PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 13:58 UK, 9th Oct 2017, by Mike Verdin
Hedge funds return to net short on ags - led by coffee, soyoil, sugar selling

Hedge funds, after only one week of bullish betting on ags, returned to a net short position on the complex, led by a record selldown in soyoil, and sizeable increases in bearish bets on coffee and sugar too.

Managed money, a proxy for speculators, swung net bearish by 66,648 contracts in its positioning on the top 13 US-traded agricultural commodities in the week to last Tuesday, analysis of data from the Commodity Futures Trading Commission regulator shows.

The shift returned hedge funds to a net short in the complex (meaning that short bets, which profit when prices fall, exceed long positions, which benefit when values rise) of 53,264 lots.

The swing reflected overall net selling in both grains and soft commodities, offset in part by purchases in the livestock complex.

'A few bones to pick'

However, the shift bearish in position reflected very largely selling in a few contracts, and notably soyoil, in which hedge funds slashed their net long position by 42,313 lots.

Speculators' net long in Chicago grains, Oct 3 (change on week)

Soyoil: 30,716, (-44,913)

Soybeans: 27,758, (-562)

Kansas wheat: 9,468, (-1,950)

Soymeal: 1,155, (+6,647)

Chicago wheat: -56,475, (+8,224)

Corn: -143,201, (-9,759)

Sources: Agrimoney.com, CFTC

That represented the biggest selldown on records going back to 2006, and came as the US Environmental Protection Agency proposed easing the strictures on US consumption of biodiesel a biofuel which is made from vegetable oil and, in the US, in particular from soyoil.

The worries prompted a sharp drop in Chicago soyoil futures, of more than 10% in the four weeks to a low last Monday, although prices have recovered somewhat since amid a fightback by the US biodiesel industry.

Iowa's senior Senator Chuck Grassley, a Republican, "has a meeting with EPA head Scott Pruitt on his calendar for October 17," Benson Quinn Commodities said.

"Senator Grassley, a staunch supporter of the renewable fuels standard (RFS), has a few bones to pick with current proposed changes to the programme versus assurances previously given regarding same."

'Restructuring and changes in personnel'

The overall ag selldown also largely reflected a rebuild of 20,684 contracts in hedge funds' net short in New York-traded sugar futures and options, a figure viewed "bullish" by Sucden Financial, in indicating that substantial selling pressure from speculators had already been absorbed.

Speculators' net longs in New York softs, Oct 3, (change on week)

Cotton: 51,232, (-5,934)

Cocoa: -25,984, (+7,842)

Arabica coffee: -27,121, (-13,980)

Raw sugar: -90,951, (-20,684)

Sources: Agrimoney.comn, CFTC

This when open interest (ie the number of live contracts) in futures and options combined dropped by 26,300 lots to a little over 777,000 contracts, "which is the lowest open interest seen in New York sugar since December 2011/January 2012", Sucden senior trader Nick Penney said.

Indeed, the data highlight "the reluctance of both producers and trade to enter into substantial flat price positions" in sugar, with some of the latter appearing stung by the extent of sugar price falls.

"The trade have seemingly overestimated demand, especially by India, and have not had a good year, judging by reports of restructuring and changes in personnel," Mr Penney said, following talk of shake-ups at ED&F Man and Citadel.

'Improving weather'

Meanwhile, hedge funds also raised their net short in New York arabica coffee futures and options by nearly 14,000 lots, one of the largest selldowns on record, as fears eased over dryness in Brazil, the top producing country.

Speculators' net longs in Chicago livestock, Oct 3, (change on week)

Live cattle: 96,682, (+4,324)

Lean hogs: 56,546, (+2,920)

Feeder cattle: 16,921, (+1,177)

Sources: Agrimoney.com, CFTC

Rabobank flagged that "the improving weather for Brazilian crops, where rains helped promote flowering" fuelled a drop of 5% in arabica prices over the week.

In Chicago, speculators also sold down corn, raising their net short to a four-month high, amid solid reports on US harvest yields, while in Kansas City-traded hard red winter wheat, hedge funds were net sellers for a 12th successive week the longest such streak on record.

'Strong seasonal demand'

However, in Chicago wheat, managed money trimmed its net short to 56,475 lots, a figure termed "manageable" by broker Benson Quinn Commodities.

Managed money net long in top 13 US-traded ags and (change on week)

Oct 3: -53,264, (-66,648)

Sep 26: 13,384, (+27,688)

Sep 19: -14,304, (+58,746)

Sep 12: -73,050, (+57,427)

Sep 5: -130,477, (-2,566)

Aug 29: -127,911, (-47,245)

Aug 22: -80,666, (-178,404)

Aug 15: 97,738, (-173,212)

Sources: Agrimoney.com, CFTC

And in the Chicago-traded livestock sector, managed money raised net longs in lean hog, feeder cattle and live cattle contracts to take its net long

In lean hogs, the move bullish "follows strong seasonal demand and a flurry of technical trading, despite an otherwise bearish supply outlook", Rabobank said, with demand being spurred by the opening of two new US plants last month too.

Water Street Solutions said that while slaughter numbers had been "big, packers are bidding to stay full, finally helping the lean index".

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