20121129 1011 Global Commodities Related News.

U.S. Heads for Warmest Year Recorded in Lower 48 States (Bloomberg)
The U.S. is about to register the warmest year on record in the lower 48 states, and the world its ninth-hottest, a United Nations agency said in a report, adding new urgency to the quest to control global warming. Two-thirds of the U.S. states suffered drought this year, while heat waves hit across Europe and in Morocco, Jordan, China and Russia, the World Meteorological Organization said in a report released in Doha, where UN climate talks began this week. It noted Arctic sea ice shrank to its smallest on record. “The alarming rate of its melt this year highlighted the far reaching changes taking place on Earth’s oceans and biosphere,” WMO Secretary-General Michel Jarraud said in a statement. “Climate change is taking place before our eyes and will continue to do so as a result of the concentrations of greenhouse gases in the atmosphere, which have risen constantly and again reached new records.”
Envoys from 194 nations are working on setting the framework for negotiations on a treaty that would be agreed to in 2015 and come into force in 2020. It would limit fossil fuel emissions, which the WMO earlier this month said reached their highest ever. As delegates met for their third day of discussions scheduled to conclude on Dec. 7, environmental groups joined China, Brazil and 48 of the least developing countries in the world saying industrial nations must make good on their promises for $100 billion a year in aid for developing nations.

Obama Urged to Declare Emergency for Mississippi River (Bloomberg)
Shippers and lawmakers are pressuring President Barack Obama to declare a federal emergency along the Mississippi River, citing potential “catastrophic consequences” in the Midwest if barge traffic is curtailed by low water on the nation’s busiest waterway. Lawmakers, including Senator Tom Harkin of Iowa, and the National Association of Manufacturers, the U.S. Chamber of Commerce and the American Petroleum Institute urged Obama to tell the U.S. Army Corps of Engineers to hasten the planned removal of submerged rocks near Cairo, Illinois, that may impede barge traffic at low water levels. The Corps also should stop its seasonal restriction on the flow of Missouri River water into the Mississippi, which it began last week, the groups said. “We still got a lot of stuff to move down that Mississippi before winter totally sets in,” Harkin said in an interview. “They can release more water, sure they can.”
Mississippi River barge traffic is slowing as the worst drought in five decades combines with a seasonal dry period to push water levels to a near-record low, prompting shippers including Archer-Daniels-Midland Co. (ADM) to seek alternatives. Computer models suggest that without more rain, navigating the Mississippi will start to be affected Dec. 11 and the river will reach a record low Dec. 22, Corps spokesman Bob Anderson, based in Vicksburg, Mississippi, said.

Wheat Market Recap Report (CME)
December Wheat finished up 3 at 876, 4 off the high and 11 1/4 up from the low. March Wheat closed up 2 3/4 at 891 1/4. This was 11 1/2 up from the low and 4 1/4 off the high.
Chicago, KC, and Minneapolis wheat ended the day with marginal gains but traded in positive territory throughout the day. Strong cash markets and the terrible weather conditions in the western plains continue to support the US wheat markets this week. The sluggish demand fundamentals have been set aside as traders instead focus on the potential for deteriorating supply of winter wheat next year. No significant precipitation is expected in the next two weeks and temperatures are expected to be above normal which will keep some wheat from entering dormancy in the south. Conditions in the east remain mostly favorable. Very poor soil moisture conditions have improve since September which should promote good root and stand establishment for much of the Soft Red Winter wheat growing region. US Soft Red Winter wheat has become competitive in the global market so some traders expect the US wheat export sales pace to pick up in 2013 which could add additional support to the trade going forward.
December Oats closed down 2 1/4 at 370 3/4. This was 1 up from the low and 5 1/2 off the high.

Corn Market Recap for 11/28/2012 (CME)
December Corn finished up 1/4 at 760 1/4, 3 off the high and 5 1/2 up from the low. March Corn closed unchanged at 764. This was 5 1/4 up from the low and 3 1/2 off the high.
March corn ended the day slightly lower but traded both sides of the unchanged. Basis in the Gulf of Mexico was steady on light demand but low water levels on the Mississippi River south of St. Louis continues to help support. The stronger trade in the wheat market helped to lift corn to new highs this morning but the action settled down as soybeans trended lower off early highs. This morning's ethanol stocks report was considered mixed against trade expectations. Ethanol production for the week ending November 23rd averaged 803,000 barrels per day, down from 811,000 last week and down 13.7% vs. last year. Total ethanol production for the week was 5.62 million barrels. Corn used in last week's production is estimated at 84.3 million bushels vs. 85.16 last week. This crop year's cumulative corn used for ethanol production for this crop year is 1.02 billion bushels. Corn use needs to average 86.64 million bushels per week to meet this crop year's USDA estimate of 4.5 billion bushels. Stocks as of November 23rd were 18.35 million barrels. This is down 3.06% vs. last week and up 7.63% vs. last year. January Rice finished up 0.105 at 15.19, equal to the high and 0.14 up from the low.

