Weather Pushing Grains Higher at Midday (Source : CME)
Grain trade is continues to ride the poor weather higher. By David Fiala DTN Contributing Analyst
The U.S. stock market indices are mixed with the Dow index down 30 points. The interest rate products are lower. The dollar index is 106 higher. Energies are mixed with crude down $0.45. Livestock trade is mixed. Precious metals are lower with gold down $14.
General Comments
Corn
Corn trade is 14 to 18 higher with the weather marketing rolling on, in addition to stiumulus from Europe and China. The weather pattern remains dry for most growing areas, although the heat looks to abate somewhat this weekend. There are scattered systems of rain out there right now. December put in a new contract high on the close Tuesday, and traded briefly through 7 dollars this morning The bear argument will be demand destruction at these price levels. Ethanol production is expected to slide again this week, and driving demand for fuel has been soft all year. The amount fund interest in buying corn will also remain a wild card, and they are not heavily invested in corn compared to the recent past, and if they jump in it will add a lot of explosiveness to the market. Exports are delayed until tomorrow. In our expanded trading hours it seems like we fall asleep a little bit during the day. It appears the biggest moves and activity occur near the afternoon closes and during the first few hours of our evening opens.
Soybeans
Soybean trade is 32 to 36 higher with weather and demand continuing to push trade. Meal is $13 higher, and oil is 60 to 70 higher. The trade is set up for a run to the multi-year high at $15.44 as the chart lacks significant resistance. Support will be $15.00 for now. Weather remains far less than ideal, although there is more time to bail the beans out with a pattern change. The bean charts are pretty overbought which could open up some short term corrections, with the extensive fund length. Exports are delayed until tomorrow. Final Brazlian production was estimated at 67.4 million metric tons.
Wheat
Wheat trade is 15 to 20 higher across three exchanges. Russian weather remains less than ideal as harvest continues with disappointing yields, and the above normal heat in the US is stressing spring wheat during the heading phase. Rising cash prices in Russia and Europe are going to support US export competitiveness, and they have pushed to new highs. The fund interest is still pretty limited at this point, and if the funds want to be aggressive they could push the charts pretty good. Jordan skipped a tender because of price yesterday. El Nino still looks probably for fall which will hurt Australia.
Wheat Market Recap Report (Source : CME)
September Wheat finished up 38 3/4 at 838, 2 3/4 off the high and 28 3/4 up from the low. December Wheat closed up 33 1/4 at 847. This was 23 3/4 up from the low and 2 1/2 off the high. Chicago wheat traded sharply higher heading into the close of the session on concern over weather and the decline of new crop corn yields. Chicago wheat gapped higher at the opening bell and has reached contract highs not seen since September 2011. Kansas City and Minneapolis wheat both traded sharply higher on the day and posted new highs for the move. The afternoon forecast calls for cooler temperatures next week and a chance for better rainfall in some areas, but confidence in those forecasts remain low. Afternoon weather maps call for a little warmer 1-5 day forecast for the northern U.S. and extreme heat is expected to stick around for another 3-4 days in central and southern Midwest. Paris Matif wheat traded over 2% higher in anticipation of the sharply higher open for U.S. markets. Wheat is also seeing strength from a drier forecast for the Spring Wheat region of Russia where a third of their crop could see yield reduction. The market is anticipating lower production estimates for Russia on the next WASDE report. Jordan canceled their wheat tender from Wednesday after Russian offers were thought to be too high. Russian domestic and export cash wheat has surged this week in the wake of an expected lower production forecast and sharply higher U.S. markets. Wheat was able to shake off the negative outside market action as the U.S. Dollar gained 1% and stocks were marginally weaker. September Oats closed up 14 1/4 at 365 1/4. This was 8 1/4 up from the low and 1 3/4 off the high.
