Commodities Drop on Chinese Trade Deficit; U.S. Stocks Are Little Changed (Source: Bloomberg)
Commodities snapped a three-day advance and the yuan weakened after Chinese exports grew at a slower pace than forecast, fueling concern about the global economy. U.S. stocks and Treasuries ended little changed. The S&P GSCI Index of raw materials lost 0.4 percent as of 4:15 p.m. in New York and oil dropped 1 percent. The Standard & Poor’s 500 Index rose less than 0.1 percent to 1,371.09, while Exxon Mobil Corp. and Merck & Co. led the Dow Jones Industrial Average (INDU) up 37.69 points to 12,959.71. Ten-year Treasury note yields added less than one basis point to 2.03 percent. The yen strengthened against 12 of its 16 most-traded peers. The euro climbed 0.3 percent to $1.3158.
China weakened its daily fixing for the yuan by the most since August 2010 after reporting the biggest trade deficit in at least 22 years on March 10, sapping optimism that was spurred last week by stronger-than-forecast jobs data in the U.S. European finance ministers are meeting in Brussels today to complete the 130 billion-euro ($170 billion) aid package for Greece and discuss Spain’s budget-cutting efforts. “Commodity market watchers have cautioned quite some time ago that ‘as goes China so do commodities,’” Jon Nadler, an analyst at Kitco Inc. in Montreal, wrote in a note today. “When combined with the data concerning that country’s factory output and consumer retail activity, the conclusion that China is indeed experiencing notable difficulties is obviously not very hard to draw.”
Hedge Funds Trim Bullish Commodity Bets (Source: Bloomberg)
Hedge funds reduced bets on higher commodity prices for the first time in seven weeks after China cut its growth target, just as prices rallied on signs the U.S. economy is improving and Greece is containing its debt crisis. Money managers reduced combined bullish positions across 18 U.S. futures and options by 1.1 percent to 1.17 million contracts in the week ended March 6, Commodity Futures Trading Commission data show. Investors cut bets on copper by the most in two months and those on oil by the most since December. China uses more copper and energy than any other nation. Commodities fell 1.5 percent in the week ended March 6, a day after China cut its economic-growth target to 7.5 percent, from 8 percent, the lowest since 2004. Prices rebounded 2.1 percent in the following three days, extending this year’s advance to 9.7 percent, as Greece and bond investors agreed to the biggest sovereign restructuring in history and the U.S. added more jobs than economists were expecting.
“The economy is looking better, and there’s a general risk-on kind of sentiment,” said Mihir Worah, who manages Pacific Investment Management Co.’s $22 billion Commodity Real Return Strategy Fund from Newport Beach, California. “How do I think investor sentiment is? Certainly, they’re voting with their money, and we’re seeing steady inflows into our funds.”
Demand, Climate Change Threatens Water Resources - UN Report (Source: CME)
Rising food demand, rapid urbanization, and climate change are putting significant strain on global water resources, warns the latest edition of the United Nations World Water Development Report, issued by the U.N. Educational, Scientific and Cultural Organization, or UNESCO. "Freshwater is not being used sustainably, according to needs and demands," states UNESCO Director-General Irina Bokova and the Chair of U.N.-Water Michel Jarraud at the World Water Forum in Marseille, France Monday. "Accurate information remains disparate, and management is fragmented. In this context, the future is increasingly uncertain and risks are set to deepen." According to UNESCO's report, almost 1 billion people do not have access to safe drinking water, with sanitation infrastructure lagging growth of the world's urban population. The report estimates that the world will need 70% more food by the middle of the century, with demand increasing especially for livestock products.
"A surge in food production will lead to an increase of at least 19% in the water required for agriculture, which already accounts for 70% of freshwater use," said UNESCO. UNESCO warns that climate change will make a bigger impact on water resources near-term. "It alters rainfall patterns, soil humidity, glacier-melt and river-flow, and also causes changes to underground water sources. Already, water-related disasters such as floods or droughts are rising in frequency and intensity," warned UNESCO. By 2070, UNESCO predicts that water-stress will be felt in central and southern Europe, affecting the lives of up to 44 million people.
