Commodity funds pick oil as safest option: John Kemp
--John Kemp is a Reuters market analyst. The views expressed are his own--
LONDON, Dec 19 (Reuters) - In a tough landscape for commodities, most hedge funds and other money managers have decided to stick with long positions in crude oil, boosting their investments even as prices slide.
For commodity funds, who must basically be long of something to justify their continued existence, crude is the least-dangerous among a series of tricky alternatives.
Corn (Source: CME)
US corn futures settle at a three-week high, fueled by broad-based support from external financial markets. US dollar weakness, strength in equities and energy sector provided a supportive backdrop to keep sellers sidelined, analysts say. Lingering concerns about yield threats in South America and ideas recent declines left futures oversold was enough to underpin prices, analysts add. However, the rally lacked any strong follow through buying, as traders remained cautious of taking on risk heading toward the holiday weekend. CBOT March corn finished up 6c at $6.07/bushel.
Wheat (Source: CME)
US wheat futures end higher, as weakness in the US dollar sparked a short-covering rally. Spillover support from corn and positioning ahead of year's end also prompted some buying, analysts say. KCBT wheat rallied, shaking off bearish impact of needed moisture in the form of snowfall in some dry areas of the Plains hard red winter wheat belt. Broader based advances across asset classes limited selling interest. CBOT March wheat ended 8 cents higher at $6.07 3/4/bushel, KCBT March was 9 1/2 cents higher at $6.68 and MGEX March closed 12 cents higher at $8.39 1/4.
Rice (Source: CME)
US rice futures end higher, rising as traders continued to cover short positions. Weak demand had caused prices to stumble in prior weeks, leaving the market oversold, analysts say. Broader-based buying across asset classes buoyed prices as well. CBOT March rice ends up 9 1/2c at $14.24 per hundredweight.
US soy near 4-week top on dry South American weather
SINGAPORE, Dec 20 (Reuters) - U.S. soy gained more ground to hover near a 4-week top, while corn was little changed around two-week highs, supported by dry weather in South America, which is threatening to curb supplies.
"If you look at the estimates, many have factored in almost best case record crop scenarios for South America, that's always a danger as you still have the full growing season to go through," said Adam Davis, a senior commodity analyst at Merricks Capital in Melbourne.
Thai 2011/12 second rice crop delayed, output seen up
BANGKOK, Dec 20 (Reuters) - Severe floods will delay Thailand's 2011/12 second rice crop by around 2 months but production is likely to rise from last year as farmers are trying to grow more grain to offset losses from the main crop, an Agriculture Ministry official said on Tuesday.
Harvesting of the second crop normally starts in February but is more likely to begin in April next year as flooding has delayed sowing, Apichart Jongsakul, head of the Office of Agriculture Economy, told Reuters.
Wetter Jan-March likely in west, east Australia
SYDNEY, Dec 20 (Reuters) - Australia is expected to see above-average rainfall in the January to March period over most of eastern New South Wales state, southeast Queensland and western parts of Western Australia, the weather bureau said on Tuesday.
In its latest season outlook, the Bureau of Meteorology said that the chances of receiving above-average rain in these areas was between 60-70 percent.
Poland's 2011 grain harvest seen down 3.3 pct
WARSAW, Dec 19 (Reuters) - Poland's grain harvest is estimated to have fallen 3.3 percent in 2011 to around 24.3 million tonnes due to unfavourable weather conditions, Poland's statistics office said on Monday.
Intensive rainfall in autumn 2010 delayed sowings, which left plants vulnerable to severe frosts in the winter, the office said. Unusual spells of snow and low temperatures in May also took their toll, while further rains in June hindered harvest.
Ukraine ships maize to Japan under 800,000 T deal
KIEV, Dec 19 (Reuters) - Ukraine sent to Japan on Dec. 18 the first 64,000 tonnes of maize under an 800,000 tonne contract, analyst ProAgro said on Monday.
A market source said last month Japan had bought about 800,000 tonnes of maize from Ukraine for shipments between November and March to diversify suppliers.
India farm min sees record 2012 wheat output
NEW DELHI, Dec 19 (Reuters) - India is on track to produce a record wheat crop in 2012, Farm Minister Sharad Pawar said on Monday.
"The wheat crop looks better than last year. As the acreage is higher and the weather conditions have become very favourable it would be a record crop this year," he said.
Ukraine grain exports nearly 1 mln T Dec 1-16
KIEV, Dec 19 (Reuters) - Ukraine exported about 980,000 tonnes of grain, mostly maize, between Dec. 1-16, analyst ProAgro said on Monday, citing data from Ukrainian sea ports.
