Commodities Decline for Third Session on U.S. Budget Impasse, Europe Debt (Source: Bloomberg)
Commodities sank a third day on speculation that U.S. lawmakers won’t agree on a plan to reduce the deficit and amid concern Europe’s debt crisis will send the region into recession. The Standard & Poor’s GSCI Index of 24 raw materials fell 1.4 percent. Cotton slumped to a 14-month low, cocoa slid to the lowest in 30 months and silver also declined. A 12-member bipartisan debt-reduction committee will probably announce today that it can’t reach agreement on deficit reductions of at least $1.2 trillion. Germany’s Finance Ministry said the country’s expansion has gotten “noticeably slower.” “The euro-zone debt crisis and news that the U.S. Congress has failed to agree to measures to reduce the budget deficit depressed commodities,” Greg Grow, the director of agribusiness at Archer Financial Services Inc. in Chicago, said in a telephone interview.
Tyson Foods Sees Flat 2012 Demand As Grain Rises
The head of Tyson Foods Inc. said that grain prices may rise again next year, leaving a flat demand outlook for the largest U.S. meatpacker as it continues efforts to pass price rises on to consumers and food-service buyers. Higher feed costs have driven a sharp increase in beef prices while even the oversupplied chicken sector has seen some recovery as producers cut back supplies after what Tyson President and Chief Executive Donnie Smith called two of the toughest summer months the industry has ever experienced. Volatile grain markets left Tyson nursing losses on hedging contracts while chicken demand was poor over the key July 4 holiday weekend, leaving the company with a 54% decline in fiscal fourth-quarter profit. Smith said Tyson's chicken segment returned to profitability in October, and forecast U.S. industry supplies would drop 4% in its 2012 fiscal year, with beef production down 1% to 2% over the same period.
The executive said on a post-earnings call that he expected U.S. gross domestic product to rise by just 1.5% next year, leading him to keep a close eye on retail demand as the company continued efforts to pass on higher feed costs. Smith also said Tyson was pushing its international expansion "as hard as we can" to offset weakness in domestic markets which he saw flat for both retail and food-service segments. Tyson forecast sales would rise above $34 billion next year from $28.4 billion in fiscal 2011, and Smith said on the call that the company would pursue its "conservative" hedging strategy despite wracking up mark-to-market losses on grain futures contracts. For the quarter ended Oct. 1, Tyson reported a profit of $97 million compared with $213 million a year earlier. Per-share earnings fell to 26 cents from 57 cents, undershooting analysts' expectations.
Earnings in the beef segment--the largest top-line contributor--were down 2.5% as revenue rose 16% on a 19% jump in average prices, but volume fell 2.3%. The chicken business swung to a loss despite 9.2% revenue growth, and volume rose 3.7% with 5.3% higher prices.
Corn
US corn futures ended lower, extending the market's recent downtrend as global economic fears prompt widespread cross-asset selling pressure caused by bearish economic and political factors. Corn prices were also anchored by an overall sluggish export sales pace. Futures fall to a 7-week low, with December corn settling below $6/bushel at $5.97 3/4 while March fell 13c to $6.05.
Wheat
US wheat futures closed lower, succumbing to the broader-based selling that filtered across asset classes. Global economic fears associated by European debt and the failure of the US supercommittee to agree on a plan to reduce deficit levels encouraged traders to reduce risk exposure. Poor export demand added to the bearish theme. However, hard-red winter wheat futures in Kansas City did pare losses, briefly trading higher on worries about dryness issues for crops in the southern Plains. CBOT March wheat ended down 6 3/4c at $5.91 1/2 a bushel as KCBT March dropped 1 1/4c to $6.78 and MGEX December dropped 12 3/4c to $8.62 1/2.
Rice
US rice futures fell, falling to 4 1/2 month lows. General weakness across broader asset classes encouraged traders to reduce risk exposure in unison with the declines seen amid other grain futures, analysts say. CBOT Jan Rice ended down 22 1/2c, or 1.5%, to $14.45 1/2/hundredweight.
