Weather Controlling 75% of Movements in Agricultural Commodities
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The price of grain and other soft commodities are being driven by changes in weather, according to Ole Hansen of Saxo Bank. He calls this time of year "silly season" because weather developments control 75 percent of price movements. As result, many investors are trimming their positions to reduce risk.
"Hedge funds and other large investors continued to reduce their net long exposure to commodities," stated the strategist, referring to CFTC data for the week ending June 5th.
"Hardest hit was the grain sector, which saw a one-quarter reduction in net long positioning to a five month low. Soybean traders reduced their net long by $1.7 billion. Wheat net positioning swung back into negative while the net long in corn tumbled to the lowest since June 2010."
Despite nervousness among traders, soft commodities have rallied. PowerShares DB Agriculture (NYSE: DBA) an ETF composed of futures contracts on agricultural commodities, has posted a gain of 2.5 percent in the past 5 trading sessions.
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"Hedge funds and other large investors continued to reduce their net long exposure to commodities," stated the strategist, referring to CFTC data for the week ending June 5th.
"Hardest hit was the grain sector, which saw a one-quarter reduction in net long positioning to a five month low. Soybean traders reduced their net long by $1.7 billion. Wheat net positioning swung back into negative while the net long in corn tumbled to the lowest since June 2010."
Despite nervousness among traders, soft commodities have rallied. PowerShares DB Agriculture (NYSE: DBA) an ETF composed of futures contracts on agricultural commodities, has posted a gain of 2.5 percent in the past 5 trading sessions.
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