Commodities Erase 2012 Gains as Economic Outlook May Dim Demand (Source: Bloomberg)
Commodities fell, nearly erasing this year’s gains, as the struggle by Greek political leaders to form a coalition underscored growing concern that the region’s debt crisis will worsen, dimming prospects for raw-material demand. The Standard & Poor’s GSCI Spot Index dropped for a fifth straight session, heading for its worst run since August. The measure lost as much as 1.6 percent to 641.8, the lowest since Dec. 29, erasing the yearly gain before paring losses. The gauge, which tracks 24 raw materials, was at 648.6 as of 3:42 p.m. in New York, up 0.6 percent for the year. Sugar, silver, gold and soybeans led the declines. The last annual slump was in 2008.
Raw materials retreated as Greek political leaders met for a second day in a bid to form a government. New Democracy’s Antonis Samaras failed to forge an agreement following an election that raised questions about the euro membership. Reports showed last week that services and manufacturing output shrank in April in the euro region, and unemployment rose to a 15-year high. “We’re in a deflationary credit contraction situation globally,” said James Dailey, who manages $215 million at TEAM Financial Asset Management LLC in Harrisburg, Pennsylvania. “The banking systems in China, Australia, and obviously much of Europe are under severe stress, and that’s creating this kind of deflationary contraction that’s starting to unfold. You’re starting to get a smell of panic in the air and a shift towards bearishness in commodities broadly.”
Sugar dropped the most in six weeks, and crude oil fell for a fifth session, capping the longest slump in three months. Gold slipped below $1,600 an ounce for the first time since January, copper declined the most in almost five weeks, and orange-juice futures tumbled to the lowest price since 2009. Seventeen of the commodities tracked by the GSCI were lower.
Market Recap: Wheat Futures (Source: CME)
Chicago wheat closed fractionally to 3 cents higher in most contracts, with Kansas City 3 to 5 cents higher. Minneapolis wheat ended mostly 2 to 3 cents lower. Wheat futures enjoyed slight gains throughout the morning on spillover from corn futures and a downturn in the condition of the HRW wheat crop. But as corn moved off its session highs late due to spillover from sharp weakness in key outside markets like crude oil and gold futures, wheat followed suit.
Wheat Market Recap Report (Source: CME)
July Wheat finished up 3 at 615, 6 1/4 off the high and 3 3/4 up from the low. December Wheat closed up 1 1/2 at 652 1/2. This was 3 up from the low and 5 3/4 off the high. On a day of exceptionally weak outside market forces, July wheat managed to push to a 4-session high to close higher on the day. With a bearish tone to outside market forces, the market did not see too much selling as traders see more short-covering ahead of the USDA Crop Production and supply/demand reports for Thursday. Ideas that the market is oversold with fund traders holding a hefty net short position helped to support. European economic concerns, a stock market set-back and a rally in the US dollar are all factors which would normally cause increased selling but the tendency to "lighten up" on all positions when the financial markets turn more volatile seems to be supporting a short-covering trend. News of a slight deterioration in the winter wheat condition plus a surge in old crop corn futures helped to support as well. Jordan bought 50,000 tonnes of hard wheat at their tender. European milling wheat futures closed up 1.5% as the market followed US markets higher. July Oats closed up 1/4 at 337 3/4. This was 3/4 up from the low and 4 3/4 off the high.
Market Recap: Corn Futures (Source: CME)
Corn futures closed fractionally to 5 1/2 cents higher, which was anywhere from low-range (May contract) to the upper third of today's range (new-crop contracts). May corn futures, which are in delivery, posted a very broad 21 1/2 cent trading range today as early double-digit gains gave way to a late-session price drop. Deferred futures weren't as volatile, but the December contract posted a 10 1/2 cent range.
Corn Market Recap for 5/8/2012 (Source: CME)
July Corn finished up 3 at 623, 9 1/4 off the high and 4 1/2 up from the low. December Corn closed up 3 1/4 at 528. This was 7 1/2 up from the low and 3 off the high. Corn managed to buck the trend of most other commodity markets to see periods of strong gains on the day with July and December corn closing slightly higher on the day. A sharp break in soybeans and other financial sensitive commodity markets helped to pull the market off of the mid-session peak. Talk of potential strong demand from China, a lack of deliveries and a very strong cash market helped to support the market early today. A lack of confirmation from the USDA on new China demand, better than expected planting progress and weakness in gold, energy and equity markets were factors which did not seem to spark much selling. In fact, July corn was still moderately higher on the session into the mid-day while May corn pushed sharply higher and to the highest level since September 27th. Ideas that the USDA will tighten ending stocks for the 2011/12 season on Thursday helped to support the rally as well and talk that ending stocks for the 2012/13 season will sharply recover to near 1.7 billion bushels helped to hold December corn in check today. July Rice finished up 0.08 at 15.295, equal to the high and 0.065 up from the low.
