Speculators prune long bets on soy complex

October 1st, 2012

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Category: Oilseeds

(AgriMoney) – Speculators made a big effort at pruning their huge net long position in the soybean complex, amid improving yield hopes, but reversed a sell-down in Chicago grains – in time for Friday’s 5% rally.

Managed money, a proxy for speculators, cut its net long position in soybean futures and options below 200,000 lots for only the second time since March, regulatory data showed.

The net long position, at 195,402 contracts as of last Tuesday, was still historically large, but nearly 60,000 lots below the record high reached in May after drought damage to South American crops forced prices higher to ration demand.

The reduction in the net long position in the week to Tuesday was achieved through the reduction of long bets, which gain when prices rise, rather than speculators taking extra short positions, which profit when values fall, the data from the Commodity Futures Trading Commission showed.

And it came in the face of increasing evidence that the US crop, while damaged by drought, may not have suffered as severely as earlier believed.

“Latest yield reports support our bias that the corn yield will contract and the soybean yield will advance appreciably” when the US Department of Agriculture next week unveils its latest Wasde crop report, Richard Feltes at broker RJ O’Brien said.

The potential upside for soybean futures from Friday’s close, when they were pulled higher by a strong performance in grains following USDA inventory data, “is limited given ongoing parade of better-than-expected soybean yields”, he said.

Sell-off in products too

The sell-down was reflected elsewhere in the complex too in soyoil futures and options which, with a cut of more than 13,000 lots to the managed money net long position, suffered their biggest cut to net long position in four months.

Sentiment over the contract has been sapped by a collapse in prices of rival vegetable oil palm oil, which continued its decline in Kuala Lumpur on Monday, falling to a fresh two-year low of 2,449 ringgit a tonne at one point.

The drop in palm oil has been fuelled by fears for Malaysia’s exports, which cargo surveyor Intertek Testing Services said on Monday fell 0.7% last month, at a time when production sees a seasonal uptick – implying a rise in inventories and a decreased pressure on buyers to compete for supplies.

In soymeal, the other product of soybean processing, used in feed, speculators’ net long position dropped below 50,000 lots for the first time since February, and is now at less than half the level seen at a high in April.

Sell-downs stall

However, in grains, a trend of speculative selling which started in August stalled, as investors closed short holdings which in corn especially have been profitable bets.

Net long positions rose in both Chicago corn and wheat.

And, among soft commodities, a sharp sell-off in sugar ended too, as renewed rains in Brazil’s Centre South put the dampeners on a rapid pace of cane crushing in the most important producing region of the more important producing country.

However, in cotton, speculators halved their net long position, in a sell-down accelerated by the prospect of the US harvest, meaning fresh supplies available to buyers, and over a potential sell-down by China of some of its huge state inventories.

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