Midwest Weather Expected to Be Hot and Dry Through July(Source:Bloomberg)
The Midwest will probably remain dry through the end of the month and the heat that has been wilting crops may persist until September. Temperatures in the Great Plains and Midwest are expected to remain 5 to 7 degrees Fahrenheit above normal (2.8 to 3.9 Celsius) through the end of July, according to MDA EarthSat Weather in Gaithersburg, Maryland. The company’s 30- to 60-day outlook calls for above-normal temperatures to grip the center of the U.S. through September. “The pattern is driven by persistence, with the heat of the first two months of summer continuing into August,” MDA’s forecast showed. Hot, dry conditions in the Midwest have left corn and soybean fields in the worst shape since 1988 as the most severe U.S. drought since 1956 continues. Soybeans reached a record high $16.5125 a bushel today on the Chicago Board of Trade, surpassing the previous peak of $16.3675 on July 3, 2008.
Soybeans for November delivery rose 1.7 percent to $16.48 a bushel by 7 a.m. on the CBOT. The oilseed jumped 36 percent this year as U.S. harvest concerns followed a drought that slashed the past season’s production in Brazil and Argentina. Corn for December delivery rallied 1.3 percent to $7.945 a bushel after touching $7.98. The record for a most-active contract is $7.9925. Corn has surged 57 percent since mid-June. Futures for September delivery, the contract closest to expiration, rose as high as $8.115 today. The area from Nebraska and Iowa south to Texas and Louisiana is expected to have less than normal rainfall through July 28, according to Commodity Weather Group LLC in Bethesda, Maryland. The rainfall deficit may continue for Iowa, Illinois and Indiana through Aug. 2, according to Commodity Weather.
Crop Traders Extend Bullish Streak on U.S. Drought: Commodities(Source:Bloomberg)
Corn and soybean traders are bullish for a 13th consecutive week on mounting concern that yields will keep dropping amid the worst U.S. drought in a half century. Twenty analysts surveyed by Bloomberg expect soybeans to climb next week, after reaching a record yesterday. A further five were bearish and three neutral. Nineteen predicted gains in corn, five saw a decline and three anticipated little change. Hedge funds are holding the biggest bet on rising soybeans since the beginning of May and the largest wager on corn since April, U.S. Commodity Futures Trading Commission data show. The drought may persist in the Midwest for the rest of the growing season, the U.S. government said this week. Above- average temperatures and below-normal rainfall will continue through next week, according to meteorologist Telvent DTN.
The 55 percent jump in corn and 26 percent gain in soybeans since mid-June may spur another bout of global food-price inflation, after surges in 2008 and 2011 that sparked civil unrest in developing countries, Barclays Plc said in a report July 18. “There’s not much reason for us to see a slowdown in the price rally,” said Erin FitzPatrick, an analyst at Rabobank International in London, who predicted in April that soybeans would reach a record. “The size of the 2012-13 harvest is shrinking every day that we don’t get rain or a cooling off in the U.S. It’s fundamentally still bullish, even though we’re at these record prices.”
Crop Insurers Could Face First Loss Since 2002 on Drought(Source:Bloomberg)
Crop insurers may face their first underwriting loss since 2002 as the worst Midwest drought in more than two decades threatens the U.S. harvest, according to Iowa State University’s Bruce Babcock. “The only way they would make a profit is if they saw this disaster coming, because of the low water tables and the low soil-moisture levels at the beginning of the season, and they opted to minimize their exposure in the Corn Belt,” Babcock, an economics professor at the Ames, Iowa-based university, said today. “But the companies have made money year after year after year maximizing their exposure to risk in the Corn Belt because it’s been such a good run of years.”
Hot, dry weather across much of the Midwest has damaged crops, led to a rally in corn and soybean futures, and boosted insurance loss estimates. The U.S. subsidizes farmers’ premiums for so-called multiperil coverage, which protects against a loss of revenue or production as a result of drought, hail, wind, frost or other natural causes. Prices for the policies are set by an agency within the Department of Agriculture. Crop insurers including Ace Ltd. (ACE), QBE Insurance Group Ltd. (QBE) and Wells Fargo & Co. (WFC) will probably face higher costs this year as farmers make claims, Fitch Ratings said in a report yesterday. Private insurers sell and administer multiperil crop insurance in the U.S. In return, the federal government backstops the firms with payments and reinsurance.
