Evolving Hedge Funds Come Out Fighting (Source: CME)
It has been a scandal-packed few months for the European financial services community, with few outside of the industry having anything positive to say, but one sector, which has had to deal with negative headlines in the recent past, has come out fighting by portraying the valuable role it plays in society. The Alternative Investment Management Association (AIMA), the global hedge fund industry association, has highlighted the important role hedge funds are increasingly playing such as managing investments for pension funds, university endowments, charitable foundations and other socially-important institutional investors. "When people in Europe ask what social value is provided by Europe's hedge fund industry, they are asking a perfectly legitimate question," said Andrew Baker, AIMA's chief executive. "And our answer to that question is really very simple. Not only is our industry responsible for 50,000 jobs in Europe, but because institutional investors are increasingly investing in hedge funds, our industry plays a major part in protecting the pensions of ordinary European citizens, boosting the resources of universities and charities and cutting the cost of insurance premiums." After the Bernard Madoff scandal first broke in December 2008, with the U.S. businessman pleading guilty in March 2009 to operating a Ponzi scheme considered to be the largest financial fraud in U.S. history, the perception of the hedge fund industry took a battering from the world's media. Although Madoff did not run a hedge fund himself, hundreds of hedge funds invested in his Ponzi scheme with prosecutors estimating that the size of the fraud was $64.8 billion. But AIMA, which this week issued a paper highlighting the social and economic value provided by the hedge fund industry, estimates that there are 50,000 people employed directly or indirectly by the hedge fund industry in Europe–the first such statistic of its kind produced–and 300,000 worldwide. Additionally, AIMA's paper looked to debunk a number of popular myths about the industry, such as that the industry is "unregulated", takes excessive risks and is "secretive". The Alternative Investment Fund Managers (AIFMD) Directive, which will, for the first time, put hedge funds and other private equity vehicles under European Union supervision, has caused some consternation within the hedge fund industry and is set to go live from 2013. "The hedge fund industry suffered big disappointments over AIFMD, but it is coming in now and we will be prepared for it," one hedge fund executive, based in London, told Markets Media. "But I wouldn't say it will be a revolution, more an evolution in the way we operate. Also, the more institutional money that hedge funds attract–because they demand better quality, better systems and more transparency–means that hedge funds have had to set themselves up in a better way anyway." Meanwhile, hedge funds posted meager gains in June to close the first half of the year with modest gains of 1.7%, according Chicago-based Hedge Fund Research (HFR), a provider of data and analysis for the alternative investment industry. Last month, the average hedge fund posted gains of 0.05%, according to HFR, although the benchmark S&P 500 stock index rose 4.12% in June and was up 9.48% year-to-date as of June 30. "Hedge fund performance in the first half of 2012 reflects the challenging and volatile environment created by the combination of slowing global growth, persistently low levels of investor risk tolerance and the wide-ranging impacts of the European financial crisis across asset classes and global regions," said Kenneth J Heinz, president of HFR. Not all strategies have performed badly though, with fixed income-based relative value arbitrage strategies up 4.3% for the year so far and event-driven strategies up 2.4% for the same period. "The broad based gains concentrated in relative value arbitrage and event-driven strategies reflect not only defensive positioning with regard to the European sovereign debt crisis, but caution with regard to regulatory and shareholder reaction to developments at specific financial institutions. Performance also reflects continued evolution of the hedge fund industry toward lower equity market beta strategies; we expect hedge fund industry growth to continue along these dynamics in coming quarters."
DTN Closing Grain Comments 07/12 14:57 : Corn, Wheat Sharply Higher (Source: CME)
Corn ended its two-day losing streak in a big way by closing sharply higher on continued support from a lack of rain in the forecast. Wheat also had a strong day fueled by crop concerns globally and the possibility of increasing feed demand. Soybeans lagged well behind as investors continue to mostly sit on the sideline.
Wheat Market Recap Report (Source: CME)
September Wheat finished up 20 1/2 at 846 3/4, 11 1/4 off the high and 26 1/2 up from the low. December Wheat closed up 21 1/2 at 859 3/4. This was 26 1/4 up from the low and 10 1/4 off the high. Chicago wheat was up 23 cents late in the session and managed to push out to new 11 month highs. Minneapolis wheat was also up strong which KC lagged gains in the other wheats by about 5 cents. The continued surge in corn prices on fears of broadening pollination problems in Iowa next week helped to support active buying. The USDA lowered US and world ending stocks yesterday and commercial traders see the need for a further 3-5 million tonne drop in global production from the USDA estimate from yesterday. In addition, surging feedgrain prices suggest a significant increase in global wheat feeding for livestock. Net weekly export sales for wheat came in at 311,800 metric tonnes which was well below trade expectations. As of July 5th, cumulative wheat sales stand at 22.8% of the USDA forecast for 2012/2013 (current) marketing year versus a 5 year average of 25.7%. Sales of 533,000 metric tonnes are needed each week to reach the USDA forecast. Iraq is tendering to buy 50,000 tonnes of wheat. Surging corn prices and ideas that US wheat sales will pick-up in the weeks ahead helped to support. European milling wheat futures closed sharply higher and pushed to new 16 month highs. September Oats closed up 6 1/4 at 370 1/2. This was 10 3/4 up from the low and 1 1/2 off the high.
