Thursday, March 31, 2011

20110331 0918 Global Commodities Related News.

Corn (Source: CME)
US corn futures finish lower as projections for exports to China diminish. The US may miss out on sales to the resource-hungry nation if China turns to Argentina for corn, analysts say. That is a possibility, as Australia & New Zealand Banking Group says Chinese food-health officials traveled to Buenos Aires to discuss quality standards of Argentine corn. Argentina is the second-largest exporter of the grain behind the US. CBOT May corn ends down 8 1/2c at $6.63 1/4 a bushel.

Wheat (Source: CME)
US wheat futures finish lower, with CBOT suffering the steepest decline as uncertainty about government crop reports prompts traders to reduce risk. USDA is slated tomorrow to issue highly anticipated estimates on spring plantings and quarterly grain inventories. Concerns that wet weather will delay or prevent planting of spring wheat underpin MGEX prices, analysts say. CBOT May wheat falls 10c to $7.27 1/4 a bushel; KCBT May drops 5c to $8.62; MGEX May loses 2 1/4c to $8.86.

Rice (Source: CME)
Nearby US rice futures close weaker for the third consecutive session on profit-taking. Traders continued to take money off the table after the market finished at a five-week high Friday. Spillover selling from losses in corn and wheat, another global food staple, added pressure, traders note. Market participants are waiting for USDA to issue planting estimates Thursday. CBOT May rice ends down 7 1/2c at $13.78 per hundredweight.

USDA Sees U.S. Share Of Top Wheat Buyer Egypt's Imports Rising (Source: CME)
The U.S. share of imports by top wheat buyer Egypt has jumped to 36%, or 3.5 million metric tons, this season in the wake of Russia's grain export ban, the U.S. Department of Agriculture said. In a new report published, the USDA's Cairo attache said the U.S. was ranked behind only France in supplying the Arab world's most populous nation, and its share of the 10 million-ton market is expected to rise next season. And while the USDA said Egypt's state grain buyer, the General Authority for Supply Commodities, has covered its needs for the 2010-11 season, holding about two months of stocks in reserves with a further two to three months in the pipeline, it said it may come back into the market for up to 50,000 tons soon in a bid to take advantage of a recent slump in prices. "The U.S. and France have dominated the Egyptian market since the August 2010 Russian wheat export ban and are likely to continue to play a major role in the market," said the report.
"Given the current market situation, U.S. wheat will be likely to win any tenders for shipment this marketing year." Egypt produces about 80 billion loaves of low-cost bread a year as part of its program to feed millions of people that live on the poverty line. A surge in international wheat prices after Russia banned exports last summer has driven up the cost of GASC's subsidy scheme by around 50% to $4.4 billion and left the country scrambling to feed its rapidly expanding population. The cost of imported wheat for GASC has increased to about $345/ton in the last tender made in February 2011 from about $210 a ton in July 2010. But although the gains in international markets since last summer have put pressure on GASC, compounded by the Jan. 25 revolution, the USDA does not believe Egypt will run short of food. "The Russian ban on wheat exports has an impact on the GASC budget and on the private sector," the report said. "Egypt's overall food security was not jeopardized by the Russian ban."
Domestic wheat production is also expected to increase in 2011-12 to around 8 million tons as higher government procurement prices boost plantings by around 5% and better weather help the crop, the USDA said. Still, with the country's economy likely to improve by next year after the upheavals of the previous months, private buyers are likely to "make up the slack" of any fall in state imports.

US, Ethanol Industry Look At Dropping Fuel Blending Credit (Source: CME)
The U.S. government and the ethanol industry are discussing significantly scaling back a longtime federal tax credit to promote use of the biofuel, according to a person familiar with the situation. The subsidy being discussed provides a 45-cent tax credit for each gallon of the corn-based fuel blended into gasoline. The credit has faced growing scrutiny from critics of ethanol who contend federal mandates already require blending and the additional subsidy is a giveaway to the industry. The Renewable Fuels Association, the main arm of the ethanol lobby, is talking to industry members and lawmakers about ending the blending credit in its current form. The credit potentially could be replaced with one tied to the price of crude oil and result in no subsidies until prices fall under a preset price, making the corn-based fuel less competitive, a person familiar with the discussions said. The talks on the tax credit come as Congress takes a closer look at government support for ethanol.
President Barack Obama, in a Wednesday speech on alternative energy, called for "ways to reform biofuels incentives to make sure they meet today's challenges and save taxpayers money." Obama also called for the construction of four advanced ethanol plants, each able to produce up to 20 million gallons a year of biofuel made from non-food materials, including switchgrass or wood chips. The current blending subsidy, known as the Volumetric Ethanol Excise Tax Credit, cost taxpayers $5.4 billion in 2010, according to the Government Accountability Office. Critics of the ethanol industry have said the credit unfairly props up an industry that already enjoys a government mandate requiring 12.6 billion gallons of the biofuel to be blended into the nation's fuel supply this year. The credit, which was part of the 2004 Jobs Creation Act, is set to expire at the end of this year. The subsidy has existed in various forms for about three decades.
The U.S. Department of Agriculture estimates biofuel refiners are on track to produce 13.5 billion gallons of ethanol this year. The fuel has benefited from rising crude oil prices, making it economic to blend as much ethanol as possible into gasoline even as corn prices have surged as well. Federal law, for now, prevents gasoline sold at the pump from containing more than 10% ethanol, but the U.S. Environmental Protection Agency has approved raising the blend to 15% ethanol for newer cars. Ethanol can be competitive with traditional fuels even without subsidies, although there are times when high corn prices could make government aid necessary, said Aaron Brady, associate director CERA, an energy research consultancy. "A variable credit would have to look at the relationship between oil and corn," Brady said. American corn farmers have come to rely on the ethanol industry to buy their crops.
Ethanol producers are expected to consume roughly 5 billion bushels of corn this year, more than a third of total production, according to a USDA forecast. U.S. farmers are poised to increase plantings to take advantage of corn prices that recently topped two-and-a-half year highs on strong demand and concerns about tight supplies. Talk about removing the tax credit shouldn't impact farmers' crop plans, experts said, as no changes have been approved yet and farmers already have their plans in place.

