Tuesday, May 8, 2012

20120508 1805 FCPO EOD Daily Chart Study.

FCPO closed : 3351, changed : -9 points, volume : higher.
Bollinger band reading : pullback correction downside biased.
MACD Histogram : falling lower, seller in control.
Support : 3350, 3330, 3300, 3270 level.
Resistance : 3380, 3420, 3450, 3470 level.
Comment :
FCPO closed little lower with better volume changed hand. Soy oil price currently consolidating higher after overnight closed recorded minor loss while crude oil price trading weaker.
Price traded range bound moving between gain and losses as traders eyeing coming Thursday MPOB official April 2012 data and cargo surveyor export figure.
Chart reading remained calling a pullback correction downside biased market development testing support and resistance level.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistant or strength with quick cut loss and profit target.

20120508 1735 FKLI EOD Daily Chart Study.

FKLI closed : 1585.5 changed : +7.5 points, volume : lower.
Bollinger band reading : side way range bound.
MACD Histogram : recovering, seller reducing position.
Support : 1580, 1570, 1565, 1550 level.
Resistance : 1590, 1595, 1600, 1605 level.
Comment :
FKLI closed recorded gains with decreasing volume traded doing 5 points discount compare to cash market that rebounded higher. Overnight U.S. markets closed mixed and today Asia markets ended mostly rebounded little higher while European markets currently trading weaker.
Still uncertain over how Greece and France political changes will affect Europe debt crisis resolution process with some better corporate earnings report from Japan and Warren Buffet statement of "American Banks are in fine shape resulted global market to trade mixed.
Technical chart reading revised to suggesting a side way range bound market development after market managed to break and stayed above middle Bollinger band resistance level.
When to buy : buy at support or weakness with quick cut loss and profit target.
When to sell : sell at resistance or strength with quick cut loss and profit target.

20120508 1701 Regional Markets EOD Daily Chart Study.

 DJIA chart reading : correction range bound little upside biased
 Hang Seng chart reading : side way range bound.
KLCI chart reading :  correction range bound little downside biased.

20120508 1554 Global Market & Commodities Related News.

Shares recovered from the previous day's plunge, as sentiment improved on hopes Spain would use public funds to bolster its struggling banks, although persistent wariness over Greece weighed on the euro. Investors brushed off Europe's election results, as the S&P 500 rebounded from early losses to end nearly unchanged on Monday, despite the uncertainty surrounding the euro zone's ability to tackle its debt crisis.

FOREX-Euro slips but possible short covering may lend support
SINGAPORE, May 8 (Reuters) - The euro eased on Tuesday but stayed above the previous day's three-month low, with the potential for short covering seen offering the currency some support even as worries over political uncertainty in Greece clouded its outlook.
"This seems to me like a pretty serious situation," said Satoshi Okagawa, senior global markets analyst at Sumitomo Mitsui Banking Corp. in Singapore, referring to the election results and political uncertainty in Greece.

HKEx chief confident on buying LME; Q1 profit dips
HONG KONG, May 7 (Reuters) - Hong Kong Exchanges and Clearing Ltd  said it was confident of winning an auction to take over the London Metal Exchange (LME), the world's largest metals trading market, as it looks to China to drive new business growth in the face of declining stock market activity.
Speaking after the world's second-biggest bourse operator by market value posted a 7 percent dip in quarterly profit, HKEx CEO Charles Li declined to be drawn on a timetable for bids for the 135-year-old LME, which handles about 80 percent of global metal futures trading and could cost up to $1.6 billion.

China's state soy sales at 68,328 T, largest since 2010
China sold 68,328 tonnes of soy from state reserves at a regular auction on Tuesday, the largest volume since late 2010, as lower state prices prompted crushers to stock up on the oilseed.

Argentine farmers plan 4-day sales halt over tax
Farmers in Argentina's top farming province will halt sales of grain and livestock for four days to protest a planned tax rise, but exports should not be affected, an agricultural leader said on Monday.

Corn, soy planting pace tops analysts' expectations
U.S. corn and soybean farmers kept their planters rolling during the past week -- with particular progress made in the northern states -- despite spotty rain showers could have slowed their efforts, a U.S. Agriculture Department report showed on Monday.

The euro eased but stayed above the previous day's three-month low, with the potential for short covering seen offering the currency some support even as worries over political uncertainty in Greece clouded its outlook.

U.S corn futures edged up, finding some support after succumbing in the previous session to a selloff of riskier assets over concerns about the euro zone, and brushing off strong planting data from the U.S. Department of Agriculture.

Temasek, RRJ to invest $468 mln in US LNG plant
Singapore state investor Temasek Holdings  and Asia-based private equity firm RRJ Capital have agreed to invest $468 million in Cheniere Energy  to help the U.S. energy firm fund the country's first liquefied natural gas export plant.

Iran accepts yuan in exchange for oil -FT
Iran is accepting yuan for some of the crude oil it supplies to China, partly due to U.S. sanctions aimed at limiting Tehran's nuclear programme, and is spending the currency on Chinese goods and services, the Financial Times reported on Monday.

Saudi oil min says kingdom pumping 10 mln bpd crude
Top oil exporter Saudi Arabia is pumping at around 10 million barrels per day (bpd), Oil Minister Ali al-Naimi told reporters on a visit to Japan on Tuesday.

Brent crude held steady above $113 a barrel, recovering slightly after four straight sessions of losses caused by fears that the slowing economies of the United States and the euro zone would reduce oil demand.

China daily crude steel output hits record in April-CISA data
China's daily crude steel output hit a new record high of 2.026 million tonnes in April, industry data showed on Tuesday, as the country's steelmakers sustained high output despite a slow recovery in demand.

China sets duties on EU and Japanese steel tubes
China has set anti-dumping duties on some stainless steel tubes imported from the European Union and Japan, the Ministry of Commerce said on Tuesday, finalising a probe launched in September after complaints from Chinese producers.

China eyes upper hand in pricing with iron ore platform
China's first physical iron ore trading platform is set to debut on Tuesday, helping the world's biggest buyer of the commodity boost its price-setting influence.

Chile April copper export revenue ebbs to $3.583 bln
SANTIAGO, May 7 (Reuters) - Chilean copper export revenue  slipped 8 percent to $3.583 billion in April compared with a year ago, when it was boosted by high prices, and fell 1.1 percent from the previous month, the central bank said on Monday.
April marks the first month copper export revenue decreased month-on-month in the world's top copper producer since the start of the year.

London copper rose as the London Metal Exchange resumed trading after a one-day holiday, with sentiment improving on hopes Spain would use public funds to bolster its struggling banks.

Gold edged lower as a backlash by voters in Greece and France against austerity measures weighed on the euro, while prices are supported by bargain hunters lurking around the lower end of a recent range.

METALS-Copper boosted by hopes for Spain bank rescue
SHANGHAI, May 8 (Reuters) - London copper prices crept up on Tuesday, with sentiment improving after Spain signalled it would use public funds to bolster its struggling banks, though nagging fears about the euro zone's debt woes kept investors on edge.
"Copper's gains on COMEX helped to lift prices on the LME and SHFE today," said a Shanghai-based trader.
PRECIOUS-Gold dragged down by weak euro on political uncertainty
SINGAPORE, May 8 (Reuters) - Gold edged lower on Tuesday as a backlash by voters in Greece and France against austerity measures weighed on the euro, while prices are supported by bargain hunters lurking around the lower end of a recent range.
"The sentiment in gold is likely to remain weak for a while, after the changes in European governments again triggered worries about the bloc's debt crisis and pressure the euro," said Li Ning, an analyst at Shanghai CIFCO Futures.

20120508 1104 Global Market & Commodities Related News.

GLOBAL MARKETS-Shares revive after Europe election uncertainty
TOKYO, May 8 (Reuters) - Shares and riskier assets recovered on Tuesday from the previous day's plunge, as sentiment improved on hopes Spain would use public funds to bolster its struggling banks, although wariness remained over Greece.
"After fears regarding the week-end elections, markets return to what they do best, namely range trading and squeezing concentrations of positions," said Sebastien Galy, strategist at Societe Generale, adding that the next key events included negotiations for a coalition government in Greece and the announcement of some form of bad bank scheme for Spain.

COMMODITIES-Up after early drubbing on Europe; nickel jumps
NEW YORK, May 7 (Reuters) - Commodities rebounded on Monday after the huge selloff of the previous session, with nickel staging a big rally and bargain hunting lifting oil prices from their lows after investors shrugged off earlier fears about election outcomes in Europe.
"The uncertainties that have emerged in Europe are going to contribute to a downside bias to the trading range," Nicholas Snowdon, an analyst with Barclays Capital in New York, said.

OIL-Oil dips as Europe's election results fan uncertainty
NEW YORK, May 7 (Reuters) - Oil prices inched lower on Monday, but settled well above lows reached after European election results revived worries about the euro zone debt crisis, reinforcing anxiety about anemic economic growth and petroleum demand fueled by last week's U.S. employment data showing slower job creation.
"It finally dawned on everyone that a socialist leading France is not the same thing as, say, a socialist leading America," said John Kilduff, partner at Again Capital LLC.
NATURAL GAS-US natgas futures end up on low storage estimates
NEW YORK, May 7 (Reuters) - U.S. natural gas futures ended higher on Monday, backed by expectations for another supportive weekly inventory report, but moderate weather and still-high supplies kept prices range bound.
"Expectations this week are for another below-average (EIA) storage build. Fundamentals are still bearish, but storage numbers are starting to come off, showing that demand (particularly from the power sector) is strong," said Eric Bickel, analyst at Summit Energy.
EURO COAL-ARA prices tick higher, China on sidelines
LONDON, May 4 (Reuters) - European coal prices crept higher by 25 cents a tonne on Friday as the market steadied after hitting two-year lows earlier in the week on weakening fundamentals.
"While exports of U.S. coal may make some economic sense we believe their impact will continue to be marginal," Deutsche Bank  said in a research note on Friday.

