Commodity Weather Group – Midwest Dryness to Persist in September (Source:CME)
Drier than normal conditions likely will continue in most of the U.S. Midwest in September, forecaster Commodity Weather Group said, as a historic drought that’s sent corn and soybean futures to all-time highs persists into the fall. The outlook suggests a reduced threat of early frost or rain-delayed harvest in September, the forecaster said. Still, the damage to U.S. crops has already been done with the searing heat of the past two months. Citing the drought, Commodity Weather Group cut its projected average U.S. corn yield to 125.9 bushels an acre, down 7% from a July estimate. The drought will cause the abandonment of more corn than usual, the firm said, with an estimated 12% of total planted acres going unharvested, compared to 8% to 10% typically.
Concern over shrinking harvest prospects sent CME Group grain futures up sharply in trading August 9. December corn futures rose 7 ¼ cents to $8.23 ¾ a bushel, a record high settlement for any December contract. November soybean futures rose 50 cents to $16.31 ¼ a bushel.
Global Food Reserves Falling as Drought Wilts Crops (Source: Bloomberg)
Stockpiles of the biggest crops will decline for a third year as drought parches fields across three continents, raising food-import costs already forecast by the United Nations to reach a near-record $1.24 trillion. Combined inventories of corn, wheat, soybeans and rice will drop 1.8 percent to a four-year low before harvests in 2013, the U.S. Department of Agriculture estimates. Crops in the U.S., the biggest exporter, are in the worst condition since 1988, heat waves are battering European crops and India’s monsoon rainfall already is 20 percent below normal. The International Grains Council began July by forecasting record harvests. It ended with a prediction for a 2 percent drop in output.
The speed of the destruction drove corn prices to a record today and soybean prices to an all-time high last month, while wheat went to a four-year high. For investors, crops are the best-performing commodities this year, and Goldman Sachs Group Inc., Macquarie Group Ltd. and Credit Suisse Group AG say the trend will continue. An index of 55 food items tracked by the United Nations’ Food & Agriculture Organization jumped 6.2 percent in July, the biggest increase since November 2009, the Rome-based agency reported today, less than two years after record prices pushed 44 million people into extreme poverty and contributed to uprisings in North Africa and the Middle East. “People thought we were going to be swimming in corn by the end of the year,” said Kelly Wiesbrock, who helps manage $1.3 billion of assets for Harvest Capital Strategies, a San Francisco-based hedge fund. “Then the month of June hit and into July, and it’s just been a train wreck.”
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Wheat gained 42 percent to $9.27 a bushel this year on the Chicago Board of Trade, soybeans appreciated 35 percent to $16.3125 a bushel, and corn rose 27 percent to $8.2375 a bushel, after today touching a record $8.2975. They were the biggest advances in the Standard & Poor’s GSCI Spot Index of 24 raw materials, which increased 2.6 percent in 2012. The U.S. drought in June was the widest since December 1956 and the past 12 months were the hottest on record, weather data show. While the USDA anticipated a record harvest as recently as June, it cut the domestic corn forecast by 12 percent on July 11, the most since at least 1990. The estimate will be reduced again when the department reports Aug. 10, according to the average of 29 analyst forecasts compiled by Bloomberg.
The American drought is spreading beyond agriculture into power and fuel production. U.S. nuclear plants’ output on July 27 was the lowest for the day since 2001 because water was too hot to be an effective coolant, government data show. Parched conditions will spread into North Dakota and central Texas through October and last across the Midwest, the main growing region, the Camp Springs, Maryland-based Climate Prediction Center said Aug. 2.
Worst Drought Covers Nearly One-Fourth of Contiguous U.S. (Source: Bloomberg)
The two worst levels of drought now grip nearly one-fourth of the lower 48 states, the U.S. Drought Monitor reported. About 24.1 percent of the region was suffering extreme or exceptional drought in the week ended Aug. 7, up from 22.3 percent in the previous period and 18.3 percent last year, according to the monitor, based in Lincoln, Nebraska. While there has been some improvement in the drought in the Midwest, that wasn’t the case in the Great Plains, said Mark Svoboda of the National Drought Mitigation Center in Lincoln. “Maybe the drought overall is improving but the areas hardest hit in the corn and bean belt have intensified,” Svoboda said by telephone. The drought has helped push corn prices to a record. World food prices have surged 6.2 percent as dryness has also gripped Russia and below-average monsoon rains fell in India.
The primary corn and soybean agriculture areas in the U.S. had their sixth-driest April-July growing season in records dating back to 1895, the National Oceanic and Atmospheric Administration said yesterday. Svoboda said the amount of corn-growing area affected by the two worst categories of drought has jumped to 53 percent from 14 percent in the past three weeks. For beans, it has increased to 50 percent from 16.
