Headlines:

  • Hedge funds swing back to buying softs, rather than grains
    Hedge funds lost their preference for grains over soft commodities, as fears over North American wheat crop losses went off the boil, while comfort over supplies of the likes of cocoa and cotton supplies waned. Managed money, a proxy for speculators, lifted its net long position in futures and options in the top 13 US-traded agricultural commodities, from cotton to corn, by 29,667 contracts in the week to last Tuesday, analysis of data from the Commodity Futures Trading Commission regulator shows. The increase in the net long – the extent to which long bets, which profit when values rise, exceed short holdings, which benefit when prices fall – reflected buying in both grain and soft commodity complexes, although betting on Chicago livestock contracts turned a little less positive. However, in contrast to the recent trend, soft commodities were far more popular in the latest week – this after hedge funds built a record net short position in the complex earlier this month, and the most bearish position, relative to grains, for nearly five years.

 

Summary:

Initial indications of better weather pressured the markets today with Wheat leading the way as the percentage loser. With funds starting to move to the sidelines bulls were hoping for the opposite needing the hot and dry weather to persist in order to push prices higher once again. The forecasts across the middle part of the US thought the East Coast were very cool according to the National Weather Service for the next 6-10 days. Today’s export inspections data was reasonably strong with Corn, Wheat and Soybeans all coming in near the top end of trade expectations.

According to the USDA Crop Progress Report today, 61% of the US Corn crop was rated good to excellent which was 1% below the prior weeks’ rating and well below the rating of 76% from a year ago. For Soybeans, 48% of the nation’s crop is setting pods compared to the 45% five-year average. The US Soybean crop good to excellent rating was at 59% which was 2% improvement from the prior week’s rating. The USDA pegged the US Spring Wheat crop at 31% in the good to excellent which was 2% below the prior week’s rating.

The markets were largely under pressure overnight and in early regular session trading but USDA data seems to have been well received enabling the grain and Soybean markets to recover much of their intraday losses.