Funds Rebuilding Long Positions in Grain/Soy Futures

October 19, 2011 01:38 AM

What Traders are Talking About:

* Funds moving back to the long side of grain/soy markets. Funds actively liquidated long positions in grain and soy futures in September. But data through the first 12 trading days of October show they are pumping money back into the long side of these markets. So far this month, funds have bought at net 48,000 contracts of corn and a net 41,000 contracts of soybeans. Funds have been much smaller buyers of Chicago wheat, soymeal and soyoil.

The long and short of it: Fund buying suggests they saw value after the sharp price break. There's also evidence of that with end-user buying. Both are signs markets have indeed put in seasonal lows, although the road to recovery may continue to be bumpy.

* Deal or no deal? Britain's Guardian newspaper reported that France and Germany had reached a deal to increase the size of the European Financial Stability Facility by around 5 times to more than 2 trillion euros, but senior EU officials say no such agreement has been reached. Still, European stocks and the euro rose while the U.S. dollar index declined amid optimism EU leaders will take steps forward on solving euro-zone debt issues at this weekend's summit.

The long and short of it: The risk on/risk off switch appears to be "on" today.

* CFTC approves position limits for some commodities. The Commodity Futures Trading Commission (CFTC) on Tuesday voted 3-2 to approve position limits on the number of futures and swaps contracts that can be held by any one traders of ag, energy and metals futures. The caps would start 60 days after the CFTC defines the term "swap," but a date for finalizing that definition is not yet set. CFTC reportedly estimates the limits will affect 85 energy traders, 12 metals traders and 84 traders of certain agricultural contracts.

The long and short of it: Trying to regulate "excessive speculation" in commodity markets has been a long-standing contentious issue. Now that the rule has been finalized, the battle might head to the courts.


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