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

MALAYSIAN PALM OIL CALENDAR SW (Non-Commercial)

13-Wk Max 1,184 3,480 N/A N/A -2,296
13-Wk Min 1,184 3,480 N/A N/A -2,296
13-Wk Avg 1,184 3,480 N/A N/A -2,296
Report Date Long Short Change Long Change Short Net Position Rate of Change (ROC) ℹ️ Open Int.
June 18, 2019 1,184 3,480 0 0 -2,296 0.00% 21,604

Net Position (13 Weeks) - Non-Commercial

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

COT Interpretation for PALM OIL

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.

Trading Strategy for Malaysian Palm Oil Calendar Swaps (CME) based on COT Report Analysis (Retail & Market Investors)

This strategy utilizes the Commitments of Traders (COT) report to identify potential trading opportunities in Malaysian Palm Oil Calendar Swaps traded on the CME (Chicago Mercantile Exchange). It aims to provide a framework for both retail traders and market investors, taking into account their different risk tolerances and investment horizons.

I. Understanding the Basics:

  • Malaysian Palm Oil Calendar Swaps: These are derivative contracts that allow market participants to hedge or speculate on the price difference between two different delivery months of palm oil futures. They offer a view on the expected evolution of the forward curve for palm oil.
  • COT Report: This report, published by the CFTC (Commodity Futures Trading Commission), provides a breakdown of open interest in futures and options markets, categorized by trader groups. Key groups for palm oil swaps include:
    • Commercials (Hedgers): Primarily processors, exporters, and importers who use swaps to manage price risk associated with their physical palm oil business. They are typically net short in the market.
    • Non-Commercials (Speculators): Hedge funds, money managers, and other institutional investors who trade for profit. They are typically net long in the market.
    • Non-Reportable Positions: Small traders, often retail, whose positions are too small to be individually reported.

II. Data Acquisition and Preparation:

  1. Obtain COT Data: Download the Legacy Futures-Only COT report from the CFTC website. The report relevant to this strategy is the "Malaysian Palm Oil Calendar Swaps - Chicago Mercantile Exchange".
  2. Identify Key Data Points: Extract the following data from the report for each reporting period:
    • Commercial Net Position: (Long positions - Short positions) of Commercials.
    • Non-Commercial Net Position: (Long positions - Short positions) of Non-Commercials.
    • Open Interest: Total number of outstanding contracts.
  3. Calculate Useful Indicators: Derived indicators can provide more actionable signals:
    • Commercial Index (CI): CI = (Current Commercial Net Position - Lowest Commercial Net Position in a defined period) / (Highest Commercial Net Position - Lowest Commercial Net Position in the same defined period) * 100 (Often uses a 52-week or 3-year period). Higher values indicate commercials are less short (or more long) than usual.
    • Non-Commercial Index (NCI): Similar to CI, but for Non-Commercials. NCI = (Current Non-Commercial Net Position - Lowest Non-Commercial Net Position in a defined period) / (Highest Non-Commercial Net Position - Lowest Non-Commercial Net Position in the same defined period) * 100 Higher values indicate speculators are more long than usual.
    • Net Position Change: The change in the net position for Commercials and Non-Commercials from the previous reporting period.
  4. Price Data: Obtain historical price data for the specific calendar swap contract you are trading (e.g., January/February spread). This data is crucial for confirming signals and setting entry/exit points.

III. Trading Strategy Framework:

This strategy focuses on identifying divergences between the COT data and price action. The underlying principle is that commercial hedgers are generally better at predicting long-term price trends, while speculators can sometimes push prices to unsustainable levels.

A. Key Signals and Interpretations:

  • Commercial Extreme Levels (Contrarian Indicator):
    • High CI (approaching 100): Commercials are less short than usual, suggesting the market may be overbought (short the spread). This is a contrarian signal.
    • Low CI (approaching 0): Commercials are more short than usual, suggesting the market may be oversold (long the spread). This is a contrarian signal.
  • Non-Commercial Extreme Levels (Momentum Confirmation):
    • High NCI (approaching 100): Speculators are very long, which can initially push prices higher (confirm upward momentum), but also indicates a potential for a correction.
    • Low NCI (approaching 0): Speculators are very short, which can initially push prices lower (confirm downward momentum), but also indicates a potential for a rally.
  • COT Divergence:
    • Price Up, Commercials Increasing Short Position: Bearish Signal - Commercials are hedging against higher prices, suggesting they expect prices to decline.
    • Price Down, Commercials Decreasing Short Position: Bullish Signal - Commercials are less concerned about lower prices, suggesting they expect prices to rise.
    • Price Up, Non-Commercials Decreasing Long Position: Bearish Signal - Speculators losing confidence, suggesting a potential reversal.
    • Price Down, Non-Commercials Increasing Long Position: Bullish Signal - Speculators gaining confidence, but watch for commercial confirmation.
  • Open Interest (OI) Analysis:
    • Rising OI with Price Up: Confirmation of the uptrend. More market participants are taking long positions.
    • Rising OI with Price Down: Confirmation of the downtrend. More market participants are taking short positions.
    • Falling OI with Price Up/Down: Weakening trend, potential for reversal. Indicates market participants are closing positions.

