Back to COT Dashboard
Market Sentiment
Sell
Based on the latest 13 weeks of non-commercial positioning data. ℹ️

NON FAT DRY MILK (Non-Commercial)

13-Wk Max 150 1,477 62 214 -797
13-Wk Min 0 891 -179 -169 -1,448
13-Wk Avg 71 1,158 -12 41 -1,088
Report Date Long Short Change Long Change Short Net Position Rate of Change (ROC) ℹ️ Open Int.
April 29, 2025 116 1,299 -2 214 -1,183 -22.34% 10,897
April 22, 2025 118 1,085 -32 32 -967 -7.09% 10,471
April 15, 2025 150 1,053 43 72 -903 -3.32% 9,974
April 8, 2025 107 981 -27 -11 -874 -1.86% 9,545
April 1, 2025 134 992 62 -169 -858 21.21% 10,654
March 25, 2025 72 1,161 29 -116 -1,089 11.75% 10,324
March 18, 2025 43 1,277 43 -32 -1,234 5.73% 9,998
March 11, 2025 0 1,309 -29 -168 -1,309 9.60% 9,693
March 4, 2025 29 1,477 -27 121 -1,448 -11.38% 10,669
February 25, 2025 56 1,356 56 200 -1,300 -12.46% 10,528
February 18, 2025 0 1,156 0 133 -1,156 -13.00% 9,572
February 11, 2025 0 1,023 -94 132 -1,023 -28.36% 8,910
February 4, 2025 94 891 -179 124 -797 -61.34% 8,748

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 Sell
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 based on the Commitments of Traders (COT) report for Non-Fat Dry Milk (NFDM) futures traded on the Chicago Mercantile Exchange (CME), tailored for retail traders and market investors.

I. Understanding the Basics

  • Commodity: Non-Fat Dry Milk (NFDM)
  • Contract Size: 44,000 lbs
  • Exchange: Chicago Mercantile Exchange (CME)
  • CFTC Code: CME (This is more for internal tracking; the important part is knowing it's traded on the CME)
  • COT Report: The Commitments of Traders report, released weekly by the CFTC (Commodity Futures Trading Commission) after market close every Friday (data is as of the previous Tuesday), provides a breakdown of open interest in futures and options markets. It categorizes traders into:
    • Commercials (Hedgers): Entities involved in the production, processing, or merchandising of NFDM (e.g., dairy cooperatives, food manufacturers). They primarily use futures to hedge price risk.
    • Non-Commercials (Large Speculators): Typically large hedge funds, commodity trading advisors (CTAs), and other institutional investors who trade futures for profit.
    • Small Speculators (Retail Traders): Smaller traders who generally trade for speculative purposes.
    • Index Traders: Institutional participants that trade using an index or a group of agricultural commodities.

II. Core Principles of COT-Based Trading

  • Follow the "Smart Money": The general premise is that Commercials (hedgers) are often considered the "smart money" because they have the most intimate knowledge of the underlying NFDM market (supply, demand, inventories, etc.). Their positions tend to be more informed by fundamental factors.
  • Speculators as Trend Followers: Non-Commercials (large speculators) are often trend followers. They tend to increase their long positions during uptrends and their short positions during downtrends.
  • Divergences are Key: Pay close attention to divergences between price action and COT data. For example, if the price of NFDM is rising, but Commercials are increasing their short positions (hedging against future price declines), it could signal a potential trend reversal.
  • Extreme Positions: Look for extreme net positions (either long or short) by Commercials. These extremes can indicate that the market is overbought or oversold, and a correction may be imminent.

III. Trading Strategy for Retail Traders & Market Investors

A. Data Acquisition and Analysis:

  1. COT Report Source: Download the Legacy or Disaggregated COT reports from the CFTC website (www.cftc.gov). Look for the "Supplemental" data for a more detailed breakdown.
  2. Data Tracking: Maintain a spreadsheet or use charting software to track the following data points over time:
    • Net position of Commercials (Long - Short)
    • Net position of Non-Commercials (Long - Short)
    • Open Interest (Total number of outstanding contracts)
    • NFDM Futures Price (Closing price of the front-month contract)
  3. Visualization: Create charts to visualize the data. Plot the NFDM price on one axis and the net positions of Commercials and Non-Commercials on another. This will help you identify trends and divergences.
  4. Calculate Ratios and Percentiles:
    • Commercial Hedger Index: Divide the total number of long commercial futures contracts by the total commercial shorts. This ratio can be analyzed relative to its historic levels.
    • COT Percentile: Calculate the percentile rank of the Commercials' net position over a defined lookback period (e.g., 52 weeks, 104 weeks). A high percentile (e.g., >80%) suggests a strong bullish sentiment among commercials, while a low percentile (e.g., <20%) suggests strong bearish sentiment.

