Hedge funds ended their record long spell of bearish
positioning on lean hogs as cold and the spread of porcine epidemic diarrhoea
virus diminished supply prospects, helping futures for summer delivery hit
Managed money, a proxy for speculators, lifted its net long
position in futures and options in the main 13 US-traded agricultural
commodities by more than 12,000 lots in the week to last Tuesday, according to data
from the Commodity Futures Trading Commission, the regulator.
The rebuild - for a second successive week, after the
longest period of bearish positioning since records began eight years ago –
reflected largely a less bearish take on corn prices, after the US earlier in
the month cut its estimate for stocks at the end of 2013-14.
The US Department of Agriculture cited a lower estimate for
last year's domestic harvest, and increased use of the grain for feed compared
with higher-priced wheat, for the revision.
However, the figure also signally included an increase in hedge
funds' net long in Chicago lean hog futures and options for the first time
since speculators in September notched up their most bullish positioning on
Speculators' net longs in Chicago livestock, Jan 21, (change on week)
Live cattle: 123,655, (+4,799)
Lean hogs: 41,313, (+2,832)
Feeder cattle: 9,002 (+951)
Sources: Agrimoney.com, CFTC
The net long has since more than halved, from the all-time
high of 97,952 lots reached in the latest week, but revived in the week to last
Tuesday in part thanks to cold weather which has prompted ideas of logistical
hiccups and reduced weight gains, although these have been countered in part by
strong US slaughter weights.
"Record weights are the current negative," US Commodities
However, prices have also been supported by the continued
outbreak of porcine epidemic diarrhoea virus, or PEDv, which causes high
mortality in piglets, and slows development severely in older animals.
Indeed, hedge funds' return to increasing their net longs in
lean hog futures has been a winning call, with news last week of the spread of
PEDv to Canada fuelling a rise in prices, which for many summer lots remain
near contract highs.
"Canada reported their first PEDv, showing that it is still
spreading," US Commodities said.
Speculators' net longs in grains and oilseeds, Jan 21, (change on week)
Chicago soybeans: 127,161, (+18,713)
Chicago soymeal: 59,524, (+767)
Kansas wheat: 6,341, (+747)
Chicago wheat: -56,571 (-89)
Chicago corn: -59,325, (+4,606)
Chicago soyoil: -64,537, (-3,878)
Sources: Agrimoney.com, CFTC
Chicago-based broker Allendale said: ""Canada's first
confirmed case of PEDv will change this year's pricing.
"From a wildly bullish standpoint we now have to write down
our production estimates for our friends up north.
"That will also lead to fewer imports. Of last year's 112m
hog kill here in the US, 5m came from Canada either as weaned/feeder pigs or
Lean hog futures for April on Monday stood 0.2% higher at
94.25 cents a pound in late deals, having touched a three-month high of 94.50
cents a pound earlier.
July futures matched their contract high, set in the last session,
of 101.10 cents a pound.
Wrong footed on
However, hedge funds' increase in their net long position in
cotton futures and options in the week to January 21, by 7,778 contracts to a
three-month high of 49,139 contracts, was looking less profitable on Monday,
after a 3.4% tumble in prices to 84.25 cents a pound.
Speculators' net longs in New York softs, Jan 21 (change on week)
Cocoa: 69,398, (-437)
Cotton: 49,319, (+7,778)
Arabica coffee: -2,755, (-2,461)
Raw sugar: -56,380, (-4,074)
Sources: Agrimoney.com, CFTC
Cotton prices had gained on ideas of tightening US supplies,
stoked by relatively low levels of inventories certified for delivery against
Chicago futures, and strong US export data.
US export sales for the week to January 9 trebled to more than
230,000 running bales, including trade forward for next season, and more than
doubled again the following week to 550,000 running bales, making it the second
best week of the current 2013-14 marketing year so far.
The figure for the latest week included nearly 180,000
running bales bought by Chinese importers, helping underpin ideas that proposed
reforms to the country's support regime for cotton growers will not, for now,
remove a major source of international demand which has been a key prop for
However, cotton prices have retreated with the broader
market weakness caused by concerns over emerging market growth, being, as an
industrial commodity, more susceptible than values of food crops to changes in
Profits on sugar
Hedge funds have proved more profitable in their bets on raw
sugar futures and options, in which they raised their net short position for a
12th successive week and which, indeed, have continued to fall, undermined
by ideas of strong supplies.
New York raw sugar futures for March on Monday fell 2.1% to 14.80
cents a pound, the first close for a spot contract below 15 cents a pound since
"We still suspect oversupply in both markets will cause
these to weaken further as we approach the respective March expiries and the
physical markets show no sign of improvement," said Nick Penney, senior trader
at Sucden Financial, raising the threat of a weaker Brazilian real to prices
"What may also affect the sugar market is the macro situation,
affected by the current peso devaluation crisis in Argentina which has
sharpened attention on emerging market risk.
"The Brazilian real and Indian rupee may be buffeted by this,
and any fall in local currencies against the dollar in producing countries adds
to the potential selling pressure on sugar and other dollar-denominated
The real on Monday shed 1.0% against the dollar, on track
for its weakest close since August.