Commodities Advance, Head for Longest Rally Since Late February(Source:Bloomberg)
Commodities headed for the longest rally since February as the worst U.S. drought in more than half a century threatened crops and on speculation that monetary easing by central banks will boost demand for raw materials. The Standard & Poor’s GSCI Spot Index of 24 raw materials rose 1.6 percent to 649.93 at 11:10 a.m. in New York, after reaching 650.91, the highest since May 10. The gauge is up for the seventh session, the longest advance since Feb. 24. Soybeans jumped to a record, and wheat climbed to the highest in almost four years. Coffee, soybeans and cocoa led the rally. Global equities rallied on speculation that governments will act to spur economic growth. Federal Reserve Chairman Ben S. Bernanke said on July 17 that policy makers are studying options for further easing. The European Central Bank reduced interest rates to a record low on July 5, and the Bank of England announced the resumption of bond purchases on the same day.
“The Bank of England, European Central Bank and probably the Federal Reserve are all going to engage in additional accommodation,” William O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview. “That is a plus for commodities. We have an across- the-board better tone to the commodity board here, and of course there’s the big fear surrounding the grain markets.” The GSCI index is up 0.8 percent this year. The MSCI All- Country World Index (MXWD) rose 5.2 percent, and Treasuries returned 2.7 percent, a Bank of America Corp. index showed. Grains helped lead the rally today as about 55 percent of the contiguous U.S. was in moderate to extreme drought at the end of June, the highest percentage since 1956, National Climatic Data Center figures show.
Wheat Jumps to Highest Since 2008 as Global Droughts Erode Crops(Source:Bloomberg)
Wheat futures jumped to the highest in almost four years as the worst drought since 1956 erodes crop prospects in the U.S. and dry weather hurts production in Australia and Russia. Little rain will fall during the next seven to 10 days in the northern Great Plains of the U.S., the world’s biggest wheat exporter, forecaster Telvent DTN said in a report. Australia will be drier-than-normal for the next three months, the Bureau of Meteorology said. Russian farmers will collect 46.5 million metric tons of the grain in the year that began July 1, down 4.1 percent from 2011, researcher SovEcon said. “Look at what’s going on in the U.S. and look at what’s going on in Australia and Russia, and people are looking at drawing down world carryout,” Mike O’Dea, a risk management consultant at INTL FCStone in Kansas City, Missouri, said by telephone today. “There are a lot of people talking up wheat right now.”
Wheat futures for September delivery rose 3.5 percent to settle at $9.35 a bushel at 2 p.m. on the Chicago Board of Trade, after reaching $9.38, the highest for a most-active contract since Aug. 21, 2008. Prices have surged 49 percent since mid-June. Farmers in Argentina will reduce wheat planting by 22 percent in the 2012-2013 crop year, the Rosario Cereals Exchange said yesterday. Australia is the second-biggest exporter, followed by Canada, Russia, Kazakhstan and Argentina, according to the U.S. Department of Agriculture. Wheat is the fourth-largest U.S. crop, valued at $14.4 billion in 2011, behind corn, soybeans and hay, government data show.
Pro Farmer: After the Bell Wheat Recap (Source:CME)
Wheat futures ended with gains in the teens to 30s in nearby contracts, while some deferred contracts faced pressure. Wheat enjoyed stronger gains than the front-month corn contract as wheat is being viewed as a value buy. Front-month corn futures rose to an all-time high on the weekly continuation chart today, but front-month Chicago wheat is around $4 lower than its all-time high set in 2008.