GRAINS-Corn up on near-term supply concerns, Chinese demand talk
SYDNEY, May 8 (Reuters) - U.S. corn futures rose, supported by worries over near-term inventories and rumoured Chinese demand, which helped overshadow stronger-than-expected data from the U.S. Department of Agriculture on planting.
"There are some concerns about how low inventories of old-crop corn are, while there is some continued Chinese demand for corn at these prices," said Abah Ofon, softs analyst at Standard Chartered.
Corn, soy planting pace tops analysts' expectations
CHICAGO, May 7 (Reuters) - U.S. corn and soybean farmers kept their planters rolling during the past week -- with particular progress made in the northern states -- despite spotty rain showers could have slowed their efforts, a U.S. Agriculture Department report showed on Monday.
The USDA report showed 71 percent of the corn crop was planted as of May 6, up from 53 percent a week earlier. Soybean planting was 24 percent complete compared to 12 percent a week earlier.
POLL-China 2012/13 corn imports seen climbing 60 pct
BEIJING/SINGAPORE, May 7 (Reuters) - China's corn imports are likely to jump almost 60 percent in the year to September 2013, turning it into the world's fourth-largest buyer as Beijing strives to supply livestock feed to meet fast-growing demand for meat and cool near record prices.
The world's second-biggest consumer and producer of corn is projected to buy 7.9 million tonnes in 2012/13, up from an estimated 5 million tonnes this year, according to a Reuters survey of 10 analysts and traders.
Farmers to strike in top Argentine grains province
BUENOS AIRES, May 7 (Reuters) - Farmers in Argentina's top farming province will halt grains and livestock sales for four days starting Thursday to protest a planned tax hike, but exports should not be affected, an agricultural leader said on Monday.
The protest in Buenos Aires province could spread if provincial legislators vote to raise land taxes, said Julio Curras, vice president of the Argentine Agrarian Federation (FAA), noting that some growers say higher taxes could put them out of business.
Brazil analyst cuts soy view, sees record corn
SAO PAULO, May 7 (Reuters) - Brazil grain analyst Celeres made a further deep cut to its forecast for the country's 2011/12 soybean crop on Monday, lowering its view to 64.95 million tonnes from its early April estimate of 67.9 million.
The world's No. 2 soy producer suffered harsh drought in the southern growing states early in the year. Analysts have been steadily cutting their forecasts as the drought damage to the now nearly mature crop becomes fully apparent.
Egypt's GASC sees bigger food purchasing bill
CAIRO, May 7 (Reuters) - Egypt, the world's biggest wheat importer, will hike its food purchasing bill for the fiscal year that starts in July from a year earlier to cope with rising global prices as its economy reels from months of political instability.
Nomani Nomani, vice chairman of the General Authority for Supply Commodities (GASC), said the state budget for fiscal year 2012/13 would include a food purchasing bill exceeding the $24 billion earmarked for 2011/12 that ends in June.
US corn stocks may soar 130 pct next year
CHICAGO, May 7 (Reuters) - Corn supplies in the United States, currently on track to reach a 16-year low this year, are expected to soar nearly 130 percent next year to a six-year high as farmers plant the largest corn area in 75 years.
An expected record corn crop; steady to slightly higher demand from exporters, livestock sector and fuel makers plus competition from feed wheat will combine to pressure prices beginning with the new-crop marketing year on Sept. 1, analysts said.
US wheat production seen up after mild winter, wet spring
CHICAGO, May 7 (Reuters) - Near-perfect growing conditions in key production areas of the U.S. Plains throughout the winter and spring should increase the U.S. winter wheat crop by nearly 10 percent from last year for the biggest harvest since 2008, according to a Reuters poll.
A bumper crop will add to the already-ample U.S. stockpile. Wheat prices have been pressured as harvest expectations have risen during the past few weeks.
SOFTS-Raw sugar slips, holds above 1-year low
LONDON, May 8 (Reuters) - Raw sugar futures edged lower, as the global sugar surplus continued to drag on prices, while coffee and cocoa also eased, inline with weaker outside markets including world stocks and oil. Raw sugar futures on ICE eased, consolidating above last week's one-year low, as recent upward revisions to the expected 2011/12 global surplus weighed on prices.
Vietnam Coffee-May shipments may fall, discounts steady
HANOI, May 8 (Reuters) - Vietnam's coffee exports in May could fall to 110,000 to 130,000 tonnes (1.83-2.17 million bags) from an estimated 150,000 tonnes shipped in April, due to lower prices for farmers, traders said on Tuesday.
Prices hovered below a key psychological level of 40,000 dong ($1.92) per kg for most of April, which discouraged farmers from releasing stocks to exporters, traders said.
