by Agrimoney.com
Hedge funds extended their return to a more positive stance on ags despite a more bearish take on corn and many soft commodities, raising bullish bets on soybeans to a seven-month high and cocoa to a five-year top.
Speculators - whose position in futures and options in the main US-traded agricultural commodities was at least most pessimistic on record in early April - continued to rebuild a net long position in the week to last Tuesday, raising it nearly to 310,000 contracts, regulatory data showed.
Sentiment in many soft commodities weakened, with managed money - a proxy for speculators - cutting its net long position in New York cotton futures to the lowest since January, as official data showed US farmers catching up on corn plantings, and the International Cotton Advisory Committee cut its price forecast.
In New York raw sugar, speculators raised their net short position nearer to a record high, as prices continued to suffer from expectations of a bumper harvest and from a weakening real – a factor for arabica coffee too, given that Brazil is also the top producer and exporter of the bean.
Meanwhile, in corn, hedge funds trimmed their net short position, as an easing off in rains boosted hopes for farmers finishing off plantings of the grain.
Positive on soybeans
However, such bearish positioning was more than offset by bullish turns on sentiment in crops such as soybeans, in which speculators raised their net long position above 140,000 contracts for the first time since November.
While sowings of soybeans also picked up, the better planting conditions overall lower the risk of farmers switching to the oilseed from corn, for which the ideal sowing window closes earlier.
Demand news on the soy complex overall has also been firm, with shipments and export orders of soymeal, high protein feed ingredient derived from soybeans, already exceeding the official forecast for 2012-13 with more than three months of the season to go.
Although exports from Brazil, a major US rival in crop exports, hit a record 7.95m tonnes in May, up 800,000 tonnes year on year, its soymeal shipments fell 230,000 tonnes to 1.38m tonnes, reflecting logistical hiccups.
Quality fears
In New York-traded cocoa, hedged funds raised their net long position in futures and options to 46,488 contracts, the highest since March 2008, helped by a lift by the International Cocoa Organization to its forecast for the world surplus in 2012-13, but also concerns over West African bean quality.
Macquarie analyst Kona Haque said: "Supplies from the mid crop have started to arrive, although bean sizes and quality are said to be deterring buying" by end-users, so boosting the appeal supplies meeting New York exchange criteria.
Prices have also been lifted "on the back of technical moves and spread trading activity, and concerns over potential supplies due to damaged cocoa at Antwerp warehouses".
Surprise shift in wheat
However, the biggest turn bullish – or at least less bearish – in hedge fund sentiment came in Chicago wheat, in which speculators slashed their net short position by more than 18,000 contracts.
That represented the most significant bout of short-covering since June last year, as dryness concerns in the former Soviet Union and the US sent grain prices soaring.
The positioning puzzled many investors, coming against a backdrop of concerns about US wheat exports, following the discovery of genetically modified plants in an Oregon field.
Furthermore, prospects for former Soviet Union crops improved, as rains provided refreshment for dry areas of Russia and Ukraine, major wheat exporters.
Chicago vs Minneapolis
The change in positioning was seen in part down to technical factors, with the grain benefiting as investors closed spreads with other crops.
"Wheat has been a prime candidate for spreading with the likes of corn. So if funds are closing corn longs, wheat could benefit as an after- thought," a UK grains trader told Agrimoney.com.
The troubles besetting northern US spring wheat farmers, for whom rains have continued to slow plantings, also appears to be being reflected in Chicago prices, even though spring wheat is traded in Minneapolis.
"Minneapolis is not a preferred market for hedge funds. It is not liquid enough," the trader said.
"If speculators want exposure to the slow spring wheat sowings story, they are going to get it in Chicago."
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