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Tuesday, August 28, 2012
20120828 0914 Global Commodities Related News.
Drought-Driven Food Costs May Damp Sentiment: Economy (Bloomberg)
The worst U.S. drought in at least 50 years may restrain consumer confidence and spending as it pushes Americans’ grocery bills higher later this year. Food prices will increase an average 4 percent annual rate in the nine months ending June 2013, up from 1.5 percent currently, said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. That may trim real disposable incomes by 0.3 percentage point from the fourth quarter of 2012 through the first half of next year and reduce spending by a similar amount, he estimates. The projected food-price increase will squeeze budgets of households already contending with a 13 percent gain in gasoline prices since early July and unemployment that is stuck above 8 percent three years into the economic recovery. Consumer sentiment has yet to return to pre-recession levels, confidence gauges show.
“Energy is hitting us now, food is going to hit us later,” Feroli said. “It will be a headwind for consumers. It’s going to damp people’s perceptions of the economy.” While the effect on total inflation will be limited and transitory, food and fuel costs have a disproportionate impact on confidence because consumers make frequent stops at grocery stores and filling stations. Food and fuel together account for about 24 percent of the consumer-price index, according to the Labor Department.
DTN Closing Grain Comments 08/27 14:32 Grains Drift Lower Monday (CME)
The grain complex was unable to hold on to overnight gains with the November bean contract collapsing over 40 cents from its new all-time high. Volumes were light as most traders stood on the sideline waiting to see what type of damage is inflicted by Hurricane Isaac.
GRAINS: U.S. soybeans hit new contract highs after a tour of experts concluded the drought damage to the U.S. soybean crop is worse than government forecasts. (Reuters)
Pro Farmer: After the Bell Wheat Recap(CME)
Wheat futures finished slightly lower in most contracts at all three exchanges following a choppy day of price action. With corn not providing support today, wheat futures were vulnerable to selling pressure. Fundamental pressure came from rains, which are expected to move into winter wheat areas this week and provide needed soil moisture ahead of planting.
Wheat Market Recap Report(CME)
December Wheat finished down 7 1/4 at 881 1/4, 18 off the high and 1/4 up from the low. March Wheat closed down 6 1/2 at 892. This was 1/2 up from the low and 17 1/4 off the high. December Chicago wheat traded sharply lower into the close today while the July 2013 contract only saw marginal loses. Kansas City and Minneapolis wheat ended the day lower as well. The wheat market struggled to hold a firm footing today after weather conditions for most US wheat growing areas were seen as a negative force. The fact that Egypt bought another round of Black Sea wheat over the weekend and corn has taken on a slightly negative, short term tone weighted on the wheat market. Export inspections for the week ending August 27th were reported at 18.88 million bushels vs. 23.42 the week prior and 24 million bushels are needed each week to reach the current USDA estimate. The export pace is 19% of the USDA estimate vs. the 5 year average of 23%.
Rainfall in Australia continues to disappoint which offered underlying support to the complex. Private analyst's now suggest that Western Australia winter wheat production could fall near 6 million tonnes from the 11.6 million tonnes seen last year. The next 2-3 weeks will be a critical period of growth for their wheat crop. Outside markets offered limited direction with the US Dollar steady on the day and US stocks slightly higher. December Oats closed down 4 1/2 at 387. This was 7 up from the low and 9 1/4 off the high.
Pro Farmer - Corn, Soybean Crops May Hit 9-Year Lows on Drought(CME)
Crop Tour Reveals "Extreme" Stress Across Midwest
The U.S. corn and soybean crops are expected to shrink to the smallest in nine years after severe drought hit most of the prime Midwest growing areas, advisory firm Pro Farmer said following its annual Crop Tour last week. Farmers will harvest about 10.478 billion bushels of corn this year, Pro Farmer said August 24, citing results from fields surveyed in Illinois, Iowa and five other Midwest states. Based on Pro Farmer’s forecast, the harvest would be down 15% from the 2011 crop and the lowest since the crop totaled 10.09 billion bushels in in 2003. Pro Farmer’s estimated U.S. corn yield, at 120.25 bushels an acre, would be a 17-year low, according to U.S. Department of Agriculture data. The devastating impact of what by some measures is the worst U.S. drought since 1956 were evident as crop scouts found parched fields and stunted plants across the Midwest. Corn in eastern Indiana, for example, showed “extreme drought stress,” Pro Farmer said.
