COMMODITIES-Sliding global demand, Fed policy sinks markets
NEW YORK/LONDON Sept 22 (Reuters) - Commodity markets were sharply lower on Thursday afternoon as they continued to be battered by news from the day before that the U.S. Federal Reserve would not deliver for a third time easy money to rescue a trembling economy.
"We can have bear market rallies, but I can't see in the background where the big good news is going to come from," said Sean Corrigan, chief investment strategist at Diapason Commodities Management in Switzerland.
Corn (Source: CME)
US corn futures slump as economic jitters fuel heavy selling amid many asset classes, pushing corn to a 2 1/2-month low. Traders reduce risk following the FOMC's gloomy outlook and increasing concerns about European debt. Meanwhile, commodity funds sell an estimated 25,000 contracts, a large amount. The selling was an accelerated version of what likely would have played out during a longer period of time due to declining demand for corn, says John Kleist of ebottrading.com. "Because of the financial crisis, we're down here a lot faster than I thought it would happen." CBOT December corn loses 35 3/4c to $6.50/bushel.
Wheat (Source: CME)
US wheat futures close sharply lower as widespread selling hits commodity and equity markets. Traders reduce risk amid concerns about a global economic slowdown, with commodity funds selling an estimated 6,000 wheat contracts at CBOT. Economic gloom adds to worries about declining foreign demand, as Egypt, the world's top wheat buyer, bought 240,000 tons from Russia and none from the US. CBOT December wheat closes down 33c, or 4.9%, at a 2 1/2-month low of $6.33 3/4 a bushel. KCBT December loses 39 1/2c, or 5.2%, to $7.21; MGEX December slides 20 1/2c, or 2.4%, to $8.20.
Rice (Source: CME)
Rice futures finish with heavy losses after temporarily dropping the daily 50c limit amid widespread selling in many markets caused by increased concerns about the global economy. Export demand offered no support to prices today as weekly rice sales to foreign buyers were weak at 31,500 metric tons. CBOT November rice slumps 47.5c, or 2.8%, to $16.66 1/2 per hundredweight.
Domestic wheat dulls China's hunger for corn, for now
SINGAPORE/BEIJING, Sept 22 (Reuters) - China is likely to at least quadruple corn imports in the next crop year to fatten its animal feed sector and squeeze food inflation, but how much grain it buys will depend on the amount of wheat it uses for rations from its large reserves.
China's emergence as a significant importer would bolster prices at a time when corn supplies are estimated at 16-year lows, and traders say Beijing has little choice but to shop abroad due to its rapidly growing meat consumption.
Wheat at 6-week low, corn falls for 3rd day on Fed warning
SINGAPORE, Sept 22 (Reuters) - U.S. grain futures slid, with wheat falling 1 percent to its lowest in six weeks and corn losing ground for a third straight session, weighed down by a warning from the U.S. Federal Reserve of significant risks to the economy.
"Today's selloff is linked to the pessimistic macro-economic sentiment," said Lynette Tan, an investment analyst at Phillip Futures in Singapore.
Ukraine raises grain harvest f'cast to 52-53 mln T
KIEV, Sept 22 (Reuters) - Ukraine has raised its 2011 grain harvest outlook from the previous estimate of 51 million tonnes, First Deputy Prime Minister Andriy Klyuev said on Thursday.
"We will harvest 52-53 million tonnes of grain in 2011," he told the parliament.
China's rising corn demand to spur imports -COFCO Exec
CHANGCHUN, Sept 22 (Reuters) - China is likely to harvest 181.5 million tonnes of corn this year while its consumption is projected to rise to 181.3 million tonnes, an executive with a state-owned trading house said in a prepared speech on Thursday, reflecting a trend that could lead China to become a regular corn importer in the future.
The estimated 2011 output growth, 4.25 million tonnes, cannot meet demand growth, estimated at 11.6 million tonnes, from 2010, Fan Zhenyu, deputy general manager with COFCO's corn division, said in remarks for a prepared speech to a corn conference.
CWG cuts U.S. corn yield estimate to 147.3 bu/acre
CHICAGO, Sept 21 (Reuters) - Commodity Weather Group (CWG) said on Wednesday it had lowered its yield forecast for the 2011 U.S. corn crop to 147.3 bushels per acre, from its August estimate of 148.7.
The firm estimated U.S. corn production at 12.370 billion bushels.
