20121212 1009 Global Commodities Related News.

DTN Closing Grain Comments 12/11 14:34 Wheat's Collapse Drags All Grains Lower (CME)
A bearish surprise in the monthly USDA supply and demand report triggered a massive round of wheat futures selling, and skittish traders applied pressure to the entire grain sector despite soybeans' and corn's less-bearish fundamental outlooks.

Wheat Falls to Five-Month Low as Global Supplies May Gain (Bloomberg)
Wheat tumbled to a five-month low after a government report showed global inventories will shrink less than forecast, easing concern that droughts from the U.S. to Australia were creating a grain shortage. Stockpiles will be 176.95 million metric tons on May 31, more than the 174.18 million projected in November, the U.S. Department of Agriculture said today in a report. Analysts expected a cut to 173.61 million, based on 16 estimates in a Bloomberg survey. The agency increased its forecasts on crops in Canada, Australia and China. Prices have rallied 26 percent this year as drought cuts production in the U.S., Australia and Russia, last year’s largest exporters. While inventories will still be down 9.6 percent from a year earlier, the USDA has increased its forecast for a second straight month. Lower cereal prices helped reduce global food costs tracked by the United Nations 2.2 percent since September.
“Anytime you can alleviate fears about running out of wheat, that’s going to be a little bit bearish and temper the rallies to the upside,” Jason Britt, the president of Central States Commodities Inc. in Kansas City, Missouri, said by telephone. Wheat futures for March delivery fell 3.2 percent to settle at $8.215 a bushel at 2 p.m. on the Chicago Board of Trade, the biggest drop since Oct. 12. Earlier, the price touched $8.16, the lowest for a most-active contract since July 11.

Tightest Corn Crop Since ‘74 as Goldman Sees Rally: Commodities (Bloomberg)
Three consecutive years of smaller U.S. corn harvests are driving inventories of the world’s most- consumed grain to a 39-year low and spurring Goldman Sachs Group Inc. to predict that prices will rise near record highs. Global stockpiles will drop 11 percent to 117.61 million metric tons by Oct. 1, or 13.6 percent of what will be used for food, ethanol and livestock feed, the lowest ratio since 1974, the U.S. Department of Agriculture said today in a report. Prices surged 44 percent since mid-June as U.S. farmers endured their worst drought in 56 years, and heat waves and dry weather seared crops from Australia to Europe. While futures fell 14 percent since reaching a record $8.49 a bushel on Aug. 10, tightening supply before next year’s harvest will drive prices to an average of $8.25 in the next six months, 13 percent higher than today, Goldman said in a Dec. 5 report.
“It will take more than one year of good weather and high yields to dig the world out of this supply hole,” said Peter Meyer, a senior director of agriculture commodities at PIRA Energy Group in New York. “While corn prices may not spike, they will remain well supported until the extreme moisture deficits in the U.S. are rectified.”

Wheat Market Recap Report (CME)
March Wheat finished down 27 1/4 at 821 1/2, 27 1/2 off the high and 5 1/2 up from the low. May Wheat closed down 26 1/2 at 833 3/4. This was 5 1/2 up from the low and 26 1/2 off the high.
March Chicago and KC wheat ended the day sharply lower following this morning's USDA report that was considered bearish against trade expectations. US all wheat carryout was increased to 754 million bushels vs. 704 in November and against trade estimates of 712. All wheat exports were cut by 50 million bushels from last month with a majority of the cuts coming out of the Kansas City market. World ending stocks for the 2012/13 season came in at 176.95 million tonnes as compared with 174.2 million last month. Australian production jumped 1 million tonnes to 22 million tonnes and Argentina production was left unchanged at 11.50 million tonnes. Many in the market feel Argentina production is closer to 10.50 million tonnes. Some in the trade expect Egypt to come to the market after the sharp sell off today. Jordan bought 50,000 tonnes of optional-origin wheat overnight and India officials are considering exporting an additional 2.5 million tonnes of wheat this year. Overall, the demand fundamentals and technical action favored the bears throughout the day.
March Oats closed down 1 at 388. This was 2 up from the low and 7 off the high.

