Commodity Blog

Archive for June, 2009

Copper in Shanghai climbed for a fifth day on optimism that demand may be picking up as global stockpiles decline.

Copper inventories in Shanghai fell 18 percent last week, the first drop in four weeks, the Shanghai Futures Exchange said in a report after the market closed June 26. Stockpiles of the metal tallied by the London Metal Exchange have declined every day since May 7.

“The large drop in inventories certainly lends support to the market,” Zeng Chao, analyst at Everbright Futures Co, said in an e-mail.

October-delivery copper on the Shanghai Futures Exchange, the most-active contract, gained as much as 0.9 percent to 40,740 yuan ($5,962) a metric ton and traded at 40,490 yuan at 10:03 a.m. Singapore time.

Three-month delivery copper on the London Metal Exchange rose as much as 1.8 percent to $5,125 a ton before trading at $5,105 a ton. Copper for September delivery in New York was up 0.6 percent at $2.3235 a pound.

Wheat futures fell to the lowest in nearly two months in Chicago on concern the dollar may extend its gains, curbing demand for the grain from importers and investors. Soybean and corn futures also declined.

The Dollar Index, which tracks the greenback against six currencies, fell 0.1 percent at 9:42 a.m. in Singapore, after gaining 0.9 percent yesterday as the Federal Reserve kept its $1.75 trillion bond-purchase program unchanged while saying the pace of the U.S. economic contraction is slowing.

The dollar is “causing concerns with the direction for the grain market,” Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney, said by phone today.

Wheat for July delivery fell as much as 0.8 percent to $5.3525 a bushel, the lowest price since April 30, in after- hours electronic trading on the Chicago Board of Trade. The futures traded at $5.36 a bushel at 10:09 a.m. Singapore time. September-delivery wheat, the contract with the most open interest, dropped as much as 0.8 percent to $5.6325 a bushel before trading at $5.6425.

Japan plans to offer loans to power producers in the U.S. and Australia that buy so-called clean coal generators from Japanese manufacturers, according to a government document obtained by Bloomberg News.

Funding from state-owned Japan Bank for International Cooperation would help drive sales of the plants that cost about $3.1 billion apiece, said a senior trade ministry official involved in producing the 113-page draft plan, due to be released today. The ministry said in an e-mail it will brief the media on a report about clean coal at 4:30 p.m. in Tokyo.

Mitsubishi Heavy Industries Ltd. and Hitachi Ltd. compete with General Electric Co. and Germany’s Siemens AG to supply plants that convert coal into gas before generating power, making it easier to trap carbon-dioxide emissions. Japan wants to benefit from new demand for clean energy after world leaders including U.S. President Barack Obama pledged to back technologies that reduce gases blamed for global warming.

“The government’s marketing campaign will be a big plus for Mitsubishi Heavy in the competition to capture the market for ‘green technology,’” said Futoshi Usui, a Tokyo-based analyst at Credit Suisse, who rates the stock “outperform”.

Palm oil futures fell after data showed that exports from Malaysia, the second-largest producer, dropped in the first half of this month as supply picked up.

Shipments from Malaysia dropped 10 percent to 560,416 metric tons in the first 15 days of June compared with the previous month, according to independent surveyor Intertek. The figures were released before the start of the day’s trade.

Last week, the nation’s Palm Oil Board said production had surged 8.5 percent to 1.4 million metric tons in May, lifting stockpiles for the first time in six months by 5.7 percent to 1.37 million tons compared with April.

“Exports are down,” Ong Chee Ting, an analyst at Maybank Investment, said from Kuala Lumpur. If that trend persisted, “prices would be slightly weaker this week,” Ong said.

August-delivery palm oil dropped as much as 1.8 percent to 2,420 ringgit ($687) a ton on the Malaysia Derivatives Exchange, before trading at 2,423 ringgit at 12:08 p.m. The price may fall to less than 2,000 ringgit in the second half, Ong added, when output is seasonally higher than the first six months.

Sugar futures rose for the second time in three days on speculation that a global production deficit will widen toward the end of 2009. Coffee also gained.

The shortfall may reach 4.5 million metric tons in the year starting in April, up from a March estimate of 2.5 million tons, according to sugar broker and researcher Kingsman SA. The premium for October futures over July has risen 49 percent since March 31, showing there is less demand for immediate supply than for later this year, said Jeff Bauml at broker R.J. O’Brien.

“The perception within the trade is that the fourth quarter is when the deficit will be felt the most,” Bauml, an R.J. O’Brien senior vice president, said by telephone from New York.