Drought bedevils U.S. winter wheat, minor rain to fall
CHICAGO, Sept 21 (Reuters) - Drought kept a harsh grip on the U.S. Plains hard red winter wheat region, with only minor amounts of rainfall forecast for this week on powder dry soils, an agricultural meteorologist said Wednesday.
"Pretty limited relief. They had some showers over the past weekend and at mid-week maybe a half inch or less in the Texas Panhandle and Oklahoma, then dry from there on out," predicted John Dee, a meteorologist with Global Weather Monitoring.
OECD Farm Support Hit 30-Yr Low In 2010 As China's Surged To Record (Source: CME)
Soaring food prices meant the world's richest countries paid the lowest support to farmers in decades last year, even as China boosted its agricultural payments to a record $147 billion. Data from the Organization for Economic Cooperation and Development showed the share of farmers' income derived from subsidies fell to 18% in 2010, down from 22% in 2009, marking a "record low since the start of the series in 1986." Carmel Cahill, agriculture counselor in the OECD's directorate for Trade and Agriculture, said the fall is "mainly due to current market conditions," as higher food prices have meant farmers need less support. Last year, the 34 countries that make up the OECD spent $227 billion on farming subsidies, down almost 6% from 2009, the data show. But she added that in some regions, like Europe, the decline marked a long-term reduction in assistant--a policy advocated by the Paris-based body--and a trend that could be supported by higher food prices in the future.
"The medium-term outlook suggests that prices for the main agricultural commodities will be significantly higher over the next decade than the previous decade," she said. The lowering farm support in OECD countries contrasts markedley with many emerging economies, where pressure from expanding populations has spurred investment in domestic food production. In China, the world's second-largest economy, farming payments rose 40% to a record $147 billion in 2010 compared with 2009. That pushed the share of Chinese farm income derived from subsidies to 17%, only one percentage point below the OECD average of 18%, the data show. Much of this was down to policies triggered by the rise in world prices, which account for about 60% of China's support mechanisms, noted Cahill. In Russia too, "producer support has increased since the mid-1990s to a level that currently exceeds the OECD average," said the report.
"The recent food price surges have increased concerns on import dependency and have further strengthened the focus on increasing domestic food supplies." Agricultural subidies are a contentious polticial issue in many countries and were a key factor in the breakdown of the moribund Doha world trade talks. Debate on how to reform Europe's Common Agricultural Policy next month and the U.S.'s farm bill next year will give a key indication of whether lawmakers still see farming support as a priority amid the gathering financial gloom. Cahill said that with food prices expected to continue high over the next decade the opportunity to cut payments is there, but there is no guarantee that governments will do that. "The direction that they're moving in is toward allowing market signals to play out," she said.
IGC Cuts World Corn 2011-12 Output View 4Mln Tons To 845Mln Tons (Source: CME)
International Grains Council cut its estimate for world 2011-12 corn output by 4 million metric tons to 845 million tons due to diminishing prospects for the U.S. harvest. The London-based body reduced its forecast for this year's crop in the world's largest corn producer by 10 million tons from its previous estimate to 315 million tons--which would be the smallest crop since 2008-09. And despite a 4 million ton upward revision to prospects in both Brazil and Argentina, which are now expected to produce a total of 95.2 million tons, the IGC said world consumption is still expected to outstrip supply in 2011-12. "The further downward revision in the U.S. maize production forecast is only partly balanced by an enhanced outlook for crops shortly to be planted in South America," it said.
Still, improving prospects for the world wheat crop, which was revised up by 2 million tons to 679 million tons thanks to "upward revisions for Russia, Ukraine and Australia," means "there is little overall change in the 2011-12 supply and demand outlook," said the council.
Tesco Moves First In Cutting U.K. Prices (Source: CME)
Tesco PLC said it will invest GBP 500 million ($775 million) in price cuts in a move that could spark a price war among U.K. supermarkets. The supermarket chain said it will cut prices on thousands of essential items from Monday, with most of the financial investment going into reducing the price of Tesco's own-branded goods. It will also simplify and scale back promotions and end its double-Clubcard-points promotion for its loyalty scheme, which has been running for the past two years, to fund the move, which U.K. Chief Executive Richard Brasher insisted wouldn't affect margins. Analysts believe the move will prompt competing grocers to launch their own initiatives, and force those supermarkets that match prices on Tesco products to reduce their prices in line with Tesco's. Still, a severe price war is unlikely as investors and analysts think the cut-throat U.K grocery market is relatively rational.
