Commodity indexes in rebalancing act as Brent rises
NEW YORK, Oct 6 (Reuters) - Every year around this time, the world's commodity index managers go through the annual rite of rebalancing their mix, shifting ratios that can swing billions of dollars from one market to another come January.
It is an important, but rarely dramatic, process. These mammoth products, which now boast more than $300 billion in tracking funds after growing from nearly nil a decade ago, follow fairly clear formulas for deciding whether to add or subtract oil, wheat or copper from their plan.
COMMODITIES-Strong weekly gains as copper, oil surge
NEW YORK, Oct 7 (Reuters) - Commodities fell on Friday but ended with the biggest weekly gains in three months in volatile trading, as Europe's debt problems continued to weigh on a sector recovering from a dismal third quarter. A downgrade for the credit ratings of Spain and Italy served as the latest twist in the euro zone debt saga, offsetting the positive impact of a better-than-expected U.S. jobs report for September
"Each downgrade is a more visible acknowledgment of the problems"
Corn (Source: CME)
US corn futures end lower, retreating on seasonal harvest selling ahead of an active harvest weekend. Traders were cautious not to push prices higher, bracing for an influx of freshly harvested US corn to enter the supply chain. Industry analysts expect harvest to accelerate amid warm, dry Midwest weather. Harvest was the dominant feature for traders to focus on ahead of next week's government crop report, analysts say. Corn remained vulnerable to external financial market influences, with a better than expected US jobs report helping limit declines. CBOT Dec corn ended down 5 1/2c at $6.00/bushel.
Wheat (Source: CME)
US wheat futures close mixed, with prices in Chicago and Kansas City declining while Minneapolis spring wheat continuing to surge on tight near-term supplies. MGEX, particularly the spot month, has surged due a small crop and farmers' refusal to sell at prices they feel are bound to rise, analysts say. But CBOT and KCBT fell on expected export competition from the Ukraine and ample rains expected in the southern Plains, which are badly needed for the hard red-winter-wheat crop. December CBOT ends down 1.4% at $6.07 1/2 while KCBT December falls 1.9% to $6.84 1/2. MGEX December jumped 2.7% to $9.19 1/2 while deferred contracts showed modest gains.
Rice (Source: CME)
US rice futures stumble to a three-month low amid harvest pressure and weak demand. The ongoing harvest is putting seasonal pressure on the market, which lacks any fresh fundamental news to counteract that. Outside markets also weigh, as other grains, including corn and wheat, also end lower. Weather damage to crops in Asia could give support to the market, analysts say. CBOT Nov. rice ends down 30 1/2c, or 1.9% to $15.62 1/2 per hundredweight.
China kick-starts soybean market recovery: Gavin Maguire
--Gavin Maguire is a Reuters market analyst. The views expressed are his own. To get his real-time views on the market, please join the Global Ags Forum. --
The recent heavy slump in soybean prices has reignited buy-side interest in the commodity and looks set to pave the way for a sustained recovery in the soy market.
China's 354,100-metric-ton purchase of U.S. soybeans announced on Thursday follows that country's purchase of 845,000 tons
the week prior, and has helped turn trader focus to the demand side of the market equation following weeks of supply and
macro-related attention. And with the cost of U.S. soybeans still hovering at close to its lowest levels in a year,
additional acquisitions from overseas buyers look likely in the near future.
Soy falls on yield outlook, harvest pressure; wheat firms
SINGAPORE, Oct 7 (Reuters) - Chicago soy slid half a percent, trading close to a one-year low as the market was weighed down by a forecast of higher U.S. crop yields and ideal weather aiding the harvest in the Midwest.
"There is pressure on corn and soybean prices as the harvest is progressing well with dry weather in the Midwest," said Lynette Tan, a grains analyst at Phillip Futures in Singapore.
Kazakh grain exports seen 1 mln T/month from Nov
AKKOL, Kazakhstan, Oct 7 (Reuters) - Kazakhstan, expecting a record grain crop this year, plans to raise monthly exports to 1 million tonnes from November and is trying to secure extra rail wagons to boost shipments, Agriculture Minister Asylzhan Mamytbekov said on Friday.
"In October, we plan to reach an export level of 650,000 tonnes. From the following month, we plan to export 1 million tonnes every month," Mamytbekov said during a visit to a grain elevator 100 km (63 miles) north of the capital Astana.
Argentina's key wheat area helped by rain –exchange
BUENOS AIRES, Oct 6 (Reuters) - Rains over the last week in key Argentine wheat areas improved conditions of 2011/12 crop after a dry September had raised concerns about it, the Buenos Aires Grains Exchange said on Thursday.
