Speculators axed a massive short position in the corn market within 11 days earlier this month. And what do they have now to show for it? Lower prices.

Specs, usually hesitant to become buyers in such an oversupplied market, bought nearly 1 billion bushels of corn in the form of CBOT futures and options – equivalent to 200,000 contracts – between June 6 and June 16.

That buying among money managers reversed the 200,981-contract short position held as of May 30. By June 13, the net short had dwindled to 17,929 contracts and fund buying activity in the days after strongly suggested that the net short no longer existed by the end of last week.

During the 11-day buying rally, July corn futures peaked on June 8, a 5 percent gain in price. By the end of last week – which is when the funds had presumably evened out their bets – the total gains amounted to only 3 percent. Prices have fallen further since, as Tuesday’s $3.70 settle was the lowest of the month.

This probably sets the record as the biggest fund buyback with the most pitiful price move, as gains were significantly less than those produced by the spring and early summer short-covering rallies of the last two years.

In 2015, funds depleted a hefty short position within the last nine days of June, culminating in a 17 percent jump in July futures. They did the same within nine days in mid-April 2016 for an 11 percent gain in the July contract on increasingly unfavorable South American weather. The 2015 move was sparked initially by U.S. weather concerns and capped off with bullish government stocks and acreage reports on June 30.

Balance sheets from the previous two years show ample domestic corn supply relative to previous years, but apparently not as ample as this year given the stubbornness in the futures market.

Corn futures finally broke above the relentless 20-cent range earlier this month, spurring action on the commercial side of the market, including U.S. farmers who have been hoarding last year’s crop in hope of better prices. CBOT corn trading volume broke records on June 7 with help from intense selling by commercial handlers, which pushed against price gains from speculative buying.

Data from the U.S. Commodity Futures Trading Commission suggests commercial corn hedgers had their third-biggest net sell-off in the week ended June 13, which suggests significant farmer selling. Not surprisingly, the top spots are occupied by weeks in April 2016 and June 2015.

Weather the Only Hope?

It has been exactly one year to the day since front-month corn futures traded above $4. With lots of old supply still sitting in bins throughout the Midwest, prices may struggle to notch gains comparable to years past unless U.S. weather genuinely takes a turn for the worse.

Weather thus far in the 2017 growing season has not been perfect, which has been reflected in lower crop ratings than in the previous three high-yielding years. Forecasts have been relatively benign this week, but the outlooks will become even more important in the next two months as pollination followed by grain fill occurs – more chance for volatility should they call for hot and dry stretches.

Even if July and August weather is not glaringly adverse, crop shortfalls that may have arisen amid the wet and cold spring will come to light as soon as the combines begin to roll in September, which could give a late-season boost to futures.

A similar situation arose in 2015 as disappointing early harvest results and a cut in expected production from the U.S. Department of Agriculture sparked a 12 percent futures rally in the first half of September.

Monstrous output in Brazil will also offer pressure to corn prices as the ongoing harvest could touch 100 million tons. This is 50 percent larger than last year’s drought-stricken crop, which carried the original April 2016 futures rally into mid-June with even bigger price gains.

In the past decade, funds were net short corn during July and August only twice. In 2013, the U.S. corn crop was on track to easily surpass the previous year's disastrous harvest, and in 2016, the eventual record-large output appeared very likely by the midpoint of the summer under non-threatening weather conditions.