Bets on Raw Materials Rising Most Since ‘06 as Factories Grow: Commodities (Source: Bloomberg)
Investments in commodities are expanding at the quickest pace in six years on signs of rising economic growth, even as JPMorgan Chase & Co. and Goldman Sachs Group Inc. warn that some prices have rallied too fast. The number of futures contracts on 24 commodities from oil to copper rose 9.3 percent last month, the most since January 2006, according to data compiled by Bloomberg. Speculators are the most bullish since November, Commodity Futures Trading Commission data show. Gold and silver had the best start to a year since 1983, orange juice posted its biggest rally in more than three decades, the LMEX gauge of six industrial metals rose the most since 2006, and cattle futures advanced to a record.
Raw materials are rebounding from the first annual drop in three years on growing signs the world will skirt another recession and reports that manufacturing is expanding from China to India to the U.S. Investors are betting record-low U.S. interest rates and China’s efforts to shore up growth will bolster demand. The optimism is being tempered by Europe’s widening debt crisis, with the International Monetary Fund warning it could derail the global economy.
Corn (Source: CME)
CBOT corn ends slightly higher amid a lack of fresh news, as worries about South American supplies and strong cash prices underpin. Analysts say the market tracked changes in the U.S. dollar. Traders expect crop shortfalls in South America will drive stronger U.S. export sales, and weekly sales released reaffirmed that sales are improving. Still, questions persist about whether demand will fall again as prices climb. CBOT March corn ends up 1c to $6.43 a bushel.
Wheat (Source: CME)
U.S. wheat futures back tracktrack, ending lower amid profit-taking and ideas the market was overbought on Wednesday's rally. Traders say that recent gains on severe cold in Russia and Ukraine may have reflected a "buy the rumor" scenario, and that traders were now selling the fact. Uncertainty about Russian exports limits losses, but traders say even if the country enacts restrictions, world supplies are ample. CBOT March wheat falls 11 1/2c to $6.62 3/4 a bushel, a day after hitting a fresh 4-month high. KCBT Wheat ends down 4 3/4c to $7.17 3/4 and MGEX March wheat closes down 3/4c to $8.36.
Rice (Source: CME)
US rice futures end lower, extending their recent steep drop amid poor demand. Weak demand, both domestically and for export, has weighed on the market for months, and spot futures have hit fresh 8-month lows this week. CBOT March rice ends down 10c to $13.64 per hundredweight.
GRAINS-U.S. grains retreat; traders eye Russia's export decision
NEW DELHI, Feb 2 (Reuters) - U.S. wheat slid around half a percent as investors booked profit, snapping a two-day winning streak fuelled by the possibility that Russia may clamp down on exports after bitter cold ravaged the Black Sea region.
"The fall is a natural corollary after a sharp rise in the past two days, due to concerns over production in the Black Sea and fears that Russia could restrict exports," said Jonathan Barratt, chief executive of BarrattBulletin, a Sydney-based commodity research firm.
China plays down rising corn import concern-senior official
BEIJING, Feb 2 (Reuters) - China has not changed its grain import policy and will continue to allow an "appropriate volume" of imports, playing down global concern over rising corn imports by the world's second-largest consumer, a top government agriculture official said on Thursday.
"There is no change regarding the country's grain import and export policy," Chen Xiwen, director of the Office of Central Rural Work Leading Group, the top body which guides the country's agricultural policy, told a news conference.
Cargill, CHS to expand U.S. PNW grain export venture
CHICAGO, Feb 1 - U.S. agribusiness firms Cargill Inc and CHS Inc said on Wednesday they are expanding their joint grain export venture in the Pacific Northwest.
Temco, a 50-50 Cargill-CHS venture which operates a facility in Tacoma, Washington, will expand to include facilities in Kalama, Washington, that is leased by CHS, and the Cargill Irving Elevator at Portland, Oregon, the two firms said in a joint statement.
S.Africa corn output forecast revised down-attache
Feb. 1 - Following are selected highlights from a report issued by a U.S. Department of Agriculture attache in South Africa:
"Commercial farmers in South Africa planted 2.63 million hectares of corn for the 2011/12 MY (2012/13 MY for South Africa), almost 11 percent more than the previous season's 2.37 million hectares on the back of higher domestic corn prices.
U.S. seeks to idle fragile land amid crop boom
WASHINGTON, Feb 1 (Reuters) - The U.S. government will idle "as many acres as we possibly can" of fragile farmland but record-high grain prices are pulling land into crop production, a senior Agriculture Department official said on Wednesday.
