Hedge Funds Boost Bullish Bets on Grain, Soy as Demand Rises

Date: Monday, April 11, 2011
Author: Whitney McFerron, Bloomberg

Hedge funds boosted their bullish bets on corn and soybeans to the highest in four weeks as demand surged for food, livestock feed and fuel. Bullish bets on wheat jumped the most since early December.

The funds and other large speculators increased net-long positions, or wagers on rising prices in corn by 14 percent to 322,069 futures and options contracts as of April 5, according to data from the Commodity Futures Trading Commission. Bullish soybean bets gained 2.9 percent to 118,280 contracts. Holdings for both commodities were the highest since March 8.

Corn touched a 33-month high last week in Chicago amid concern that demand is outpacing available supplies. U.S. stockpiles before this year’s harvest may drop to the lowest since 1996, the Department of Agriculture said on April 8. Soybeans have surged more than 45 percent in the past year on record demand from China and as U.S. farmers may cut acres in favor of more profitable corn, USDA data show.

“The speculator community is just inordinately long,” said Dave Marshall, a farm marketing adviser for Toay Commodity Futures Group LLC in Nashville, Illinois. In corn, “there are two things the market is trying to accomplish right now. It’s trying to make people park their cars, and it’s trying to make people walk past the meat counter.”

Ethanol, Meat

The U.S. may use a record 5 billion bushels of corn this year to make ethanol, a gasoline additive, the USDA said. The agency also boosted its forecast for red-meat production. Cattle futures reached record a this month on the Chicago Mercantile Exchange, and hogs have climbed to the highest since at least 1986.

Speculators were net-long 24,093 wheat contracts as of April 5, up 70 percent from a week earlier, the CFTC said. That marked the biggest jump since the funds moved from short to long in early December. Prices have surged 72 percent in the past year as drought in Russia and floods in Canada and Australia eroded global supplies.

Corn futures for May delivery rose 9 cents, or 1.2 percent, to close at $7.68 bushel on April 8 on the Chicago Board of Trade. The grain has more than doubled in the past year. Soybeans for May delivery climbed 28.75 cents, or 2.1 percent, to $13.9225 a bushel. Wheat futures for July delivery rose 23.25 cents, or 2.9 percent, to $8.3225 a bushel.

To contact the reporters on this story: Whitney McFerron in Chicago at wmcferron1@bloomberg.net