Inflation fears prompted investors to raise their exposure to agricultural-based exchange traded products for the first time in eight months, Societe Generale said, in a note recommending long bets in sugar and wheat.
Exchange traded products (ETPs) in gold and silver were the commodity sector's main beneficiaries of the increased fears for rises in retail prices stoked by central bank action to boost economic growth through easing monetary policy.
Measures such as quantitative easing tend to provoke concerns over currency debasement, stoking inflation, and so increasing the appeal of assets such as commodities which tend to rise in line with retail prices.
"The anticipation in August and reality through September of new European Central Bank and Federal Reserve monetary programmes helped lift inflation expectations and likely currency devaluation expectations – both bullish for commodities in general and precious metals in particular," SocGen analyst Jeremy Friesen said.
Total assets under management in commodity ETPs reached $197.4bn, narrowly short of the record high in August last year, and reflecting a net inflow of $4.93bn over the month.
While paling against the cash injected into precious metals, this figure also included the first monthly inflows – of some $10m - into agricultural ETPs since January, and only the second in 18 months.
And it contrasts with an exit from agricultural futures and options, both by non-commercial investors as a whole, which ended the month with roughly 100,000 lots fewer open in US contracts than they started, and managed money, a proxy for speculators, in particular.
Managed money's open bets on US agricultural commodity futures and options also fell by some 100,000 last month, with a particular decline in long exposure, which profits when prices gain, as harvest pressure sapped values of Chicago corn and soybeans.
The declines left Societe Generale well positioned, as one of the more downbeat commentators on agricultural commodities, a position Mr Friesen restated.
"We remain broadly bearish on the grains sector," he said, recommending in particular a negative position on Chicago soybeans, for which an "overall improved supply outlook remains bearish for prices", with the US harvest beating expectations and South America's crop due early next year.
"Without any sudden jump in demand, markets are likely to become increasingly less concerned over the tightness in the market, allowing prices to continue to drive lower."
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