Corn Market Recap for 12/11/2012 (CME)
March Corn finished down 2 at 728, 6 3/4 off the high and 4 1/4 up from the low. May Corn closed down 1 3/4 at 730 1/2. This was 4 1/4 up from the low and 6 1/2 off the high.
March corn traded marginally lower on the day after a slightly bullish USDA report. US ending stocks are pegged at 647 million bushels which was unchanged from last month and against trade estimates of 663 million. Total usage was left unchanged while many in the market expected a cut to export demand give the slow pace of exports. Export shipments so far this season have reached just 217.1 million bushels as compared with 438.1 million bushels last year. World ending stocks for the 2012/13 came in at 117.61 million tonnes vs. November estimates of 117.99 and against trade estimates of 118. Argentina corn production was cut by just 500,000 tonnes to 27.50 million vs. trade estimates of 26.02 and against the November estimate of 28 million tonnes. China corn production jumped a whopping 8 million tonnes to 208 million tonnes but usage was also revised higher by 8 million tonnes to 209 million. The bullish data was offset by a very bearish wheat report and the pressure from the sharply lower wheat market spilled over to corn. US corn remains a stiff premium to South America origins which continues to keep export demand subdued. Wheat narrowed its premium to corn on the day which could entice more feeders to use wheat in rations rather than corn going forward.
January Rice finished up 0.07 at 15.52, equal to the high and 0.13 up from the low.

Recap Energy Market Report (CME)
January crude oil prices traded early in the session, helped by a rebound in outside market sentiment and gains in global equity markets. Optimism seemed to come from better than expected sentiment readings out of Germany and speculation that US leaders might be getting closer to a fiscal cliff resolution. Another source of support to the crude oil market was the latest production figures from OEPC that showed a pullback in November, largely from a 230,000 barrel per day drop in Saudi Arabian output. While general expectations are for OPEC to leave their quota unchanged at tomorrow's meeting in Vienna, the trade appears cautious ahead of the final result. Expectations for this week's EIA crude oil inventory data are for a draw in the range of 2.0 million barrels last week.

Oil Fluctuates as U.S. Crude Stockpiles Climb Before OPEC Meets (Bloomberg)
Oil fluctuated after a report showed stockpiles rising in the U.S., the world’s biggest crude consumer, and as OPEC delegates gathered in Vienna to decide the group’s production quota. Futures were little changed after rising for the first time in six days yesterday. Crude inventories increased by 4.27 million barrels last week, the most since August, data from the American Petroleum Institute showed. An Energy Department report today may show supplies shrank by 2.5 million barrels, according to a Bloomberg News survey. Most members of the Organization of Petroleum Exporting Countries have signaled they’ll keep the output target unchanged at 30 million barrels a day. “The ceiling for this meeting we think won’t change,” David Lennox, an analyst at Fat Prophets in Sydney, said in a Bloomberg television interview today. “We do see that supply and demand probably at this particular point in time are pretty equally balanced.”
Crude for January delivery was at $85.85 a barrel, up 6 cents, in electronic trading on the New York Mercantile Exchange at 12:25 p.m. Sydney time. The contract gained 23 cents to $85.79 yesterday, the highest close since Dec. 7. Prices are down 13 percent this year. Brent for January settlement rose 21 cents to $108.22 a barrel on the London-based ICE Futures Europe exchange and was at a premium of $22.37 to West Texas Intermediate. The European benchmark contract is heading for its highest-ever average annual price, at $111.77 a barrel so far this year.

