Hedge funds may have blinked too soon in undertaking a massive close of short bets on agricultural commodities, after bears regained ascendancy on Monday following Cyprus's plans to tax bank deposits.

Managed money, a proxy for speculators, turned more bullish on agricultural commodities in the week to last Tuesday fort the first time in more than a month, according data from the Commodity Futures Trading Commission, the US regulator.

The turn upward of nearly 100,000 lots in speculators' net long position, as measured by futures and options holdings in the 13 best-traded US agricultural commodities, was also the largest bullish swing since July last year.

It reflected both a sharp fall in short positions, which profit when prices fall, and a rise in long holdings, which benefit when values rise.

And the trend was evident in all the contract bar two – Kansas wheat, softened by the improving condition of US hard red winter wheat seedlings, and feeder cattle, which suffered from ideas of weak demand from feedlots, which have suffered two years of unbroken losses, and look set to remain in the red potentially into 2014, according to the US Department of Agriculture.

Short-term positive

Turning more bullish proved a winning call on some contracts over the rest of last week.

New York cotton, in which speculators raised their net long position to the highest since September 2010, had gained nearly 6% by Friday's close, as measured by the benchmark May contract.

Prices reverse

However, prices reversed direction on Monday after Cyprus at the weekend unveiled a tax on bank deposits in return for winning a European bailout package.

Among agricultural commodities, cotton was one of the biggest losers, shedding 2.0% as of 11:30 UK time (07:30 New York time) to 90.64 cents a pound for May delivery.

Raw sugar, in which managed money undertook a massive short-covering drive in the week to last Tuesday, the biggest since July last year, was 1.8% lower at 18.56 cents a pound.

'Definitive downward turn'

"Many agriculturals are finding themselves unable to defy the negative market environment that has been influenced by the events in Cyprus," Commerzbank said, highlighting wheat, given that prices face a potential headwind from ideas of strong northern hemisphere crops too.

"That said, the high feed demand is likely to limit the price slide in the case of wheat."

Chicago wheat for May was 1.2% lower at $7.14 ¼ a bushel.