20121011 0922 Global Commodities Related News.

Drought Cuts U.S. Crops Below Demand First Time in 38 Years (Bloomberg)
Drought damage to corn and soybean fields in the U.S., the world’s top grower and exporter, is eroding supplies of the nation’s two largest crops to below year-earlier consumption levels for the first time since 1974. The government probably will say tomorrow that the U.S. corn harvest and inventories on Sept. 1 will be a combined 11.604 billion bushels, less than the 12.33 billion consumed and exported last year, according to a Bloomberg survey of 31 analysts. Soybean supplies will be 2.932 billion bushels, below the 3.157 billion used in 2011. Supplies failed to top usage from the previous year only twice since 1960 for corn and five times for soybeans, U.S. Department of Agriculture data show.
Record heat in June and July sparked the worst drought since 1956, sending corn and soybeans prices to record highs. Morgan Stanley predicted corn may rally 35 percent in a year, while Barclays Plc sees soybeans gaining 16 percent. Higher costs for dairies, grain processors and livestock producers helped send global food prices in September to the highest since March, United Nations data show. “Supplies of both corn and soybeans will be tight, and we expect prices to rebound after the report,” said Bill Tierney, the chief economist for Chicago-based AgResource Co. and a former USDA grain analyst. “There is no evidence that current prices are rationing soybean supplies, and there will be less supply relief for corn” from South American harvests that start in February, he said.

Commodity Rally
Corn futures have jumped 15 percent this year through yesterday on the Chicago Board of Trade, and soybeans surged 28 percent. The 24 commodities tracked by the Standard & Poor’s GSCI Spot Index rose 3.5 percent in the period, led by wheat’s gain of 33 percent. The MSCI All-Country World Index of equities climbed 11 percent, and Treasuries returned 1.9 percent, a Bank of America Corp. index shows. Corn fell 0.8 percent today to $7.36 a bushel at 11:40 a.m. on the CBOT, and soybeans dropped 1.4 percent to $15.28 a bushel. In its report tomorrow at 8:30 a.m. in Washington, the USDA probably will cut its domestic corn-production forecast to a nine-year low of 10.616 billion bushels, down 1 percent from 10.727 billion estimated in September and the fourth straight monthly reduction, according to the average of estimates in the Bloomberg survey. As recently as June, the government predicted a record harvest of 14.79 billion bushels.

Tighter Supply
Combined with the government’s Sept. 1 estimate of reserves at 988 million bushels, total U.S. supply will 6.3 percent below estimated consumption last year. Inventories before next year’s harvest may fall to 656 million bushels, the lowest since 1996, a Bloomberg survey showed. About 25 percent of the corn crop was in good or excellent condition as of Sept. 30, compared with a five-year average of 52 percent, USDA data show. The dry weather also sped up the harvest, which was 69 percent complete as of Oct. 7, compared with a five-year average of 28 percent. Plunging output in the U.S. is expected to erode global corn reserves before the Northern Hemisphere harvest to the lowest since 2007, a separate Bloomberg survey showed. The average U.S. cash price was $7.3027 on Oct. 8, 26 percent higher than a year earlier, boosting costs for meat companies including Sanderson Farms Inc. (SAFM) and ethanol makers including Valero Energy Corp. (VLO)
Prices have dropped from the record of $8.49 on Aug. 10, as exports slowed and farmers increased sales from newly-harvested fields. Corn futures for December delivery touched $7.05 on Sept. 28, the lowest since July 12. Soybean futures that reached an all-time high of $17.89 on Sept. 4 slipped as low as $15.04 on Oct. 3.

Premiums Rise
There are still signs that farmers will store more of their remaining supply in a bet prices will increase. Premiums paid on Oct. 9 above Chicago futures for corn delivered to export terminals near New Orleans and in Decatur, Illinois, were the highest since at least 2008, a sign that grain merchants are increasing inventories from this year’s harvest, said Tim Emslie, the research manager for Country Hedging Inc. in Inver Grove Heights, Minnesota. “The cash markets are already reflecting tightening supplies and will lead the rally to slow usage,” said Emslie, who predicted corn would reach $8.50 in the next six months. Corn, the primary source of livestock feed in the U.S., may reach $10 before this time next year because cattle and hog producers may not have culled herds even as feed costs rose, Hussein Allidina, head of commodities research at Morgan Stanley, said Oct. 3 in an interview at Bloomberg News offices in London.

