Hedge funds bet on grains, as speculator sentiment reaches its highest since January

(Agrimoney) – Hedge funds increased their long positions on grain prices ahead of Friday’s supportive US data release, with speculators more bullish on grain prices than at any points since the start of the year, even while growing more bearish on coffee.

The weekly commitment of traders report, released by the US Commodity Futures Trading Commission (CFTC) regulator, showed that long positions held by managed money, a proxy for speculators, increased in the week to July 7.

Funds are net long on grains by 353,081 contracts, up 129,205 contracts on the previous week, the most bullish funds have been on grains since January.

Corn gets short covering boost

Corn saw the biggest boost, thanks to week of rains in the US, and ahead of data that showed stocks of corn were smaller than previously thought.

Speculators increased their net long position in Chicago corn by 102,674 lots, to 173,280.

This is the longest that funds have been on corn since January.

Speculators have been closing out short positions on corn as rains continue to spread unwanted moisture across the US Midwest.

Commodity brokers EHedger said the increased positive position “didn’t come from fresh longs entering the market, rather from shorts covering which explains why the rally has been so abrupt”.

Scramble from soybean shorts

Meanwhile funds increased their net long in soybeans to 73,256 lots, up by 5,660 lots and the largest net long since June 2014.

Speculators have been scrambling to cover short positions in soybeans since the start of June.

Soybean prices were the early beneficiary of the rains in the US Midwest, thanks to a perception that they are more vulnerable to wet weather.

But funds look to have slowed the pace of realignment in soy. Given the historically high level of the long position now being held, the rally may have run out of fuel.

And speculators slashed long position in soyoil, as Grexit fears weighed on crude oil prices.

The shift in managed money positions may have been triggered by the Midwestern rains, but row crop prices got a fillip from US government data on Friday.

The US Department of Agriculture’s world agriculture supply and demand estimate (wasde) showed the US’s existing stocks of corn and soy were higher than previously estimated, pushing up prices.

Mixed softs

In softs the story was more mixed, with hedge funds growing more bullish on raw sugar, cocoa and cotton, but more bearish on coffee.

Speculators more than doubled their net short position in arabica coffee to 20,995 contracts, increasing the short by 10,789 contracts.

Agricultural lender Rabobank said the short positioning in coffee was “well above expectations,” and ascribed it to the falling values of the Brazilian and Colombian currencies against the dollar.

Meanwhile, funds eased back on short positions in raw sugar. Funds are still net short on sugar by 36,484 contracts, a reduction in the net short by 33,754 contracts from last week.

Overall speculators are net long on softs by 46,483 contracts, up by 25,731 contracts from last week.