Some 6.5 million acres could return to tillage when Conservation Reserve contracts expire this fall. That's one-fifth of the land in the government's program and may be the largest turnover ever for the reserve, created in 1985 during an agricultural recession.
China to invest in agriculture innovation to boost food security
BEIJING, Feb 1 (Reuters) - China said on Wednesday it would boost agriculture innovation in an effort to increase food output, signaling that the world's most populous country is trying to tackle outdated farm and food infrastructure to feed its people.
China accounts for a fifth of the world's population with less than 9 percent of its arable land, and the cabinet suggested in a document that China's leaders were aiming to get serious about technology to ensure long-term food supplies.
Ukraine exports 1.9 mln T grain in Jan - lobby
KIEV, Feb 1 (Reuters) - Ukraine's grain exports fell by 27 percent to 1.9 million tonnes in January 2012 compared with December 2011, Ukrainian Agrarian Confederation (UAC) grain lobby said on Wednesday.
UAC quoted its director Serhiy Stoyanov as saying the volume included 1.3 million tonnes of maize and 540,000 tonnes of wheat.
India 2011-12 Wheat Output Estimated At 88.31 Mln Tons - Officials (Source: CME)
India's wheat output this crop year is estimated to rise to a record 88.31 million tons due to higher acreage and favorable weather, senior farm ministry officials said. The country's wheat output in the year ended June 30, 2011, was 85.93 million tons. This will be the second straight year of a record crop, boosting the government's plan for introducing a food security program this year that promises cheap foodgrains to the poor and malnourished. Wheat is sown in the winter month of November and its harvesting starts from end-March to early April. Prolonged cold weather across the breadbasket states as well as good soil moisture after the monsoon has improved the crop outlook.
South Africa's 2011-12 Corn Output Seen At 11.5M Tons On Dry Weather (Source: CME)
South Africa's 2011-12 commercial corn production estimate has been revised downwards to 11.5 million metric tons, the U.S. Department of Agriculture's Pretoria attache said in a report released, as dry weather during planting season meant it occurred two to four weeks later than was optimal. Nevertheless, the USDA expects South Africa to be able to export an extra two million tons of corn in 2011-12 due to increased production, with total corn plantings standing almost 9% more than the previous year at 3.13 million hectares. Corn plantings have increased in 2011-12 due to concerns that Argentina's drought would limit global supplies, the USDA said, and because of record high domestic prices caused by exports depleting domestic stock levels. Indeed, the USDA said corn exports will likely slow down over the next few months to reach 2.4 million tons by the end of the 2010-11 marketing year, as current stock levels could be depleted before the start of the new marketing season.
South Africa has already exported almost 2.15 million tons of corn, the USDA said, including 1.47 million tons of white corn and 684,000 tons of yellow corn.
Corn Imports Don't Mean Shortfall In Domestic Market (Source: CME)
China doesn't suffer from a shortage of corn in the domestic market, despite its importing corn, a senior government official said. "We export a considerable amount of corn-based products such as starch and alcohol, and animal products that consume corn," Chen Xiwen, general director of the Office of the Central Rural Work Leading Group, told a news conference. "If we take this into consideration, we export more corn than import," he said, according to a transcript of his remarks published on a central government website. Chen also said some corn imports are aimed at balancing regional demand, and the price of imported corn in south China, a major consuming area, might be lower than domestic corn. China bought about 3 million-4 million metric tons of corn from the U.S. last year to replenish state reserves, traders said.
Farmers, Traders Pack Meeting To Discuss Rice Contract Changes (Source: CME)
Rice farmers, traders and grain elevator managers packed a CME Group Inc. meeting on possible changes to the exchange's futures contract that would tie prices more closely to the cash market. The wide gap between CME futures prices and the price of actual grain in the southern U.S., where most of the crop is grown and processed, has become a sore point for farmers, who have difficulty hedging under such circumstances. The exchange aims for convergence, when the cash-market price and futures price come together as expiration approaches. But the gap has widened in recent years, with futures at times approaching a $2 premium to the cash market. The reason for the widening gap is debated, with some farmers blaming an influx of speculative fund money into futures markets in recent years. Others, including several traders and a procurement agent with Anheuser-Busch Inc., said the weak basis was more a function of poor supply and demand fundamentals, which tend to be reflected in basis.
