20120904 1004 Global Commodities Related News.

Commodities Beat Stocks, Bonds for Second Month in August
Commodities beat equities, bonds and the dollar for a second consecutive month, the longest streak in more than a year, on mounting speculation policy makers will seek to rescue their economies. The Standard & Poor’s GSCI Total Return Index of 24 commodities rose 6.4 percent in August, led by silver, cocoa and heating oil. The MSCI All-Country World Index of equities gained 1.9 percent for a third straight advance, as the U.S. Dollar Index (DXY), a measure against six currencies, dropped 1.7 percent. Bonds of all types returned 0.2 percent on average, led by Europe’s most indebted nations, according to Bank of America Merrill Lynch’s Global Broad Market Index.
Gains in riskier assets show investors expect policy makers will succeed in bolstering growth. The Federal Reserve and European Central Bank are already holding borrowing costs at a record low, and more than two-dozen nations cut market interest rates this year. China has slowed for six quarters, the 17- nation euro area is contracting, and consumer confidence in the U.S. fell the most in 10 months in August. “The market has clearly already taken a very sanguine view,” said Bill O’Neill, the London-based chief investment officer for Europe, Middle East and Africa at Merrill Lynch Wealth Management, which oversees more than $1.8 trillion of assets. “The dollar has been weaker, and that’s one of the reasons why commodities are propelled higher. Part of it has been the easing expectations, and the conviction that the Fed would do something aggressive in early September.”

Cotton Glut Seen Extending Slump as Levi’s Costs Slide
Cotton warehouses from China to Australia are bulging with the biggest-ever glut, a year after record prices spurred farmers to expand output. Harvests will exceed demand for a third year, swelling stockpiles by 10 percent to 74.67 million 480-pound bales by August, the U.S. Department of Agriculture estimates. Inventories in China, the biggest user, will triple over two years to a record as domestic demand slumps to the lowest since 2005, USDA data show. Cotton may drop 12 percent to 67.87 cents a pound by the end of the year, according to the average of 20 analyst and merchant estimates compiled by Bloomberg. Slowing economic growth means the surplus will widen even as China, Australia, Brazil and India produce less this season, leading to the first global output decline in three years, the USDA predicts. Prices already plunged 65 percent from last year’s peak of $2.197 a pound, reducing costs for buyers from Hanesbrands Inc. (HBI), the maker of Champion apparel, to San Francisco-based Levi Strauss & Co.
“There’s an awful lot of cotton around,” said David Wookey, a managing director and trader at Isis Commodities Ltd., a cotton merchant in Boston, England, founded 17 years ago. “You’ve got a large stocks situation that’s been coupled with weaker global consumption.”

U.S. Shale Glut Means Gas Shortage for Mexican Industry: Energy
Mexico has begun cutting natural gas supplies to some of its largest customers by as much as 45 percent of their orders to cope with ballooning demand from households to steelmakers such as Ternium SA and ArcelorMittal. (MT) Monopoly supplier Petroleos Mexicanos, known as Pemex, started reductions on a case-by-case basis as the government studies forcing the measure on all companies. Pemex has already increased imports from the U.S. to records this year as its state-owned pipelines run at about 95 percent of capacity. The bottleneck in Latin America’s second-largest economy is the latest energy whiplash stemming from the U.S. shale gas boom. Mexican gas prices are tied to rates in its northern neighbor, where soaring supplies from shale fields drove gas to a 10-year low and reduced Mexico’s wholesale price 32 percent in the past year. Manufacturers can’t get enough of the energy.
“The shortage of natural gas is affecting companies economically and technically,” Octavio Rangel, the Mexico Steel Chamber chief, said without naming any, in a written response to questions. “In some plants, gas supply has been reduced 40 percent to 45 percent of what was originally agreed.” Pemex contacted all clients last month for the 15th time this year to recommend they cut consumption or face incomplete deliveries, compared with 18 times in all of 2011. The pinch illustrates how the global supply balance was rocked by advanced extraction techniques that have buyers in the U.S. paying about one-eighth the price Asian nations are charged for gas. At the same time, nations like Mexico that link prices to the U.S. Henry Hub benchmark are seeing rapid demand growth compared with Europe, where most rates are tied to oil.

Oil Rises to Highest in One Week on Stimulus Speculation
Oil rose to the highest intraday price in more than a week in New York on speculation central banks will take more steps to boost growth after reports signaled the economic slowdown is deepening. Futures gained as much as 0.9 percent from the Aug. 31 close. Euro-area manufacturing contracted more than initially estimated in August, a report from London-based Markit Economics showed yesterday. China’s factory output shrank for the first time in nine months, according to a government survey in Beijing released Sept. 1. European Central Bank President Mario Draghi told officials yesterday he would be comfortable buying three- year government bonds to bring down borrowing costs for nations in financial distress.
“The disappointing data from China emphasizes that waiting for central bank action is the name of the game,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt who predicts prices will stay above $90 a barrel this month. “Speculation of central bank intervention will keep prices supported despite bearish fundamentals of weak demand and abundant supplies.” Oil for October delivery increased as much as 83 cents to $97.30 a barrel in electronic trading on the New York Mercantile Exchange, the highest intraday price since Aug. 27, and was at $96.86 at 9:29 a.m. Sydney time. There was no floor trading yesterday because of the U.S. Labor Day holiday and transactions since the Aug. 31 close will be booked with today’s trades for settlement. Front-month prices are 2 percent lower this year.
Brent oil for October settlement rose $1.21, or 1.1 percent, to $115.78 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark grade’s premium to West Texas Intermediate closed at $18.10 on Aug. 31.