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

BUTTER (CASH SETTLED) (Non-Commercial)

13-Wk Max 286 1,977 45 239 -1,349
13-Wk Min 0 1,349 -111 -467 -1,938
13-Wk Avg 55 1,664 -19 -3 -1,609
Report Date Long Short Change Long Change Short Net Position Rate of Change (ROC) ℹ️ Open Int.
April 29, 2025 0 1,642 0 131 -1,642 -8.67% 12,538
April 22, 2025 0 1,511 0 73 -1,511 -5.08% 12,074
April 15, 2025 0 1,438 0 89 -1,438 -6.60% 11,738
April 8, 2025 0 1,349 0 -328 -1,349 19.56% 11,541
April 1, 2025 0 1,677 0 -36 -1,677 2.10% 13,345
March 25, 2025 0 1,713 0 5 -1,713 -0.29% 13,067
March 18, 2025 0 1,708 0 207 -1,708 -13.79% 12,739
March 11, 2025 0 1,501 -30 -467 -1,501 22.55% 12,487
March 4, 2025 30 1,968 -81 -9 -1,938 -3.86% 14,246
February 25, 2025 111 1,977 0 239 -1,866 -14.69% 13,879
February 18, 2025 111 1,738 -64 63 -1,627 -8.47% 13,268
February 11, 2025 175 1,675 -111 -64 -1,500 -3.23% 12,791
February 4, 2025 286 1,739 45 58 -1,453 -0.90% 13,613

Net Position (13 Weeks) - Non-Commercial

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

COT Interpretation for BUTTER

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 (Oversold)
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 Butter (Cash Settled) based on the COT Report (CME)

This strategy outlines how retail traders and market investors can use the Commitments of Traders (COT) report to make informed trading decisions in the Butter (Cash Settled) futures contract on the Chicago Mercantile Exchange (CME). Remember, the COT report is just one tool among many and should not be the sole basis for your trading decisions. Sound risk management and further fundamental/technical analysis are crucial.

I. Understanding the Butter Market and COT Report

  • Butter Market Fundamentals: Understand the key drivers of butter prices. This includes:
    • Dairy Production: Monitor milk production levels, as butter is a key derivative. Seasonal variations in milk production can significantly impact butter prices. Spring flush typically leads to lower prices, while winter often sees higher prices.
    • Demand: Track domestic and international demand for butter. Consider factors like consumer spending, dietary trends (e.g., increasing popularity of high-fat diets), export demand, and demand from the food processing industry.
    • Government Policies: Be aware of government regulations affecting dairy production and trade, such as price supports, tariffs, and import quotas.
    • Weather: Extreme weather events can disrupt dairy production and impact prices.
    • Storage Levels: Monitor butter inventory levels as this can signal potential shortages or surpluses.
  • COT Report Basics: The COT report, released weekly by the CFTC, categorizes market participants based on their holdings in futures contracts. For the Butter market, focus on:
    • Commercials (Hedgers): These are entities involved in the production, processing, or distribution of butter. They use futures to hedge their price risk. Typically, Commercials are net short, aiming to lock in a price for future production or purchases.
    • Non-Commercials (Large Speculators): These are hedge funds, institutional investors, and other large speculators who trade futures for profit. Their positioning can indicate market sentiment and potential price trends.
    • Small Speculators (Retail Traders): This category represents smaller traders and retail investors. While their individual positions are small, their collective behavior can sometimes contribute to market volatility.
    • Reportable Positions: The number of contracts above a certain threshold which need to be reported to the CFTC.
    • Non-Reportable Positions: The number of contracts which are below the reporting threshold and are not reported.

II. Key COT Indicators and Interpretation for Butter

  1. Commercial Net Position:
    • Extreme Net Short: When Commercials are at a historically large net short position, it could suggest that they believe prices are high and are hedging against a potential price decline. This is not a guaranteed signal, but it's a warning sign to be cautious about long positions.
    • Decreasing Net Short (or Increasing Net Long): If the Commercial net short position is decreasing or even turning net long, it could indicate they believe prices are relatively low and are reducing their hedges or even speculating on a price increase.
  2. Non-Commercial Net Position:
    • Extreme Net Long: An extremely large net long position held by Non-Commercials could suggest excessive optimism and potential for a correction.
    • Extreme Net Short: An extremely large net short position held by Non-Commercials could suggest excessive pessimism and potential for a rally.
    • Shifts in Positioning: Pay attention to changes in the Non-Commercial net position. A rapid shift from net short to net long, or vice versa, can signal a change in market sentiment.
  3. Spread Analysis (Comparing Commercials and Non-Commercials):
    • Confirmation: If both Commercials and Non-Commercials are aligned in their positioning (e.g., both net short), the signal is generally stronger.
    • Divergence: Divergence occurs when Commercials and Non-Commercials have opposing views (e.g., Commercials net short, Non-Commercials net long). This can signal uncertainty and potential volatility. Look for fundamental reasons behind the divergence.
  4. Open Interest: Analyze open interest alongside the COT data.
    • Rising Open Interest with Increasing Long Positions: Can confirm an uptrend.
    • Rising Open Interest with Increasing Short Positions: Can confirm a downtrend.
    • Declining Open Interest: Can signal that a trend is weakening.

