Crop price fallbacks ease speculators’ nerves

September 17th, 2012

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Category: Grains, Miscellaneous, Oilseeds

Farm Bill(AgriMoney) – An easing in agricultural commodity prices on Monday eased pressure on speculators who appear to have been wrong-footed by the market revival late last week spurred by crop estimate changes and US monetary easing.

Managed money, a proxy for speculators, reduced its net long exposure to futures and options in all the major US-traded crops – bar cocoa and coffee – in the week to last Tuesday, regulatory data showed.

In Chicago wheat, they raised levels of short bets, which profit when prices fall, to their highest since June, while in corn and soybeans liquidating a stack of long positions, which benefit when values rise.

Among New York-traded soft commodities, they raised short positions in cotton and, especially, raw sugar, for which price sentiment has been hurt by the continued recovery in cane harvesting in Brazil’s Centre South region, which is responsible for nearly 90% of national output of the sweetener.

Price positive

However, the positioning came ahead of a broadly positive finish to the week for futures, spurred in oilseeds by a bigger-than-expected downgrade by the US Department of Agriculture on Wednesday to its forecast for the domestic soybean crop.

Talk of wind causing damage to Canadian canola prospects estimated at 1.7m tonnes, according to market talk reported by RJ O’Brien, also underpinned the oilseeds complex.

Grains gained support from weakened prospects for the Australian wheat crop, which Australia & New Zealand Bank on Friday downgraded to 20m tonnes, fuelling a gain of nearly 5% in Chicago wheat in the last three days of last week.

And the full range of risk assets, including agricultural commodities, gained from the US Federal Reserve’s announcement of a campaign, of unlimited duration, to boost the US economy through snapping up mortgage-backed securities.

Even New York cotton, which fell initially after being handed some bearish estimate revision changes by the USDA, gained overall in the last three days of last week.

Weak start to week

However, short positions appeared a more profitable bet on Monday, when the boost from the Federal Reserve’s move wore off, leaving shares and most agricultural commodities in negative territory.

Chicago corn and soybeans were particularly weak as of 13:00 London time (07:00 Chicago time), losing 1.8% apiece, feeling pressure too benign weekend weather which has speeded up the US harvest, giving a short-term boost to supplies.

For wheat, the price “suffered a setback”, falling 1.3%, “as rainfall in the US has improved the conditions for planting”, Commerzbank said.

Cocoa promise?

The bank also highlighted the resilience of cocoa futures to the sell-off, with speculators’ net long position in the bean – the balance of long holdings over short bets – rising by nearly 2,000 contracts last week to just under 32,000 lots, the highest since spring 2010.

The move “is evidence that the market still anticipates a supply deficit in the 2012-13 period, mainly as a result of the unusually dry conditions in West Africa and a possible recovery of demand in the industrialised countries”, Commerzbank said.

“Despite a still ample stocks-to-grindings ratio, this –coupled with the current positive mood on the markets – could cause the price to climb further.”

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