Barclays Capital does a nice job of assessing the latest back-dated release from the CFTC on commodity index trader positions in the CBOT corn market.
The CFTC statistics, released on October 20, present disaggregated positions of swap dealers and managed money going back to 2006. They were released in an attempt to provide further transparency to 2007 figures, which originally hoped to address the issue of speculator influence on commodity prices As Barcap explain:
The CFTC sought to address this in January 2007 by releasing back-dated data to August 2006 showing Commodity Index Trader positions in agricultural markets. While this clarified the index positions, there were still areas of overlap as it did not differentiate between swap dealers and managed money ,which blurred the distinction between passive long-term investment and active money. In an attempt to provide further transparency, last month the CFTC released disaggregated data and last week pulled that data back to August 2006 with the newly-introduced data drawing that distinction between swap dealers and managed money.
Luckily for Barcap, the new figures seem to confirm what the banks’ analysts have been saying all along: that there is no discernible connection between speculative money flows and price direction in commodities.
Or as they put it:
Swap dealer positions in CBOT corn as a percentage of open interest were 32% in early October when prices were trading at about $3.5/bushel. When corn prices hit all-time highs last year of over $7.4/bushel, swap dealer positions accounted for less than 26% of open interest. The lack of convergence between swap dealer positions and price trends, in our view, highlights that these positions fail to account for price trends. Corn prices rose to all-time highs in early July last year as floods in the Midwest led to concerns on supply from the US — the world’s largest corn producer. On the demand front, China’s corn exports through 2008 decelerated sharply while the US’s ethanol policies saw an increasing diversion of its domestic supplies and global inventories dropped sharply. This appears a more fitting attribution to why prices rose rather than swap dealer positions, and we expect prices to continue to take their cues from supply and demand developments.
And here’s the chart they reference:
Although, all that said, we’d now be interested in seeing a chart plotting the managed money component too.
Related links:
In defence of energy speculators - FT Alphaville
Dresdner/Commerzbank blames oil speculators - FT Alphaville
