Hedge funds' 'massive' ag selldown spurs hopes of buying to come
by Mike Verdin, Agrimoney
20th Mar 2017
Hedge funds turned bearish on agricultural commodities en masse, undertaking their biggest switch short in positioning on record, led by grains – in which they may ironically have boosts the chances of price gains.
Managed money, a proxy for speculators, slashed its net long position in futures and options in the top 13 US-traded agricultural commodities, from corn to sugar, by 232,217 contracts in the week to last Tuesday, analysis of data from the Commodity Futures Trading Commission regulator shows.
The cut 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 on records going back to 2006.
And it meant that hedge funds - which in the first six weeks of the year doubled bullish bets on ags to a net long position nearly 800,000 contracts, amid a popular play of inflation expectations meaning higher commodity values - have now reversed back to a net long of 384,635 lots.
That is nearly exactly where they started 2017.
Inflation play founders ...
'Left the market in droves' ...
'Looks supportive to prices' ...
Bullish on cattle
Hedge funds turned more bullish on the Chicago-traded livestock complex too, by more than 7,000 contracts, reflecting buying in both cattle and lean hogs.
"Cash cattle trade and better packer margins have supported the futures trade," said ag advisory group Water Street Solutions, if cautioning that history suggests that a rally in prices from multi-year lows set in October may soon run out of steam.
"Typical seasonal topping can be found in late March. Supplies for now look ample into summer."
By contrast, in hogs...