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 face big losses if weather fears hold

Twitter Linkedin

Hedge funds, having avoided a second drubbing at the hands of US grain stocks numbers, face heavy losses if forecasts hold of worrying heat for Midwest crops, having extended short positions on corn to a record high.

Managed money, a proxy for speculators, slashed its net long position in futures and options in the major US-traded agricultural commodities by 134,000 contracts in the week to July 2, according to analysis of data from the Commodities Futures Trading Commission, the regulatory authority.

The shift in sentiment cut the net long position below 175,000 contracts, the lowest since April, the month when hedge fund sentiment towards agricultural commodities fell to its lowest ebb on record, with a figure of less than 60,000 lots.

On average, hedge funds have kept a net long of some 570,000 contracts, the CFTC data, going back seven years, show.

Cocoa selldown

The reduction in the latest week reflects in part a further cut in bullish exposure to cocoa, in which managed money cut its net long position for a third successive week, this time by more than 4,500 lots to take the total below 36,000 lots for the first time since April.

Speculators' net longs in grains and oilseeds, July 2, (change on week)

Chicago soybeans: 110,812, (-17,468)

Chicago corn: -19,943, (-90,644)

Chicago soymeal: 53,134, (-8,478)

Kansas wheat: -5,651, (-2,923)

Chicago wheat: -50,152, (-30,832)

Chicago soyoil: -35,824, (-7,852)

Sources:, CFTC

Sentiment on cocoa has been curtailed by expectations of selling to come by Ivory Coast and Ghana, although prices managed some rebound last week on concerns that Ivory Coast, the top growing country, plans to diversify the economy away from its reliance on the bean.

Investors trimmed their net long exposure to cotton too, reflecting macroeconomic concerns, and the impact of tighter US monetary policy.

Cotton, as an industrial commodity, tends to move more in line with broader markets than other agricultural commodities.

Bearish calls

However, hedge funds main bearish calls came in soybeans, wheat and, in particular, corn futures and options, which they slashed their net long position by more than 90,000 contracts for only the third time on record.

Speculators' net longs in New York softs, July 2, (change on week)

Cocoa: 35,596, (-4,502)

Cotton: 57,303, (-270)

Arabica coffee: -25,873, (+1,687)

Raw sugar: -44,127, (+10,327)

Sources:, CFTC

The gross short position, at 238,446 contracts, was the largest on record.

And this had appeared a winning bet as of Friday, when December futures, the best-traded contract, touched $4.89 ¾ a bushel, the lowest level since 2010, weakened by mounting hopes for this year's crop underpinned by strong sowings.

The US Department of Agriculture stunned investors on June 28 by revealing that US growers planted 97.4m acres of corn - 2.1m acres more than expected by analysts, who had foreseen significant setbacks thanks to an unusually wet spring in the Midwest.

The turn net short represented "a significant change in the fact that the investment community may no longer be supporting this market unless more bullish information comes to the market such as a change in the weather pattern", one US broker said.

'May have legs'

However, just such an outcome arrived on markets late on Friday, when weather models first began indicate the potential for a US heatwave, signals which have gathered strength this week.

Speculators' net longs in Chicago livestock, July 2, (change on week)

Lean hogs: 58,855, (+4,528)

Live cattle: 39,413, (+9,270)

Feeder cattle: 963, (+3,157)

Sources:, CFTC

The rally, which "may have legs if subsequent weather model updates confirm a drier trend to at least one-quarter of the US corn and soybean areas", Richard Feltes at broker RJ O'Brien said

Whether the upswing is the start of a sustained 2013 summer row crop rally "will depend on subsequent weather developments", he added.

Huge wheat short

In soybeans, hedge funds cut their net long position in the week to July 2 for a third successive week, this time by more than 17,000 contracts, although maintaining a relatively large net long position of 110,812 lots.

The net long position in soymeal was also cut for a third week, with hedge funds raising their net short position in soyoil to more than 35,000 contracts, the highest since April.

In wheat - often a focus for managed money short holdings, frequently in spreads against long bets in corn or soybeans - hedge funds raised their net short position by more than 30,000 contracts above 50,000 contracts for the first time in more than a year.

That was a record bearish shift for one week on records going back to 2006, and also put the net short close to an all-time high.

However, while wheat prices would gain a pull from a rise in corn values, a US heatwave likely not prove as serious a threat for wheat crops, with much of the winter crop already in the barn and dry weather a bonus for the rest of the harvest.


Twitter Linkedin
Related Stories

KWS beats EU rapeseed stagnation, but falls short in South American corn, soybeans

The German seeds group reports widened losses, as it misses out on growth in Argentine, Brazilian corn and soybean area

Will the correct Argentine weather outlook please stand up

There appears a lack of consensus on what lies in store for the country, just as worries are growing of an imminent La Nina

Morning markets: Palm oil dips. But Dalian corn, sugar rise despite Chinese import growth

Palm oil futures renew their decline, amid India import concerns. Dalian corn, sugar and rubber futures fare better

Evening markets: robusta coffee misses out on pre-holiday cheer

Many markets strengthen into Thanksgiving, including sugar and soybeans, helped by a stronger real. Will volatility reign after the holiday?
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