Hedge funds turned net short on soybeans for the first time since 2011, and reduced heavily exposure to rising sugar and coffee prices, as they further extended their bearish turn in agricultural commodity bets.
Managed money, a proxy for speculators, cut its net long position in futures and options in the top 13 US-traded agricultural commodities, from cotton to cattle, by nearly 100,000 contracts in the week to last Tuesday, according to data from the Commodity Futures Trading Commission regulator.
The cut in the net long – the extent to which long holdings, which profit when values rise, exceed short bets, which benefit when prices fall – took it to 448,000 contracts, the lowest in five months, and less than half levels seen in May, amid fears over Ukraine and US weather.
And it reflected more bearish sentiment in all the major agricultural commodities except two – feeder cattle, ie those be fattened, and live cattle, those which are ready for slaughter.
While cattle futures suffered an early July reversal, which many investors expected after the July 4 weekend, a peak period for US grilling, prices have revived close to record highs.
Speculators' net longs in grains and oilseeds, Jul 15, (change on week)
|Chicago corn: 93,101, (-14,499)Chicago soymeal: 28,202, (-2,914)|
Kansas wheat: 13,619, (-4,079)
Chicago soyoil: 792, (-7,913)
Chicago soybeans: -6,089, (-8,231)
Chicago wheat: -46,495, (-2,199)
Sources: Agrimoney.com, CFTC
Cutout, or wholesale, prices of beef have set record highs this month, and stand some 30% higher than a year ago, underpinned by a shortfall in cattle slaughter.
The number of cattle slaughtered two weeks ago was, at 468,000 head, down 8.2% year on year.
Short on soybeans
However, sentiment towards row crops has been undermined by continued benign US weather, sending new crop corn and soybean contracts to contract lows in a sell-off reflected in hedge fund positioning.
Speculators' net longs in New York softs, Jul 15, (change on week)
|Raw sugar: 69,980, (-45,600)Cocoa: 67,243, (-2,388)Arabica coffee: 31,116, (-5,945)Cotton: 7,624, (-3,373)Sources: Agrimoney.com, CFTC|
The biggest net short on soybeans in records going back to 2006 was in 2006 itself, at 55,265 contracts, suggesting some scope for further bearish positioning on the oilseed.
For corn, hedge funds held a net short of 180,000 contracts in October last year, implying considerable room for further selling before raising questions over where further short positions will come from.
In New York-traded raw sugar, hedge funds for a second week cut bullish positioning by more than investors had expected – this time by 45,600 contracts, taking the net long below 70,000 contracts for the first time since March.
Speculators' net longs in Chicago livestock, Jul 15 (change on week)
|Live cattle: 121,377, (+1,986)Lean hogs: 55,948, (-2,121)Feeder cattle: 11,806, (+1,189)Sources: Agrimoney.com, CFTC|
The CFTC data "showed a dramatic reduction in the net speculative length", said Thomas Kujawa, co-head of the softs desk at Sucden Financial.
"The short-term price action seems to be dominated this morning by some weak shorts running for cover."
Cool on coffee
Speculators also cut heavily their net long position in New York arabica coffee, by nearly 6,000 contracts, the biggest reduction in nearly a year.
The coffee market has proved especially volatile this month, amid conflicting reports on the extent of damage to Brazil's crop from the early-2014 drought.
In wheat, hedge funds extended their net short position by some 2,200 lots to a five-month high of 46,495 contracts, ahead of the Ukraine plane crash which is believed to have prompted some significant covering of these positions on Thursday.