Wheat Market Recap Report (Source:CME)
September Wheat finished up 31 3/4 at 935, 3 off the high and 38 1/2 up from the low. December Wheat closed up 22 at 934 1/2. This was 27 up from the low and 8 1/4 off the high. September Chicago wheat soared to new highs today before backing off slightly midday on profit taking. September wheat closed 31 3/4 higher on the day. Wheat found support from sharply higher corn and soybean markets, along with concern over tightening world supplies in 2012/13. Jordan and Tunisia tendered to buy wheat today. Jordan bought 100,000 tonnes of option-origin wheat. The sale was reportedly made by the Black Sea. Tunisia bought 125,000 tonnes of soft milling wheat. Wheat also saw boost from better than expected export sales for the week ending July 12th. Net weekly export sales for wheat, came in at 589,200 tonnes. Sales of 532,000 metric tonnes are needed each week to reach the USDA forecast. Temperatures are expected to reach 95-105 degrees this week in the western Corn Belt, adding to corn stress. Wheat is also seeing support from speculation that Russian wheat production for 2012/13 will continue to fall. Outside markets are adding support with the US Dollar trading weaker and crude oil is sharply higher on the day. September Oats closed up 3 1/2 at 383 1/2. This was 3 1/4 up from the low and 6 off the high.
Pro Farmer: After the Bell Corn Recap (Source:CME)
Corn futures saw a very volatile day of trade and market bears gained the upper hand heading into the close. The July contract ended 12 3/4 cents higher and December settled 5 3/4 cents lower, but the rest of the market posted losses of 12 3/4 to 25 cents. September corn futures set a record high on the weekly continuation chart this morning thanks to ongoing concern about widespread drought and the extended forecast for more crop-damaging temps and dryness ahead.
Corn Market Recap for 7/19/2012(Source:CME)
September Corn finished up 10 1/2 at 805 1/2, 11 1/4 off the high and 15 1/4 up from the low. December Corn closed down 6 1/4 at 778. This was 1 1/2 up from the low and 21 off the high. September corn made new all-time highs today on concern that blistering temperatures this week and into next week will drop the new crop corn yield further. Bull spreading was active today as the December 2013 corn contract traded down 30 cents while the September 2012 contact saw double digit gains. Corn turned lower following the pit open after rumors circulated that China feeder companies planned on selling back cargos of US corn for a profit after sharp increases in prices. Argentina raised their corn crop production estimate to 21 million tonnes vs. previous estimates of 20.1 million tonnes. Additional pressure was added following an abysmal weekly export sales report. Weekly export sales for the week ending July 12th came in at 31,900 tonnes for the current marketing year and 148,800 for the 2012/13 marketing year, for a total of 180,700. This was well below the low end of market expectations. Old crop sales of 205,000 tonnes are needed each week to reach the USDA forecast. Current price levels suggest the USDA may need to revise the 2011/12 export forecast lower. Weather forecasts for most of the Midwest look terrible for the US corn crop the next two weeks. Average rainfall was seen in the eastern Corn Belt in the last 48 hours, however the focus of the market has shifted to the western Corn Belt where the 10 day forecast calls for 95-105 degree temperatures. The market is anticipating another drop in corn condition ratings next Monday which will likely shift yield estimates lower. Technical traders saw the 799 high for December corn and lower close on the day as a potential reversal top signal and this could attract technical selling. September Rice finished down 0.04 at 15.495, 0.195 off the high and equal to the low.
GRAINS-Soybeans, corn climb to record highs on U.S. drought
SYDNEY, July 19 (Reuters) - U.S. soybeans rose to a record high while front-month corn scaled an all-time high as weather maps showed no sign of an end to a drought that has damaged U.S. crops and provoked concern about food supplies.
"Soybeans are entering their pollination stage now later than corn, and so the weather will be a bigger factor for soybeans at the moment," said Lynette Tan, investment analyst at Phillip Futures.
Argentina 2012-13 wheat area seen down 22 pct
BUENOS AIRES, July 18 (Reuters) - Argentina's 2012-13 wheat area is expected to shrink 22 percent from last season, the country's biggest grains exchange said on Wednesday in its first plantings forecast.
Farmers in Argentina, the world's sixth-biggest wheat exporter and the main supplier to neighboring Brazil, are seen dedicating 3.59 million hectares to the grain, according to Rosario Grains Exchange.
India's monsoon falls short but no drought yet
NEW DELHI, July 18 (Reuters) - Halfway through the crucial planting month of July, India's monsoon rains continue to cause concern, with sowing of pulses and rice behind schedule and rainfall still 22 percent below average for the time of year.
If there is no pick-up by the end of July, when India's meteorological department will update its official forecast, this year might qualify as a drought, with rainfall less than 90 percent of average annual levels.
