Soybean prices extended their sell-off on Monday, setting fresh four-month lows, stoked by concerns that a sharp drop in hedge funds' exposure to the oilseed may not mark the end of liquidation.
Managed money, a proxy for hedge funds or speculators, slashed their net long exposure to Chicago soybean futures and options by more than 9,600 contracts in a week, data from the Commodity Futures Trading Commission late on Friday showed.
The cut - reflecting a hike in short positions which profit when prices fall as well a cut in long holdings which benefit when values rise - reduced managed money's net long position to 164,528 lots, the lowest since early March.
And even though speculators have now sold cut nearly 90,000 lots from their net long position from the high hit earlier in the year, further liquidation may be forthcoming, RJ O'Brien said.
The US Department of Agriculture's bigger-than-expected upgrade on Friday's Wasde report to estimates for this year's US crop was only one reason to encourage more negative positioning, the broker's vice-president, research, Richard Feltes, said.
The prospect of large South American and US crops next year was also weighing on sentiment, as was the return of prices to their lowest in four months.
Speculators' net longs in grains and oilseeds, Nov 6, (change on week)
Chicago corn: 235,438, (-944)
Chicago soybeans: 174,194 (+1,846)
Kansas wheat: 49,116, (-2,550)
Chicago wheat: 48,431, (-79)
Chicago soymeal: 46,346, (-2,705)
Chicago soyoil: -35,853, (-13,032)
Sources: Agrimoney.com, CFTC
"Fund managers… knowing full well that all soy-drought buyers since late June are carrying losses, may continue to liquidate longs," Mr Feltes said.
At Benson Quinn Commodities, Kim Rugel cautioned that "without an imminent weather threat for South American planting", offering investors a reason to inject risk premium into prices, "fund liquidation keeps pressure on the market to the downside".
Soybeans for January, Chicago's best-traded contract, at one point dropped to $14.09 a bushel - the lowest since June 29 and down more than 5% in two sessions – before recovering a little to stand at 14:15 a bushel at 09:45 local time (15:45 UK time), down 2.5% on the day.
Sector out of favour
The shift in speculators' positioning on soybeans contributed to a drop of 73,919 lots in managed moneys' overall net long position on US-traded agricultural commodities, to the lowest since June, according to Rabobank calculations.
Cocoa, over which there are concerns of weakening production prospects, was alone among major agricultural commodities in seeing a rise in net long positioning.
Speculators' net longs in New York softs, Nov 6, (change on week)
Raw sugar: 20,726, (-12,255)
Cocoa: 29,686, (+1,844)
Cotton: -6,354, (-16,105)
Coffee: -23,998, (-6,138)
Sources: Agrimoney.com, CFTC
New York raw sugar futures and options saw its net long position slashed by more than 12,000 lots, and cotton by more than 16,000 lots, the biggest sell-down of the year, meaning speculators turned net short on the fibre.
For coffee, hedge funds' net short position rose to nearly 24,000 contracts, the largest on record.
Extremes in speculative positioning are often closely watched as they raise questions of how much further such trends can continue.
New York arabica coffee for December added 1.3% to 151.90 cents a pound, after closing the last session at the lowest for a spot contract since June.