Soybean Futures and Options
Trading:
Hedge Funds Raise Bullish Raw-Material Bets Most in 16
Months: Commodities
Bloomberg Jan. 3--
Speculators increased wagers on rising commodity
prices by the most since August 2010 on signs that sustained
economic growth will drive a rebound in raw materials from their
first annual slump since the recession.
Hedge funds and other money managers increased combined
net-long positions across 18 U.S. futures and options by 18 percent to
536,907 contracts in the week ended Dec. 27, Commodity Futures Trading
Commission data show. Soybean holdings jumped more than ninefold and those
for corn reached a five-week high. Speculators trimmed bets on declining
prices for copper, cocoa, wheat, and soybean oil and meal.
While the Standard & Poor’s GSCI Total Return Index of 24
commodities declined 1.2 percent last year, it rallied 12 percent from a
10-month low reached in October on mounting optimism about growth.
Confidence among American consumers rose in December to the highest level in
eight months and pending sales of existing homes jumped in November for a
second month. More than $3.3 trillion was added to the value of global
equities since Oct. 4, data compiled by Bloomberg show.
“The U.S. is certainly putting the floor on
commodities,”said the chief investment strategist at Minneapolis-based Wells
Capital Management, which oversees about $330 billion of assets. “Data out
of the U.S. flies in the face of recession. More and more people are saying:
‘Maybe things are not that bad.’”
Quarterly Rally
The S&P GSCI Total Return Index rose 9 percent
last quarter, snapping two consecutive three-month drops. The MSCI
All-Country World Index of equities rose 6.7 percent, the most in a
year. The U.S. Dollar Index, a measure against six trading partners,
gained 2.1 percent, the second straight quarterly advance, while the
yield on 10-year Treasuries slid 2.1 percent, Bloomberg Bond Trader
prices show.
Twelve of the 24 raw materials tracked by the S&P GSCI
rose last week. Gains were led by wheat traded in Kansas City which surged
6.2 percent. Cotton climbed 5.2 percent. In New York today, silver, cotton,
sugar and oil jumped more than 4 percent, while gold climbed 2.2 percent,
the most since Oct. 25.
On a total return basis, the drop in commodities last
year was the first since 2008, as Europe’s debt crisis escalated and China's
economic growth cooled. Money managers have cut bets on higher prices by 65
percent since this year’s high in April. More than $10 trillion has been
wiped off the value of global equity markets since May 1 as markets were
roiled by concern that the world would tumble into recession.
Precious Metals
Investors withdrew $936 million from commodity
funds in the week ended Dec. 28, according to data from EPFR Global,
which tracks investment flows. Gold and precious-metals outflows
accounted for $688 million, while $248 million was withdrawn from
other commodities, said the director of research at the Cambridge,
Massachusetts-based research company. Inflows totaled $12.8 billion
last year, of which $8.1 billion was into bullion EPFR said.
“We have seen people reducing risks, and the future of
commodities largely depends on whether Europe and U.S. can avoid a
recession,” said Nic Johnson, who helps manage $30 billion in commodity
assets at Pacific Investment Management Co. in Newport Beach, California.
Commodities plunged 46 percent in 2008 as the collapse of
Lehman Brothers Holdings Inc. triggered the worst global recession since
World War II. Prices rebounded 13 percent in 2009 and 9 percent in 2010 as
governments around the world flooded markets with money to shore up growth.
‘Finding a Bottom’
“News from Europe continues to remain depressing,
while U.S. economic reports are getting better and better, and
people think we will find the bottom for most of the commodities
soon,” said
Michael Smith, the president of T&K Futures and Options in Port
St. Lucie,
Florida.
The U.S. expanded at a rate of 1.8 percent in 2011 and
will probably grow 2.1 percent in 2012, according to the median of 70
economist estimates compiled by Bloomberg. Fewer Americans filed
applications for jobless benefits in the four weeks through Dec. 24 than at
any time since June 2008, according to figures from the Labor Department on
Dec. 29.
Goldman Sachs Group Inc. said in a Dec. 1 report that the
world probably will avoid a recession and maintained its“overweight”
allocation to commodities, predicting a 15 percent return in the next 12
months. A close balance between supply and demand across raw materials
“could drive a strong price rebound in early 2012,” Barclays Capital said
last month.
Farm Bets
A measure of 11 U.S. farm goods showed
speculators increased bullish bets in agricultural commodities by 35
percent to 273,677 contracts. That’s the biggest gain since July
2010.
Soybean wagers surged to 23,683 from 2,575 a week
earlier, the CFTC data show. Prices jumped 6.8 percent in December, the
biggest monthly gain since August. Corn holdings climbed 18 percent to
148,653 contracts, the highest since Nov. 22.
Lower-than-average humidity and dry soil will curb crop
development in Argentina and southern Brazil through at least Jan. 7,
according to T-Storm Weather LLC, a forecaster in Chicago. Nineteen of 25
traders surveyed by Bloomberg expect corn to advance this week.
A La Nina weather pattern is similar to the 2008-2009
growing season, according to T-Storm. In that period, there was at least a
30 percent plunge in Argentina’s grain and oilseed production and a 13
percent decline in Brazil’s corn output. The La Nina phenomenon typically
brings heavier rainfall in Asia and drier weather in South America
“The headlines out of Europe have not gotten any worse,
and the U.S. economy is improving, so in general the story for commodities
can only get better,” John Stephenson, who helps manage $2.6 billion at
First Asset Management Inc. in Toronto, said in a telephone interview.
Also visit: corn futures,
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