New York, 29 March 2011

Net investment into commodity indices rose to a record high for a third month in a row in February, with long positions crossing $300 billion for the first time ever, data showed on Monday. The value of holdings by institutional investors and others who buy into commodity baskets has surged by more than $45 billion in the past three months, partly as a result of rising prices that have drawn near record highs.

That rally has also reignited debate about the influence of financial investors on commodity prices at a delicate time, with U.S. regulators poised to make a final push on new rules to limit excessive speculation, which many fear will put a lid on this kind of large, passive investment.

Net long holdings rose by $12.5 billion to reach a total $232.7 billion in February, according to the Commodity Futures Trading Commission's monthly report on futures positions connected to index-based investment.

Long-only indexes rose $24.5 billion to $322.7 billion. Short index holdings gained $12 billion to $90 billion. Inflows climbed as markets recovered from an early January slump. The Reuters-Jefferies CRB index rose 3.3 percent, with oil prices igniting on turmoil in North Africa and the Middle East, corn scaling new post-2008 peaks and sugar touching a 30-year high.

The data does not measure net new inflows or outflows, only the notional value of futures. That net value had peaked at near $256 billion in June 2008, as oil prices were about to touch a record high $147 a barrel and corn $7 a bushel before the financial crisis that followed.

The CFTC began tracking the amount of index investment in commodity futures in late 2007 amid criticism that the influence of financial investors was distorting markets, although many analysts have said such buy-and-hold inflows typically cause only short-term price appreciation.

Ends --

Reuters - for Commodities Now