The consultancy said the volume included 664,000 tonnes of maize, 251,000 tonnes of wheat and 39,000 tonnes of barley.
India Needs To Boost Grain Output By Up To 25 Mln Tons By 2016-17 (Source: CME)
India will have to boost its annual food-grain output by 20 million to 25 million metric tons from the current level by 2016-17 to feed its growing population and to meet the requirement of a proposed food security program, Farm Secretary P.K. Basu said. The South Asian nation of 1.2 billion people is the second-largest producer of both wheat and rice, and it posted a record food-grain output of 241.56 million tons in the crop year ended June 30. While consumption is rising due to the expanding population, the government will also have to procure more grains because of the food security program--the cabinet cleared the draft law Sunday--that seeks to extend the reach of the existing public food distribution system that sells rice, wheat and a few other items to low-income families at below-market prices.
"Our focus will be to bring a green revolution in the eastern states and improve productivity of crops in rain-fed areas," Basu said during an interview to Dow Jones Newswires. He said the government is also gearing up to handle higher supplies required for the food-security program. India will annually require 60 million to 61 million tons of grains for the food security program, up from about 55 million tons it needs for current state-run welfare schemes. The government is expected to spend an additional INR1.1 trillion to boost farm production and productivity over the next five years. Basu said India's wheat output in 2011-12 is expected to exceed last year's 85.93 million tons due to higher acreage and better productivity. Wheat acreage will likely be 200,000-300,000 heaters more from last year's 29 million hectares, despite a slight delay in the start of sowing, he said.
Farmers have planted wheat on 24.4 million hectares until Friday, up from 24 million hectares a year earlier, according to government data. Basu said India's oilseed output this year will likely fall below the target of 33 million tons as some acreage has been shifted to pulses and wheat. "We are trying to achieve at least last year's level," he added. India produced a record 31.1 million tons of oilseeds in the last crop year ended June 30. Lower oilseed production this year may lead to higher imports by the world's top edible oil buyer. According to industry executives, edible oil imports in 2011-12 are likely to rise to about 9.0 million tons from 8.37 million tons last year.
Fitch Lowers Outlook On Cargill To Negative, Citing Income Pressure (Source: CME)
Fitch Ratings lowered its outlook on Cargill Inc.'s credit rating to negative from stable, saying the world's largest agricultural commodity trader continues to face earnings pressure. Fitch's credit rating for the company is A, five levels above a junk-grade rating. The rating firm said Cargill's credit profile could be weakened by its lower cash balances and the absence of its equity stake in Mosaic Co. Cargill sold its majority investment in the fertilizer producer this year, but its cash balances are expected to be lower in part because of its recent streak of acquisitions. Downward pressure on commodity prices, slowing global demand and euro-zone turmoil could also weigh on earnings. Fitch said that if Cargill's earnings continue to weaken without materially lower debt levels, it could lead to negative rating action. Significant debt reduction or earnings improvement could cause Fitch to raise its outlook to stable.
The privately held U.S. conglomerate's activities range from grain handling and storage to meat packing and energy trading. Commodity markets have swung wildly in recent months as global economic uncertainty and currency fluctuations have prompted investors to move money in and out of commodities. In October, Cargill reported a sharp drop in its fiscal first-quarter profit as volatile markets limited opportunities for the conglomerate, though revenue rose.
Vietnam Rejects Indian Corn On Quality, Buys From Argentina (Source: CME)
Vietnam has rejected a cargo of Indian corn because of quality concerns and resold the grain to another southeast Asian buyer, trading executives said. The shipment was rejected earlier this month at Hai Phong port because the destructive pest trogoderma granarium was detected, according to a Ho Chi Minh City-based executive at a grain trader. He added that since October at least seven corn shipments from India have had to be refumigated before clearance at Hai Phong port. These shipments totaled 45,000 metric tons. Traders in India confirmed the rejection of one shipment. They added other shipments were accepted only after refumigation. Nevertheless, they contested these shipments had been properly fumigated in India and that pests could not survive this process. A possibility, they suggested, is that the shipments were infested at the Vietnamese port. They asserted other importers including Malaysia and Indonesia haven't complained about quality.
