Commodities Beat Financial Assets for Fifth Month in Best Streak Since ’97 (Source: Bloomberg)
Commodities beat stocks, bonds and the dollar for a fifth straight month, the longest stretch in at least 14 years, as demand for raw materials increases with expanding economies and Federal Reserve promises to boost growth. The Standard & Poor’s GSCI Total Return Index of 24 commodities climbed 4.4 percent in April, after reaching the highest level since October 2008. The MSCI All-Country World Index of equities advanced 3.9 percent, the most since December, and the U.S. Dollar Index, a gauge against six counterparts, fell 3.9 percent, touching a 33-month low. Bonds of all types returned 0.9 percent on average, based on Bank of America Merrill Lynch’s Global Broad Market Index.
Corn (Source: CME)
US corn futures tumble 2.9%, slumping as traders reduce risk premium amid hopes for improved planting opportunities. The market went into the weekend adding premium on fears of severe planting delays; now the forecasts have open window of opportunity for active planting the western Midwest, notes Chad Henderson at Price Ag Consultants. Today's declines were weather-related as the market has a perception farmers in parts of the western belt could actually finish up some corn seedings before a new rain system moves into the area. CBOT July corn was down 22c at $7.34 1/2 a bushel.
Wheat (Source: CME)
US wheat futures stumbled, backpedaling from early price gains on spillover weakness from corn. Traders booked profits on initial gains after wheat failed to attract buyers after futures spiked on crop and planting fears, analysts said. The market didn't have enough fresh supportive news to withstand pressure from tumbling corn. Meanwhile, traders said futures were a little overbought, a feature encouraging traders to take profits on recent gains. CBOT July wheat fell 1.2% to $7.97 3/4 a bushel.
Rice (Source: CME)
US rough rice futures rallied, picking up where it left off on Friday when futures climbed the exchange-imposed daily trading limit. Worries about excessive rains hurting production--including Arkansas, a key growing state-- and flooding in Missouri are underpinning futures. The threat of the US Army Corps of Engineers opening an emergency floodway encompassing 130,000 acres of prime farmland to ease near-record flooding at the confluence of the Ohio and Mississippi rivers helped lift futures to 10-week highs. CBOT July rice finished up 26 1/2c at $15.19 1/2 per hundredweight.
India Panel Defers Lifting Of Wheat, Rice Export Ban (Source: CME)
An Indian ministerial panel deferred a decision on lifting a ban on wheat and rice exports as it wanted to first take stock of requirement under a proposed food security law to increase subsidized grain sales, a senior government official said. The country is facing a dilemma as there is little space left to store grains in government warehouses. That had triggered speculation the government may soon allow limited exports of wheat and rice. India's Farm Ministry had been pushing for some exports as procurement from a bumper wheat crop is underway, but food ministry officials have opposed the move, saying that it will need to keep all the stocks bought from farmers to meet the proposed food security law. Last month, Farm Secretary P.K Basu said India can easily export 2.0 million tons each of wheat and rice because of good stocks and a likely bumper production this crop year through June.
India, the world's second-largest producer of wheat and rice, has maintained a ban on exports of the two staples for more than three years to curb inflation, although it has allowed limited shipments under diplomatic agreements. The country is expecting a record foodgrain output of 235.9 million tons in 2010-11 because of favorable weather and higher plantings, up from 218.1 million tons last year. As of April 1, India's rice and wheat stocks stood at 44.18 million tons, more than double the buffer requirement. The food ministry official, who didn't want to be identified, told Dow Jones Newswires that the ministerial panel cleared a proposal to import edible oil for subsidized sales to the poor until Sept. 30. The move will allow the world's top edible oil importer to continue supplying cheap cooking oil beyond the previous deadline of March 31 to millions of poor families.
The food ministry had proposed to import 500,000 metric tons of edible oil through various state-run agencies on behalf of provincial governments. India's state-run trading agencies have been importing edible oil regularly since July 2008 and selling them below cost for welfare programs. The federal government later reimburses the agencies for selling edible oil below cost. The state-run agencies imported around 650,000 tons of edible oil in the last fiscal year that ended March 31. India meets more than half of its total edible oil requirement of about 15 million tons through imports from Indonesia, Malaysia, Argentina and Brazil. The ministerial panel also approved a proposal to supply around 120,000 metric tons of common-grade rice and 106,234 tons of wheat flour to Maldives from April 2011 until March 2014 to honor a diplomatic request, the official said.
