Speculators sell coffee as interest in crops wanes

Coffee has joined wheat in speculators’ bad books, representing the only two raw materials in which they hold net short positions, amid a waning interest among investors in farm commodities.

In exchange traded funds, farm commodity products "have seen a steady outflow of investor funds at an approximate rate of $10m a day" over the last three months, Standard Chartered analysis showed.

The decline contrasted with a jump in investments in exchange traded gold, of nearly $5bn in the period, as global economic uncertainty and political stasis boost the attractions of the yellow metal, with silver seeing a more recent uptick.

And on futures markets too, exposure has waned in terms of index assets under management, dropping to some $60bn from a spring high of nearly $70bn, the bank said.

Coffee and wheat

Among speculators , while interest in holding long positions in gold, silver and many industrial metals, such as copper, palladium and platinum, has increased in recent weeks, that in many agricultural commodities has declined.

In Chicago wheat – in which speculators in June turned net short, meaning bets on falling prices outweighed those on futures rising – the level of the negative weighting increased in the week to July 26, US regulatory data showed.

Speculators’ net short in wheat increased to 10,160 contracts from 4,315 lots the week before, as the northern hemisphere harvest boosted supplies, Russian competition undermined export prices and fears for US corn passed their peak.

And New York arabica coffee "joined wheat to become the only net short length commodities", Standard Chartered said, with speculators holding a net short position of 933 lots, compared with a net long holding of 1,441 lots a week before.

In April, speculators’ net long position in coffee reached more than 35,000 lots.

‘Pressure prices lower’

This position represents speculators’ biggest net short holding in coffee in two and a half years, Ker Chung Yang at Phillip Futures said, attributing the decline in part to hopes for a "bumper crop" of robusta coffee beans in Vietnam.

Technical signs have also encouraged selling, with the price of New York’s benchmark September contract falling below their 200-day moving average, at about 246 cents per pound, Mr Ker added.

Meanwhile, Rabobank has forecast that "expectations of large crops in Vietnam in the fall and Brazil next year as well as possible selling by producers should pressure prices lower".

Expectations for Brazil’s harvest, the world’s biggest, have waned with the passing of fears for frost damage.

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