Bulls Ascendant as Wagers Climb to Three-Month High: Commodities (Source: Bloomberg)
Speculators raised bullish wagers on commodities to a three-month high on mounting speculation that more stimulus measures will boost demand for everything from oil to metals and crop prices will keep rising as drought spreads. Money managers raised their net-long positions across 18 U.S. futures and options by 7.5 percent to 1.13 million contracts in the week ended July 17, U.S. Commodity Futures Trading Commission data show. Wheat holdings reached a record, and corn bets climbed to the highest since March. Almost $2.5 trillion was added to the value of global equities since June 4 as investors anticipated policy makers would step in to bolster growth. Federal Reserve Chairman Ben S. Bernanke told Congress during testimony on July 18 that he is prepared to act to boost the recovery and central banks from Europe to China cut interest rates in the past several weeks. The worst U.S. drought in 56 years is parching crops, and a lack of rain is also wilting fields from Australia to Russia.
“You could probably call it a miniature stampede back into commodities,” said Jeffrey Sica, the Morristown, New Jersey- based president of SICA Wealth Management who helps oversee more than $1 billion of assets. “A lot of investors at this point see that increased liquidity in the market will mean more appreciation in raw-materials prices.”
Crop Sowing Delayed in Some Parts of India Due to Weak Rains (Source: Bloomberg)
The weakest monsoon rainfall in three years is delaying sowing of rice, oilseeds and lentils in several parts of India, Agriculture Secretary Ashish Bahuguna told reporters in New Delhi today. The deficient rains may prompt growers to shift to corn from peanuts in some parts, he said. The worst affected by the below-average rainfall are Karnataka, Gujarat, Maharashtra and Rajasthan states, he said. The area under all the monsoon-sown crops fell 14 percent to 53.4 million hectares from a year earlier, the agriculture ministry said yesterday. Monsoon, which accounts for more than 70 percent of India’s annual rainfall, is the worst since 2009 when showers were 22 percent less than a 50-year average.
Crop Traders Extend Bullish Streak on U.S. Drought: Commodities (Source: Bloomberg)
Corn and soybean traders are bullish for a 13th consecutive week on mounting concern that yields will keep dropping amid the worst U.S. drought in a half century. Twenty analysts surveyed by Bloomberg expect soybeans to climb next week, after reaching a record yesterday. A further five were bearish and three neutral. Nineteen predicted gains in corn, five saw a decline and three anticipated little change. Hedge funds are holding the biggest bet on rising soybeans since the beginning of May and the largest wager on corn since April, U.S. Commodity Futures Trading Commission data show.
The drought may persist in the Midwest for the rest of the growing season, the U.S. government said this week. Above- average temperatures and below-normal rainfall will continue through next week, according to meteorologist Telvent DTN. The 56 percent jump in corn and 28 percent gain in soybeans since mid-June may spur another bout of global food-price inflation, after surges in 2008 and 2011 that sparked civil unrest in developing countries, Barclays Plc said in a report July 18. “There’s not much reason for us to see a slowdown in the price rally,” said Erin FitzPatrick, an analyst at Rabobank International in London, who predicted in April that soybeans would reach a record. “The size of the 2012-13 harvest is shrinking every day that we don’t get rain or a cooling off in the U.S. It’s fundamentally still bullish, even though we’re at these record prices.”
Argentina Wheat Export Cap Benefits Heineken, Pig Farmers (Source: Bloomberg)
Argentina’s policy of capping wheat exports to contain food inflation is having the “perverse effect” of benefiting brewers such as Heineken NV (HEIA) and cheapening feed for pig farmers in China, wheat growers said. Argentine farmers in an area known in the first half of last century as the world’s granary basket will boost barley planting by 17 percent this year at the expense of wheat, which will shrink to the second-lowest in a century, the Buenos Aires Cereals Exchange said yesterday. Barley isn’t part of President Cristina Fernandez de Kirchner’s export restrictions. The government is considering increasing taxes on grain exports, Lapoliticaonline reported today.