20120508 1023 Local & Global Economy Related News.

A sum of RM5m has been allocated this year to upgrade various infrastructures in Kuala Lumpur, Federal Territories and Urban Wellbeing Minister Datuk Raja Nong Chik Raja Zainal Abidin said. These projects, such as upgrading the drainage system and walkways, are aimed at providing better convenience and comfort for city dwellers, he said. (Bernama)

Bose Corporation, a US-based company that specialises in audio equipment, is to build a manufacturing facility in Malaysia, marking its first big venture into the Asian region. Its Vice President Manufacturing and Global Supply Chain, Bryan Fontaine said the facility to be located in Batu Kawan, Penang, on 9.2 hectares of land, is scheduled for opening in mid-2013 and will cater to its Asia-Pacific (APAC) business includes Australia, China, India, Japan, the UAE and the Asean countries. Fontaine, who declined to disclose the total investment in Malaysia, said it would be multi-phased and multi-layered, and eventually see the plant expand to 600,000 square feet. (Bernama, BT)

Indonesia’s foreign reserves rose to US$116.41bn in Apr (US$110.49bn in Mar), which could have been partly boosted by the proceeds of the government's US$2.5bn international bond offering in Apr. (Dow Jones)

Indonesia’s unemployment rate in Feb reached 6.32%, lower than the 6.8% of Feb 2011. (Jakarta Post)

Indonesia: Posts slowest GDP in six quarters
Indonesia posted its slowest growth in six quarters in 1Q12, as exports fell due to weaker global demand. The central bank might have to hold its policy rate steady for the whole year to spur the domestic economy. Government data yesterday showed 1Q growth was 6.3% from a year ago, as expected, and still among the highest in the region, but exporters expect a shrinkage this year due to the weak recovery in the US and the ongoing debt problems in the Eurozone. (Bloomberg)

India: Vows cuts in Iran-oil imports as Clinton talks sanctions
India will curtail its imports of Iranian oil by 20%, officials said, as US Secretary of State Hillary Clinton held talks in New Delhi to enlist India’s help with sanctions aimed at pressuring Iran over its nuclear program. Asia’s third-biggest oil importer will cut purchases of crude from Iran to 14m tonnes from 17.5 m tonnes in the 12 months ending 31 March, according to two Indian diplomats and two refinery officials who asked not to be identified because they weren’t authorized to speak publicly. The officials said Iranian crude would account for 7% of India’s imports in fiscal year 2013, down from 10% currently. (Bloomberg)

South Korea: Producer-Price Inflation eases before rate decision
South Korean producer-price inflation cooled to the slowest pace in 26 months on a decline in meat and fish costs, according to a report released two days before a monetary-policy meeting. Prices climbed 2.4% in April from a year earlier, the smallest gain since February 2010, after a 2.8% increase in March, the Bank of Korea said in a statement in Seoul yesterday. Prices fell 0.1% from March. Consumer prices rose 2.5% in April from a year earlier, the slowest pace in 21 months, a government report showed on 1 May. (Bloomberg)

The Philippines’ foreign reserves declined marginally to US$76bn in Apr from US$76.1bn in Mar, as remittances and inflows remained robust. (Philippine Daily Inquirer)

Singapore’s foreign reserves increased to US$246.11bn in Apr from US$243.58bn in Mar.

Spain: Industrial production declined the most in more than two years in March as the economy sank into its second recession since 2009 and Prime Minister Mariano Rajoy stepped up austerity efforts. Output at factories, refineries and mines adjusted for the number of working days fell 7.5% YoY, the most since October 2009. That compares with a revised decline of 5.3% YoY in February. (Source: Bloomberg)

Taiwan: Exports fell for a third time in four months in April, as Europe's debt crisis and slower Chinese growth crimped demand for its electronics products. Shipments abroad fell 6.4% YoY compared with a 3.2% YoY decline in March, the Ministry of Finance said. (Source: Bloomberg)

Taiwan: Inflation accelerates for a second month in April on food prices. The consumer-price index climbed 1.44% YoY, compared with a revised 1.25% YoY increase in March. (Source: Bloomberg)

Australia: Retail sales rose in 1Q12, capping the best quarter since 2009 as consumers spent more at restaurants and clothing stores. Sales adjusted to remove inflation jumped 1.8% QoQ in the three months through March from the prior quarter, the Bureau of Statistics said. That was the biggest gain since the second quarter of 2009. (Source: Bloomberg)                                                                                  

EU: Europe, IMF vow to pursue budget checks on next Greek government
Europe and the International Monetary Fund pledged to resume checks on Greece’s eligibility for more aid disbursements when a new Greek government emerges after voters split over the rescue conditions. The European Commission in Brussels said it “hopes and expects” Greece will fulfill the budget-austerity requirements for a loan payment due in June following the 6 May election. The Washington-based IMF said “we look forward to being in contact with the new Greek government once it has been formed.” (Bloomberg)

EU: German factory orders rose more than forecast in March
German factory orders rose more than economists forecast in March as demand from outside the euro area helped Europe’s largest economy weather the debt crisis. Factory orders, adjusted for seasonal swings and inflation, jumped 2.2% from February, when they gained a revised 0.6%, the Economy Ministry in Berlin said today. Economists surveyed by Bloomberg News predicted a 0.5% increase, according to the median of 37 estimates. From a year ago, orders dropped 1.3% when adjusted for work days. (Bloomberg)

EU: Merkel rejects stimulus in challenge to Hollande’s growth plans
German Chancellor Angela Merkel rejected government stimulus as the way to spur economic growth in Europe, setting up a clash with French President-elect Francois Hollande before he’s even taken office. In her first response to Hollande’s victory in yesterday’s French election, Merkel rejected a return to the “huge” stimulus programs following the financial crisis in favor of business-friendly economic changes. She and Hollande will talk “very openly” about the form of growth to pursue, a discussion now taking place across Europe and “to which the new French president will bring his own accents.” (Bloomberg)

EU: ECB financing to Portuguese banks declined in April
The European Central Bank’s financing to Portuguese lenders fell in April from the previous month, the Bank of Portugal said. ECB financing decreased to EUR55.4bn (USD72.2bn) from a record EUR56.3bn in March, the Lisbon- based Bank of Portugal said today on the BPStat portion of its website. Financing reached a record in March after the Frankfurt- based ECB awarded EUR529.5bn to 800 financial institutions at the end of February. The central bank’s second round of three-year loans was designed to avert credit paralysis and ease concern that Europe’s banks would run out of cash or curb lending as the debt crisis drove up borrowing costs.(Bloomberg)

Total US consumer credit grew by US$21.36bn in Mar (US$9.27bn in Feb) - more than twice the US$9.8bn rise that economists had forecast. (Reuters)

Europe’s banks are increasingly hoarding cash, anxious the continent's crisis could intensify. At the end of Mar, 10 of Europe's biggest banks had parked a total of US$1.2tr at central banks around the world, US$128bn higher, or a 12% jump, since Dec and up 66% from the end of 2010. (WSJ)

Greece's first efforts to negotiate a cross-party coalition government following weekend elections stumbled, after conservative leader Antonis Samaras failed to reach a deal with rival lawmakers, raising the specter of fresh elections and casting doubts over the country's future in the euro zone. (WSJ)

The US will post a budget surplus for Apr of US$58bn, the first month it will have done so since the 2007-2009 financial crisis, forecast the Congressional Budget Office. (Reuters)

20120508 1022 Malaysia Corporate Related News.

Bumi Armada clinches RM198m contract
Bumi Armada subsidiary, Bumi Armada Navigation SB, has been awarded a contract valued at USD65m or RM198.9m. The contract is for the provision of an accommodation workboat from Mexican oil and gas services company Tecnologias Relacionadas con Energia y Servicios Especializados, S.A. de C.V. The contract is for a period of five years with an extension option of an additional five years. The vessel, which will be provisioned by Bumi Armada, will provide accommodation and offshore support services in Mexican territorial waters. (StarBiz)

Perodua to invest RM1.2bn over the next three years
Perusahaan Otomobil Kedua SB (Perodua) will be investing between RM1.2bn and RM1.5bn over the next three years as it gears up for the imminent liberalisation of the local automotive industry. Perodua managing director Datuk Aminar Rashid Salleh said the investment would be to upgrade its production line and equipment, improvement to its sales and service outlets nationwide as well as for research and development for new models.“The reality is that liberalisation will happen sooner or later. It's just a matter of time and we need to transform,” he told StarBiz yesterday, adding that Perodua had also submitted its five-year roadmap (outlining its growth strategy for that duration) to the Government. (StarBiz)

Strong demand expected for Gas Malaysia's IPO
MMC Corp is optimistic regarding the proposed listing of its subsidiary, Gas Malaysia, this year due to encouraging demand for Malaysian stocks and ample liquidity in the local market. "Based on the feedback from Miti (Ministry of International Trade and Industry), Gas Malaysia stocks are oversubscribed," said MMC group managing director Datuk Haji Hasni Harun recently. He said Malaysian stocks were currently on foreign investors' radar, although they were not that aggressive in buying the shares as they needed certainty on the impending 13th general election before making investment decisions. (BT)

MMC plan for KTMB on track
MMC Corp expects to complete due diligence on Keretapi Tanah Melayu Bhd (KTMB) by between July and August this year, its group managing director Datuk Haji Hasni Harun said. The due diligence is for MMC to participate in the proposed privatisation of the national rail company. “We have appointed consultants. We are at 30% of the (due diligence) exercise now. There are still 70% to complete before we can forward our privatisation proposal to the government,” Hasni told Business Times. KTMB is currently incurring losses averaging RM200m a year and Hasni said MMC’s proposal will be aimed primarily at turning around the rail company. The company, together with Gamuda Bhd, was eyeing to privatise KTMB and take over its assets in 2003. (BT)