“A lack of ears and grain length pulled yields down.” In South Dakota, Pro Farmer found “absolutely the worst corn crop we’ve sampled since 1998,” when the firm began surveying states in the region. Pro Farmer estimated the U.S. soybean crop at 2.6 billion bushels, down 15% from last year and the smallest since 2.45 billion bushels in 2003. For nationwide yields, Pro Farmer projected the crop at an average of 34.8 bushels an acre, also the lowest since 2003.
The soybean crop from Ohio to Nebraska “needs a drink right now to realize these yield estimates,” Pro Farmer said. Corn and soybean futures traded on Chicago-based CME Group already rallied to all-time highs this summer as the drought stirred concern over tightening global grain supplies. In late trading August 27, December corn futures rose ¼ cent to $8.08 ¾ a bushel. December futures are up almost 60% since mid-June and reached a record high of $8.49 on August 10. November soybean futures fell 10 ¼ cents to $17.21 ¼ a bushel, after notching a record at $17.60 ½ earlier in trading.
Pro Farmer: After the Bell Corn Recap(CME)
Corn futures ended 5 1/4 to 7 3/4 cents lower in the September through July contracts, which was a low-range close. Far-deferred futures ended mixed. Futures were firmer in overnight trade, but softened this morning and extended losses as soybeans drifted lower. Corn needs a dose of fresh positive news to keep bulls energized, but signs of softening demand due to high prices are limiting buying interest.
Corn Market Recap for 8/27/2012(CME)
December Corn finished down 7 3/4 at 800 3/4, 17 1/4 off the high and 1/2 up from the low. March Corn closed down 7 at 801 1/2. This was 1/2 up from the low and 16 off the high. December corn traded sharply lower into the close and settled at it's lowest level since August 16th. Technical selling and profit taking were noted today and sluggish export inspection numbers added to the downside momentum. Export inspections for the week ending August 27th were reported at 14.46 million bushels vs. 21.51 the week prior and 47.26 million bushels are needed each week to reach the current USDA estimate. The slow sales pace reflects a demand shift from major importers to South American and Black Sea grain. Iowa ethanol margins dropped to a 25 cent per bushel loss from a 17 cent per bushel loss the week prior. The higher trend in corn prices mixed with steady ethanol prices continues to tighten margins for ethanol facilities in Iowa.
The corn market received bullish news out of Europe after the European Commission crop monitoring unit cut their corn production estimate to 6.28 tonnes per hectare vs. 6.73 last month and 7.62 last year. Outside markets offered limited direction with the US Dollar steady on the day and US stocks slightly higher. November Rice finished down 0.095 at 15.595, 0.135 off the high and 0.005 up from the low.
Spec net long in CBOT corn surges to 17-month peak-CFTC(Reuters)
Speculators raised their bullish bets on Chicago Board of Trade corn futures and options in the past week to the largest in 17 months on deepening worries about a drought-shortened U.S. crop, regulatory data released on Friday showed.
Speculators double cotton long, raise coffee short-CFTC(Reuters)
Speculators doubled their net long position in cotton on ICE Futures U.S., becoming their most bullish on fibers since February, while they raised their net short in arabica coffee to multiyear highs in the week to Aug. 21, U.S. Commodity Futures Trading Commission data showed on Friday.
Robusta Coffee Beats Arabica As Folgers Cut Prices: Commodities (Bloomberg)
Robusta is beating arabica for the first time in four years as roasters use more of the cheaper grade and farmers reap fewer beans in Vietnam, the top grower. While robusta, used in espresso and instant coffee, typically costs less than the arabica used to make specialty drinks by retailers including Starbucks Corp. (SBUX), its discount has narrowed to 70 cents a pound, from 145 cents at the end of 2011. The spread will contract to 55 cents by the end of the year, the lowest since July 2009, as demand increased to a record, the average of 10 trader estimates compiled by Bloomberg shows. Roasters used more robusta to control prices as arabica surged to a 14-year high in May 2011 after the smallest Colombian harvest since 1976 and reduced output from Brazil, the biggest supplier. Even after falling 26 percent this year, arabica is still more expensive than robusta and is the worst- performing commodity tracked by Bloomberg.