Shore Capital analyst Clive Black said Tesco's price initiative is "measured, planned and rational," although it will still put pressure on Tesco's supermarket competitors, whether through margin investment or lost revenue. Wal-Mart Stores Inc.-owned Asda Supermarkets said it will continue to guarantee that its shopping basket is 10% cheaper than its rivals. Wm Morrison Supermarkets PLC declined to comment on Tesco's move, while J Sainsbury PLC and Ocado Group PLC weren't immediately available for comment. The difficult consumer environment in the U.K. has forced all retailers to compete more vigorously on price, with a raft of promotions such as price-match promises, new marketing tag-lines focusing on value and offers of cash returns if customers can shop for cheaper elsewhere. Tesco has lagged behind its U.K. rivals for several quarters, not least because it is the most heavily exposed to nonfood sales.
Sales of these goods have suffered as food and fuel-price inflation have crimped consumer spending on no nessential items. "We're giving customers a more straightforward shop - reducing the number of promotions and putting the emphasis on clear and reliable savings that everyone can benefit from," Mr. Brasher said. He said there will be some price cuts on nonfood items but the main thrust of the cost savings will be focused on everyday grocery essentials. Coordinated price cuts aren't new to the U.K. grocery market. Supermarkets traditionally invest in new-year promotions, and in January Tesco pledged GBP 340 million of price cuts, while Morrisons promised to cut weekly shopping bills by GBP 40 a week and Sainsbury announced savings of GBP 300 million. Panmure analyst Philip Dorgan believes Ocado will be the hardest hit by a Tesco price move, because it matches the prices on more than 7,000 of Tesco's products and doesn't have the same scale as the other, larger supermarkets.
Tesco shares closed down 2.25%, or 8 pence, at GBP 3.56 in a sharply lower London market.
Corn Futures Gain to $6.535 a Bushel in Chicago, Wheat, Soybeans Advance (Source: Bloomberg)
Corn for December delivery rose 0.5 percent to $6.535 a bushel on the Chicago Board of Trade at 9.04 a.m. in Sydney. November-delivery soybeans advanced 0.45 percent to $12.88 a bushel. Wheat for December delivery gained 0.8 percent to $6.39 a bushel.
Coffee Output in Vietnam May Reach Record on Weather, Area, Survey Shows (Source: Bloomberg)
Vietnam, the second-largest coffee grower, may produce a record crop in the upcoming harvest as favorable weather and a larger cultivated area boost output in the 2011-2012 season, increasing global supplies. Production may total 1.32 million metric tons, according to the median estimate in a Bloomberg survey of 12 traders, growers and exporters. That compares with 1.12 million tons, or 18.7 million, 60-kilogram bags, in the last crop, according to a U.S. Department of Agriculture estimate. For 2011-2012, the USDA has forecast output of 1.24 million tons, which would be an all-time high, according to data stretching back to 1959. Record production from Vietnam, the largest grower of robusta coffee, used in instant drinks, may boost exports and further lower prices that have shed 24 percent from their peak this year. Coffee has slumped on speculation that supplies may gain as a slowdown in global growth pares demand.
ICE cocoa, sugar, coffee join commodities retreat
LONDON, Sept 22 (Reuters) - ICE cocoa, raw sugar and arabica coffee futures all fell in early trade, tracking a broad-based setback in crude oil and other commodity markets.
Indonesia's cocoa output is seen rising 19 percent to around 500,000 tonnes next year, from 420,000 tonnes this year, the country's cocoa association said.Production will still be down from 2010 levels because of crop disease, an official at the association said.
Japan lowers 2011/12 sugar import estimate
TOKYO, Sept 22 (Reuters) - Japan has revised down its sugar import estimate for the year to September 2012 from three months ago as local sugar beet output is likely to rise and inventories remain sufficient, a government official said on Thursday.
Japan now estimates sugar imports for the year from Oct. 1 to Sept. 30, 2012 at 1.304 million tonnes on a refined basis, down 3.7 percent from a year earlier, a quarterly report from the Ministry of Agriculture showed.
Indonesia cocoa output to rise 19 pct in 2012 - assoc
JAKARTA, Sept 22 (Reuters) - Indonesia's cocoa output is seen rising 19 percent to around 500,000 tonnes next year, from 420,000 tonnes this year, the country's cocoa association said on Thursday.
Production will still be down from 2010 levels because of crop disease, an official at the association said at a conference.