Corn Market Recap for 7/5/2012 (Source : CME)
September Corn finished up 35 1/2 at 709 1/2, 4 1/2 off the high and 22 1/2 up from the low. December Corn closed up 34 at 708 1/2. This was 23 up from the low and 4 1/2 off the high. December corn gapped higher on the open and surged past 7.00 early in the session. After a brief mid-day dip on profit taking, corn surged into the closing bell to finish the day near it's highs. Continued concern over decreasing new crop corn yields due to blistering temperatures this week continued to support the corn market. Afternoon weather maps called for a little warmer 1-5 day forecast for the northern U.S. and extreme heat is expected to stick around for another 3-4 days in the central and southern Midwest. Changes also include a chance for better rainfall in the Midwest and western U.S. plains in the 6-10 day map. Ethanol production for the week ending June 29th averaged 857,000 barrels per day. This is down 2.9% vs. last week and down 5.2% vs. last year. Corn used in last week's production is estimated at 91.3 million bushels, posting a new 16 week low and displaying further signs of demand destruction from the rally in corn. Corn use needs to average 98.25 million bushels per week to meet 2011/12 USDA estimate of 5.05 billion bushels. Ethanol Stocks as of June 29th were 20.3 million barrels which is also a 16 week low. This is down 2.2% vs. last week but up 9.3% vs. last year. The Brazilian government adjusted their 2011/12 corn crop production to 69.48 million tonnes, nearly 2 million tonnes higher than their last revision. Outside markets are offering minimal resistance as the U.S. Dollar surged over 1% and stocks were marginally weaker. September Rice finished up 0.145 at 15.15, equal to the high and 0.08 up from the low.
Thai rice intervention a slow motion smash
--Clyde Russell is a Reuters market analyst. The views expressed are his own.--
LAUNCESTON, Australia, July 4 (Reuters) - The Thai government's intervention in the rice market is like watching a train wreck in slow motion: you can see every step of the unfolding disaster but can't do anything to stop it.
The latest twist in the saga is the government's failure to sell even a tiny amount of its record stockpile of the grain that is the staple food of two-thirds of the world's population.
U.S. crop worry to fuel world food prices in July-UN
MILAN, July 5 (Reuters) - Searing heat in the U.S. Midwest is expected to see global food prices snap three months of declines in July, the UN said on Thursday, as some international grain prices surged to highs last seen during the 2007-08 food crisis.
Concerns about extreme hot and dry weather hitting U.S. corn and soybeans ignited a grain rally in the second part of June and a series of crop quality downgrades by the U.S. Department of Agriculture has added fuel to the rally which brought Chicago corn futures to a 10-month high this week.
Asian corn buyers caught off guard as U.S. crop wilts
SINGAPORE, July 4 (Reuters) - Corn buyers in Asia, who account for just under half of the world's imports, have been caught on the wrong side of the market as worsening U.S. drought threatens to squeeze global supplies, driving prices to a 10-month top.
Asian buyers, including top world importer Japan, had expected the corn market to soften on hopes of a record harvest in top exporter the United States.
Bulgaria to reap over 4 mln T of wheat-Agmin
SOFIA, July 4 (Reuters) - Bulgarian farmers will harvest over 4 million tonnes of wheat this year, more than initially expected due to rains in May, deputy Agriculture Minister Svetlana Boyanova said on Wednesday.
"The expected crop of over 4 million tonnes of wheat and over 700,000 tonnes of barley will completely cover domestic needs and will allow for exports," Boyanova said a statement.
Philippine H1 rice output likely up 5 pct y/y - official
MANILA, July 5 (Reuters) - The Philippines' unmilled rice production in the first six months of the year likely grew 5 percent from a year earlier to a hit a record volume, supported by favourable weather, a senior government official said on Thursday.
"We expect record rice production in the first half because of good weather," Dante Delima, assistant secretary and coordinator of the National Rice Program at the Department of Agriculture, told reporters, adding the government's irrigation support also boosted harvests. He did not give the exact volume.
Ukraine sees 20-21 mln T early grains crop in 2012
KIEV, July 4 (Reuters) - Ukraine, hit by poor weather during the sowing and wintering of major crops, expects to harvest 20 million-21 million tonnes of early grains - mostly wheat and barley - in 2012 against 34 million tonnes in 2011, farm minister Mykola Prysyazhnyuk said.
"Taking into account the grain yields in steppe and forest zones of Ukraine, we expect to harvest about 20-21 million tonnes of early grain," the ministry on Wednesday quoted Prysyazhnyuk as saying.
