Funds reduced bullish bets on commodity prices to the lowest level in almost a year on speculation that slowing global growth will curb demand for metals, energy and grains.
Speculators cut their net-long positions in 18 U.S. commodities by 15 percent to 958,309 futures and options contracts in the week ended June 28, government data compiled by Bloomberg show. That’s the lowest since the week ended July 13 last year. Declines were led by a 67 percent drop in holdings of soybean meal. Investors trimmed bets on silver by 26 percent, the most since May 2010.
The Standard & Poor’s GSCI Index of 24 raw materials slumped 7.8 percent last quarter, the biggest such loss since 2008. China’s non-manufacturing industries expanded at the slowest pace in four months in June, adding to concerns that efforts to tame inflation are curbing growth in the world’s second-biggest economy and largest consumer of commodities.
“You have slower imports and economic growth from China and other regions of the world, and then you have the threat of rising interest rates,” said Luis Rangel, a vice president at ICAP Futures LLC in Jersey City, New Jersey, who cited the end of the second round of quantitative easing, or QE2. “Those are the underlying factors that are slowing the commodity trend.”
Gold for August delivery advanced 0.9 percent to $1,495.60 an ounce by 10:13 a.m. London time on the Comex in New York today, rallying from two straight weekly declines. Futures tumbled to a six-week low on July 1 after Greece came closer to staving off default, curbing demand for the metal as a haven investment.
Hedge-fund managers and other large speculative investors decreased their net-long positions in New York gold futures by 18 percent in the week ended June 28, U.S. Commodities Futures Trading Commission data show. Speculative long positions, or bets that prices would rise, fell by 37,325 contracts to 165,902, CFTC data show.
Silver traders cut net-long positions by 17 percent from a week earlier to 15,998 contracts, according to the CFTC. The metal fell 2.7 percent last week.
Managed money bets that crude-oil prices will rise, in futures and options combined, outnumbered short positions by 153,148 futures, the CFTC said. Net long positions fell by 14,322 contracts from a week earlier. Crude for August delivery gained 0.2 percent to $95.12 a barrel on the New York Mercantile Exchange today after falling 7.1 percent in June and 9.9 percent in May.
A measure of net-long positions in 11 U.S. farm goods tumbled 10 percent to 604,091 contracts, the lowest since July 2010. Corn futures in Chicago reached $5.755 a bushel on July 1, the lowest level for the most active contract since December. The market is closed today for Independence Day.
Goldman Sachs Group Inc. cut forecasts for corn and wheat prices by 26 percent after a U.S. Department of Agriculture report showed growers seeded more of the grains and stockpiles were larger than expected. Goldman cut its soybean outlook by 7.1 percent
Corn and wheat will be at $5.90 a bushel in three months, down from estimates of $8, Damien Courvalin and Allison Nathan, New York-based analysts at the investment bank, said in a report on July 1. Corn futures plunged 8.3 percent in the two days after the release of the report and wheat fell 9.2 percent.
The USDA report “caught the market by surprise and may exacerbate the near-term decline in prices, especially for corn,” the Goldman Sachs analysts said.
Higher Than Estimated
U.S. farmers planted 92.282 million acres of corn this year, 1.8 percent more than projected by analysts in a Bloomberg News survey and the second-highest since 1944, the agency said in its report. Stockpiles as of June 1 were 3.67 billion bushels, 12 percent higher than forecast.
Farmers planted 13.627 million acres of spring wheat, 2.6 percent above estimates by analysts, the USDA said. U.S. inventories as of June 1 totaled 861 million bushels, topping forecasts by 4.6 percent.
“The USDA has surprised the market on a number of occasions with its data releases and today’s revisions to its planted area and quarterly grain stocks estimates in the grain markets were no exception,” Rabobank analysts Luke Chandler, Erin FitzPatrick and Keith Flury said in a June 30 report. The reports are “significantly bearish” for grains, they said.