Breweries such as Heineken and Anheuser-Busch InBev NV (ABI), the maker of Budweiser, stand to gain as Argentina lowers one of their main costs, Raul Maestre, the treasurer of Argentina’s wheat growers association said in a telephone interview yesterday. Growers are also attracted to barley as rising corn prices are causing pig and chicken farmers in China to switch to barley as feed, he said. “Farmers are running away from wheat because of this government intervention,” Daniel Miro, president of agro- industrial consulting company Novitas SA said in a telephone interview yesterday from Buenos Aires. “Barley is an emerging cereal.”
Wheat Market Recap Report (Source: CME)
September Wheat finished up 8 1/4 at 943 1/4, 1 1/2 off the high and 26 1/2 up from the low. December Wheat closed up 13 3/4 at 948 1/4. This was 26 up from the low and 3 1/4 off the high. September Chicago wheat traded higher into the closing bell, posting another new high for the move. Kansas City and Minneapolis wheat also traded higher on the day. Wheat found support from sharply higher corn market after weather forecasts show temperatures are expected to reach 95-105 degrees in Kansas, Missouri, South Dakota, Iowa, and Nebraska into next week; increasing stress on crops. Wheat is also being supported on shrinking production estimates in the Black Sea as warm and dry weather continues to lower yield potential. Current trade estimates peg Russian wheat production for 2012/13 near 45 million tonnes vs. the current USDA estimate of 49 million tonnes. The market believes the small US corn crop will force importers to use more feed wheat in the coming year. Japan's usage of corn in May dropped to a 20 year low as the world's largest importer of corn continues to use wheat. This trend is likely to remain intact going forward. Grain markets are trading higher despite the negative outside markets and a sharply higher US Dollar. September Oats closed up 3 1/2 at 387. This was 5 up from the low and 1 3/4 off the high.
Pro Farmer: After the Bell Wheat (Source: CME)
Recap Wheat futures saw another choppy day of trade, but bulls again carried the market into the close. Chicago and Minneapolis wheat settled moderately higher, while Kansas City wheat saw lighter gains. Wheat surged sharply higher week-over-week. Wheat's action was tied to that of the corn market this week and more of the same can in the week ahead. The corn rally has shown signs of sputtering, then surged higher. This signals a top is likely near.
Pro Farmer: After the Bell Corn Recap (Source: CME)
To cap off a strong week of price gains, September corn posted an all-time high for a front-month contract as traders fear next week's extreme heat will further damage yield potential and there's not enough rain in the forecast to really make a difference. Many traders had an upside target of $8.00 as the drought was gaining momentum, as they recognize that price should (and has) slowed demand. That's not to say prices won't or can't continue to rally, as focus is turning to areas where traders had anticipated near-trendline yield potential, only to see a forecast for increased stress next week.
Corn Market Recap for 7/20/2012 (Source: CME)
September Corn finished up 16 3/4 at 824 1/2, 4 1/4 off the high and 25 up from the low. December Corn closed up 17 1/4 at 795 3/4. This was 16 3/4 up from the low and 1 1/4 off the high. September and December corn traded sharply higher into the close. September corn posted a new high for the move while the December contract once again failed to move above the 800 level, offering a slightly negative technical view. The trade believes crop conditions could lose another 3-5% on their good/excellent ratings on Monday's Crop Condition report. Weather forecasts continue to look abysmal for US row crops the next two weeks with below normal rainfall and above normal temperatures in the central Midwest. Temperatures are expected to reach 95-105 degrees in Kansas, Missouri, South Dakota, Iowa, and Nebraska this week; increasing stress on crops. The blistering temperatures are expected to last until the middle of next week. Iran bought 50,000 tonnes of Brazilian corn today and sluggish export sales reported yesterday suggest demand is slowly backing off. The bearish demand headlines are being offset by lower corn yield estimates. A closely followed commodity weather agency revised their new crop corn yield to 136.2 bushels/acre. This was down from 152.2 bushels per acre. Yield could fall further if current weather patterns persist into August. Grain markets are trading higher despite the negative outside markets and a sharply higher US Dollar. September Rice finished up 0.04 at 15.535, equal to the high and 0.025 up from the low.