Feed Use
With the drop in prices during the past two weeks, cattle and hog producers could have bought corn and sold livestock futures to lock in small profits, the Chicago-based Linn Group said in a report Oct. 5. Domestic feed, food and fuel production will account for almost 89 percent of total usage, the highest in 40 years, USDA data show. Corn exports by the U.S. may fall to the lowest since 1975 as overseas buyers shift to other grains and suppliers, the government estimates. World inventories as a percentage of use before next year’s harvest will drop to the lowest since 1974, government data show. “Exports are less important for corn prices than the demand for feed and ethanol,” AgResource’s Tierney said.
Soybean farmers may see a smaller reduction in their harvest than the USDA predicted last month, after August rain improved yields. Production may be 2.763 billion bushels, or 4.9 percent more than the 2.634 billion estimated a month earlier, the Bloomberg survey of analysts showed. That’s still below the 2011 harvest of 3.093 billion.

Rising Exports
Rising export demand will erode reserves before next year’s harvest to 135 million bushels, down from the 169 million the USDA estimated for Sept. 1, the survey showed. U.S. exporters sold 1.297 million metric tons of soybeans in the week ended Sept. 27, the most since Nov. 25, 2010, the USDA said Oct. 4. Sales commitments for delivery before Aug. 31 rose to 23.47 million tons, 40 percent higher than a year earlier and equal to 82 percent of what the government forecast last month for the marketing year, USDA data show. Sales of soy-based animal feed for delivery in the year that began Oct. 1 rose 54 percent to 2.53 million tons from 1.64 million a year earlier, the USDA said last week. Last month, the government said reduced production would cut U.S. exports 28 percent this year and soymeal sales by 17 percent.
“USDA export projections are too low, and possibly significantly too low,” said Randy Mittelstaedt, the director of research at R.J. O’Brien & Associates in Chicago. “Demand is not slowing, and any increase in production will be offset by an increase in export projections.” He predicted soybeans will rise to a record.

DTN Closing Grain Comments 10/10 14:54 (CME)
Corn, Beans Drift Lower; Wheat Rallies Again
Corn and soybeans continued their recent slide with the latter falling through technical price support. Wheat was able to close higher for a third straight day, tied to ongoing concerns over global production and tightening supplies.

Pro Farmer: After The Bell Wheat Recap  (CME)
Wheat futures at all three locations favored a firmer tone most of the day and ended mid- to high-range. Chicago and Minneapolis wheat ended mostly 5 1/4 to 6 1/4 cents higher. Kansas City wheat saw slightly higher gains. Futures benefited from some spread trading with corn today as traders bet on a rise in wheat prices.

Wheat Market Recap Report (CME)
December Wheat finished up 5 1/2 at 869 3/4, 7 off the high and 6 1/4 up from the low. March Wheat closed up 5 1/4 at 881. This was 6 up from the low and 7 off the high.
December Chicago wheat traded slightly higher on the day along with KC and Minneapolis wheat. Early support came from a lower US Dollar and additional momentum due to dry conditions for a portion of the western plains, and some suggest that North America may see better export demand in the second half of the crop year. Wheat markets found a bit of bullish news overnight after the French Farm office cut its estimate for French soft wheat stocks to 1.8 million tonnes, which was down 600,000 from their September estimate and the lowest level in 13 years. France exported 1.4 million tonnes of soft wheat in August which brings the total for this marketing year to 2.2 million tonnes. The market expects this pace to increase over the next quarter as they sell wheat to customers that were previously supplied by the Black Sea shippers. Traders will keep a close eye on cuts in production for world exporters and the impact those cuts will have on world ending stocks in tomorrow's USDA report. World ending stocks for 2012/13 are estimated at 176.71 million tonnes and most in the trade estimate the report will show ending stocks just under 173. Traders anticipate cuts in production of 2-4 million tonnes in Australia and the USDA currently has the crop pegged at 26 million tonnes.
December Oats closed up 5 1/2 at 383 1/2. This was 8 up from the low and 3 off the high.

Pro Farmer: After The Bell Corn Recap  (CME)
Corn futures closed 3 1/2 to 5 1/4 cents lower in the December through July 2013 contracts, which was in the lower half of today's range but off session lows. Far-deferred futures closed mostly 2 to 3 cents higher. Buying interest was limited as traders await USDA's October crop reports tomorrow morning, which caused futures to drift lower today.

