Monday, September 9, 2013

Hedge funds lift bullish soy bets to 10-month high


Hedge funds, in the face of continuing Midwest weather concerns, extended their surge of bets on higher soybean prices, offsetting fresh scepticism on hopes for higher grain futures and bearish sentiment on sugar values too.

Managed money, a proxy for speculators, hiked by 21,256 lots its net long position in Chicago soybean futures and options in the week to last Tuesday, according to data from the Commodity Futures Trading Commission (CFTC), the US regulator.

The rise represented a fourth week running of increases in the net long position in soybeans, taking it to a 10-month high of just under 160,000 lots.

Indeed, the net long has risen by more than 115,000 contracts over the four weeks, a performance beaten only once by any such period since record began in 2006, and a shift reflecting the waning expectations for the US crop which took Chicago's November soybean lot within 1 cent of a contract high last week.

Polls show that analysts believe that heat and dryness has cut the US soybean yield to about 41 bushels per acre, from the 42.6 bushels per acre the US Department of Agriculture is currently forecasting, although its estimate is up for revision in Thursday's Wasde crop report.

Downbeat on grains

Hedge funds turned more upbeat in futures in soymeal, one of the two main soybean processing products, too, lifting their net long position nearly to 65,000 lots, the highest since June.

In soyoil, speculators cut their net short position by 1,883 lots to the lowest since May.

The bullish shifts contrasted with a return to more bearish sentiment on grains, with investors rebuilding their net short position in Chicago corn futures and options for the first time in three weeks.

With corn crops more developed, and indeed being harvested in southerly parts of the US, production prospects are less affected by current weather.

In wheat, whose prices have largely followed those of corn, hedge funds increased their net short position for the first time in four weeks.

Mixed softs

Among soft commodities, hedge funds took overall a more bearish position, particularly in cotton, in which price sentiment has been dented by improved production prospects, in the likes of India as well as the US, besides the sizeable discount of rival fibre polyester.

The managed money net long in New York cotton futures and optioned tumbled by nearly 12,000 lots to its lowest since June.

And in raw sugar, hedge funds raised their net short by more than 10,000 contracts – indeed, many appear to have been caught off guard by a revival in prices since spurred by Czarnikow's caution that demand for the sweetener may be far larger than had been thought.

Hedge funds have called better the cocoa market, increasing their net long position for an eighth successive week to nearly 60,000 lots, the highest since 2008, ahead of a rise in futures to their highest in nearly a year.

"Cocoa prices are enjoying an impressive upswing," Commerzbank said, pointing to a rise of 6% in rise since Tuesday.

"The fact that West Africa has also seen only roughly half its usual rainfall in recent weeks is fuelling fears about the next main harvest, due to begin in October."

Hogs vs cattle

And, in livestock, investors proved more bullish on hogs, boosted by signs of resilient demand for pork, but less so in live cattle, with high beef prices raising questions over demand.

Still, on feeder cattle, those ready for fattening, hedge funds raised their net long position for the first time in four weeks, amid hopes that the retreat in corn futures will support demand from feedlots.

Overall, hedge funds turned mildly more bearish in the top 13 US-traded agricultural commodities, but only just, cutting their net long position by 2,363 lots to 297,119 contracts.

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