Headlines:
- HEDGE FUNDS HIKE BETS ON IDEAS OF COFFEE, HARD WHEAT SUPPLY SQUEEZES
Hedge funds bet hard on stories of squeezes in higher quality wheat, and coffee, markets, even as they cut bullish positioning on agricultural commodities overall, to the weakest in nearly five months. Managed money, a proxy for speculators, reduced by more than75,000 contracts its net long position in futures and options in the main 13 US-traded agricultural commodities, from corn to cattle, in the week to last Tuesday, according to data from the Commodity Futures Trading Commission (CFTC) regulator. The drop in the net long – the extent to which long positions, which benefit when prices rise, outnumber short bets, which profit when values fall – took it to 337,820 contracts, the lowest since mid-April, and well below a mid-June high above 950,000 lots. And it reflected widespread selling among AGs, with net longs falling in grain, livestock and soft commodities complexes, and only hedge funds raising bullish bets only in three contracts – New York-listed Arabica coffee and cotton, and Kansas City-traded hard red winter wheat. - COTTON PRICES TUMBLE, AS HOPES OF INCREASED US EXPORTS ARE DASHED
Cotton prices fell sharply, as the US Department of Agriculture lefts its US export forecast unchanged. Markets were expecting this month’s WASDE report from the USDA to unveil an increase in exports, offsetting an increase in production from last month’s forecast. But the report actually saw predicted end stocks to rise, thanks to unchanged exports, at 11.50m bales, and lower domestic use.
Summary:
The USDA reported tighter global supply pushed for Wheat because of lower European production and that was enough to keep Wheat futures trending higher. December Wheat was up 6 cents today and was only 50 cents off the day’s high. The USDA’s reported decline was not huge but the potential for a cycle low along with hedge funds hold record levels of short positions is starting to look like a recipe for a significant low. We have already suggested the possibility that the contract low may already be in place so the price action in the coming weeks will be very important. Additionally, once the short position starts to be unwound look for a strong move in Wheat.
The September Crop Production and WASDE report was complementary to the prospect of record US Corn and Soybean production. The forecast for Corn came in at 174.4 bushels per acre and a crop of 15.093 billion bushels. The Soybean forecast was at 50.6 bushels per acre which translates into a crop of 4.201 billion bushels. The Brazilian Corn crop was reduced as was the Brazilian Soybean crop compared to last month. Corn ended the day pretty much flat after having a mixed day in trading. Beans were down as much as 21 cents on the day but finished about 7 cents off the low down 14.25 on the day.