AA Anthony in MBO talks
AA Anthony SB's management Datuk Lim Tiong Chin is negotiating a management buyout (MBO) for the Penang-based stockbroker with its parent Multi-Purpose Holdings (MPHB), financial executives involved in the corporate plan said. The proposed MBO, which is expected to be finalized by mid-June, is part of MPHB's rationalization to focus its business on gaming. Also, Lim who bought the stockbroking company in 1990, has been keen to bring the company back into his family holdings, the financial executives said. Pricing remains sketchy, but several analysts who track MPHB estimated AA Anthony to be worth around RM170m in terms of shareholders' funds. (Financial Daily)

RHB Bank: Despite the Eurozone economic uncertainties, RHB Bank Bhd foresees growth of 10%-12% this year in its loan sector. Its acting director Vince Au Yoong said he was confident that the loans sector will continue to grow, but will see a slightly lower margin compared with last year. He said housing and car loans will be among the major drivers while ASB financing will continue to contribute as well. (Source: The Sun Daily)

MMC: Hopes to start MRT job by January 2013. MMC Corp Bhd expects to commence the MYR8.28b underground works package for the MYR30b Klang Valley MY Rapid Transit (MRT) project by January next year. (Source: Business Times)

Automotive: Perodua to invest MYR1.2b over next 3 years. Perodua will be investing between MYR1.2b and MYR1.5b over the next three years as it gears up for the imminent liberalisation of the local automotive industry. Perodua managing director Datuk Aminar Rashid Salleh said the investment would be to upgrade its production line and equipment, improvement to its sales and service outlets nationwide as well as for research and development for new models. (Source: The Star)

Tenaga Nasional Bhd (Tenaga) will find the best solution towards resolving the problem of interruption to electricity supply in Sabah. The company said this includes close cooperation with Sabah Electricity Sdn Bhd (SESB) to determine an effective remedy for the problem. Tenaga has already sent a team to Sabah and is working together with SESB to finalise a proposal that will be forwarded to the Ministry of Energy, Green Technology and Water. (Bernama)

Malaysia's automotive industry is expected to contribute 6.8% of the country's Gross Domestic Product (GDP) by 2020 from 2.4% presently by increasing Foreign Direct Investments that would lead to increased exports and competition in the sector. The National Automotive Policy (NAP) that is slated to be announced soon aims to turn Malaysia to be regional hub for energy efficient vehicles. (BT)

Suzuki Motor said it will recall about 109,000 Swift subcompact cars worldwide, half of them in Japan, to repair a defect that may cause petrol leakage. The cars were produced between September 2010 and last month with 55,146 of them shipped to the domestic market and 53,801 exported outside the country, including Australia, Mexico, and Europe, a company spokes-man said. (AFP, BT)

Property developer Wing Tai Malaysia Bhd is looking to add more names to its growing portfolio of fashion brands. "We are presently evaluating and negotiating to add another one or two brands this and next year, subject to the finalisation of the contract terms," said Lee Cheng Toh, executive director of DNP Clothing Sdn Bhd, which is the retail subsidiary of Wing Tai. (Financial Daily)

Felda Global unit’s MSM Q1 net profit rises to RM66.4m
MSM Malaysia Holdings Bhd, a Felda Global Group subsidiary, has registered a net profit of RM66.39 million in the first quarter ended March 31 2012, a slightly better performance compared with RM62.2 million recorded in the same previous quarter. Revenue for the first quarter was also higher at RM531.76 million compared with RM503.18 million in the first quarter of the year ended December 2011. (Source: Business Times)

20120508 1012 The Political Splintering of Europe by CME

Market Insights: The Political Splintering of Europe (Source: CME)
By Bluford Putnam - Mon May 07 16:01:00 CDT 2012 CT

Split Votes in Euro Block Countries May Destabilize Markets
All across Europe, from the north to the south, countries have made tremendous progress in cutting discretionary spending in their central government budgets. Many European countries, however, are in recession, and the automatic spending associated with social safety net programs has risen. There is a general realization that budget deficits will not decline meaningfully as a percent of GDP until economic growth resumes. Moreover, there are signs that voters are very unhappy with their current leadership and potentially seeking changes. France, Greece, Ireland, Italy and Germany are reviewed in terms of voter splits, and the possible ramifications.

Disclaimer. The research views expressed herein are those of the author and do not necessarily
represent the views of the CME Group or its affiliates. All examples in this presentation are hypothetical
interpretations of situations and are used for explanation purposes only. This report and the information
herein should not be considered investment advice or the results of actual market experience.

20120508 1007 Global Market Related News.

Asian Stocks Rebound From 6-Month Amid Earnings Optimism (Source: Bloomberg)
Asian stocks rose, with the regional benchmark index rebounding from a six-month low, after Capcom (9697) Co. predicted higher earnings and Hong Kong Exchanges & Clearing Ltd. posted profit that beat analysts’ estimates. Capcom jumped 6 percent in Tokyo after the video game developer predicted full-year net income will increase 46 percent. Honda Motor Co., Japan’s second-largest carmaker, climbed 1.9 percent after Credit Suisse Group AG raised its rating to outperform, the equivalent of buy. Leighton Holdings Ltd. added 0.7 percent in Sydney as the Australia’s largest construction company reaffirmed its profit forecast. “It’s not as bad as it seems,” said Stan Shamu, a market strategist at IG Markets in Melbourne, a provider of trading services in stocks, bonds and commodities. “There are still growth concerns, but yesterday was just an easier decision for people to exercise caution. After such a big reaction we’d expect markets to come back.”
The MSCI Asia Pacific Index (MXAP) gained 0.3 percent to 121.57 as of 9:41 a.m. in Tokyo, with more than shares rising for each that fell. The measure lost 2.9 percent in the past three days on concern Europe’s debt crisis may worsen amid political changes and the global economic recovery may falter as Australia’s central bank cut its economic growth forecast and U.S. services industries expanded less than forecast.

S&P 500 Halts 3-Day Slump After Europe Vote as Banks Rise (Source: Bloomberg)
The Standard & Poor’s 500 Index (SPX) advanced, halting a three-day decline, as bank shares rallied after Warren Buffett said American lenders are in “fine shape” and investors weighed elections in France and Greece. Banks had the biggest gain among 24 groups in the S&P 500 as Buffett said the nation’s lenders have “liquidity coming out of their ears” and are in better shape than European rivals. Walt Disney Co. (DIS) rose 2.1 percent as the movie “Marvel’s The Avengers” earned a record $200.3 million in its opening weekend. American International Group Inc. retreated 3 percent as the U.S. Treasury Department sold $5 billion of shares. The S&P 500 advanced less than 0.1 percent to 1,369.58 at 4 p.m. New York time, following a 2.6 percent drop in three days. The measure fell as much as 0.4 percent earlier today. The Dow Jones Industrial Average slid 29.74 points, or 0.2 percent, to 13,008.53. About 6.3 billion shares changed hands on U.S. exchanges today, or 5.1 percent below the three-month average.
“U.S. banks are in pretty good shape,” said Paul Zemsky, the New York-based head of asset allocation for ING Investment Management. His firm oversees $160 billion. “In addition, the perception is that European governments are not going to do anything stupid. We’re not talking about a wholesale change in fiscal policy. There was a big reaction to well-telegraphed news. It’s good to see a bounce from the lows.”

Most U.S. Stocks Climb, Led by Banks, While Euro Weakens (Source: Bloomberg)
May 7 (Bloomberg) -- Most U.S. stocks rose, led by banks, after billionaire investor Warren Buffett said American lenders are in “fine shape.” The euro slid for a sixth day and commodities fell after French Socialist Francois Hollande was elected president and Greek voters picked anti-bailout parties. The Standard & Poor’s 500 Index (SPX) added less than 0.1 percent to 1,369.58 at 4 p.m. in New York as six stocks gained for every five that fell on U.S. exchanges. The euro lost 0.3 percent to $1.3051 as the shared currency extended its longest losing streak since September. Ten-year French yields slipped three points to 2.80 percent and the CAC-40 Index of stocks rallied 1.7 percent. The S&P GSCI Index of commodities fell for a fourth day, declining 0.2 percent. Ten-year U.S. Treasury yields were little changed at 1.88 percent.
Financial shares rose 0.7 percent as a group to lead gains among the 10 main industries in the S&P 500 after Buffett said U.S. lenders have “liquidity coming out of their ears.” Speculation that European austerity measures will be curbed grew after Hollande’s victory made him the first Socialist to take the helm of Europe’s second-biggest economy in 17 years. The Greek parliament will have three new anti-bailout parties represented. “Every time Buffett gives the seal of approval, it helps certain stocks or segments of stocks,” Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in a telephone interview. “As for Europe, we’ve priced in some of what’s happened. Yet investors are not really quite sure of what to make of those trends.”

