A slowdown in sales of corn by funds raised questions over whether a sell-down by funds in their net long position in the grain will continue – even as speculators' bearish position in wheat increased.

Non-commercial investors in Chicago corn futures and options continued to reduce their net long position – the advantage of long positions which benefit when prices rise over the short positions which profit when values fall – in the week to last Tuesday, with the figure falling to a 17-month low of 50,099 contracts.

"Pessimism about the global economy outlook amid Europe's debt crisis urged investor caution and sapped trading volume ahead of the year-end holidays," Lynette Tan, at broker Phillip Futures, said.

However, the week-on-week decline of 1,363 lots represented a considerably slower pace than seen in the previous four weeks, which cost Chicago corn more than 70,000 lots in net length.

Price positive? 

Indeed, the data "could be construed as positive by some in the trade", Jon Michalscheck at Minneapolis-based broker Benson Quinn Commodities.

Non-commercial investors' net long position in corn topped 350,000 lots in February, before beginning a descent which continued even as the grain ran up to a record high in March of $7.99 ¾ a bushel.

That was reflected in the managed money segment, viewed by many commentators as a proxy of speculators – who raised their net long in corn by 2,021 contracts, after a drop of more than 15,300 lots the previous week, the position data, from the US Commodity Futures Trading Commission, show.

'Threat to soybean development'

Extremes in the range of net longs, and net shorts, are closely watched as they can signal an increased wariness to continue the trend - and a greater risk of a wave of sales of long positions, or covering of short positions, sparking hefty price pressure.

And the slowdown in the corn sell-off comes amid increasing worries over dryness setting back South American corn and soybean crops due for harvest early in 2012. A disappointing harvest would reduce competition with US corn and soybean exports, raising Chicago prices.

Indeed, non-commercial investors reduced their net short position in Chicago soybeans by more than 8,600 contracts to some 15,500 lots in the latest week.

In managed money, the net short fell by more than 7,000 contracts to a 3,158 contracts.

"After several weeks of clear negative positioning short and long contracts are now almost balanced again," Commerzbank analysts said.

"News of a possible threat to soybean development in South America due to dry weather is likely to have been responsible for this."

Softs out of favour

In wheat, speculators increased a negative stance, increasing their short position by nearly 4,400 contracts to 43,049 lots, not far short of the record set last month.

They turned more pessimistic in many soft commodities too, such as New York cocoa too, in which they increased their net short exposure by nearly 4,000 lots to nearly 12,000 lots.

Net long positions in cotton and coffee, also took heavy pastings. Managed money's net long in New York coffee more than halved to 5,721 lots.