Agriculturals continue to lag

Although agricultural commodity prices have shown a bit of strength in recent weeks, they remain the poor cousin to other commodity groups. Indeed, while the S&P GSCI agriculture index has risen by 2% since mid-March, the energy index rose by 10% and the precious metals index by 5%. Ample supplies for many agricultural commodities continue to weigh on prices. However, a softer dollar, after a string of weaker US economic data, has provided a boost to the agriculture and other indices. While we continue to believe that the US recovery will strengthen, the recent economic data could mean that the Fed delays its first interest rate hike until some time in the second half of this year. Nevertheless, investor sentiment towards most of the agricultural commodities we cover remains bearish, reflected in fewer net-long non-commercial positions.