(Agrimoney) – Hedge funds swung to betting on price falls in cotton, soybeans and wheat, amid ideas of easier supplies, as they cut bullish positioning in agricultural commodities to the weakest in three months.
Managed money, a proxy for speculators, cut its net long position in futures and options in the top 13 US-traded agricultural commodities, from coffee to cattle, by more than 43,000 contracts in the week to last Tuesday, according to data from the Commodity Futures Trading Commission regulator.
The reduction in the net long position – the extent to which long holdings, which profit when values rise, exceed short bets, which benefit when prices fall – represented a third successive week of decline.
The selldown, which took the net long to its lowest since October, has been attributed to factors including the strengthening dollar, which reduces the competitiveness of dollar-denominated assets, but also to reduced supply concerns, which has allowed the removal of some risk premium.
Slower exports
For Chicago wheat, in which hedge funds returned to a net short for the first time in seven weeks, price declines have reflected a slowdown in US exports – at 14.4m tonnes so far in 2014-15 down one-third year on year – besides the removal of uncertainty over Russian shipments.
Although Russia will from February 1 impose a tax of at least E35 a tonne on its wheat exports, the move will cost the country a modest 2m tonnes in shipments, on US Department of Agriculture estimates.
And that demand will likely transfer in the main to the European Union, which is to become the world’s biggest wheat exporter for the first time in 2014-15, rather than to the US.
EU wheat exports are being supported by a softening euro, which boosts their competitiveness.
Soybean short
In Chicago soybean futures and options, hedge funds flipped from a net long position to a net short position for the first time since October.
Prices have been undermined by the onset of the South American harvest, and the uptick in supplies that promises, besides by a reduction in the weather extremes which were threatening yields.
While some analysts have cut forecasts for Brazil’s soybean output, with Agroconsult last week lowering its forecast by 2.9m tonnes to 91.9m tonnes, that would still set a record, and follows last year’s record crop in the US.
And, with expectations of strong US sowings this year too, hedge funds have cut their gross long position in soybeans to the lowest in three years.
Less sour on sugar
Hedge funds also turned net short in New York cotton, for the first time in five weeks, amid a price decline attributed to a technical downtrend, and producer selling, overcoming a series of strong US export data.
However, speculators were not more bearish on all ags during the week, taking a dramatically less negative view of raw sugar, and cutting their net short by a strong 28,210 lots to a four-month low of 21,680 contracts.
Brazil last Monday revealed it was to reinstate its Cide tax on gasoline, a levy which, in boosting the price competitiveness of ethanol, has been seen as a positive too for sugar, which competes with the biofuel for cane.