Recap Energy Market Report (CME)
January crude oil prices traded sharply lower during the early US trading session, falling to their lowest level since November 15th. Early pressure in the market came from a definitive risk-off vibe coming from uncertainty surrounding the Greek debt deal and US budget negotiations. This morning's EIA data showed an unexpected draw in crude oil stocks last week of 347,000 barrels. Crude oil imports for the week stood at 8.118 million barrels per day compared to 7.768 million barrels the previous week. The refinery operating rate was up 1.1% to 88.6%. January crude oil prices rallied on the inventory data, as well as a positive reversal in outside markets. Optimistic comments over the US fiscal cliff debate from US House Speaker John Boehner provided an added lift.

Natural Gas Falls as Moderating Weather Cuts Heating Demand (Bloomberg)
Natural gas futures declined for the third time in four days as forecasts for mild weather next week signaled reduced demand for the heating fuel. Gas dropped as much as 3.8 percent as forecasters including MDA Weather Services predicted above-normal temperatures for most of the lower 48 states over the next 10 days. Unusually cold weather helped reduce a supply glut this month. The December contract expires today. “The weather is moderating so it’s wearing a little bit on the market,” said Tom Saal, senior vice president of energy trading at INTL Hencorp Futures LLC in Miami. “We’ve got an expiring contract today, that could be part of it.” Natural gas for December delivery fell 12.7 cents, or 3.4 percent, to $3.642 per million British thermal units at 1:34 p.m. on the New York Mercantile Exchange. Prices are up 8.3 percent from a year ago. The January futures contract dropped 12.6 cents to $3.766 per million Btu.
Volume was 175,317 contracts at 12:32 p.m. in electronic trading, up 36 percent from about 129,000 at the same time yesterday. Gas has slumped 7.4 percent since rising to 13-month intraday high of $3.933 on Nov. 23 as revised forecasts showed a warmer start to December. Warm weather building up over the next five days in the western two-thirds of the U.S. will spread to the East Coast next week, according to MDA in Gaithersburg, Maryland.

Oil Snaps Three-Day Drop on Falling Supplies, U.S. Budget Talks (Bloomberg)
Oil snapped a three-day decline in New York after U.S. stockpiles unexpectedly fell and political leaders said they’re optimistic a budget agreement can be reached in the world’s biggest crude consumer. Futures rose as much as 0.3 percent after sliding 0.8 percent yesterday to a two-week low. Republican House Speaker John Boehner is optimistic that budget talks on the so-called fiscal cliff can “avert this crisis sooner rather than later,” he told reporters. President Barack Obama said he hopes to reach a deal before Christmas. U.S. crude supplies slid 347,000 barrels last week, an Energy Department report showed. They were forecast to climb 350,000 barrels, according to a Bloomberg News survey of analysts. “The fiscal cliff is a very significant thing for world economies and therefore oil demand,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The consensus view is that a reasonable compromise will be reached.”
Crude for January delivery climbed as much as 26 cents to $86.75 a barrel in electronic trading on the New York Mercantile Exchange and was at $86.65 at 12:04 p.m. Sydney time. The contract pared a decline of as much as $1.82 yesterday to close down 69 cents at $86.49, the lowest since Nov. 15. Prices have fallen 12 percent this year. Brent for January settlement rose 21 cents to $109.72 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $23.07 to West Texas Intermediate futures, compared with $23.02 yesterday.

Rio Tinto Targets $5 Billion Spending Cuts, Production Boost (Bloomberg)
Rio Tinto Group, the world’s second- largest mining company, said it’s targeting savings of $5 billion by the end of 2014, while simultaneously boosting production at its iron ore, copper and alumina units. “We are taking further tough action to roll back the unsustainable cost increases of the past few years,” Tom Albanese, chief executive officer of the London-based company, said today in a statement. “Our two most challenged businesses are aluminum and coal, and in particular Australian coal,” he later told reporters in Sydney. Rio Tinto plans to cut the $5 billion in operating and support costs compared with expected costs this year, joining mining companies including BHP Billiton Ltd. (BHP) in seeking cost savings as well as curbing investment on new projects as metal demand wanes. Rio last month said it’s delaying investment decisions in commodities such as coal while continuing spending on its Australian iron ore expansion.
“Those two businesses are potentially loss-making where commodity prices currently are, which is clearly not sustainable,” Prasad Patkar, who helps manage about A$1.1 billion at Sydney-based Platypus Asset Management Ltd., said by phone. “Banking on a sharp recovery would be foolish at this stage so the only thing managements can do is to aggressively take costs out.” Rio rose 0.6 percent to A$57.06 as of 10:56 a.m. in Sydney trading while the key S&P/ASX 200 gained 0.2 percent.