Shoppers may be spared worst of corn price surge
NEW YORK, July 19 (Reuters) - U.S. grain prices are soaring as the Midwest corn belt suffers its worst drought since 1956, but that doesn't mean grocery bills are about to jump.
Easing costs of other commodities, hedging strategies aimed at keeping corn costs in line and fears of turning off consumers in a weak economy should all keep packaged food companies from hiking prices, at least in the short term.
GRAINS-US corn climbs, extends drought-fed rally to 55 pct in 5 wks
SYDNEY, July 20 (Reuters) - U.S. new-crop corn rose taking its drought-driven rally to more than 55 percent in five weeks, as crops continued to wilt under a searing Midwest heat, stoking fears of a food shortage.
"Funds were in buying all three grains last night, and I think that will continue on, though the book will be squared before the weekend."
Japan corn use in animal feed falls to two-decade low
TOKYO, July 20 (Reuters) - Japan's usage of corn in animal feed reached a 20-year low in May, maintaining a downtrend that began in 2010 when high prices spurred the world's biggest corn importer to use more wheat instead.
Preliminary government data, released on Friday, showed the ratio of corn in animal feed fell to 43.7 percent in May compared with 46 percent in the same month a year ago.
Rains too late for some drought-savaged US corn fields
CHICAGO, July 19 (Reuters) - Indiana farmer Brian Scott saw on Thursday the heaviest rains of the year soak his 2,300-acre farm in the throes of the worst drought in five decades, but they were a mixed blessing at best.
The downpour came too late for his corn crop, which was already past the critical stage of setting yields. His soybeans, though, could get better and set more pods.
Argentine exchange trims wheat view as prices soar
BUENOS AIRES, July 19 (Reuters) - Argentina will plant 22 percent less wheat this season than it did in the previous crop year, a key local exchange said on Thursday, feeding a world rally in grains prices sparked by dry and hot U.S. farm weather.
Argentina is the world's No. 6 wheat exporter and the top supplier to neighboring Brazil. With Chicago Board of Trade wheat futures already at four-year highs, a shortfall in global wheat seedings and output could boost prices further.
Crops suffer as drought intensifies in US breadbasket
July 19 (Reuters) - The most expansive U.S. drought in more than a half century intensified this week and stretched further into major farm areas of the western Midwest where crops had largely been shielded from the harsh conditions that decimated yields further east.
The moderate drought in parts of eastern Nebraska, northern Illinois and much of the top corn and soybean state Iowa was downgraded to a severe drought in the past week, climate experts said Thursday, and forecasts showed little relief in sight.
Argentine 2012/13 wheat area seen at 3.6 mln hectares
BUENOS AIRES, July 19 (Reuters) - Argentine farmers will plant wheat this year on 3.6 million hectares, the Buenos Aires Grains Exchange said on Thursday, cutting its previous estimate by 100,000 hectares.
If the forecast proves correct, it would mark a 22 percent reduction in wheat area from the 2011/12 season, the exchange said in its weekly crop report.
EU farmers struggle with barley harvest in rain
HAMBURG, July 19 (Reuters) - Europe's drenched summer which has ruined countless holidays has also made harvesting this season's barley crop immensely difficult for farmers, analysts and traders said on Thursday.
"We urgently need an end to the rain to get harvesting completed," one barley trader said. "The crop could be reduced if rain goes on."
Weak monsoon casts drought shadow over India
NEW DELHI, July 19 (Reuters) - India's monsoon rains lost momentum again last week, falling nearly a fifth short of averages and raising the risk of a drought year in one of the world's leading producers of grains and sugar just as global prices hit record highs.