Traders warned moves to force convergence could reduce liquidity in what is already a thinly traded market. Fred Seamon, a CME economist leading the exchange's look at the issue, said basis started to deteriorate in the last decade as U.S. supplies grew even as world supplies tightened. While CME futures are tied to U.S. supplies, there are few other options for traders around the world who want to trade rice futures. Wednesday's meeting drew roughly 100 people, many who came from the heart of the rice industry in Arkansas and Louisiana, and others who participated by phone. Farmers said the lack of convergence is causing so much uncertainty for rice growers that many are increasingly deciding to plant corn or soybeans instead. "We are losing rice acres to other crops, and the lack of ability to comfortably hedge is a major reason," said John Owen, a Louisiana producer who has chaired a committee with the U.S.A. Rice Federation, a trade group, to examine the issue.
Owen and other proponents of change say the wheat market, which faced similar problems before the CME changed the contract a couple years ago, serves as a "road map" for rice. The changes CME put in place in wheat market allow prices charged by grain-elevator operators to fluctuate, and the rate steadily increased after the new system took effect. Rising storage costs encourage market participants to deliver grain when a futures contract expires, and price convergence depends in part on physical grain being delivered. CME said the wheat market has consistently converged since the changes were enacted in 2010. Critics of the changes to the wheat contract say the variable storage rates have caused their own distortions, with rising rates giving elevators an incentive to keep grains in storage rather and causing artificially high prices for end-users. They also say it has distorted deferred futures contract prices, and chased some speculators out of the market.
Traders also said that thanks to dramatic moves over the past couple of days, cash market prices for rice had essentially converged with futures. Rice futures have tumbled sharply the past couple days, hitting an eight-month low Wednesday. Owen said the exchange could unveil changes as soon Feb. 14, at an industry conference in Washington. Seamon wouldn't confirm that, saying that while he discussed speaking at the conference on changes to the contract, he hadn't yet been formally invited. The Commodity Futures Trading Commission, which pushed for the changes in the wheat contract, "continues to monitor the situation and to encourage the CME and the USA Rice Federation to work together to arrive at a mutually acceptable solution," a spokesman said Wednesday. Changes to encourage convergence do carry risks, and could potentially hurt volume, said Jack Scoville, a broker and vice president of Price Futures Group, and one of a relatively small number of analysts who tracks rice.
"Basically when you force convergence, you're forcing futures down to cash most of the time," Scoville said.
Iran's ships stopped from shipping Ukrainian grain
KIEV, Feb 1 (Reuters) - Traders are no longer booking cargoes on Iranian ships to transport grain exports from Ukraine
because of difficulties with payments following European Union sanctions on Iran, traders said on Wednesday.
"The issue has nothing to do with the government of Ukraine," one Ukrainian trader said. "Traders cannot book Iranian vessels
because banks refuse to transfer money to Iranian companies due to the embargo."
Macquarie sees rise in C/S Brazil cane output
LONDON, Feb 1 (Reuters) - Macquarie Bank sees 2012/13 cane output in the centre-south of Brazil at around 520 million tonnes,
about 5.5 percent up from 493 million in 2011/12, a director said on Wednesday.
"We estimate a range between 515-530 million tonnes in 2012/13 with 520 million tonnes as our best guess at this stage of the
crop," Carlos Murilo Barros de Mello, managing director of the physical and derivatives sugar trading business at Macquarie
in Brazil, said in an emailed interview.
Indonesia's Jan Sumatra coffee bean exports fall 64 pct y/y
JAKARTA, Feb 2 (Reuters) - Robusta coffee bean exports for January from Indonesia's main growing area in Sumatra slumped 64 percent to 6,306.41 tonnes from a year earlier, government trade data showed on Thursday.
Indonesia shipped 17,589.10 tonnes of robusta in the same month a year ago, Muchtar Lutfie, research head of the Indonesia Coffee Exporters Association's (AEKI) Lampung branch, told Reuters.
Brazil CS sugar output slows as harvest ends
BRASILIA, Feb 1 (Reuters) - Sugar production in Brazil's center-south region slowed to a trickle during the first half of January, data from cane industry association Unica showed on Wednesday, as a disappointing harvest draws to a close.
The cane crush from the outset of the season on April 1 until Jan. 16 stood at 492.7 million tonnes, up from 492.2 million tonnes by Jan. 1, Unica said. Sugar production was barely changed from early January at 31.2 million tonnes.
