The rise in speculators' position on arabica coffee futures to its most bearish in at least six years could add to pressure on prices which remain amongst their lowest in the last two years.
Managed money, a proxy for speculators, raised its net short position in coffee futures and options by 2,761 contracts to 19,627 lots in the week to last Tuesday, the highest since at least June 2006, according to records held by Rabobank.
The increase in the net short position – the advantage of short bets, which profit when values fall, over the long bets which win when prices rise – reflected continued ideas of the boost to supplies of arabica coffee, the type traded in New York, thanks largely to a recovery in the Brazilian harvest from a poor start.
"New York arabica futures have been a favourite for funds to play from the short side this year due to bearish macro signals, Brazil's on-cycle season, the weaker Brazilian real currency, and growing evidence that demand is switching out of arabica towards cheaper robustas," Macquarie analyst Kona Haque said.
And Commerzbank warned that the trend of falling speculative interest could have further to run, saying the data on speculators' positioning, released by the Commodity Futures Trading Commission late on Friday "could weigh further on the price of coffee".
'Dampening the outlook'
"The rally in cocoa, on the other hand, could continue," Commerzbank said, after the CFTC data showing managed money's net long position in the chocolate ingredient soaring by nearly 11,500 lots to 29,992 contracts, the highest for some two years.
The increase, which fostered a rise in New York cocoa prices to a 10-month high last week, is "doubtless due to the fact that the continuing dry weather in West Africa is dampening the outlook for the main crop, due to begin in October, and thus increasing the supply risks in 2012-13," the bank said.
net longs in New York softs, Sept 4, (change on
Raw sugar: 39,729, (-19,608)
Cocoa: 28,992, (+10,467)
Cotton: 16,722, (+3,675)
Coffee: -19,627, (+2,761)
"Some parts of Ivory Coast and Ghana have seen just 10-30% of their usual rainfall" since late July.
However New York cocoa prices eased in early deals on Monday, by 1.2% to $2,645 a tonne for December delivery, while arabica coffee rose 0.8% to 164.40 cents a pound.
Some investors see extreme managed money net long or net short holdings as a reason to expect a trend reversal, given that they may prompt some speculators to question the appetite for taking out further such positions.
'Plenty of room'
Among grains, position data appears to show that in Chicago wheat funds "appear to have plenty of room to add additional long positions, if upward momentum continues", Brian Henry at Benson Quinn Commodities said.
The managed money net long in Chicago wheat, at 72,691 lots last Tuesday, remained below a high above 80,000 contracts reached a month before.
net longs in grains and oilseeds, Sept 4, (change on week)
soybeans: 237,671 (+5,131)
Chicago corn: 323,629,
Chicago soymeal: 73,712, (+85)
Chicago wheat: 72,421, (+3,837)
Chicago soyoil: 54,177, (+8,045)
Kansas wheat: 46,327, (+2,877)
For soybeans, speculators' net long position rose some 5,100 lots to 237,671 contracts, below July highs above 250,000 contracts.
Speculators' net long holding in corn, at 323,629 contracts, remains well below levels above 400,000 lots reached in late 2010.