Corn Market Recap for 7/12/2012 (Source: CME)
September Corn finished up 28 1/2 at 732 1/2, 6 off the high and 28 up from the low. December Corn closed up 28 1/4 at 732 1/4. This was 27 1/4 up from the low and 7 off the high. December corn closed sharply higher on the session as fund and speculative buying emerged despite the bearish technical action from yesterday. Weather fears persist with a special focus on pollinating corn in Iowa. Parts of Iowa may get up to 1/2 inch of rain into early next week but forecast models are mixed with the idea. Temperatures look to surge into the 100's and with extremely dry topsoil (88% of the state showing short to very short topsoil conditions as compared with 15% as the 5-year average) traders see very poor weather for pollination which could lead to permanent yield loss. Rain is expected for the eastern Corn Belt for the second half of next week but traders see rains in this region as beneficial but not so much for corn yield which was already permanently damaged in the Eastern Corn Belt. Net weekly export sales for corn, came in at 172,700 metric tonnes for the current marketing year and 492,100 for the next marketing year for a total of 664,800 which was higher than expected. As of July 5, cumulative corn sales stand at 96.2% of the USDA forecast for 2011/2012 (current) marketing year versus a 5 year average of 97.0%. Sales of 184,000 metric tonnes are needed each week to reach the USDA forecast. Ideas that crop conditions will continue to deteriorate until meaningful rainfall hits the Midwest has helped support. December corn has rallied as much as 54 cents off of yesterday's lows. September Rice finished down 0.115 at 14.995, 0.155 off the high and 0.125 up from the low.
USDA yield cut shifts corn's focus to demand
--Gavin Maguire is a Reuters market analyst. The views expressed are his own--
CHICAGO, July 11 (Reuters) - The U.S. Department of Agriculture surprised traders Wednesday by aggressively slashing its forecasts for U.S. corn yields sooner than usual in its reporting cycle, and before it has had the chance to conduct actual field surveys that it typically relies on to refine output projections.
But the bigger surprise may have been the shift in market focus from depleting supplies to waning consumption, as the USDA's latest crop balance sheets suggest demand destruction is already under way.
Crop Prices Rally as Expanding U.S. Drought Cuts Harvest Outlook (Source: Bloomberg)
Corn and soybeans rose for the first time in three days as an expanding drought in the U.S. Midwest increased the chances that yield losses will exceed government forecasts. Wheat also rallied. Most of the Midwest will get less than 20 percent of normal rain in the next five days, and temperatures will rise above 100 degrees Fahrenheit (35 degrees Celsius) in the four days ending July 18, according to T-storm Weather LLC. As much as 51 percent of the region got less than 25 percent of average rain in the past 14 days. The ratings of the corn and soybean crops are the lowest since 1988, government data show. “The warmer temperatures will increase yield losses for corn and raise the risks for soybeans,” Ron Mortensen, the president of Advantage Ag Strategies Ltd. in Fort Dodge, Iowa, said in a telephone interview. “Soil moisture is empty, and you can see the crops declining daily. Crops will get smaller without a dramatic increase in rain in the next two weeks.”
Corn futures for December delivery advanced 4 percent to close at $7.3225 a bushel at 2 p.m. on the Chicago Board of Trade. The price has jumped 44 percent since June 15, reaching $7.48 yesterday, the highest for a most-active contract since Sept. 13. Soybean futures for November delivery rose 0.4 percent to $15.29 a bushel. Yesterday, the oilseed reached $15.75, the highest since July 2008. Wheat futures for September delivery gained 2.5 percent to $8.4675 a bushel, the third gain this week. Earlier, the price reached $8.58, the highest since April 2011.
US corn firm on yield losses, soy falls for 3rd day
SINGAPORE, July 12 (Reuters) - Chicago corn rose 0.8 percent recouping some of last session's losses with support from U.S. government's estimates showing deeper reduction in yields although gains were capped by forecasts of rains in parts of the grain belt.
