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Hedge Funds Boost Bullish Agriculture Bets as Corn, Soy Yields May Slump

Date: Monday, August 29, 2011
Author: Yi Tian, Bloomberg

Speculators increased bullish bets on agricultural commodities to the highest level since early May after adverse weather eroded yield prospects for corn and soybean crops in the U.S., the world’s top grower and exporter.

Hedge funds and other speculators raised their net-long positions across 11 agricultural futures and options by 15 percent to 776,774 contracts in the week through Aug. 23, government data compiled by Bloomberg show. That’s the highest since May 6. Funds became bullish on wheat for the first time since June and wagers that soybeans will gain rose 64 percent.

“It’s really all on the supply side,” Chris Nagel, a market analyst at Northstar Commodity Investment Co. in Minneapolis, said in a telephone interview. “Investors will keep piling money into corn and beans until they see better certainty what the crop size will be.”

Soybean prices jumped to $14.3325 a bushel, the highest level in six more than months today and corn futures rose to an 11-week high of $7.77 a bushel on concern that hot, dry weather in the U.S. Midwest is hurting crops. November-delivery soybeans on the Chicago Board of Trade gained 0.6 percent to $14.315 a bushel at 1:46 p.m. in Shanghai. Corn for December delivery climbed 1.2 percent to $7.765 a bushel.

Wheat prices may be higher than estimated in July, Rabobank said in a report on Aug. 26. The most expensive drought in Texas history may limit cotton supplies from the U.S., the biggest shipper.

A broader measure showed that funds also raised their net- long positions in 18 commodities by 9 percent to 1.11 million futures and options contracts, data from U.S. Commodity Futures Trading Commission show.

Speculators reduced positions in gold by 7.8 percent to 201,294 contracts, the third straight decline, government data show. Holdings fell as price rose to a record $1,917.90 an ounce on Aug. 23.

To contact the reporters on this story: Steve Stroth at sstroth@bloomberg.net