Traders betting commodities will be scarcer and more expensive
New data published by the Commodity Futures Trading Commission show that coffee wagers have reached a 33-month high. Meanwhile, hedge funds raised bullish gold wagers to the highest in more than 14 months amid mounting concern that the US economic recovery is weakening.
A measure of speculative positions across 11 agricultural products jumped 22% to 701,961 contracts, the most since September 2012, the commission data show. The S&P GSCI Agriculture Index of eight commodities climbed 9.7% in February, the biggest monthly advance July 2012. The measure is rebounding after tumbling 22% in 2013, the most since 1981.
Investors boosted their net-long position in coffee by 15% to 27,866 contracts, the highest since May 2011. Arabica-coffee prices in New York surged 44% last month, the biggest gain in more than 19 years. Before February, speculators were betting on lower prices, holding a net-short position for 18 months.
After tumbling 23% in 2013, coffee rebounded 66% this year amid the driest January in six decades in Brazil.
Crops suffered “irreversible” damage, and losses will tip the global market into a deficit in the year starting October 1 in most countries, according to Volcafe Ltd, the coffee unit of commodity trader ED&F Man Holdings Ltd.
The net-bearish position in wheat shrank to 20,311 contracts from 34,402 a week earlier. Futures in Chicago climbed 8.4% in February, the biggest monthly advance since July 2012. Cold weather and lingering drought left 47% of Texas wheat in poor or very-poor condition as of February 23, up from 44% on February 16.
“Bad weather equals higher commodity prices, in particular, agricultural prices,” said Walter ‘Bucky’ Hellwig, who helps manage $17bn (€12.35bn) at BB&T Wealth Management in Birmingham, Alabama. “It does have a ripple effect into other markets, like grains. In the case of coffee, that’s all driven by the adverse weather conditions in Brazil.”
