A massive sell-off by speculators fuelled a decline in values
of US wheat which has left the grain looking amongst the cheapest in the world,
challenging Indian supplies on price.
Managed money, a proxy for speculators, cut it net long position
in Chicago wheat futures and options by more than 22,000 contracts, the biggest
sell-down since January, regulatory data showed.
The data were for the week to December 11 – a day marked by
the US Department of Agriculture's 50m-bushel cut to its forecast for US wheat
exports in 2012-13, a downgrade which sent prices of the grain tumbling to
their lowest since July.
Indeed, by late last week US soft wheat "had become just
about the cheapest in the world, possibly even undercutting Indian exports of
somewhat dubious quality", grain traders at a major European commodities house
State-run trading houses PEC and MMTC last week received
offers of about $324 a tonne for Indian milling wheat, equivalent to some $8.80
Speculators also cut their bets on rises in Kansas hard red wheat
futures and options - by more 4,000 contracts to the lowest net long position
since early summer - although, at 36,715 lots, it represents significantly more
optimistic positioning than that in Chicago soft red winter wheat derivatives.
Speculators' net longs in grains and oilseeds, Dec 11, (change on week)
Chicago corn: 225,538, (-53,472)
Chicago soybeans: 123,275 (+16,613)
Chicago soymeal: 37,957, (+10,355)
Kansas wheat: 36,715, (-4,682)
Chicago wheat: 11,219, (-23,210)
Chicago soyoil: -28,606, (+14,519)
Sources: Agrimoney.com, CFTC
And, in Chicago corn, managed money cut its net long
position by more than 50,000 contracts, marking a week which Paul Georgy at
broker Allendale said witnessed "the largest long liquidation in corn by funds
in 18 months".
Many investors are also downbeat on US corn export
prospects, with South Korean tenders last week highlighting the competitiveness
of Argentine and Brazilian offers, despite supplies there supposed to be
"US corn is still priced at a $30-a-tonne premium to South
American offers," Brian Henry at Benson Quinn Commodities said.
Soybean sell-down stalls
Speculators' turn bearish on grains contrasted with a more
positive view on soybean futures and options, in which the managed money net
long position increased for the first time since October.
Soybean prices, boosted by strong US exports and domestic
processing volumes, have continued to recover from November lows below $14 a
bushel, and returned back above $15 a bushel on Monday for the first time in
And, among soft commodities, speculators continued to
rebuild a net long position in cotton, in which the USDA last week reduced its
estimate for US stocks at the close of 2012-13 by 400,000 bales to 5.4m bales.
However, they returned to selling down New York raw sugar,
in which their net long fell below 10,000 lots, the lowest in five years.
Speculators' net longs in New York softs, Dec 11, (change on week)
Cocoa: 39,640, (-2,231)
Cotton: 6,963, (+6,313)
Raw sugar: 6,056, (-12,678)
Coffee: -23,939, (+2,354)
Sources: Agrimoney.com, CFTC
Indeed, the extent of the sell-down, on ideas of a large
world production surplus in 2012-13, has raised concerns over speculators'
appetite for further liquidation, and was seen as fuelling a rebound of 0.8% to
19.16 cents a pound in March futures in early deals on Monday.
"The perception was that the market was getting oversold,"
Nick Penney at Sucden Financial said.
However, he added that "we have seen these [investor
positioning] induced rallies before and suspect once this is fully digested
normal service on the downside will be resumed".