Hedge funds focused bearish attention on soybeans, corn and wheat as they hiked their net short positions in agricultural commodities to an all-time high, far exceeding the previous record.
Managed money, a proxy for speculators, raised its net short position in futures and options in the top 13 US-traded agricultural commodities, from corn to cattle, by more than 96,000 contracts in the week to last Tuesday, analysis of data from the Commodity Futures Trading Commission regulator shows.
The increase took the net short – the extent to which short holdings, which profit when values fall, exceed long bets, which benefit when prices gain - to 195,117 lots, by far the biggest on records going back to 2006.
The previous record net short was 142,612 contracts, set in mid-April.
Change of attitude
The positioning reflected in part a further selldown in Chicago soybean futures and options, in which hedge funds raised their net short above 100,000 lots for the first time on data going back to 2006.
Speculators' net longs in grains and oilseeds, May 26, (change on week)
Chicago soyoil: 28,571, (815) Kansas wheat: 3,515, (+4,722) Chicago soymeal: -9,319, (-44) Chicago wheat: -83,335, (-10,336) Chicago soybeans: -103,963, (-13,692) Chicago corn: -140,443, (-5,703) Sources: , CFTC |
Indeed, this represented a second successive record net short, underlining the growing comfort that hedge funds have this year with large bearish positions.
Historically, large net short, or indeed net long, holdings have tended to spark a reversal in such holdings, amid concerns that appetite for these bets may be spent.
And managed money has appeared cautious over short bets per se, with the record bearish positioning for US ags until this year at a net short of 2,686 lots, set in August 2013.
However, this year has already seen Chicago wheat and New York raw sugar demonstrate how speculators have become less apprehensive over extending already-large net short positions.
This trend has been attributed in part to a stronger dollar, which cuts the competitiveness of dollar-denominated exports such as many commodities, raising the sector as something of currency play.
'Stocks must be high'
In fact, hedge funds returned to extending their net short in Chicago wheat in the latest week, by more than 10,000 lots, after weekly official crop condition data showed that the southern US Plains crop appeared not to have suffered as much from heavy rains as many investors had feared.
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