Is the global agricultural market price performance overdone? Is the market readying for a sharp correction? Speculators and tactical investors in the derivatives market may have recently changed their view about further price performance, but a simmering crude market has turned supportive.

For the week ended February 15, CFTC (US commodity futures market regulator) data showed that as regards agricultural markets the view of investors has turned negative with net fund length falling across the complex, except in cocoa and cotton.

The trend was evident across grains with long liquidation that resulted in non-commercial (speculative) net fund length falling and, in some cases, addition of fresh short positions. Corn, wheat and the entire soyabean complex covering bean, meal and oil witnessed declines.

On the other hand, tactical investors held a different view on soft commodities. Non-commercial net fund length rose in cocoa and cotton. However, sugar declined on long liquidation and addition of fresh short positions.

Edging up

Yet, things may turn out to be different this week. After a somewhat weak performance last week, the grains market is beginning to edge up, ably supported by other commodity markets, especially oil. The ongoing geopolitical developments in the Middle East and North Africa region can trigger stockpiling of grains amidst political uncertainty.

Improved weather conditions in Argentina have raised hopes of an increase in soyabean crop size, albeit small; while there is expectation that China may slowdown soyabean imports in the coming months.

Weather across the globe continues to be a known unknown. Uncertain supplies imply that commodity price volatility is here to stay for some time.

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