Corn (Source: CME)
US corn futures rise on tight cash markets and on speculation Chinese companies are buying US corn. Corn settles at the highest price for the front-month contract since Sept. 21. CBOT corn for March delivery was higher than May corn, which was higher than July corn, reflecting tight cash markets. Lack of official confirmation today weakened but didn't eliminate speculation on Chinese purchases. CBOT March corn ends up 17 1/2c or 2.7% at $6.71 1/2 a bushel. May corn up 14 1/2c at $6.59 1/2 a bushel.
Wheat (Source: CME)
US wheat futures end higher, boosted by rising corn prices and short-covering ahead of the March contract's expiration Wednesday. Wheat and corn are tied as the crops compete for acreage and can both be used as animal feed. CBOT May futures rise 8 1/4c to $6.51 1/4 a bushel while KCBT May climbs 12c to $6.96 and MGEX May jumps 14 1/2c to $8.19 1/2.
Rice (Source: CME)
US rice futures end higher, continuing to rebound from last week's slide to five-week lows. General strength in grain futures helped boost prices to one-week highs, analysts say. Futures also drew fundamental support from traders concerned about reduced acreage expectations for the coming planting season. Questions on the amount of rice that might be grown in the US amid drought issues in Texas and farmers in the Delta looking at the positive economic signals of seeding competing crops buoy prices, says Jack Scoville, analyst with Price Futures Group. CBOT May rice ended up 19c or 1.3% to $14.34 1/2/hundredweight.
Soy near 5-1/2 month top, wheat dips on US weather
SINGAPORE, March 12 (Reuters) - U.S. soybean futures edged higher, hovering near last week's five-and-half month high, boosted by strong Chinese demand and drought-reduced South American supplies. Wheat inched down, pressured by favourable weather for hard red winter wheat across areas of the U.S. Plains. Corn was little changed after closing 1.5 percent less last week.
"Soy is the one that has some concerns on the supply side and if demand remains strong those issues will be real," said Brett Cooper, a senior manager of markets at FCStone Australia.
Manila sets March 19 tender for rice import rights
MANILA, March 12 (Reuters) - The Philippines' National Food Authority (NFA) said on Monday that it has set a March 19 tender for permits to import 190,000 tonnes of rice -- 38 percent of the approved maximum import volume of 500,000 tonnes for this year.
Private importers will be allowed tariff-free rice purchases in exchange for paying a service fee to the NFA, the state rice procurement agency. The minimum service fee has been set at 100 pesos ($2.34) per 50-kilogram bag of rice.
Climate, food pressures require rethink on water-UN
PARIS, March 12 (Reuters) - The world's water supply is being strained by climate change and the growing food, energy and sanitary needs of a fast-growing population, according to a United Nations study that calls for a radical rethink of policies to manage competing claims.
"Freshwater is not being used sustainably," UNESCO Director-General Irina Bokova said in a statement. "Accurate information remains disparate, and management is fragmented ... the future is increasingly uncertain and risks are set to deepen."
Vietnam to stockpile 1 mln T rice to avoid price falls
HANOI, March 10 (Reuters) - Vietnam's government has allowed rice exporters to stockpile an equivalent 1 million tonnes of milled rice for three months to help prevent prices falling during the peak of the harvest.
Member companies of the Vietnam Food Association, the industry body, will be able to buy rice, equivalent to 2 million tonnes of unhusked grain, between March 15 and April 30 and keep it in stock until June 15, Prime Minister Nguyen Tan Dung said.
Argentina tweaks system for corn exports
BUENOS AIRES, March 9 (Reuters) - Argentina's government is modifying its unpopular corn export system, scrapping incremental quotas that farmers said depressed prices but keeping a cap on total sales abroad to ensure domestic needs are met.
Agriculture Minister Norberto Yauhar said on Friday that officials will announce on April 18 the bulk of 2011/12 corn exports to be authorized. The remainder of what can be shipped abroad will be unveiled at a later date.