Indonesia to targets zero rice imports, 5.5 mln t surplus
JAKARTA, July 4 (Reuters) - Indonesia is unlikely to import rice in 2012 and is forecast to have a 5.5 million tonne surplus of the staple by the end of the year, the state rice procurement agency, Bulog, said on Wednesday.
Indonesia's unmilled rice production is forecast to rise 4.3 percent this year on good weather, the statistics bureau said on Monday.
Vietnam to stockpile up to 500,000 T rice -govt
HANOI, July 4 (Reuters) - Vietnam exporters will stockpile up to 500,000 tonnes of rice from the summer-autumn harvest in a bid to keep prices from falling, the government said. The businesses will buy the grain from July 10 to Aug. 10, the government said in a statement seen by Reuters on Wednesday.
SOFTS-ICE sugar touches 2-1/2-month high, coffee dips
LONDON, July 5 (Reuters) - Raw sugar futures on ICE rose to their highest level in 2-1/2 months supported by delays in shipments from Brazil, and readjusting after a rise in Liffe futures during Wednesday's U.S. Independence Day holiday.
Cocoa futures on ICE eased, adjusting to Wednesday's fall on Liffe, while robusta coffee posted modest losses in light volumes.
Brazil sugar delays to increase as harvest peaks
July 4 (Reuters) - Waiting times at Brazilian sugar ports, which have shortened thanks to drier weather, are likely to increase again in the coming weeks as harvesting gathers pace, a shipping agency director said.
"As the rain has subsided, there is an improvement in loadings, but with the peak of the crop coming, the waiting times should increase a bit," Glynne Williams, of Williams (Servicos Maritimos) Ltda, told Reuters in an email late on Tuesday.
Ivorian San Pedro cocoa arrivals 589,719 T by June 24-CCC
ABIDJAN, July 4 (Reuters) - Cocoa arrivals at Ivory Coast's port of San Pedro reached 589,719 tonnes by June 24 since the start of the season in October, according to data from the Coffee and cocoa council (CCC) obtained by Reuters on Wednesday.
That compared with 493,207 tonnes delivered to the port during the same period of the 2010/11 season.
Bahia cocoa flow slows as warehouses fill up
SAO PAULO, July 4 (Reuters) - Deliveries of cocoa from Brazil's top producing state Bahia eased off in the last week as warehouses became crammed after weeks of abundant arrivals, data from Bahia Commercial Association and comments from analyst Thomas Hartmann showed.
The pace of harvesting also slowed due to a local celebration held over several days each June in Brazil, Bahia-based Hartmann said. He said the storage problems were apparent in other smaller cocoa states as well as Bahia.
Australian raw sugar exports face wet weather delay
SYDNEY, July 4 (Reuters) - Australian raw sugar exports are likely to be delayed as wet weather slows the harvest of sugar cane, even though most of the crushing operations that were disrupted last week by rain have resumed, refining firms said on Wednesday.
The delays from the world's third largest sugar exporter are likely to boost sugar prices, which have firmed in the last few days as wet weather also threatens to delay exports from largest exporter Brazil.
Milk Rallying as New Zealand Weather Sours: Commodities (Source: Bloomberg)
Goldman Sachs Group Inc. says this may be the first time in five years that New Zealand, the world’s biggest dairy exporter, produces less milk, at a time when surging corn prices are raising costs for U.S. farmers. The country’s output will drop 2.4 percent in the 12 months ending June 30 as the weather turns less favorable, according to Goldman’s New Zealand unit. Supply from the seven biggest exporting regions may gain 1.2 percent in the second half of 2012, slowing from 3.2 percent in the first six months, according to Rabobank International. Futures, which rose 20 percent since mid-April, will climb a further 15 percent to $20 per 100 pounds in Chicago by Dec. 31, said Shawn Hackett, the agricultural adviser who correctly predicted the rally in March.
