Oilseeds top speculators’ exit list amid sell-off

Fast money proved particularly quick to exit the oilseeds complex during the depths of the market liquidation, with speculators adding soyoil to the list of crops on which they are betting on falling prices.

No major crops avoided a sell-off by speculators amid the mayhem which followed the downgrading of America’s credit rating by Standard & Poor’s, and was fuelled also by jitters of spreading eurozone debt problems.

But data from the Commodity Futures Trading Commission (CFTC) for the week to August 9 showed that oilseeds were affected far more severely than grains and soft commodities from an exit by the managed funds which are taken by many observers as a proxy for speculators.

Managed funds near-halved to 64,000 lots their net long position in Chicago soybean futures and options in the week.

In soyoil, managed money funds, taken by many observers as a proxy for speculators, sold nearly 30,000 lots to leave themselves with a net short of 2,500 contracts, data from the Commodity Futures Trading Commission (CFTC) showed

Net short

This meant that speculators – for the first time in more than a year – turned net short in soyoil, with their short positions on the vegetable oil, which profit when prices fall, exceeding their long positions.

"Speculators’ positions in soybean oil went negative for the first time since July 2010," Victor Thianpiriya at Australia & New Zealand Bank said.

The sell-off came as prices of the oilseed hit their lowest of the year, depressed by weakness in Kuala Lumpur in futures in rival palm oil, hurt by soaring Malaysian production, as well as weak oil prices.

Much soyoil, and palm oil, is used in making biodiesel.

In soymeal, the other major soybean product, used as a livestock feed, managed funds cut their net long position by more than 7,000 lots.

‘Already short’

The soyoil liquidation put it with coffee and wheat as the two US-traded crops, and products, in which speculators have a net short.

However, this may not necessarily be a negative sign for the vegetable oil, potentially signalling that further speculator sales may be limited.

Indeed, Kuon-Ken Lee at Standard Chartered attributed the relatively small sell-downs in speculators’ positions in coffee, in which they added a modest 387 lots to their net short, and wheat in which they added 791 contracts, to considerations of the positions already in place.

"The declines in coffee and wheat positions were subdued because they (speculators) were already very short," Mr Lee said.

At Benson Quinn Commodities, Brian Henry said: "The prospects of a weakening dollar may result in trend-following funds leaning towards the buy side as we go forward."

A weaker dollar makes dollar-denominated assets, such as many farm commodities, more affordable to buyers in other currencies.

Soyoil for December closed up 1.5% at 55.46 cents a pound in Chicago.

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