EU 12/13 sugar output seen 15.5 mln tonnes-attache
May 7 (Reuters) - Following are selected highlights from a report issued by a U.S. Department of Agriculture attache in the European Union:
"For MY 2012/13, EU sugar production is forecast at 15.5 million tonnes on a raw sugar basis, dropping 10 percent back to 2010/11 levels. Sugar imports in MY 2012/13 are forecast to drop slightly to 3.3 million tonnes, while exports are forecast at 1.5 million tonnes, falling 40 percent from this year but remaining above 2010/11 levels.
Zambia Sugar sees 2012/13 output above 400,000 T
LUSAKA, May 7 (Reuters) - Zambia Sugar , a unit of South Africa's Illovo Sugar , expects its sugar output to increase by more than 7 percent to over 400,000 tonnes in the current 2012/2013 season from last year, it said on Monday.
The company, which produced 374,000 tonnes of sugar in the last season to end March, said it expected output to rise due to good climatic conditions, increased age of cane and a larger planted area.
Vanishing volatility in the oil market
--John Kemp is a Reuters market analyst. The views expressed are his own--
LONDON, May 8 (Reuters) - The most remarkable thing about Friday's sudden drop in oil prices was not how large the move was but how small. The small size of the decline confirms there has been a structural shift in oil market volatility
On May 4, front-month Brent futures fell by $2.90 per barrel (2.50 percent) from the previous night's close. It was the largest one-day decline so far this year, and the second-largest move in either direction since January 3.
OIL-Oil falls below $113 on slowdown, higher output
LONDON, May 8 (Reuters) - Brent crude oil fell below $113 a barrel on Tuesday in a fifth day of losses as economic slowdown on both sides of the Atlantic deepened fears of lower oil demand at time of ample supply from major oil producers.
"Renewed concerns over the health of the euro zone coincide with weaker growth elsewhere and news of better oil supply," Weinberg said. "Saudi Arabia is pumping plenty of oil and even storing it, so there is no shortage."
Philippine, China firms discuss South China Sea gas project
MANILA, May 8 (Reuters) - The Philippines' Philex Petroleum Corp said on Tuesday it has discussed a possible partnership with Chinese offshore oil producer CNOOC to develop a natural gas prospect in the disputed South China Sea, a deal that may help ease tension between the two sides.
China meanwhile warned the Philippines that confrontation over an island in the South China Sea could worsen and Beijing has made "every preparation" to counter what it called potential expansion of the conflict by Manila.
Shell in talks to cut Iraq's Majnoon output target
BAGHDAD, May 8 (Reuters) - Royal Dutch Shell is in talks with Iraq to cut the final production target of the Majnoon oilfield to 1 million bpd from 1.8 million bpd, according to oil ministry documents seen by Reuters, in a move that may kickstart talks with other firms to review the country's overall production target.
Shell executives met with oil ministry officials on March 15 and also proposed to extend the oil field's plateau time, which is to begin in 2017, to "more than" 20 years from seven years.
Taiwan Formosa plant to run below 70 pct in June
SINGAPORE, May 8 (Reuters) - Taiwan's Formosa Petrochemical Corp said on Tuesday it expects to operate its 540,000 barrels per day (bpd) refinery in Mailiao at between 65 percent and 67 percent of its capacity in June, as maintenance reduces runs from May's rate of around 70 percent.
The refiner operates three crude distillation units (CDUs) at 180,000 bpd each. It will shut one of these units on May 10 for about 45-50 days as planned, the company spokesman said.
Petro-dollar windfall could help China's rebalancing
BEIJING, May 7 (Reuters) - A $1 trillion oil-fired trade windfall couldn't be better timed to help Chinese companies climb the value chain and rebalance the economy of the world's biggest exporter.
Fast growing countries producing oil and other commodities, are taking advantage of the windfall from the recent surge in prices and buying roughly half of the $2 trillion worth of goods sold by China overseas.
U.S. working with India on Iran oil replacements-Clinton
NEW DELHI, May 8 (Reuters) - The United States is working with India to secure alternative sources of crude supply to Iran, Secretary of State Hillary Clinton told a news conference on Tuesday, as Washington pressures its allies to reduce oil imports from Tehran.
Carlos Pascual, the U.S. negotiator who has been pressing Iran's customers to cut imports, would visit India next week to discuss the issue. On Monday, Clinton said the United States was encouraged by steps India had already taken to cut but that "even more" was needed.
Saudi's Naimi says kingdom pumping 10 mln bpd
TOKYO, May 8 (Reuters) - Top oil exporter Saudi Arabia is pumping at around 10 million barrels per day (bpd), and is storing 80 million barrels to meet any sudden disruption in supplies, Oil Minister Ali al-Naimi said on Tuesday.
