • Black Sea Specific News: Keep abreast of news specific to the Black Sea wheat market, such as crop conditions, export data, and political developments. This news can override COT signals in the short term.

Retail Trader vs. Market Investor Adaptations:

  • Retail Trader:
    • May focus on shorter-term trades (days to weeks).
    • May use more aggressive entry and exit strategies.
    • Needs to be very disciplined with risk management.
  • Market Investor:
    • May focus on longer-term trends (months to years).
    • May use a buy-and-hold or a trend-following approach.
    • May be less concerned with short-term volatility.

Backtesting and Paper Trading:

Before risking real money, backtest this strategy using historical data and/or paper trade to see how it performs. This will help you refine your rules and gain confidence in the strategy.

Disclaimer:

Trading commodities involves risk, and it is possible to lose money. This strategy is for educational purposes only and should not be considered financial advice. Always consult with a qualified financial advisor before making any trading decisions. Remember to adjust the strategy to fit your individual risk tolerance and investment goals.

By understanding the Black Sea Wheat Financial contract, interpreting the COT report, and combining it with technical analysis and sound risk management, you can develop a robust trading strategy to potentially profit from this market. Good luck!