European Stocks Advance After Elections in France, Greece (Source: Bloomberg)
European stocks rose the most in more than a week as German Chancellor Angela Merkel said she will receive French president-elect Francois Hollande with “open arms” as they work together to tackle the debt crisis. France’s BNP Paribas SA (BNP) and Societe Generale SA (GLE) erased earlier losses. Italian banks rallied as UBS AG recommended UniCredit SpA (UCG) and Intesa Sanpaolo SpA. (ISP) CSM (CSM) NV jumped 19 percent after saying it will sell its U.S. and European bakery-supply units. Greece’s ASE Index (ASE) plunged the most since November as voters switched to anti-austerity parties in yesterday’s election, boosting concern the nation will default. The Stoxx Europe 600 Index (SXXP) rose 0.7 percent to 254.83 at the close of trading, erasing an earlier decline of as much as 0.8 percent as a report showed German factory orders topped forecasts. Today’s gain was the biggest since April 27 and takes this year’s advance to 4.2 percent.
“Since last week it has been obvious to most people that Hollande would defeat Sarkozy, but what we need to see is how he’ll work together with Merkel and what that will mean for the euro zone,” Alexander Kraemer, a strategist at Commerzbank AG, said in a phone interview from Frankfurt. “The question will be how any new growth initiatives will be implemented. Will it be spurred by new government spending, being the absolute opposite of austerity measures, or will it be achieved through liberating the labor market.”

Emerging Stocks Drop to 3-Month Low as Oil Falls on Vote Results (Source: Bloomberg)
Emerging-market equities slumped to the lowest level in more than three months, with Korean and Taiwanese stocks leading declines, as French and Greek voters rejected pro-austerity parties and oil slipped to a 2012 low. The MSCI Emerging Markets Index (MXEF) lost 1.1 percent to 1,001.85 by 5:46 p.m. in New York, the weakest since Jan. 25. Industrial and information technology companies drove declines as Samsung Heavy Industries Co. (010140) fell the most since November. South Korea’s Kospi Index and Taiwan’s Taiex slid more than 1.6 percent. Brazil’s Bovespa Index (IBOV) advanced for the first time in three days as Hypermarcas SA (HYPE3) jumped in Sao Paulo.
Socialist candidate Francois Hollande defeated President Nicolas Sarkozy in French elections, while Greece’s political leaders struggled to form a coalition government after voters flocked to anti-bailout parties. Crude oil sank to as three- month low of $97.94 a barrel, pushing the Standard & Poor’s GSCI Spot Index of commodities down for a fourth day on concern a slowing global economy will hit resource demand. “Emerging market weakness is carrying over from last week because euro zone debt concerns and slow growth recession concerns are still floating around,” Win Thin, global head of emerging markets strategy at Brown Brothers Harriman & Co., said by phone in New York today. “The soft data is not good for risk assets.”

Facebook’s Zuckerberg Meets Would-Be Investors in New York (Source: Bloomberg)
Facebook Inc. (FB) Chief Executive Officer Mark Zuckerberg and other officials touted growth prospects for the largest social network in a meeting with hundreds of would- be investors ahead of its record initial public offering. Investors watched a video featuring pitches by Zuckerberg, Chief Operating Officer Sheryl Sandberg and Chief Financial Officer David Ebersman, and then asked questions of the trio, said several people who attended today’s meeting at the Sheraton New York Hotel. The executives discussed their reasons for acquiring photo-sharing site Instagram and told investors they were optimistic about potential for future gains at Facebook. Facebook plans to raise as much as $11.8 billion in its IPO, the biggest ever for an Internet company. Zuckerberg, 27, has had to pitch his business model during Facebook’s years as a private company and probably won’t have trouble communicating the mission to prospective public investors, said Herman Leung, an analyst at Susquehanna International Group.
“It’s important to hear directly from him for investors who are about to put millions and millions of dollars into a company,” said Leung, who is based in San Francisco. “Convincing others now they should buy shouldn’t be that hard for a company that has amassed a user base of over 900 million.”

Japan’s Topix Index Rebounds on Signs Shares Oversold; Yen Falls (Source: Bloomberg)
Japanese stocks rose, with the Topix (TPX) Index rebounding from its worst slide in nine months, amid speculation shares on the gauge were oversold. Gains in the yen eased, brightening the outlook for exporters. Nissan Motor Co. (7201), a carmaker that gets almost 80 percent of its revenue overseas, gained 1.6 percent. Video-game developer Konami Corp. (9766) rallied 4.7 percent after plunging 18 percent yesterday. Marubeni Corp. (8002) rose 3.8 percent on a report the trading house is in talks to buy U.S. grain company Gavilon LLC. “The yen’s climb, one of the biggest market concerns, has halted, driving gains in exporters’ shares,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “Some technical indicators are signaling that stocks are a buy and the price-to-book ratio is undervalued.”
The Topix rose 0.4 percent to 775.01 as of 9:43 a.m. in Tokyo, climbing back from yesterday’s drop, the steepest since Aug. 5. The Nikkei 225 Stock Average (NKY) gained 0.7 percent to 9,180.73, with volume about 8 percent below the 30-day average.

FOREX-Euro tumbles as Greek vote threatens austerity
LONDON, May 7 (Reuters) - The euro fell heavily across the board after Greek and French elections cast doubt on politicians' commitment to austerity plans aimed at tackling the euro zone debt crisis.
"The reaction in the foreign exchange market shows if it really comes to the point where it's clear European politicians will step back from austerity measures that will be perceived as very negative by financial markets," said Lutz Karpowitz, currency analyst at Commerzbank.

Euro Drops to 3-Month Low After Greek, French Elections (Source: Bloomberg)
The euro weakened to a more than three-month low after Francois Hollande was elected president of France and as Greek voters flocked to anti-bailout parties, stoking concern austerity efforts in Europe may be derailed. The 17-nation currency slid for a sixth day, its longest series of declines since September, dropping as much as 1 percent before paring losses. Hollande, who becomes the first Socialist in 17 years to control Europe’s second-biggest economy, pledged to push for less austerity and more growth in the region. The yen weakened against most of its major counterparts as stocks gained, boosting demand for risky assets. “The outcomes in both France and Greece are decidedly negative for the euro,” said Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage. “There’s still a risk that we see this result in some kind of clashes between France and Germany going forward, based on their views on growth versus austerity. That is a key risk for the euro.”
The euro declined to $1.2955, the weakest since Jan. 25, before trading 0.3 percent lower at $1.3051 at 5 p.m. New York time. It dropped 0.2 percent to 104.28 yen. The U.S. dollar advanced 0.1 percent to 79.92 yen.

No Repeating Slowdown Seen by U.S. With Banks to Housing (Source: Bloomberg)
The smallest gain in U.S. payrolls in six months need not presage the kind of slowdown that bedeviled the world’s largest economy for the past two years. Rising auto sales, improving bank credit and stabilization of housing are among the signs the economy is more resilient now than it was around the same time in 2010 and 2011, according to Marisa Di Natale, an economist at Moody’s Analytics in West Chester, Pennsylvania. “From where we sit right now, we think the economy looks fundamentally stronger,” Di Natale said. “Surveys of business and consumer confidence are better, the labor market data looks a lot better than it did last year, even some of the housing data looks better.”
Stocks and bond yields fell on May 4 after a report showing payrolls climbed 115,000 in April, less than the 160,000 median forecast in a Bloomberg News survey of 85 economists. The slowdown followed data showing the pace of economic expansion cooled in the first quarter, prompting concerns that another pickup in growth may again be sputtering.

Ranieri Says Housing Market in U.S. Is Reaching Bottom (Source: Bloomberg)
The U.S. housing market is reaching a bottom, according to Lewis Ranieri, the mortgage-bond pioneer. While “broad” concern that home prices have further to fall is restraining sales, “many, myself included, think we are at a bottom,” Ranieri said today at a conference hosted by the Mortgage Bankers Association in New York. The second or third quarter will prove the nadir, said Ranieri, who added that in his distressed mortgage business “we can’t buy loans fast enough anymore.” Home prices have slumped 35 percent since a 2006 peak, S&P/Case-Shiller index data show. Ranieri, chairman of Uniondale, New York-based Ranieri Partners, helped expand the mortgage-securities market in the 1980s at Salomon Brothers Inc., where he was vice chairman. His firm’s investments include Selene Finance LP, which targets soured debt, and home lender Shellpoint Partners LLC.

Consumer Credit in U.S. Increases by Most in 10 Years (Source: Bloomberg)
Consumer borrowing in the U.S. surged in March by the most in more than a decade on growing demand for educational financing and autos. Credit rose by $21.4 billion, the biggest gain since November 2001, to $2.54 trillion, Federal Reserve figures showed today in Washington. The advance was paced by a $16.2 billion jump in non-revolving debt, including student and car loans. Americans may have been trying to get school financing before a possible increase in interest rates takes place on July 1. Rising consumer confidence also means that households are more willing to take on debt to boost spending, which accounts for about 70 percent of the economy.
“There was a burst of borrowing in March as warm weather pulled forward spring shopping and auto sales were strong,” said Julia Coronado, chief economist for North America at BNP Paribas in New York. “Student loan growth continues to be very strong and a little worrisome. Smoothing through the monthly volatility consumers are becoming a little more comfortable with borrowing to buy cars.”

Rating Companies, Banks Must Face Suits Over Investments (Source: Bloomberg)
Credit-rating companies Moody’s, Standard & Poor’s and Fitch must face a claim they misled investors who lost money in structured investment vehicles, a federal judge ruled. U.S. District Judge Shira Scheindlin in Manhattan dismissed several claims from suits filed by institutional investors in two vehicles, named Rhinebridge and Cheyne. Scheindlin said the investors may go forward with claims the rating companies and other defendants, including Morgan Stanley and IKB Deutsche Industriebank AG, negligently misrepresented the quality of the investments. “Plaintiffs have sufficiently alleged that the rating agencies possessed unique or specialized expertise, and that the rating agencies knew and intended that their ratings would be used by investors in deciding whether or not to invest in Rhinebridge,” Scheindlin said in an opinion filed publicly today. In a separate opinion, Scheindlin said her reasoning also applied to the case filed by investors in the Cheyne structured investment vehicle.