S Africa sugarcane output seen up 6 pct-attache
Sept 21 (Reuters) - Following are selected highlights from a report issued by a U.S. Department of Agriculture attache in South Africa:
"Sugar cane production in South Africa is expected to increase by only 6 percent to 16.98 million tonnes in the 2011/12 season due to the worst drought in 20 years that hit the main sugar producing area in 2010.
Sustainable cocoa powder demand lags butter-Cargill
LONDON, Sept 21 (Reuters) - Demand for sustainable cocoa powder is lagging that of sustainable cocoa butter, U.S. agribusiness Cargill said.
Demand for sustainable cocoa butter from chocolate manufacturers has been driving demand for sustainably grown cocoa beans, Taco Terheijden, sustainable cocoa manager at Cargill, said on the sidelines of a conference.
India initial 2011/12 sugar output seen at 24.6 mln T
NEW DELHI, Sept 21 (estimated by the farm minister last week. That was also an initial estimate.
"This is a conservative estimate and production will not fall below this. There are also reports that production could be 25.0-25.5 million tonnes," Thomas said.
India cotton exports seen up 17 pct over govt f'cast
MUMBAI, Sept 21 (Reuters) - India's cotton exports could rise 17 percent, or 1.4 million tonnes, over an official forecast in the year to September 2012, spurred by a record harvest, a weaker domestic currency and a freer trade policy, the top exporter of the fibre said.
India contributes 22 percent of global output and is expected to have a bumper harvest of 6.14 million tonnes, pushing it into competition with suppliers from Latin America, Australia and Africa, that will squeeze world prices.
Uralkali: Potash Market May Reach 58 Mln-59 Mln Tons In 2011 (Source: CME)
The global potash market may reach between 58 million and 59 million metric tons in 2011, above the pre-crisis level of 56 million tons in 2007, Russian fertilizer giant OAO Uralkali said. "Given the current market trends and the fact that major potash producers work at the capacity exceeding 90%, Uralkali believes that the potash market in 2011 may reach 58-59 million tons," Uralkali said in a statement. The company said potash prices are still significantly lower than before the global financial crisis started in 2008. "Despite the volatility on the international commodities markets, the potash market continues to be very resilient, largely due to strong demand," Uralkali said. "The situation on the potash market in first half of 2011 as well as its development in the second half gives us confidence to believe that the upward trend will continue in 2012," the company said.
U.S. ethanol output falls 8,000 barrels per day
Sept 21 (Reuters) - U.S. ethanol production fell nearly 1 percent last week as gasoline demand dipped, limiting blender consumption. The Energy Information Administration said on Wednesday that U.S. ethanol production totaled 871,000 barrels per day in the seven days to Sept. 16, down 8,000 barrels per day, or 0.9 percent, from the previous week.
S.Korea's Aug crude oil imports down 3.8 pct yr/yr -KNOC
SEOUL, Sept 22 (Reuters) - South Korea's crude oil imports fell about 4 percent on the year in August, swinging from two months of year-on-year growth due to delayed maintenance shutdowns at some local refining units.
Crude imports by South Korea, the world's fifth-largest crude buyer, stood at 72.8 million barrels last month compared to 75.6 million barrels imported a year earlier, state-run Korea National Oil Corp (KNOC) said on Thursday.
China resumes tax on some naphtha, fuel oil
BEIJING, Sept 22 (Reuters) - China will resume its consumption tax on naphtha and fuel oil from Oct 1 when producers of the two products sell them to ethylene and aromatics makers, the Ministry of Finance said on Thursday.
The charge will be refunded to ethylene and aromatics makers based on the actual volumes of naphtha or fuel oil they use.
Oil tumbles more than 4 pct on recession fears
NEW YORK, Sept 22 (Reuters) - Oil tumbled more than 4 percent on Thursday after alarmingly weak Chinese industrial data and a bleak economic outlook from the U.S. Federal Reserve triggered the biggest commodity sell-off since May.
"We're just not seeing any real signs of life out there economically. Traders are heading to higher ground," said Rob Kurzatkowski, futures analyst with OptionsXpress.
NYMEX-Natural gas ends down, front hits 11-month low
NEW YORK, Sept 22 (Reuters) - U.S. natural gas futures trimmed early losses but still ended lower on Thursday, with mild weather and a government report showing another big inventory build driving the front contract to an 11-month low.