Russian grain exports seen halving in 2012/13
MOSCOW, July 18 (Reuters) - (Opinions in this report represent the views of SovEcon Ltd, an independent research organisation specialising in agricultural production and trade in the former Soviet Union. They should not be seen as reflecting the views of Reuters.)
Russian grain exports amounted to 28.1 million tonnes in the 2011/12 crop year, including rice, flour equivalent and legumes. In the coming season exports could decline by half to 13-14 million tonnes due to a very tight forecast supply/demand balance.
Heat wave and drought besiege already deteriorated US crops
CHICAGO, July 18 (Reuters) - It keeps getting worse for the U.S. Midwest, whose corn and soybean crops are deteriorating fast from the harshest drought in more than half a century.
The weather will remain hot and dry for the next week in the western Midwest, though cooler temperatures and light rain in its east may provide some relief from relentless drought, an agricultural meteorologist said Wednesday.
Weakest Monsoon Since 2009 to Shrink India Rice Harvest(Source:Bloomberg)
The rice harvest in India, the world’s second-biggest producer, is set to drop from an all-time high as the weakest monsoon in three years slows planting, potentially boosting global prices. “It will be difficult to match last year’s record rice production,” said Samarendu Mohanty, a senior economist at the International Rice Research Institute in Manila. Output was 104.3 million tons in the year ended June 30. A 22 percent shortfall in monsoon rains delayed sowing of crops from rice to cotton, stoking a rally in commodity prices and threatening to accelerate India’s inflation that exceeded 7 percent for a fifth straight month in June. Dry weather from the U.S. to Australia has parched fields, pushing up corn, wheat and soybean prices on concern global supplies will be curbed. Costly rice, staple for half the world, may increase global food prices forecast by the United Nations to advance this month.
“The whole grains complex of wheat, corns, soybeans are forcing rice prices higher as well,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity- markets newsletter in Sydney. “Indian production is very important for the market.” Rice planting in India dropped 19 percent to 9.68 million hectares (24 million acres) this year from 12.04 million hectares a year earlier, the farm ministry said July 13. The country is estimated to export 8 million tons of rice in 2011-2012, according to the U.S. Department of Agriculture, accounting for about 25 percent of the global trade.
SOFTS-Sugar, coffee edge up early in cautious trade
LONDON, July 19 (Reuters) - Sugar, coffee and cocoa futures on ICE were firmer in thin early trade buoyed by stronger financial markets and a weaker dollar. Dealers said the sugar market was underpinned by the prospect that weak monsoon rains may reduce production in top consumer India. Rains in Australia have also slowed the flow of supplies from the world's third-largest raw sugar exporter.
Honduras sees coffee exports growing 29 pct in 2011/12
TEGUCIGALPA, July 18 (Reuters) - Coffee exports from Honduras, Central America's top producer, are expected to reach nearly 5 million 60-kg bags for the current 2011/2012 harvesting season, up 29 percent over the previous cycle.
The head of Honduras' national coffee institute IHCAFE said on Wednesday that the surge in exports was due to increased productivity motivated by high market prices.
Brazil's Copersucar may again turn buyer of sugar-CEO
SAO PAULO, July 18 (Reuters) - Copersucar S.A., the world's biggest sugar exporter, may again turn to buying the physical commodity -- after surprising the market with purchases earlier this month -- as rains continue to impede the harvest in Brazil, its chief executive said on Wednesday.
Copersucar Chief Executive Paulo Roberto de Souza said rain over the past few days has forced 42 percent of the group's 48 associate mills to stop crushing.
Bahia's cocoa flow picks up but buyers still absent
SAO PAULO, July 18 (Reuters) - Deliveries of cocoa from Brazil's top producing state Bahia picked up again this week but the partial absence of terminal buyers is keeping cocoa upstate and in middlemen's warehouses, a local analyst said.
The flow of cocoa from other producing states such as Para is back to normal, data from Bahia Commercial Association and comments from analyst Thomas Hartmann showed.
Brazil rain stops crush in many sugar mills - Copersucar
SAO PAULO, July 18 (Reuters) - One of Brazil's largest sugar milling groups, Copersucar, said rain over the past few days has forced 42 percent of the group's associate mills to stop crushing on Wednesday.