Obama Hits Syria With Brutal Blast of Adverbs (Source: Bloomberg)
The crackdown by Syrian dictator Bashar al-Assad against his own citizens counts as one of the most blood-soaked acts of political repression in the Middle East since his father and predecessor, Hafez al-Assad, waged his own onslaught against anti-regime activists three decades ago. Almost 10,000 people have died in the current Syrian uprising, and each passing day brings the killing and torture of more civilians, including many children. Some critics say the U.S. has shamed itself by not intervening aggressively on behalf of Syria’s rebels and dissidents. They’re wrong. The Obama administration hasn’t helped to arm the rebels, nor has it created safe havens for persecuted dissidents. But it has done something far more important: It has provided the Syrian opposition with very strong language to describe Assad’s various atrocities.

Japan Futures Signal Nikkei Rebound Amid Earnings Outlook (Source: Bloomberg)
Japanese stock futures rose, signaling the Nikkei 225 Stock Average will rebound from the worst slide since November, amid speculation earnings will hold up and after billionaire investor Warren Buffett said American lenders are in “fine shape.” American depositary receipts of American depositary receipts of Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest bank, climbed 1.9 percent from the closing share price in Tokyo. ADRs of Sony Corp., Japan’s biggest consumer electronics exporter, climbed 0.8 percent after shares yesterday fell 4.5 percent. Those of BHP Billiton Ltd., the world’s largest mining company, rose 1.1 percent. Futures on Japan’s Nikkei 225 expiring in June closed at 9,205 in Chicago yesterday, up from 9,110 in Osaka, Japan. They were bid in the pre-market at 9,210 in Osaka at 8:05 a.m. local time. Futures on Australia’s S&P/ASX 200 Index advanced 0.8 percent today. New Zealand’s NZX 50 Index rose 0.1 percent in Wellington.
“It’s not as bad as it seems,” said Stan Shamu, a market strategist at IG Markets in Melbourne, a provider of trading services in stocks, bonds and commodities. “There are still growth concerns but yesterday was just an easier decision for people to exercise caution. After such a big reaction we’d expect markets to come back.”

BOJ Tells Fed Credit Rules May Hinder Japan Monetary Policy (Source: Bloomberg)
Federal Reserve plans for rules on credit risk may hamper monetary policy in Japan and have an “adverse impact” on the liquidity of high-quality sovereign debt, the Japanese central bank said in a letter to the Fed. Single-counterparty credit limits “could have unintended impacts on non-U.S. financial systems,” Bank of Japan Executive Director Kenzo Yamamoto said in the letter dated April 28 and posted on the central bank’s website today. It’s the second time since December that the central bank has expressed concerns about proposed U.S. financial rules, joining companies from Goldman Sachs Group Inc. (GS) to JPMorgan Chase & Co. (JPM) The Fed curbs on counterparty risks for financial firms are aimed at containing the damage from the collapse of a bank or a government to prevent another global financial crisis.
“It’s a polite suggestion from the BOJ,” said Katsuhide Takahashi, Tokyo-based director of credit markets at Citigroup Global Markets Japan. “What the BOJ really means to say to the Fed is don’t make trouble for Japan’s financial system.”

S. Korea Producer-Price Inflation Eases Before Rate Decision (Source: Bloomberg)
South Korean producer-price inflation cooled to the slowest pace in 26 months on a decline in meat and fish costs, according to a report released two days before a monetary-policy meeting. Prices climbed 2.4 percent in April from a year earlier, the smallest gain since February 2010, after a 2.8 percent increase in March, the Bank of Korea said in a statement in Seoul today. Prices fell 0.1 percent from March. “Waning price pressures will give policy makers more room to stay pat for a long time or even cut interest rates,” said Park Sang Hyun, chief economist at HI Investment & Securities Co. in Seoul. “Without a clear sign of growth momentum at home and overseas and a limited government budget, they may consider monetary easing as early as July.”
The Bank of Korea will keep its benchmark rate unchanged for an 11th straight month, according to all 15 economists surveyed by Bloomberg News. Samsung Securities Co. says that the first cut since 2009 may come next quarter as waning inflation allows policy makers to focus on spurring growth.

Putin Returns to Power Amid Street Protests (Source: Bloomberg)
Vladimir Putin said his return to the presidency heralded a “new stage” for Russia, reclaiming the pinnacle of the country’s politics as police detained hundreds of anti-government protesters. “Today we begin a new stage in the nation’s development,” Putin said yesterday. “The coming years will determine Russia’s fate for decades to come.” The Russian leader signed at least a dozen decrees within hours of being sworn in for his third term, assigning deadlines for priorities including state asset sales, improving the investment climate and job creation. Putin also nominated former President Dmitry Medvedev to be prime minister. Putin, 59, inherits an economy with more difficult prospects than when he left the Kremlin in 2008, making it harder to soothe the domestic tension that brought tens of thousands onto Moscow streets on May 6 in the latest protests.

Gillard Seeks Australia Budget Surplus to Halt Poll Slide (Source: Bloomberg)
Australian Prime Minister Julia Gillard plans to end four years of deficits in her government’s annual budget today, seeking to reverse a slide in opinion polls and strengthen its economic credentials. The governing Labor party, which trails the opposition by 18 percentage points in the latest survey, says a return to surplus will give the central bank room to lower borrowing costs in a nation where almost 90 percent of mortgages have variable rates. Economists predict Australia’s unemployment rate last month rose to a seven-month high of 5.3 percent, according to the median forecast ahead of a report due May 10. “By coming back to surplus, we give the Reserve Bank maximum flexibility to cut interest rates should they decide to do so independently of the government,” said Treasurer Wayne Swan, who will deliver the budget to parliament at about 7:30 p.m. in Canberra.
The nation’s first female prime minister, battling political scandals that threaten her minority government’s control of parliament, is aiming to use the budget to shore up Labor before elections due by November 2013. Gillard received a fillip on May 1, when the central bank lowered its benchmark rate, the highest among major economies, by half a percentage point, to 3.75 percent, following cuts in November and December.

India Vows Cuts in Iranian-Oil Imports as Clinton Visits (Source: Bloomberg)
India will curtail its imports of Iranian oil by 20 percent, officials said, as U.S. Secretary of State Hillary Clinton held talks in New Delhi to enlist India’s help with sanctions aimed at pressuring Iran over its nuclear program. Asia’s third-biggest oil importer will cut purchases of crude from Iran to 14 million tons from 17.5 million tons in the 12 months ending March 31, according to two Indian diplomats and two refinery officials who asked not to be identified because they weren’t authorized to speak publicly. The officials said Iranian crude would account for 7 percent of India’s imports in fiscal year 2013, down from 10 percent currently.
India is “certainly working toward lowering their purchase of Iranian oil” and “we hope they will do even more,” Clinton told a gathering of students and civic leaders in the eastern Indian city of Kolkata yesterday, before flying to New Delhi for government meetings. The U.S. believes that there is sufficient production from Saudi Arabia, Iraq and other Persian Gulf nations for Iran’s customers to find alternate suppliers, she said. In their meetings, Indian Prime Minister Manmohan Singh, National Security Adviser Shivshankar Menon and Clinton agreed that Iran must fulfill its United Nations obligations to abandon any possible military dimensions of its nuclear program, according to a State Department official present at the talks who spoke on condition of anonymity.

Euro Drops to 3-Month Low After Greek, French Elections (Source: Bloomberg)
The euro weakened to a more than three-month low after Francois Hollande was elected president of France and as Greek voters flocked to anti-bailout parties, stoking concern austerity efforts in Europe may be derailed. The 17-nation currency slid for a sixth day, its longest series of declines since September, dropping as much as 1 percent before paring losses. Hollande, who becomes the first Socialist in 17 years to control Europe’s second-biggest economy, pledged to push for less austerity and more growth in the region. The yen weakened against most of its major counterparts as stocks gained, boosting demand for risky assets. “The outcomes in both France and Greece are decidedly negative for the euro,” said Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage. “There’s still a risk that we see this result in some kind of clashes between France and Germany going forward, based on their views on growth versus austerity. That is a key risk for the euro.”  
The euro declined to $1.2955, the weakest since Jan. 25, before trading 0.3 percent lower at $1.3051 at 5 p.m. New York time. It dropped 0.2 percent to 104.28 yen. The U.S. dollar advanced 0.1 percent to 79.92 yen.

Best Stocks in Europe Show German Export Miracle on BMW (Source: Bloomberg)
While Germans debate their role rescuing Europe from its debt crisis, stocks in the DAX Index (DAX) have never had it so good. Companies in Germany were the seven best performers in the Euro Stoxx 50 (SX5E) Index this year as of April 30, led by Bayerische Motoren Werke AG (BMW), the world’s largest luxury carmaker, SAP AG, the biggest producer of management software, and chemical supplier BASF SE. (BAS) That hasn’t happened in at least a decade, according to data compiled by Bloomberg. Optimism about exports and historically low valuations helped push the DAX to the highest level since 1990 compared with the rest of Europe, excluding dividends.
Advances in stocks and bunds underscore confidence in the world’s fourth-biggest economy and may help Chancellor Angela Merkel, who is fighting to preserve European unity after Spanish unemployment approached 25 percent, Italy struggled to sell bonds and Nicolas Sarkozy lost the French presidency. With an economy expanding twice as fast as the region and a balanced budget, equity valuations are 18 percent below the average level since 2006, data compiled by Bloomberg show.

