The investment binge in U.S. agriculture funds has ended as record crops and the promise of improving meat supplies send prices plunging.
After taking in more money than precious metals or energy funds during the first five months of 2014, exchange-traded products backed by agriculture had a net outflow for the year of $57.7 million as of Aug. 29, down 2.9 percent, data compiled by Bloomberg show. Energy, precious-metal, industrial-metal and broad-based funds saw net inflows over the period, boosting total raw-material investment by $341 million, or 0.5 percent.
While coffee, cattle and hogs posted gains that beat most commodities this year, prices for cotton, soybeans, corn and wheat fell into bear markets. Speculator bets on an agriculture rally are down 78 percent since early April as farmers in the U.S., the world’s largest grain grower, prepare to collect what the government predicts will be record harvests. Global food costs fell for four straight months through July.
“We’re coming up on what could be one of the biggest crop years ever,” Kurt Nelson, a founder and partner at SummerHaven Investment Management in Stamford, Connecticut, said in an Aug. 28 telephone interview. The SummerHaven Dynamic Commodity Index holds about $850 million. “There’s more certainty now about the success of the crop,” Nelson said. “It looks like we’re not going to have any surprises.”