Short interest in agriculture surges 14 November 2014London Reporter: Stephen Durham
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Three years of downbeat commodity prices have seen investors become “increasingly disillusioned” with agricultural resources, according to research from Markit.
Exchange traded funds (ETF) investors have pulled cash from both commodity and agriculture tracking funds in 2014.
Short interest has surged in tractor maker Deere as well as in a number of food and beverage firms—some of which topped Markit’s global sector Purchasing Managers' Index (PMI).
Research analyst at Markit, Simon Colvin, commented: “Investing in commodities looked set to be a decent hedge against inflation a few years ago which, given the record amount of cash being minted by central banks, weighed on many investor’s minds.”
“This rush to hard assets saw record inflows into all aspects of the commodities world, something which was facilitated by advances in the ETF world which opened previously inaccessible markets to any investor with an equity trading account.”
The most shorted firm in Markit’s research is US listed AGCO, which has 14 percent of its shares outstanding on loan.
The company, which manufactures tractors and combine harvesters under a host of brands, has felt the recent downturn in agriculture “quite hard” according to Colvin, and has seen revenue fall by 9 percent year to date from 2013 along with widely eroding margins.
Current short interest represents nearly four times what was seen in January after a severe price fall.
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