Food crisis looms as importers sit out grain price highs
LONDON, July 12 (Reuters) - What looks to be the worst U.S. drought in a quarter of a century has given rise to an old-fashioned commodity rally on world markets, with key grain prices hitting highs which caused food crises in vulnerable parts of the globe last time around.
Seeking to protect their populations from hunger this time, many countries relying heavily on imports have held off for now, touting healthy stock levels and hoping other sources will come through and bring prices down.
China commodity demand may not pick up with GDP
--Clyde Russell is a Reuters market analyst. The views expressed are his own.--
LAUNCESTON, Australia, July 13 (Reuters) - While China's second-quarter economic growth was encouraging insofar as it wasn't worse than forecast, it actually tells us very little about what commodity demand will be like in the second half.
Gross domestic product expanded 7.6 percent year-on-year, the weakest in three years, but weak enough to add to fears that China is having a hard landing.
Hedge Funds Bet Right Before Longest Winning Streak: Commodities (Source: Bloomberg)
Hedge funds boosted their bullish commodity bets above 1 million contracts as mounting speculation that China will take more steps to boost growth spurred the longest rally in prices since February. Speculators raised their net-long positions across 18 U.S. futures and options by 8.9 percent to 1.05 million contracts in the week ended July 10, Commodity Futures Trading Commission data show. That’s the highest since April 3. Wagers on a wheat rally reached a record. The Standard & Poor’s GSCI Spot Index of 24 raw materials climbed for a third consecutive week, jumping 10 percent in the longest winning streak since Feb. 24. Global equities climbed the most in two weeks on July 13, ending the longest slump since November, after a government report showed China’s economy last quarter slowed to the weakest pace since the global financial crisis, putting pressure on Premier Wen Jiabao to boost stimulus measures.
Federal Reserve Bank of Atlanta President Dennis Lockhart said the same day that the central bank may need to begin a new program of asset purchases if recent economic weakness persists. “The Chinese numbers are telling us that there will be more easing,” said James Paulsen, the chief investment strategist at Wells Capital Management, which oversees about $333 billion of assets. “People realize that the effect of the easing that we saw in some countries will be realized over the next few months. There is a change in the direction of the wind because of a combination of these factors, and probably we are seeing some confidence building.”
Grains, Soybeans Extend Rallies on Expanding U.S. Dry Weather (Source: Bloomberg)
Corn futures rallied to a 10-month high, wheat reached the highest since February 2011, and soybeans gained on signs that a drought is expanding in the main growing region of the U.S., the world’s biggest exporter. A “large-scale, intense heat wave” will affect most of the central U.S. during the next 10 days, increasing stress on crops after the seventh driest May-to-June period since 1895, T- Storm Weather LLC said in a report. At least 50 percent of the growing region was pressured by temperatures above 90 degrees Fahrenheit (32 degrees Celsius) in 10 of the last 14 days. This month may be the warmest July in 117 years, the forecaster said. “There is no relief in sight, and most crops are running out of soil moisture to stay alive,” Gregg Hunt, a market analyst at Archer Financial Services Inc. in Chicago, said in a telephone interview. “This is setting up to be an international disaster.”
Corn futures for December delivery climbed 1.1 percent to close at $7.4025 a bushel at 1:15 p.m. on the Chicago Board of Trade, after reaching $7.49, the highest for the most-active contract since Sept. 13. Prices gained 6.8 percent for the week, the fourth straight advance and the longest since November.
GRAINS-Corn extends gains on supply woes, wheat near 17-mth top
SINGAPORE, July 13 (Reuters) - Chicago corn rose for a second straight day extending its drought-driven rally over four weeks to 45 percent, with little relief expected for the crop which has been hit by the worst drought in the U.S. grain belt in 25 years.
"A correction in prices after the release of USDA data has given opportunity for traders to buy back into the market," said Serene Lim, a commodities analyst at Standard Chartered Bank in Singapore. "We are going to see more heat and dryness in the Midwest which may severely impact soybeans as well."
