Hedge Funds Pare Back Bullish Commodity Bets

Mar 9 2015 | 3:14pm ET

Hedge funds have slashed bullish bets on a broad range of U.S. agricultural derivative contracts as the U.S. dollar’s continued rise reduces the competitiveness of U.S. commodity exports.

As measured by positioning in futures and options contracts, aggregate managed money (i.e. speculative) long interests were nearly 130,000 contracts lower across the main 13 U.S.-traded agricultural commodities in the week through March 3rd, according to the CFTC. This was the fastest reduction in net longs in 20 months, led by a surge in pessimism in wheat and sugar.

Net long positions measure the extent to which positions whose profit rise when underlying values rise exceed those of short holdings, which benefit when prices fall. 

The combined net long position of 133,665 contracts is the lowest since August 2013, according to the data. 

The rise in the U.S. dollar is partly to blame for the reduction. At 11-year highs, the dollar’s strength against a basket of currencies has been supported by rising expectations that continued U.S. economic growth will lead to a rise in interest rates sooner rather than later. 


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