The panel also approved a proposal to supply a total of 5.0 million tons of wheat and rice from federal stocks to poor families over six months starting June 1, a move that will help trim stocks at overflowing warehouses.
'Crop Scouts' Ready To Measure Wheat (Source: CME)
Food makers are heading into the wheat fields of Kansas this week to get an early read on the U.S. crop -- and possibly commodity costs in the months ahead. General Mills Inc., Sara Lee Corp. and Nestle SA are expected to send employees to the nation's breadbasket as part of the state's annual crop tour. They will join government officials, millers and members of the media in assessing the impact dry conditions have had on the Kansas wheat crop. A record number of people are expected to join the tour as worries grow about the impact a poor harvest could have on wheat prices, said Ben Handcock, executive vice president of the Wheat Quality Council, an industry group that sponsors the tour. Kansas last year grew 16% of the country's wheat and is the top U.S. producer of hard red winter wheat, the variety milled into flour for bread. Prices for hard red winter wheat have nearly doubled since last summer on concerns about low supplies.
Costs could surge further for food makers and restaurants alike if the Kansas crop looks worse than expected. "Everybody wants to see this bad wheat to see if it's true," Mr. Handcock said. Rising commodity prices have pushed up the cost of flour, corn-based sweeteners and beef, among other products on which food makers and restaurants rely. General Mills and Kellogg Co. have already raised prices in response to surging costs for grains and other commodities. McDonald's Corp. also is raising prices, recently doubling its forecast for the rise in U.S. commodity costs this year to a range of 4% to 4.5%. Kellogg, Sara Lee and Kraft Foods Inc. will report earnings as the tour is under way. Commodity costs are expected to be a top issue for many food companies. For Kraft, "commodity cost-inflation expectations have increased as the prices of cheese, meat and coffee have increased," wrote Sanford C. Bernstein analyst Alexia Howard in a report last week.
Cereal and pasta maker Ralcorp Holdings Inc. is likely to face commodity cost pressures as the year goes on and hedges put in place to protect against price surges, particularly for wheat, come to an end, Ms. Howard wrote. Company employees and others on the tour, known as "crop scouts," wade into fields to count kernels and measure plants with the goal of predicting an average yield before the harvest starts in a few weeks. The projection can influence the grain-purchasing strategies of companies and forecasts for commodity prices. The crop tour will put out an estimate for the Kansas wheat crop late Thursday. The harvest in the southern Plains, which will come ahead of other major crops such as corn and soybeans, could influence whether rising commodity costs are a one-year blip or a lingering issue. Companies likely will have to pay up if farmers bring in a smaller-than-expected crop, and futures markets rally.
Analysts already expect significant losses to the wheat crop from drought conditions that stretch from southern Texas to Kansas and Colorado. Citigroup predicts farmers will produce 700 million bushels or less of hard red winter wheat, a 30% drop from last year.
US farmers still on track to plant huge corn crop
CHICAGO, April 29 (Reuters) - U.S. farmers should still be able to achieve the U.S. Agriculture Department's corn seedings forecast of 92.2 million acres -- the second-largest since 1944 -- despite weather delays in April, a grains analyst said Friday.
Planting progress is behind schedule, but it's too early for farmers to start shifting some acreage to soybeans or even to other varieties of corn.
Corn Products 1Q Profit Triples, Raises Year View (Source: CME)
Corn Products International Inc.'s first-quarter earnings more than tripled, beating analyst estimates as the company's recent acquisition of National Starch continues to drive higher sales. The company also benefited from a $58 million payment from Mexico stemming from a North American Free Trade Agreement settlement, and increased its full-year earnings estimate by $1.25, to $4.85 to $5.15 a share. The suburban Chicago company, which supplies sweeteners and starches to food processors and industrial customers, successfully passed on rising corn costs to customers, and continued to reap the benefits of last year's $1.3 billion purchase of National Starch. The acquisition is part of the company's drive to diversify, and has driven increased volumes and profit-margins. National Starch's products, including ingredients for soups, mayonnaise, sauces and yogurt, have allowed Corn Products to capitalize on the growing demand for healthier food ingredients, which have higher profit margin.