Retailers are reluctant to change the taste of their products again so soon in the $75.5 billion global market. “We have additional demand the market has to cater for and roasters are unlikely to shift back to arabica,” said Kona Haque, an analyst at Macquarie Group Ltd. in London who has followed agricultural markets for 14 years. “A smaller crop in Vietnam is very bullish for robusta prices.” Robusta rose 14 percent to $2,055 a metric ton (93 cents a pound) this year on NYSE Liffe in London as arabica declined to $1.67 a pound ($3,674 a ton) on ICE Futures U.S. in New York after Brazil’s government forecast a record crop for this year. The Standard & Poor’s GSCI gauge of 24 commodities added 3.4 percent and the MSCI All-Country World Index (MXWD) of equities gained 8.4 percent. Treasuries returned 1.9 percent, a Bank of America Corp. index shows.
Isaac To Reach Hurricane Strength On Path To Louisiana (Bloomberg)
Tropical Storm Isaac strengthened to near hurricane intensity as it forced the shutdown of about 78 percent of U.S. Gulf of Mexico oil production and sent gasoline futures to a four-month high. The storm halted 48 percent of natural gas production in the Gulf and forced evacuations from 346 production platform and 41 rigs, the Bureau of Safety and Environmental Enforcement said today. Four refineries in Louisiana are shut, totaling 832,700 barrels per day, or 4.8% of U.S. capacity, and four are running at reduced rates. Isaac’s center was about 255 miles (410 kilometers) southeast of the mouth of the Mississippi River with top winds of 70 miles per hour, 4 below hurricane level, moving northwest at 12 mph, the National Hurricane Center said in an advisory at 5 p.m. East Coast time. It’s on track to go ashore Aug. 29 south of New Orleans, possibly as a Category 2 hurricane. President Obama issued a declaration of emergency for Louisiana, authorizing agencies to coordinate relief efforts.
The storm, which has winds extending 205 miles from its core, or almost the distance between Boston and New York, is expected to become a hurricane overnight.
Energy Department - U.S. Coal Output up 3.3% in Past Week(CME)
Prices Down 22% From Year Ago
U.S. coal production rose to about 20.45 million short tons during the week ended August 18, up 3.3% from the previous week but down 3.7% from a year earlier, the Energy Information Administration said in a report. Production from coal mines west of the Mississippi River rose 51,000 tons to 12.15 million tons, while output east of the river increased 150,000 tons to 8.3 million tons. So far this year, U.S. coal production, at 642.1 million tons, is down 5.4% from the same period in 2011. Central Appalachian coal averaged $63.10 per ton during the week ended August 17, up from $59.90 the previous week but down 22% from $80.70 a year earlier. In NYMEX futures trading, Central Appalachian coal futures for September delivery settled at $57.38 per ton on August 23, down from $57.68 at the end of last week.
Natural Gas Update - Natural Gas Prices Fall Third Straight Week(CME)
Power Sector Consumption Down 11%
Benchmark U.S. natural gas prices fell for the third consecutive week, with lower demand from the electric power sector overshadowing stronger residential and industrial use, the Energy Information Administration said. Henry Hub gas was $2.80 per million British thermal units as of August 22, down 2 cents from a week earlier. In NYMEX futures trading August 23, September gas fell 2.4 cents to $2.802, up 3.1% from the end of last week but down almost 13% since the end of July. During the week ending August 22, U.S. gas consumption fell 5.1% from the previous week, led by a drop of 11% in the power sector. Residential and commercial sector consumption rose 4.5%. Working natural gas in underground storage increased to 3.308 trillion cubic feet as of August 17, an implied net injection of 47 billion cubic feet from the previous week. Storage levels are up almost 15% from a year ago.
EU energy market drive sees gas trading growth
--Gerard Wynn is a Reuters market analyst. The views expressed are his own--
LONDON, Aug 24 (Reuters) - Development of European gas hubs and regional markets contrasts with lagging efforts to diversify supplies from Asia, by-passing Russia, and will see a break with oil-indexed contracts.
Gas trading developments reflect a European Union drive to create an internal energy market by 2014 and mirror increased market coupling in electricity.
OIL-Oil rises above $114 on storm threat, stimulus hopes
GENEVA, Aug 27 (Reuters) - Crude oil futures rose above $114 a barrel, lifted by worries that a Tropical Storm could suspend U.S. oil production and hints of another round of monetary stimulus by the U.S. Federal Reserve.
"The storm is probably helping but there's better sentiment generally. Everybody is waiting to see if Jackson Hole will be a turning point for commodities," said Eugen Weinberg, global head of commodities research at Commerzbank.