DTN Closing Grain Comments 08/09 15:00 : Soybeans Explode Higher Ahead of USDA Reports (Source:CME)
The soybean market closed sharply higher pulling the other grains along for the ride. It appears traders built in bullish numbers, setting up a weaker session if USDA's numbers vary dramatically from pre-report estimates.
Pro Farmer: After the Bell Wheat Recap (Source:CME)
Wheat futures posted double-digit gains in Chicago and Minneapolis, while Kansas City wheat finished with slightly lesser gains. Wheat futures were supported by spillover from the corn market and a stronger-than-anticipated weekly export sales figure. That was enough to offset strength in the U.S. dollar index.
Wheat Market Recap Report (Source:CME)
September Wheat finished up 13 3/4 at 913, 6 1/2 off the high and 15 up from the low. December Wheat closed up 13 1/2 at 927. This was 14 1/2 up from the low and 5 3/4 off the high. Chicago September wheat traded sharply higher into the close and posted a new weekly high for the move. Kansas City and Minneapolis traded higher with Chicago. The wheat market was supported by a stronger corn market today and on thoughts that the USDA will revise Black Sea production and global wheat ending stocks lower on tomorrow's report. Russia is expected to produce 45 million tonnes of wheat vs. the current USDA estimate of 49 million tons. The trade also expects slight declines in wheat production for Ukraine and Kazakhstan tomorrow morning. Pakistan has agreed to a 1 million tonne wheat barter agreement with Iran. Pakistan will ship the wheat to Iran in exchange for fertilizer and iron ore. Weekly exports sales were supportive this morning with sales for wheat, at 665,300 tonnes. Cumulative wheat sales stand at 29.3% of the USDA forecast for 2012/2013 marketing year versus a 5 year average of 35.2%. Sales of 533,000 metric tonnes are needed each week to reach the USDA forecast. September Oats closed up 13 3/4 at 389 1/2. This was 12 up from the low and 4 1/2 off the high.
Pro Farmer: After the Bell Corn Recap (Source:CME)
Corn futures saw an upside day of trade and closed mid-to high-range with gains 5 to 10 cents in the September through July 2013 contracts. Deferred months saw lighter gains. Traders displayed greater risk appetite as they readied for USDA reports tomorrow. Pre-report expectations are for USDA to slash its 2012 corn production estimate by nearly 2 billion bu. from July to 10.971 billion bu. with a national average yield of 126.2 bu. per acre.
Corn Market Recap for 8/9/2012 (Source:CME)
September Corn finished up 7 3/4 at 818 1/2, 7 1/2 off the high and 8 1/2 up from the low. December Corn closed up 6 1/4 at 822 3/4. This was 7 up from the low and 7 off the high. December corn traded higher into the close but settled off session highs. The new crop contract posted a new all-time high at 8.29 3/4 before backing off as traders look ahead to tomorrows critical USDA report. The trade expects the USDA to cut the average US corn yield to 127 bushels/acre leaving production near 11 billion bushels. Total usage last month was projected at 12.72 billion bushels. Traders continue to hear reports of worse than expected yields as harvest moves north. Export sales were impressive this morning but the jump in sales was anticipated after the market saw the large purchase by Mexico last week. Total net weekly export sales for the week ending August 2nd came in at 1.103 million tonnes. Sales of 269,000 tonnes are needed each week to reach the USDA forecast. The trade is expecting a slightly decrease in the 2011/12 export forecast to compensate for the slower export pace. September Rice finished up 0.235 at 15.92, equal to the high and equal to the low.
CropCAST - Drought May Send Corn Yields to 17-year Low (Source:CME)
U.S. farmers may generate their poorest corn yields in 17 years because of severe drought, and there appears to be little relief in sight for parched Midwest crops this month, according to CropCAST/MDA EarthSat Weather. For the rest of August, a “fairly warm and dry” pattern is expected to persist in the Midwest, though conditions won’t be as extreme as in July, Kyle Tarpley, CropCAST’s senior ag meteorologist, said in an Aug. 7 report. Nationwide, corn yields will average an estimated 125 bushels an acre, Tarpley said, citing results from a CropCAST tour of Midwest farmland in late July. That would be the lowest average yield since 113.5 bushels an acre in 1995. CropCAST projected an average soybean yield of 36 bushels an acre, a nine-year low.
