The liquidation in Chicago futures that followed this month's US reports showing higher-than-expected crop inventories "extinguished" a revival in speculators' sentiment towards grains, Australia & New Zealand Bank said.

Data from the US Commodity Futures Trading Commission, the market regulator, showed speculators turning significantly more bearish on grains after US agriculture officials estimated domestic corn, soybean and wheat inventories far higher than the market had expected.

"This latest sell-off has extinguished any rebound in speculative positioning over the last quarter," Australia & New Zealand Bank analyst Paul Deane said, comments which contrast with a range of more upbeat comment on sentiment towards agricultural commodities.

'Limited risk'

Indeed, the liquidation "created a divergence between US equities and ag speculative flows", Mr Deane said, contrasting the recovery in share prices with the retreat in long exposure by fast money to farm commodities since July.

However, Hightower Report put a more bullish interpretation on the sell-down, saying that the extent of the "healthy liquidation of speculative long positions" could herald a reluctance to liquidate more. 

Hefty sell-offs

ANZ uses a different analysis of CFTC to many other commentators, including a broader array of data under the "speculator" category.

However, the more commonly used technique of equating just the "managed money" criterion with speculators also showed a hefty sell-off, with net long exposure to Chicago soybeans cut by 11,000 lots, to some 33,500 contracts.

Speculators slashed their net long exposure to corn slashed by more than 47,000 lots to 176,000 contracts. That represents less than half the net longs a year ago.

And in Chicago wheat, fast money rebuilt its net short position by nearly 14,000 contracts nearly to 50,000 lots – within 1,100 contracts of last year's record high.

"This was the largest weekly increase in the [wheat] net short since June 2011," Rabobank said.

Profit taking 

Speculators turned more bearish in some soft commodities too – including orange juice, selling long holdings into the rally focused initially on fears of a Florida freeze and of the US Food and Drug Administration banning Brazilian imports for findings of a banned fungicide.

However, managed money lifted its net long position in New York raw sugar by 7,400 contracts, to 57,800 lots, amid talk of ran delaying the onset of the 2012-13 cane crushing season in Brazil, the top producer and exporter of the sweetener.

Sugar futures have recovered more than 8% from a January 10 low.