Oil Trades Near Two-Week Low On Forecasts Isaac Impact Limited (Bloomberg)
Oil traded near the lowest level in almost two weeks on speculation Tropical Storm Isaac’s impact on production in the Gulf of Mexico will be limited. Futures were little changed in New York after dropping for a third day yesterday, the longest losing streak since June. Isaac was near hurricane intensity and may make landfall south of New Orleans tomorrow, according to the National Hurricane Center. The storm has halted about 78 percent of oil production and 48 percent of gas output in the Gulf, the Bureau of Safety and Environmental Enforcement said. “All of the facilities are built to withstand Category 2 storms so it really should be a non-event,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “It’s hard to maintain a rally in the face of a storm of that strength.”
Oil for October delivery was at $95.60 a barrel, up 13 cents, in electronic trading on the New York Mercantile Exchange at 9:25 a.m. Sydney time. The contract yesterday fell 68 cents, or 0.7 percent, to $95.47, the lowest close since Aug. 15. Prices are down 3.3 percent this year. Brent oil for October settlement declined $1.33, or 1.2 percent, to $112.26 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark grade’s premium to West Texas Intermediate closed at $16.79. Isaac’s center was about 255 miles (410 kilometers) southeast of the mouth of the Mississippi River with top winds of 70 miles per hour, 4 mph below hurricane level, and moving northwest at 12 mph, the National Hurricane Center said in an advisory at 5 p.m. East Coast time.
Vale Sees Iron-Ore Rebound As China Producers Cut Supply (Bloomberg)
Vale SA (VALE3), the world’s largest iron- ore producer, expects the steel-making ingredient to rebound this year because current prices aren’t profitable for producers in China and other countries. Iron-ore below $120 a metric ton is a “short-lived” situation, the company’s Investor Relations Director Roberto Castello Branco told reporters at an event in Rio de Janeiro today. Vale is not among the suppliers planning to reduce output because it has low production costs, he said. “The iron-ore price is below the cost for marginal producers not only in China but also in other countries,” Castello Branco said at the sidelines of the Platts SBB Steel Markets in Latin America conference. “If you are a producer with higher costs, you won’t continue producing at a loss; you will stop your operations.”
Iron-ore fell below $100 for the first time since 2009 last week on concern that rising stockpiles and slowing growth in China, the biggest buyer, will cut demand for the raw material. The decline pushed Vale shares to the lowest level in almost three years. BHP Billiton Ltd. (BHP), the world’s biggest mining company, expects “long-term” price declines for its commodities because of a slower Chinese economic expansion, Chief Executive Officer Marius Kloppers told the Inside Business program on the Australian Broadcasting Corp. yesterday.
Vale dropped 1.6 percent to 33.39 reais in Sao Paulo, the lowest level since Sept. 4, 2009. The stock is down 12 percent this year.
Gold Set For Best Year Since 2010 As Stimulus Bets Increase (Bloomberg)
Gold is poised to climb the most in two years as prospects for additional economic stimulus by governments from the U.S. to China stoke demand for the precious metal as a bet against inflation, a survey showed. Bullion for immediate delivery may reach $1,800 an ounce by the year-end, extending gains this year to 15 percent, according to the median forecast in the Bloomberg survey of 15 traders and analysts at a conference in Hyderabad in South India on Aug. 25. That would be the most since a 30 percent surge in 2010, data compiled by Bloomberg show. Gold is set for a 12th year of gains as the European sovereign-debt crisis boosts haven demand amid speculation of further policy easing by central banks, including the U.S. Federal Reserve, which may be considering a third round of so- called quantitative easing, or QE3. Investment holdings have expanded to a record on demand for a hedge against inflation.
“The euro zone has been quiet of late, but that doesn’t mean the problems have disappeared,” said Jeffrey Rhodes, global head of precious metals at INTL FCStone Inc. (INTL), who expects gold to rally to $1,975 by year-end. “The U.S. economy has been sluggish and there is a growing belief that there is going to be QE3 soon. This anticipation is driving the market.” Fed Chairman Ben S. Bernanke said last week there’s “scope for further action” from the U.S. central bank. He is scheduled to speak later this week at the Fed’s annual symposium in Jackson Hole, Wyoming. China’s Premier Wen Jiabao has urged additional steps to support exports and help meet economic targets as evidence mounts the slowdown is deepening.
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