Hedge fund selldown on ags hits longest on record

Speculators chalked up their longest bearish switch in positioning on agricultural commodities on record, official data showed, as another raw material hedge fund said it is to close because of the trouble raising capital.

Managed money, a proxy for speculators, cut its net long position in futures and options in the major US-traded agricultural commodities by 8,600 contracts in the week to last Tuesday, data from the Commodity Futures Trading Commission regulator show.

The decline represented a ninth successive week of decline the longest unbroken trend of bearish positioning on records going back to 2006.

The selldown has halved hedge funds' net long in US agricultural commodity futures and options to some 260,000 lots.

And the data came as Higgs Capital Management, set up in July last year, and which had an estimated $340m in assets under management at its peak, became the latest commodity fund to quit.

'Lack of capital stability'

The fund said in a letter to its investors: "We have taken this decision based on recent redemptions we have received and general headwinds we face in commodity capital raising.

Speculators' net longs in grains and oilseeds, Dec 24, (change on week)

Chicago soybeans: 165,723, (-6,633)

Chicago soymeal: 60,313, (-3,049)

Kansas wheat: 8,066, (-6,137)

Chicago soyoil: -44,010, (-2,060)

Chicago wheat: -69,832 (+1,882)

Chicago corn: -87,794, (+17,051)

Sources:, CFTC

"Our lack of capital stability meant that although we could have continued to manage capital into 2014 this would have required a significant reduction in expenses along with a restructuring of the fund."

The funds' assets under management had fallen to $250m as of the start of this month, according to the Financial Times.

Other commodity funds to close this year include Clive Capital, which had $5bn under management at its peak and an estimated $1bn at the time of its closure three months ago, and Arbalet Capital.

Sour on sugar

The negative trend in agricultural commodity futures and options positioning was led, again, in the latest week by New York raw sugar, in which speculators extended their net short position by more than 14,000 contracts.

Speculators' net longs in New York softs, Dec 24 (change on week)

Cocoa: 76,702, (+1,978)

Cotton: 37,555, (+3,262)

Arabica coffee: -7,564, (+4,081)

Raw sugar: -23,553, (-14,482)

Sources:, CFTC

In an eight-week bearish turn, fuelled by a resilient finish to the Brazilian production season and improved hopes for Indian and Thai supplies, hedge funds have turned from a net long of more than 200,000 contracts in raw sugar to a net short of 23,553 contracts.

Speculators also - having raised their net short in Chicago soft red winter wheat to a record high as of December 17 turned their selling pressure on the rain to hard red winter wheat.

The net long in hard red winter wheat fell to 8,066 contracts, its lowest in four months.

Hog data

Hedge funds also trimmed their large net long in soybeans futures and options, which have come under pressure with improved South American weather conditions.

Speculators' net longs in Chicago livestock, Dec 24, (change on week)

Live cattle: 91,149, (+1,878)

Lean hogs: 43,958, (-6,332)

Feeder cattle: 9,776 (-38)

Sources:, CFTC

And they cut their net long in Chicago lean hogs for a 13

th successive week, amid ideas of better-than expected pork supplies - although these have been called into question by data on Friday showing the US herd shrinking by 0.7% this year to 65.9m head, more than the 0.1% drop investors had forecast.

Some have seen this bigger-than-expected decline as evidence of the spread of porcine epidemic diarrhoea virus (PEDv).

"It appears that hog expansion is nowhere to be found and that the disease situation is indeed quite serious," Paragon Economics and Steiner Consulting said in a report.

"Much of the [pork] supply growth expected for 2014 will have to come from heavier weights rather than higher slaughter."

However, broker Allendale said that "the US Department of Agriculture kept the pigs per litter number at large levels which implies no PEDv-based problems".

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