Australia Raises 2013 Iron Ore Price Outlook on China Demand (Bloomberg)
Australia, the world’s biggest iron ore exporter, raised its price forecast for next year on expectation that infrastructure projects and stimulus spending by China, the world’s biggest buyer, will boost demand. Prices will average $106 a metric ton in 2013, compared with a September estimate of $101 a ton, the Canberra-based Bureau of Resources and Energy Economics said in a report today. Prices are set to average $128 a ton in 2012 from $126 a ton forecast in September, the bureau said. Australia’s exports may total 481 million tons in 2012 and 543 million tons in 2013, from 483 million tons and 528 million tons predicted in September, it said.
Iron ore climbed yesterday to the highest price in more than four months on signs China will rebound after a seven- quarter slowdown. Industrial output and retail sales rose faster than economists estimated, data showed Dec. 9. China imported 65.78 million tons of the ore last month, the customs bureau said Dec. 10, the second-highest level after a record 68.97 million tons in January 2011, data compiled by Bloomberg show. “Prices in the first half of 2013 are expected to remain around current levels, while prices are forecast to increase in the fourth quarter of 2013 in line with an expected increase in steel consumption demand,” the report said. China approved plans including building of roads, subways and extra spending on railways in September.
The bureau’s forecast referred to iron ore with 62 percent content free-on-board Australia. The same grade of ore delivered to the Chinese port of Tianjin rose 1.2 percent to $124.90 a dry ton yesterday, the highest since July 20, according to a gauge compiled by The Steel Index Ltd. Iron ore is measured in dry tons, or metric tons less moisture. At Tianjin port moisture can account for 8 percent to 10 percent of the ore’s weight.

Gold CEOs Told to Fix Slump as Investors Prove Restless (Bloomberg)
Gold-mine investors are losing patience with management in the $60 billion industry as their shares head for the first back-to-back annual slump since 1998, even as the metal completes a dozen years of gains. Producers from Canada’s Barrick Gold Corp. (ABX), the world’s biggest, to Newmont Mining Corp. (NEM) of the U.S. are failing to control expenses. The average cost to extract an ounce of gold by the largest miners jumped 23 percent to $584.70 in 2011, data compiled by Bloomberg show. In contrast, silver production costs fell 12 percent to the lowest since 2007, the data show. Money managers including billionaire investor George Soros reacted by boosting stakes in physical gold, pushing gold-mine executives to resign, or shifting into silver. Direct holdings of the metal reached a record 2,629.3 metric tons Dec. 10, valued at $145 billion, after more than tripling in five years, data compiled by Bloomberg show.
“Investors are very critical, voting with their feet and pushing management teams to resign,” said John Wong, a portfolio manager at CQS Group’s New City Investment Managers, who increased his silver holdings. “You can tell from the way investors sold Barrick down that they are on short fuses.” Barrick replaced Chief Executive Officer Aaron Regent with Chief Financial Officer Jamie Sokalsky on June 6, saying it was “disappointed” in the share performance after costs rose and production dropped. Since then the stock lost another 19 percent as the company missed earnings for four straight quarters amid delays and cost overruns at its Pascua-Lama project on the mountainous Argentina-Chile border. At least five more gold CEOs lost their jobs this year.

Silver Market Recap Report (CME)
The silver market saw a fleeting morning rally, weakened ahead of the scheduled data and then managed to bottom around mid morning. While the March silver contract managed a modest recovery bounce prior to mid session, the trade remained entrenched in negative ground for a large portion of the Tuesday US trade action. For some silver bulls the weak action in silver was accentuated by the very impressive action in the platinum market. Perhaps gold and silver are now in need of some fresh signs of progress on the fiscal cliff negotiations.

Gold Market Recap Report (CME)
February gold forged a lower high today as the gold trade wasn't emboldened by outside market forces that have recently favored the bull camp. A strong upward extension in US equities seemed to give off the impression of an impending fiscal cliff deal but even when the Speaker of the House claimed that the President wasn't serious yet, the stock market mostly held its gains. Gold on the other hand, generally gave some ground after the political news from the Capitol flooded the airwaves. One might have expected a weaker US currency to have underpinned gold prices but instead the bull camp in gold was simply disinterested.