Hedge funds turned their most bullish on agricultural commodities for three years, as they flocked to bet on higher grain prices amid the mounting tensions over Ukraine, and raised the stakes on the sugar rally too.
Managed money, a proxy for speculators, raised its net long position in futures and options in the top 13 US-traded agricultural commodities, by more than 133,000 contracts in the week to last Tuesday, according to data from the Commodity Futures Trading Commission (CFTC) regulator.
The increase took the net long in these commodities, from cotton to cattle, above 1.0m contracts for the first time since March 2011.
And the gain was fuelled by a dash to bet on higher grain prices amid concerns over the Ukraine, a major exporter of corn and wheat, besides fears over US weather, deemed too dry in many areas for winter wheat emerging from dormancy, and too cold to enable speedy corn germination.
In Chicago corn, hedge funds raised their net long position by more than 51,000 contracts to 209,561 lots, the highest since December 2012, when the hangover from the drought-hit US harvest was still supporting prices.
Speculators' net longs in grains and oilseeds, Mar 11, (change on week)
Chicago corn: 209,561, (+51,439)Chicago soybeans: 192,648, (-15,845)Chicago soymeal: 69,929, (-203)Kansas wheat: 32,944, (+4,747)Chicago soyoil: 25,382, (+29,365)Chicago wheat: 10,515, (+16,555)Sources: Agrimoney.com, CFTC
Managed money has now lifted its net long position in corn by more than 175,000 contracts in a month, the second-biggest for any four-week period, behind only that seen in July 2010 when Russian drought sent grain prices soaring.
Speculators now have a bigger net long position in corn than soybeans, for the first time since April last year.
In Chicago wheat, hedge funds turned net long for the first time since October, fuelling the rally which has sent prices to the four-month highs.
The CFTC report "drives home the significant structural changes taking place in the wheat market", Jonathan Watters at Benson Quinn Commodities said.
Besides the rise in bullish bets in Chicago, "longs are flexing their muscles in the hard wheat contracts as well", extending their net long in Kansas City-traded hard red winter wheat to a four-month high of nearly 33,000 contracts.
The net long position in Minneapolis-traded hard red spring wheat (not included in Agrimoney.com's 13 top US-traded agricultural commodities) "is managed money's largest long since late 2011", Mr Watters said.
'Bears get a little more comfort'
Hedge funds raised their net long position in New York-traded raw sugar futures and options too, by more than 35,000 contracts nearly to 100,000 lots – a marked turnaround to the net short position they held until late February.
Speculators' net longs in New York softs, Mar 11, (change on week)
Raw sugar: 99,945, (+35,205)Cocoa: 75,963, (-4,413)Cotton: 62,969, (+8,632)Arabica coffee: 33,581, (+5,709)Sources: Agrimoney.com, CFTC
However, the latest spurt in the net long position appears to have been a poor bet for hedge funds so far, with prices standing on Monday at 17.17 cents a pound in early deals, down 7% from a March 6 high.
Indeed, the extent of the net long position "and considering where we are in terms of price will give the bear jobbers a little more comfort", said Tom Kujawa, co-head of the softs department at Sucden Financial.
Large net long positions often provoke thoughts of waning bullish pressure, in raising questions over the appetite for more such holdings.
Quest for hogs
Hedge funds extended their net long in futures and options in New York arabica coffee too, for which Brazil drought has also raised crop fears, although, with an increase of some 5,700 contracts, the pace of the net long increase remains relatively sedate.
Speculators' net longs in Chicago livestock, Mar 11, (change on week)
Live cattle: 131,294, (-779)
Lean hogs: 72,351, (+2,709)Feeder cattle: 12,094, (+530)Sources: Agrimoney.com, CFTC
In the livestock sector, speculators raised their net long in Chicago lean hogs to a four-month high of 72,351 contracts amid continued concerns over the impact of porcine epidemic diahorrea virus (PEDv) on expectations for an expansion in the US hog herd this year.
These long bets, speculators have shown hedge funds immediate profits, with hog futures setting a series of record highs last week.
"The rate of weekly increases in PEDv cases is the accelerator," US Commodities said, noting that "the cases have accelerated since the fourth quarter.
"Pullbacks [in prices] have been few, showing that sellers have hit the sidelines. The momentum of the market has had little regard for the overbought technicals."