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Speculators stage record exit from ag commodities

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Agricultural commodities have fallen particularly far in speculators' affections, with bets on price rises suffering their steepest decline ever, with sentiment in cotton and wheat at its most negative for at least a year.

Managed money, a proxy for speculators, cut its net length in futures and options in the main Chicago and New York crops by one-third to 356,000 contracts in the week to last Tuesday, analysis by Standard Chartered of US regulatory data showed.

For metals, the sell-down amounted to 20% of net long exposure, with the energy position seeing a 15% reduction.

According to Rabobank, which includes Chicago livestock futures and Kansas wheat in its figures too, the reduction in net long exposure was the "largest on record".

'Heavy liquidation'

Australia & New Zealand Bank, which uses a broader definition for speculators, and also includes Chicago livestock and Kansas wheat, said that the reduction in net longs amounted to 45% over the week.

"Unsurprisingly, Commodity Futures Trading Commission data showed speculators liquidated positions heavily," ANZ analyst Paul Deane said.

Furthermore, speculative interest accounted for only 5.2% of open interest in farm commodity futures and options as of last Tuesday, on ANZ methodology - down 4.2 points week on week.

These figures were taken ahead of Friday's sell-off prompted by the US discovery of larger grain stocks than had been thought.

Worst hit

On Standard Chartered methodology, which is more widely used, speculators extended their net short position in Chicago wheat futures and options by 11,300 lots to 36,200 contracts, the highest since summer last year.

In New York cotton, they dropped their net long position by 20,000 lots to just under 21,000 contracts, the lowest since 2009.

And in Chicago corn, the sell-off topped 46,000 contracts, taking the net long position to 203,869 lots – less than half the total a year ago.

Meanwhile, Rabobank singled out a cut of nearly 28,000 lots, to 90,400 contracts, in speculators' net long exposure to sugar, "the largest [reduction] since February 21010".

None of the main crops enjoyed a rise in speculators' net long interest, although the sell-down in cocoa, by 4,700 contracts to a net short of nearly 12,500 contracts, was relatively small.

'Significant outflows'

In the market for exchange-traded products, those links to agricultural commodities saw a "second week of significant outflows", as of October 2, with a net withdrawal of $128m, equivalent to some 2.8% of assets under management, Standard Chartered analyst Kuon-Ken Lee said.

The previous week, the outflow was $81m.


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