Soybeans, sugar and wheat felt the brunt of selling as hedge funds returned to taking a more bearish stance on agricultural commodities, amid renewed confidence in world production of major crops.
Managed money, a proxy for speculators, cut its net long position in futures and options in the top 13 US-traded agricultural commodities, from cotton to cattle, by more than 40,000 contracts in the week to last Tuesday, according to data from the Commodity Futures Trading Commission regulator.
The net selldown - the 17th in the last 19 weeks - reduced the net long below 260,000 contracts for the first time since January.
The cut in the net long position - the extent to which long positions, which profit when values rise, exceed short bets, which benefit when prices fall - was particularly marked in soybeans, for which US production prospects rose early last week with a retreat in forecasts of a widespread Midwest frost.
Hedge funds raised their net short in Chicago soybean futures and options by more than 14,000 contracts nearly to 40,000 lots, the highest since October 2006.
Speculators' net longs in grains and oilseeds, Sept 9, (change on week
Chicago corn: 81,466, (+1,350)Chicago soymeal: 34,543, (-13,372)Kansas wheat: 12,880, (-1,166)Chicago soyoil: -21,300, (-3,270)Chicago soybeans: -39,786, (-14,212)Chicago wheat: -61,886, (-10,026)Sources: Agrimoney.com, CFTC
Hopes for soybean supplies have been boosted by growing expectations for plantings in Brazil, the second-ranked producer after the US, after an early start to rains ahead of the sowings season which starts today, after a regulated inter-crop period to reduce the spread of soy diseases.
Soybeans remain a far more profitable option for Brazilian producers than corn, the main alternative crop, thanks to low prices of the grain.
Soybeans vs corn
Indeed, many investors are believed to be spreading short positions in soybeans against long holdings in corn, in expectation of some price convergence.
Speculators' net longs in New York softs, Sept 9, (change on week)
|Cocoa: 68,800, (-3,992)Arabica coffee: 44,775, (-202)|
Cotton: +2,574, (+6,774)
Raw sugar: -31,873 (-17,830)Sources: Agrimoney.com, CFTC
However, in rival grain wheat, hedge funds raised their bet short position by more than 10,000 contracts to 61,886 lots, back within range of the record net short of 73,088 contracts reached in January.
Sentiment has been undermined by growing world wheat production estimates, as underlined late last week by the UN Food and Agriculture Organization and the US Department of Agriculture, besides by a turn in the US weather better for harvesting of the spring crop, and sowing of the winter crop.
Sour on sugar
Meanwhile, in New York raw sugar, hedge funds increased their net short by nearly 18,000 contracts to 31,873 lots, the most downbeat positioning in seven months, and helping fuel a rout in futures below 14 cents a pound last week for the first time in four years.
Speculators' net longs in Chicago livestock, Sept 2 (change on week)
|Live cattle: 109,031, (+9,396)Lean hogs: 50,953, (+5,544)Feeder cattle: 9,492, (-107)Sources: Agrimoney.com, CFTC|
"It is hard to get too excited by the market from a bullish perspective, technically, as all levels just get blown away, rallies are limited and the problem we fear is that it is the fresh longs that have to exit which keep grinding this market lower," said London broker Marex Spectron.
However, investors turned more positive on cotton, returning to a net long in the fibre after five weeks when bets on falling prices outnumbered those on rising values.
Cotton futures recovered last week in part on ideas that the USDA would, in Thursday's Wasde report, cut its forecast for US production - a forecast that proved correct.
Hedge funds also returned to boosting net long positions in the livestock sector, in Chicago lean hog and live cattle futures and options, amid stronger US cash meat markets, ahead of the Thanksgiving holiday.
A report from Paragon Economics and Steiner Consulting said: "Almost every year we see pork prices trend higher in late September and October.
"What is different this year, however, is that packers cannot rely on a big seasonal increase in slaughter to meet this demand," with slaughter rates down, a reflection of the US outbreak of porcine epidemic diahorrea virus (PEDv) and a desire by producers to retain stock to rebuild herds.