Falling corn and soybean markets are behaving likes ones
that "simply have too much speculative length", traders warned, even as data
showed hedge funds continuing to cut their bets on rising prices.
Managed money, a proxy for hedge funds, cut its net long
exposure to Chicago corn futures and options by more than 12,200 contracts to
the lowest in two months, data from the Commodity Futures Trading Commission
In soybeans, the net long position – the advantage of long
bets, which gain when prices rise, over short holdings which profit when values
fall – fell for a fifth successive week, dropping below 177,000 contracts for
the first time in more than six months.
The data are accurate as of last Tuesday, two days ahead of
US Department of Agriculture crop estimates which, in forecasting strong demand
for US corn and soybean supplies, prompted – temporary – relief from a downward
trend in prices.
However, the return of values to falling since suggests that
funds still have unfinished business to do in liquidating positions, traders
'Too much speculative
"The general feel in the ag sector is that corn and soybeans
are still trading like markets that simply have too much speculative length,"
Brian Henry at broker Benson Quinn Commodities said.
"These markets may have value near these levels, but the commercial/end
user has not had to shift away from securing coverage on their own term."
Speculators' net longs in grains and oilseeds, Oct 9, (change on week)
Chicago corn: 260,466, (-12,260)
Chicago soybeans: 176,907 (-1,835)
Chicago wheat: 47,778, (-10,419)
Kansas wheat: 44,189, (-1,242)
Chicago soymeal: 43,288, (-567)
Chicago soyoil: 5,672, (-10,126)
US Commodities said: "Funds are now unloading their long positions. It is this long position that is short-term
pressing the market lower."
Prices continued falling on Monday, when soybeans dropped
below $15 a bushel for the first time since June, and at one point posted a
drop of 2.3% to $14.86 ¾ a bushel.
Corn for December eased 1.8% to an intraday low of $7.39 a
Indeed, the best performer of Chicago's big crops was wheat,
in which managed money undertook last week its biggest clear out of net length
in four months, by more than 10,000 contracts, with negative sentiment boosted
by rains which improved prospects for US winter grain sowings.
'Below the historical
Among soft commodities, speculators trimmed their net short
position in cotton for the first time in five weeks, amid talk of a poor quality
US crop which continued on Monday.
The US Department of Agriculture has "indicated that just
46% of the cotton harvested so far this season meets the delivery standards of
the New York futures contract", Luke Mathews at Commonwealth Bank of Australia
Speculators' net longs in New York softs, Oct 9, (change on week)
Raw sugar: 75,479, (+25,873)
Cocoa: 25,455, (-753)
Coffee: -5,066, (-3,688)
Cotton: -6,699, (+266)
"This is well below the historical average of around 70%."
And managed money raised its net long position in New York
raw sugar by more than 25,000 contracts, the highest in three months, amid
ideas of a slowdown in the cane crush in Brazil's Centre South region which
were confirmed by industry group Unica last Tuesday.
However, in coffee, speculators turned net sellers, as fears
eased for the impact of a dry spell which following a promising lowering period
in major Brazilian coffee regions.