Milk tumbled 33 percent in the eight months to April 18 as New Zealand’s production was boosted by abundant rain that gave cattle more to eat and U.S. yields reached a record after an unusually mild winter. Global food costs tracked by the United Nations fell 15 percent since reaching a record in February 2011. The worst Midwest drought in a decade is now parching corn crops, driving prices for the feed 33 percent higher since June 15 and increasing the incentive for farmers to cull herds. “Last year was a perfect weather scenario that happens once in a long, long, long while,” said Hackett, the president of Boynton Beach, Florida-based Hackett Financial Advisors Inc. who has specialized in agriculture for almost a decade. “Animals are going to be stressed. They’re not likely to produce as much milk as last year.”
Sugar Bulls Strongest in Six Months on Brazil Rain: Commodities (Source: Bloomberg)
Sugar traders are the most bullish in six months after prices moved to within a percentage point of exiting a year-long bear market as rain delayed cane processing in Brazil, the biggest producer. Nine of 11 analysts surveyed by Bloomberg said they expect raw sugar to keep rallying next week and two were bearish, the highest proportion of bulls since Jan. 6. Futures reached an 11- week high of 22.69 cents a pound in New York yesterday. Hedge funds increased wagers on rising prices by 29 percent to the highest since April in the week ended June 26, U.S. Commodity Futures Trading Commission data show.
The sweetener has been in a bear market since September as forecasters from Rabobank International to Macquarie Group Ltd. predicted a third annual glut. Prices rallied 19 percent since the start of June after above-average rainfall in Brazil’s main growing region increased concern about shortages. Copersucar SA, which owns mills in the country, said July 2 it took delivery of about 112,000 metric tons of raw sugar against the ICE Futures U.S. exchange’s expired July contract. “The sugar turnaround has been fast because the short term supply issues in Brazil are bullish,” said Keith Flury, an analyst at Rabobank in London. “We are in a weather market.”
Raw sugar is still 3.3 percent lower since the start of the year at 22.53 cents, extending a 27 percent retreat in 2011. The Standard & Poor’s GSCI Agriculture Index (MXWD) of eight commodities rose 8.7 percent after grain prices rallied because a U.S. heat wave is wilting crops. The MSCI All-Country World Index of equities advanced 4.8 percent and Treasuries returned 1.8 percent, a Bank of America Corp. index shows.
Oil Drops in New York as Europe Concern Weighs on Demand Outlook (Source: Bloomberg)
Oil dropped a second day in New York, trimming a weekly gain, on speculation Europe’s economy will weaken, threatening global growth and demand for raw materials. Futures slipped as much as 0.7 percent, extending the 0.5 percent decline from July 3, after European Central Bank President Mario Draghi said some “downside risks to the euro- area economic outlook have materialized” as the ECB cut interest rates to a record low. London-traded Brent surged 0.9 percent yesterday as Norwegian oil producers planned to shut all offshore operations amid an 11-day strike over pensions. Oil for August delivery decreased as much as 63 cents to $86.59 a barrel in electronic trading on the New York Mercantile Exchange and was at $86.75 at 9:10 a.m. Sydney time. Prices are 2 percent higher this week for a second weekly gain, the longest winning streak since April. Crude is down 12 percent this year.
West Texas Intermediate settled at $87.22 yesterday after slipping 44 cents. Floor trading was closed July 4 for the U.S. Independence Day holiday and transactions since the July 3 close were booked with July 5 trades for settlement purposes. Brent oil for August settlement gained 93 cents, or 0.9 percent, to $100.70 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark’s premium to West Texas Intermediate closed at $13.48.
POLL-China's top refineries cut July throughput on weak demand
BEIJING, July 4 (Reuters) - Top Chinese refineries will cut crude oil processing runs in July, following gains in the previous two months, as sluggish demand, poor refining margins and high fuel stocks hurt operations, a Reuters poll showed.
The 12 plants, which make up nearly a third of the capacity in China, the world's No.2 oil consumer, are located mostly in coastal areas, and plan to process 2.88 million barrels per day (bpd) of crude oil this month, the poll showed.
OIL-Oil jumps $2 on Norway strike
LONDON, July 5 (Reuters) - Oil prices jumped $2 to more than $102 a barrel as Norway's state oil major Statoil said it would start shutting down production at its North Sea fields after its dispute with the unions over pensions hit a deadlock.
