by Agrimoney.com
Hedge funds appear to have avoided being wrong-footed by Friday's double bill of US sowings and stocks data as they were over the last batch, in March, when bets on rising prices turned "disastrous".
Managed money, a proxy for speculators, reduced its net long position in Chicago corn futures and options for a fourth successive week in the week to last Tuesday, to 70,701 lots, according to data from the Commodity Futures Trading Commission, the US regulator
The decline appears to have positioned hedge funds well for the slump of some 7% in prices since, fuelled by data on Friday showing that US farmers sowed 97.4m acres with corn – a little more than they had initially planned on.
Analysts had expected a sowings number of 95.3m tonnes, banking on the set spring preventing growers from planting with corn all fields they had allocated to the grain.
While July futures have risen by some 3.5% since Tuesday, this contract, with expiry imminent bringing the contract physical delivery implications, is thinly traded and not widely held by funds.
More short positions
Indeed, while managed money's allocation to corn of long positions - which benefit when prices rise - was, at some 256,000 contracts, close to the long-run average, the level of short positions – which profit when values rise - was, at about 185,000 contracts, near record levels.
The positioning represents a sharp contrast from that ahead of that in March, before the US Department of Agriculture's previous data on sowings crops, released - as on Friday - with separate statistics on the level of grains in US inventories.
Ahead of that report, hedge funds had ramped up their net long position to a 2013 high, including long bets of more than 300,000 contracts.
This left them badly caught out after statistics showing higher-than-expected corn inventories sent futures tumbling 13% in two sessions, a scenario termed "disastrous" for hedge funds by Ann Berg, former director at the Chicago Board of Trade, in a report for the UN Food and Agriculture Organization.
More upbeat on livestock
Despite a reduction in the net long position in corn, managed money raised its net long position in the top US-traded agricultural commodities overall, by nearly 20,000 contracts.
The increase reflected in part improving sentiment over cattle futures, which have shown some recovery from a mid-June low, helped by ideas that weakening corn prices and improved pasture conditions in many areas will encourage herd rebuilding, prompting competition between beef packers and ranchers for animals.
Hog prices have also been underpinned by the prospect of weaker grain prices, besides hopes for firm demand for pork, and in particular bellies, the basis of bacon.
While futures fell in the last session, in profit-taking ahead of a quarterly USDA report on the domestic hog and pig herd, many investors expect prices to open firm on Monday, after the briefing showed animals numbers little changed, at 66.647m head.
Analysts had expected the number to come in at 66.992m head.
Sugar shorts covered
Among soft commodities, managed money also undertook a massive covering of short positions in raw sugar, ahead of the expiration of New York's July lot, but also amid wet weather in Brazil's key Centre South region, hampering the cane harvest and lowering sugar levels in crop.
Data from Brazilian cane industry group Unica last week indeed showed the Centre South harvest slowing, although sugar output remained well above year ago levels.
Short positions on sugar have been a profitable bet for speculators, with futures down some 14% so far this year on a front contract basis.
However, hedge funds cut their net long exposure to New York-traded cotton futures and options, amid talk of improved weather in Texas, America's top producing state, and of potential reforms to a Chinese subsidy programme for its farmers which has been a major support to world values.
In arabica coffee, for which a decline in values has stalled amid ideas that they are well below production costs in many countries, hedge funds continued for a sixth successive week to build a net short position, but at a far slower rate.
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