"We continue to move from basic products to more specialized offerings that command a higher selling price," Chief Executive Ilene Gordon said in a conference call. The NAFTA settlement, stemming from a finding that Mexico had unfairly tried to protect its domestic sugar producers with a tax on beverages with corn sweetener, accounts for 75 cents of the $1.25 increase it Corn Products' 2011 earnings estimate. Also contributing to the quarterly results, and the improved guidance, were rising volumes from the National Starch business, a lower tax rate and the ongoing strength of the Brazilian real, Chief Financial Officer Cheryl Beebe said. Still, Beebe warned investors that the first half of the year would be stronger than the second, as the company starts to feel more pressure from corn prices. She said rather than the 20.4% gross margin it reported in the first quarter, the full-year margin would be around 18%. "Don't multiply the first quarter by four to get a full-year number," Beebe said.
U.S. Faces Sugar Squeeze (Source: CME)
There's no candy-coating it: The U.S. is facing a sugar crunch. A potential drop in home-grown sugar coupled with government caps on imports of the sweetener could drive up prices, just before the peak Christmas season. A harsh winter has caused headaches for U.S. sugar-cane and sugar-beet farmers. Record cold in December damaged sugar cane in Florida, taking about 260,000 short tons of raw sugar out of production, according to the U.S. Department of Agriculture. Now, soil soaked by snow melt and continued cool and wet weather in the Midwest is delaying the planting of sugar beets, the source of more than half of U.S. sugar production. The delays could reduce yields of the sweetener, because the sugar content of the root increases the longer it is in the ground. As of April 24, just 10% of sugar-beet acreage has been planted in major grower states, down from 80% at the same time last year, the USDA has said.
The U.S. consumes more than 11 million tons of sugar a year and has to import some every year to cover its needs. But to shield domestic producers, the government increases tariffs on sugar imports after a limit known as the tariff-rate quota, or TRQ, of 1.2 million tons is reached. While world raw-sugar futures prices have plunged 38% since early February, U.S. prices, which are usually more stable due to the trade restrictions, have fallen 7.9%. The thinly traded domestic sugar contract for July delivery on Friday fell 2.1% to settle at 36.50 cents a pound. In comparison, world sugar futures ended at 23.38 cents, down 2.3% on the day. Responding to the Florida freeze, the USDA in April raised the TRQ by 325,000 tons for this fiscal year, which ends Sept. 30. At the time, the USDA said this increase should reduce the need for expensive sugar imports.
But it "really won't cover the loss of production that we're likely to see due to the late planting of sugar beets," said Dave Abler, a professor of agricultural economics at Pennsylvania State University. "Compared to historic standards, we're well behind getting sugar-beet acreage planted." Even if the sugar-beet harvest, which begins in early October, is poor, the U.S. by law can't raise the TRQ until April 1, when most of the domestic sugar crop has been harvested and sold. The result could be less sugar on the domestic market and higher prices, just as food manufacturers are preparing for the end-of-the-year holiday season.
Corn, wheat fall on bin Laden news, weather
MADRID/SINGAPORE, May 2 (Reuters) - Chicago corn and wheat futures fell about 1 percent on Monday after news of the death of al-Qaeda leader Osama bin Laden prompted a broad-based sell-off on commodity markets.
"It is all about erosion of risk premium. If Osama is taken out, you are going to see risk premium being wiped out from the market," said Jonathan Barratt, managing director at Commodity Broking Services in Sydney.
Australia wheat exports strong, high currency yet to impact
SYDNEY, May 2 (Reuters) - Wheat stocks held by bulk handlers in Australia fell 8 percent for the second straight month in March indicating strong exports despite the local dollar rising above US$1 during the month, making exports less competitive.
Australia's bulk storage of wheat grain at the end of March was estimated at 18.7 million tonnes, a drop of around 1.6 million tonnes from February, the Australian Bureau of Statistics (ABS) said on Monday. Stocks also fell 8 percent in February from March.
Western US Corn Belt seen drier next week, east wet
CHICAGO, April 29 (Reuters) - A drier pattern in the western half of the U.S. Corn Belt could promote planting in some areas next week, but more rain should continue to limit fieldwork in the eastern belt, a forecaster said Friday.
"Things are going to improve a bit in the western belt, but could deteriorate late next week and next weekend," said Mike Palmerino, a meteorologist with Telvent DTN.
