Commodity CFTC: Silly season plays havoc with grain traders

Hedge funds and other large investors continued to reduce their net long exposure to commodities during the week ending June 5. Across the 24 different commodities we track in this report, the net long position was reduced by 6.5 percent to 1,034,000 contracts, corresponding with a nominal exposure of USD 73.5 billion. Hardest hit was the grain sector, which saw a one-quarter reduction in net long positioning to a five month low just ahead of the dry weather induced rally while the metals, especially gold, saw it's first meaningful increase in a while.

Speculators have now reduced their net long exposure to commodites by one-third since the February 28 peak, corresponding with a USD 64.6 billion drop in the nominal value due to position reductions and lower prices.

Highlights:

- The jump in gold back above 1,600 the previous week triggered a net buying of 28k contracts, equivalent to a nominal increase of USD 4.5 billion.

- WTI crude only saw a small net reduction which could indicate that speculative longs have now been reduced to managable levels.

- Grain traders continue to be caught during this silly season, where weather developments control more than 75 percent of  price movements. Soybean traders reduced their net long by USD 1.7 billion during a week where the price dropped by 6.2 percent only to witness an even greater rally after June 5.

- Wheat net positioning swung back into negative while the net long in corn tumbled to the lowest since June 2010.

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