Concern over shrinking harvest prospects sent CME Group grain futures up sharply in trading August 9. December corn futures rose 7 ¼ cents to $8.23 ¾ a bushel, a record high settlement for any December contract. November soybean futures rose 50 cents to $16.31 ¼ a bushel.
Corn Leads U.S. Crop Surge as Drought Seen Eroding Grain Output (Source: Bloomberg)
Corn surged to a record, leading rallies in soybeans and wheat, on mounting signs that the worst U.S. drought since 1956 will erode production from farmers that are the world’s largest exporters of the crops.
The U.S. Department of Agriculture, in a report tomorrow, probably will cut its domestic corn-crop forecast to 10.929 billion bushels, the smallest in six years, according to the average estimate of 29 analysts in a Bloomberg survey. That would be down 16 percent from a July forecast, the biggest August reduction since 1974. The estimate for soybeans may drop 8.3 percent to 2.796 billion bushels, the smallest since 2007. Corn prices through yesterday were up 61 percent since mid- June and soybeans rallied 20 percent, while the government rated the condition of the U.S. crop on Aug. 3 as the worst since 1988. Output threats are being compounded by dry weather in Russia and below-average monsoon rains in India. Goldman Sachs Group Inc. is among the banks forecasting prices will keep rising, and the United Nations reported today the biggest gain in global food costs since 2009.
“This year’s crops are a disaster,” Dale Schultz, the buyer-relations manager for AgWest Commodities LLC in Holdrege, Nebraska, said in a telephone interview. “We have to raise prices and reduce demand immediately to prevent a real shortage developing in January or February. There is so much competition for every bushel of grain this year.”
U.S. use of corn for ethanol is high but hyped
--Gerard Wynn is a Reuters market analyst. The views expressed are his own--
LONDON, Aug 8 (Reuters) - The U.S. ethanol industry is right to complain that its consumption of corn is routinely exaggerated, by opponents of biofuel and in wider commentary, but it still consumes enough to make a minimum blending mandate look vulnerable.
A U.S. drought and shrinking corn yields have thrown a focus once more on the role of biofuels, four years after a rise in grain prices led to a food-versus-fuel debate and riots in developing countries.
GRAINS-Soybeans, corn rise for second session, USDA report eyed
SYDNEY, Aug 9 (Reuters) - U.S. soybeans extended gains into a second session as the market readied for a supply and demand report from the U.S. Department of Agriculture, while weather concerns for new-crop oilseed production fed bullish sentiment in grains.
"We do have the USDA numbers coming out tomorrow night, and the market is trying to position itself for that," Michael Creed, agribusiness economist at National Australia Bank said.
India's Aug 1 grains stocks well above targets
NEW DELHI, Aug 9 (Reuters) - India's wheat stocks at government warehouses on Aug. 1 were 47.5 million tonnes, more than three times the official target of 17.1 million tonnes for the quarter ending September, government sources said on Thursday.
Rice inventory for the same period was 28.5 million tonnes against a target of 9.8 million tonnes.
Bangladesh extends ban on most rice exports
DHAKA, Aug 9 (Reuters) - Bangladesh has extended a ban on the export of most varieties of rice until next June, the commerce secretary said on Thursday, backtracking on a plan to end the restriction.
Bangladesh, the world's fourth-biggest rice producer, banned overseas shipments of some common varieties in May 2008 following a spike in prices. It banned all exports a year later.
Brazil grain exporters seek court help against port strike
SAO PAULO, Aug 8 (Reuters) - Brazilian soy and corn exporters are seeking help from the local courts to guarantee clearance documents from striking inspection agents at the country's main ports, the grain exporters association Anec said on Wednesday.
Food inspectors from the agriculture ministry went on strike on Monday over better pay and have so far had only limited effect on the flow of bulk commodities through Brazilian ports, but Anec President Sergio Mendes told Reuters that there are real risks of food commodities exports being held up.
Australia 11/12 wheat exports seen at 22.5 mln tonnes
Aug 8 (Reuters) - Following are selected highlights from a report issued by a U.S. Department of Agriculture attache in Australia:
"Post's 2011/12 grain estimates were revised in line with official Government of Australia statistics and in response to the changing world grain market outlook. Exports of rain-affected wheat have surged in response to strong world feedgrain prices, and the estimate for total wheat exports in 2011/12 was increased to 22.5 million tonnes. The estimate for 2011/12 barley exports was raised to 5 million tonnes tonnes.
Russia sees no need for grain export tariffs in 2012
MOSCOW, Aug 8 (Reuters) - Russian Deputy Prime Minister Arkady Dvorkovich said on Wednesday that Russia had no grounds to ban grain exports but did not rule out protective export tariffs after the end of the 2012 calendar year.