"The USDA report maintains a very bullish bias in the grains and oilseeds markets," said Luke Mathews, a commodities strategist at the Commonwealth Bank of Australia.
Goldman cuts U.S. corn yield forecast, ups price view
July 12 (Reuters) - Investment bank Goldman Sachs cut its U.S. corn yield forecast for the second time in less than two weeks to 143.5 bushels per acre from 153.5 bushels per acre and raised its price forecasts for corn, soybean and wheat due to a drought in the U.S. Midwest.
The worst Midwest drought in a quarter century is doing more damage to U.S. crops than previously expected with the U.S. Department of Agriculture (USDA) slashing its estimate for what was supposed to be a record harvest.
Vietnam H1 rice exports drop to 3.82 mln T-customs
HANOI, July 12 (Reuters) - Vietnam's rice exports in the first half of this year dropped 6 percent from a year ago to 3.82 million tonnes, but sales to China soared five-fold year-on-year, the customs office said on Thursday.
Rice exports to China between January and June surged to 1.08 million tonnes from 222,000 tonnes from the same year-ago period, the customs office said.
Strategie Grains cuts EU 2012 grain crop estimates
PARIS, July 12 (Reuters) - Analyst Strategie Grains on Thursday cut its 2012 estimates for major grain crops in the European Union to take account of weather problems across the bloc, both drought and excessive rain, and warned of further reductions.
The main cut concerned the maize crop, seen 850,000 tonnes lower than last month at 65.1 million tonnes, now down 2 percent on 2011, following hot and dry weather in central and southeastern Europe.
U.S. corn crop on razor's edge as drought continues
MYSTIC, Iowa, July 11 (Reuters) - Scorching heat and rain-less skies continued to frustrate U.S. Midwestern farmers on Wednesday, with damage to the corn and soybean crops growing more dire by the day.
"There are a lot of people thinking of chopping their corn up and feeding it to cows," said University of Missouri Professor of Plant Sciences William Wiebold.
Midwest drought slashes US corn estimate, jolts market
WASHINGTON, July 11 (Reuters) - The worst Midwest drought in a quarter century is doing more damage to U.S. crops than previously expected with the government on Wednesday slashing its estimate for what was supposed to be a record harvest.
The U.S. Department of Agriculture said the corn crop will average just 146 bushels an acre, down 20 bushels from its June estimate and a much more dramatic drop than analysts had projected.
Bad weather in south hits yields, wheat quality
MOSCOW, July 11 (Reuters) - Inclement weather in Russia's southernmost agricultural regions has slashed yields of grains and legumes to 2.5 tonnes per hectare from 4.1 tonnes last year, early harvest data gathered by Russia's Agriculture Ministry showed.
As of July 11, Russia had harvested grain and legumes from 9.4 percent of the total target area, bringing in 10.6 million tonnes compared with 1.9 million tonnes a year earlier after a harsh drought hit the south in the middle of spring.
Disaster Declared in 26 States as Drought Sears U.S. (Source: Bloomberg)
More than 1,000 counties in 26 states are being named natural-disaster areas, the biggest such declaration ever by the U.S. Department of Agriculture, as drought grips the Midwest. The declaration makes farmers and ranchers in 1,016 counties -- about a third of those in the entire country -- eligible for low-interest loans to help them weather the drought, wildfires and other disasters, Agriculture Secretary Tom Vilsack said today. The USDA is also changing procedures to allow disaster claims to be processed more quickly and reducing the penalty ranchers are assessed for allowing livestock to graze on land set aside for conservation. “Agriculture remains a bright spot in our nation’s economy,” Vilsack said. “We need to be cognizant of the fact that drought and weather conditions have severely impacted farmers around the country.” The declaration is effective as of tomorrow.
Moderate to extreme drought now covers about 53 percent of the Midwest, the country’s main growing region, fueling crop- price gains that are the biggest this year among the 24 commodities tracked by the Standard & Poor’s GSCI Spot Index. The rallies are boosting costs for companies from McDonald’s Corp. (MCD) and Coca-Cola Co. (KO) to Archer Daniels Midland Co. (ADM) and Smithfield Foods Inc. (SFD)
SOFTS-Cocoa slides after plunge in Europe Q2 grind
LONDON, July 12 (Reuters) - Cocoa futures on ICE fell sharply in early trade after a much deeper than expected drop in the European second-quarter cocoa grind, a key measure of demand.
Raw sugar futures inched higher with upside potential limited by prospects for a big global surplus of the sweetener in 2012/13, and coffee dipped in light volumes.
