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

MILK, Class III (Non-Commercial)

13-Wk Max 5,426 10,066 734 813 -1,393
13-Wk Min 2,902 6,184 -1,072 -442 -6,528
13-Wk Avg 4,267 8,341 1 301 -4,074
Report Date Long Short Change Long Change Short Net Position Rate of Change (ROC) ℹ️ Open Int.
April 29, 2025 3,826 10,066 36 129 -6,240 -1.51% 23,528
April 22, 2025 3,790 9,937 296 -18 -6,147 4.86% 22,984
April 15, 2025 3,494 9,955 592 525 -6,461 1.03% 22,087
April 8, 2025 2,902 9,430 -1,072 -442 -6,528 -10.68% 21,022
April 1, 2025 3,974 9,872 234 721 -5,898 -9.00% 24,399
March 25, 2025 3,740 9,151 -531 553 -5,411 -25.05% 23,654
March 18, 2025 4,271 8,598 -455 383 -4,327 -24.02% 22,717
March 11, 2025 4,726 8,215 -700 813 -3,489 -76.57% 21,942
March 4, 2025 5,426 7,402 53 579 -1,976 -36.28% 24,443
February 25, 2025 5,373 6,823 561 618 -1,450 -4.09% 23,224
February 18, 2025 4,812 6,205 224 21 -1,393 12.72% 22,233
February 11, 2025 4,588 6,184 38 -412 -1,596 21.99% 21,780
February 4, 2025 4,550 6,596 734 446 -2,046 12.34% 25,341

Net Position (13 Weeks) - Non-Commercial

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

COT Interpretation for MILK

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: Class III Milk Futures (CME) based on COT Report Analysis for Retail Traders & Investors

This strategy outlines how retail traders and market investors can use the Commitments of Traders (COT) report to inform trading decisions in Class III Milk futures contracts traded on the Chicago Mercantile Exchange (CME). It aims to provide a framework for understanding market sentiment and potential price movements, but remember that futures trading is inherently risky and past performance is not indicative of future results. This strategy is for informational purposes only and should not be considered financial advice. Consult with a qualified financial advisor before making any trading decisions.

I. Understanding the COT Report and Class III Milk:

  • What is the COT Report? The COT report, released weekly by the Commodity Futures Trading Commission (CFTC), provides a breakdown of open interest in futures markets. It categorizes market participants into:

    • Commercials (Hedgers): Entities involved in the actual production, processing, or marketing of the underlying commodity (e.g., dairy cooperatives, cheese manufacturers). They primarily use futures to hedge price risk.
    • Non-Commercials (Large Speculators): Hedge funds, managed money, and other large investors who primarily trade for profit.
    • Non-Reportable Positions (Small Speculators): Positions held by traders whose positions are small enough that they are not required to be reported.

  • Why Class III Milk? Class III milk futures are based on the price of milk used to produce cheese. It's a liquid market, making it accessible for trading. Price fluctuations are influenced by factors like:

    • Milk production: Supply driven by weather, herd health, and government policies.
    • Cheese demand: Influenced by consumer preferences, economic conditions, and export markets.
    • Dairy product stocks: Levels of cheese and other dairy product inventories.
    • Government regulations: Farm bill provisions and dairy support programs.
    • Global trade: Imports and exports impacting supply and demand.

II. Trading Strategy Framework:

A. Data Acquisition and Preparation:

  1. COT Report Source: Download the Legacy Futures Only report from the CFTC website (https://www.cftc.gov/). Look for the "Chicago Mercantile Exchange - Class III Milk" data.
  2. Data Frequency: Analyze weekly data to identify trends.
  3. Data Calculation: Calculate the following key metrics:
    • Net Positions: Commercial Net = Long Positions - Short Positions; Non-Commercial Net = Long Positions - Short Positions.
    • Change in Net Positions: Calculate the week-over-week change in Commercial and Non-Commercial net positions.
    • COT Index (Optional): Calculate a COT Index to normalize the net positions over a longer timeframe (e.g., 52 weeks). This helps identify extreme positioning. The COT Index is calculated as:
      • ((Current Net Position - Lowest Net Position in Period) / (Highest Net Position in Period - Lowest Net Position in Period)) * 100

B. Interpreting the COT Report:

  1. Commercial Positioning:

    • Extreme Net Short: Commercials are heavily net short when they anticipate lower milk prices. This can be a bearish indicator.
    • Extreme Net Long: Commercials are heavily net long when they anticipate higher milk prices. This can be a bullish indicator.
    • Changes in Positioning: Pay attention to significant increases or decreases in commercial net positions. A sharp increase in net shorts can suggest a looming price decline.

  2. Non-Commercial Positioning:

    • Confirmation: Look for alignment between Non-Commercial and Commercial positioning. If both are trending in the same direction, it strengthens the signal.
    • Divergence: Divergence between Commercial and Non-Commercial positions can be a warning sign. For example, if Commercials are increasing their net shorts while Non-Commercials are increasing their net longs, a potential reversal could be brewing.

  3. COT Index Interpretation:

    • Overbought (COT Index > 80): Indicates a potentially overextended market where Non-Commercials are heavily long. A correction might be imminent.
    • Oversold (COT Index < 20): Indicates a potentially oversold market where Non-Commercials are heavily short. A rally might be imminent.

C. Trading Signals and Strategies:

Important: Combine COT analysis with technical analysis and fundamental analysis for more robust signals.

