Investors in exchange traded products have deserted agricultural commodities at a pace not seen since at least 2009 this month – but the exodus may be reversible.
The net outflow from farm commodity exchange traded products (ETPs) has already reached $600m for May, shrinking the total invested in the asset class to $7.8bn, Societe Generale said.
The total exceeded the exodus from base metal, commodity index and energy ETPs combined, but was behind the outflow from products in gold and other precious metals, which lost a net $3.0bn.
And it comes amid a mixed period for many farm commodity futures, with sugar flat on the month, Chicago wheat showing a small rise and both corn and soybeans lower, despite the weather setbacks hampering North American farmers in their spring sowings campaign.
"Commodity ETPs experienced huge outflows in May so far. No subsector escaped, not even gold," SocGen said.
However, the bank was upbeat over prospects for a revival in the asset class's fortunes, given the "tense supply" in markets for many raw materials.
"Outflows from commodities could therefore be temporary, especially if the dollar starts to weaken again as we expect."
In a note on Tuesday, the bank forecast the dollar renewing weakness against the euro, which will gain strength from a further interest rate rise, and recommended investors to "open long positions in commodities".
Dollar declines tend to boost prices of dollar-denominated commodities, making them more competitive to buyers in other currencies.
The comments come amid renewed interest among analysts in commodities, with Goldman Sachs on Tuesday upgrading its rating on the sector, and Morgan Stanley raising its forecast for oil prices, even if the strength in commodity futures remains patchy.
On Wednesday, most of the main Chicago crops and New York soft commodities showed small gains as of 08:40 GMT, while oil prices stood down more than 1%.
The comments also build on a calculation by Standard Chartered that outflows from agricultural index funds topped $800m since early April.
"To put this in context, this has wiped out the prior build-up of inflows since February 26, plus an additional $90m," Standard Chartered analyst Abah Ofon said.