Corn, wheat slip as euro zone crisis weighs on market
KUALA LUMPUR, Nov 21 (Reuters) - U.S. corn declined for a fourth day because of euro zone debt worries and increased supply as the United States harvested its crop, and other food grains also fell as the global uncertainty kept investors away from riskier assets.
"The European debt crisis means investors are putting money into lower-risk assets, which are not commodities," said Malcolm Bartholomaeus, a senior grains analyst at consultancy Profarmer Grain in Melbourne.
Algeria close to breaking grain import record
ALGIERS, Nov 20 (Reuters) - Algeria is this year close to breaking its all-time record for wheat imports, customs data showed on Sunday, after the government, worried about unrest in the wake of the "Arab Spring" uprisings, embarked on a grain buying spree.
The data seen by Reuters showed total wheat imports were 6.35 million tonnes in the January-October period of this year, up 40.5 percent on the same period in 2010.
Rain to slow final corn harvest in Ohio
CHICAGO, Nov 18 (Reuters) - Showers early next week will slow the final harvest of corn in Ohio and crop-friendly rains are expected next week in the Plains hard red winter wheat belt, an agricultural meteorologist said on Friday.
"Showers in the first half of next week will keep late harvest slow in Ohio and the rains could cause flooding in the northern Delta," said Joel Widenor, meteorologist for Commodity Weather Group.
Weather favours Russia crop planting, hard on Ukraine
KIEV, Nov 18 (Reuters) - Favourable weather is laying the foundation for Russia to dominate the regional grain export market again next season while a disastrous autumn in Ukraine is leaving farmers with tough choices over how make up for damaged winter sowings.
Russia, which plans to harvest around 100 million tonnes of grain this year, reported perfect weather conditions for its winter grains, looking forward to a second record export season in a row in the 2012/13 season.
Agribusiness Fund Goes Farther Afield For Harvest
As the global population continues to grow and investors' interest in agriculture expands, Adam Patti says it is good to stay small. His agriculture ETF, the IQ Global Agribusiness Small Cap fund, bypasses the largest, household names in the sector, such as Archer Daniels Midland, Monsanto Co., and Mosaic Co. Instead, the fund's portfolio is filled with names that Patti admits most investors have never heard of. In doing so, the fund offers a different path to diversify and invest in "hidden gems," said Patti, founder and CEO of Index IQ. Investors aren't following them, analysts aren't covering them. "These are the companies those in the large-cap space are looking to acquire," he said. But Patti isn't just awaiting a one-time pop, and said small-cap funds tend to outperform large caps.
The fund started in March, arriving in the midst of a global boom in agriculture, fueled by rising populations and income levels in emerging markets such as China, where people are eating more meat, and by substandard crops and biofuel demand. That has sent prices for crops and livestock soaring, boosting the profile for companies in fertilizer, farm equipment, seed and meat production. But as investors flock to large agribusiness companies and funds such as the Market Vectors Agribusiness ETF (MOO) -- the dominant agriculture-related mutual fund -- some of the benefits of diversification are lost, Patti said. "When people want to play the theme, they pour billions of dollars into ADM," he said. Meanwhile, smaller companies can be overlooked and undervalued, he said.
The fund corresponds to the IQ Global Agribusiness Small Cap Index, which was created in February. Patti said he doesn't expect investors to invest in his fund as opposed to Market Vectors Agribusiness, but to invest in both as part of a well-rounded approach to the agriculture sector. Compared to Market Vectors Agribusiness, the "800-pound gorilla," CROP is just a "spec on the radar," said Morningstar analyst Abraham Bailin said. It has $37 million in assets, compared to $5.7 billion for MOO. But Bailin said investors could see a good chance to diversify by investing in the IQ Global Agribusiness Small Cap fund and its roster of smaller companies. He said the largest companies in agriculture are often involved in chemicals and more exposed to energy prices, making them less of a pure play.