  1. Trend Following Strategy:

    • Bullish Signal:
      • Commercials are decreasing their net short positions (or increasing their net long positions).
      • Non-Commercials are increasing their net long positions.
      • Technical indicators confirm the upward trend (e.g., price above moving averages, bullish chart patterns).
    • Action: Consider buying Class III Milk futures contracts or call options. Set a stop-loss order below a recent swing low.
    • Bearish Signal:
      • Commercials are increasing their net short positions (or decreasing their net long positions).
      • Non-Commercials are decreasing their net long positions (or increasing their net short positions).
      • Technical indicators confirm the downward trend (e.g., price below moving averages, bearish chart patterns).
    • Action: Consider selling Class III Milk futures contracts or buying put options. Set a stop-loss order above a recent swing high.

  2. Contrarian Strategy (Fading the Crowd):

    • Bullish Signal:
      • Commercials are holding a substantial net long position.
      • Non-Commercials are holding a substantial net short position.
      • COT Index is below 20 (Oversold).
      • Price shows signs of bottoming (e.g., bullish reversal candlestick patterns).
    • Action: Consider buying Class III Milk futures contracts or call options.
    • Bearish Signal:
      • Commercials are holding a substantial net short position.
      • Non-Commercials are holding a substantial net long position.
      • COT Index is above 80 (Overbought).
      • Price shows signs of topping (e.g., bearish reversal candlestick patterns).
    • Action: Consider selling Class III Milk futures contracts or buying put options.

  3. Range Trading Strategy: (Use when the market is trading sideways)

    • Monitor the positioning of Commercials and Non-Commercials around the extremes, when prices are trading on the edge of the sideways channel.

D. Risk Management:

  1. Position Sizing: Never risk more than 1-2% of your trading capital on a single trade.
  2. Stop-Loss Orders: Always use stop-loss orders to limit potential losses. Place stops based on technical levels (e.g., swing highs/lows, support/resistance).
  3. Leverage: Be extremely cautious with leverage. Futures contracts offer significant leverage, which can amplify both profits and losses. Start with small positions and gradually increase as you gain experience.
  4. Diversification: Don't put all your eggs in one basket. Diversify your portfolio across different asset classes and commodities.
  5. News and Events: Stay informed about factors that influence milk prices, such as weather patterns, dairy production reports, and government policy changes. These events can trigger sharp price movements.
  6. Trading Plan: Develop a detailed trading plan that outlines your entry and exit criteria, risk management rules, and position sizing strategy.

III. Fundamental Analysis Overlay:

  • USDA Reports: Closely monitor USDA reports such as:
    • Milk Production Reports: Provide insights into milk supply.
    • Dairy Market News: Offers a summary of market conditions and prices.
    • Cold Storage Reports: Track inventory levels of cheese and other dairy products.
  • Weather: Extreme weather conditions (e.g., droughts, heat waves) can significantly impact milk production.
  • Global Demand: Monitor global dairy trade and demand trends, particularly from major importing countries.
  • Government Policies: Be aware of any changes in government dairy support programs, trade agreements, or regulations.

IV. Technical Analysis Confirmation:

  • Moving Averages: Use moving averages (e.g., 50-day, 200-day) to identify the overall trend.
  • Support and Resistance Levels: Identify key support and resistance levels to pinpoint potential entry and exit points.
  • Chart Patterns: Look for chart patterns like head and shoulders, double tops/bottoms, triangles, and flags to anticipate price movements.
  • Oscillators: Use oscillators like the Relative Strength Index (RSI) and MACD to identify overbought and oversold conditions and potential divergences.
  • Volume: Confirm price movements with volume. Increasing volume on a breakout or breakdown strengthens the signal.

V. Example Trade Scenario:

  • Scenario: It's early spring, and the latest COT report shows that Commercials have significantly increased their net short positions in Class III Milk futures. Non-Commercials are still holding a sizable net long position, but their positions have decreased compared to the previous week. The COT index is at 75. The USDA forecasts above-average milk production due to favorable weather conditions. Technically, the price of Class III Milk futures has broken below a key support level and is trading below the 50-day moving average.
  • Analysis:
    • The increasing net shorts by Commercials suggest they anticipate lower milk prices.
    • The decreasing net longs by Non-Commercials indicates a potential loss of bullish sentiment.
    • High COT index sugests price might come down.
    • The USDA forecast of increased milk production points to a potential oversupply situation.
    • The technical breakdown confirms the bearish outlook.
  • Trade: Consider selling Class III Milk futures contracts or buying put options. Place a stop-loss order above the broken support level (now acting as resistance). Target: A price level where you expect supply and demand to balance out based on the information you have gathered.

VI. Important Considerations:

  • Market Volatility: Milk futures can be volatile, especially during periods of weather uncertainty or major news events.
  • Rollover: Be aware of the contract expiry dates and roll your positions over to the next contract month before the expiry date to avoid physical delivery.
  • Transaction Costs: Factor in transaction costs such as commissions and exchange fees.
  • Paper Trading: Practice trading strategies using a demo account before risking real money.

VII. Continuous Improvement:

  • Track Your Results: Keep a detailed trading journal to track your trades, analyze your performance, and identify areas for improvement.
  • Stay Updated: Continuously learn about the dairy market, economic trends, and trading strategies.
  • Adapt: Be prepared to adapt your strategy as market conditions change.
  • Patience: Trading is a marathon, not a sprint. It takes time and effort to develop a profitable trading strategy.

Disclaimer: This strategy is a starting point for your own research and analysis. It is crucial to conduct your due diligence and consult with a qualified financial advisor before making any trading decisions. Futures trading involves substantial risk of loss, and you should only trade with capital you can afford to lose.