Tuesday, August 30, 2016

Agriculture: "Grain markets' lurch lower catches hedge funds off guard"

Last Chg
Corn 320-4-0-2
Soybeans 962-4-1-6
Wheat 399-4+2-4

From Agrimoney:

The extent of the latest lurch lower in grain prices appears to have taken by surprise even hedge funds, which had cut their bearish bets on the complex – raising questions over whether fresh selling lies in wait.
Managed money, a proxy for speculators, raised its net long position in futures and options in the top 13 US-traded agricultural commodities, from cotton to cattle, by more than 113,000 contracts in the week to last Tuesday, according to data from the Commodity Futures Trading Commission regulator.
The increase in the net long - the extent to which long positions, which profit when values rise, exceed short bets, which benefit when prices fall – reflected in part an increase of 27,375 contracts in the net long in New York-traded soft commodities, taking it a fresh record high of 418,209 lots.
However, it also reflected a cut in the net short position in the main grain contracts, including the soy complex, of 83,256 lots – the biggest bullish turn in positioning in grains in more than two months.
Many hedge funds may wish they had held their nerve with short bets, given the tumble in prices since last Tuesday of more than 5% in Chicago corn futures, to contract lows, while Chicago wheat has shed a further 7% to hit their weakest in 10 years.
'Did not go well'
In fact, short-covering was relatively light in Chicago soft red winter wheat, with the net short cut by 1,761 contracts, with hedge funds focusing more on Kansas City-traded hard red winter wheat, in which they reduced their net long by more than 9,000 lots week on week....MORE