Ivorian cocoa arrivals 1,047,364 T by Mar 31 -CCC
ABIDJAN, July 12 (Reuters) - Cocoa arrivals at ports in top grower Ivory Coast reached 1,047,364 tonnes by March 31, up from 1,038,929 tonnes in the same period a year ago, according to data from the Coffee and Cocoa Council (CCC) obtained by Reuters on Thursday.
The figure represents the total cocoa purchases made during the 2011/2012 main crop, which is marketed from October through March.
Vietnam June coffee exports fall 30.8 pct m/m -customs
HANOI, July 12 (Reuters) - Vietnam's actual coffee export loadings in June fell 30.8 percent from May to 140,900 tonnes, or 2.35 million 60-kg bags, Vietnam Customs said on Thursday, above market expectations.
Coffee exports in the first half of 2012 jumped 20.4 percent from the same period last year to nearly 1.05 million tonnes, or 17.5 million bags, the finance ministry-run customs department said in its monthly report.
Vietnam to help Angola rejuvenate coffee production
HANOI, July 12 (Reuters) - Vietnam, the world's second-largest coffee producer after Brazil, will help Angola revitalise its war-ravaged coffee production by planting the commodity on 100,000 hectares over the next decade, officials said on Thursday.
Prior to 1975 Angola ranked as the world's fourth-biggest coffee producer with annual shipments of around 4 million bags. But a civil war between 1975 and 2002 destroyed the southern African country's coffee sector.
German Q2 2012 cocoa grind down 16.73 pct on year
HAMBURG, July 12 (Reuters) - Germany's second quarter 2012 cocoa grind fell 16.73 percent on the year to 84,643 tonnes, the association of German confectionery producers BDSI said on Thursday.
Observers had expected weak cocoa grinding figures because of sluggish chocolate sales.
Brazil exports 1.63 mln bags green coffee in June-Cecafe
SAO PAULO, July 11 (Reuters) - Brazilian green coffee exports reached 1.63 million bags in June, down 10 percent from the 1.82 million in the same month of 2010, the coffee exporters association Cecafe said on Wednesday.
Brazil's coffee crop, whose output varies in a biennial cycle with production rising one year and falling the next, pr oduced 4 3 .48 million 60-kg bags in the 2011/12 July-June low-crop year, compared with the 39.47 million bags from 2009/10.
Slowdown could cap oil prices but still risks –IEA
July 12 (Reuters) - Global economic slowdown could put a lid on oil prices but there is a risk that "nasty supply surprises" could reignite a market rally, the International Energy Agency said on Thursday.
The agency, which advises industrialised countries on energy policy, said market fundamentals had "clearly eased since the start of the year" and that oil stocks had built up significantly over the last few months.
US crude inventories fall sharply, products build
July 11 (Reuters) - U.S. crude oil stocks fell more than expected last week after crude imports dipped and refiners boosted their processing rates, government data showed on Wednesday.
Meanwhile, stocks of refined products rose much more than analysts had forecast and U.S. crude futures pared some of their earlier gains following the weekly oil data.
OPEC sees 2013 oil demand growth slowing
LONDON, July 11 (Reuters) - World oil demand growth will slow in 2013 from the already weak 2012, OPEC said on Wednesday, citing Europe's debt worries, a faltering U.S economic recovery and deceleration of growth in emerging markets.
The Organization of the Petroleum Exporting Countries (OPEC), which produces a third of global oil, said healthy output levels from non-OPEC producers next year would be enough to cover the modest growth in demand without the need for OPEC itself to increase output.
Saudi cranks up June oil output, Iran slumps-OPEC
LONDON, July 11 (Reuters) - Top oil exporter Saudi Arabia ramped up output to record rates in June despite a big drop in oil prices as Iranian production sank to its lowest in more than 20 years, OPEC said on Wednesday.
Riyadh said it pumped 10.1 million barrels per day (bpd) last month, up 300,000 bpd on May, according to a monthly report from the Organization of the Petroleum Exporting Countries.
Iran oil trade skirts ship insurance ban
BEIJING/TOKYO, July 11 (Reuters) - Iran is shipping oil to China, its top buyer, despite a row over freight terms, and Japan has taken steps to resume imports in August as Tehran finds ways to get around Western sanctions on ship insurance for its drastically reduced shipments.
On Wednesday, industry sources said Japanese insurers were expanding their maritime coverage to allow more domestic tankers to transport Iranian crude and that Iranian shipments to China were flowing despite the dispute about terms.