Lack of precipitation last month delayed corn planting and battered wheat crops in Argentina. The South American grains powerhouse is a leading wheat exporter and the world's No. 2 corn supplier.
US drought expands in Texas but rain seen soon
Oct 6 (Reuters) - A devastating drought expanded in Texas over the last week as rain showers dotting the U.S. Plains mostly missed the thirsty Southern state, according to a national drought report issued Thursday.
Moderate to locally heavy rains fell on northeastern Oklahoma and southern Missouri, but appeared insufficient to substantially change the drought there.
Coceral ups EU 2011 wheat, maize crop forecasts
PARIS, Oct 6 (Reuters) - European Union grain trade lobby Coceral raised its forecast for the bloc's soft wheat harvest in 2011 to 128.39 million tonnes from the 126.53 million tonnes estimated in July.
The forecast was in line with recent estimates by French analysts Strategie Grains, which last month put the bloc's total soft wheat output at 129.0 million tonnes.
UK 2011 wheat harvest up 3 pct on year -farm ministry
LONDON, Oct 6 (Reuters) - The U.K.'s 2011 wheat harvest is estimated at 15.4 million tonnes, up 3 percent on the year, the farm ministry reported on Thursday.
"This increase is a combination of a slightly increased yield of 7.8 tonnes a hectare, along with a 1 percent increase in the wheat area," the ministry said.
End To Ukraine Wheat, Corn Duties Boosts Export Hopes (Source: CME)
Ukraine's parliament voted to end duties on grain exports as of next year, in a move industry sources say will boost shipments from this year's expected bumper harvest. The new bill plans to abolish duties on wheat and corn put in place last year, while keeping the barley export duty at 14% but not less than EUR23 per metric ton, according to the parliamentary press service. The bill now needs to be signed by president Victor Yanukovich but is expected to come into force on July 1, 2012--a year after the current taxes were put in place. Industry groups welcomed the move to reduce the duties, which they blame for Ukraine's modest grain exports so far this year. Ukraine's agriculture ministry forecasts grain production could reach 50 million to 53 million tons in 2011, up from the less than 40 million tons harvested from last year's drought-hit crop.
"The tariffs had a very negative influence on the market as a result of which traders suffered very large losses," Leonid Kozachenko, president of the Ukrainian Agrarian Confederation, told Dow Jones Newswires. "And the state also didn't receive the desired revenues into the budget." He estimates that Ukraine has the potential to export 23 million to 24 million tons of grain in the 2011-12 marketing year. In the first three months, traders have exported a little over 3 million tons in the first three months of the current marketing year, compared to around 3.5 million tons last season. The move also comes at a time when higher grain prices in Russia--a key supplier to the world market since the Kremlin lifted a ban on shipments this year--have made Ukrainian grain more attractive.
This week, the state grain buyer for Egypt, the world's largest wheat importer, signalled it intends to add Ukraine to its approved suppliers for the first time since 2008; Ukrainian wheat was also offered as the cheapest origin in its latest tender. "Russian wheat is still the cheapest offer into Egypt, but the fact that Ukrainian wheat was offered cheaper (but not accepted) may point the way to the future, especially if current export duties are relaxed," said U.K.-based merchant, Gleadell. Still, local traders in Ukraine said they don't expect a sudden flood of exports any time soon. Poor weather earlier in the season could also limit demand as much of the wheat harvest will be of feed wheat, Gleadell added. Ukraine's government imposed export duties on grain July 1 as a result of last year's drought. Wheat export duty was 9% of the contract price but not less than EUR17 per metric ton. The corn export duty was EUR12 but not less than EUR20 per ton.
Up To 8% Of Thai Rice Crop Hit By Flooding But Price Impact Seen Limited (Source: CME)
At least two million metric tons of unmilled rice or about 8% of Thailand's main harvest has been hit by severe flooding in the northern and central parts of the country, potentially lowering output this year, trading executives and industry officials said. However, this is unlikely to have an immediate impact on global prices as Thai rice is already priced out of the market following a controversial decision by the new government earlier this year to buy rice from farmers at sharply higher prices, making exports un-viable. Rice prices in Thailand and Vietnam, two of the biggest exporters of the grain, have already been around three-year highs for more than a month, prompting most buyers to turn to cheaper sources such as India, Pakistan and Myanmar. Rice from India and Pakistan is offered at least $100/ton below Thail and Vietnamese prices. Moreover, it is too early to estimate the real damage to the crop as that would depend on how long the flooding continues.