German final season sugar test content up on year
HAMBURG, Feb 1 (Reuters) - The final test on sugar beet delivered to refineries in Germany in the current 2011/12 season showed sugar content of 18.05 percent, the association of German sugar producers WVZ said on Wednesday.
This was up on the average 17.27 percent sugar content for the previous full 2010/11 season.
Exporters absent again from I.Coast cocoa auctions
ABIDJAN, Feb 1 (Reuters) - Ivory Coast conducted a second day of auctions to forward-sell cocoa on Wednesday, but a number of leading export companies continued their boycott in protest over a lack of clarity in the top grower's overhaul of its sector.
The auctions are part of a return to a regulated system aimed at guaranteeing Ivory Coast's farmers a price floor for their produce. It is a precondition for IMF-backed debt relief needed to rebuild the country after last year's civil conflict.
Brent rises above $112 on Iran, promising economic data
SINGAPORE, Feb 2 (Reuters) - Brent crude rose above $112 a barrel, extending gains for a third day on persistent worries over supply from Iran, while upbeat global manufacturing data also boosted appetite for riskier assets.
"We've got a bullish bias and the Chinese PMI data was supportive of that," said Jonathan Barratt, chief executive of Barratt's Bulletin.
Shell eyes big growth, but at big cost
LONDON, Feb 2 (Reuters) - Royal Dutch Shell said it was targeting aggressive growth in the coming years, with the start-up of big new projects and higher investments set to drive a 50 percent rise in cashflow and a 25 percent rise in oil and gas production.
However, weaker-than-expected results for the fourth quarter, partly due to dismal industry-wide refining margins, and an anaemic dividend hike, raised the question of whether Shell was simply running faster to stand still, with investments offering ever-dwindling returns.
Kazakhstan to ban light fuel exports for entire 2012
ASTANA, Feb 2 (Reuters) - Kazakhstan will extend a ban on exports of light refined fuels to the end of this year in a bid to stem re-exports of these oil products from its northern neighbour Russia, the oil and gas minister said on Thursday.
The government regularly suspends exports of oil products at the end of each year to accumulate enough fuel for spring sowing and for harvesting in the summer and autumn. The current temporary ban on oil product exports would have ended on July 1.
Oil in equilibrium at $100 - Mercuria
DAVOS, Feb 1 (Reuters) - Oil prices are comfortable around $100 a barrel and are unlikely to spike much higher for long even if Iranian oil supply is disrupted, the head of energy trading house Mercuria says.
Marco Dunand, chairman of Mercuria Energy Group, told Reuters the oil market had steadied despite turbulence in the Middle East and North Africa over the last year and tension between Iran and the West over Tehran's nuclear programme.
Oil Gains in New York, Trims Weekly Decline Before U.S. Jobs Data Release (Source: Bloomberg)
Oil rose in New York, trimming the biggest weekly decline in more than a month, before a report that may show U.S. employment increased in January. Futures gained as much as 0.4 percent, snapping the longest losing streak since August. Employment climbed by 140,000 last month after rising 200,000 in December and the jobless rate held at an almost three-year low of 8.5 percent, according to a Bloomberg News survey of economists before the Labor Department report. London-traded Brent’s premium to West Texas Intermediate widened to the biggest in 12 weeks yesterday. Crude for March delivery advanced as much as 42 cents to $96.78 a barrel in electronic trading on the New York Mercantile Exchange. It was at $96.71 at 10:08 a.m. Sydney time. The contract fell 1.3 percent to $96.36 a barrel yesterday, the lowest since Dec. 19. Prices are down 2.9 percent this week, the biggest drop since the week ended Dec. 16.
Gold Rises to Two-Month High as Fed’s Bernanke Says U.S. Economy Improving (Source: Bloomberg)
Gold rose to a two-month high after Federal Reserve Chairman Ben S. Bernanke said he sees signs the U.S. economy is improving, boosting prospects for commodity demand. “Indicators of spending, production, and job-market activity have shown some signs of improvement,” Bernanke said today in prepared testimony to the House Budget Committee in Washington. Improving growth prospects will help buoy gold as “deflationary concerns subside,” said Scott Gardner, the chief investment officer at Verdmont Capital SA in Panama. “When economic news comes in better than expected, it boosts commodities, including gold,” Gardner said in an e-mail. Gold futures for April delivery gained 0.6 percent to settle at $1,759.30 an ounce at 1:35 p.m. on the Comex in New York, after reaching $1,763.80, the highest since Dec. 2. The metal climbed 11 percent last month, the biggest January rally since 1983.
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