Argentina port strike hits 85 grain ships-exporters
BUENOS AIRES, March 9 (Reuters) - A week-long strike by specialized port workers has held up about 85 grains ships in Rosario port, the biggest agricultural hub in grains powerhouse Argentina, an exporters chamber said Friday.
The crews that guide ships through Argentina's ports and moor them walked off the job last week to demand that more staff be assigned during busy shifts.
Argentina Grain Port Strike Moves Into Second Week (Source: CME)
A strike at Argentina's leading grain- and mineral-export ports entered its 11th day, stalling the shipment of hundreds of millions of dollars in goods. Operations at the numerous port complexes across the greater Rosario area are shut down, said Gabriel Albo, general manager of the San Lorenzo chamber of commerce. San Lorenzo is a key shipping hub just north of the city of Rosario. Most of the grain shipped from Argentina passes through the area and disruptions can have ripple effects across global grain markets. Argentina is the world's second-largest corn exporter, leads soymeal and soyoil exports, and ranks third in soybean shipments. "Last week was really complicated, with a lot of boats affected," said an executive at one of the country's largest grain exporters. The corn and soybean harvests are just kicking off, with the crops starting to make their way to port, piling on the pressure for exporters to reach a quick deal.
The SOMU merchant marine union and exporters were planning on sitting down to talks later Monday in a bid to break the impasse, Albo said. SOMU says staffing is insufficient at the port complexes. The directors of SOMU and the grain-export chamber were not immediately available for comment. The government is expected to step in and supervise mandatory arbitration to force a deal and reopen the ports, said the export-company executive. The strike has left 85 boats stranded, waiting to dock or set sail, the private ports chamber CPPC said in a statement. That has stalled the loading of at least $400 million in agricultural goods, CPPC said in the statement issued jointly with the grain-export chamber CEC and the vegetable-oil-export chamber Ciara. So far, exporters have suffered losses of about $5 million due to the stoppage, according to the chambers.
Milk Price Slumping as Record Profit Spurs Expansion of Herds: Commodities (Source: Bloomberg)
Record dairy profits and milder weather are leading to a surge in milk supplies from Auckland to California, turning last year’s best-performing commodity contract into one of the worst of 2012. Output in the U.S., the world’s largest producer, will advance 1.8 percent to a record 199.7 billion pounds (90.6 million metric tons) in 2012, the Department of Agriculture estimates. Futures traded on the Chicago Mercantile Exchange already fell 29 percent from a four-year high in August and may drop another 7.8 percent to $14.25 per 100 pounds by July, the median of six analyst estimates compiled by Bloomberg shows. An estimated 30 percent jump in U.S. dairy exports led to the most profitable year ever for farmers, who expanded herds that now are the biggest since May 2009, USDA data show. Yields reached a record during an unusually mild winter. Supply is also rising in Australia and New Zealand, the largest exporter, and dairy was the only food cost tracked by the United Nations to decline last month.
“This blasted weather that most people have enjoyed, the dairy cows have really enjoyed it,” said Bill Brooks, an economist for INTL FCStone Inc. in Kansas City, who grew up on a dairy farm in Missouri and has covered the industry for two decades. “We’re going to see more milk production.”
Fonterra Cuts Forecast, Warns on Prices (Source: CME)
New Zealand's milk giant Fonterra Co-Operative Group Ltd., producer of about a third of the world's traded dairy products, forecast a lower payout to farmers for the season ending May 31 and said global uncertainty and concerns over China's economic outlook means dairy prices are likely to remain under pressure until at least mid-2012. Fonterra Chief Executive Theo Spierings said "global markets seem to be reacting to the ongoing economic difficulties in Greece, the potential for conflict in the Middle East and China's reduced growth forecasts." The revised payout, which came on the heels of news that China swung to a massive trade deficit in February, put added pressure on the New Zealand dollar. At 3:07 p.m. local time, it was trading at US$0.8174 versus US$0.8206 prior to Fonterra's announcement and off the six-month high of US$0.84711 hit Feb. 29.
