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In both Chicago-traded soft red winter wheat futures and options and Kansas City hard red winter wheat, hedge funds swung more bullish in positioning by the largest amount in 19 months, since October 2013.
However, hedge funds retain a historically sizeable bearish position in wheat nonetheless, particularly in the Chicago contract, in which they held a net short of 72,999 lots.
"Friday's positions report showed that investors still held large short positions, as of last Tuesday," said Tobin Gorey at Commonwealth Bank of Australia.
'Continue to worry'
While investors are likely to have covered some further short holdings since Tuesday, the extent of the negative positioning could spur some further short-closing, and upward pressure on prices, given further weather worries.
"Weather forecasters contin.
"The trade will consequently continue to worry about wheat availability – and so sell only reluctantly – despite inventories being comfortable."
Still, at Minneapolis-based broker Benson Quinn Commodities Brian Henry said that at a weak finish for futures on Thursday "hinted at the idea that the funds were done covering shorts for now".
Despite the less bearish thinking on wheat, hedge funds extended their net short position on grains overall, including the soy complex, by more than 28,000 lots to a record 280,736 contracts, with large pile-ups of short positions in corn and soybeans.
In corn, the managed money net short rose to its highest since November 2013, also encouraged by the benign Corn Belt weather, which is expected to see the US crop given a strong condition score on its first official rating, released on Tuesday.
"Expectations are for a near-record high [rating]," Benson Quinn Commodities said.
Downbeat on softs
In the latest week, hedge funds also turned more negative on soft commodities, led by a return to extending their net short in New York-traded raw sugar futures and options.
Expectations for a shortfall in world production of the sweetener in 2014-15 have continued to decrease, largely thanks to increased ideas of Indian production.
They also cut their net long in New York-traded cotton, despite some concerns over the southern US wetness slowing plantings, and a decent US export pace.
"We are seeing a continuation of the fluctuation in the hedge fund position, which has been swinging back and forth since October between net short and net long," said John Robinson, expert on cotton marketing at Texas A&M University.
However, speculators for a fourth successive week rebuild their net long in Chicago livestock futures, encouraged by a seasonal boost to demand from Monday's Memorial Day holiday in the US, viewed as the start of the barbecue season.
Noting a rise in beef prices of some 15% year on year, Paragon Economics and Steiner Consulting said that "we think retail promotions certainly have been key going into Memorial Day.
"Retailers understand that consumers are willing to pay for high priced, high quality beef during special times of year. The start of the summer grilling season is one of those times."
"Heavy rains in southern Oklahoma and Texas have resulted in widespread flooding, and more wetness is expected this week," the weather service added.