Chicago: Hedge funds cut bullish bets on agricultural prices to the lowest in more than two years on signs of expanding global supplies.
A measure of speculative positions across 11 products from wheat to coffee to cattle fell 3.6% to 258,071 futures and options in the week ended 6 December, Commodity Futures Trading Commission data shows. That’s the lowest since September 2009. Bullish wagers on corn fell 11% to a 17-month low, and bearish ones on cocoa increased for a fourth week.
World food prices tracked by the United Nations retreated for a fifth consecutive month in November, the longest decline in more than two years. The US government said on 9 December that combined global inventories of corn, soya beans and wheat will be 3.2% larger than anticipated a month earlier. Cocoa capped its longest slump in 50 years last week on increasing supplies from Ivory Coast, the world’s biggest producer.
“We’ve got all the harvest data, and there’s not a lot of catalysts that are going to turn around the direction of agricultural prices,” said Peter Sorrentino, a senior fund manager at Huntington Asset Advisors in Cincinnati, which oversees $14.5 billion of assets.
The Standard & Poor’s (S&P) GSCI Agriculture Index of eight commodities touched a 14-month low on 9 December, for a weekly decline of 1.8%. Cattle, wheat and soya beans led the retreat. The MSCI All-Country World Index of equities dropped 0.4%, while the Dollar Index, a measure against the currencies of six trading partners, rose less than 0.1%. The yield on 10-year treasuries rose 3 basis points, or 0.03 percentage point, to 2.06%, according to Bloomberg Bond Trader prices.
Cattle prices fell 3.9% in Chicago, the most since August. Wheat dropped 4.7%, and soya beans declined 2.5%. Cocoa tumbled for 12 consecutive sessions through 9 December, the longest slide since at least 1961, according to data compiled by Bloomberg. The S&P GSCI Index of 24 commodities, which includes energy products and metals, retreated 1.7%.
A measure of 55 food items fell 0.4% in November, the UN’s Rome-based Food and Agriculture Organization (FAO) said on 8 December. World cereal production will climb 3.5% to a record 2.32 billion metric tonnes this year, according to the FAO forecast. The food-price gauge has dropped 9.6% since reaching a record in February, easing a surge in costs that helped spark uprisings across northern Africa and the Middle East this year, ousting leaders in Tunisia, Egypt and Libya.
Speculators boosted their bearish soya bean bets to 10,193 contracts last week, the most negative since October 2006. Investors are also net-short in cocoa, wheat, soya bean meal and soya bean oil, as well as copper and natural gas.
“Fund managers don’t like to be long the grain markets with rising supplies,”, said Dan Cekander, the Chicago-based director of grain research at brokerage Newedge USA Llc. “As long as supplies appear to be adequate, there will be less interest in agricultural commodities.”
World wheat stockpiles will total 208.52 million tonnes by June, 2.9% more than forecast a month earlier and the highest in more than a decade, the US department of agriculture said on 9 December. Soya bean reserves will be 1.5% bigger than last month’s estimate, and corn supplies will be 4.6% higher. The supply outlook for all three crops exceeded analysts’ forecasts.