The revised payout will be NZ$6.75-NZ$6.85 a share, comprising a lower Fonterra Farmgate milk price of NZ$6.35 a kilogram of milk solids, down from the prior forecast of NZ$6.50. Its forecast distributable profit range of NZ$0.40-NZ$0.50 a share is unchanged. Goldman Sachs Economist Philip Borkin said the revised payout will likely reduce total dairy farm cash income for the cooperative's 10,500 farmer shareholders by around NZ$200 million. Markets keep a close eye on Fonterra, as any significant slide in agricultural commodity prices will weigh on New Zealand's economy as it struggles to gain traction after a prolonged downturn and a series of devastating earthquakes in the Canterbury region of South Island. Dairy accounts for nearly 25% of the country's NZ$45 billion (US$36.96 billion) in exports. Fonterra Chairman Sir Henry van der Heyden said the New Zealand dollar's continuing strength, higher levels of global milk production, and uncertainties in international markets led to the decision.
Last week Ian Palliser, director of optimisation, trading and sourcing at Fonterra, told Dow Jones Newswires that abundant milk supply out of New Zealand, Europe, the U.S., Australia and South America was a factor weighing on the milk price, and he expects the trend to continue. Mr. Van der Heyden said prices have fallen in five out of the last six biweekly auctions held on Fonterra's online trading platform. Its trade-weighted index, which covers a variety of products and contract periods, is down 5.7% since Fonterra opted to raise its payout forecast in December. ANZ Rural Economist Con Williams said the combination of weaker in-market prices and the higher New Zealand dollar were the main factors, with it likely that "a lot of the downside has been from the higher New Zealand dollar." The New Zealand dollar is around 8% higher against the U.S. dollar since Fonterra lifted its forecast payout in December.
Mr. Borkin said Fonterra's announcement is consistent with comments made last week by Reserve Bank of New Zealand Governor Alan Bollard, when he highlighted considerable concern over the high New Zealand dollar and the impact this could have on growth. The central bank held the benchmark interest rate at 2.50% and pushed out its rate increase track, warning the strength of the local currency was curbing the need for future rate increases.
Indian ministers to review cotton exports in 2 weeks
NEW DELHI, March 12 (Reuters) - A panel of ministers will likely review a halt on fresh cotton exports from India in two weeks, Trade Secretary Rahul Khullar told reporters on Monday.
India's government has flip-flopped on the issue of banning cotton exports. After saying it was lifting a ban on overseas sales of the fibre on the weekend, Khullar said on Monday no fresh exports would be allowed and only the quantity permitted to be sold before the ban will be allowed to be shipped.
India not to allow fresh cotton exports-govt
NEW DELHI, March 12 (Reuters) - India will not allow any fresh exports of cotton and only the quantity permitted before the government imposed a ban on overseas sales will be allowed to be shipped, the trade secretary said on Monday.
"No new registration certificates will be issued," Rahul Khullar told reporters, a day after the government announced the lifting of a controversial ban on cotton exports at a time when the global market is over-supplied.
Colombia's coffee output, exports fall in Feb-growers
BOGOTA, March 9 (Reuters) - Colombia's coffee production in February fell 25 percent from a year earlier to 571,000 60-kg bags, the eleventh consecutive monthly decline, due to the continued effects of heavy rains, the country's coffee federation said on Friday.
The world's top producer of high-quality Arabica beans in 2011 posted a third consecutive year of lower-than-expected coffee output as bad weather, fungus and a tree renovation program keep output below historic averages of 11 million bags.
India Rolls Back Cotton-Export Ban (Source: CME)
India will rescind a ban on cotton exports that was imposed last week, Trade Minister Anand Sharma said in a statement. "Keeping in view the facts, the interests of the farmers, interest of the industry, trade, a balanced view has been considered by the [ministerial panel] to roll back the ban and a formal order will be made public [Monday] by the government," he said. The government didn't give further details Sunday about the rollback. The trade ministry banned cotton exports on March 5 for a second time in nearly two years, citing concerns that lower supplies could put upward pressure on local prices. A ministerial panel reviewed the ban Friday after Farm Minister Sharad Pawar raised objections to the move, saying it would harm farmers, but no new decision had been announced immediately after the meeting.