"A lockout is still a part of the legal strike," said Gro Oerset, senior adviser at the Labour Ministry.
Saudi oil prices show no Iran worries
--Clyde Russell is a Reuters market analyst. The views expressed are his own.--
LAUNCESTON, Australia, July 5 (Reuters) - If you were looking for a sign that the oil market has shrugged off the loss of Iranian supplies, look no further than the Saudi decision to raise prices for August cargoes to Asian refiners.
While Saudi Aramco uses a formula to calculate changes in its official selling price (OSP), it's also very unlikely that the state-controlled company would have boosted them if there was any doubt that the market was sufficiently supplied.
Mongolia Mining Bets China Will Double Coal Imports (Source: Bloomberg)
Mongolian Mining Corp. (975) is betting there’s enough demand from China to support the construction of an $800 million railway that will double export capacity to the nation that counts Mongolia as its biggest coal supplier. Expanding transportation links between the adjacent countries “will improve the position of Mongolia as the leading coking coal supplier to China,” Battsengel Gotov, chief executive officer of MMC, as the company is known, told reporters in the Mongolian capital of Ulan Bator. Mongolia, the world’s fastest growing economy, overtook Australia as China’s biggest coking coal supplier last year, exporting 20 million metric tons of the raw material used to make steel. MMC is building a 250 kilometer (155 mile) rail to add 30 million tons of export capacity direct to China. “There’s still room for everybody in Mongolia” to mine and sell commodities, Gotov said from the company’s head office.
MMC shares rose 3.6 percent to close at HK$4.36 in Hong Kong compared with a 2.2 percent gain in the benchmark Hang Seng index. The stock has dropped 25 percent this year as coal prices declined.
Indonesia’s Tin Exports Set to Decline as Low Prices Curb Output (Source: Bloomberg)
Refined-tin shipments from Indonesia, the largest exporter, probably dropped to the lowest level in five months in June as miners reduced production because of lower prices and bad weather disrupted ore supplies to smelters. Exports fell 7.2 percent to 7,300 metric tons last month from 7,866 tons in May, according to the median estimate of four smelter executives and an analyst in a Bloomberg survey. That’s the least since shipments of 5,380 tons in January and compares with sales of 10,875 tons in June 2011. The Trade Ministry is expected to release the data next week.
Prices have plunged 26 percent from a six-month high in February on concern the debt crisis in Europe and slower growth in China may erode demand for the metal used in soldering and packaging. Falling supplies may limit the slump, helping boost revenues at producers including Malaysia Smelting Corp. (SMELT) and PT Timah (TINS), the world’s second and third-largest producers. Prices below $20,000 ton have some adverse impact on small-scale production in Indonesia, according to ITRI Ltd. Last month’s shipments may be as low as 7,000 tons, Peter Kettle, research manager at the St. Albans, England-based ITRI, said by e-mail July 2. “My reason is lower prices resulting in lower volumes through the independent smelters.” Three-month tin fell 0.3 percent to $19,100 a ton on the London Metal Exchange at 4:55 p.m. in Singapore yesterday. The metal dropped 4.2 percent in June for the fifth straight monthly loss. The price peaked this year at $25,880 a ton on Feb. 8.
Gold Futures Fall on Stimulus Outlook, Dollar’s Rally (Source: Bloomberg)
Gold fell the most in a week on bets that the Federal Reserve may refrain from more U.S. stimulus measures, while the dollar’s rebound eroded the appeal of the metal as an alternative investment. Data from ADP Employer Services showed today that U.S. companies added more workers than forecast in June, which may ease concern that the labor market is deteriorating. The euro tumbled to a four-week low against the dollar after the European Central Bank cut its benchmark interest rate to a record. “There is now less impetus for the policy makers to expand the balance sheet,” Bart Melek, the Toronto-based head of commodity strategy at TD Securities Inc., said in a telephone interview. “The dollar’s strength is not helping matters.” Gold futures for August delivery fell 0.8 percent to settle at $1,609.40 an ounce at 1:40 p.m. on the Comex in New York, the biggest drop for a most-active contract since June 28.
In the second quarter, the metal slumped 4 percent as the dollar gained 3.3 percent against a basket of major currencies.
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