China To Launch Cotton Purchase System To Stabilize Acreage (Source: CME)
The Chinese government will soon establish a cotton purchase and reserve system that will allow the government to buy unlimited quantities from farmers when market prices fell below a certain level, the China Cotton Association said. The system, which will be similar to the government's minimum procurement price programs for wheat and rice, has been highly anticipated by farmers, as it will allow them to lock in yields. The move will also stabilize domestic cotton acreage by increasing farmer interest in planting cotton, the association said in a monthly market report published on its website. "The government may set the minimum purchase price based on cotton production costs every year," an association official who declined to be identified, without elaborating.
The purchase and reserve system is designed to give farmers more confidence in the crop, as the government doesn't want local cotton acreage to be affected by plunging global prices and a sharp increase in cotton acreage in the U.S., China Futures Co. analyst Pan Ying said. "As downside risks for cotton have emerged, the launch of such a purchase system is a necessary (move) to prevent domestic acreage from falling," Pan said. China usually builds up its cotton reserves by purchasing a certain amount of cotton from farmers. It bought about 2.7 million tons of cotton between October 2008 and April 2009, as cotton prices plummeted during the global financial crisis. Following the release of a considerable amount of cotton in 2009 and 2010, the government now holds only 400,000 tons in reserves, and it will need to raise those stocks in order to regulate the market, Pan said.
The association said cotton area this year is expected to rise 5.1% to 5.4 million hectares. The Ministry of Agriculture expects a slightly larger increase of 5.4%.

Three-Month Copper in London Set for First Quarterly Loss Since June 2010 (Source: Bloomberg)
Copper in London headed for its first quarterly decline since the three months ended June 2010 on speculation global growth may slow as Japan struggles to contain a nuclear crisis and China extends its tightening measures.

BlackRock likes copper, fundamentals support price
LONDON, March 29 (Reuters) - Copper is the most favoured base metal in BlackRock's $17 billion World Mining Trust, fund manager Evy Hambro said on Tuesday, with the demand and supply outlook keeping prices of the metal resiliently high.
At just under 20 percent, copper is the single largest weighting on a pure commodity basis in the fund, Hambro told an Association of Investment Companies roundtable in London.

Jiangxi copper says sees China using 10-12 pct more copper in 2011
HONG KONG, March 30 (Reuters) - Jiangxi Copper Co Ltd expects China's copper consumption to rise by 10-12 percent in 2011, Huang Dongfeng, assistant to the general manager, said on Wednesday after the company's annual results announcement.
"Consumption could rise a bit more than GDP growth (this year). Output could rise given that smelters have been building (new capacity)," Deputy General Manager Wu Yuneng said at the same news conference in Hong Kong. He added that Jiangxi Copper expected record high international copper prices this year.

India Apr-Feb iron ore exports down 18 pct, March falls eyed
MUMBAI, March 30 (Reuters) - India's iron ore exports fell 18 percent to 85.43 million tonnes in April-February period from a year ago as a ban on shipments by Karnataka state continued to bite and March levels could be lower as Chinese buyers wait for global price falls.
The world's third-biggest exporter of the steel-making ingredient shipped 10.137 million tonnes in the month of February, down 18.6 percent from a year ago, according to figures released by the Federation of Indian Mineral Industries (FIMI).

Japan rare earths imports from China fall in February
TOKYO, March 30 (Reuters) - Japanese imports of rare earths from China shrank further in February, sliding 36 percent from January, data from Japan's Ministry of Finance showed on Wednesday.
Imports of rare earths from China stood at 1,138 tonnes in February, down from January's 1,783 tonnes.