In addition to the opposition by the farm minister, parliamentary representatives from India's largest cotton-growing province, Gujarat, had voiced their concerns to the prime minister about the export ban. "While we welcome the decision and thank the government for quickly reviewing the decision, we would like to see the details of the order before commenting," said Dhiren Sheth, president of the Cotton Association of India. "We hope that it's a complete lifting of the ban and not a partial one." On Friday, the government had partially relaxed the restriction on cotton exports by allowing shipments of the consignments for which paperwork had been completed by March 4, the day before the ban was imposed. In India, an exporter must register a shipment's quantity with the government and obtain customs clearance before shipping cargo.
The country is the world's second-largest cotton exporter after the U.S. The ban drove up cotton prices on the ICE Futures exchange in the U.S., but prices eased when a review of the ban was announced. In addition to domestic opponents of the ban, the China Cotton Association strongly protested the move, describing it as a "no-win" decision that would seriously disrupt international trade. China is the largest importer of Indian cotton, taking one million metric tons in 2011. The Trade Ministry said last week that the ban was imposed because exporters had already shipped 9.4 million bales of cotton, more than the 8.4 million bales of exports projected for the marketing year that started Oct. 1. One bale is equal to 170 kilograms.
Ghana: GMO Seeds See Cotton Production Increasing To 60,000 Tons This Year (Source: CME)
Cotton production in Ghana will rise to 60,000 metric tons by the end of this year, from 17,000 tons last year, and 3,000 tons in 2010, following the introduction of genetically modified seeds after the country's parliament passed the required legislation, Robert Tandoh, a director of the ministry of trade and industries, said. Ghana is aiming at 60,000 tons by the end of this year, Tandoh said, although "that would depend on our production level of 1,000 kilograms per hectare and we have about 60,000 hectares under cultivation." "One of the problems that has affected production so far is the lack of improved seeds and we hope to improve yields with GMO seeds. Currently, the farmers are producing between 1000 kilograms per hectare and we want to further increase that," he added. Minister of trade and industry, Hannah Tetteh, has attributed the revived interest in cotton production to the incentive of good pricing.
Officials of the cotton sector say since the introduction of cotton in the country as a cash crop in the 1960s, the country produced 435,295 tons between 1968 and 2005, whereas Burkina Faso in the same period produced 713,000 tons.
Rising gasoline prices point to mid-year slowdown
--John Kemp is a Reuters market analyst. The views expressed are his own--
LONDON, March 9 (Reuters) - Analysts at leading banks have been out in force to reassure investors the U.S. economy is in better shape to weather rising gasoline prices this year than in the first half of 2011 or 2008, when increases at the pump helped push the economy into a slowdown.
Many commentators have pointed to the continuing robustness of data on employment and confidence to argue the U.S. economy will shrug off rising fuel prices.
Brent crude falls towards $125 as China data spur demand worry
SINGAPORE, March 12 (Reuters) - Oil fell for the first time in four sessions, with Brent slipping towards $125 as weak Chinese exports raised fears about global demand and offset the support provided by a better outlook for the U.S. economy and Middle East supply concerns.
"It's hard for prices to rise sharply higher, although they are well supported because of the Iran situation and better economic data from the United States," said Ken Hasegawa, a Tokyo-based commodity sales manager at brokerage Newedge Japan. "Everyone worries about expensive gasoline in the United States which might hurt economic growth," Newedge's Hasegawa said, adding that prices were unsustainable and could correct in the next few months.
Saudi to supply full April crude to Asia -source
TOKYO, March 12 (Reuters) - Saudi Arabia, the world's top crude exporter, will supply full contracted volumes of crude oil in April to at least one Asian term buyer, unchanged from March, an industry source familiar with the matter said on Monday.
State-run Saudi Aramco made no changes to its monthly allocations of light and heavy grades for April, the source said.
China Feb implied oil demand rebounds to record high
BEIJING, March 10 (Reuters) - China's implied oil demand in February rebounded to a record high rate last seen in December after a dip in January, official data showed on Saturday, as refineries continued with fairly hefty runs while net imports of oil products surged from a month earlier.
