There is, ironically, nothing like a huge net short position in crop futures to get buyers on board.

Managed money, a proxy for speculators hiked their short positions in New York raw sugar futures in the week to last Tuesday by more than 43,000 contracts.

The move turned a net long position of 12,162 the week before into a net short holding [meaning short bets, which profit when values fall outnumber long positions, which benefit when prices rise] of 18,302 lots, the most since at least 2006.

And the question then is whether speculators have fulfilled their appetite for short positions, and where the next sellers are coming from.

Ethanol to  boost share?

Especially when there are some reasons not to be so downbeat.

"The expectation of a record-high sugar cane crop in Brazil, due to commence in April, is weighing on prices," Commerzbank said.

"Nonetheless, it is increasingly anticipated that a growing proportion will be converted into ethanol for reasons of profitability," the bank said, noting a forecast that a 9% higher cane crop in Brazil's key Centre South region would raise ethanol output by 24%, but sugar only 4% to 35.5m tonnes.

With sugar technically "oversold", New York's March contract rose 1.9% to 18.73 cents a pound as speculators booked profits on their short holdings.

Cocoa eases

However, in cocoa, for instance, another soft commodity in which ideas of looser supplies than previously expected are undermining prices, speculators still have plenty of room to raise their short holdings without ringing alarm bells.

Speculators cut their net long holding by more than 4,000 lots in the latest week, but it still remained, at 18,642 contracts, relatively high, and in contrast to the net short position managed money had in New York cocoa a year ago.

With expectations of West African selling in the wings, New York cocoa for March eased 0.6% to $2,161 a tonne, the lowest since June last year, if gaining 0.4% to £1,432 a tonne in London.

In New York arabica coffee, meanwhile, in which speculators have a reasonable net short position of 11,206 lots, added 0.5% to 149.00 cents a pound, amid lingering concerns over the impact of disease pressures on central American crops.

Moisture in Argentina?

For grains and oilseeds, meanwhile, although speculators' net short in Chicago wheat has raised some eyebrows, given the poor condition of the US winter wheat crop, it was South American weather which continued to dominate trading, and send prices on a topsy-turvy path.

"The overnight trade began higher and stayed firmer most of the night until the morning forecast added moisture to southern Brazil and Argentina," US Commodities said.

That was price negative, given the support which dryness fears have given to prices.

'Not a lot a rain'

Not so fast. Was the forecast right?

"The GFS weather model continues to point to another round of precipitation this week that is much heavier. But the EU model is not in agreement," Darrell Holaday at Country Futures said.

"This is the same problem we had with the models last summer in the middle part of the US last summer.

"As a whole the GFS model continues to point to more moisture that actually falls as it looks out in the future. "

Weather service WxRisk.com added: "The European model has some rain over central and northern Argentina and south eastern Brazil" in its outlook, "but nothing like the GFS is showing. 

While rains are to reach 70% of areas, "the European model has no rain fall these areas over the five day   period   greater than one inch.  Over a five day interval that is simply not a lot a rain."

'The real concern'

Gail Martell, at Martell Crop Projections, said that "hot temperatures in the mid-90s Fahrenheit are predicted this week in Argentina's grain belt.   

"Intense heat is capping off a month of sub-par rainfall and reduced humidity.

"Shallow-rooted corn," which fell short on the rooting front after being planted into water-laden soils, "and soybeans would be most vulnerable to moisture stress".

Mr Holaday said that, from all this, "the concern really should be the Argentina corn crop.

"Rainfall in almost all of Argentina in the last two weeks has been below 50% of normal and temperatures are going above 100 degrees this week.

"This is when the corn is in or moving into a critical development stage."

'Rapid enough to support prices'

The impact of all this, coupled with weekly US export data, as measured by cargo inspections, of 21.1m bushels was to send corn higher.

The respectable export figure, twice that of a week before, countered ideas that soft ethanol production and an unexpected drop in feedlots' animal intake last month meant corn rationing was happening in earnest.

"The pace of current and expected corn consumption appears to be rapid enough to provide support for old crop prices for several more weeks," Darrel Good at the University of Illinois said.

He added that the dynamics do "not suggest the need for much higher prices", without a South American weather scare.

'US wheat competitive'

Still, with the lingering Argentina concerns, Chicago corn for March added 1.2% to $7.29 ¼ a bushel.

And that helped fellow grain wheat too, which closed up 0.4% at $7.79 ¼ a bushel for March.

After all, on export markets, "US soft red winter wheat is now competitive out of the US Gulf," US Commodities said.

"US wheat is $24 a tonne under French wheat and $20 a tonne under Australian wheat," while "Russian wheat continues to push to new highs" amid talk that it will indeed ditch a 5% import duty on grain.

And US wheat exports remained relatively high, at 22.3m bushels, not far below the previous week's. and well above the year-ago figure of 18.8m bushels.

'Locking in positive crush margins'

Soybean exports were not quite so upbeat, coming in at 40.7m bushels, down more than 8m bushels week on week., and a little below the year ago figure.

But import fears were assuaged by a separate USDA announcement that China had bought 220,000 tonnes of US wheat, for 2013-14 delivery.

"This brings their new crop total up to 1.9m tonnes. Processors enjoying locking in positive crush margins," Mr Holaday said.

Soybeans for March ended up 0.5% at $14.47 ¾ a bushel.