Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
Head of Commodity Strategy
Summary: Hedge funds cut bullish commodity bets to a 40-month low in the week to May 7. The 41% reduction to just 219k lots was broad-based with all sectors being sold in response to renewed trade war and demand concerns.
The combined grain short saw a small reduction with planting delays supporting short covering in corn while trade war concerns and demand worries hit soybeans. The week went from bad to worse when the USDA in their monthly WASDE report on Friday forecast bigger-than-expected U.S. supplies of all three major crops (table). Soybeans dropped to lowest since 2008 while July corn hit a contract low.
COT on grains:
In soft commodities the sugar net-short almost doubled while cotton returned to a net short following a week where the trade war raised demand concerns and the price sank to a an 18-month low.