Fears for South American weather have brought a wave of buying by hedge funds in the soybean complex, even as they stampeded out of sugar, running up their biggest net short position in the sweetener on record.

Managed money, a proxy for speculators, hiked its net long position in Chicago soybean futures and options by more than 18,000 contracts in the week to last Tuesday, data from the Commodity Futures Trading Commission, the US regulator, showed.

The buying in the oilseed represented the strongest since August, when heat and dryness were heightening concerns for the US crop, and came this time as a dearth of rain in Argentina and southern Brazil raised concerns about the some yield losses in forthcoming harvests.

Speculators also raised their net long position in soymeal for the first time since before Christmas, and sliced their net short in soyoil by 22,499 contracts, a historically high move.

La Nina coming back? 

"Argentina growing conditions have become more stressful for late planted corn and soybeans," Gail Martell at Martell Crop Projections said, noting that "conditions have been dry for over one month, the new forecast calls for more of the same".

The wet conditions prevalent at the time Argentine crop was planted has meant that many crops "have a shallow root system, increasing vulnerability to drought".

With Argentine soybeans 77% planted by a December 20 date which marks the end of the ideal window, and only 74% of corn, "one-fourth of Argentina crops are at risk of drought stress from shallow rooting", Ms Martell said.

And the crop may face significant deterioration if fears prove justified that a fresh La Nina is emerging, as some conditions, such as cooler Pacific water temperatures, indicate could be on the way.

While official Australian and US meteorologists say that "indicators do not warrant a full-fledged La Nina… the weather has manifested symptoms of La Nina," she said. 

"Not only emerging dryness in Argentina, but also drier-than-normal conditions recently in the US southern Great Plains and bitter cold in the upper Midwest."

Corn vs wheat 

The concerns over South America were reflected in a further lift too to speculators' net long position in Chicago corn futures and options, by 9,658 lots to more than 150,000 contracts.

However, these were balanced against an increase in their net short position in Chicago wheat, by nearly 3,000 lots to 20,908 contracts, to the largest since May.

Traders have reported a popular trade of spreading a long position in corn or soybeans against a short position in wheat.

Cotton vs sugar

Meanwhile, among soft commodities, speculators hiked their net long position in cotton by 16,.661 lots to more than 41,000 contracts, the highest for at least a year, and purchases reflected in a strong market for the fibre.

However, in raw sugar, speculators sold a massive 30,000 lots to become net short of 18,302 contracts, by far the biggest on records going back to 2006.Managed money has rarely been short at all in raw sugar futures and options over this period.

However, sentiment towards the sweetener has deteriorated with growing ideas for the world production surplus.

Analysts expect a surplus of 8.5m tonnes in 2012-13, up from a forecast in July of 4.72m tonnes, Reuters poll last week showed.

And 2013-14 may see a surplus too, pegged at 5.15m tonnes.