US to announce settlement with BP over Texas City refinery
HOUSTON, July 11 (Reuters) - U.S. workplace safety regulators plan to announce a settlement on Thursday with BP Plc's U.S. refining subsidiary over safety violations found at the company's Texas City, Texas, refinery in 2009, according to a statement issued Wednesday.
BP has been trying to sell the nation's sixth-largest refinery and a settlement would make the facility more attractive to potential buyers. Spokesmen for BP and the U.S. Labor Department declined comment.
Oil Drop as Demand Concern Outweighs Additional Iran Sanctions (Source: Bloomberg)
Oil fell for the first time in three days, paring a weekly gain, on speculation fuel demand will falter as Europe’s debt crisis curbs global economic growth. Futures slid as much as 0.6 percent. Moody’s Investors Service cut Italy’s government bond rating, citing a deteriorating near-term economic outlook. China, the world’s second-biggest crude user, may say today its economy expanded 7.7 percent in the second quarter, the slowest pace in more than three years, according to the median estimate of economists in a Bloomberg News survey. Crude closed at the highest price in a week yesterday after the U.S. announced new sanctions on Iran. “The risk for oil continues to be on the downside,” said David Lennox, an analyst at Fat Prophets in Sydney. “Look at the debt crisis in the European Union, the biggest regional user of petroleum, while the U.S. economy is very weak, the biggest user overall, and China is weakening. Add those together and you can see why oil has some downside risk, barring supply-side shocks.”
Oil for August delivery fell as much as 50 cents to $85.58 in electronic trading on the New York Mercantile Exchange and was at $85.74 at 9:35 a.m. Singapore time. The contract rose 27 cents yesterday to $86.08, the highest close since July 5. Prices are up 1.5 percent this week and 13 percent lower this year. Brent crude for August settlement fell 46 cents, or 0.5 percent, to $100.61 a barrel on the London-based ICE Futures Europe exchange. The European benchmark’s premium to West Texas Intermediate was at $14.87. It closed at $14.99 yesterday, the highest level in a month.
OIL-Brent slips below $100 as Fed holds off stimulus
SINGAPORE, July 12 (Reuters) - Brent crude slipped below $100 per barrel, after a more than 2 percent rally in the prior session, as uncertainty over whether the U.S. Federal Reserve would launch more stimulus measures curbed investor appetite for riskier assets. "All across risk assets, including oil, investors are seeing the global economic outlook as a glass half-empty," said Ben Le Brun, a markets analyst at OptionsXpress in Sydney. "There is a lot of caution ahead of the Chinese data."
Copper Traders Most Bearish in Six Weeks on Demand: Commodities (Source: Bloomberg)
Copper traders are the most bearish in six weeks on concern demand will slow in China, Europe and the U.S. at a time when hedge funds are betting on lower prices. Thirteen analysts surveyed by Bloomberg said they expect prices to drop next week and nine were bullish. A further six were neutral, making the proportion of bears the highest since June 1. Speculators have been wagering on a price drop since May and held a net-short position of 1,749 contacts on July 3, U.S. Commodity Futures Trading Commission data show. More than $1.2 trillion has been wiped from the value of global equities since early July amid concern growth is stalling. Federal Reserve policy makers said at their June meeting that strains from Europe’s debt crisis may spill over into the U.S. Copper imports to China, which accounts for about 40 percent of demand, slid to a 10-month low in June.
“People are quite concerned about slowing growth in China which leads to slowing demand for industrial metals,” said Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt. “We should know about almost all the risks in Europe for now, but it’s definitely not positive. At the moment everything is sentiment driven.”
Gold 22% Rally to Record Seen by Eric Sprott: Commodities (Source: Bloomberg)
Gold will climb to a record by yearend as the global economy slows from the weight of too much debt, says Eric Sprott, the founder and chairman of Canadian fund manager Sprott Inc. (SII) “I just can’t imagine the demand for gold is going down,” he said in a July 9 interview at Bloomberg’s Toronto office. “I don’t personally see a solution to the problem that we’re in, the financial leveraging issue that we all have where everybody wants to shed debt and there’s no buyers.” Sprott’s company manages funds investing mainly in gold, silver, and precious-metals equities. He expects bullion will rise as investors seek the safest assets while governments spend to stimulate their economies, increasing chances that inflation will accelerate. Gold, which had advanced for 11 successive years, is little changed so far in 2012. It’s 19 percent lower than the record $1,923.70 an ounce traded on Sept. 6 in New York after investors favored buying the dollar amid Europe’s escalating debt crisis.
The metal “should go to new highs before yearend, that would be my guess,” said Sprott, 67. “Gold has blown away every financial market in the world since 2000, let’s not forget that.”
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