Thursday, November 1, 2012

20121101 1008 Global Commodities Related News.

Commodities Post Biggest Loss in 5 Months to Trail Stocks (Bloomberg)
Slumping energy and metal prices sent commodities to their biggest monthly loss since May, lagging behind stocks, bonds and the dollar, as the global economy grew at the slowest pace since the 2009 recession. The Standard & Poor’s GSCI Total Return Index of 24 raw materials fell 4.1 percent, erasing gains for the year. The MSCI All-Country World Index of stocks slid 0.6 percent, including dividends, while the U.S. Dollar Index slid 0.02 percent. While bonds of all types gave positive returns, prices dropped on average, according to Bank of America Merrill Lynch’s Global Broad Market Index. (MXAP) Investor optimism dimmed as the International Monetary Fund cut its global growth forecast and the Federal Reserve said strains on the world economy present “significant downside risks.” China reported the seventh straight quarter of slowing growth, while services and manufacturing in the 17-nation euro area last month contracted more than economists forecast.
“Europe is a complete and total disaster and doesn’t appear to be solved,” John Stephenson, who helps manage $2.7 billion at First Asset Investment Management Inc. in Toronto, said in a telephone interview. “China clearly seems to be slowing. You essentially have a situation where investors just have very little optimism.” The S&P GSCI Total Return Index slumped for a second month, leaving the gauge down 0.7 percent for 2012. Commodities are headed for a second consecutive annual loss. The last time that happened was 1998.

DTN Closing Grain Comments 10/31 14:32 Grains Pick Up Pace (CME)
The grain complex shot higher Wednesday with double-digit gains posted in row-crop contracts as investors returned after a slow couple of days early in the week. Wheat rallied less enthusiastically, though most contracts were able to post a solid showing.

Wheat Market Recap Report (CME)
December Wheat finished up 8 1/2 at 865 1/4, 9 3/4 off the high and 7 up from the low. March Wheat closed up 7 1/4 at 879. This was 5 1/2 up from the low and 10 1/4 off the high. December Chicago wheat surged 15 cents higher midday but gains eroded in the second half of the trading day as traders took profits and markets struggled with the lack of export demand. The US Stock market re-opened for the week and month end positioning added to the underlying support in commodities, along with short covering. It was announced midday that Egypt bought 300,000 tonnes of Romanian, Russian, and French wheat for December 21-31 shipment. US prices levels have narrowed their premium to France but cheap offers out of the Black Sea continue to be bought by Middle East customers. Tunisia also bought 125,000 tonnes of optional origin wheat in there tender overnight. The wheat supply situation in Ukraine is adding tension to the market after their Ag Minister announced that wheat exports would not be banned. The minister went on to say that they planned to increase their prior export estimate from 5 million tonnes to 5.5 million tonnes. Additional support was linked to concerns that the Argentina and Australia wheat crops could see additional cuts to production in next week's USDA report and as a result shift demand to the US border. December Oats closed up 1/4 at 389. This was 1 up from the low and 3 1/4 off the high.

Corn Market Recap for 10/31/2012 (CME)
December Corn finished up 14 at 755 3/4, 2 off the high and 14 up from the low. March Corn closed up 12 1/2 at 757. This was 12 3/4 up from the low and 2 1/4 off the high. December corn traded higher on the day and into the close after traders noted that Southern Brazil and Argentina were seeing less than ideal planting conditions. Financial markets reopened in New York today and some suggested that the stronger trade was also linked to short covering and positioning for month end. Concern that heavy rainfall in areas of Argentina may remove nearly 20% of its projected corn crop forced bears to the sideline today. The recent hail, rain, and flooding in Argentina could mean that some corn fields are completely lost which could result in drastic cuts to production. The USDA is projecting Argentina corn production at 28 million tonnes and a 20% reduction would reduce the crop down to 22.4 million tonnes vs. year ago levels of 21 million tonnes. The tight global balance sheet in corn is a supportive factor long term and a production problem in South America could intensify the situation. Additional support was linked to thoughts that the US may see an uptick in corn export demand from Asian buyers. November Rice finished up 0.065 at 14.83, equal to the high and equal to the low.