B. Trading Signals & Rules:

  • Bullish Signals:

    • Commercials Buying on Dips: NFDM price declines, but Commercials increase their net long positions (or reduce their net short positions). This suggests they see value at lower prices and are accumulating.
    • Non-Commercials Short Covering: NFDM price rises, and Non-Commercials decrease their net short positions (or increase their net long positions). This confirms the uptrend.
    • Extreme Commercial Net Long Position: Commercials reach an historically high net long position (high percentile). This signals potential bottom and bullish market view.
    • Increase in Open Interest during price uptrend: An increase in the number of outstanding contracts, and the price is moving higher. This confirms and strengthen the bullish trend.

  • Bearish Signals:

    • Commercials Selling on Rallies: NFDM price increases, but Commercials increase their net short positions (or reduce their net long positions). This suggests they see prices as overvalued and are hedging against future declines.
    • Non-Commercials Adding to Longs: NFDM price declines, and Non-Commercials increase their net long positions (or decrease their net short positions). This confirms the downtrend.
    • Extreme Commercial Net Short Position: Commercials reach an historically high net short position (low percentile). This signals potential top and bearish market view.
    • Increase in Open Interest during price downtrend: An increase in the number of outstanding contracts, and the price is moving lower. This confirms and strengthen the bearish trend.

  • Confirmation Signals (Use with Caution):

    • Small Speculators: Generally considered to be on the "wrong side" of the market, but extreme positions can sometimes act as contrarian indicators. If small speculators are heavily long, it could suggest the market is overbought.

C. Entry and Exit Strategies:

  1. Entry:
    • Confirmation: Don't rely solely on the COT report. Use other technical indicators (moving averages, trendlines, oscillators like RSI or MACD) to confirm your entry signal.
    • Price Action: Look for specific candlestick patterns (e.g., bullish engulfing, bearish engulfing, doji) near support/resistance levels.
    • Staggered Entry: Consider entering your position in stages to manage risk.
  2. Exit:
    • Profit Targets: Set pre-defined profit targets based on technical analysis (e.g., Fibonacci extensions, support/resistance levels).
    • Stop-Loss Orders: Crucially important! Place stop-loss orders to limit your potential losses. Consider using a trailing stop-loss to protect profits as the market moves in your favor.
    • COT Reversal: If the COT data starts to contradict your initial signal (e.g., Commercials start reducing their net long positions after you've entered a long trade), consider exiting your position.
    • Time-Based Exit: If the trade is not working after a certain period, consider closing the position.

D. Risk Management:

  • Position Sizing: Never risk more than a small percentage of your trading capital on a single trade (e.g., 1-2%).
  • Diversification: Don't put all your eggs in one basket. Trade other commodities or asset classes to diversify your portfolio.
  • Leverage: Be very careful with leverage. It can magnify both your profits and your losses. Understand the margin requirements for NFDM futures.
  • Market Knowledge: Stay informed about factors that can affect the NFDM market, such as weather patterns (affecting milk production), government policies, trade agreements, and global demand.

E. Important Considerations & Caveats:

  • Lagging Indicator: The COT report is a lagging indicator. It reflects positions as of the previous Tuesday, so the market may have already moved significantly by the time the report is released.
  • Correlation, Not Causation: The COT report shows correlation between trader positions and price movements, but it doesn't necessarily prove causation. Other factors can influence the market.
  • Manipulation: While rare, it's possible for large traders to manipulate the market temporarily. Be aware of this risk.
  • Fundamental Analysis: The COT Report should be used in conjunction with fundamental and technical analysis.
  • Volatility: Commodity markets, including NFDM, can be volatile. Be prepared for price swings.
  • Specific to NFDM: The NFDM market has unique supply and demand dynamics. Understand those dynamics (e.g., seasonality of milk production, government support programs).

IV. Example Scenario

  1. Scenario: The price of NFDM has been in a downtrend for several weeks.
  2. COT Data: The latest COT report shows that Commercials have significantly reduced their net short positions (they are becoming less bearish) and their net position is at the 80th percentile of the last 52 weeks, while Non-Commercials are still heavily short.
  3. Technical Analysis: The NFDM price is approaching a key support level on the chart. The RSI is oversold.
  4. Trading Decision: This combination of factors suggests a potential trend reversal. Consider entering a long position near the support level, with a stop-loss order placed below the support level.

V. Continuous Learning & Refinement

  • Backtesting: Backtest your trading strategy on historical data to see how it would have performed in the past.
  • Paper Trading: Practice your strategy in a simulated trading environment before risking real money.
  • Stay Updated: Continuously monitor the COT report, NFDM market news, and economic data.
  • Adapt: Be prepared to adapt your strategy as market conditions change.

In summary, the COT report can be a valuable tool for NFDM futures traders, but it should be used in conjunction with other forms of analysis and sound risk management practices. This strategy will require ongoing monitoring and adjustments based on market dynamics. Good luck!