METALS-Copper eases, doubts about China demand dominate
LONDON, March 30 (Reuters) - Copper slipped on Wednesday as doubts about demand from top consumer China intensified.
"We are cautious on copper's outlook ... It could be just be monetary tightening impacting on the copper market," said Nic Brown, analyst at Natixis. "It could be a reflection of copper stockpiles built up in 2009 and now being run down."

PRECIOUS-Gold regains footing but monetary tightening eyed
LONDON, March 30 (Reuters) - Gold firmed on Wednesday, after four sessions of losses amid broad support from unrest in the Middle East and North Africa, but gains were capped by expectations monetary policy in key regions may tighten.
"Gold players are anxiously waiting for policy signals from the U.S. and to see what the ECB (European Central Bank) actually does next week in its monthly meeting," said Credit Agricole analyst Robin Bhar.

U.S. wheat, corn, soy steady, market awaits USDA report
BEIJING, March 30 (Reuters) - Chicago Board of Trade wheat futures were steady on dry weather in United States and China crop
areas, while corn and soy were supported ahead of a key U.S. Department of Agriculture (USDA) crop plantings report due on
March 31.  "The USDA numbers will give direction (for the market)," said Greg Smith, managing director of Global Commodities,
adding the market expects higher corn acreage but lower soy and wheat area.

Russia 2011 grain output seen up to 84 mln tonnes-attache
WASHINGTON, March 29 (Reuters) - Following are selected highlights from a report issued by a U.S. Department of Agriculture
attache in Russia:
"In MY 2011, Russia's grain production might recover to 84 million tonnes, including 52.5 million tonnes of wheat and 16
million tonnes of barley. If production reaches this volume, the ban on grain exports might be partially lifted and Russia's
exports could reach 6 million tonnes.

US corn profit margin slips, but high acreage seen
CHICAGO, March 29 (Reuters) - The potential profit advantage in planting corn over soybeans has slumped 35 percent this year,
but it still remains high enough to push U.S. farmers into seeding a vast swath of land to the feed grain, industry sources
On Thursday, the U.S. Department of Agriculture will unveil its first survey-based forecast of how much land will be seeded
with corn and soybeans in the United States this year.

China officials visit Argentina over corn exports
BUENOS AIRES, March 29 (Reuters) - Chinese food health officials arrived in Argentina this week to work on a protocol that
would pave the way for Argentine corn exports to the commodity-hungry Asian nation, an official said on Tuesday.
China currently does not buy Argentine corn due to curbs on genetically modified (GMO) varieties, which account for about 80
percent of the South American country's corn crop.

India says may lift wheat export ban in April-May
NEW DELHI, March 29 (Reuters) - India is considering lifting a ban on wheat exports by April or May, Junior Farm Minister
Arun Yadav said on Tuesday, as the country heads for an all time record production of the grain in 2011.
India, the world's second-biggest producer of the grain, had banned wheat exports in 2007 to bolster domestic supplies to
rein in price rises.

Cocoa extends losses, eyes on I.Coast, coffee firm
ICE cocoa futures extended losses after falling almost 6 percent the previous session as forces for Ivory Coast president
claimant Alassane Ouattara moved to within 200 km (120 miles) of the two main port cities in an intensifying offensive
against incumbent Laurent Gbagbo.
Coffee prices were higher, with limited physical trading, after robusta and arabica pulled back from multi-year highs made
earlier this month.

Mexico sugar output up 22 percent through Mar 26
MEXICO CITY, March 29 (Reuters) - Mexico has so far produced 3.88 million tonnes of sugar in the 2010/11 harvest, nearly 22
percent more than in the same period last year, the national sugar industry chamber said on Tuesday.
Mexico is likely to produce 5.2 million tonnes of sugar in the 2010/11 season, slightly less than original forecasts after a
cold snap hit some production in the western growing state of Jalisco.

Global 2011/12 sugar output set for rise--F.O.Licht
SAO PAULO, March 29 (Reuters) - Increased planting of sugar cane and beet due to a sharp increase in prices for the sweetener
should boost global production in 2011/12 if the weather is favorable, analysts F.O. Licht said Tuesday.
"There could be a sizable increase in sugar output in 2011/12," said Stefan Uhlenbrock, senior commodity analyst at German
consultancy F.O. Licht on the second day of a three-day seminar it is hosting in Sao Paulo.

Brazil 2011/12 cane, ethanol output to rise-F.O.Licht
SAO PAULO, March 29 (Reuters) - Brazil's production of cane-derived sugar and ethanol will increase slightly in the 2011/12
season compared to the previous year, analysts F.O. Licht said on Tuesday.
Sugar output would rise almost 3 percent to 42 million tonnes (raw equivalent) from 40.8 million tonnes in the 2010/11
season, while production of ethanol biofuel would rise to 25.1 billion liters from 24.9 billion liters in the last season.

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