Corn (Source: CME)
US corn futures close higher as traders discount USDA's steady season-end supply forecast to focus on concerns about strong demand draining low inventories. Market participants had expected supplies to drop to a fresh 15-year low after USDA's report on March 1 stockpiles, issued last week, indicated demand had been stronger than expected. Futures prices still need to rise to curb demand, analysts say. "We haven't rationed anything yet. That's a little unnerving," says Bill Gentry of Risk Management Commodities. Surging crude oil prices and a weak dollar added support, traders note. CBOT May corn jumps 9c to $7.68 a bushel.
Wheat (Source: CME)
US wheat futures finish firmer, with CBOT prices rallying sharply. Market participants unwound long KCBT wheat/short CBOT wheat spread trades to take profits after KCBT wheat climbed recently on concerns about a drought reducing production in the Plains, traders say. USDA signaled demand may improve for soft red winter wheat, traded at CBOT, as livestock producers increasingly feed wheat to animals instead of expensive corn. CBOT May wheat climbs 24 1/4c at $7.97 1/2 a bushel; KCBT May rises 10c to $9.32 3/4; and MGE May jumps 12 1/2c to $9.53 1/4.
Oats (Source: CME)
US oat futures climb the daily, exchange-imposed limit of 20c/bushel on poor weather threatening the next harvest. Drought is stressing the crop in Texas while cool, wet weather could delay planting in the northern Plains and Canada. Oats for May delivery rose 20 cents or 5.4% to $3.93 1/2 a bushel.
Rice (Source: CME)
US rice futures settle modestly higher in a rebound from a one-week low. Futures felt spillover support from gains in the neighboring wheat, corn and soy markets, traders say. The USDA's April crop report was a bit of a mixed bag today, as it cut the forecast for world rice production and season-end supplies but raised the forecast for domestic season-end stocks. CBOT May rice closes up 6c at $13.68 1/2 per hundredweight.
USDA Seeks To Spur Ethanol Pumps At Gasoline Stations (Source: CME)
The U.S. Department of Agriculture will soon begin helping gasoline stations install new pumps that can dispense ethanol in an effort to curtail the nation's dependence on petroleum-based fuel, USDA Secretary Tom Vilsack said. The USDA will soon begin handing out grants and loan guarantees to gasoline stations that want to install costly new "blender pumps" that would allow drivers to buy fuel with a higher ratio of corn-based ethanol. Most gasoline sold in the U.S. is mixed with 10% ethanol, but there is a growing fleet of flexible fuel vehicles that can run on an 85%-ethanol blend, or E85, in the U.S. but not enough pumps that dispense it, Vilsack said. There are only about 2,350 fueling stations out of more than 110,000 that offer E85 pumps in the U.S., according to the USDA. Vilsack said it costs about $120,000 to install a blender pump.
New blender pumps would also make it easier for drivers of conventional cars to increase the ethanol content of the gasoline they buy. The Environmental Protection Agency released a decision that newer vehicles can safely run on gasoline with a 15% blend of ethanol. Vilsack said the grants and loan guarantees represent a role the USDA is playing in President Barack Obama's pledge to cut U.S. dependency on foreign oil by one-third by 2025. The USDA goal, Vilsack said, is to increase the number of flexible fuel pumps across the country by 10,000 over the next five years. There is opposition to the government's support of corn-based ethanol. Livestock producers argue that the ethanol industry pushes corn prices higher by consuming so much of the commodity that is also used to feed animals. The ethanol industry is expected to consume 5 billion bushels of corn this year, almost as much as the 5.2 billion bushels that will be used to produce livestock feed, according to USDA data.
Farmers produced 12.4 billion bushels of corn last year. Congress also provides hefty support for the ethanol industry with a 45-cent-a-gallon subsidy that is paid to gasoline blenders that include ethanol into fuel.
High Corn Prices Here To Stay (Source: CME)
It's a good year for ears. U.S. farmers expect to plant 92.2 million acres of corn in 2011, the second most since 1944. Yet corn futures hit an all-time high of $7.73 1/4 a bushel this week, more than double a year ago, driven by soaring demand for corn for use as animal feed and in ethanol production. There may be further grain gains. Normally, higher corn plantings in the U.S. - the world's largest corn producer -- would dampen prices. And higher corn prices would dampen demand. But so far there is little evidence of either. Instead, U.S. corn stocks have fallen 15% year-on-year, leaving them equal to around 5% of annual demand - enough to cover 18 days of U.S. consumption - sharply down from over 13% in the last two years. Prices will have to rise much higher before demand starts to fall. With meat prices also high, livestock farmers may only lower demand or seek feed substitutes like wheat when corn prices reach $8.60 per bushel, Goldman Sachs estimates.
