Hedge funds making exit from agricultural markets

NEW YORK, Feb 26 (Bloomberg): Hedge funds are leading an exodus from agricultural markets, slashing bullish bets in the US from almost the highest levels on record after grain prices slumped, money managers said. Speculators reduced bets on rising wheat prices by 57 per cent in the week ended February 22, the biggest drop since November, according to data released today by the Commodity Futures Trading Commission. Bullish bets on soybeans fell 17 per cent, declining for a third straight week, and those for corn slid 1.8 per cent to a seven-week low. Holdings in eight agriculture commodities by money managers are higher than during the global food crisis three years ago. Floods from Canada to Australia and drought from China to Russia ruined crops and drove food prices tracked by the United Nations to a record in January. That helped spark protests across North Africa and the Middle East, toppling leaders in Tunisia and Egypt. Agricultural "products had a great run, but now the opportunity appears to be in oil and gold," said Walter "Bucky" Hellwig, who helps oversee $17 billion at BB&T Wealth Management in Birmingham, Alabama. "If I am the hedge-fund manager, I'm getting killed on the long grain positions." Before today, the Standard & Poor's GSCI Agriculture Index of eight futures declined 6.8 per cent since February 17, a four- session slump that was the longest since October and included an 11 percent plunge by Chicago wheat futures. The managed-money category of investors tracked by the CFTC includes hedge funds, commodity pools and trading advisers. "The amount of speculative positions is off the charts," said Nic Johnson, who helps manage about $30 billion in commodities at Pacific Investment Management Co in Newport Beach, California. "What you've seen in the last few days is liquidation of that length." Wheat futures reached a 29-month high of $9.1675 a bushel on the Chicago Board of Trade February 14, and since then the price is down 12 per cent. Before today, corn dropped 6.4 per cent from a 31-month high of $7.4425 a bushel reached February 22, and soybeans slid 8.7 per cent since touching a 30-month high of $14.5575 a bushel February 9. Prices rebounded today. Wheat futures for May delivery advanced 28.75 cents, or 3.7 per cent, to close at $8.1125 a bushel, while corn futures for May delivery gained 25.5 cents, or 3.7 per cent, to $7.22. Soybean futures for May delivery jumped 45.75 cents, or 3.4 per cent, to $13.75. "Some funds definitely had a harrowing moment," Peter Sorrentino, who helps manage $13.8 billion at Huntington Asset Advisors, said by telephone from Cincinnati. "There were some nerves on edge." Crude oil traded on the New York Mercantile Exchange jumped to $100 a barrel February 23 for the first time in two years as clashes in Libya threatened to disrupt supplies from Africa's third-biggest producer. Through yesterday, gold rose for eight consecutive trading sessions in New York. Loyalists of Libyan leader Muammar Qaddafi are seeking to crush dissent in the capital, Tripoli, as opponents tighten their control of eastern cities. The fighting is the most violent yet seen in six weeks of protests across the Middle East and North Africa. In agriculture, "the big speculators were holding very large net-long positions and have begun to liquidate those positions to take some profits after the strong rally," said Dan Cekander, the director of grain research at Newedge USA LLC in Chicago. "We may have reached the limit of their buying."