While the fund has outperformed Market Vectors Agribusiness since its inception, "neither one of these are yield plays," Patti said. The nascent fund has posted a three-month return of 0.22%, versus negative 4.5% for the world stock category, according to Morningstar data. Market Vectors Agribusiness has a three-month return of negative 0.15%, but both MOO and CROP have lagged the Standard and Poors' three-month return of 7.2%. Analysts have touted agriculture investments as a hedge against inflation, and as a way to invest in a global population expected to balloon to 9 billion by mid-century. "The agriculture story, regardless of how you play it, is the story in the next 10 years," Patti said. About 20% of CROP's holdings are in emerging markets in Asia, which is central to the growth story in agriculture. Another 23% are in Japan, and 32% of the holdings are in North America.
While many of the holdings would be considered obscure to the typical North American investor, its top holdings -- and top performers -- are relatively well-known. The largest holding is Tractor Supply Corp. (TSCO), a farm supply company that is broadly exposed to agriculture and has had a 49.9% return year-to-date, according to Morningstar data. Another large holding, Smithfield Foods (SFD), has surged thanks to a booming export market for pork, particularly to China. It has posted returns of 12.6% year-to-date. Many of the fund's laggards have been foreign companies, such as China Modern Dairy Holdings Ltd., which comprises 1.6% of the portfolio and has lost 25.4% year-to-date, according to Morningstar data.
Asia Rice Prices May Rise Due To Tight Supply
Asian rice prices will likely rise this month as supply continues being squeezed in Thailand, the world's largest exporter, though sales by India and Pakistan will cap gains, trading executives said. "Strain is beginning to show in the market as the government steps up purchases at the guaranteed price," a Singapore-based exporter said. Keeping a pre-election promise, the Thai government is buying unmilled rice, or paddy from growers at THB15,000 a metric ton, while the market price is THB10,000 a ton or lower. Thai rice prices have increased by around $20/ton so far this month because the government's price has now become a benchmark, said Chookiat Ophaswongse, Honorary President, Thai Rice Exporters Association. Thai 5% broken white rice is now being offered around $615/ton, free-on-board and 25% broken around $580/ton. Vietnamese rice grades are mostly between $500-$550/ton, FOB. However there aren't many buyers at current price levels.
Due to the floods and high prices, hardly any fresh sales are taking place, said Christophe Cousin, managing director of Prasert & Sons, a Thailand-based rice brokerage. Thai rice exports are likely to fall to 500,000 tons or lower this month compared with 628,000 tons in October and an average 1.0 million tons each month during the first half of 2011. Some of this shortfall in Thai supply is being met by sales from India and Pakistan, where export cargoes are cheaper by as much as $200/ton, on an FOB basis. Last week, Indonesia, the world's largest rice importer, purchased 250,000 tons from private Indian companies at $483/ton, basis cost and freight. This marks a paradigm shift in Indonesia's rice import strategy and also shows pragmatism, because Thai and Vietnam rice is costlier, a Singapore-based exporter said. If the quality is found acceptable, it may open the door for Indian rice in Jakarta permanently, another trader said.
India has already contracted sales of more than 1.0 million tons ordinary, or non-Basmati rice since allowing shipments in September. Sales from the India are definitely a boon for buyers in Asia and Africa because its absence could have made rice even costlier, a trader in Bangkok said. However, analysts point out that India has limited infrastructure and it is difficult for monthly exports to exceed 500,000 tons. India's 5% and 25% broken white rice is being offered around $440/ton and $385/ton, FOB. Prices have already bottomed out and a further downward correction is unlikely.
ICE cocoa sets 2-1/2 year low, sugar rebounds
LONDON, Nov 21 (Reuters) - ICE cocoa futures dipped to a 2-1/2 year low in early trade on Monday as the deepening economic crisis combined with bearish market fundamentals to drive prices lower.
Arabica coffee futures also eased while raw sugar rebounded from the prior session's five-month low.
India again puts off meeting on sugar export to Tuesday
NEW DELHI, Nov 21 (Reuters) - India has again put off to Tuesday a meeting to consider allowing a first tranche of sugar exports, government sources said, sending domestic prices down as traders worried ministers could not agree on the quantity for overseas sales.
Earlier, government sources had said a panel of ministers, empowered to permit exports, was scheduled to meet at 3.45 pm (1015 GMT) on Monday.
