Hedge funds cut wagers on rising agricultural prices at the fastest pace since January before the U.S. government predicted rising supplies of everything from wheat to rice.
Money managers are now holding the smallest wager on farm goods including cotton and soybeans in almost four months. The Standard & Poor’s Agricultural Spot Index fell for a seventh week, the longest streak since 2001. Global wheat stockpiles will reach a three-year high before the 2015 harvest, and corn reserves are poised to be the biggest since 2000, U.S. Department of Agriculture data showed June 11.
Rising supplies are helping to keep a lid on global food inflation, with the United Nations reporting a second monthly drop in prices in May. Farmers across North America are speeding up sowing, while drought conditions recede in the U.S. Great Plains, where winter wheat is being harvested.
"We’re going to have bountiful world supplies," Walter "Bucky" Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama, said June 12. "If we have continued good weather for the growing season in the U.S., that’s going to increase the harvest outlook even more, and that will be a drag on prices."
The S&P Agriculture Index of eight commodities tumbled 4.6 percent last week, the most in a year. The wider S&P GSCI Spot Index of 24 raw materials rose 2.1 percent, while the MSCI All- Country World index of equities slid 0.3 percent. The Bloomberg Dollar Index and the Bloomberg Treasury Bond Index were little changed.
Combined net-bullish positions across 11 agricultural products fell 16 percent to 633,959 contracts as of June 10, U.S. Commodity Futures Trading Commission data show. The wagers are down 43 percent from this year’s peak in April.
Investors are betting on declines in wheat for the first time since March, after prices entered a bear market last week. The funds are holding a net-short wager of 27,135 contracts, compared with a net-long holding of 1,037 a week earlier. World inventories by the end of May will reach 188.61 million metric tons, the USDA said June 11. That compares with last month’s estimate of 187.4 million.
A favorable mix of rain, sunshine and warmer weather in the next two weeks will boost development of corn and soybeans in the U.S., the biggest producer, according to MDA Information Systems Inc. in Gaithersburg, Maryland.