Hedge funds wrong-footed on cocoa, soy, sugar bets |
Date: Tuesday, June 18, 2013
Author: Agrimoney.com
Hedge funds, which it was highlighted last week had made a "disastrous" bet on corn, appear to have been wrong-footed for now on cocoa,
soybeans and sugar too, regulatory data showed. Managed money,
a proxy for speculators, continued to rebuild their net long position in futures
and options in major US-traded agricultural commodity in the week to June 11,
taking it to a four-month high of 320,000 contracts, analysis of data from the
Commodity Futures Trading Commission showed. In a few
contracts, such as lean hogs, in which speculators lifted their net long
position by more than 8,200 lots during the week, that proved a profitable call,
with summer demand supporting pork demand at a time when lower grain prices are
encouraging producers to think of herd rebuilding. Chicago's June
lean hog contract expired on Friday with its best ever finish, of 102.30 cents a
pound, also the highest close for spot contract in nearly two years. Soybean
retreat However,
increasing net long exposure to Chicago soybeans for a fifth successive week,
taking the total above 150,000 contracts for the first time in seven months,
appeared on Monday a step too far. Prices of the old crop July
futures contract have eased more than 2% since, weakened by profit-taking and a
downgrade by the US Department of Agriculture to hopes for 2012-13 exports of
the oilseed. The new crop
November contract has lost 3% under pressure from ideas that the delayed sowing
season may prompt farmers to switch some corn land to soybeans. While Morgan
Stanley on Monday
held out hope for soybean prices, this followed downgrades last week from
Goldman Sachs and Societe Generale, and downbeat comments from Deutsche Bank
too. Cocoa
setback On cocoa too,
hedge funds, in extending their net long position to a five-year high of nearly
50,000 contracts, appear to have opened themselves up to losses, at least on the
latest positions taken out, with New York's best-traded September contract down
5% since Tuesday. Prices have been undermined
by improved weather in West Africa, where MDA's Kyle Tapley said that rains
"have begun to improve conditions in Ghana", the second-biggest producing
country, if prompting "minor wetness concerns" in the west of top-ranked Ivory
Coast. Futhermore,
soft Chinese economic data have fuelled concerns over demand in Asia, whose
grindings prospects for 2012-13 have been downgraded by the International Cocoa
Organization. Sugar
rebound Meanwhile, a
decision by speculators to ratchet up further their net short position in raw
sugar - meaning short bets, which profit when prices fall, outnumber long
positions, which benefit when values rise – has have caught out hedge funds late
to the trend. Sugar futures, which have
been depressed by ideas of bumper world production, have rallied some 4% since
last Tuesday, amid concerns that the more than halving in prices from 2011 highs
to well below costs of production in many areas may have gone far enough in
incentivising producers to choke off supplies. The regulatory
data followed a caution from Ann Berg, a former Chicago Board of Trade director
and Louis Dreyfus grain trader, that hedge funds
may be retreating from agricultural commodities following a succession of
losses. These included
a "disastrous" long bet in March on corn.