DEC Commodity Program Stumbles

May 4 2007 | 12:12pm ET

DEC Capital’s Commodity Alternatives program lost its footing in April after jumping out to an 11.19% gain through March. The discretionary agricultural futures program was down 7.8% last month, and is up 2.6% for the year with some  $17.3 million in assets under management as of the end of April.

“A USDA crop report issued on Friday, March 30, forecast record corn supplies in the 2007 crop year, causing limited down moves in corn on two successive trading days, as well as related volatility in wheat and soybean prices for several days,” according to a memo sent to investors. “DEC was positioned going into the report with bearish relationship strategies in all three major grain markets.”

Then, in the third week of April, there was an abrupt wheat freeze whereby wheat prices shot up and the portfolio incurred sharp losses in a short wheat strategy as well as the bearish relationship spread, according to the firm. “We reacted quickly, closing out wheat options and radically reducing position size. Simultaneously, the supply situation in corn continued to look inflated, and we closed out the corn spread before giving back all of the year-to-date gains.”

The firm added that research “still strongly suggests high prices in corn and beans in deferred crop years” so it is building a soybean strategy and plans to re-enter the distant contracts in corn, with an underlying relationship bias between the two in favor of the beans.


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