Hedge funds' wave of buying in agricultural commodities stalled, amid some question over whether sentiment has already peaked, and indeed whether optimism may have already gone too far in some contracts.
Managed money, a proxy for speculators, cut its net long position in futures and options in the top 13 US-traded agricultural commodities, from lean hogs to sugar, by 5,028 contracts in the week to last Tuesday, analysis of data from the Commodity Futures Trading Commission regulator shows.
The decline was only the second in an eight-week run which has seen managed money more than double its net long - the extent to which long bets, which profit when values rise, exceed short holdings, which benefit when prices fall.
At 790,988 contracts, the net long in the top US-traded ags as of last Tuesday remained the second highest in eight months, and reflects too an enhanced investor appetite this year for commodities as a whole.
However, many investors question whether this trend of money flows - spurred by ideas of a revival in inflation which would boost values of the likes of raw materials - may be running out of steam.
'Covering too much'
"Commodity indexes have struggled to extend recent gains and traders look for global inflationary signals," said ag advisory group Water Street Solutions.
The Bcom index is currently flat for February, after setting a seven-month closing high two weeks ago, with the agriculture sub-index also retreating close to where it started the month.
With hedge funds in ags now having boosted their net long notably, particularly in grains, some commentators raised doubts about the potential for the trend to continue.
Broker Benson Quinn Commodities said the latest CFTC report "looks bearish corn with funds adding slightly to next longs", while "covering too much" of their net short position in wheat.
'Demand expectations fell'
Indeed, in Chicago wheat, managed money reduced its net short to 27,385 lots –down 75% so far in 2017, to the lowest level in 15 months.
Besides the broader move into ags, hedge funds have been particularly encouraged to turn less bearish on wheat thanks to weak US winter wheat seedings, and a rising rouble which has elevated the price of supplies from Russia, the top exporter.
In Kansas City hard red winter wheat, hedge funds raised their net long in futures and options by nearly 7,000 contracts week on week to 34,370 lots - the highest since May 2014.
However, the more bullish shifts were offset in the grains complex in the latest week by selling in soybeans, and in soyoil, in which speculators cut their net long below 50,000 contracts for the first time in six months.
Sentiment on soyoil reflected broader weakness in vegetable oil markets as, according to Rabobank, "demand expectations fell in light of the incoming Indian soy harvest and falling Chinese edible oil imports".
'Prices may come under modest pressure'
Among New York-traded soft commodities, hedge funds backed away from a trend of bullish positioning on cotton, cutting their net long for only the second week since Christmas.
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Still, the net long, at its third biggest on record, "remains very large, despite some liquidation having occurred in the past fortnight", said Tobin Gorey, at Commonwealth Bank of Australia.
With the US Department of Agriculture on Friday, in initial forecasts for world cotton supply and demand in 2017-18, seeing stocks outside China on the rise "international prices may come under modest pressure", Mr Gorey added.
However, Dr John Robinson, of Texas A&M University's department of agricultural economics, flagged idea of support from an imbalance between mills' unhedged purchases of cotton, and unhedged purchases from suppliers.
"One theory about why the hedge funds are maintaining an historically large position is that they are anticipating the buying that must accompany expected mill [price] fixations on the spring 2017 contracts," Mr Robinson said.
'Excellent weight gains'
By contrast, in New York cocoa, hedge funds were net buyers for the first time since November, ending an 11-week selling spree which was the longest on data going back to 2006, and had driven the net short to a record high.
The selling had driven the net short in cocoa to the high.
However, in the livestock sector, hedge funds extended a decline in their net long in Chicago live cattle futures and options, amid some confidence in levels of beef supplies.
"Concerns about beef or cattle supply and demand changes in upcoming weeks are not in evidence as the Lenten season approaches," said Paragon Economics and Steiner Consulting.
"February weather has been spring-like in major cattle feeding regions, which should abet excellent weight gains for cattle in feedlots."
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