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(Bloomberg) — The commodity meltdown that pushed oil to a 12-year low and copper to the cheapest since 2009 isn’t over yet. At least, that’s how hedge funds see it.

Money managers increased their combined net-bearish position across 18 raw materials to the biggest ever, doubling the negative bets in just two weeks. A measure of returns on commodities last week slid to the lowest in at least 25 years. Metals, crops and energy futures all slumped amid supply gluts and an anemic outlook for the global economy.

Market turmoil in China, the biggest commodity buyer, is adding to worries over consumption. A stronger dollar is also eroding the appeal of raw materials as alternative investments. While Goldman Sachs Group Inc. predicts that the prolonged slump will start to spur more supply cuts, the bank doesn’t expect prices to rebound until later this year.

“There’s fear in the marketplace,” said Lara Magnusen, a La Jolla, California-based portfolio manager at Altegris Investments Inc., which oversees $2.5 billion. People are “very concerned about slower economic growth and what’s going on with China and the contagion effect,” she said.

With a strong U.S. dollar and the Federal Reserve considering more interest-rate increases, “there’s not a lot of places where you can put your money right now,” she said. “Short commodities is a pretty good place.”

The net-long position across 18 U.S.-traded commodities expanded to 202,534 futures and options as of Jan. 12, according to U.S. Commodity Futures Trading Commission figures published three days later. That’s the largest since the government data begins in 2006 and compares with 164,203 contracts a week earlier.

Prolonged Slump

The Bloomberg Commodity Index fell 4.2 percent last week and touched the lowest level since its inception in 1991. Last year was the fifth straight year the index has fallen, a prolonged price slump that is a reversal of the previous decade, when growth in Asia fueled a surge in prices, dubbed the commodity super cycle.

Farmers, miners and oil drillers expanded supplies, encouraged by prices that were at record highs in 2008. Now, that output is coming to the market just as global growth is slowing. The World Bank this month lowered its growth forecast for the global economy, warning that the slowdown in China will mean more weakness for raw materials.

Excess supplies are the main driver for the bear markets across commodities, Goldman analysts led by Jeffrey Currie said in a report on Jan. 15. Prices will likely have to fall further to spur the production cuts needed to end gluts, but markets will start to rebound later in the year, creating “the birth of a new bull market,” the analysts said.

With plunging prices taking a toll on commodity producers, more significant supply cuts may not be far off. BHP Billiton Ltd. said last week it expects to take a writedown of $4.9 billion on the value of its U.S. shale assets due to the tumble in oil prices. Shares of Freeport-McMoRan Inc., the biggest publicly traded copper producer, are approaching a record low, and analysts at firms including BB&T Capital Markets predict the company will probably need to step up its asset sales to bolster its balance sheet. Explorers have idled more than 150 drilling rigs in U.S. oilfields since August, according to Baker Hughes Inc.

Not Waiting

Investors aren’t waiting patiently for the supply cuts to come. Speculators are betting on declines for half of the 18 commodities tracked by the combined measure. The corn net-short position is at a record, and money managers are the most negative on coffee since November. The funds held a bearish outlook in copper for the 11th straight week, the longest streak since September.

An economic report scheduled for Tuesday is forecast to show China’s economy slowed to the weakest pace since 1990. The country’s Lunar New Year break follows in February, when industrial activity typically slows. Tepid economies across emerging markets are keeping investors negative on the outlook for commodities, said Frank Holmes, the chief executive officer and chief investment officer at San Antonio, Texas-based U.S. Global Investors, which oversees $724 million.

“The fact is there’s no major fiscal stimulus to ignite global growth,” Holmes said. “Everyone is extremely bearish.”

To contact the reporter on this story: Lydia Mulvany in Chicago at lmulvany2@bloomberg.net To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net Millie Munshi, Steve Stroth