If pests are detected in shipments to Vietnam they must be quarantined and refumigated on a case-by-case basis before quality clearance. This results in delays, according to another trader in Vietnam. Delays to several recent shipments have forced feedmillers to buy corn from Argentina and also substitute it with cheaper Australian feed wheat. Indian corn shipments faced similar problems in Vietnam a year ago. Some of them were resold to Indonesian buyers. Exporters in India contend that complaints about quality give Vietnamese buyers the chance to cancel costlier contracts at a time when global prices have declined sharply. The rejected cargo was purchased several weeks ago at around $310/ton C&F, while Indian corn is now being offered to Vietnam at around $270/ton. "It makes sense to wash out costlier deals and then buy again at lower levels," said a grains exporter in Mumbai. However, buyers in Vietnam say quality issues were being faced even before the latest fall in prices.
Vietnamese feedmillers are now seeking other suppliers and have purchased their first corn from Argentina in almost four months. Traders said a 20,000-metric-ton Argentinian corn shipment was purchased at $289/ton, basis cost and freight for shipment to Hai Phong port in February. Buyers are also taking Australian feed-grade wheat on a delivered basis at around $260/ton, Ho Chi Minh City and $263/ton, Hai Phong port. Wheat and corn are direct substitutes as animal feed ingredients but scope for such swaps is more apt for pork than poultry. Pork dominates Vietnam's meat industry.
Cameroon 2011-12 coffee output seen up at 65,000 T
YAOUNDE, Dec 19 (Reuters) - Cameroon coffee production may nearly double in 2011-12 to 65,000 tonnes, recovering from a dismal previous season, a senior official at industry regulator CCIB told Reuters on Monday.
He said coffee plants that had been rested during the 2010-11 season will become productive again and enhanced use of herbicides will reduce disease.
Strong Harmattan worries Ivorian cocoa farmers
ABIDJAN, Dec 19 (Reuters) - Dry Harmattan wind mixed with parched weather across Ivory Coast's cocoa regions could hamper development of the main crop in the world's top cocoa grower, farmers said on Monday.
Farmers said they were concerned by the particularly strong Harmattan wind, the dry west African trade wind which blows south from the Sahara desert to the Gulf of Guinea from December to March, because the scale could determine the size of the main crop.
Brazil coffee crop outlook cut due to dry weather
LONDON/BRASILIA, Dec 19 (Reuters) - A prolonged spell of dry weather has led to a scaling back of coffee crop estimates for top producer Brazil.
The consensus amongst international coffee trade houses for Brazil's coming 2012/13 crop is around 55 million to 58 million 60-kg bags, down from previous expectations in excess of 60 million.
Ivorian cocoa arrivals up 13 pct from year ago
ABIDJAN, Dec 19 (Reuters) - Ivory Coast's cocoa output is running about 13 percent higher than in the last season, but the performance is unlikely to last beyond mid-January, exporters estimated on Monday.
Arrivals at ports in the top grower nation reached around 574,000 tonnes by Dec. 18 from the start of the season in October, up from 506,970 tonnes registered in the same period last year, the exporters said.
U.S. crude extends gains, up $1 on supply worry
LONDON, Dec 20 (Reuters) - U.S. crude extended gains to rise $1, on worries about supply, even as euro zone concerns dented sentiment on other demand-sensitive assets like equities.
By 0846 GMT, U.S. light crude had touched the day's high of $95.05, $1.00 higher.
Thailand diesel exports down in Dec as domestic demand rises
SINGAPORE, Dec 20 (Reuters) - Thailand's diesel exports fell in December as domestic demand increased with year-end holidays and as vehicles returned to the streets after the country's worst floods in 50 years, industry sources said on Tuesday.
Diesel exports to Singapore nearly halved in the first two weeks of December to 628,340 barrels, from the same period a month ago, data from Singapore's International Enterprise showed.
China halves Jan Iran oil imports in payment dispute
BEIJING, Dec 19 (Reuters) - China's top refiner Sinopec Corp will in January buy less than half the crude it typically imports from Iran, trade sources said on Monday, as the two haggle over terms against a backdrop of rising international pressure on Tehran.
Iran's largest crude buyer has cut its January purchases by about 285,000 barrels per day (bpd), sources said. That is over half of the close to 550,000 bpd that China has been buying on annual contract this year.
