Bull Rush as Commodity Wagers Rise to Three-Month High (Source: Bloomberg)
Speculators raised bullish wagers on commodities to a three-month high on mounting speculation that more economic stimulus 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.”
McDonald’s Bought Commodities Before Rally, Cuts Cost Forecast (Source: Bloomberg)
McDonald’s Corp. (MCD), the world’s largest restaurant chain, said it bought grain and other commodities before a rally in prices, allowing the company to cut a forecast for some costs. A U.S. “grocery basket” will be 3.5 percent to 4.5 percent higher this year, Peter J. Bensen, the chief financial officer of Oak Brook, Illinois-based McDonald’s, said today on a conference call with analysts. That compared with the company’s projection on April 20 for an increase of 4.5 percent to 5.5 percent. The worst drought in 56 years has eroded prospects for crops in the Midwest. Corn and soybean futures rose to all-time highs today, increasing feed costs for livestock producers. The U.S. is the top producer of both commodities. In March, the retail price of ground beef rose to the highest since at least 1984, and grocers in April sold whole chickens at record highs on average.
“Our supply-chain folks, our suppliers, our treasury folks really spent a lot of time earlier this year looking at the markets and did a great job in securing a lot of our grains and other commodities at cost before they ran up related to the recent drought,” Bensen said. “And so that’s why we are able to lower our outlook for this year.” About 55 percent of the contiguous U.S. was in moderate to extreme drought at the end of June, the highest percentage since 1956, National Climatic Data Center figures show. From June 15 to July 20, corn futures surged 57 percent. McDonald’s bought 727 million pounds of chicken and 800 million pounds of beef in the U.S. in 2010.
Pro Farmer: After the Bell Wheat Recap (Source: CME)
The September and December wheat contracts at all locations posted losses in the 20- to 30-cent range. Deferred contracts saw losses ranging from around a nickel to the mid-teens, depending on location. Heavy losses in the soybean market and the corn market at times today, along with strength in the U.S. dollar index kept pressure on wheat for most of today's session.
Pro Farmer: After the Bell Corn Recap (Source: CME)
Corn futures ended lower in the September through July 2013 contracts, while far-deferred months posted slight gains. Futures ended well off today's lows. Despite forecasts calling for better rain chances the next several days and midday weather models suggesting cooler, wetter conditions are likely during the second half of the 15-day window, futures closed well off session lows and avoided chart damage. Traders realize that rains now would be too late for much of the corn crop as irreversible damage has been done. Still, it's hard for futures to continue to charge higher if rains are in the outlook.
GRAINS-Corn, soy ease from record highs; U.S. crops face more heat
SINGAPORE, July 23 (Reuters) - Chicago corn and soy slid after marking record highs last week, tracking declines in broader markets as worries on Europe's debt woes festered, though relentless heat in the U.S. grain belt continued to destroy crops.
"We don't think the rally is over year yet, especially for corn as demand rationing, which the market has to do, is something it has never done before in terms of the scale," said Victor Thianpiriya, an agricultural commodity strategist at ANZ.
Thailand raises main rice crop forecast to 25.9 mln tonnes
BANGKOK, July 23 (Reuters) - Thailand, the world's biggest rice exporter, is expected to produce 25.9 million tonnes of paddy in its main 2012/13 crop, more than an earlier forecast of 24 million tonnes, the Agriculture Ministry said on Monday.
"We expect to see higher-than-forecast output this year as the government intervention price has encouraged farmers to grow more rice," Apichart Jongsakul, head of the ministry's Office of the Agriculture Economy, told Reuters.
Poor rains, prices boost India's basmati sowing
CHANDIGARH, July 23 (Reuters) - Scanty monsoon rains and expectations of better returns have boosted the cultivation of premium basmati rice in India, the world's second biggest rice producer and top basmati seller, improving the prospects of more exports, government officials said.
Basmati rice brings higher returns, requires less water and can be sown late, factors that attract farmers in the northern Indian states of Punjab and Haryana. These states account for over 70 percent of India's output of the aromatic, long-grain staple, which has been exempted from a rice export ban.
Grain prices set records, more searing heat in forecast
CHICAGO/NEW YORK, July 20 (Reuters) - Grain prices set record highs on Friday and weather forecasts showed little to no relief in sight from the worst U.S. drought in more than half a century, feeding worries about food inflation at home and abroad as supplies dwindle in the world's largest grain exporter.
The United Nations' Food and Agriculture Organization (FAO) said it was concerned about the spike in grain prices, but it did not yet see the current situation as a repeat of the 2007-2008 food crisis when high prices sparked riots in many poor countries.