Greek Elections Raise Euro-Exit Risk, Calls for Growth (Source: Bloomberg)
New Democracy leader Antonis Samaras began trying to put together a government after a Greek election that raised fresh questions about the country’s euro membership and triggered the biggest stock-market drop in six months. Samaras was given three days from today to put together a coalition from an assembly split down the middle on whether to renege on the terms of bailout agreements negotiated since May 2010. New Democracy and the socialist Pasok party, rivals until the country’s crisis threw them into a national government together this year, are two seats short of the 151 seats needed for a parliamentary majority. “We respect the will of the Greek people,” Samaras told President Karolos Papoulias in Athens today as he formally received the mandate. Exploratory talks to form a government began immediately and Samaras’s first meeting with Alexis Tsipras, the head of Syriza, which came in second place, ended with Tsipras saying he’d rejected an offer to join a coalition.
New Democracy led in the election, receiving 19 percent of the vote and 108 seats in the 300-seat Parliament. Syriza got 17 percent to score 52 seats; Pasok came third with 13 percent and 41 seats.

20120508 1007 Global Commodities Related News.

ICE Expanding Default Fund as Risk, Volatility Climb (Source: Bloomberg)
ICE Futures U.S., home to markets for commodities including sugar, cotton and orange juice, said it will increase the size of a fund created to protect members against trading defaults after an increase in volatility and risk during the past year. The so-called Guaranty Fund, which is supported by surcharges on trading, will increase to a minimum of $250 million from $215.89 million, the exchange said today in a statement. The fund is designed to cover the greatest potential loss at any one clearing member given the largest historical price move in any one commodity, it said. The exchange uses margin deposits and position limits by the clearing house to reduce default risk, while the Guaranty Fund provides additional protection against “extreme market conditions,” Brookly McLaughlin, a spokesman for ICE, said in the statement. McLaughlin, contacted by e-mail, declined to elaborate on how the change will affect margin requirements or trading fees.

Commodities Close to Erasing 2012’s Gains on Europe, U.S. Data (Source: Bloomberg)
Commodities fell for a fourth straight session, nearly erasing this year’s gains, after elections in France and Greece showed voters rejecting austerity and fueled concern that raw-material demand will slow. The Standard & Poor’s GSCI Spot Index had its worst run since August, losing as much as 1.3 percent to 645.29, the lowest level since Dec. 30. The gauge, which tracks 24 raw materials, settled down 0.2 percent at 4:04 p.m. in New York, paring gains this year to 1.1 percent. Crude oil fell as much as 3.2 percent to $95.34 a barrel, the lowest since Dec. 20. Commodities retreated in March, April and this month on concern that the European debt crisis may endanger the global recovery. Slowing expansion in China and worse-than-expected job growth in the U.S. also spurred declines. In March, Goldman Sachs Group Inc. cut its three-month commodities outlook to neutral, warning that economic growth was likely to soften.
“The market is not happy with the sudden increase in uncertainty,” said Jeremy Friesen, a commodity strategist at Societe Generale SA, referring to the election outcomes in Europe. “We expect China to continue to weaken near term, the U.S. is still going through this funk, Europe is in recession, and now you overlay some policy uncertainty.” Crude-oil futures for June delivery fell 0.6 percent to settle at $97.94 on the New York Mercantile Exchange. Energy, including crude oil, gasoline and natural gas, accounts for 70.5 percent of the S&P GSCI, according to weightings on Standard & Poor’s Ratings Services’s website for Dec. 30. Most markets in London are closed today for a holiday.

Hedge Funds Bet Wrong Before Biggest Slump Since October (Source: Bloomberg)
Hedge funds raised bets on higher commodity prices for the first time in six weeks, just before the biggest three-day slump since October as U.S. jobs data fell short of expectations and European manufacturing contracted. Money managers increased net-long positions across 18 U.S. futures and options by 6.9 percent to 895,240 contracts in the week ended May 1, the biggest gain since Feb. 28, Commodity Futures Trading Commission data show. Bullish copper wagers surged sevenfold before prices fell for three days, and soybean bets reached the highest since at least June 2006 as the oilseed capped the biggest weekly loss since mid-January. The Standard & Poor’s GSCI Spot Index of 24 raw materials tumbled 4.9 percent in the three sessions ended May 4, the most since Oct. 4. Reports showed last week that services and manufacturing output shrank last month in the euro region and the U.S. added fewer jobs than forecast in April.
Open interest, or contracts outstanding, across commodities fell 2 percent in the seven sessions through April 30, the longest slide since November, data compiled by Bloomberg show. “We had some soft data points along the edges that’s taken some of the steam out of the market,” said Kelly Wiesbrock, who helps manage $1.3 billion of assets for San Francisco-based hedge fund Harvest Capital Strategies. “It’s hard to know whether this is a just a little bit of a pause, or if this is something bigger.”

Exports fuel speculative buying in corn, soy-CFTC
CHICAGO, May 4 (Reuters) - Large speculators raised their net long position in Chicago Board of Trade corn futures and options, breaking a five-week streak of cuts to the position, as surging export demand threatened to further tighten up the U.S. supply situation, regulatory data released on Friday showed.
The speculators also added to their net soybean long, raising it to a fresh record high as prices rose 2.5 percent due to stepped-up purchases from top buyer China.

Wheat Market Recap Report (Source: CME)
July Wheat finished up 2 1/2 at 612, 2 off the high and 11 1/4 up from the low. December Wheat closed up 3 at 651. This was 11 3/4 up from the low and 1 3/4 off the high. July wheat closed moderately higher on the session and up sharply from the early lows. Bearish outside market forces helped to pressure the market early but the market stayed moderately lower on the day into the mid-session even with a solid recovery in the US stock market and a set-back from the highs for the US dollar. Weakness in corn and soybeans added to the negative tone. Ideas that the Crop Production and Supply/demand updates on Thursday could bring some bearish supply news plus more rain in the forecast for the southern plains helped to pressure the market. Selling was limited by news from the COT report on Friday of a short-covering trend last week from fund traders who still held a hefty net short position. Weekly export inspections came in at 24.07 million bushels which was higher than expected and compares with just 16 million necessary each week to reach the USDA projection. Wheat stocks in Canada on March 31st fell to 14.5 million tonnes which at the low end of expectations and compares with 15.8 million tonnes last year. The rally in the corn market to higher on the day helped spark some short-covering in wheat and this helped to provide for the buying support to close higher. For the report on Thursday, traders see winter wheat production near 1.64 billion bushels as compared with 1.494 billion last year. All wheat production is expected near 2.195 billion bushels as compared with 1.999 billion last year. For ending stocks for the 2011/12 season, traders see stocks near 780 million bushels as compared with 793 million posted in the April update. For the 2012/13 season, traders see ending stocks near 785 million bushels but with a range of near 600-925 million bushels. July Oats closed down 2 1/2 at 337 1/2. This was 2 up from the low and 2 1/4 off the high.

Market Recap: Wheat Futures (Source: CME)
Chicago wheat futures staged a recovery into the close to finish 2 to 3 3/4 cents higher and Kansas City futures ended mostly around a nickel higher. While the winter wheat markets ended near session highs, Minneapolis futures closed low-range with losses of 4 3/4 to 10 1/2 cents. Wheat futures were pressured for much of the session by negative outside markets as investors reacted to disappointing election results in Europe, primarily Greece.

Heavy rain boosts western Europe wheat crop outlook
LONDON, May 4 (Reuters) - Heavy rain across western Europe in the last few weeks has  improved the outlook for wheat crops following a prolonged dry spell although it may heighten the threat posed by disease.
"We needed this rain. There had been a serious concern about a drought until a couple of weeks ago, and now plants should not have any problems," Paolo Abballe, grain expert at Italy's biggest farmers association Coldiretti, told Reuters.

GRAINS-US grains drop on risk aversion after Greece, France polls
SYDNEY, May 7 (Reuters) - U.S. grain futures dropped as investors fled riskier assets, after Greek and French polls stoked concerns on whether struggling euro zone economies could continue to pursue austerity measures crucial to resolving the bloc's debt crisis.
"Today we are seeing some risk aversion in the grains market due to political risk emanating out of the euro zone, and on Friday we that saw employment numbers in the U.S. is weakening," Lynette Tan, an analyst at Phillip Futures in Singapore said.

POLL-China 2012/13 corn imports seen climbing 60 pct
BEIJING/SINGAPORE, May 7 (Reuters) - China's corn imports are likely to jump almost 60 percent in the year to September 2013, turning it into the world's fourth-largest buyer as Beijing strives to supply livestock feed to meet fast-growing demand for meat and cool near record prices.
The world's second-biggest consumer and producer of corn is projected to buy 7.9 million tonnes in 2012/13, up from an estimated 5 million tonnes this year, according to a Reuters survey of 10 analysts and traders.

Corn Market Recap for 5/7/2012 (Source: CME)
July Corn finished down 1/4 at 620, 1 1/4 off the high and 7 3/4 up from the low. December Corn closed up 1/2 at 524 3/4. This was 9 3/4 up from the low and 2 off the high. July corn closed just 1/4 of a cent lower but well up from the early lows. The strong cash market supported a higher close for the May corn. Ideas that the weather outlook is favorable and that the USDA will release high production, yield and ending stocks estimates in their first supply/demand update for the 2012/13 season on Thursday morning helped to pressure the market early and also helped to push December corn down to match Friday's lows at 515. December corn closed higher on the day. Traders see corn plantings as of Sunday (for release this afternoon) near 67% complete as compared with 53% last week. Weekly export inspections came in at 29.3 million bushels which was about as expected and this compares with 31.2 million necessary each week to reach the USDA projection. Strong cash markets continue to help support the May contract with historically high basis bids, record wide May/July inversion and a lack of deliveries against the May contract helping to support. South Korea passed on a tender to buy 55,000 tonnes of corn at a tender indicating prices were too high. For ending stocks for the 2011/12 season, traders see stocks near 750 million bushels as compared with 801 million posted in the April update. For the 2012/13 season, traders see ending stocks near 1.71 billion bushels but with a range of near 1.2 billion to well above 2 billion bushels. July Rice finished up 0.01 at 15.215, equal to the high and 0.115 up from the low.

