Commodity CFTC: Grain exposure doubles on South American drought

As of last Tuesday hedge funds and large investors increased their overall exposure to the 24 US traded commodities that we track by 12 percent to 738,000 lots. In nominal terms this was a 5 billion dollar increase on the previous week.

While investors continued to scale back exposure to metals, softs and meats the main reason behind the increased long exposure came from a 3 billion dollar addition into both energy and grains.
Investors returned to the grain sector last week, almost doubling their exposure, especially in corn and soybeans. The week-long drought in South America has eroded the prospect for the corn and soybean production with current estimates of production now being 5 to 7 million tonnes below the previous forecast. As a consequence the net position in the soybean complex (soybeans, meal and oil) swung by 34,500 contracts into a plus position for the first time in seven weeks.

Speculators in energy continued to react to the end of year rally by increasing long exposure to crude, heating oil and gasoline while at the same time reducing short positions in natural gas.

Gold and silver longs were cut again as the near-term outlook has continued to deteriorate. Long positions in silver have almost been wiped out while speculators hold the smallest long gold position in almost three years.

Background information: The Commitments of Traders is a report issued by the Commodity Futures Trading Commission every Friday with data from the previous Tuesday. It comprises the holdings of participants in various U.S. futures markets split into "commercial" and "non commercial" holdings. The non commercial or speculative holding are typically institutional investors such as hedge funds and CTAs. Analysts and investors follow changes in these positions because such transactions can reflect an expectation of a change in prices.