U.S. Winter-Wheat Condition Worst in 27 Years as Drought Lingers (Bloomberg)
The condition of winter-wheat crops in the U.S. are the worst for this time of year since the government began monitoring in 1985, as drought damage spread from Midwest corn and soybean fields to the Great Plains. An estimated 40 percent of winter wheat, the most-common domestic variety, was rated good or excellent as of Oct. 28, with 15 percent poor or very poor, the U.S. Department of Agriculture said today in its first assessment of the season. A year earlier, 46 percent got the top ratings. The worst U.S. drought since 1956 already has cut output of the nation’s two biggest crops, corn and soybeans, and sent prices to record highs. Wheat futures are up 32 percent this year. About 79 percent of Kansas, the biggest grower of winter grain, was in extreme or exceptional drought as of Oct. 23. Warm, dry weather the next two weeks will delay plant emergence and root growth before crops begin to go dormant for the winter. The U.S. is the world’s largest exporter of wheat.
“The low crop ratings will increase concern about the yield potential of this year’s crop,” Shawn McCambridge, the senior grain analyst for Jefferies Bache LLC in Chicago, said in a telephone interview. “The weather doesn’t look promising for much improvement and may increase overseas demand for supplies left from last year’s U.S. harvest.” Wheat planting was 88 percent complete in the top 18 producing states, compared with 81 percent a week earlier and 86 percent a year earlier, the USDA said today in a weekly report that was delayed two days because of Hurricane Sandy. About 63 percent of the plants had emerged from the ground, down from the previous five-year average of 67 percent because of dry soil.

Grains, Soybeans Rise on Weather Concerns in Argentina, Brazil (Bloomberg)
Corn and soybeans rose for a second day as adverse weather threatened South American yields, tightening global supplies and boosting overseas demand for U.S. crops. Wheat advanced. About 45 percent of the grain and soybean fields in Argentina are excessively wet after getting as much as three times the normal rain the past two months, David Streit, the senior forecaster for Commodity Weather Group LLC in Bethesda, Maryland, said in a telephone interview. About 30 percent of Brazil is too dry for planting and germination with some showers expected during the next week, he said. “It’s very soggy in Argentina, delaying corn and soybean planting and reducing yields for maturing wheat,” Brian Grete, the senior market analyst for the Professional Farmers of America newsletter in Cedar Falls, Iowa, said in a telephone interview. “Rains the next week in Brazil are more critical for corn, because it needs to get planted earlier than soybeans.”
Corn futures for December delivery rose 1.9 percent to close at $7.5575 a bushel at 2 p.m. on the Chicago Board of Trade, capping the first two-day gain since Oct. 19. Prices fell 0.1 percent this month. Soybean futures for January delivery climbed 0.8 percent to $15.4875 a bushel in Chicago, paring this month’s decline to 3.3 percent. Wheat futures for December delivery advanced 0.9 percent to $8.645 a bushel on the CBOT. The grain lost 4.2 percent in October, the first monthly drop since May. Prices extended gains after Egypt announced buying 300,000 tons in a tender today from supplies in Russia, France and Romania, Grete said. Combined wheat harvests in Ukraine, Russia and Kazakhstan fell by 37 percent this year, helping send global stockpiles to four-year low, data from the U.S. Department of Agriculture show. Corn is the biggest U.S. crop, valued at $76.5 billion in 2011, followed by soybeans at $35.8 billion, government figures show. Wheat is the fourth-largest at $14.4 billion, behind hay.

