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Investors Slash Agriculture Bets as Concerns Ease

Sunday, 26 Jun 2011 04:16 PM

Funds slashed bets on rising agriculture prices by the most in three months, led by declines in holdings of wheat and coffee, as supply concerns eased amid signs the global economy may slow.

Speculators reduced their net-long position in 11 U.S. farm goods by 12 percent to 674,396 futures and options contracts in the week ended June 21, government data compiled by Bloomberg show. That’s the biggest drop since mid-March. Investors turned net-short, or bet on declines, on wheat for the first time since late November. Coffee holdings tumbled 65 percent.

The Standard & Poor’s GSCI Agriculture Index fell for a third straight week, touching 456.16 on June 23, the lowest since Dec. 1. Improving U.S. weather conditions boosted the outlook for corn and soybean crops and accelerated the winter- wheat harvest. The U.S. economy is recovering at a “moderate pace, though somewhat more slowly,” Federal Reserve Chairman Ben S. Bernanke said on June 22.

“Some of the macro fundamentals are suggesting that funds should take some money off the table here,” said Mike Zuzolo, the president of Global Commodity Analytics & Consulting in Lafayette, Indiana. “This is a very broad, macro-based sell- off.”

Wheat prices have tumbled 16 percent in June, heading for the biggest monthly drop since October 2008. Investors held a net-short position of 8,570 contracts as of June 21, compared with net-long holdings of 7,558 contracts the previous week. Russia, once the world’s second-largest shipper, will lift an export ban on July 1, adding to speculation that global supplies will be ample.

‘Big Driver’

“The big driver in the grain markets has been the return of Russia to the export market,” said Nic Johnson, who helps manage about $24 billion in commodities at Pacific Investment Management Co. in Newport Beach, California. “A stronger dollar and concerns about global growth have caused people to pare commodity bets.”

Speculators cut their net-long positions in 18 U.S. commodities by 13 percent to 1.13 million futures and options contracts in the seven-days ended June 21, data from the Commodity Futures Trading Commission show. That’s the biggest decline since May 10.

The S&P GSCI Index of 24 raw materials dropped 3.6 percent last week, the second straight loss. The dollar has gained for three straight weeks against a basket of six currencies, reducing the appeal of commodities as alternative assets.

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Funds slashed bets on rising agriculture prices by the most in three months, led by declines in holdings of wheat and coffee, as supply concerns eased amid signs the global economy may slow.Speculators reduced their net-long position in 11 U.S. farm goods by 12 percent to...
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2011-16-26
 

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