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Hedge funds slow bearish shift in ag positioning

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Hedge funds have slowed their shift into short position in agricultural commodities, but not by much, maintaining in particular a negative stance on livestock derivatives.

Managed money, a proxy for speculators, made their biggest positive shift in three months in positioning in Chicago wheat futures and options in the week to last Tuesday, according to data from the Commodity Trading Futures Commission, the US regulator.

That said, the reduction of nearly 4,000 lots in speculators' net short position - for a week which included the US Department of Agriculture's first estimates for 2013-14 crops, including a relatively upbeat forecast for farmgate wheat prices - still left the holding at a historically large 45,366 contracts.

In Chicago soymeal, speculators raised their net long position – meaning long bets, which profit when prices rise, exceed short position which benefit when values fall – to a five-month high of nearly 48,000 contracts.

And among New York-traded soft commodities, hedge funds trimmed historically-high net short positions in arabica coffee and raw sugar futures and options.

'Lowest since March 2009'

However they, overall, retained a bias towards increasing short positioning, seen being encouraged by forecasts of bigger global output this year, especially of corn and soybeans, but also of the likes of sugar and wheat.

Speculators' net longs in grains and oilseeds, Feb 26, (change on week)

Chicago soybeans: 122,998 (-3,520)

Chicago corn: 52,075, (-13,228)

Chicago soymeal: 47,840, (+6,861)

Kansas wheat: 1,754, (-2,427)

Chicago soyoil: -41,697, (-28,391)

Chicago wheat: -45,366, (+3,857)

Sources:, CFTC

"Managed money reduced its net long position in the agri-commodities complex by 49,152 contracts to 145,460 contracts − the lowest level since March 2009," Rabobank said."This was the third consecutive week of managed money net long positions declining, falling a total of 327,043 contracts since the beginning of February."

The absence of conditions deemed either indicating El Nino or La Nina patterns, which tend to cause weather extremes, has raised hopes that upbeat estimates will, this year, be realised, and seen hefty turns to short holdings in agricultural commodities both in the week to February 12 and February 19.

In Chicago corn futures and options, speculators cut their net long position by more than 13,000 contracts to an eight-month low of 52,000 lots.

Soyoil has taken the brunt of negative positioning in the soy complex – with short positions often spread against long positions in soymeal.

Managed money increased its net short position in Chicago soyoil by more than 28,000 contracts, the biggest bearish shift in positioning since August 2011, and encouraged also by the weak prices of rival vegetable oil palm oil, which on Monday looked set for its first positive close in nine sessions.

Bearish on livestock

But speculators were particularly acute in their bearish positioning in livestock.

Speculators' net longs in New York softs, Feb 26, (change on week)

Cotton: 52,527, (-7,076)

Cocoa: 12,571, (-2,051)

Coffee: -23,103, (+5,351)

Raw sugar: -48,626, (+8,447)

Sources:, CFTC

In the cattle complex, managed money cuts its net long position in live cattle, ie those ready for slaughter, to the lowest since October 2009.

In feeder cattle, ie animals ready to be fattened, speculators increased their – unusual – net short position.

Caught out?

However, speculators appear to have been caught out on their short bets in cattle, with Chicago live cattle prices increasing since Tuesday, encouraged by the disruption to supplies caused by US blizzards, which slow animals' weight gain too.

Speculators' net longs in Chicago livestock, Feb 26, (change on week)

Lean hogs: 9,688, (-12,485)

Live cattle: 6,657, (-3,093)

Feeder cattle: -1,492, (-1,346)

Sources:, CFTC

Historically-high short holdings often cause speculators to think twice about putting on further bearish bets, in boosting the risk of a spike in prices should a turn in the newsflow encourage a rash of short-covering.


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