Rainfall was 22 percent below average across the country in the week to July 18, even though the parched interior in the south received downpours up to 179 percent above average, data from the India Meteorological Department (IMD) on Thursday showed.
SOFTS-Cocoa slips after grindings data, sugar firm
LONDON, July 20 (Reuters) - Cocoa futures eased following mixed global grindings results, clouding the outlook for demand, while sugar firmed to a fresh 3-month high and arabica coffee edged lower. Cocoa futures were slightly lower following mixed grindings results with North America's grind falling sharply, while the Asian grind rose.
Asia's Q2 cocoa grindings rise 5.7 pct on yr -trade body
SINGAPORE, July 20 (Reuters) - Cocoa grindings in Asia rose 5.7 percent to 150,726 tonnes in the second quarter of 2012 from the same period last year, the Cocoa Association of Asia said on its website, outpacing grindings in North America and Europe.
The CAA gave no details, but dealers said the increase in grindings in Asia was driven by steady demand for cocoa powder, which is used to make chocolate-flavoured products including bakery good, beverages and ice cream.
N America Q2 cocoa grind sees biggest drop in 3+ years
NEW YORK, July 19 (Reuters) - North American cocoa grindings in the second quarter of 2012 made their biggest decline in more than three years, data from the National Confectioners Association (NCA) showed on Thursday.
The quarterly grindings reached 112,768 tonnes, down 9.76 percent from the second quarter of 2011. This is the biggest quarterly drop since the first quarter of 2009, when grindings dropped by nearly 13 percent at 99,962 tonnes.
Brazil sugar lineup grows under rains, strike
SAO PAULO, July 19 (Reuters) - The lineup of ships waiting to load sugar in Brazil rose to 87 from 81 a week earlier as rains and striking sanitary inspectors at the ports slowed loading, Williams shipping agents said in a report released late Wednesday.
The number of ships waiting at Brazilian port was also rising as the harvest of the 2012/13 crop in the important center-south region picked up steam. Wet weather in Santos and Paranagua over the past several days slowed loading of bulk raws into open holds.
Rain may strand Brazil cane in field till next yr-Datagro
SAO PAULO, July 19 (Reuters) - Abundant rainfall over Brazil's main center-south sugar cane crop during this dry season risks stranding some of the 2012/13 crop until the next season, leading sugar and ethanol consultancy Datagro said on Thursday.
Many of Brazil's cane mills have delayed the start of harvest this season, which officially started in April, to allow the crop to mature and yields to improve after a wet start to the crushing season.
Indonesia eyes investment plan for rubber industry
JAKARTA, July 19 (Reuters) - Indonesia, the world's second-largest rubber producer, is considering investing $526 million over three years to boost and improve output in its rubber trees.
Starting in 2013, if approved the money will be used to re-plant or revitalise about 350,000 hectares of old and unhealthy rubber plantation in Southeast Asia's largest economy, Rismansyah Danasaputra, director of perennial crops at the Agriculture Ministry said on Thursday.
Oil Drops a Second Day on China Slowdown, Europe Crisis (Source: Bloomberg)
Oil dropped for a second day amid speculation fuel demand will falter as China’s economy slows and Europe struggles to control its debt crisis. Futures slid as much as 0.9 percent after a Chinese central bank adviser said the nation’s economy may cool further. International creditors meet in Athens tomorrow amid concern Greece may not meet its bailout targets, and after an aid package for Spain failed to prevent the euro dropping to its lowest level in more than two years against the dollar. Iraq resumed oil exports to Turkey after an explosion shut a pipeline that carries as much as 350,000 barrels a day, Sumaria News reported July 21, citing an unidentified Iraqi official. “The Spanish or European story will result in repeated volatility in the market,” Jarmo Kotilaine, the chief economist at Jeddah-based National Commercial Bank, said by phone yesterday. “We are still not clear on what the policy options will be. Demand-erosion concerns keep coming back.”
