Thursday, January 17, 2013

20130117 0936 Global Commodities Related News.

Drought Stretching to Second Year Boosting Risk for U.S. Crops (Bloomberg)
The risk of drought damaging U.S. corn and soybean crops for a second year is increasing as forecasters predict persistently dry weather in the Midwest and Great Plains through April, the start of the planting season.
The U.S. Climate Prediction Center probably will say tomorrow that the growing region will remain drier than normal over the next three months, according to four of five forecasters surveyed by Bloomberg. Almost 42 percent of the contiguous U.S. was in severe to exceptional drought as of Jan. 8, government data show. That’s more than double for the date a year earlier, before the worst drought since the 1930s cut combined output of corn and soybeans by the most since 1996.
“The drought will persist through May with warm temperatures and below-normal rain in the western half of the Midwest,” Joel Widenor, the director of agricultural services for Bethesda, Maryland-based Commodity Weather Group LLC, said in a telephone interview yesterday. “About 50 percent of the Midwest will remain in drought condition.”
Corn and soybean prices surged to records last year as output fell, while dry fields across the Great Plains left winter-wheat conditions in November at their worst since at least 1985, when the U.S. Department of Agriculture began collecting the data. Wheat futures jumped to a four-year high last year, and farmers have already collected a record $11.581 billion on insurance claims for damage to all crops in 2012.

Wheat Market Recap Report (CME)
March Wheat finished up 2 1/4 at 785, 6 off the high and 8 up from the low. May Wheat closed up 2 3/4 at 793 3/4. This was 7 3/4 up from the low and 5 1/4 off the high.
KC and Chicago wheat traded lower early in the session but managed to close higher on the day. Kansas City wheat led the way higher on concern over the dry conditions in the west. Short covering was noted in each market which helped to support the move higher. Export demand continues to be unimpressive for wheat and it was reported this morning that France likely sold as much as 400,000 tonnes of milling wheat to Algeria overnight for May/April shipment. Most expected the US to do the business but it seems other origins around the world are comfortable with their domestic supply outlook to sell additional cargos for export. This could add long term resistance to the price outlook in wheat. The tight corn supply this year suggests better feed wheat demand which may pick up some of the slack from missed export opportunities. Additional support continues to come from the drier weather outlook in the western plains for the next 10-14 days.
March Oats closed up 3/4 at 357 1/4. This was 4 up from the low and 2 3/4 off the high.

Corn Market Recap for 1/16/2013 (CME)
March Corn finished up 3/4 at 731 1/4, 3 3/4 off the high and 6 3/4 up from the low. May Corn closed up 1/2 at 731 1/4. This was 6 1/4 up from the low and 3 3/4 off the high.
March corn traded lower for most of the day but managed to close higher into the closing bell led by a sharply higher soybean market. Light profit taking was seen early on following 8 straight sessions of higher trade. Non-existent export demand and poor ethanol data continue to suggest that at least some kind of demand rationing has taken place due to the higher corn prices this year. Ethanol production for the week ending January 11th averaged 784,000 barrels per day, down 5% vs. last week and down 16.7% vs. last year. Corn used in last week's production is estimated at 82.3 million bushels, down from 86.7 the week prior and the lowest weekly usage for the 2012/13 marketing year. Corn use needs to average 86.8 million bushels per week to meet this crop year's USDA estimate of 4.5 billion bushels. Stocks as of January 11th were 20.4 million barrels, up 2.6% vs. last week and up 4.2% vs. last year. Implied demand, total supply net of the weekly change in stocks, fell to its lowest level in 5 weeks at 5.17 million barrels. The data was considered negative to the price outlook and suggests a slowdown in ethanol demand.

