Linked In
News In
Linked In

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

Hedge funds at their most bullish on ags this year

Twitter Linkedin

Hedge funds took their positioning on rising agricultural commodity prices to the highest in 10 months, encouraged by ideas of strong demand for US wheat exports, and a dent to Brazilian sugar output from rains.

Managed money, a proxy for speculators, lifted its net long on the top 13 US-traded agricultural commodities to 498,748 contracts as of October 15, analysis of data from the Commodity Futures Trading Commission shows.

The net long – the extent to which long bets, which profit when prices rise, exceed short positions, which benefit when values fall – was the highest since December last year, and reveals a sharp improvement in hedge fund sentiment towards the sector since the summer.

In August, managed money turned net short on agricultural commodities for the first time since records began in 2006.

Sugar bets

Hedge funds' more upbeat attitude towards the asset class reflects largely a dramatic reversal in gloom over prices of sugar, for which they had, even early last month, been betting heavily on price falls thanks to expectations over a further season in 2013-14 of large world production surplus.

However, sentiment towards the sweetener has improved in part thanks to ideas, fuelled by Czarnikow, that demand is far stronger than has been thought, prompting many commentators to halve forecasts of the output surplus in 2013-14 to 2m-3m tonnes.

Furthermore, the onset of rains in the main cane-growing region in Brazil has slowed dramatically output in the top producing country, as confirmed in data from industry group Unica.

As of October 15, hedge funds had a net long of 178,651 lots in New York raw sugar futures and options, the most bullish positioning since February 2010.

'Little bit more uncomfortable'

This was before the fire at the Copersucar plant in Brazil's Santos port which sent raw sugar futures to a one-year high of 20.16 cents a pound – up from levels around 16.50 cents a pound in early September, before the hedge fund buying wave.

Speculators' net longs in New York softs, Oct 15 (change on week)

Raw sugar: 178,651, (+26,111)

Cocoa: 71,149, (+969)

Cotton: 43,741, (-10.989)

Arabica coffee: -17,084, (+4,884)

Sources:, CFTC

Indeed, with sugar prices now back to early-October levels below 18.40 cents a pound, Sucden Financial questioned how happy speculators may be with their huge net long position.

"We are now getting quite close to levels… [that] make the bears wonder if some of the funds who haven't taken a 'Brazil fire' windfall profit are sitting on longs that are a little bit more uncomfortable than they were a week ago," said Thomas Kujawa, co-head of the broker's softs desk.

Wheat and cattle

Speculators have also taken a more positive view of wheat, continuing in the week to October 15 a month-long increase in bullish bets which has taken them to their largest net longs in both Chicago and Kansas City contracts this year.

Speculators' net longs in grains and oilseeds, Oct 15, (change on week)

Chicago soybeans: 111,179, (+2,913)

Chicago soymeal: 48,488, (-2,666)

Kansas wheat: 41,033, (+7,592)

Chicago wheat: 22,076 (+2,027)

Chicago soyoil: -27,737, (-1,753)

Chicago corn: -153,537, (+1,110)

Sources:, CFTC

And, in the livestock sector, hedge funds continued in the week to build a net long position in Chicago live cattle futures and options, taking it to a 19-month high of 79,035 contracts, underpinned by concerns of a squeeze on beef supplies.

Elevated corn prices for much of this year reduced feedlots' appetite for taking in animals to fatten, implying tighter supplies of finished cattle ahead, with decreasing use of growth promoters implying lower slaughter weights.

Cargill late on Wednesday revealed it would follow rival Tyson Foods in banning cattle fattened with Merck's Zilmax drug from its beef processing operations "until we are 100% confident that the animal welfare issues are resolved".

Downbeat on corn

However, on corn hedge funds have, backed by reports of better-than-expected yields from the US harvest, taken an increasingly negative line – until the latest week.

Speculators' net longs in Chicago livestock, Oct 15, (change on week)

Lean hogs: 89,573, (-3,321)Live cattle: 79,035, (+10,616)Feeder cattle: 11,181, (+1,148)Sources:, CFTC


Twitter Linkedin
Related Stories

Evening markets: Wheat futures tumble to contract low, on US export downturn

Weak US export sales data hurt wheat prices, while depressing soybean futures too. But cotton prices buck the trend

Hopes nudge higher for UK rapeseed sowings, and soar for Ukraine

Origin Enterprises and the International Grains Council underline a divide in EU sowings fortunes. East in Ukraine, rains boost rapeseed hopes

Ag commodity prices face further pressure, says SocGen, urging sell bets

The bank sees scope for forward prices of the likes of corn, cotton, hogs and wheat falling well below investor expectations

US soybean export sales fall short, but cotton stars again

Total US cotton export commitments are running 39% ahead of year-ago levels. But shippers may be wise to keep the champagne on ice for now
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

© 2017 and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of the Briefing Media group
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069