Speculative bets on wheat gains highest since 2007

Speculators' bets on rising wheat prices have reached their largest since 2007, with tensions in Ivory Coast prompting a burst in expectations of higher cocoa prices.

Speculators' net long position in Chicago wheat – that is the balance of investments which gain on rising prices over the short positions which profit when values fall – jumped by 12,000 lots to 21,000 lots, Australia & New Zealand Bank analysis of weekly regulatory data showed.

This level of long interest was the highest since June 2007, when grain prices were on their way to the last price spike.

With the data compiled as of January 25, the increase implied a role of funds in a seven-day run of rising grain prices, which ended on January 27.

Historic short

Indeed, large long interest from managed funds can be, from farmers' perspective, a mixed blessing, providing support for prices while the position is being run up, but creating a large overhang of potential sellers in the process.

And speculators have typically been net short in wheat in recent years, a position often balanced by purchases of corn or soybean contracts.

Even eight weeks ago, they held a net long of 49,000 lots on ANZ's methodology, which includes the "net other" and "net non-reportable positions" categories in weekly reports released by US regulators, besides the "net managed money" grouping more widely used as a proxy for speculators.

The latest week showed declines in speculators' net long interest in Chicago corn and soybeans, tallying with recent observations of investors closing "short wheat-long corn" and "short wheat-long soybeans" spreads.

Hot cocoa

In New York, many soft commodities, including cotton and sugar, saw modest increases in speculators' net long position during the week.

However, cocoa saw a marked rise, of 10,000 lots to 30,000 lots, as, as ANZ said, "the Ivory Coast, the world's top cocoa producer, moved to ban export shipments out of the country".

Cocoa ran up a nine-day winning streak in New York over concerns for Ivory Coast supplies before falling 2.4% on Friday.

The benchmark March lot eased a further 0.5% to $3,260 a tonne in early deals on Monday.

(Source: http://www.agrimoney.com/news/speculative-bets-on-wheat-gains-highest-since-2007--2763.html)