After the largest monthly gain in 20 years, hedge funds cut their net long position in Arabica coffee whilst raising their bullish investments in natural gas prior to the falls in heating fuel prices.
Data from the Commodity Futures Trading Commission showed that the net-long position held by fund managers and investors in arabica fell by 16 percent, or 3,859 contracts, to 20,236 contracts before closing on February 25 at 20,236 contracts.
The most-active second-month contract for New York-traded arabica coffee closed at $1.5485 a lb on February 18 and rose to a near 17-month high of $1.8125 on February 25 before settling the day at $1.7625.
As a result of this type of movements, it is estimated that short-term speculators may have gained 14 per cent in that week alone while those with long positions in coffee may have returned more.
Weather issues and reduced inventories of stock have been huge concerns across all commodity markets in recent times with raw materials markets decoupled from equities.
Adam Sarhan, chief executive of New York-based financial advisory and boutique investment firm Sarhan Capital, said: “The risk-on play in commodities is more alive than ever.
“There’s been a tremendous amount of risk appetite that’s returned to the space, a welcome sign after last year’s lackluster performance.”
Hedge funds added 5,521 contracts in New York-traded natural gas futures and options, increasing their net long position to 447,529 across markets.
Natural gas hit five-year highs of $6.493 per million British thermal units in late February, maintaining impressive performances since January.