Commodity Crop Markets a Hot Potato for Hedge Funds

Hedge funds are reportedly bailing on crop commodity markets such as the grains and cotton while the USDA reports excess supply adding to inventories. The grain markets have closed mixed today after an initial sell-off in the overnight markets, but cotton has been weak all during this trading session and is currently down 285 points to close the day near .6406 cents per pound at the Intercontinental Exchange.

For five straight weeks now the USDA has reported professional funds downsizing their bets for higher crop prices when in fact markets such as corn, soybeans, and wheat are seeing a reported combined slowing demand amid bumper global harvests. The “bullish” holdings have reportedly dropped 67% in five weeks!

The fundamentals just don’t support higher crop prices right now and in the foreseeable future,” said Kevin Craney, Director of Managed Futures at RJO Futures in Chicago, regarding the fundamental assessment of the crop-orientated commodity futures markets. Craney added, The hedge funds may have been looking for an orderly way out of the bullish positions, but evolved more into a situation of ‘musical chairs’ or getting out when opportunities presented itself which never materialized.”

All of the grain markets that are followed here are in down-trends with no bottom yet in sight. Cotton futures, however, appear to be resuming its overall downtrend just when a bullish scenario had been unfolding.

ALL COMMENTARY IS CONSIDERED OPINION & VIEWS FROM THE AUTHOR AND NOT A SOLICITATION OF ANY SECURITIES. THE RISK OF LOSS IN TRADING COMMODITY INTERESTS CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION.