Drought Drives Investors Back to Grain Funds

By CnAgri2012-08-13 19:30:10 Print

Investors who had fled agricultural commodity funds for more than a year rushed back in droves last month as the worst U.S. drought in more than half a century caused prices to surge, data from fund tracker Lipper showed on Friday.

Reuters reports that exchange-traded funds and other security products that track agriculture-focused futures or indexes recorded an inflow of just below $110 million in July, the highest since March 2011. Flows turned positive in June, ending a 14-month streak in which investors slashed bets by billions.

Early indications are that more money will be coming into the funds in August, said Matthew Lemieux, a research analyst who helps compile the data for Lipper, a Thomson Reuters company.

Corn futures in Chicago have risen nearly 30 percent so far for the quarter, while soybean futures have gained almost 15 percent, responding to the drought that has severely cut yield potential in the two crops.

Prior to June, when the drought set in, investors had pulled a total $2.7 billion out of agricultural funds due to prolonged drop in grains prices.