Soybeans, Corn Gain on South American Crops; Wheat Rises (Bloomberg)
Soybeans rose to a three-week high and corn extended the longest rally in a year on speculation that warmer, drier weather may hurt crops in South America, increasing demand for U.S. supplies. Wheat also advanced.
Soil moisture in central Argentina, Paraguay and southern Brazil will decline during the next seven days with little rain expected in the following week, World Weather Inc. in Overland Park, Kansas, said in a report. Frequent precipitation in northern Brazil into February will slow soybean harvesting, the company said.
“The forecast is starting to look more threatening for the crops in South America,” Mark Schultz, the chief analyst at Northstar Commodity Investment Co. in Minneapolis, said in a telephone interview. “We are capping crop potential, and yields will start to decline in February if the forecast verifies.”
Soybean futures for March delivery rose 1.6 percent to close at $14.365 a bushel at 2 p.m. on the Chicago Board of Trade, after reaching $14.39, the highest since Dec. 26. Prices are up 4.6 percent this week and 24 percent higher than a year ago.
Corn futures for March delivery rose 0.1 percent to $7.3125 a bushel on the CBOT, after touching $7.35, the highest since Dec. 10. The price has climbed 7.5 percent over eight sessions, the longest rally since December 2011.

Sugar Production in India to Drop on Cheap Imports, Dry Weather (Bloomberg)
Sugar output in India, the biggest producer after Brazil, is set to decline in the year from October as domestic prices fall on cheaper imports and dry weather curbs planting, the Indian Sugar Mills Association said.
Production will probably slide from 24 million metric tons in the year ending Sept. 30, M. Srinivaasan, president of the association, said in a phone interview. Decreasing local prices will hamper mills’ ability to make timely payments to farmers, encouraging them to switch to other crops, he said. He didn’t give a forecast for 2013-2014.
A lower harvest after two years of surplus may spur the world’s second-biggest consumer to boost imports further, curbing a slide in New York futures. Sugar slumped 16 percent in 2012 because of a second year of glut and Goldman Sachs Group Inc. cut its forecast this week to 18.5 cents a pound in three and six months from an earlier estimate of 22 cents, citing rising inventories. Cheaper sugar may extend a decline in food costs tracked by the United Nations.
“The domestic sugar situation right now is pretty bad,” said Srinivaasan. “We are going to have negative planting in consequence to that and also due to the drought situation in certain states. Imports are taking place too soon.”
Parts of Maharashtra and Karnataka states, which together account for 45 percent of India’s sugar output, have been facing drought in the past 24 months hurting monsoon and winter-sown crops, according to the farm ministry.

Brazil coffee trees enjoy showers after dry weeks (Reuters)
Brazil's coffee-growing regions are at last experiencing a bounty of rain after weeks of drier-than-average weather, moisture that will help beans swell out to a more desirable, yield-boosting size, forecaster Somar said on Monday.

Cotton Jumps to Highest Since October as China Mill Demand Grows (Bloomberg)
Cotton futures jumped to the highest since October on signs that demand is improving in China, the world’s biggest consumer and importer.
To satisfy domestic mill demand, the government began selling from state reserves this week, the China National Cotton Exchange said yesterday. Imports rose 75 percent in December from a month earlier, another report showed. The U.S. Department of Agriculture on Jan. 11 boosted its forecast of Chinese imports this year by 8.7 percent to 12.5 million bales. Prices fell 18 percent in 2012 on signs of ample supply.
“They are going to need to import more cotton over the next six weeks” to replenish stockpiles, Chris Kramedjian, a fibers and textiles consultant at INTL FCStone LLC, said in a telephone interview from Nashville, Tennessee.
Cotton for March delivery rallied 1.5 percent to 77.39 cents a pound at 12:08 p.m. on ICE Futures U.S. in New York, after touching 77.78 cents, the highest for a most active contract since Oct. 19.
On Jan. 11, the USDA cut its estimate for domestic production in the year ending July 31, reduced the outlook for stockpiles and boosted its projection for shipments. The U.S. is the world’s largest exporter.
A bale of cotton weighs 480 pounds, or 218 kilograms.

Recap Energy Market Report (CME)
February crude oil prices trended higher throughout the US trading session. The market was under attack during the overnight and early morning hours, weighed down by a sell off in global equity markets and a downwardly revised 2013 global growth forecast from the World Bank. Crude oil prices began to stabilize during the early US trading hours, drafting support from supply disruptions in the North Sea region and a rebound in US equity markets. February crude oil rallied to its high of the session in reaction to this morning's EIA inventory report that showed an unexpected draw last week of 951,000 barrels. Crude oil imports for the week stood at 8.03 million barrels per day compared to 8.342 million barrels the previous week. The refinery operating rate was down 1.2% to 87.9%. The crude oil market stayed firm and near their best levels of the session going into the close. The relative out performance of WTI compared to Brent crude oil tightened that spread differential by $0.75 on the session.