Worries of a supply disruption from the Middle East due to escalating tensions between the West and Iran over Tehran's disputed nuclear programme pushed Brent prices 20 percent higher since the start of the year to a record of over $128 in March.
Oil Trades Near Three-Month Low as Report Shows Rising Supplies (Source: Bloomberg)
Oil traded near the lowest level in three months in New York after a report showed stockpiles climbed the most since March in the U.S., the world’s biggest crude consumer. Futures were little changed after dropping for a fifth day yesterday. U.S. supplies increased 7.8 million barrels last week to 378 million, the highest level since August 1990, figures from the American Petroleum Institute showed after the settlement. A government report today may show supplies rose 2 million barrels, according to a Bloomberg News survey. Oil’s decline stalled after it fell below its 200-day moving average. Crude for June delivery was at $97.15 a barrel, up 14 cents, in electronic trading on the New York Mercantile Exchange at 9:28 a.m. Sydney time. It slid 1 percent yesterday to $97.01, the lowest close since Feb. 6. Front-month prices are down 1.7 percent this year.
Brent oil for June settlement dropped 43 cents, or 0.4 percent, to $112.73 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark contract’s premium to West Texas Intermediate closed at $15.72. New York crude pared declines after it fell below its 200- day moving average. Buy orders tend to be clustered near chart- support lines. The level is at about $96.29 today, according to data compiled by Bloomberg.
Silver Forecasters Bullish as Funds Retreat From Slump (Source: Bloomberg)
At a time when hedge funds are reducing bullish silver bets by the most in two years, analysts predict a rally as manufacturing expands from China to the U.S., boosting demand for the precious metal most used in industry. Money managers cut wagers by 68 percent in two months as futures tumbled 21 percent, Commodity Futures Trading Commission data show. Prices will rally to average $35.40 an ounce in the fourth quarter, the third-highest on record, according to the median of 11 analyst estimates compiled by Bloomberg. Shares of Fresnillo Plc, the largest producer, will rise 24 percent in the next 12 months, based on the average of seven forecasts.
Silver, the most volatile metal tracked by Bloomberg, rose almost twice as much as gold this year on mounting confidence the global economy will skirt another recession. China’s factory output gained for a fifth month in April and U.S. manufacturing grew at the fastest pace in a year. Industrial demand from solar panels to batteries to film accounts for about 53 percent of consumption, the Washington-based Silver Institute estimates. “A greater amount of confidence in the global economy generally means higher growth and that means more silver demand,” said David Jollie, an analyst at Mitsui & Co. Precious Metals Inc. in London and the most accurate forecaster in last year’s London Bullion Market Association survey of silver prices. “If you look out beyond the end of the year, you can still see reasons to be bullish.”
LME Receives a Number of Proposals That May Lead to Takeover (Source: Bloomberg)
The London Metal Exchange, the world’s biggest metals bourse, received multiple proposals that may lead to a takeover. The proposals will be considered by the board, the LME said in a statement today. They were from companies that had been shortlisted after assistance from Moelis & Co., the LME’s adviser, according to the statement. Hong Kong Exchanges and Clearing Ltd. said April 30 that it was one of several companies looking to buy the LME. CME Group Inc., NYSE Euronext (NYX) and IntercontinentalExchange Inc. made preliminary offers, three people with direct knowledge of the matter said in February. Takeover bids for the LME, which handles more than 80 percent of industrial metals futures, had to be submitted by yesterday. Claire Miller, a spokeswoman for ICE in London, Allan Schoenberg, a spokesman for CME in London, and James Dunseath, a spokesman for NYSE in London, declined to comment. Chris Evans, a spokesman for the LME, said there’s nothing more to add to the statement.
China’s Gold Imports Jump as Country May Become Biggest User (Source: Bloomberg)
Mainland China’s gold imports from Hong Kong surged more than sixfold in the first quarter, adding to signs that the country may displace India as the world’s largest consumer of the precious metal on an annual basis. Imports from Hong Kong were 135,529 kilograms (135.53 metric tons) between January and March, from 19,729 kilograms in the year-earlier period, according to data from the Census and Statistics Department of the Hong Kong government. Shipments in March rose 59 percent from February, yesterday’s data showed. Demand has climbed in the world’s second-largest economy as rising incomes and curbs on property speculation boosted purchases. China may become the biggest user annually this year, according to a forecast from the producer-funded World Gold Council. Last year, total Indian demand including for jewelry and investment was 933.4 tons to China’s 769.8 tons.
“We’re looking at another solid year for Chinese demand based on these early numbers,” said Nick Trevethan, senior commodities strategist at Australia & New Zealand Banking Group Ltd. “While it’s largely related to price, negative real interest rates should keep demand strong.”
