Cotton may see its price revival flag, despite hedge funds' improved sentiment towards the fibre, while South American weather has rendered corn and soybeans are vulnerable to further liquidation, analysts warned.
Commonwealth Bank of Australia acknowledged the reasoning behind a rash of short-covering by speculators which returned them to a net long holding in New York futures and options.
Managed money, a proxy for speculators, closed a net 4,500 short positions, which profit when prices fall, and opened some 4,200 long bets, which exploit rising values, in the week to October 16, regulatory data late on Friday showed.
The shift in speculators' thinking reflected a 60% slump year on year to a decade-low of 7,802 bales in inventories certified for delivery against New York cotton futures, thanks to a delayed and, in particular, poor quality harvest.
"Holders of short futures positions have become increasingly nervous about a potential December short squeeze, and as a result traders have recently sought to cover their short positions," CBA analyst Luke Mathews said.
Holders of short positions were badly burnt on the expiry of the July contract, which saw a surge, then plunge, in cotton prices as news of a large export order, which some investors questioned.
Speculators' net longs in New York softs, Oct 16, (change on week)
Raw sugar: 55,537, (-19,942)
Cocoa: 26,567, (+1,112)
Cotton: 2,045, (+8,744)
Coffee: -13,096, (-8,030)
However, despite the latest round of short-covering, which prompted a rise of 6% in the price of New York's benchmark December cotton lot over the week, and has seen values rise further since, this rally looked unlikely to last for long,
"We don't believe futures price gains to endure past December, nor do we expect a significant impact on global physical prices," Mr Mathews said, citing the boost to New York stocks which will be brought by the continuing harvest.
"Furthermore global cotton stockpiles are forecast to reach record high levels in 2012-13."
However, there was potential for speculators to continue a sell-down of their net long position in Chicago corn and soybean futures, given a turn to the more benign in South American weather, UK broker RJ O'Brien said.
"South American weather reads slightly negative with lower than expected weekend Argentine rains and Brazil dryness limited to the north eastern belt," RJ O'Brien's Richard Feltes said.
Speculators' net longs in grains and oilseeds, Oct 16, (change on week)
Chicago corn: 256,561, (-3,905)
Chicago soybeans: 167,096 (-9,811)
Chicago wheat: 45,391, (-2,387)
Kansas wheat: 45,385, (+1,196)
Chicago soymeal: 43,418, (+130)
Chicago soyoil: -11,969, (-17,641)
Excess rain has been a problem in Argentina, hampering corn sowings, which are an estimated 11 points behind the average pace, while the central and northern areas of Brazil have been unduly dry.
For corn and soybean futures, "it will be important for prices to hold last week's lows to reassure the remaining managed fund longs", being a factor which would signal technical support for values.
In the week to October 16, managed money cut its net long position in Chicago corn futures and options by 3,900 contracts to the lowest level since mid-July.
In soybeans, speculators cut their net long position for a sixth successive week to a seven-month low of 167,096 contracts, while turning net short in soyoil, meaning bets on price falls exceeded those on rising values.
Managed money's net long position in Chicago wheat fell by 2,387 lots to the lowest since June.