Speculators "missed the rally" in grains, adding in only relatively small amounts of bets on price gains ahead of US weather scare, and found themselves comprehensively wrong-footed by cotton too.

Managed money, a proxy for speculators, still had, as of Tuesday, a net short in Chicago wheat futures and options - meaning short holdings, which profit when prices fall, outnumbered long positions, which benefit when values rise.

The positioning came near the start of a rally - sparked by evidence of heat and dryness damaging corn crops, and with forecasts of further inclement conditions to come – which continued on Monday to lift prices.

Wheat stood 2.6% higher in Monday at breakfast time in Chicago (08:00 local time, 14:00 UK time), taking gains since Tuesday to more than 6%.

'Missed the rally'

Speculators also only increased by a small amount their net long holding in Chicago soybeans, albeit a crop in which they already had an elevated number of bets on price rises.

And in corn, while speculators did raise their net long position by a sizeable 28,000 contracts, their net long holding, at 70,715 lots, remained low by historical standards, data from the Commodity Futures Trading Commission, the US regulator, showed.

The net long position in corn approached 450,000 lots in late 2010.

"I thought there would be a bigger increase in net long positions held by speculators in grains," an analyst at a major commodities bank told Agrimoney.com.

"I was expecting to see that rise far more in the week. It looks like the speculators have missed the rally."

Wrong-footed by harvest?

The negative positioning by investors in wheat may have been down to expectations of the grain remaining depressed by observations of a rapid US winter wheat harvest, if one which has disappointed yields, with prices by Chicago lore reaching a seasonal low on July 1.

"In some US states the winter wheat harvest had already been completed or nearly completed by mid-June."

However, the early harvest may have brought forward the seasonal nadir too, Mike Mawdsley at broker Market 1 said, flagging the grain's firm price performance over the past two weeks.

"If the market can do that this time of year, the low is probably in," Mr Mawdsley said.

Cotton conundrum

Separately, research by Rabobank showed investors holding one of the lowest – and perhaps the lowest – net long position in soft commodities in five years, factoring in data on investors in both New York and London exchanges.

"Positions now stand at 20,956 contracts net long, down from 56,974 contracts the week before. The recent peak saw net long positions reach 147,040 contracts net long in March 2012," Rabobank said.

These holdings have served investors better, with soft commodities broadly declining since Tuesday.

However, many speculators have been wrong-footed in cotton, closing a stack of short bets as news of a huge order sent prices soaring, and holding, as of Tuesday.

They may have been better holding firm with short positions.