Click to enlarge:

Source: Bianco research

 

 

Various hedge funds that had extensive commodity exposure have been throttling back, according to a recent Bloomberg report:

“Hedge funds trimmed bets on a commodity rally for the first time in nine weeks as signs of U.S. growth and speculation that central banks will do more to stimulate economies drove prices to a three-month high. Money managers lowered their net-long positions across 18 U.S. futures and options by 1.9 percent to 1.2 million contracts in the week ended Aug. 7, U.S. Commodity Futures Trading Commission data show.

The decline ended eight consecutive weeks of gains, the longest streak on record. Soybean wagers dropped by the most since early June just as prices surged for three days and reached a two-week high… Inflows to raw-material funds totaled $736 million in the week ended Aug. 9, according to EPFR Global, which tracks the funds. Inflows into precious metals accounted for $626.8 million, the Cambridge, Massachusetts-based company said.”

-Hedge Funds Reduce Wagers After Longest-Ever Rally, Bloomberg.com

 

While true that money managers reduced their net position in commodities such as soybeans, perhaps some perspective is needed.  As the blue line in the chart below shows, money managers are still very close to a net long extreme position in soybean futures.  In fact, most of the grain futures affected by the drought are close to extreme net long positions within the managed money community.

Category: Commodities, Hedge Funds, Trading

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2 Responses to “Hedge Funds Cool On Commodities?”

  1. machinehead says:

    A convenient way to get a quick glance at commodity performance is to check GCC on the NYSE:

    http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=gcc&insttype=&freq=&show=

    This ETF tracks the Continuous Commodity Index (CCI). Since it’s been flat since the 1st of July, the momo crowd are losing interest.

  2. dsawy says:

    The prices will move sideways until probably September to November, as actual yields start coming in.

    There’s lots and lots of fields that look nice from the road, but when you wade in 10 yards or so, and start really looking at the crop, you find out just how bad the yields will be. There are corn fields that look tall and green from the road, look like they have ears on the stalk, but when you peel open the ear, you find 50% or less fill. The corn harvest isn’t based on how green the plant matter is, unless you’re chopping and ensiling it.