Brazil sugar output seen up in 2012/13-Kingsman
SAO PAULO, Nov 20 (Reuters) - Sugar output in centre-south Brazil is expected to rise to 32.5 million tonnes in 2012/13, some 2 million tonnes more than in 2011/12, Jonathan Kingsman, managing director of consultancy Kingsman SA, said on Sunday.
He told Reuters that he expected cane output in centre-south Brazil, the main growing region of the world's No. 1 sugar producer, to stand at 515 million tonnes in 2012/13.
China could import sugar from India -ISO
NEW DELHI, Nov 21 (Reuters) - China, set to resume sugar imports to shore up depleted stocks, could buy the sweetener from India, which is soon likely to permit this year's first tranche of overseas sales, the chief of the International Sugar Organization (ISO) said.
"It makes sense for both India and China to tie up some trade deals," ISO Executive Director Peter Baron told Reuters in an interview.
Brazil sugar losing competitiveness-Kingsman
SAO PAULO, Nov 20 (Reuters) - Brazil is losing its competitive advantage as a sugar producer because of rising costs, creating opportunities for beet growers like Russia and reducing world sugar trade, a senior analyst said on Sunday.
Jonathan Kingsman, managing director of consultancy Kingsman SA, told Reuters that Brazil, the world's No. 1 sugar producer and exporter, now produced sugar at a cost of 18-22 cents a lb, up from around 4 cents a lb in the 1990s.
Brazil Sugar Week to focus on competitiveness
SAO PAULO, Nov 20 (Reuters) - Brazil's rising costs of sugar production and the challenge of how to help the domestic ethanol industry meet strong biofuel demand will be key themes of Brazil Sugar Week starting on Monday.
The events this week will bring together several hundred traders, brokers, fund managers, analysts and industry leaders from around the world for conferences and seminars on sugar and ethanol culminating in an industry dinner on Thursday.
Dryness fears ease as rain soaks Brazil coffee
BRASILIA, Nov 18 (Reuters) - Concerns about overly-dry weather in the early stages of the development of Brazil's coffee crop have eased after good showers this week that look set to continue, a forecaster and agronomist said.
Trees had begun shedding some delicate blossoms due to dryness in the last few weeks after a burst of flowering that will essentially fix the size of the harvest in the 2012 crop in the world's No. 1 coffee grower.
Colombia '11 coffee output to miss goal but value up
BOGOTA, Nov 18 (Reuters) - Colombia's coffee growers federation said on Friday that bean production would be 8 million 60-kg bags this year, worse than earlier predictions about the impact of heavy rains on output.
This is the third consecutive year that coffee production in the world's top producer of high-quality Arabica beans will fall below the federation's target as bad weather, fungus and a tree renovation program cut output.
Indonesia rubber exports seen falling in Q4-assoc
JAKARTA, Nov 18 (Reuters) - Indonesia's natural rubber exports in the fourth quarter are seen dropping to 500,000 tonnes, from more than 600,000 tonnes per quarter so far this year, on weaker demand from key consumers such as China, an industry official said on Friday.
Worries about slowing demand could lead growers in the world's second-biggest rubber producer to cut exports if prices keep falling, the country's rubber association said, ahead of a meeting at the end of this week by top producers to discuss the market.
Euro Coal-Prices steady, no trades seen
LONDON, Nov 18 (Reuters) - Prompt physical coal prices were broadly steady on Friday with no fresh trades reported.
Europe remains flush with coal and unless the weather turns sharply colder, utilities will not need much more spot material this winter.
"Yesterday and the day before there was some activity and traders today looked happy to sit the week out," one European dealer said. "A lot of people will be happy to sit the rest of the year out seeing as we are already in the middle of November."
US coal consumption fell 1 pct last week - Genscape
Nov 18 (Reuters) - U.S. coal consumption fell 1 percent last week and was down 8 percent from the same week a year ago, according to power industry data monitor Genscape.
Coal use swings up and down seasonally and varies from week to week and region to region, depending on electricity demand to run air-conditioners or power heaters.