Unless flood waters stay at current levels for long, which seems unlikely, any further increase in rice prices will be short-term and limited, said Santitarn Sathirathai, an economist with Credit Suisse. "Most of the damage is in the central Thailand and production may fall this year but we are hopeful of making up with the secondary harvest in April because the water has actually benefited the crop in the north-eastern highlands," said Chookiat Ophaswongse, former president of Thai Rice Exporters Association. While Thai government estimates show more than 1.3 million hectares or 13% of the total rice acreage affected by flooding, Chookiat said serious damage may occur only in half that area. He said the harvest will gather momentum only in December-January and waters may recede by then.
Some traders said there could still be further upside potential in prices, although that would be more a result of a new government procurement program that got underway. Under the program, the new government is buying rice from farmers at prices that are some 50% higher than last year. The other wild cards are supply fro Vietnam and demand in the Philippines. The Philippines had cut back imports last year but Typhoon Nesat has damaged part of the local crop this year, potentially raising the need for higher imports. Rainfall has also been high in Vietnam's Mekong Delta which accounts for most of the rice is exported from the country, although only a small third crop is currently being harvested in the region. Still, such developments will only have limited impact on prices as there are plentiful stocks elsewhere, said Concepcion Calpe, a senior economist with United Nations' Food and Agriculture Organization.
Rain Brings More Relief To Argentina's Parched Wheat Crop - Exchange (Source: CME)
Argentina's developing wheat crop got some relief from dry conditions thanks to mild showers during the last week, the Buenos Aires Cereals Exchange said in its weekly crop report. "Though the demand for water is still greater than the rainfall that is available, the showers gave some breathing room following a prolonged period without rain," the exchange said. The exchange forecast abundant rainfall over a large portion of the country's farming belt during the next seven days. The Agriculture Ministry is expecting 2011-12 wheat production to total 11 million to 13 million metric tons, compared with the 15 million metric tons the U.S. Department of Agriculture pegged the 2010-11 crop at.
Japan Seeks New Rice Source (Source: CME)
Japanese consumers typically prefer fresh, home-grown rice, but that isn't true this year. Demand has surged for remaining supplies of last year's harvest of the country's staple crop, as well as for foreign-grown grains. Shoppers worry that the latest domestic harvest may be contaminated with radiation from the Fukushima Daiichi nuclear accident. In Hyogo prefecture in western Japan, rice-store owner Toshikazu Nishira said online orders for U.S.-grown organic rice have jumped, despite steep tariffs on rice imports designed to protect the domestic market. In August, the orders, mostly from eastern Japan, were nearly 20 times more than normal, as people who couldn't find domestic rice from last year ordered imported rice, Mr. Nishira said. "For the first time, Japanese people seem to be worried about domestic rice," said Mr. Nishira, who has been running the business for almost 30 years. "I have no idea how long this will last, and how it might turn out."
Fukushima prefecture, showered with radiation in March, is the fourth-largest rice-producing region in Japan. It is also a big supplier for Tokyo, where government tests for rice contamination are expected to be largely finished next week. So far, one tested batch has turned up contamination near levels triggering a sales ban. But consumer advocates and others criticize the government's testing method. Mariko Sano, secretary-general of Tokyo-based consumer group Shufuren, said the amount of contamination allowed is too high, because it is the same level for rice -- which Japanese consume in quantities seven times greater than Americans -- as it is for beef and other types of food eaten in smaller quantities. "The government seems to only tighten its rules after problems have occurred, and that is creating mistrust among consumers," she said. Japan has gone through other food-safety scares since the nuclear accident, particularly the discovery this summer that contaminated beef had escaped testing.
But the safety of rice is particularly important in Japan, a country where people pay as much as $1,000 for rice cookers flecked with silver, gold or diamond dust that promise to steam up the perfect bowl.
Thailand Bolsters Flood Defenses (Source: Bloomberg)
Thai Prime Minister Yingluck Shinawatra ordered authorities in Bangkok to bolster flood defenses as the nation’s worst deluge in more than 50 years threatens to inundate the capital over the next few days. At least 269 people have been killed as a result of the seasonal monsoon rains that have hit the country since July 25, the Department of Disaster Prevention and Mitigation said on its website today. About 30 of Thailand’s 77 provinces remain underwater, the agency said. Floodwaters that shut down factories operated by Honda Motor Co., Nikon Corp. and Canon Inc. over the weekend will reach Bangkok later this week, said Yingluck, who conceded that her two-month-old administration is struggling to respond to the crisis. The city of more than 6 million people is less than 2 meters above sea level, making its susceptible to flooding.