Dvorkovich said Russia's new crop and stocks would provide enough grain to cover domestic requirements. He also reiterated the government's forecasts of 75-80 million tonnes of grain, with an exportable surplus of 10-12 million tonnes.
Russia, Ukraine, Kazakh wheat crop to fall 30 pct
LONDON, Aug 8 (Reuters) - Wheat production from Russia, Ukraine and Kazakhstan will drop 30 percent from last year because of a drought, a Reuters poll found, fanning fears of a global food price scare.
The median forecast from analysts and traders puts the aggregate crop for the three Black Sea exporting countries at around 70 million tonnes versus around 100 million tonnes last year. The region normally supplies around a quarter of world wheat export volumes.
Argentine wheat takes beating in turf war against corn
BUENOS AIRES, Aug 8 (Reuters) - Grains powerhouse Argentina could produce a record corn harvest in the upcoming season while wheat output shrivels, a trend that will likely deepen over the years ahead as growers balance government policy risk against zooming market demand.
A severe drought in the U.S. Midwest has put No. 2 global corn supplier Argentina in the spotlight at a time of increasing world food consumption.
SOFTS-Raw sugar nudges up, eyes on Brazil harvest, coffee firm
LONDON, Aug 9 (Reuters) - Raw sugar futures on ICE edged higher as harvest pressure from top producer Brazil capped gains, while arabica coffee and cocoa futures were firm. Raw sugar futures edged a off 5-week low in early trade, weighed down by dealers' anticipation that the latest data on Brazil's cane crush due later this session would show rapid progress.
Brazil's Cosan posts 17.1 mln reais loss on weak cane harvest
SAO PAULO, Aug 8 (Reuters) - Brazil's largest sugar and ethanol producer Cosan recorded a loss in the first quarter of its 2013 fiscal year after a late start to the sugarcane harvest led to lower sales of sweeteners and vehicle fuels, the company said on Wednesday.
Cosan said in a securities filing its fiscal first quarter 2013 loss was 17.1 million reais ($8.47 million) compared with an adjusted profit of 167.5 million reais a year earlier. Cosan's fiscal first quarter 2013 ended on June 30, 2012.
Arab unrest boosts Egyptian white sugar exports
LONDON, Aug 8 (Reuters) - Civil unrest in the Middle East is providing opportunities for Egypt, a major importer of raw sugar, to export refined sugar to markets such as Libya, Sudan and potentially Syria, trade sources said.
Egypt, which imports raws primarily from Brazil, has increased its refining capacity and also has the advantage of lower freight costs in supplying rising demand for high-quality refined sugar in nearby countries.
India's sugar body upbeat on output, export curbs loom
NEW DELHI, Aug 8 (Reuters) - India's sugar industry on Wednesday gave an upbeat assessment of next year's production despite a drought as it tried to avoid export curbs which government sources said New Delhi is contemplating as part of steps to bolster domestic supplies.
India, the world's top sugar consumer and the biggest producer behind Brazil, has also started discussing dropping a 10 percent import duty to calm local prices although traders and analysts do not see India tiptoeing to imports for now.
Oil Heads for Second Weekly Gain as U.S. Jobless Claims Decline (Source: Bloomberg)
Oil headed for a second weekly gain in New York after applications for unemployment relief unexpectedly declined last week in the U.S., the world’s biggest consumer of crude. Futures were little changed and poised for a weekly increase of 2.2 percent. That would be the most since the seven days ended July 20. Jobless claims dropped by 6,000 to 361,000 in the week ended Aug. 4, Labor Department figures showed yesterday. The median forecast of 43 economists surveyed by Bloomberg News called for an increase to 370,000. A depression formed in the Atlantic and may become Tropical Storm Gordon today, the National Hurricane Center said. “The employment situation seems to have stabilized,” David Lennox, an analyst at Fat Prophets in Sydney, said in a telephone interview today. “Perhaps the gloom that we’ve seen over the last few years may be lifting.”
Oil for September delivery was down 2 cents at $93.34 a barrel in electronic trading on the New York Mercantile Exchange at 10:35 a.m. Sydney time after climbing 1 cent yesterday. Prices are 5.5 percent lower since the start of the year. Brent crude for September settlement was at $113.12 a barrel, down 10 cents, on the London-based ICE Futures Europe exchange. The European benchmark’s premium to West Texas Intermediate was at $19.70. It closed at $19.86 yesterday, the widest gap since April.
OIL-Oil up at $112.75 on supply fears, stimulus hopes
LONDON, Aug 9 (Reuters) - Oil prices rose to around $112.75 a barrel, buoyed by supply disruptions in the Gulf of Mexico and lower Brent output along with disappointing data from China, which raised hopes in some quarters of further monetary stimulus there.