Speculators boost net long corn stake for 5th straight week
CHICAGO, July 20 (Reuters) - Large speculators raised their net long stake in corn to the biggest in more than three months as the most extensive drought in the United States in 56 years triggered a sharp rise in corn prices, regulatory data released on F rid ay showed.
The Commodity Futures Trading Commission's weekly commitments of traders report also showed that noncommercial traders, a category that includes hedge funds, boosted their net long stake in soybeans to the most since early May in the five trading days ended July 17.
SOFTS-Sugar, coffee slip, worries on Europe debt fester
LONDON, July 23 (Reuters) - Sugar and coffee futures on ICE eased in early trade tracking declines in broader markets as worries on Europe's debt festered.
Cocoa futures dipped following mixed global grindings results this month, clouding the outlook for demand. Sugar markets dipped on light investor dealings, pressured by a stronger dollar.
Ivorian cocoa arrivals seen at 1,285,000 T by July 22
ABIDJAN, July 23 (Reuters) - Cocoa arrivals at ports in top grower Ivory Coast reached around 1,285,000 tonnes by July 22, exporters estimated on Monday, compared with 1,350,226 tonnes in the same period of the previous season.
Exporters estimated around 12,000 tonnes of beans were delivered to the West African state's two ports between July 16 to July 22, down from 19,687 tonnes in the same week a year ago.
Centam, Mexico, Colombia coffee exports up 22.5 pct in June
GUATEMALA CITY, July 20 (Reuters) - Coffee exports from Central America, Mexico, Colombia, Peru and the Dominican Republic rose 22.5 percent in June compared to the same month last year, reaching 2.94 million 60-kg bags in the month.
Guatemala's coffee association ANACAFE, which collates figures from the mostly arabica growing region, said Friday exports through the first nine months of the 2011/2012 harvesting season were 20.71 million bags, down 2.3 percent from the same nine-month period in the 2010/2011 season.
Europe Heat Wave Wilting Corn Adds to U.S. Drought: Commodities (Source: Bloomberg)
Heat waves in southern Europe are withering the corn crop and reducing yields in a region that accounts for 16 percent of global exports at a time when U.S. drought already drove prices to a record. Temperatures in a band running from eastern Italy across the Black Sea region into Ukraine reached 35 degrees Celsius (95 degrees Fahrenheit) or more this month, about 5 degrees above normal, U.S. government data show. Corn, now in the pollination phase that creates kernels, risks damage above 32 degrees, said Cedric Weber, the head of market analysis at Bourges, France- based Offre et Demande Agricole, which advises farmers on sales. The heat wave in Europe is adding to concern about global food supplies as U.S. farmers face the worst drought since 1956, India delays sowing because of a late monsoon and Australian crops endure below-average rainfall. Soybeans and corn rose to all-time highs yesterday and wheat surged 51 percent since June 1.
The United Nations says food prices will probably rebound after falling the most in three years in the second quarter. “Everyone is looking to the U.S., but clearly in Europe we’ll need to import a lot of wheat and corn,” said Weber, whose company advises about 5,000 farmers. “That’s just adding to the problems we’ve got everywhere.”
Oil Trades Near One-Week Low After Biggest Drop This Year (Source: Bloomberg)
Oil traded near the lowest level in a week in New York after the biggest drop this year on concern fuel demand is weakening as Europe’s debt crisis threatens to derail the global economy. Futures were little changed after declining 4 percent yesterday, the most since December. The U.S. refinery utilization rate slipped for a second week, according to a Bloomberg survey before a government report tomorrow. Moody’s Investors Service cited “rising uncertainty” about Europe’s debt crisis as it cut the Aaa credit-rating outlook for Germany, the Netherlands and Luxembourg to “negative.” “These are macro factors driving the market,” Michael McCarthy, a chief market strategist at CMC Markets in Sydney, said in a telephone interview today. “In the very short-term we’re looking for further falls.”
Oil for September delivery was at $88.06 a barrel, down 8 cents, in electronic trading on the New York Mercantile Exchange at 10:35 a.m. Sydney time. The contract yesterday decreased $3.69 to $88.14, the lowest since July 13. Prices are down 11 percent this year. Brent crude for September settlement was at $103.40 a barrel, up 14 cents, on the London-based ICE Futures Europe exchange. The European benchmark’s premium to West Texas Intermediate was at $15.34, from $15.12 yesterday.
Iran has small win with China, still losing battle
--Clyde Russell is a Reuters market analyst. The views expressed are his own.--
LAUNCESTON, Australia, July 23 (Reuters) - Iran appears to have won a small victory with Chinese imports of its crude set to reach a monthly record in July, but any relief in Tehran may be short-lived.
