Hedge Funds Cut Wagers as Fed Signals Less Stimulus: Commodities
Hedge funds reduced bullish bets on commodities for a second consecutive week as the Federal Reserve signaled it may refrain from more monetary stimulus, increasing concern that growth will slow and curb demand for raw materials. Money managers lowered net-long positions across 18 U.S. futures and options by 2.8 percent to 1.1 million contracts in the week ended April 3, data from the Commodity Futures Trading Commission show. Bets on higher corn prices fell to the lowest since February, while those on hogs dropped by the most since May. Speculators cut wagers on costlier crude oil for a third week, and are now the least bullish in two months.
Minutes from the March 13 Fed policy meeting released April 3 showed policy makers will probably hold off on increasing monetary accommodation unless the U.S. economic expansion falters. The Standard & Poor’s GSCI gauge of 24 commodities rose more than 80 percent from December 2008 to June 2011 as the central bank set rates at a record low and bought $2.3 trillion of debt in two rounds of quantitative easing. The U.S. economy will accelerate this quarter and the next, economist estimates compiled by Bloomberg show. “The market is addicted to stimulus,” said Jeffrey Sica, the Morristown, New Jersey-based president of SICA Wealth Management who helps oversee $1 billion of assets. “This market has risen because of the liquidity push and the market will decline when it’s deprived of liquidity.”
France’s Wheat Area to Slump to Nine-Year Low on Winter Kill
France’s soft-wheat growing area may fall to the lowest in nine years after freezing temperatures destroyed fields in the European Union’s largest grower of the grain, the government’s crop office reported. The area may fall 5.4 percent to 4.72 million hectares (11.7 million acres) from 4.98 million hectares in 2011, according to data from FranceAgriMer, which last month estimated farmers had planted 5.07 million hectares of soft wheat, an increase of 1.7 percent over last year’s area. Temperatures in France’s Lorraine, Champagne and Burgundy regions fell as low as minus 20 degrees Celsius (minus 4 Fahrenheit) in February, damaging emerging wheat plants. French wheat production may be cut by 2.5 million tons due to winter kill, farm adviser Offre et Demande Agricole estimates. The estimated crop area was reviewed following the damage caused by frost, Xavier Rousselin, head of arable crops at Montreuil-sous-Bois, France-based FranceAgriMer, said by e-mail.
Slumping U.S. Crop Reserves Raising Food Costs in Election Year
U.S. corn stockpiles are poised to be the smallest in 16 years by August and soybean reserves will be lower than the government expected, potentially accelerating food-price inflation in an election year. The U.S. Department of Agriculture may say tomorrow that corn inventories on Aug. 31 will be 37 percent lower than a year earlier at 715 million bushels (18.2 million metric tons), the average of 32 analyst forecasts compiled by Bloomberg show. That compares with a projection of 801 million bushels last month. Soybean stockpiles will be 242 million bushels, down from a March prediction of 275 million, the survey showed.
The government is already predicting food inflation of 2.5 percent to 3.5 percent in 2012. While that’s down from 3.7 percent in 2011, it would be higher than gains in as many as five of the past eight years. Drivers are contending with gasoline prices that have jumped 20 percent this year, American Automobile Association data show. Global food costs rose for the third straight month in March, the United Nations said April 5. “Consumers will see additional price gains this year,” said Corinne Alexander, an agricultural economist at Purdue University in Lafayette, Indiana. “There will be no relief for consumers until later this year if high prices lead to large world crops.”
Crude Oil Declines on Economic Outlook; Brent Slides
Oil fell for the third time in four days after U.S. employers added fewer jobs than expected, damping the economic outlook in the biggest crude consumer, and Iran agreed to resume talks over its nuclear program. Futures slid as much as 1.2 percent after climbing 1.8 percent on April 5. The U.S. created 120,000 jobs in March, the smallest increase in five months, a Labor Department report showed April 6. The median estimate in a Bloomberg survey of economists was for an increase of 205,000. International negotiations with Iran’s government are scheduled to start this week, easing concern that supplies may be disrupted by the dispute over the Persian Gulf nation’s nuclear program. “The payroll number seems to be quite negative, so probably people are thinking there will be a slowdown in the economy in the US,” said Tetsu Emori, a commodity fund manager at Astmax Ltd. (8734) in Tokyo. “It might be regarded as a downside risk for the oil market and also for oil demand.”
Oil for May delivery declined as much as $1.28 to $102.03 a barrel in electronic trading on the New York Mercantile Exchange and was at $102.09 at 9 a.m. Singapore time. The contract closed at $103.31 on April 5. Prices have gained 3.3 percent this year. Brent crude for May settlement slid $1.04, or 0.8 percent, to $122.39 a barrel on the London-based ICE Futures Europe exchange. The premium of the European benchmark contract to New York futures was at $20.30, the widest gap in three days. Markets were closed in New York and London on April 6 for public holidays.
Gold Prices Gain as U.S. Employers Add Fewer Jobs Than Forecast
Gold in London rose for a second straight day after U.S. employers added fewer than jobs than forecast, boosting prospects for the Federal Reserve to use additional stimulus measures to spur growth. Payrolls climbed by 120,000 in March, the Labor Department said today. Economists forecast a gain of 205,000, the median of 80 projections in a Bloomberg News survey. Minutes from a Fed policy meeting released this week indicated that the central bank will hold off on increasing monetary accommodation unless economic expansion falters. “There’s going to be this feeling that the Fed’s minutes that said easing was off the table is not going to pan out,” Michael Gayed, the chief investment strategist who helps oversee $150 million at New York-based Pension Partners LLC, said in a telephone interview. “We’re getting the consistent message that stimulus is good for gold.” Bullion for immediate delivery gained 0.3 percent to settle at $1,636.43 an ounce. Trading on the Comex in New York is closed today for Good Friday.
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