(Agrimoney) – Hedge funds reduced, a little, their bearish bets on agricultural commodities, but remained unusually downbeat on price prospects, particularly for the likes of sugar and arabica coffee.
Managed money, a proxy for speculators, cut its net short position in futures and options in the top 13 US-traded agricultural commodities, from cotton to cattle, by nearly 24,000 contracts in the week to last Tuesday, according to data from the Commodity Futures Trading Commission regulator.
It was only the second week of 2015 in which hedge funds’ bets on rising crop prices had exceeded those on price falls.
Nonetheless, hedge funds remained, overall, net short – meaning that short bets, which benefit when prices fall, exceeded long positions, which profit when values rise.
It is only the third week showing a net short on data going back to 2006. And, at 78,131 contracts, the net short was the second largest, behind that only of the 102,126 lots the previous week.
Planting data considerations
The less bearish take reflected largely short-covering in two ags – Chicago corn and New York-traded cotton – which are viewed as likely candidates to emerge with bullish credentials from a much-anticipated US Department of Agriculture report on Tuesday on prospective US spring crop sowings.
The report, drawn from a survey of farmers, is expected to show a drop of nearly 2m acres in US corn plantings this year, and a sharp drop too in plantings of cotton, with lower prices of both crops deterring growers.
In corn, hedge funds turned from a net short (of 37,030 contracts) the previous week, for the first time in 13 months, to a small net long position, a swing down in the main to closing of short positions.
In cotton, managed money extended its net long by nearly 6,000 contracts.
Hogs, softs out of favour
Managed money also raised its net long in live cattle futures and options, by more than 12,000 contracts, the most in 14 months, encouraged by strong cash markets and official data showing a bigger-than-expected drop in placements on US feedlots last month.
In lean hogs, however, hedge funds cut their net long below 15,000 contracts for the first time in nearly two years.
Futures fell last week to their lowest since 2009, undermined by boosts to pork supplies from lower-than-expected US hog losses in the winter to porcine epidemic diahorrea virus (PEDv), and with the strong dollar sapping exports and boosting imports.
And in most New York-traded soft commodities too, hedge funds continued to extend bearish bets.
Indeed, they extended their overall net short in softs by nearly 20,000 contracts to 77,640 lots, the highest on records going back to 2006.
Record sugar short
The dynamic reflected a further extension of hedge funds’ net short in arabica coffee futures and option, by nearly 3,000 lots to 8,399 contracts, the biggest in 14 months.
And in raw sugar, managed money further extended its record net short, this time by more than 10,000 contracts to 116,984 lots.
Extreme net short, or net long, holdings often raise alarm that the appetite for this position is spent, and provoke waves of position closing.
However, in raw sugar, hedge funds have now, for a fourth successive week, set a record in their net short position.
Prices have come under pressure from ideas of ample supplies, and from weakness in the real, which cuts the value, in dollar terms, of Brazilian assets, so having depressing values of commodities such as sugar and coffee in which Brazil is a major player.
