Headlines:
- Hedge funds rewarded for selling in cattle – but wrong-footed on cotton, wheat
Hedge funds returned to cutting bullish bets on agricultural commodities – but to mixed effect, with the strategy reaping profits on cattle derivatives, but looking less well placed on wheat. Managed money, a proxy for speculators, cut its net long position in futures and options in the top 13 US-traded agricultural commodities, from corn to sugar, by 68,406 contracts in the week to last Tuesday, analysis of data from the Commodity Futures Trading Commission regulator shows. The reduction in the net long – the extent to which long bets, which profit when values rise, exceed short holdings, which benefit when prices fall – was the largest in nearly two months, and reflected selling across all three complexes, grains, soft commodities and livestock. However, in grains, which accounted for the bulk of the ag selling, funds may wish they held on to long bets, given a revival in prices since fueled by weather worries, besides hopes that signs of political rapprochement between Beijing and Washington will indeed open the way to a revival in Chinese interest in US ag exports.On corn and soybeans, short bets were looking profitable until the revival of the past two sessions, which has driven prices back to around their levels of Tuesday last week. Corn values had faced pressure from improvement in the US spring sowing pace, while soybeans, of which China is the top importer, faced further pressure from trader concerns. On wheat, speculators are looking out of the money, having returned to a net short position – just before Chicago futures began a bounce of nearly 6% spurred by a series of weather worries, besides long-standing concerns over dryness in the US southern Plains. “The weather worries are gathering for wheat,” said Tobin Gorey at Commonwealth bank of Australia. “US problems are well known but the market now has concerns about Australia, the European Union and parts of the Black Sea. “Global wheat supply was already set to tighten in 2018,” even before the latest worries, with the US Department of Agriculture forecasting a 6m-tonne drop in global inventories in 2018-19, top 264m metric tons, of which more than half will be in China, so effectively unavailable to the world market.
Summary:
Corn prices traded higher in the overnight premarket session on news of improving trade relations with China. Profit taking took hold at the opening regular session bell until some support came in after about an hour of trading. Prices moved into positive territory but a selloff in the last hour of trading prevailed causing price to close 1 tick in the red. Some of the intraday support was credited to the declining Corn crop in Brazil. The USDA average estimate for Corn planting came in at 80% complete versus the trade estimates that ranged from 75-86% complete and compared to last week’s 62% complete. Soybean prices traded higher on hopes of renewed trade between the US and China and remained higher for the balance of the day. The USDA average estimate for Soybean planting came in at 54% complete with trade estimated that ranged from 52-56% complete. Last week’s figures came in at 35% complete. Wheat markets all turned lower because of beneficial rain falling on crops over the weekend. The USDA average estimate for Spring Wheat planting came in at 77% complete. The trade estimates ranged from 72-90% complete. Last week’s estimate came in at 58% complete.