Raw-sugar futures for October delivery rose 0.05 cent, or 0.3 percent, to 16.47 cents a pound on ICE Futures U.S. in New York. The price earlier fell as much as 1.1 percent and gained 0.8 percent. The spread between October and the July contract was 1.12 cents a pound, compared with 0.75 cent at the end of March and a record 1.28 cents on June 3.

Brazil, the world’s largest producer, and India, the top consumer, have helped keep sugar futures in a range over the past month, said Jonathan Kingsman, the head of Kingsman SA in Lausanne, Switzerland. October futures have traded between 15.62 cents and 16.91 cents since May 11.

Rubber declined for a second day in Tokyo as supplies increased from Thailand, the world’s biggest producer, and the Japanese currency gained against the dollar, encouraging investors to sell the yen-denominated contracts.

The commodity slid as much as 1.5 percent after the yen recovered from a one-month low against the dollar. Thai farmers have also offered to sell more rubber than in previous months, Rewat Yenchai, an analyst at Bangkok-based AGROW Enterprise Co., said yesterday.

“The yen is the biggest factor right now,” Navarat Kaewpratarn, a marketing official at Future Agri Trade Ltd., said by phone in Bangkok today. “There is also a lingering concern that demand’s still lagging supply.”

Production in Thailand typically increases in June following the end of the so-called wintering season, when trees shed leaves and produce less latex.

Natural rubber for November delivery, the most-active contract, dropped 0.5 percent to 167.9 yen a kilogram ($1,709 a metric ton) on the Tokyo Commodity Exchange as of 11:30 a.m. local time. The dollar traded at 98.26 yen, falling from 98.55 earlier. The yen fell to 98.89 on June 5, the lowest since May 8.

Crude oil rose in New York, poised for a third weekly gain, after Goldman Sachs Group Inc. said prices may reach $85 a barrel by the end of the year as demand recovers and supplies shrink.

Oil surged to a seven-month high yesterday and gasoline climbed after the bank increased its year-end forecast from $65. The dollar’s drop over the past six weeks has boosted crude prices as investors buy commodities as an inflation hedge.

“It’s the funds that are pushing the market higher,” said Jonathan Kornafel, a director for Asia at options trader Hudson Capital Energy in Singapore. “When everyone reads the same report and comes to the same conclusion, then you’re going to have the market moving in one direction. The general trend is for the dollar to get weaker and for crude to get stronger.”

Crude oil for July delivery rose as much as 71 cents, or 1 percent, to $69.52 a barrel on the New York Mercantile Exchange. It was at $69.38 a barrel at 2:10 p.m. Singapore time. Yesterday, the contract rose $2.69 to $68.81, the highest settlement since Nov. 4. Prices are up 4.6 percent this week.

The U.S. Dollar Index, which values the greenback against a basket of international currencies, has dropped 5.5 percent since May 7, while crude has gained 22 percent.

“It really has been driven by pretty strong inflows from funds and that’s been encouraged by quite significant weakness in the dollar,” said Toby Hassall, an analyst at Commodity Warrants Australia Pty in Sydney. “Given the momentum crude seems to have at the moment, $85 as a high for 2009 doesn’t seem unreasonable.”

Soybeans jumped close to an eight- month high and corn climbed to a more than seven-month peak on speculation rain may delay planting, possibly damaging yields for some crops already seeded in the U.S. Midwest.

Rain that falls over the next few days will hinder planting efforts of farmers, according to a forecast yesterday from AccuWeather.com. Corn planting remains several weeks behind schedule in parts of the Midwest, it said. In areas where planting has taken place, any new flooding issues could damage existing crops, the forecaster said.

“Forecast for rain this week has stoked concerns over planting delays of corn as well as soybeans,” said Hiroyuki Kikukawa, general manager of research at IDO Securities Co.

Soybeans for July delivery added as much as 1.3 percent to $11.995 a bushel on the Chicago Board of Trade and were $11.99 by 10:04 a.m. Singapore time. The most-active contract rose 1.5 percent last week, climbing for a fifth straight week, and jumped 12 percent in May, the third straight monthly advance. The price touched $12.0075 on May 27, the highest since Sept. 25.

U.S. soybean inventories on Aug. 31, before the harvest, will drop to a five-year low of 130 million bushels from 205 million bushels a year earlier, the USDA said on May 12.

The weaker dollar has boosted demand for soybeans and corn as well as other commodities, Kikukawa said. The dollar weakened to a five-month low on May 29 and fell 7 percent in May, its biggest monthly decline this year against the euro.