"The general mood is bullish - any dip is still being used as a buying opportunity," said Carsten Fritsch, an energy analyst at Commerzbank in Frankfurt. "Given the supply risk, with falling North Sea output and the closure of three oil ports in Mexico, all this should lend support to prices."
Buzzard, the field that sets the world oil price
--John Kemp is a Reuters market analyst. The views expressed are his own--
LONDON, Aug 8 (Reuters) - As output from other fields in the North Sea declines, global oil prices are increasing being driven by production problems and maintenance at a single, mid-sized field 60 miles northeast off the coast of Aberdeen in Scotland.
Buzzard, owned and operated by Nexen, which has a 43 percent stake, with minority shares owned by Suncor (30 percent), BG Group (22 percent) and Edinburgh Oil and Gas (5 percent), has assumed outsized importance in setting oil prices around the world.
Saudi to supply full Sept crude to 3 Asia buyers -sources
TOKYO, Aug 9 (Reuters) - Top crude exporter Saudi Arabia will supply full contracted volumes of crude to at least four Asian term buyers in September, unchanged from August, industry sources familiar with the matter said on Thursday.
The move had been expected, as the OPEC kingpin has supplied full contractual volumes to most Asian buyers since late 2009. "There was no cut, and (the Saudis) did not make any changes on the volumes for each grade," one source said.
China's July crude runs up 1.1 pct -stats bureau
BEIJING, Aug 9 (Reuters) - China's refinery throughput inched up 1.1 percent in July, reversing a run of declines for three straight months, but was the second lowest this year as demand stayed tepid in the world's second-largest oil consumer.
The National Bureau of Statistics said on Thursday that China processed 37.6 million tonnes, or 8.85 million barrels per day (bpd) of crude oil in July, up 1.1 percent from a year earlier. On a daily basis it was 1 percent, or 90,000 bpd, higher than the 8.76 million bpd in June.
China Increases Fuel Prices for First Time in Five Months (Source: Bloomberg)
China, the world’s second-biggest oil consumer, increased gasoline and diesel prices for the first time since March after global crude costs climbed. The maximum at which gasoline can be sold to motorists will rise by 390 yuan ($61) a metric ton and diesel by 370 yuan starting today, the National Development and Reform Commission said in a statement on its website yesterday. The pump price of 90-RON China III gasoline in Beijing will increase about 4.3 percent to 9,490 yuan a ton, or $4.27 a U.S. gallon, according to Bloomberg calculations from NDRC data. The China III specification is similar to the Euro III fuel standard.
China is raising fuel prices as it faces economic growth that slowed to 7.6 percent in the second quarter, the weakest pace in more than three years. The nation cut fuel costs three times between May and July, helping truckers and motorists with the lowest pump prices since December 2010. Inflation cooled for a fourth straight month in July to 1.8 percent, data from the National Bureau of Statistics showed yesterday. “This is the first time the NDRC increased fuel prices in a timely fashion once the threshold for doing so was reached, probably because August is not a month of peak consumption and inflation pressure has eased,” C1 Energy, a Shanghai-based commodity researcher that correctly predicted the price change before the official announcement, said on its website.
Gold Bulls Strengthen on Outlook for Additional Stimulus (Source: Bloomberg)
Gold traders are the most bullish in five weeks as investors expanded their bullion holdings near a record on mounting speculation that central banks will have to do more to bolster economic growth. Fifteen of 30 analysts surveyed by Bloomberg said they expect prices to rise next week and eight were bearish. A further seven were neutral, making the proportion of bulls the highest since July 6. Investors bought about $850 million of gold through exchange-traded products this month, taking the total of 2,411.7 metric tons to within 0.1 percent of the all- time high set July 5, data compiled by Bloomberg show.
China’s industrial-production growth weakened in July and U.S. and European manufacturing contracted. The Federal Reserve pledged to do more if needed on Aug. 1 and the European Central Bank promised last month to do “whatever it takes” to preserve the euro. Lower interest rates increase the allure of gold, which generally earns investors returns only through price gains. Bullion rose 70 percent as the Fed bought $2.3 trillion of debt in two rounds of quantitative easing through June 2011. “More stimulus or money printing is almost certain given the levels of debt out there which is slowing down economic growth,” said Mark O’Byrne, the executive director of Dublin- based GoldCore Ltd., a brokerage that sells and stores everything from quarter-ounce British Sovereigns to 400-ounce bars. “That should be supportive of gold prices.”
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