Oil Trades Near Three-Day High as Refineries Resume After Sandy (Bloomberg)
Oil traded near the highest level in three days as refineries resumed operations after Atlantic superstorm Sandy, increasing demand for crude. Futures were little changed after rising 0.7 percent yesterday. Philadelphia Energy Solutions’ 355,000-barrel-a-day Pennsylvania refinery restored operations, while PBF Energy Inc. said its Paulsboro, New Jersey, and Delaware City, Delaware, plants were running normally. Price gains stalled ahead of an Energy Department report today that may show U.S. crude stockpiles rose to the highest level in three months before Sandy struck the east coast. Oil for December delivery was at $86.09 a barrel, down 15 cents, in electronic trading on the New York Mercantile Exchange at 7:41 a.m. Singapore time. Prices gained 56 cents yesterday to $86.24, the highest close since Oct. 26. Futures are down 13 percent this year.
Brent crude for December settlement fell 38 cents to $108.70 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark grade’s premium to the West Texas Intermediate contract was at $22.46. Phillips 66 and Hess Corp. (HES)’s New Jersey refineries remained shut. Restarts at Phillips’s 238,000-barrel-a-day Bayway plant in Linden and Hess’s 70,000-barrel-a-day Port Reading facility are contingent on post-storm assessments, the companies said Oct. 30. Phillips reported flooding in low-lying areas at Linden and said yesterday the refinery regained power. U.S. crude inventories increased by 1.8 million barrels, or 0.5 percent, last week to 376.9 million, the most since July 20, according to the median of 11 analyst estimates before the Energy Department report. The weekly data on inventories and output will be published at 11 a.m. Washington time, the department said in an e-mailed statement. It postponed the report by a day because of disruptions caused by Sandy.

Recap Energy Market Report (CME)
December crude oil trended higher during the morning hours, breaking out to its highest level since October 24th in the process. Early support in the crude oil market came from a rally in global equity markets and weakness in the US dollar. December crude oil prices traded into new highs on the session following reports that a number of key Northeastern refineries were back in operation after Hurricane Sandy, which was seen bolstering near term demand for crude oil. RBOB prices were also higher, partially in the wake of the November contract expiration and fears over tight supply in the Northeast region.

Silver Market Recap Report (CME)
Eventually December silver managed to forge an upside breakout and in the process, the market managed to reach the highest level since October 23rd. Some buyers were motivated by broad based gains in a host of physical commodity markets, while others might have taken most of their direction from the upside action in gold prices. In order to climb today, silver had to discount a reversal in US equities and talk that the US economy might suffer a noted setback in the wake of a prolonged power outage in parts of the Northeastern US.

Gold Market Recap Report (CME)
At times today gold was the stellar performer in the commodities space. While the gains in silver and platinum measured up to the gains in gold today, the precious metals managed the gains in the face of potentially adverse action in US equities and in the face of limiting currency market action. Some traders continued to suggest that gold was seeing a wave of month end short covering but in the face of significant gains in grains and energies, there seemed to be a favorable macro-economic vibe behind today's action. Perhaps traders were anticipating renewed Indian buying, as today's US gains and expectation of improving seasonal demand ahead could force Indian importers to pay up for gold as some of the highest prices in 6 days.

Ships at Eight-Year Low Seen Falling in Hyundai Price War (Bloomberg)
Prices for new ships have fallen to an eight-year low as shipyards sacrifice margins to win orders. Hyundai Heavy (009540) Industries Co., the world’s largest shipbuilder, may be about to make the price war worse. The company could push prices down as much as 15 percent industrywide as it tries to replenish an order backlog that is near a five-year-low, according to E*Trade Securities Co. analyst Park Moo Hyun. The Ulsan, South Korea-based shipbuilder, which has as much capacity as the next two biggest yards combined, has so far largely resisted price cuts even as global orders drop to the slowest since 1999. “Hyundai Heavy will have to aggressively go out there and win orders to fill up its docks,” said Seoul-based Park. “That means it has to cut prices.”
The company only has about 18 months of work in hand for its shipyards because of the order slowdown and Chinese competition, and it has started its first early-retirement program. The shipbuilder has also had less success than Daewoo Shipbuilding & Marine Engineering Co. (042660) and Samsung Heavy Industries Co. in offsetting the slump with contracts to build offshore-energy equipment because of its larger facilities and later push into the sector. “Hyundai Heavy is now paying for focusing on ships and not building up its skills in the offshore business,” said Um Kyung A, a Shinyoung Securities Co. analyst in Seoul, who cut the stock to hold on Oct. 26. “They’ve been late to realize that they had to change tactics.” The shipbuilder declined to comment on prices and its retirement program in an e-mailed reply to Bloomberg News questions. The company, including unit Hyundai Samho, employs about 28,500 people, mainly in Ulsan.
Its shares fell as much as 3.5 percent, the biggest decline since July 18. They were down 3.1 percent at 222,000 won at 10:07 a.m. The stock has dropped 14 percent this year, compared with a 17 percent gain for Samsung Heavy (010140) and a 4.5 percent decline for Daewoo.

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