Britain's wheat area highest since 2008-HGCA survey
LONDON, July 13 (Reuters) - Wheat planting in Britain rose two percent to the highest level since 2008, the Home-Grown Cereals Authority said on Friday issuing results of a survey of crops to be harvested this year.
The areas planted with rapeseed and barley also increased.
Australian wheat yields threatened by cold weather
SYDNEY, July 13 (Reuters) - Cold weather across Australia's two largest wheat growing states has slowed crop growth, officials said, threatening yields in the world's fourth-largest exporter and adding to concerns about the risk of dry weather later in the year if El Nino returns.
The grains market is currently very sensitive to any hint of weather damage after a U.S. heatwave has boosted
prices.
No flood damage to Russia grain terminal, loadings to rise
NOVOROSSIISK, Russia, July 13 (Reuters) - Russia's largest grain export terminal, the Novorossiisk Grain Terminal on the Black Sea, expects exports to rise in the new crop year to 6 million tonnes of grain even though analysts predict overall Russian exports may fall, its deputy director said.
Sergey Chebotareff, deputy director of the terminal, said in an interview in the port of Novorossiisk late on Thursday the terminal loaded nearly 5.8 million tonnes last year out of Russia's record total exports of 28 million tonnes.
In Iowa, hope fades as relentless drought decimates crops
WELTON, Iowa, July 12 (Reuters) - Bob Bowman runs his hand over a slender green corn leaf here on his Iowa farm, and sighs.
"This corn should be as high as my head right now, and it is only waist high," he says, as a cool morning breeze belies the 90-degree Fahrenheit temperatures forecast to descend by afternoon in Welton, Iowa.
India's monsoon revives, drought fears diminish
NEW DELHI, July 12 (Reuters) - India's monsoon rains were above average in the past week for the first time in the current season, the weather office said, as the downpours resumed after a worrying fortnight-long pause over the central part of the country.
The annual rains are crucial for farm output and economic growth as about 55 percent of the South Asian nation's arable land is rain-fed. The farm sector accounts for about 15 percent of a nearly $2-trillion economy, Asia's third-biggest.
W.Canada heat moderates, rain to cool crops
WINNIPEG, Manitoba, July 12 (Reuters) - A heat wave this week across the Western Canada canola and grain belt has moderated slightly, and rains forecast into next week should sprinkle some relief onto stressed crops, an agricultural meteorologist said.
Temperatures that were forecast to reach around 35 degrees Celsius (95 degrees Fahrenheit) by midweek came in slightly cooler in some areas, said meteorologist Andrew Owen of Kansas City, Kansas-based World Weather Inc, and rain was falling on Thursday morning in western and central Manitoba.
SOFTS-Cocoa steadies, eyes on demand, sugar edges up
LONDON, July 13 (Reuters) - Cocoa futures were steady digesting the previous session's losses, after a sharp fall in European cocoa grindings indicated a slowdown in chocolate demand.
Sugar and coffee markets edged higher, supported by a firmer commodities complex with markets including oil and copper rising.
China cocoa powder buyers renegotiating contracts in SE Asia - trade
SINGAPORE, July 13 (Reuters) - Several cocoa powder buyers in China are renegotiating contracts with grinders in Southeast Asia after prices of the product used in chocolate, beverages and ice cream fell more than 20 percent in the last six months, three dealers said on Friday.
No details were immediately available on the quantity involved.
Light rain, no frost seen for Brazil's coffee crop
SAO PAULO, July 12 (Reuters) - Light rain will fall today over Brazil's coffee belt, and near freezing temperatures in isolated regions of the coffee belt will not damage production areas, local meteorologists Somar said on Thursday.
Rains began falling early on Thursday in Parana state, the southernmost state of Brazil's coffee belt and most exposed to cold snaps crossing over the Andes and Argentina. Showers should spread through the day but then clear by Friday in the leading growing states, Somar said in a daily coffee weather bulletin.