Market Recap: Corn Futures  (Source: CME)
After posting losses throughout the session, corn futures staged an impressive rally into the close to finish narrowly mixed. Early pressure came from uncertainty about the economic future of Europe after some key leadership changes in Greece and France. But as the session wrapped up, traders recognized that outside markets had reacted relatively quietly to the news and the stock market had even turned higher.

Traders sizing up new crop corn potential
--Gavin Maguire is a Reuters market analyst. The views expressed are his own.--
CHICAGO, May 4 (Reuters) - The prospect of a near record amount of corn plantings this spring has placed December corn futures under sustained pressure in recent weeks, with the December 2012 contract down more than 10 percent since the beginning of the year and more than $1.40 a bushel off its all-time high seen in late August of last year.
The relentless downward grind in prices for the past month or so suggests many market participants are buying into the notion that the newly planted corn will thrive under crop-friendly conditions throughout the coming months.

Brazil coffee gets moisture top up, outlook unclear
BRASILIA, May 4 (Reuters) - Brazil's coffee zones received good rainfall this week, weather forecaster Somar said in a coffee bulletin on Friday, which will go some way to compensating for weeks of unusually dry weather that producers fear could limit yields.
The world's top coffee grower is only a few weeks from harvesting its larger on-year crop, the higher-output half of a biennial up-down cycle, that traders are awaiting to top up supplies of quality arabica as demand outstrips supply growth.

Sugar users want swift end to EU production limits
BRUSSELS, May 4 (Reuters) - Europe's leading industrial sugar users have urged policymakers not to delay proposals to end EU sugar production limits from 2015, blaming the quota system for a shortage of the sweetener in Europe.
In October the EU's executive, the European Commission, proposed abolishing national production quotas, which currently limit annual sugar output to 13.8 million tonnes, compared with annual consumption of about 16.5 million tonnes.

Mexico publishes 250,000 T sugar import quota
MEXICO CITY, May 4 (Reuters) - Mexico published in its official gazette on Friday a 250,000-tonne sugar import quota for 2012 after a severe drought damaged some crops.
Under a trade deal, 10 percent of the quota is assigned to Nicaragua and the rest will come from the international market.  The economy ministry said earlier in the year it was considering the quota, but industry sources said the entire amount may not need to be imported.

Record Gas Use by U.S. Utilities Fails to Drive Up Price: Energy (Source: Bloomberg)
U.S. utilities led by Southern Co. (SO) are burning a record amount of natural gas for generating electricity without triggering a forecasted boost to the fuel’s price from near 10-year lows. The power companies used 34 percent more gas in February than a year earlier, Energy Department data show. Even Atlanta- based Southern, historically one of the largest U.S. coal-plant operators, is on pace to consume more of the cleaner-burning fuel than coal in 2012 for the first time in its 100-year history. Utilities are the nation’s biggest gas consumers. The historic switch to gas is set to peak this year without fulfilling industry predictions that it would eat up inventory and drive up gas prices. That’s because unparalleled output from new shale fields is oversupplying the $95 billion U.S. gas market, postponing relief for hundreds of producers.
Record gas use “may not be the panacea that people think” it will be, Jason Schenker, president of Prestige Economics LLC, based in Austin, Texas, said in a telephone interview. Schenker was the fourth-best predictor of gas prices in the first quarter, according to data compiled by Bloomberg.

Euro Coal-ARA prices tick higher, China on sidelines
LONDON, May 4 (Reuters) - European coal prices crept higher by 25 cents a tonne on Friday as the market steadied after hitting two-year lows earlier in the week on weakening fundamentals.
The high level of U.S. thermal coal exports - likely to be around 45-50 million tonnes this year  combined with rising Colombian exports has led to oversupply in Europe, but only because the expected demand from China and India to absorb the surplus has not yet materialised.

Day-to-day oil price stability a conundrum
--John Kemp is a Reuters market analyst. The views expressed are his own--
LONDON, May 4 (Reuters) - With just over a third of the year gone, 2012 has already proved tumultuous for the oil market, with front-month Brent futures trading as low as $108 per barrel and as high as $128.
There has been no lack of big news and surprises: civil war in Syria, the eruption of trouble in South Sudan, the rise and fall of tensions with Iran, endless production problems in the North Sea and speculation about the release of emergency stocks by the United States and its partners in the International Energy Agency (IEA).

Japan eyes guarantees for ships carrying Iran oil-Nikkei
TOKYO, May 7 (Reuters) - Japan is considering a new law to provide sovereign guarantees for its ships to allow them to continue importing Iranian crude oil after EU sanctions come into effect in July, the Nikkei business daily said.
The European Union has already prohibited European insurance coverage on hull and machinery for Iranian crude shipments, which has significantly limited Japan's lifting of Iranian crude from April.

Brent falls below $113 on global demand worries
SINGAPORE, May 7 (Reuters) - Brent crude fell below $113 a barrel, hitting its lowest since January, as political uncertainty in Europe that threatened to derail efforts to rein in the region's debt crisis and weak U.S. jobs data dented the outlook for energy demand.
"There are great fears that the new government in Greece will end austerity measures and that will lead to a disorderly default, and that has led to a sell-off across all risk markets," said Ben Le Brun, a market analyst with OptionsXpress in Sydney.

Oil Trades Near Three-Month Low as Supplies Seen Rising (Source: Bloomberg)
Oil traded near the lowest level in three months in New York before a government report that may show crude stockpiles rose to the highest in more than 21 years in the U.S., the world’s biggest consumer of the commodity. Futures were little changed after slipping for a fourth day yesterday. U.S. supplies climbed 1.9 million barrels to 377.8 million last week, according to a Bloomberg News survey before an Energy Department report tomorrow. That would be the highest level since September 1990 and the seventh weekly increase, the longest run since April 2010. Crude for June delivery was at $98.08 a barrel, up 14 cents, in electronic trading on the New York Mercantile Exchange at 9:07 a.m. Sydney time. The contract yesterday slid 55 cents, or 0.6 percent, to $97.94, the lowest close since Feb. 6. Prices are down 0.8 percent this year.
Brent oil for June settlement dropped 2 cents to $113.16 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark contract’s premium to West Texas Intermediate closed at $15.22.

Copper Futures Seen Rallying 11% on Fibonacci Retracement (Source: Bloomberg)
Copper prices, which gained the most in a week yesterday, may climb to $4.20 a pound for the first time since September, according to technical analysis by Paul Kavanaugh, a senior trader at PFGBest. The futures contract for July delivery will rise 11 percent if prices on the Comex in New York top the 50 percent Fibonacci retracement level of $3.803 within a couple of trading sessions, Kavanaugh said in a telephone interview yesterday. The metal closed yesterday at $3.7735, rising 1.4 percent, the biggest gain since April 26. Prices still are down 1.5 percent in May, heading for the biggest monthly decline of the year. “It is encouraging to see that copper is trying to claw back,” Kavanaugh said, noting that the 100 percent Fibonacci retracement level is $4.526. “In the short term, we will see some strength.”
Copper prices still are up 9.8 percent this year, partly on expectations that global demand will exceed mine output. PNB Paribas increased its forecast for a production deficit in 2012 to 400,000 metric tons on May 4 from an earlier estimate of 300,000 tons. In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

Indonesia tax on metals risks China shipments
JAKARTA/HONG KONG, May 4 (Reuters) - New Indonesian taxes on metals and curbs on raw mineral shipments are likely to hit exports of nickel and bauxite to China and push ore prices higher on world markets, an industry source said on Friday.
The government of Southeast Asia's biggest economy aims to boost investment in domestic ore processing to lift exports of higher-value finished metals. The new rules come into force on Sunday.

Iron Ore-China steel sags to 2-month lows, ore falls
SINGAPORE/SHANGHAI, May 7 (Reuters) - Shanghai rebar steel futures fell to their weakest in more than two months on Monday as slow demand in top market China kept prices under pressure, prompting sellers of raw material iron ore to cut prices.
The fall in rebar futures also tracked weakness across commodity and equity markets as French and Greek elections led to more uncertainty for an economically fragile region and fuelled a resurgence of bearish sentiment for risk assets that emerged after last week's U.S. jobs data.

20120508 1006 Soy Oil & Palm Oil Related News.

Palm-oil production in Malaysia, the second-biggest supplier after Indonesia, probably gained the most in seven months in April, after recovering from seasonally low-output months, according to a Bloomberg survey. Output advanced 6.6% to 1.29m metric tons, the biggest gain since September, from 1.21m tons in March, according to the median estimate in the survey of three plantation companies and two analysts. That’s still 16% lower than the 1.53m tons a year earlier. The Palm Oil Board is scheduled to release the official data on May 10. (Bloomberg)

Malaysia, the second-biggest palm oil producer, may announce a plan “in the near future” to compete with top supplier Indonesia which reformed its export taxes to boost its refining industry, the Malaysia Palm Oil Board said. “As we speak they are discussing in Kuala Lumpur, what’s the next plan of action,” Ahmad Kushairi Din, the deputy director-general for research and development, said in an interview. (Bloomberg)

Malaysia's April palm stocks likely hit one-year low
SINGAPORE, May 7 (Reuters) - Malaysia's palm oil stocks likely fell to a one-year low in April, as strong exports outweighed production, a Reuters median survey showed on Monday.
Stocks in the world's No.2 palm oil producer probably dropped 7.0 percent to 1.82 million tonnes in April, suggesting the decline was gaining momentum after months of hovering at two million tonnes, the survey of five plantation houses showed.