Crude falls on fears U.S. deficit talks may fail
KUALA LUMPUR, Nov 21 (Reuters) - U.S. crude fell more than $1 and Brent crude declined on concerns that U.S. lawmakers will fail to agree on plans to reduce the nation's deficit.
"This might give Standard & Poor's an opportunity to cut ratings further," said Alvin Liew, a senior economist at UOB Bank Ltd. in Singapore.
Pakistan Oct fuel oil imports at 6-mth low
SINGAPORE, Nov 21 (Reuters) - Pakistan has imported less than 400,000 tonnes of fuel oil for October, its lowest volume in six months, as transport problems due to heavy flooding hit demand, official data showed on Monday.
The country's main buyer, Pakistan State Oil , also bought the lowest volumes, at 780,000 tonnes, for its usual three-month cycle, just about a month ago.
Japan Oct LNG import volume up 17.9 pct
TOKYO, Nov 21 (Reuters) - Japan's liquefied natural gas imports climbed by more than 10 percent from a year earlier for the sixth straight month in October, Ministry of Finance data showed on Monday, as gas-fired power generation continued to surge due to the Fukushima nuclear crisis.
Japan, the world's biggest LNG buyer, last month imported 17.9 percent more LNG than a year earlier as heightened public concerns about nuclear safety have kept any reactor taken offline for routine maintenance from restarting.
Oil Trades Near One-Week Low on European Crisis Concern, U.S. Stockpiles (Source: Bloomberg)
Oil traded near the lowest price in more than a week in New York as investors speculated that fuel demand may falter as economic growth in Europe stalls and supplies rise in the U.S. Futures were little changed after dropping for a third day yesterday. Growth in Germany, Europe’s largest economy, may slow next year, the Bundesbank said. A U.S. Energy Department report tomorrow may show oil and fuel supplies increased last week, according to a Bloomberg News survey. Saudi Arabian Oil Co. Chief Executive Officer Khalid Al-Falih said the world economy is at risk of a double-dip recession. “We think consumption in the U.S. is still very subdued,” said David Lennox, a resource analyst at Fat Prophets in Sydney, who previously forecast oil would trade from $85 to $95 a barrel. “Any economic slowdown in Europe impacts on crude demand. We see $80 being the floor.”
Crude oil for January delivery was at $96.83 a barrel, down 9 cents, in electronic trading on the New York Mercantile at 11:52 a.m. Sydney time. The contract slipped 75 cents yesterday, or 0.8 percent, to $96.92, the lowest settlement since Nov. 9. Prices are 19 percent higher than a year ago.
Iron Ore-Spot prices may retreat after rally, China rebar falls
SINGAPORE, Nov 21 (Reuters) - Iron ore may fall this week as the market takes a breather after a rally seen to have taken place too swiftly, with sluggish steel demand in top consumer China likely to curb buying of the raw material.
Iron ore with 62 percent iron content eased 0.1 percent to $147.40 a tonne on Friday, according to the Steel Index, ending a 14-day rally that was the commodity's longest winning streak.
10 daily steel output lowest since Nov 2010
BEIJING, Nov 18 (Reuters) - Daily crude steel output in China stood at 1.664 million tonnes in the first 10 days of November, its lowest since November 2010, latest data from the China Iron and Steel Association showed on Friday.
Since October, steel mills across the country have scheduled overhauls in order to shield themselves from falling prices and slowing demand.
China imported iron ore stocks at new high in wk to Nov 18
BEIJING, Nov 18 (Reuters) - Inventories of imported iron ore at major Chinese ports hit a record 98.09 million tonnes this week, up 1.9 percent from last week, figures from industry consultancy Mysteel showed on Friday.
Iron ore prices have rallied by about $30 since reaching a 22-month low of $117 per tonne in late October, with Chinese steel mills replenishing stocks for the winter.
Baltic index falls, fleet growth adding pressure
LONDON, Nov 18 (Reuhters) - The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, turned negative on Friday as weaker sentiment and a build up of available vessels weighed on the market.
Brokers expect the shipping sector to see more turmoil in the coming months as a supply glut and growing economic gloom would keep earnings under pressure.
