The net long money held by hedge funds and other big speculators in commodities is back to a six-week high, moving on from April's market tumble, as traders piled into oil and oversold crops like coffee, cocoa and corn, trade data showed on Friday.
But hedge funds are not bullish on all commodities, sharply paring their bets on soybeans and natural gas for the week ended Tuesday amid expectations of a bumper soy crop and warmer U.S. weather that reduces the need for gas-driven heating.
They also cut their exposure to gold as the outlook for precious metal remained fragile after the mid-April sell-off.
The net long money held by money managers across 22 U.S.-traded commodities rose by about $1.4 billion, or 2 percent, to around $63 billion for the week ended May 7, according to Reuters calculations of data released by the Commodity Futures Trading Commission (CFTC).
It had fallen to around $53 billion two weeks earlier -- the lowest since December 2011 -- after April's broad commodities sell-off that was triggered by worries of a slowdown in China growth, more trouble in euro zone debt and uncertainty about U.S. stimulus.
Investors in commodities are at a crossroads, with as many expecting monetary easing by central banks and strong growth in China to push prices higher as those forecasting a further slump in demand and prices from a stagnating global economy.
Hedge fund legend Stanley Druckenmiller this week sounded the death knell for commodity bulls, saying the recent price tumbles in raw materials markets were not a correction but rather the end of a "supercycle" in commodities.
Supercycles refer to decades-long price rallies. Three have occurred in commodities since World War II. The first involved post-war reconstruction and the second came amid oil supply shocks of the 1970s. The third began after the end of the Asian financial crisis in the late 1990s that saw China rebound with double-digit growth, and inflation creep across the world.
This week, China's monthly trade data showed exports and imports grew more than expected in April, offering the possibility of a better outlook for the world's No. 2 economy. Even so, copper was the only major commodity that surged on the trade data, given that China is the biggest buyer of the metal.
Crude oil accounted the bulk of the rise in net longs for the week to May 7, taking in just over $1 billion in new inflows.
Front-month crude oil on the New York Mercantile Exchange rose 2.3 percent during the week to May 7 to settle at $95.62 a barrel. It had fallen to a four-month low of $88.51 on April 18.
Coffee saw more than $600 million in new bullish bets and corn more than $500 million.
Cocoa witnessed nearly $129 million in new inflows as speculators raised to a 5-year high the net long position held by money managers in the beverage and confection commodity.
The build in oil, coffee, cocoa and corn were offset partially by a combined outflow of more than $2 billion from soybeans, natural gas and gold.