Hedge funds targeted the soy complex as they accelerated a selldown in agricultural commodities to the fastest pace of this year, with sugar also suffering amid a stand-off by trade buyers.
Managed money, a proxy for speculators, cut by nearly 105,000 contracts its net long in the top 13 US-traded agricultural commodities in the week to last Tuesday, analysis of data from the Commodity Futures Trading Commission shows.
That represented the biggest selldown since November, and reduced the overall net long to below 1.09m lots for the first time in two months.
Hedge funds have now cut more than 200,000 lots from their net long in two weeks.
Soy selling
Grains bore the brunt of the selling, with the managed money net long – the extent to which long bets, which profit when prices rise, exceed short positions, which benefit when values fall – down by more than 65,000 lots week on week.
The three soy contracts suffered in particular, with soybeans themselves sustaining a net selldown of more than 20,000 contracts for the first time in six months, as investors both raised short bets, and sold down long positions.
In soymeal futures and options, net selling of 17,540 lots was the largest in eight months.
Soybeans vs corn
The shift came as Chicago soybean futures fell to three-week lows, and soymeal prices to their weakest since January, pressured by the slow start to US spring sowings, which some investors believe may end up shifting extra ground to the oilseed.
Soybeans have a slightly later sowing window than corn, their main rival in the US spring planting programme, meaning they can be favoured more than initially expected in years when seedings are delayed.
Corn planting progress, at 14% complete at the start of May, was the slowest since 2013, and compared with a typical pace of 33%, US Department of Agriculture data show, with lag reflecting cold and wet weather in the northern Midwest.
Soybean futures have also attracted selling for fears that China, the top importer, will slow buy-ins as Covid lockdowns slow its economy and hamper logistics, although customs data on Monday in fact showed an increase last month, to 8.08m tonnes.
That was above the 6.35m tonnes which China imported 6.35m tonnes in March, and the 7.45m tonnes bought in in April 2021, with the increase seen as fuelled by the late arrival of Brazilian cargos, which were delayed by bad weather.
Sugar vs cocoa
Among New York-traded soft commodities, raw sugar suffered a second week of particular net selling, this time of nearly 24,000 lots, undermined by ideas of Indian export resilience, and waning optimism over a recovery in oil prices back to March highs.
Separate CFTC data on trade positioning in ags showed also a stand-off by trade buyers such as sugar refiners, with the gross commercial long falling for a third successive week, to 232,661 lots – the smallest number since November 2018.
By contrast, cocoa attracted notable hedge fund buying, of the most in three months, amid growing concerns of dryness in the key West African producing region.
Citi – while noting hits to cocoa, and coffee, demand from China lockdowns and the Ukraine war – said that “2021-22 cocoa balances remain in deficit given the substantial short-crop in Ghana”.
