"Hedge funds cut bullish bets on ags - but may wish they hadn't"

Corn     411-2 down 1-4.
Wheat  478-6 down 2-6.

From Agrimoney:

Hedge funds reduced some of their, expansive, bullish bets on agricultural commodities – but may wish they hadn't, given the firm performance by many contracts late last week.

Managed money, a proxy for speculators, cuts its net long position in futures and options in the top 13 US-traded agricultural commodities, from corn to cattle, by 62,466 contracts in the week to last Tuesday, analysis of data from the Commodity Futures Trading Commission regulator shows.

The reduction followed an increase in the net long - the extent to which long bets, which profit when values rise, exceed short holdings, which benefit when prices fall – to its highest in nearly two years as of mid-May, amid talk of funds switching cash from shares to commodities.

However, the reduction preceded something of a late-week bounce in ag prices, with soybean futures for instance, in which speculators trimmed bullish bets for only the second time in 12 weeks hitting a 20-month top, and Chicago wheat futures soaring more than 3% on Thursday.

Caught out on wheat

In fact, hedge funds raised their net short in Chicago wheat by more than 17,000 lots ahead of the price recovery, despite the concerns over US wetness and the competitiveness of the grain against corn viewed as spurring the late-week bounce.

The shift took the net short nearly to 90,000 contracts, a historically large position, if short of the record 111,409 lots set a year ago.

Hefty net short, or net long, bets often raise alarm bells among investors, in raising concerns that the position has become too "crowded", and is liable for a reversal, threatening a sharp and contrary move in prices.....MORE