Hedge funds extend bearish positions on ags, again

Hedge funds extended their bearish turn on agricultural commodities, as increasingly negative sentiment on sugar and livestock more than offset a reassessment of downbeat positioning on wheat.

Managed money, a proxy for speculators, cut its net long position in futures and options in the top 13 US-traded agricultural commodities, from coffee to corn, by more than 18,000 contracts in the week to last Tuesday, according to data from the Commodity Futures Trading Commission regulator.

That represented the eighth successive week of hedge funds reducing their net long the extent to which long positions, which profit when values rise, exceed short bets, which benefit when prices fall.

Indeed, hedge funds have exhibiting bearish positioning in all but one week since April, slashing their net long position from 1.13m contracts to 276,000 contracts, a drop fuelled by the increasing confidence in record US corn and soybean crops, and by reduced fears over sugar supplies too, despite damage to Brazilian cane from drought.

Sour on sugar

Indeed, sugar suffered another week of selling by hedge funds, which raised their net short position in the New York-traded futures and options in the sweetener by more than 9,500 contracts to a six-month high of 27,327 lots.

Speculators' net longs in grains and oilseeds, Aug 19, (change on week)

Chicago corn: 64,719, (-2,946)

Chicago soymeal: 42,643, (+6,342)

Kansas wheat: 15,421, (+2,062)

Chicago soyoil: -15,155, (+354)

Chicago soybeans: -16,998, (-4,994)

Chicago wheat: -50,668, (+10,456)

Sources:, CFTC

The negative sentiment is being fuelled by a bonus to Brazilian sugar producers from dry weather, in that it speeds the cane harvest, allowing a ramp up in sugar output - even if producers are tending to store it, in the hope of higher prices, rather than sell it, as underlined by Cosan and Sao Martinho.

The extent of inventories is, for now, helping dilute concerns over an early finish to the cane harvest, a hangover from the impact of early-year drought in reducing yields.

Unica, the Brazilian cane industry group, will this week unveil its latest twice-monthly report on cane production in the major Centre South production region, amid talk that the data could show some evidence of a volume decline.

At broker Sucden Financial, Kujawa, co-head of softs, said that "there are rumours/speculation around the wider market that Unica isn't going to be as bearish, with possibilities of a move towards more ethanol production and/or less cane processed".

More downbeat on livestock

Hedge funds were also notable sellers in the livestock complex, cutting their net long in Chicago lean hog futures and options by more than 5,000 contracts to a seven-month low of 43,198 lots.

Speculators' net longs in New York softs, Aug 19, (change on week)

Cocoa: 70,932, (-2,259)

Arabica coffee: 41,659, (+243)

Raw sugar: -27,327 (-9,571)

Cotton: -7,404, (-1,671)

Sources:, CFTC

For live cattle, the net long fell by more than 10,000 lots to 104,442 contracts, the weakest reading in 2014.

Sentiment in both pits has been dented by the ban by Russia, a huge meat importer, on buy-ins of US agricultural products, besides by seasonal factors, with values tending to retreat at this time of year from early-summer peaks.

However, hog values have faced extra pressure from high slaughter weights and a sharp drop in the rate of porcine epidemic diahorrea virus (PEDv), although this is a disease which has proven more prevalent in the winter.

Live cattle futures, meanwhile, may see extra pressure after data released late on Friday which showed feedlots taking on more animals last month for fattening than investors had expected, if a figure still down 7.0% year on year.

Less gloomy on wheat

Among grains, hedge funds continued for a third week to row back from negative price expectations which drove their net short in Chicago futures and options to the second highest on record in late July.

Speculators' net longs in Chicago livestock, Aug 19 (change on week)

Live cattle: 104,442, (-10,407)

Lean hogs: 43,198, (-5,171)

Feeder cattle: 9,960, (-460)

Sources:, CFTC

Prices have since found some support from fresh concerns over the Ukraine crisis, besides worries over the quality of supplies in a number of geographies, including the US, where the soft red winter wheat crop has shown unusually high rates of vomitoxin, a toxic fungal residue, now being reported from the spring wheat harvest too.

However, hedge funds returned to extending their net short in Chicago soybean futures and options, by nearly 5,000 contracts to 16,698 lots, the largest-but-one net short since 2006.

Futures in the best-traded, new crop November contract have set a succession of contract lows, as decent US weather this month, a key period for the oilseed's development, has prompted the withdrawal of risk premium.

However, old-crop soybean futures have risen, amid tight supplies before the forthcoming harvest, expected to be a record.

Hedge fund enthusiasm for ags rises even as sentiment sours
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