Brazil's sugar output sags due to rains - Unica
SAO PAULO, July 12 (Reuters) - Wet weather over Brazil's cane belt continues to drag down sugar production in the world's largest supplier of the sweetener, with output trailing the last crop by 29 percent by the end of June, milling industry association Unica said on Thursday.
Brazil's main center-south cane region put out 6.69 million tonnes of sugar from April through June compared with 9.4 million tonnes produced over the same period last year.
Oil Drops From One-Week High on Concern China Economy Weakening (Source: Bloomberg)
Oil fell from the highest close in more than a week after Premier Wen Jiabao said China’s economic recovery hasn’t gained momentum, stoking speculation that demand may ease in the world’s second-biggest crude consumer. Futures slid as much as 0.5 percent in New York, slipping for the first time in four days. Wen said “difficulties” may persist for a while, according to the official Xinhua News Agency. Abu Dhabi started exporting its first crude through a pipeline that bypasses the Strait of Hormuz, shipping supplies to a refinery in Pakistan. Iran has threatened to shut the waterway, a transit route for about a fifth of the world’s oil shipments, in response to sanctions on its nuclear program. “News of China’s slowing growth is affecting markets,” Robin Mills, head of consulting at Dubai-based Manaar Energy Consulting and Project Management, said in a telephone interview yesterday. “The opening of the Fujairah pipeline that bypasses the Strait of Hormuz also means improved security.”
Oil for August delivery dropped as much as 42 cents to $86.68 a barrel in electronic trading on the New York Mercantile Exchange and was at $86.70 at 11:52 a.m. Sydney time. The contract gained 1.2 percent to $87.10 on July 13, the highest close since July 5. Prices are 12 percent lower this year.
OIL-Brent rises, above $101 as China cooling shows need for policy action
SINGAPORE, July 13 (Reuters) - Brent crude rose above $101 on Friday as a slowdown in China's economy renewed investor expectations that the central bank will announce more measures to revive growth, with fears of supply disruptions providing additional support.
"The headline GDP print of 7.6 percent was far from jaw-dropping stuff," said Tim Waterer, senior trader at CMC markets, in a report. "However, it was a case of small mercies for the market, with risk assets able to claw back some ground."
China's June oil demand down 0.4 pct on yr
BEIJING, July 13 (Reuters) - China's implied oil demand fell 0.4 percent in June from a year earlier, contracting for the second time in three months as refineries scaled back production to trim bulging stockpiles.
The world's second-largest oil user burned 8.96 million barrels of oil per day (bpd) last month, the lowest since October 2010, Reuters calculations based on preliminary government data showed on Friday.
Long-term oil price expectations converge on $90-95
--John Kemp is a Reuters market analyst. The views expressed are his own--
LONDON, July 12 (Reuters) - In the first six months of 2012, the most remarkable thing about oil prices is not how volatile they have been but how stable.
Spot prices have been whipped around by supply disruptions in the North Sea, Yemen, Syria and Iran, as well as inventory building by Saudi Arabia, frenzied speculation about an imminent air strike on Iran, and the ebb and flow of hopes for the world economy.
Wilbur Ross Says U.S. Coal Is Facing Years of Headwinds (Source: Bloomberg)
Billionaire Wilbur Ross, who built a company from distressed U.S. coal assets and sold it last year for $3.4 billion, says the industry’s current slump differs from earlier setbacks and may last for years because of the shale-gas boom. A combination of cheaper natural gas, environmental regulations and a mild winter has spurred the closure of mines and the loss of thousands of mining jobs in the U.S. Domestic demand is at a 24-year low and the fuel has lost its status as the leading source of electricity, with gas accounting for the same share for the first time in at least four decades. Ross, 74, started International Coal Group Inc. after buying Horizon Natural Resources Co., a mining company that went bankrupt 10 years ago amid a recession. While St. Louis-based Patriot Coal Corp. (PCXCQ) filed for bankruptcy protection last week, he doesn’t see any immediate buying opportunities.
“Last time the cycle was this bad, the problems were essentially just cyclical,” Ross said in a July 10 e-mailed response to questions. “This time the major secular trends are far more likely to be unfavorable for years to come.”
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