HEDGE FUNDS GROW MORE BULLISH ON CORN
The glut of corn that’s been plaguing Midwest growers is finally starting to ease, and hedge funds are betting that will help spark a rally for prices.
U. S. corn inventories are set to drop before the 2018 harvest as farmers curb plantings and demand stays robust, the Department of Agriculture said Friday.
The decline would be the first since 2013 and signals that the four-year rout for prices could be over.
Money managers have stayed bullish on the grain for five straight weeks, the most positive streak since July. Midwest growers are cutting acreage in favour of other crops, including soybeans. That’s helping to breathe life back into the corn market, especially amid near- record production from ethanol makers.
“You can’t say demand’s been bad by any stretch,” said Fiona Boal, director of commodity research at London- based Fulcrum Asset Management LLP, which oversees US$ 5.2 billion.
The corn net-long position, or the difference between bets on a price increase and wagers on a decline, increased eight per cent to 92,216 futures and options contracts in the week ended Feb. 21, according to U. S. Commodity Futures Trading Commission data released three days later. That’s the highest since mid-July.
American reserves will drop to 2.215 billion bushels before the 2018 harvest, the USDA said Friday at its 93rd annual Agricultural Outlook Forum in Arlington, Va. That’s down from 2.32 billion this season. Inventories are declining as production is forecast to slump 7.1 per cent.
Of course, bad weather could further hamper the harvest. After multiple years of nearly ideal growing conditions, money mangers could be loading up on corn now as a hedge against Mother Nature, said Donald Selkin, the New York- based chief market strategist at Newbridge Securities.