China may buy 590,000 barrels a day from Iran this month, up from 430,000 in June and the 480,000 average for last year, according to Petrologistics, a Geneva-based consultancy.
OIL-Oil slides towards $103 on eurozone fears
LONDON, July 23 (Reuters) - Oil prices slipped towards $103 a barrel as investors sold off riskier assets and fled for the perceived safety of the dollar on fears that Spain will not be able to avoid a costly sovereign bailout.
"There are fears this could be the beginning of a domino effect which ultimately leads to Spain having to join Greece, Portugal and Ireland in asking for an official rescue," said Carsten Fritsch, energy analyst at Commerzbank in Frankfurt.
Italy's Monti in Russia to boost energy cooperation
MOSCOW, July 23 (Reuters) - Russia and Italy ramped up their strategic cooperation on energy as Prime Minister Mario Monti made his first visit to the world's largest oil-producing nation on Monday to refresh ties that were typically warm under his predecessor Silvio Berlusconi.
Technocrat premier Monti met Russian Prime Minister Dmitry Medvedev in Moscow and was due to discuss plans for a major Russian gas export pipeline project to serve southern Europe at talks with President Vladimir Putin in Sochi later.
China's June Iran oil imports at 11-mth high - customs
BEIJING, July 23 (Reuters) - China's crude oil imports from Iran rose to their highest in nearly a year in June despite tough Western sanctions targetting Iran's oil shipments.
State-run Chinese oil firms resumed imports from Iran in April after resolving a dispute over 2012 annual supplies that had led to sharp cuts in oil purchases in the first quarter.
S.Korea's June crude imports from Iran down a quarter
SEOUL, July 23 (Reuters) - South Korea imported just over 176,000 barrels per day of Iranian crude oil in June, down about a quarter from a year ago, as shipments wound down ahead of a complete halt in July due to an EU ban on insuring tankers carrying Iranian oil.
The world's No.4 buyer of Iranian crude imported 34.51 million barrels from Iran during the first six months of this year, down 17.1 percent from the same period a year ago, data from state-run Korea National Oil Corp showed on Monday.
LNG Goes Extra 9,800 Miles as Europe Spurs Record Rates: Freight (Source: Bloomberg)
The biggest collapse in European demand for liquefied natural gas in at least 12 years and record Asian imports are sending fuel cargoes an extra 9,800 miles around the globe and boosting tanker rates to the highest ever. European consumption will drop 20 percent in 2012 as Asian usage jumps 11 percent, according to Sanford C. Bernstein & Co. That’s spurring traders to ship LNG imported into Europe from as far away as Qatar back on the same route and then on to Japan. Vessel rates will rise 54 percent this year, the median of six analyst forecasts compiled by Bloomberg shows. Shares of Golar LNG Ltd. (GOL), which operates nine of them, will gain 26 percent in the next 12 months, according to the average of 12 estimates.
As European economies stagnate, Japan is importing more fuel than ever as it replaces nuclear power shut off after the earthquake and tsunami in March 2011. Two of 50 nuclear plants are operational and LNG prices in the nation, the biggest importer of the fuel, are about 44 percent higher than in Europe. The biggest shortages in the LNG industry are in shipping as the cargo surge overwhelms the fleet’s capacity, according to the Paris-based International Energy Agency. “The shipping market will remain as tight as it is for the next two years,” said Fotis Giannakoulis, an analyst at Morgan Stanley in New York. “The weak European economy is not helping demand and they have excess capacity, so these imported volumes are available to be sent to Asia.”
Brazil’s Vale Seen Posting Best Mining Profit Surprise (Source: Bloomberg)
Vale SA (VALE3) is poised to deliver the biggest earnings surprise this year among the world’s top three mining companies as analysts raise profit projections, while lowering forecasts for BHP Billiton Ltd. (BHP) and Rio Tinto Group. Analysts increased estimates for Vale’s adjusted net income for this year by 7.7 percent in the past four weeks to $16.7 billion, according to data compiled by Bloomberg. Forecasts for BHP, the world’s largest mining company, and Rio Tinto fell 1.3 percent and 6.6 percent, respectively, the data show. The Brazilian real’s 23 percent decline against the U.S. dollar in the past year means cheaper labor and operational costs for Rio de Janeiro-based Vale, which gets about half its sales from exports to Asia. The bulk of BHP and Rio’s operations are in Australia, whose dollar fell 3.5 percent. Vale will benefit from China’s steps to stimulate its economy, said Jonathan Brandt, an analyst at HSBC Holdings Plc.
“Given stimulus measures that we have seen in China, there is a greater risk for a positive surprise than a negative surprise,” Brandt said in a July 20 telephone interview from New York. “The weaker real will help Vale with their cost pressure.”
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