Commodity investors are returning in full force with record bets that crops, metals and oil are preparing for rallies. The weakening dollar makes currency-denominated materials more attractive, especially when stocks fluctuate and the world recovers from the Covid-19 pandemic. All this prompted speculators to return to the commodity markets as all bets on higher prices reached a record number from 10 years ago.
This is a sharp turn for the financial market, which struggled to attract investors from the rally of Chinese commodities. Markets are merging due to the combined effect of the weakness of the US dollar, the cyclical recovery from Covid-19, central bank incentives and increased fiscal infrastructure spending.
Investors are so bullish that they held a net long position, or the difference between bets on rising prices and bets on lower ones that will fall, for 2.3 million futures and options contracts last week, Bloomberg reports. The calculations include 20 of the 23 raw materials in the Bloomberg Commodity Index. They exclude aluminum, zinc and nickel, which are reported by the London Metal Exchange on a different basis.
Currently, the bullish bets of corn managers are the highest in almost 10 years. China is stocking up on US crops after buying a record amount of grain, while soybean purchases are moving at the fastest pace since 1991. Sugar has also attracted investors, with Alvean, the world’s largest sweetener, predicting two years shortage.
Even cereals, which have been in a downward trend since 2012, have harvested more than 45% in the last six months due to drought in many places in Latin America. China, on the other hand, is ready to provide reserves of raw materials.