Oil Trades Near Four-Month High After Crude Stockpiles Decline (Bloomberg)
Oil traded near the highest level in almost four months in New York as stockpiles unexpectedly declined and petroleum consumption rose in the U.S., the world’s biggest crude-consuming nation.
West Texas Intermediate futures were little changed after climbing the most in two weeks yesterday. U.S. crude supplies slid 951,000 barrels last week, Energy Department figures show. They were forecast to increase 2.2 million barrels, according to a Bloomberg News survey of analysts. Fuel consumption climbed from the lowest level since March, the report showed.
Crude for February delivery was at $94.08 a barrel, down 16 cents, in electronic trading on the New York Mercantile Exchange at 10:43 a.m. Sydney time. The contract advanced 1 percent to $94.24 yesterday, the most since Jan. 2 and the highest close since Sept. 18. Prices dropped 7.1 percent last year.
Brent for February settlement, which expired yesterday, gained 31 cents to $110.61 a barrel on the London-based ICE Futures Europe exchange. The more active March contract rose 5 cents to $109.68. The front-month European benchmark contract closed at a premium of $16.37 to WTI futures, the narrowest spread since Sept. 19.
Total petroleum consumption increased 1.1 percent to 18 million barrels a day in the seven days ended Jan. 11, the Energy Department report showed. Gasoline demand climbed 3.9 percent to 8.32 million barrels a day.

Gold Drops From One-Week High; Platinum, Palladium Gain (Bloomberg)
Gold futures fell from a one-week high amid concern that demand is easing while global economic growth slows. Platinum closed at a three-month high.
Buyers of gold are holding back in anticipation of lower prices, according to Afshin Nabavi, a senior vice president at Geneva-based MKS (Switzerland) SA, a bullion refiner. The World Bank cut its growth forecast for this year and predicted a second year of contraction in the euro region.
“Any talk about slowing physical demand will put pressure on prices,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. “Overall, there is some nervousness because of slowdown worries.”
Gold futures for February delivery fell 70 cents to settle at $1,683.20 an ounce at 1:34 p.m. on the Comex in New York. Yesterday, the price reached $1,684.90, the highest for a most- active contract since Jan. 3. The metal rallied 7 percent last year, the 12th straight annual advance.
Silver futures for March delivery rose less than 0.1 percent to $31.542 an ounce on the Comex.
On the New York Mercantile Exchange, platinum futures for April delivery gained 0.2 percent to $1,694.10 an ounce, the highest closing price since Oct. 9.
Yesterday, the platinum settlement topped gold for the first time since March.
Anglo American Platinum Ltd. (AMS), the world’s biggest producer, said yesterday it will cut jobs and output in South Africa.
Palladium futures for March delivery rose 1.8 percent to $726.45 an ounce on the Nymex. Earlier, the price reached $727.90, the highest since Sept. 19, 2011.

Silver Market Recap Report (CME)
The silver market started out in a corrective mode but managed to throw off that negative bias and return to the vicinity of the prior session's highs early in the afternoon trade. A recovery in platinum prices might have provided silver with some spillover buying interest and it is also possible that a recovery in US equities helped to bring silver prices up off the mat. Technical traders might suggest that the morning correction in March silver today might have served to balance the markets partially overbought condition. The 50 day moving average in silver comes in above the market at $32.08.

Gold Market Recap Report (CME)
While gold showed corrective action early in the trading session, prices seemed content to claw back toward the highs into mid session and in the early afternoon. German gold reserve movements probably served to keep gold in the headlines but gold and silver today didn't seem to be tracking off a specific fundamental theme today. Weakness in the Euro might have partially undermined gold today but the currency market influence wasn't overly significant. Given the run in gold prices recently, any lack of upside momentum in gold could unnerve a portion of the bull camp, especially since the markets are anticipating fresh and potentially important economic readings from China. For the time being headline flow from the BOJ and from other central banks is likely to become more important, especially after the Gold Fields Mineral Services prediction of more central bank gold buying ahead. Offset the positive GFMS central bank talk was news that total 2012 world gold investment actually declined by 1.2%.

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