Pakistan makes large new crop wheat exports -trade
HAMBURG, April 29 (Reuters) - Private exporters have made large sales of new crop wheat from Pakistan in the past week totaling 200,000 to 220,000 tonnes, traders said on Friday.
Sales were made to a series of buyers in countries including the United Arab Emirates, Tanzania, Malaysia and Vietnam at prices between $300 to $309 a tonne FOB Pakistani ports, traders said. Sales were largely for nearby shipment."The country's harvest, which started this month, is looking considerably larger than expected and it looks like the country will be in the export market for the coming weeks," one trader said.
India's Oct-April sugar output up 24 pct-industry sources
NEW DELHI, May 2 (Reuters) - India's sugar mills have produced 22.6 million tonnes of the sweetener since the season began on Oct. 1, up 24 percent from 18.2 million tonnes a year earlier, industry sources said on Monday.
India, the world's top sugar consumer and the biggest producer behind Brazil, is likely to churn out 25 million tonnes in 2010/11 against 18.8 million tonnes in the previous year, Indian Sugar Mills Association, a producers' body, has forecast.
Brazil coffee soaks up showers but awaits dryness
BRASILIA, April 29 (Reuters) - Brazil's main coffee regions benefited from rains in April that were at least a third
heavier than the monthly average, helping fruit fill out, but conditions must turn dry in May as farmers begin to harvest.
Data from local weather forecaster Somar showed that Minas Gerais, the biggest coffee state in the world's No. 1 grower, received 36 to 84 percent more rain than usual. Other top states, Espirito Santo and Sao Paulo, were also far wetter. "This is quite beneficial," said Somar meteorologist Marco Antonio dos Santos, pointing out one exception -- the mainly robusta-growing state Espirito Santo. Rain had disrupted harvesting there, which starts earlier than for arabica.
German 2010/11 sugar output falls on year
HAMBURG, May 2 (Reuters) - Germany produced 3.442 million tonnes of refined sugar in the 2010/11 season which has just ended, down from 4.207 million tonnes in 2009/10, the association of German sugar producers WVZ said on Monday.
A fall had been expected because of poor weather which reduced beet sugar content.
Brazil ships 2.05 mln bags green coffee by Apr. 29
BRASILIA, April 29 (Reuters) - World top coffee producer Brazil shipped 2.05 million 60-kg bags of green, unroasted coffee from April 1-28, the Carvalhaes brokerage said on Friday.
The official total for the month will be issued in May by the Council of Green Coffee Exporters (Cecafe), but taking its figure for the full month of April last year of 1.98 million bags of green coffee shipped, exports have risen this month.
Oil falls by 1 percent on news Bin Laden dead
SINGAPORE, May 2 (Reuters) - Oil prices fell by 1 percent on Monday on news that U.S. forces had killed al-Qaeda leader Osama Bin Laden, after a decade of counter-terrorism efforts that deepened U.S. military involvement in central Asia and the oil-rich Middle East.
"There's probably a knee-jerk reaction to the extent that part of the geopolitical risk has been supported by al-Qaeda, so there will be an initial sell-off," said Jeremy Friesen, commodity strategist at Societe Generale, adding that the effect of the news on prices may wane later this week.
Oil Drops on Economic Growth Concern as Bin Laden Death Boosts Volatility (Source: Bloomberg)
Oil dropped for a second day in New York on signs U.S. economic growth may moderate, as volatility increased on concern the death of Osama bin Laden will lead to retaliatory attacks. Futures slid as much as 0.6 percent after the Institute for Supply Management’s manufacturing index dropped last month and a Chinese manufacturing index fell more than forecast in April. Oil yesterday reached the highest since Sept. 22, 2008, after the al-Qaeda leader was killed in Pakistan.
Saudi lifts April oil output to 8.5 mln bpd-sources
DUBAI/KHOBAR, Saudi Arabia, May 1 (Reuters) - Saudi Arabia's crude oil output edged back up in April to around 8.5 million barrels per day (bpd) from roughly 8.3 million bpd in March as demand picks up, Saudi-based industry sources said on Sunday.
The kingdom slashed output by 800,000 bpd in March, due to oversupply, oil minister Ali al-Naimi said last month, adding that he expected production in April to be a little higher than March's level.