Corn Market Recap for 10/10/2012 (CME)
December Corn finished down 5 1/4 at 736 3/4, 6 3/4 off the high and 4 1/2 up from the low. March Corn closed down 4 1/2 at 737 3/4. This was 4 3/4 up from the low and 5 3/4 off the high.
December corn traded slightly lower on the day and saw pressure from a sharply lower soybean market. Modest support was provided by a stronger wheat market throughout the day. The trade is expecting a US average corn yield near 123 bushels per acre vs. the September estimate of 122.80 in tomorrow's USDA report. Production is expected to fall near 10.600 billion bushels vs. 10.727 in September. The market is also assuming beginning stocks of 988 million bushels which was revised lower from 1.181 billion bushels on the September 1st Quarterly stocks report. The stocks report suggested that US corn domestic feed usage may need to be adjusted higher by 100 million bushels or more. Corn basis in the Gulf of Mexico fell today as weak export demand continues to limit gains. Basis in the interior of the Corn Belt was steady as harvest finishes up in various regions and farmers have lost interest in selling more grain due to the recent slide in prices. Outside markets were mixed on the day with US Stocks lower, crude oil lower, and the US Dollar steady. November Rice finished down 0.205 at 15.025, equal to the high and equal to the low.

Oil Trades Near Two-Day Low as U.S. Crude Stockpiles Increase (Bloomberg)
Oil traded near the lowest close in two days in New York after an industry-funded report showed stockpiles increased a fifth week in the U.S., the world’s biggest crude consumer. Futures were little changed after slipping for a third day in four yesterday. Crude inventories rose 1.6 million barrels last week, according to the American Petroleum Institute. An Energy Department report today may show supplies gained 1.5 million, according to a Bloomberg News survey. The department lowered its 2012 estimates for U.S. gasoline demand and the price of West Texas Intermediate oil. “The market is factoring in an inventory build and a little bit more demand destruction,” said Jonathan Barratt, chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney.
Crude for November delivery rose 9 cents to $91.34 a barrel in electronic trading on the New York Mercantile Exchange at 10:16 a.m. Sydney time. The contract yesterday declined 1.2 percent to $91.25, the lowest close since Oct. 8. Prices are down 7.6 percent this year. Brent oil for November settlement slid 17 cents to $114.33 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark grade’s premium to WTI closed at $23.08, the widest since October 2011. U.S. gasoline consumption will average 8.72 million barrels a day this year, down from 8.75 million in 2011 and a projection last month of 8.73 million, the Energy Department’s Energy Information Administration said yesterday in its monthly Short- Term Energy Outlook. WTI will average $95.55 a barrel this year, down from the September forecast of $95.66, the report showed.

Recap Energy Market Report  (CME)
November crude oil prices rallied to their highest level since September 21st early in the session and reversed to close down more than $1.00. Early support for the crude oil market seemed to come from lingering uncertainty surrounding conflict between Syria and Turkey. There were also reports that the US sent troops to Jordan to help manage the Syrian situation. It is also possible that the crude oil complex drafted support from a turn lower in the US dollar. A monthly report from OPEC this morning lowered their global oil demand forecast for 2013, and the EIA followed suit in their monthly report. Latter in the session, it seemed that weakness in the crude oil market came on slowing economic growth concerns, which pressured equity markets lower. Expectations for this week's EIA crude inventory report are for a build in the range of 1.25 million barrels last week.

Silver Market Recap Report  (CME)
The bull camp in silver has to be somewhat cheered by silver's initial capacity to avoid a new low for the move in the face of the new low for the move in the gold market this morning. Like gold, silver was probably undermined by the reversal in the equity markets as stocks at times fell down to the lowest levels of the month. With weakness in the rest of the metals complex and weakness in grain and equity prices the risk-off crowd probably felt they had the advantage of the outside market environment today.

Gold Market Recap Report  (CME)
The gold market ultimately favored the downside tilt in the action today. Clearly gold was able to reject the initial weakness and recover back into positive ground but with a fresh new low for the move into mid day it certainly seemed as if gold was tracking tightly with the US equity markets. Apparently periodic rallies in the Euro today were not given that much credence perhaps because gold was seeing weakness in a long list of physical commodity markets. Some traders were discouraged in the lack of fresh stimulus or easing talk, while others were growing concerned about a return of European debt problems.