Similarly, oil prices are also rising faster than corn, so ethanol producers - who consume 40% of corn output - are also unlikely to cut demand, particularly as gasoline blenders receive a tax credit of $0.45 per gallon for gasoline containing ethanol. Corn prices will need to rise above $10 per bushel before ethanol production costs rise above gasoline prices, Goldman says. Meanwhile supply constraints could re-emerge. The Department of Agriculture forecasts corn yields this year at 160 bushels per acre, up from 153 last year, but that assumes good growing conditions. Even then, the stocks-to-demand ratio, says Rabobank, would only improve to 6.9%, still the lowest since 1995-6. Fallow land is scarce - planned increased corn acreage comes at the expense of crops like soy beans, where prices are also rising. What might help prices lower? A reassessment of the market-distorting ethanol subsidy seems unlikely given the U.S. desire to increase ethanol's role in the energy mix.
Sharply lower oil prices would help as would a long, hot summer that boosts yields. In the meantime, high corn prices look here to stay.
Corn jumps 1 pct, nears record peak ahead of USDA data
SYDNEY, April 8 (Reuters) - U.S. corn futures rose 1 percent, closing in on a fresh record touched in the previous session ahead of key data likely to show a further cut in already thin corn inventories in the United States, the world's top exporter.
"We are still in a tight supply-demand situation so there's no incentive for traders to take profits before the report," said Ker Chung Yang, analyst at Phillip Futures in Singapore.
Corn traders reevaluate demand with prices at record
CHICAGO, April 8 (Reuters) - With corn prices at record highs, grain traders are paying more attention to the demand outlook, to gauge how big the U.S. corn supply will be in the coming months.
Rising ethanol production, which now consumes about 40 percent of the U.S. corn crop, has complicated the task of predicting when users will start to cut back purchases in the face of high prices.
METALS-Copper up, tin hits record on demand prospects
LONDON, April 8 (Reuters) - Copper rose about 2 percent to its highest level in a month on Friday as a weaker dollar and expectations for increasing demand boosted investor sentiment.
Amid a broad rally in the metals complex, three-month tin on the London Metal Exchange reached a record $33,000 per tonne, lead a three-year high of $2,861.75 and aluminium its highest since August 2008 at $2,713.25 a tonne.
Bloated Prices Mean Thin Margins For China's Food Producers (Source: CME)
China's food manufacturers are suffering from indigestion. The cause? Sustained high prices for agricultural products and government controls on retail prices. At the end of 2010, Beijing was claiming success in the fight against rising food prices. Months later, they remain stubbornly high. The Ministry of Agriculture's index of wholesale food prices has ticked down only slightly from a holiday-induced peak at the end of January. That's bad news for Beijing as it struggles to stem inflation. Food is the largest component of the consumer price index, and if March's reading goes above 5%, as expected, food will have played a large role. Higher agricultural prices, and the government's attempt to control them, are also bad news for food manufacturers. Tingyi (Cayman Islands) Holding Corp, China's largest producer of instant noodles, and Want Want China Holdings Ltd, a major producer of snack foods, both saw gross margins shrink in 2010 due to rising input prices.
Tingyi announced plans to increase retail prices on its instant-noodle product by 14% as of April 1. But the powerful National Development and Reform Commission has signaled manufacturers to go slow. Prices for cooking oil and flour were capped at the end of last year. Now Tingyi and some other manufacturers of household goods, including Unilever, have delayed plans to raise prices. Direct controls on prices don't address the problem of excess demand. Indeed, they make it worse, encouraging consumption while eroding incentives to increase supply. But in the short term they do have a certain brutal effectiveness, which makes them appealing to politicians keen to be seen on the side of the consumer. The question for investors is whether the increase in input prices for food manufacturers is the result of a supply-side blip-gone with the next harvest-or a long-term effect of rising demand. The answer is, the latter.
Higher incomes in China and other emerging markets will increase demand for processed food, helping expand the market for manufacturers. Both Tingyi and Want Want, as prestige brands, can expect to take market share from less glamorous competitors. But the same higher incomes will also drive demand for the grains that are the main input for processed food products. Normally, the rising cost for these raw materials would be passed through to consumers. But with that outcome politically unacceptable, it is food processors' profit margins that will take the strain.