III. Trading Strategies Based on COT Data for Retail Traders and Market Investors

  • Trend Following with COT Confirmation:

    • Identify a Trend: Use technical analysis (moving averages, trendlines, chart patterns) to identify an existing trend in butter prices.
    • COT Confirmation: Look for confirmation from the COT report. For example, if you identify an uptrend, look for increasing net long positions held by Non-Commercials and a decreasing net short position held by Commercials.
    • Entry: Enter a long position on a pullback or breakout, with a stop-loss order below a recent swing low.
    • Exit: Take profits when the trend weakens or when the COT report signals a potential reversal (e.g., Non-Commercials start reducing their net long positions).

  • Contrarian Trading: (More risky, requires careful analysis)

    • Identify Extreme Positioning: Look for periods when Non-Commercials are at extreme net long or net short positions.
    • Fundamental Justification: Before acting, ensure there are fundamental reasons to believe the market is overextended. For example, if Non-Commercials are extremely net long and milk production is expected to increase significantly in the coming months, a short position might be justified.
    • Entry: Enter a position opposite to the prevailing sentiment, but only after confirming with other indicators (e.g., overbought/oversold conditions on a technical chart).
    • Exit: Take profits as the market corrects and Non-Commercials start unwinding their extreme positions.

  • Hedging (for Businesses involved in Butter production/processing):

    • Calculate Exposure: Determine your risk exposure based on your expected future production or purchases of butter.
    • Hedge with Futures: Use butter futures to lock in a price for future transactions.
    • Roll Over Contracts: As contracts approach expiration, roll them over to later months to maintain your hedge. The COT report can provide insights into potential pricing trends during roll periods.

IV. Risk Management

  • Position Sizing: Never risk more than 1-2% of your trading capital on any single trade. Butter can be volatile.
  • Stop-Loss Orders: Always use stop-loss orders to limit potential losses. Place stop-loss orders at logical levels based on technical analysis (e.g., below support levels or above resistance levels).
  • Diversification: Don't put all your eggs in one basket. Diversify your portfolio across different commodities or asset classes.
  • Understand Leverage: Futures contracts offer leverage, which can magnify both profits and losses. Use leverage responsibly.
  • Stay Informed: Continuously monitor market news, economic data, and the COT report to stay informed about factors that could impact butter prices.

V. Important Considerations and Cautions

  • Lagging Indicator: The COT report is released with a delay (usually Friday afternoon, reflecting the prior Tuesday's data). Market conditions can change significantly in the intervening period.
  • Correlation, Not Causation: The COT report shows correlations between positions and price movements, but it doesn't prove causation. Other factors are always at play.
  • Market Manipulation: While the CFTC monitors for market manipulation, it's always a possibility. Be aware of the risks.
  • Other Indicators: The COT report should be used in conjunction with other technical and fundamental analysis tools. Don't rely on it in isolation.
  • Experience and Education: Before trading butter futures, gain a thorough understanding of the market and the risks involved. Consider taking educational courses or practicing with a demo account.
  • Volatility: The butter market can be volatile. Be prepared for price swings and have a plan for managing risk.

VI. Example Scenario

Let's say the COT report shows that Non-Commercials are holding a historically large net long position in butter futures. Simultaneously, technical analysis reveals that butter prices are approaching a key resistance level. Furthermore, weather forecasts predict favorable conditions for dairy production in the coming months.

  • Possible Interpretation: The market may be overbought and due for a correction. The large net long position held by Non-Commercials suggests excessive optimism, and the favorable weather forecast could lead to increased milk production and lower butter prices.
  • Possible Trading Strategy: Consider entering a short position near the resistance level, with a stop-loss order placed above the resistance. Take profits as the market corrects and Non-Commercials start reducing their net long positions.

VII. Resources

  • CFTC Website: cftc.gov (for accessing the COT report)
  • CME Group Website: cmegroup.com (for butter futures contract specifications and market data)
  • Brokerage Platforms: Many online brokerage platforms provide access to futures trading and COT data analysis tools.

This strategy provides a framework for using the COT report to trade butter futures. Remember to adapt the strategy to your own risk tolerance, trading style, and market conditions. Thorough research, disciplined risk management, and continuous learning are essential for success in the butter market. Good luck!