Oil for September delivery fell as much as 81 cents to $91.02 a barrel in electronic trading on the New York Mercantile Exchange and was at $91.03 at 12:08 p.m. Sydney time. The contract slid 1.2 percent to $91.83 on July 20. Prices are 7.9 percent lower this year. Brent crude for September settlement declined 80 cents, or 0.8 percent, to $106.03 a barrel on the London-based ICE Futures Europe exchange. The European benchmark’s premium to West Texas Intermediate was unchanged at $15.
OIL-Brent dips toward $107, steep 4-wk rally spurs selling
SINGAPORE, July 20 (Reuters) - Brent crude slipped toward $107 per barrel after an almost 18 percent rally over four weeks rompted some selling as worries about a conflict in the Middle East eased slightly.
"Prices were getting stretched a little, getting a bit ahead of themselves," said Mark Pervan, senior commodities strategist at ANZ bank. "This rally is supply driven, and supply-driven rallies tend to be very volatile because when prices go up, they threaten to hurt demand."
China end-June commercial crude stocks up 4.8 pct on mth
SHANGHAI, July 20 (Reuters) - Commercial crude inventories in China, the world's second-largest oil consumer, rose 4.8 percent in June from a month earlier, while refined fuel stocks eased by 7.56 percent, the official Xinhua News Agency reported in a newsletter on Friday.
The increase in crude oil stocks was attributed to falling crude oil throughput, which declined for a third consecutive month in June on the back of slowing energy demand amid weaker economic growth.
Coal May Regain Market Share From Natural Gas, Barclays Says (Source: Bloomberg)
Coal may regain some market share for power generation from natural gas during the summer as deferred shipments pour in, according to analysts from Barclays Capital Inc. Cheap gas displaced coal for making electricity earlier in the year, leading to high stockpiles of the fuel and prompting utilities to postpone deliveries, Shiyang Wang, an analyst in New York at the bank, said today in an e-mailed research note. “Deferred coal shipments also create an additional headwind for natural gas consumption in the U.S. power sector through the summer,” Wang wrote. Coal producers allowed the deferred shipments in lieu of renegotiating legacy contracts and slashing prices, Barclays said. As the deliveries trickle into utilities and plants also take advantage of lower spot prices for coal, gas demand may wane, according to the investment bank.
Spot coal from Wyoming’s Powder River Basin, which holds the largest and least expensive reserves, has fallen 40 percent to $8.75 a ton from a year earlier, according to data compiled by Bloomberg.
Power Dearth Threatens Indonesia Smelter Bids: Southeast Asia (Source: Bloomberg)
A shortage of electricity in Indonesia may hamper President Susilo Bambang Yudhoyono’s plan to ban all raw-ore exports by 2014, as he seeks to increase revenue by forcing companies to refine locally. More than 1 gigawatt of additional capacity may be needed to power the smelters required for the world’s biggest nickel producer and largest exporter of tin to process its ore, according to Xavier Jean, the Singapore-based associate director of corporate ratings at Standard and Poor’s. It may take longer than three years to build a plant capable of producing that much power, according to Nur Pamudji, president director of state utility PT Perusahaan Listrik Negara.
Asia’s second-biggest copper producer after China banned shipments of some metals on May 6, and the prohibition takes effect on all raw ore in 2014. The curb, combined with an export tax, is aimed at increasing revenue from higher-value processing. Japan, the second-biggest global buyer of nickel, has threatened to complain to the World Trade Organization about the restrictions. “Project management complexity will increase substantially, as not only do companies need to manage the construction of large smelters but they also need to manage the construction of the associated power generation units,” Jean wrote in an e-mail to Bloomberg News this month. “The risk of delays is high, and that could force the government to pragmatically delay or tone down some of the recent regulations applied to the sector regarding the export of unprocessed ores.”
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