"The (EIA build) was neutral to bearish. We're going to see a lot more gas go into storage over the next couple of weeks, particularly if spreads to winter stay wide, and that should put storage in good shape," a Massachusetts trader said.
Euro Coal-Prices stable despite general slump
LONDON, Sept 22 (Reuters) - Prompt physical coal prices were little changed on Thursday although swaps fell by over $1 in line with the slump in world stocks by more than 4 percent.
"Very prompt physical prices have barely moved, they're flat to Wednesday's levels in fact, because the front months are well bid for Richards Bay and DES ARA," one utility source said.
Oil Rises After Slipping to Six-Week Low on Economy; Heads for Weekly Drop (Source: Bloomberg)
Oil rose from a six-week low in New York as investors speculated the biggest weekly decline in almost two months is exaggerated before central bankers from the Group of 20 nations meet in Washington to discuss the global economic slowdown. Futures rose as much as 1.6 percent after plunging 6.3 percent yesterday. Finance heads are gathering for the International Monetary Fund’s annual meeting, while European officials said they may use leverage to increase the firepower of their regional bailout fund. OPEC said it will decide whether to cut supply after monitoring the global economy over the next two months and the pace of Libya’s output recovery. “After such a big move often there are shorts that are looking to take a profit,” Michael McCarthy, a chief market strategist at CMC Markets Asia Pacific Pty Ltd. in Sydney, said by telephone. “We haven’t seen any evidence yet of people getting aggressively into oil. The macro situation is also a very poor backdrop for oil at the moment.”
Brent crude falls more than $1 on grim econ outlook
SINGAPORE, Sept 22 (Reuters) - Brent crude lost more than $1 on Thursday on concerns oil consumption may fall, as steps announced by the U.S. Federal Reserve were seen as insufficient to jump-start an economy the central bank said faces significant downside risks. "It is hard to ignore the macroeconomic picture. Oil seems to have fallen in line with equity markets," said Tony Nunan, a risk manager with Tokyo-based Mitsubishi Corp.
Iron Ore’s Four-Year Slide Hitting Mining Earnings: Commodities (Source: Bloomberg)
Iron ore is set for the first four- year drop since at least 1982 as supplies surge, threatening to end record earnings at Vale SA (VALE3), Rio Tinto Group and BHP Billiton Ltd. (BHP), the world´s biggest producers. Global prices may fall 29 percent to an average $123 a metric ton in 2015 from a record $173 this year, according to the median estimates of 10 analysts surveyed by Bloomberg News. The decline contrasts with estimates for little change in copper and a 10 percent increase for aluminum in the same period, London Metal Exchange futures prices show. Iron ore supplies for export will jump 53 percent by 2015 even as slower growth in Chinese steelmaking saps demand, Goldman Sachs & Partners Australia Pty. said. That will reduce prices and profit that reached records this year for BHP and Brazil’s Vale, whose net income will fall almost 50 percent by mid-decade, according to data compiled by Bloomberg.
Copper Tumbles Most Since 2008 on China Manufacturing Data, Global Concern (Source: Bloomberg)
Copper futures plunged the most since 2008 as a China factory index signaling contraction added to speculation that metal demand will slump amid signs of faltering economies in the U.S. and Europe. A preliminary index of China purchasing managers was 49.4 this month, according to HSBC Holdings Plc and Markit Economics. A reading below 50 indicates contraction. Copper has dropped 22 percent this year as Europe’s debt crisis and the possibility of another contraction in the U.S. economy hampered demand. In 2008, during the U.S. recession, copper fell 54 percent. “The meltdown of 2008 is in the cards if the defaults start in Euroland,” said David Threlkeld, the president of Resolved Inc., a trading company in Scottsdale, Arizona.
Gold Set for Worst Week in More Than Four Months on Global Asset Selloff (Source: Bloomberg)
Gold headed for its worst weekly performance in more than four months as investors sold the metal alongside global equities and other commodities on concern the world economy will falter. Immediate-delivery gold traded little changed at $1,739.97 an ounce at 6:44 a.m. in Singapore, after shedding 2.4 percent yesterday, the most in two weeks. The metal, which slumped to a one-month intraday low of $1,722.03 yesterday, is down 4 percent this week, the biggest such drop since the period to May 6. “Gold has been caught up in the overall flight to the exit, but in a normal, sensible world, we should expect to see some support from the fear and trepidation investors are facing,” Nick Trevethan, senior commodities strategist at Australia & New Zealand Banking Group Ltd., wrote in an e-mail.
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