Have hedge funds begun laying bets on falling wheat prices again, after six weeks of taking a less negative stance?
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 50,000 contracts in the week to last Tuesday, data from the Commodity Futures Trading Commission showed.
The increase took the overall net long above 440,000 lots, the highest since July, and up nearly 200,000 lots in four weeks.
The more bullish sentiment has been spurred by a slow US harvest, and slightly less upbeat harvest reports as combines have spread from southern areas to the western Corn Belt, besides by some weather concerns too.
Dryness has slowed the start to Brazil's soybean sowing season, cut expectations for Australia's grains harvest and provoked fears for Russian winter wheat seedlings heading into winter, while excessive rains have raised concerns over Argentine crops.
In Chicago wheat futures and option, hedge funds have cut the net short position they often keep in the grain by some 47,000 contracts from a high of 78,928 lots reached in late September.
Speculators' net longs in grains and oilseeds, Nov 4, (change on week)
Chicago corn: 163,673, (+21,885)Chicago soymeal: 60,037, (+14,395)Kansas wheat: 15,527, (+746)Chicago soyoil: 24,666, (+10,996)Chicago soybeans: 18,697, (+10,315)Chicago wheat: -31,517, (+11,763)Sources: Agrimoney.com, CFTC
However, there is some feeling that, with the net short now at its smallest in nearly five months, the trend of less negative positioning may have run its course
For "much of" last week, it felt as though "Chicago wheat has become the short hedge against new length in the row crop market", said Brian Henry at Benson Quinn Commodities.
"A weak technical picture is offering a strong possibility of downward momentum gaining steam," he added.
CHS Hedging added that "the Russian wheat worries seem to have subsided for now.
"Meanwhile, in Argentina, fresh export licenses were issued for 1.5m tonnes of wheat."
Row crop dynamics
In fact, in row crops, hedge funds were maintaining a trend of short-covering too as of the week to Tuesday, encouraged by the delayed US harvest, which has, for instance, played a role in the surge in soymeal futures, also down to US logistical hiccups and strong export demand.
Speculators' net longs in New York softs, Nov 4, (change on week)
Arabica coffee: 39,787, (-3,099)Cocoa: 37,804, (-2,814)Cotton: 12,826, (+3,193)Raw sugar: -60,613 (-10,192)Sources: Agrimoney.com, CFTC
In soymeal itself, the hedge fund net long rose more than 14,000 contracts, taking it back above 60,000 lots for the first time since June.
In Chicago corn, speculators' net long hit 163,673 lots, also a five-month high, reflecting a cut in the gross short position of approaching 120,000 contracts in four weeks.
Among New York-traded commodities, sentiment towards cotton continued to improve too, with the net long hitting a four-month high of nearly 13,000 contracts, largely down to increased long positions rather than short covering.
Speculators' net longs in Chicago livestock, Nov 4, (change on week
Live cattle: 106,114, (-2,081)Lean hogs: 47,832, (-3,527)Feeder cattle: 6,025, (-1,096)Sources: Agrimoney.com, CFTC
However, in arabica coffee and - especially - raw sugar, hedge funds continued to take a negative stance, encouraged by Brazilian factors – one being the arrival, if late, of the rainy season for central areas, reducing concerns over drought damage to the country's 2015 production prospects.
Another negative for price prospects has been the re-election of Dilma Rousseff as Brazil's president.
During her first term, the Brazilian real lost more than half its value, so cutting the value, in dollar terms, of assets in which the country is a major player, and investors are fearful of further reductions ahead.
Gasoline price curbs
For sugar, Ms Rousseff's re-election is viewed as holding an extra threat in that, during her first term, her administration enforced a low ceiling on gasoline prices, in turn limiting prospects of ethanol prices, with a knock-on effect too on values of sugar, which competes with the biofuel for cane.
Brazil in fact last week unveiled a 3% rise in wholesale gasoline prices, and an increase of 5% for diesel.
"This is less than originally hoped for," Marex Spectron said, if terming the increases "reasonable in view of the recent collapse in crude oil prices".