China copper scrap imports set to rise - trade
HONG KONG, April 8 (Reuters) - Copper scrap arrivals into China will likely rise in late April and May after importers placed more spot orders in the past month as domestic stocks fell, supplier and buyer sources said on Friday.
More arrivals to the world's top copper scrap importer would weigh on domestic prices and widen the spread between scrap and refined copper prices, an incentive for fabricators to use scrap to replace refined copper.
METALS-Copper up, tin hits record on demand prospects
LONDON, April 8 (Reuters) - Copper rose about 2 percent to its highest level in a month on Friday as a weaker dollar and expectations for increasing demand boosted investor sentiment.
Amid a broad rally in the metals complex, three-month tin on the London Metal Exchange reached a record $33,000 per tonne, lead a three-year high of $2,861.75 and aluminium its highest since August 2008 at $2,713.25 a tonne.
Steel scrap price steady, poor steel sales weigh
LONDON, April 7 (Reuters) - Steel scrap prices were little changed this week but market players expected prices to fall soon as demand from top importer Turkey remained poor.
Steel scrap sold at $440-450 per tonne cost-and-freight Turkey this week, similar to last week, when it fell $5-15 per tonne.
Nippon Steel to take control of Malaysia JV
TOKYO, April 7 (Reuters) - Nippon Steel Corp , the world's No.4 steelmaker, said it is in talks with Tatt Giap to boost its stake in their Malaysian joint venture.
It said it will increase its stake in Nippon EGalv Steel Sdn to 50.1 percent from 10 percent now for $6.5 million by the end of June.
PRECIOUS-Gold hits record high as dollar slides
LONDON, April 8 (Reuters) - Gold hit record highs on Friday and silver its strongest since early 1980 as the dollar slid to 15-month lows versus the euro, with concerns over euro zone debt and unrest in the Middle East region further supporting buying.
Spot gold rose as high as $1,468.81 an ounce and was bid at $1,468.70 an ounce at 0857 GMT, against $1,457.45 late in New York on Thursday. Silver was bid at $40.18 an ounce against $39.51, having earlier risen as high as $40.22.
Cocoa steady, Ouattara urges sanctions end (Source: Reuters)
ICE cocoa futures were little changed in early trading after Ivory Coast presidential claimant Alassane Ouattara called for an end to sanctions and sought to return the war-torn country to normal, despite a standoff with rival Laurent Gbagbo. Arabica coffee futures on ICE edged higher in early trade supported by a weaker dollar, having surged to close up 3 percent in heavy volume on Thursday as funds added positions. The arabicas market is underpinned by tight global supplies of high quality beans.
I.Coast cocoa export ban to end in days-UN envoy
NEW YORK, April 7 (Reuters) - Ivory Coast's presidential claimant Alassane Ouattara is expected to announce within days the end of a ban on exports of cocoa, of which the country is the world's leading producer, his U.N. envoy said on Thursday.
The country's cocoa sector is close to a return to normalcy after turmoil created by a post-election conflict between Ouattara and incumbent leader Laurent Gbagbo, envoy Youssoufou Bamba told a news conference.
Pakistan sees at least 25 mln T wheat from 2010/11 crop
ISLAMABAD, April 8 (Reuters) - Pakistan is expected to produce at least 25 million tonnes of wheat in its 2010/11 crop, Finance Minister Hafiz Shaikh said on Friday, higher than the initial estimate.
"We are expecting that our wheat crop this year will cross 25 million tonnes," he told reporters.
EU clears 286,000 tonnes wheat exports this week
PARIS, April 7 (Reuters) - The European Union this week granted export licences for 286,000 tonnes of soft wheat, taking the total since the beginning of the 2010/11 (July-June) season to 15.7 million tonnes, official data showed on Thursday.
Cosan sugar retail unit not part of joint venture
SAO PAULO, April 7 (Reuters) - Cosan , Brazil's largest sugar and ethanol producer, said on Thursday its sugar retail unit will remain out of its Raizen joint venture with Royal Dutch Shell .
Cosan will put all of its 24 sugar and ethanol mills and its energy generation operations into the venture as well as the fuel distribution assets it bought from Exxon Mobil Corp in 2008.
Oil Advances a Fourth Day in New York on Libyan Conflict, Mideast Unrest (Source: Bloomberg)
Oil advanced for a fourth day in New York as NATO escalated its air campaign over Libya and on concern unrest may spread to other energy-exporting countries in the Middle East.
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