VEGOILS-Palm oil hits 8-week low on euro zone fears, rising supply
SINGAPORE, May 7 (Reuters) - Malaysian palm oil futures fell to an 8-week low, as election results in Greece and France threatened to undermine austerity measures in place to prevent the euro zone debt crisis from spreading.
"Palm oil prices plunged in unison with crude oil and CBOT (Chicago Board of Trade) soyoil futures. There was also talk that April output versus March could be higher by 5-6 percent on average," said a trader with a local commodities brokerage in Malaysia.

Argentine soy yields disappoint as harvest advances
BUENOS AIRES, May 4 (Reuters) - Farmers have harvested most early-planted 2011/12 soy in Argentina, the world's No. 3 exporter, with below-average yields confirming severe drought damage, the Agriculture Ministry said on Friday.
An acute dry spell earlier in the season dampened hopes of a bumper grains harvest in the South American country, with early-seeded soybeans and corn bearing the brunt of the dryness.

India's April oilmeal exports down 22 pct y/y-trade
MUMBAI, May 4 (Reuters) - India's oilmeal exports fell to 400,427 tonnes in April from 513,221 tonnes a year ago, a trade body said on Friday, after China stopped buying oilmeals because of worries about hazardous chemicals and high seed prices crimped crushing margins.
Rapeseed meal exports in April, the first month of the new fiscal year, dropped to 43,233 tonnes from 142,232 tonnes a year ago, according to data from the Solvent Extractors' Association of India (SEA). Rapeseed meal exports in March and February were down 20 percent and 45 percent respectively from a year ago.

Informa raises US soy acreage forecast, trims corn
CHICAGO, May 4 (Reuters) - Private analytical firm Informa Economics raised its forecast of U.S. 2012 soybean plantings to 75.822 million acres, from 74.2 million previously, and trimmed its projection of U.S. corn seedings to 96.124 million acres, from 96.4 million previously, trade sources said Friday.
Informa also forecast a jump in South American soybean production in the new crop year. The firm projected the 2012/13 Brazilian soy crop at 80.5 million tonnes and the 2012/13 Argentine soy crop at 60 million tonnes.

Soybean Complex Market Recap  (Source: CME)
July Soybeans finished down 12 1/2 at 1465 3/4, 13 off the high and 5 1/2 up from the low. November Soybeans closed down 13 1/4 at 1353 1/2. This was 3 1/2 up from the low and 14 1/2 off the high. July Soymeal closed down 6.1 at 426.5. This was 1.4 up from the low and 7.0 off the high. July Soybean Oil finished down 0.07 at 53.58, 0.19 off the high and 0.32 up from the low. July soybeans closed moderately lower on the session and up a bit from the early lows but old crop soybeans did not recover as much as wheat and corn did late in the session. A bearish tone to outside market forces plus a continued favorable weather outlook helped to spark the early selling pressures. However, even when outside market forces turned less negative, (set-back in the US dollar and a recovery in equity markets), July soybeans pushed to a new low for the session into the mid-day. News that the fund traders and combined speculator net long positions in the COT report as of May 1st showed a record high net long position helped to keep the tone bearish on thoughts that the market remains overbought. Traders see soybean plantings as of Sunday near 22% complete as compared with 12% last week. Private exporters reported the sale of 110,000 tonnes of US soybeans to unknown destination for the 2011/12 season. Weekly export inspections came in at 9.99 million bushels which was well under trade expectations near 15 million and this compares with 11 million necessary each week to reach the USDA projection. Canola stocks in Canada on March 31st fell to a 7-year low at 4.3 million tonnes which was at the low end of expectations and compares with 6.2 million tonnes last year. For ending stocks for the 2011/12 season, traders see stocks near 215 million bushels as compared with 250 million posted in the April update. For the 2012/13 season, traders see ending stocks near 165 million bushels but with a range of near 90 to as high as 250 million bushels.

Market Recap: Soybean Futures  (Source: CME)
Soybean futures posted a low-range close with losses of 9 1/2 to 14 1/4 cents. Much of today's pressure can be attributed to negative outside markets. The dollar strengthened against the euro on news France elected a Socialist president and Greek government supporters of austerity struggled in reelection efforts -- raising concerns previously announced bailout deals in Greece could falter.

Soy-Crop Bust Spurs China to Drain U.S. Bins: Commodities (Source: Bloomberg)
U.S. soybean stockpiles are poised to drop to the lowest relative to consumption since at least 1965 after the worst drought in five decades decimated crops across South America, driving China to buy more from Midwest farmers. Inventories will decline 20 percent to 172 million bushels (4.68 million metric tons) before next year’s harvest in the U.S., the largest grower, according to the average of 31 analyst estimates compiled by Bloomberg. This year’s 21 percent rally may extend another 9.2 percent by the end of June to $16 a bushel, according to Linn Group, a brokerage and researcher based in Chicago. Prices reached a record $16.3675 in 2008.
The U.S. Department of Agriculture cut its forecasts for the South American crop four times in as many months after predicting record supplies as recently as December. The estimates are scheduled to be updated May 10. Imports by China, where demand doubled since 2004, will advance to a record 55 million tons this year as farmers feed a hog herd expanding 4.4 percent to a record 690 million animals, USDA data show. “Prices may top the 2008 peak if Chinese demand doesn’t slow or there are any threats to the U.S. crop this summer,” said Christopher Narayanan, the head of agricultural commodities research for Societe Generale in New York. “China’s soybean imports have grown at a rate of more than 17 percent annually the last 10 years, and the biggest risk is that demand won’t slow.”

World Index
Soybeans traded on the Chicago Board of Trade led gains in the Standard & Poor’s GSCI Spot Index of 24 commodities this year and reached a 45-month high of $15.125 on May 2. The GSCI advanced 1.1 percent since Dec. 30, as the MSCI All-Country World Index of equities rose 7 percent. Treasuries returned 0.4 percent, a Bank of America Corp. index shows. Production across Brazil, Argentina, Paraguay, Uruguay and Bolivia will drop 16 percent this season, the most since a drought in 2009, according to Newedge USA Clearing, part of the second-biggest broker on U.S. exchanges. Craig Huss, the chief risk officer at Decatur, Illinois-based Archer Daniels Midland (ADM) Co., the world’s largest grain processor, told analysts on a conference call May 1 that fewer South American exports would make it “difficult to buy beans going forward.”
Before the 2013 harvest, U.S. reserves will be the equivalent of 2.6 percent of projected consumption of 3.363 billion bushels, said Roy Huckabay, an executive vice president at the Linn Group. The lowest stockpiles-to-use ratio was 4 percent in 1965, the earliest that government data is available, when production was 77 percent smaller than in 2011.

Smaller Inventory
The USDA probably will forecast on May 10 that global inventories will drop 23 percent to 52.96 million tons as of Oct. 1, the biggest pre-harvest slump in 16 years, according to the average of 18 analyst estimates compiled by Bloomberg. Hedge funds are making their biggest bet on higher prices since at least June 2006, according to data from the Commodity Futures Trading Commission. They held a net-long position of 253,889 contracts as of May 1. Speculators were wagering on a retreat as recently as December, the data show. The rally will spur farmers to plant more and importers to buy less, said Dale Durchholz, the senior market analyst for AgriVisor LLC, a consultant in Bloomington, Illinois. Production probably will rebound 21 percent in the year that starts Sept. 1 to a record 284.4 million tons, Memphis, Tennessee-based Informa Economics Inc. said in a report May 4. That would be the largest output gain in three years.

Financial Incentive
Shortages before the U.S. harvest starts in September mean futures for July delivery are trading at a premium of $1.41 a bushel to the March 2013 contract. That compares with 2 cents three months earlier, exchange data show. “The market is telling U.S. livestock producers and Chinese buyers to slow purchases because there is little incentive to accumulate high-priced inventories,” Durchholz said. “China already has enough on the books for post-harvest delivery to get them through two months of consumption. We will shift from perceived tightness to burdensome supplies very quickly if Mother Nature cooperates for U.S. growers.” Chinese farmers aren’t keeping up with demand for soy-based animal feed, vegetable oil and biofuel in the world’s most- populous nation, where the economy expanded 9.2 percent last year. The harvest was 13.5 million tons last year, down from a peak of 17.4 million in 2004. Consumption is up 36 percent in the past three years to an estimated 70.1 million tons, or 28 percent of global use, USDA data show. The Asian nation bought 921,642 tons of U.S. soybeans in the four weeks ended April 26, almost three times the amount a year earlier, the USDA said May 3. About 7.12 million tons have been booked for shipment in the year that starts Sept. 1, 21 percent more than at this time last year.

Global Stockpiles
China has led an expansion of world soybean consumption that was almost four times the pace of population growth in the past decade, government data show. Global stockpiles will drop to about 51.4 days of use on Oct. 1, the lowest ratio in 15 years, according to Bill Gary, the president of Commodity Information Systems Inc. in Oklahoma City, who has worked in the grain market for a half century. Supplies may be tightest around March 2013, before the South American harvests, he said. U.S. farmers probably will increase production by about 5.2 percent to 3.214 billion bushels this year, according to the average estimate of 24 analysts surveyed by Bloomberg. That may not be enough to keep up with demand. The ratio of U.S soybean reserves to demand will fall to 4.1 percent, the lowest in 48 years, predicts Doane Advisory Services Co., a farm and food- company researcher based in St. Louis.

Profitable Corn
Corn, the biggest U.S. crop, is still more profitable to plant than soybeans. Farmers are expected to boost corn planting to 95.864 million acres this year, the most since 1937, the USDA said March 30. That may limit gains in soybean planting while boosting corn output by 7.7 percent to 14.395 billion bushels, according to the average estimate in the Bloomberg survey. “We need a big crop in the U.S. to offset losses in South America this year,” said Bill Nelson, a senior economist at Doane Advisory Services who expects prices to approach $16 no later than August. “There is just no leeway when there are any crop problems. The anxiety has never been greater.”