Copper Shortage Seen Extending as China Accelerates: Commodities (Bloomberg)
Copper supply shortages will extend into the first half of next year as an accelerating Chinese economy more than doubles the pace of growth in global consumption even as mines extract a record amount of metal. Demand will outpace supply by 316,000 metric tons in the first six months, more than all copper in London Metal Exchange warehouses, before a surplus emerges in the second half, Barclays Plc estimates. Production has lagged behind consumption since 2010, according to the International Copper Study Group. The metal may average $8,300 a ton in the second quarter, 6.9 percent more than now and the most in a year, according to the median of 21 analyst and trader estimates compiled by Bloomberg.
China, which uses 41 percent of the world’s copper, is rebounding from seven quarters of slowing growth after the government approved a $161 billion subways-to-roads construction plan in September. It’s being joined by central banks from the U.S. to Europe to Japan, who also pledged more stimulus. Housing starts in the U.S., the second-largest consumer, reached a four- year high last month and business confidence unexpectedly strengthened in Germany, Europe’s biggest economy. “U.S. growth will be moderate and Europe is stabilizing, so that drag might reverse partially, and then it all falls back to China,” said Dominic Schnider, Singapore-based global head of non-traditional assets at UBS AG’s wealth-management unit. “Economic activity doesn’t have to be that strong in China for inventories to get drawn down and you could see a rally in the first half, but then you come into the second half where mine supply comes in on the strong side.”

Gold Tumbles Most in Three Weeks on Fiscal-Cliff Concerns (Bloomberg)
Gold futures fell the most in three weeks as pessimism on a U.S. budget resolution eroded demand for commodities. On the Comex in New York, gold futures for February delivery tumbled 1.5 percent to settle at $1,718.80 an ounce at 1:38 p.m., the biggest drop for a most-active contract since Nov. 2. In the first 30 seconds of floor trading, 7,700 contracts traded, according to PVM Futures Inc. The Standard & Poor’s GSCI Spot Index of 24 raw materials fell as much as 1.4 percent, erasing this year’s gain. Erskine Bowles, the co-chairman of President Barack Obama’s 2010 fiscal commission, said that a deal with Congress to avert the so- called fiscal cliff is unlikely by the end of this year. “There’s ‘risk-off’ trading, and behind that is talk of the fiscal cliff becoming more of a reality than people had thought,” Harry Denny, a broker at Hoboken, New Jersey-based PVM, said in a telephone interview. “The fiscal-cliff resolution has everyone a little cautious.”
An estimated 437,259 futures contracts traded as of 2:26 p.m. Total volume rose to a record 484,721 on May 29. Through yesterday, the daily average was 176,000 this year. Floor trading starts at 8:20 a.m. The most-traded gold options yesterday were bets on further price drops. Exchange data show 9,573 put options traded, giving owners the right to sell at $1,700 on the Comex by January. That compares with 461 contracts a day earlier. Each contract is for 100 ounces. The next-most-traded contracts were January puts giving owners the right to sell at $1,690 and at $1,695.

Silver Market Recap Report (CME)
December silver also started out waffling around both sides of unchanged with the bear camp appearing to have only moderate control. However, in the wake of a sharp downside breakout in gold prices, silver and a host of physical commodity markets came under pressure and the press was quick to blame the slide on ideas that certain members of Congress felt that going off the fiscal cliff was probably in the cards. However, the president was hopeful that a deal could be seen before Christmas and that might have stemmed the slide in silver today.

Gold Market Recap Report (CME)
The gold market waffled around both sides of unchanged early in the session before a wave of selling entered gold and then seemingly spilled over into other physical commodity markets. Some players blamed the lack of fiscal cliff progress undermined gold and other commodities but if that was the focus of the trade one might have expected gold to have bounced more significantly into the President's White House Press conference. In fact, equities rallied off a wave of fiscal cliff hopes but yet gold remained within striking distance of its lows. At times today, adverse currency market action undermined gold, but currency action didn't seem to be the primary catalyst for the gold dive today.