The situation underscores how Brazil's cane belt has seen unseasonable rainfall in the past few months that has reduced mills' harvesting and cut into production in the world's leading producer of sugar.
Indonesia's Sulawesi June cocoa bean exports fall 68 pct y/y
JAKARTA, July 18 (Reuters) - Indonesia's cocoa bean exports from its main growing island of Sulawesi fell 68 percent to 4,935.48 tonnes in June from 15,232.68 tonnes a year earlier, industry data showed on Wednesday.
Sulawesi cocoa exports were at 7,114.46 tonnes in May.
China eyes global oil futures prize
--Clyde Russell is a Reuters market analyst. The views expressed are his own.--
LAUNCESTON, Australia, July 19 (Reuters) - Breaking the global dominance of West Texas Intermediate and Brent in the crude futures market is no easy task, but the Chinese are now lining up for a shot.
The Shanghai Futures Exchange (SHFE) is planning to start up an oil futures market within months and has made reassuring noises that foreigners will be allowed to participate fully.
OIL-Oil rises above $106 on Middle East tension
LONDON, July 19 (Reuters) - Oil rose above $106 a barrel to hit a seven-week high as a rise in tension in the Middle East brought supply concerns back into focus.
"U.S. crude rising above $90 implies that overall sentiment is turning positive," said Tetsu Emori, a Tokyo-based commodities fund manager at Astmax Investments. "They touched their lows in June and are turning around. Tension between Iran and the West are also substantial factors."
Oil Drops From Nine-Week High on Weaker-Demand Outlook(Source:Bloomberg)
Oil fell from a nine-week high in New York, paring a second weekly advance, on speculation gains may have been excessive amid worse-than-expected economic data and signs seasonal crude demand is weakening. Futures slipped as much as 0.8 percent, snapping the longest run of gains since February. Oil may fall next week on signs of slowing economic growth, according to a Bloomberg News survey. Sales of existing U.S. homes unexpectedly dropped in June and manufacturing in the Philadelphia region contracted for a third month in July, reports showed yesterday. OPEC will cut shipments this month as the seasonal demand for driving fuel fades, according to Oil Movements, a tanker tracker. “The negatives are the economy,” Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity- markets newsletter in Sydney, said in a telephone interview. “We’ve had seven days of gains, the market is long, the window closes very quickly with this sentiment.”
Crude for August delivery, which expires today, slid as much as 72 cents to $91.94 a barrel in electronic trading on the New York Mercantile Exchange and was at $92.13 at 11:20 a.m. Sydney time. It climbed 3.1 percent yesterday to $92.66, the highest close since May 16. The more-active September future decreased 53 cents to $92.44. Front-month prices are 5.8 percent higher this week and down 6.8 percent this year. Brent crude for September settlement was at $107.45 a barrel, down 35 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium to West Texas Intermediate of $15.01, from $14.83 yesterday.
Biggest Iron Miner Vale Lifts Output as Brazil Rain Eases(Source:Bloomberg)
Vale SA (VALE5)’s second-quarter iron-ore production rose 0.4 percent, beating analysts’ estimates, as the world’s biggest producer of the steel-making ingredient lost less time to rain at its largest mine. Output climbed to 80.5 million metric tons from 80.3 million tons a year ago, the Rio de Janeiro-based company said in a regulatory filing yesterday. That beat the 80.2-million ton average estimate of six analysts surveyed by Bloomberg. BHP Billiton Ltd. (BHP)’s quarterly iron-ore output climbed 15 percent. Brazilian iron-ore exports rose 2.1 percent in the quarter as expanding Asian demand partially offset a slump in European orders. Steel demand in China, the biggest consumer of iron ore, is performing in a “very good” way this year, Vale Chief Executive Officer Murilo Ferreira said last month. Production at Carajas, the world’s largest iron-ore mine, grew 5.2 percent in the second quarter as weather conditions improved, Vale said.
“We were positively impressed by the recovery in production at Carajas, which delivers Vale’s highest quality ore at the lowest cost,” Barclays Plc analysts led by Leonardo Correa in Sao Paulo said in a note to customers yesterday. Vale, the world’s second-largest mining company, slid 0.1 percent to 38.57 reais at the close in Sao Paulo, the lowest since Jun 28.
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