Implied demand, the combination of crude oil throughput and net fuel imports, rose about 2 percent from a year earlier to 9.71 million barrels per day (bpd) last month, the same as in December, according to Reuters calculations based on preliminary government data.
Oil Trades Near Lowest in a Week on Stockpile Forecast and Price Concern (Source: Bloomberg)
Oil traded near the lowest level in almost a week in New York as investors bet fuel demand may falter amid rising U.S. crude stockpiles and producers of the commodity said prices are too high. Futures were little changed after dropping for the first time in four days. U.S. inventories probably rose 1.9 million barrels last week to the highest in six months, according to a Bloomberg News survey of analysts before an Energy Department report tomorrow. Crude prices are “high” because of international political tension and should be lower, oil ministers from Oman, the United Arab Emirates and Angola said. The Energy Department data is “certainly something to keep an eye on because changes in inventories are one of the best indicators of things going on demand-wise,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The geopolitical risk is certainly a major factor that is clearly preventing prices from falling too far at this stage.”
Oil for April delivery was at $106.52 a barrel, up 18 cents, in electronic trading on the New York Mercantile Exchange at 11:31 a.m. Sydney time. The contract yesterday fell $1.06, or 1 percent, to $106.34, the lowest close since March 7. Prices are 7.9 percent higher this year.
China oil demand as good as it gets
-- Clyde Russell is a Reuters market analyst. The views expressed are his own. --
SINGAPORE, March 12 (Reuters) - China's record crude imports in February are most likely as high as they will go, at least for the coming months, as rising prices, refinery maintenance and slower economic growth curb demand.
China swallowed a record 5.95 million barrels per day of crude last month from overseas, continuing a recent strong run of imports.
Ore-Shipping Cost Seen Falling to Decade Low as China Cuts Target: Freight (Source: Bloomberg)
Rates to ship iron ore, the second- biggest cargo after oil, are poised to drop to the lowest level in a decade after China cut its growth target, signaling weaker demand from the world’s biggest buyer of the commodity. Capesizes, each hauling about 170,000 metric tons of ore, will earn an average of $13,000 a day this year, the least since 2002, according to the median of 10 analyst forecasts compiled by Bloomberg. That’s 13 percent less than the median in January. Shares of New York-based Genco Shipping & Trading Ltd. (GNK), which operates nine of the vessels, will drop 19 percent in the next 12 months, the average of 11 estimates showed.
China, which buys 64 percent of all seaborne iron ore, will target growth of 7.5 percent, the lowest since 2004, Premier Wen Jiabao said March 5. Steel output will advance 4 percent this year, from 8.9 percent in 2011, the China Iron and Steel Association predicted the following day. Iron-ore imports may decline 14 percent this year, equal to about 550 Capesize cargoes, the China Mining Association estimates. “Any optimism in the market earlier on has disappeared,” said Andreas Loftesnes, a Singapore-based freight and iron-ore derivatives broker at Freight Investor Services Ltd., which claims to be the biggest broker of the swaps contracts. “We may see China clamping down and going a bit slower. We need much more cargo.”
Gold Futures Fall Below $1,700 in N.Y. on China Growth Slowdown Concern (Source: Bloomberg)
Gold dropped below $1,700 an ounce, alongside other commodities, on concern that a slowdown in China may crimp demand for raw materials. The Standard & Poor’s GSCI Index of 24 raw materials slumped as much as 1.2 percent as the world’s second-largest economy had the biggest trade deficit last month in at least 22 years, the weakest January-February factory-production gain since 2009 and retail sales in the first two months of the year below the median economist estimate, according to government data. “All commodities, including gold, have taken a hit because of China,” David Meger, the director of metal trading at Vision Financial Markets in Chicago, said in a telephone interview. Gold futures for April delivery declined 0.7 percent to settle at $1,699.80 at 1:45 p.m. on the Comex in New York. Prices jumped 2.4 percent in the previous three sessions. The precious metal has climbed 8.5 percent this year.
Managed-money firms cut net-long positions in gold futures and options by 26 percent to 145,997 contracts in the week ended March 6, according to U.S. Commodity Futures Trading Commission data. That’s the biggest reduction since August 2008.
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