B. Entry and Exit Rules (Examples):

These are examples and should be adapted based on your risk tolerance, market analysis, and backtesting.

1. Contrarian Strategy (Commercials):

  • Signal: CI reaches a pre-defined high or low threshold (e.g., CI > 80 or CI < 20). Confirm with price action showing signs of overbought/oversold conditions (e.g., RSI divergence, candlestick patterns).
  • Entry:
    • CI > 80: Enter a short position on the calendar spread (Sell the front-month, buy the back-month).
    • CI < 20: Enter a long position on the calendar spread (Buy the front-month, sell the back-month).
  • Stop Loss: Place a stop-loss order above the recent high (for short positions) or below the recent low (for long positions). Use ATR (Average True Range) or a percentage of the entry price to determine the stop-loss distance.
  • Take Profit:
    • Target 1: Based on a multiple of the stop-loss distance (e.g., 1:1 or 1:2 risk-reward ratio).
    • Target 2: When the CI reverses direction and crosses back towards the middle of its range (e.g., CI moves below 60 for short positions).

2. Trend Following Strategy (Non-Commercials Confirmation + Commercials Support):

  • Signal: NCI shows momentum in a direction (rising or falling) AND Commercials are not excessively positioned against the trend (CI is within a reasonable range, e.g., 30-70).
  • Entry:
    • Rising NCI + Rising Price: Enter a long position on the calendar spread.
    • Falling NCI + Falling Price: Enter a short position on the calendar spread.
  • Stop Loss: Place a stop-loss order based on recent price volatility (ATR) or a percentage of the entry price.
  • Take Profit: Use trailing stop-loss orders or set profit targets based on Fibonacci extensions or other technical analysis techniques.

C. Risk Management:

  • Position Sizing: Never risk more than a small percentage of your trading capital on a single trade (e.g., 1-2%).
  • Stop-Loss Orders: Always use stop-loss orders to limit potential losses.
  • Diversification: Do not put all your capital into palm oil swaps. Diversify your portfolio across different asset classes.
  • Leverage: Use leverage cautiously. Calendar swaps can be highly leveraged, magnifying both profits and losses. Understand the margin requirements.

IV. Implementation for Retail Traders vs. Market Investors:

A. Retail Traders:

  • Focus: Shorter-term trades, typically lasting days or weeks.
  • COT Analysis: Use simplified indicators like the CI and NCI. Focus on identifying short-term divergences.
  • Technical Analysis: Strong emphasis on price action, candlestick patterns, and other technical indicators to refine entry and exit points.
  • Risk Management: Tight stop-loss orders are crucial due to limited capital.
  • Tools: Use charting platforms, COT data feeds, and brokerage services offering palm oil swaps.

B. Market Investors:

  • Focus: Longer-term investments, lasting months or even years. May use swaps to hedge existing physical palm oil positions.
  • COT Analysis: More in-depth analysis of historical COT data, including trends and cycles. Consider the economic and geopolitical factors influencing palm oil prices.
  • Fundamental Analysis: Essential for understanding the long-term outlook for palm oil demand and supply.
  • Risk Management: Can tolerate wider stop-loss orders due to a longer investment horizon. Consider using options to hedge risk.
  • Tools: Access to research reports, economic data, and specialized market intelligence. May work with brokers offering sophisticated hedging strategies.

V. Important Considerations and Limitations:

  • Lagging Indicator: The COT report is published with a delay, which means the data may not reflect the current market conditions.
  • Correlation is Not Causation: The COT report provides insights into market sentiment, but it does not guarantee future price movements.
  • Market Complexity: Palm oil prices are influenced by a variety of factors, including weather, government policies, currency fluctuations, and global economic conditions.
  • Specific Contract Selection: The strategy outlined above applies broadly to calendar swaps. You need to select the specific contract (e.g., Jan/Feb 2024) based on your market outlook and trading horizon.
  • Spread Volatility: Calendar swaps can be very volatile. Understand the risks involved before trading.
  • Cost of Carry: Consider the cost of carry (storage costs, interest rates) when trading calendar spreads.

VI. Backtesting and Adaptation:

This trading strategy should be rigorously backtested using historical data before being implemented in a live trading account. The entry and exit rules, risk management parameters, and timeframes should be adapted to your individual risk tolerance and market conditions. Continuously monitor your performance and adjust your strategy as needed.

Disclaimer: This is a trading strategy for educational purposes only. It is not financial advice. Trading in commodity derivatives involves significant risk of loss, and you should only trade with capital you can afford to lose. Consult with a qualified financial advisor before making any investment decisions.