CFTC sheds new light on funds in commodities

NEW YORK (Reuters) - Money managers were mostly net long on major U.S. commodities in the week to September 1, according to a government report issued on Friday to increase transparency on hedge fund bets in the markets.

The figures were included in the inaugural report released by the Commodity Futures Trading Commission (CFTC), aimed at providing more information about the trading activities of hedge funds, large institutions, producers, merchants and traditional commodity hedgers.

The Commitments of Traders (COT) report, issued every Friday, is a crucial supply and demand indicator for traders buying and selling futures on energy, agricultural and other major commodity markets.

Pushed by the Obama administration to shed more light on the opaque dealings of speculators blamed for high commodity prices, the CFTC chose to break out four new categories for 22 commodities in the weekly report: Producer/Merchant/Processor/User; swap dealers; managed money and other reportables.

The managed money category includes hedge funds. These speculative funds have come under fire for running up commodity prices to record highs last year, raising the specter of global inflation, food shortages and runaway energy costs.

Previously, the weekly CFTC’s COT report broke down market players by commercial and noncommercial only, separating small traders holding minor positions into a “nonreportable” category.

In theory at least, Friday’s report showed that managed money provided a base for higher commodity prices by being net long on some markets that commercial producers were short.

For instance, managed money was net long on 62,004 contracts of NYMEX crude oil, versus a net short of 125,206 lots held by commercials.

Managed money was also net long on 902 contracts of copper; 57,557 lots of soybeans and 146,545 contracts of sugar. Producers were net short on 32,924 lots of copper; 133,775 contracts of soybeans and 194,537 lots of sugar.

The CFTC has vowed to clamp down on excessive speculation in the markets it regulates and had won praise in the run-up to the release of the revamped COT report.

But trade reaction on Friday to the report was lukewarm at best.

“It’s the same data, just broken out differently,” said Tom Bentz, energy analyst at BNP Paribas Commodity Futures Inc. “For those concerned about speculators in the market, I notice the managed money positions are not that different from the commercials.”

Joseph Arsenio, managing Director, Arsenio Capital Management, Larkspur, California, seemed to concur with that view.

“I’m not sure this is a move to full transparency or is this a move to avoid full transparency,” Arsenio said. “I would say there is a lot of skepticism in the entire effort.”

Aside from revamping its weekly report on trader commitments, the CFTC said it will start releasing quarterly information on index investment in the futures markets, with the goal of eventually turning that into a monthly report.

In an effort to harmonize their rules, the CFTC and the Securities and Exchange Commission also held a joint historic meeting this week to hear from exchanges, consumer groups, enforcement officials and other experts.

Reporting by Barani Krishnan, Additional reporting by Robert Gibbons; editing by Alden Bentley/Marguerita Choy