Sugar, coffee rise aftercommodities advance
LONDON, Oct 7 (Reuters) - ICE sugar, coffee and cocoa futures advanced in early trade, after gains in other commodities due to steps by the European Central Bank to aid struggling banks helped to temper concerns about the euro zone debt crisis.
Arabica coffee futures were higher in early trade as the market extended its recent rebound, boosted by a more positive tone to other financial markets.
Indonesian cocoa output seen at 450,000 T in 2011
JAKARTA, Oct 7 (Reuters) - Cocoa output in Indonesia, the world's third-largest producer, is seen down about 25 percent this year due to wet weather and disease and will improve in 2012 to a level below initial estimates, the Indonesian Cocoa Association (Askindo) said on Friday.
Indonesia has been grappling with pests and diseases for years. Heavy rains in the main growing island of Sulawesi have again triggered the spread of Vascular-streak Dieback (VSD), a disease that attacks branches, leaves and trunk, eventually killing the trees.
I.Coast cocoa arrivals 1,460,191 T by Sept 25-data
ABIDJAN Oct 6 (Reuters) - Cocoa arrivals at ports in top grower Ivory Coast reached 1,460,191 tonnes by September 25, up from 1,184,195 tonnes in the same period a year ago, according to data from the Bourse du Cafe et Cacao (BCC) obtained by Reuters on Thursday.
The figures showed 8,427 tonnes of beans declared at the ports of Abidjan and San Pedro from Sept 19 to September 25, down from 24,025 tonnes in the same week of the 2009/2010 season. A further 2,473 tonnes were declared late by some exporters.
Armajaro sees Brazil sugar output recovery in 2012/13
LONDON, Oct 6 (Reuters) - Trade house Armajaro Trading Limited, in a preliminary forecast, sees a small year-on-year recovery in centre-south Brazilian cane output to 500 million tonnes and sugar production to 32 million tonnes in 2012/13.
The forecast is subject to no government intervention over production of ethanol from cane, Guy Toller, a director of Armajaro Trading and head of global sugar operations, told Reuters in an interview late on Wednesday.
Oil edges up in choppy trade, posts weekly gain
NEW YORK, Oct 7 (Reuters) - Oil prices edged higher in volatile trading on Friday and posted a weekly gain as supportive U.S. jobs data and a ratings downgrades of Spain and Italy buffeted markets.
"Some late price recovery came after the shock that Spain was included in the downgrades wore off,"
Natural gas ends down 3 pct on weather, supplies
NEW YORK, Oct 7 (Reuters) - U.S. natural gas futures ended down sharply on Friday as forecasts for extended mild weather plus growing supplies drove the front-month contract to another 11-month spot chart low.
"People are impressed with the big storage numbers - it looks like storage is making a beeline back to last year's record levels - and the short-term weather looks pretty bearish,"
Crude Oil Gains a Fourth Day on U.S. Jobs Growth, European Crisis Pledge (Source: Bloomberg)
Oil climbed for a fourth day in New York as investors bet that fuel demand may increase on signs of an economic recovery in the U.S. and a pledge by Europe to contain its sovereign-debt crisis. Futures gained as much as 0.5 percent, after the biggest weekly gain in seven months. U.S. employers added more workers in September than forecast, a report showed Oct. 7. German Chancellor Angela Merkel said yesterday that European leaders will do “everything necessary” to ensure that banks have adequate capital. OPEC members are likely to keep their output target for oil unchanged when they meet in December, according to Iran’s representative. “Better-than-expected U.S. data boosted the outlook for the broader economy and oil demand,” James McIntyre, an economist at Commonwealth Bank of Australia, said in a note.
Malaysia says 2012 crude oil output may rise 3.3 pct
KUALA LUMPUR, Oct 7 (Reuters) - Malaysia's crude oil production is seen rising 3.3 percent in 2012, reversing a decline this year, and liquefied natural gas production may increase, the Ministry of Finance said on Friday.
Crude output is forecast to increase to 620,000 barrels a day after an estimated 6 percent drop in 2011.
Iraq's Rumaila South output back at 460,000 bpd - oil official
BASRA, Iraq, Oct 9 (Reuters) - Iraq's Rumaila South oilfield output has been restored to 460,000 barrels per day after pipeline bombings last week and normal production of about 650,000 bpd is expected to start on Monday, the head of Rumaila operations told Reuters on Sunday.