Crude Oil Rises a Third Day in New York on U.S. Economy, Iran Tension (Source: Bloomberg)
Oil climbed for a third day in New York as investors bet that signs of an economic recovery and shrinking stockpiles in the U.S., the world’s biggest crude- consuming nation, indicate fuel demand may increase. Futures advanced as much as 0.4 percent after the industry- funded American Petroleum Institute said crude inventories declined 4.57 million barrels last week. An Energy Department report today may show supplies fell 2.13 million barrels, according to a Bloomberg News survey. Prices surged 3.4 percent yesterday on U.S. housing data that beat economists’ estimates and signs shipments from Iran may be curbed. Crude for February delivery rose as much as 37 cents to $97.61 a barrel in electronic trading on the New York Mercantile Exchange at 10:40 a.m. Sydney time. The contract yesterday climbed $3.19 to $97.24. Prices are 6.8 percent higher this year after gaining 15 percent in 2010.
Italy 11-month steel output up 11.8 pct-industry
MILAN, Dec 19 (Reuters) - Steel output in Italy, the European Union's second-biggest producer after Germany, rose 11.8 percent year on year to 26.673 million tonnes in the first 11 months of 2011, industry body Federacciai said on Monday.
In November alone, Italy's steel output rose 12.2 percent to 2.566 million tonnes, according to data published on Federacciai's website. (www.federacciai.it)
Japan crude steel output hits 10-year low for Nov
TOKYO, Dec 19 (Reuters) - Japan's crude steel output fell 3.2 percent in November from a year earlier to the lowest level in 10 years for that month, an industry body said on Monday, after floods in Thailand, an Asian hub for car production, reduced demand for steel.
The November output figure, which is not seasonally adjusted, was 8.7 million tonnes. That was the lowest for the month since 2001, when November output totalled 8.1 million tonnes, the Japan Iron and Steel Federation said.
Mexico copper output up in Oct, silver nudges down
MEXICO CITY, Dec 19 (Reuters) - Mexican copper output jumped 126.4 percent in October as production continued to rise at the massive Cananea mine after a three-year strike ended last year, data from the National Statistics Institute showed on Monday.
Silver production fell to 313,317 kg in October, down 2.0 percent compared to a year ago, the institute said.
Copper Climbs as U.S. Housing Forecast Boosts Optimism on Demand (Source: Bloomberg)
Copper rose in New York after a report showed U.S. housing starts rose last month, boosting the outlook for metals demand. Builders in the U.S., the world’s second-biggest copper buyer, began work on the most homes in more than a year, a sign the market may be stabilizing heading into 2012. The metal also advanced as European leaders pledged 150 billion euros ($195 billion) to the International Monetary Fund to fight the region’s debt crisis. The euro rose as much as 1 percent against the dollar. “The U.S. is showing slow but consistent improvement,” Matthew Zeman, a strategist at Kingsview Financial in Chicago, said in a telephone interview. “Trading is also going to be dictated by what the dollar is doing in this low-volume week ahead of the holidays.”
METALS-London copper climbs off 2-day low on IMF fund boost
KUALA LUMPUR, Dec 20 (Reuters) - London copper inched up on Tuesday, edging off a two-day low in the previous session, as a euro zone pact to raise IMF resources boosted market confidence, though investors' year-end caution is set to push copper to its first annual decline in three years.
Three-month copper on the London Metal Exchange gained 0.32 percent to $7,283 a tonne by 0437 GMT, reversing some losses from the previous session, when prices dropped 1.2 percent. The metal, used in pipes and wires, has fallen 24 percent this year.
PRECIOUS-Gold tests $1,600 but Europe anxiety weighs
SINGAPORE, Dec 20 (Reuters) - Spot gold struggled to breach $1,600 an ounce on Tuesday, as investors remained nervous over the progress of a solution to the euro zone debt crisis, while a firmer dollar may cap gains in bullion.
Asian stocks and the euro held steady, but sentiment remained fragile on concerns that efforts to contain the euro zone debt crisis were faltering and tougher rules to strengthen banks' capital would further undermine their profits.
Gold Climbs Most This Month as IMF Pledge Boosts Euro Against U.S. Dollar (Source: Bloomberg)
Gold rose for the second time in three sessions as a weakening dollar boosted demand for the metal as an alternative asset. The euro advanced against the U.S. currency after Europe pledged 150 billion euros ($196 billion) to the International Monetary Fund to help stem the region’s debt crisis, and as the European Central Bank widened its support for bond markets. Bullion also gained after German business confidence unexpectedly rose for a second month in December. “We moved up on a better-bid euro, after the headlines that the IMF may put in more funding to help Europe,” Bart Melek, an analyst at TD Securities in Toronto, said in an e- mail. Investors buoyed by signs of progress in Europe had a bigger appetite for risk and were more willing to bet on assets that may bring better returns than the dollar, which is often sought as a haven during market turmoil, Melek said.
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