China's refined oil product stocks up in early Oct
BEIJING, Oct 9 (Reuters) - Refined oil product stocks in China, the world's second largest oil consumer, stood at 11.62 million tonnes as of Friday, edging up slightly from the end of September despite rising fuel sales, the top economic planner said on Sunday.
The oil product inventory saw a big increase from a year earlier, the National Development and Reform Commission said on its website (www.ndrc.gov.cn), but did not give a percentage change.
Euro Coal-Prices stable on scant trade by few buyers
LONDON, Oct 6 (Reuters) - Prompt physical coal prices were little changed on Thursday, after a steep fall of $2 a tonne early in the week, while buyers were thin on the ground.
Coal has largely been immune to the volatility seen in other markets, although prices have slowly drifted lower by around $10-$15 a tonne since June.
U.S. coal co shares rally after recent battering
NEW YORK, Oct 5 (Reuters) - Shares in U.S. coal companies, which had been hammered in recent sessions, rallied on Wednesday, with Alpha Natural Resources rising 8.7 percent.
The Dow Jones coal index, which hit a year-low on Tuesday, rose 5 percent as analysts said investors were moving back into the sector after sell-offs for the past two weeks on concerns over the global economy.
Asia Coal-Australia thermal coal prices lower, China on holiday
Oct 5 (Reuters) - Australia's thermal coal price index fell slightly during the past week, with holidays in China slowing buying from the world's biggest coal consumer and Japan, Australia's biggest customer, still on the sidelines after settling a long-term contract last month.
Thermal coal on the global COAL Newcastle index for the week to date closed at $121.51 per tonne on Tuesday, down from $122.20 per tonne a week earlier.
S.Korean utilities seeking more high calorific coal-sources
SEOUL, Oct 5 (Reuters) - South Korean utilities are seeking more high calorific coal than they usually consume in a year as they prepare for winter demand and hedge against any shortage due to possible floods in Australia, industry sources said on Wednesday. The government of South Korea, the world's third-largest thermal coal buyer after Japan and China, said last Friday that it will instruct domestic utilities to secure the coal to prevent blackouts similar to the ones that hit earlier this month during the winter.
Iron Ore-Swaps fall, spot seen down when China returns
SINGAPORE, Oct 7 (Reuters) - Iron ore forward swaps mostly fell as investors bet on declining spot rates when top buyer China returns next week after a week-long break, though the focus is on how steel prices in Shanghai will perform after suffering their worst month in September.
The recent selloff in risky assets as well as signs of slower steel demand in China, the world's biggest consumer and producer, dragged Shanghai rebar futures down more than 11 percent in September, their biggest monthly loss ever.
Copper Traders the Most Bullish Since August After Biggest Rout Since ’08 (Source: Bloomberg)
Copper traders and analysts are the most bullish since August on speculation prices at a one-year low will spur China, the world’s largest buyer, to build stockpiles. Gold, sugar, corn and soybeans may also climb. Ten of 15 respondents surveyed by Bloomberg expect copper to rise next week and 5 predicted a drop, the most bullish reading in six weeks. It’s the first time in four weeks that the separate surveys forecast gains for all five commodities. Copper slumped to a 14-month low on Oct. 3 as commodities slid on concern that demand may wane as economies slow. Diego Hernandez, chief executive officer of Codelco, the world’s largest copper producer, said the next day that China should take advantage of the slump to restock. In 2008, during the worst global recession since World War II, China’s copper demand still jumped 4.9 percent, according to Morgan Stanley.
Baltic index up for 2nd day, more gains eyed
LONDON, Oct 6 (Reuters) - The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, rose for a second day on Thursday with expectations for firmer cargo activity in the coming days.
Brokers said growing vessel supply, which was outpacing commodity demand, was set to cap dry bulk freight rate gains in the coming months with economic uncertainty adding to headwinds.
Shipping faces financing squeeze
LONDON, Oct 6 (Reuters) - The shipping industry will face tougher financing conditions in the next 24 months as banks tighten credit lines with more asset sales and ship seizures expected as a rout in seaborne earnings also takes its toll, a senior banker said on Thursday.
Many European banks are restructuring and are under pressure to shrink their balance sheets in response to tougher regulations requiring them to hold more capital against their loans. Shipping companies especially in the crude oil tanker and dry bulk sectors, hit by weak earnings and an oversupply of vessels, have already found it hard to find financing.
