Commodity Blog

Archive for December, 2009

Sugar rallied in 2009 amid tight supplies, becoming the top performing commodity in the past six months. Adverse weather conditions damaged crops in Brazil and India, the two largest producers in the world, causing sugar prices to double this year. And how the commodity is going to perform in 2010?

Fundamentals can be considered bullish for the sweetener. Investment funds, limited production in India and a weak dollar are major supporting factors for sugar prices. The commodity also helped by demand for ethanol from Brazil’s flex fuel car fleet.

Global supplies of sugar will remain low for the first half of 2010. The world is using more sweetener than it is producing, causing a deficit for two consecutive years. The global sugar supply deficit is estimated as much as 13.5 million metric tons in the 2009–2010 season. There is some pending dryness in regions including India and Australia, curbing the commodity productions in these countries. On the other side, a favorable weather conditions are expected in Brazil’s Center-South, where increasing production may start to ease the current global deficit.

Beet growers in France and Germany, the two largest producers in the Europe, expect the greatest harvest since 2006. But EU regulations state that farmers may produce no more than 13.3 million metric tons of sugar for food for the domestic market, and surplus beet is considered out-of-quota and turned into export sugar or products such as ethanol. For the foreseeable future the European Commission is not going to authorize the export of out-of-quota sugar in excess of the fixed quantitative limit. Beet harvest of French growers is highest in 50 years, adding to this year’s EU oversupply of 550,000 tons. In case European growers will convince Commission to loose regulation the commodity deficit can be significantly reduce by European sugar.

Considering all factors, the outlook for sugar is rather optimistic. Most analysts agree that next target price for the commodity should be about $0.30. Yet some analysts argue that price as low as $0.13 more realistic. They point that such factors as possibility that mills will produce more sweetener than previously predicted and probability for unloading of funds positions in case if sugar prices will fall may put downward pressure on sugar. Even considering this factors its price is not likely to fall below $0.10. As always caution is advised when dealing with commodities.

The technical analysis, that includes the indicators’ data and major pivot points for Brent Oil, Gold, Silver and Copper as traded on spot market as of December 26th 2009:

Gold imports in India, the greatest buyer in the world, may wane in December because demand went down on high prices. Imports by India expected to fall to 30 metric tons, down from 32 metric tons in November. Analysts forecast that “demand will remain low until prices fall”. Bullion for immediate-delivery rose to $1,096.66 by 9:56 in Mumbai.

Analysts predict that retail-food prices in the U.S. will rise about 2 percent this year, curbed by declining production. The outlook for food inflation in 2010 is about 3.5 percent. Beef and veal prices dropped at a rate of 0.5 to 1.5 percent this year. Pork prices fell 1.5 to 2.5 percent. Prices for fruits and vegetables slid 1.5 to 2.5 percent this year.

Latest commodity prices (ICE, NYMEX, CME) as of 17:50 GMT:

Oil (Brent) — $75.85
Gold — $1,104.10
Silver — $17.42
Palladium — $384.00
Platinum — $1,456.25
Copper — $7,134.00
Aluminum — $2,265.00
Nickel — $18,920.00
Zinc — $2,525.00
Cocoa — $3,275.00
Sugar — $27.05
Corn — $408.00
Soybean — $38.54

Platinum hit the record in four weeks after the dollar slid versus the euro, increasing demand for precious metals as an alternative investment. The greenback slid 0.8 percent against the euro. April futures for platinum delivery added $30 (2.1 percent) to $1,432.90 per ounce on the New York Mercantile Exchange.

Gold prices reached the record level in a week as the dollar fell, spurring demand for precious metals as an inflation hedge. The precious metal also gained as new home purchases in the U.S. decreased last month and consumer spending increased less than expected, boosting demand for the metal as a haven. February futures for gold delivery increased $7.30 (0.7 percent) to $1,094 per ounce on NYMEX.

Latest commodity prices (ICE, NYMEX, CME) as of 19:43 GMT:

Oil (Brent) — $75.41
Gold — $1,091.42
Silver — $17.17
Palladium — $355.50
Platinum — $1,393.00
Copper — $7,046.00
Aluminum — $2,267.00
Nickel — $18,400.00
Zinc — $2,530.00
Cocoa — $3,264.00
Sugar — $26.52
Corn — $404.25
Soybean — $38.17

Refined copper imports in China, the greatest buyer in the world, rebounded in November with rising domestic prices and increasing demand. China may increase imports to 200,000 tons per month in the first quarter of 2010 as high domestic prices made purchases from overseas sellers cheaper. Delivery for copper in three months on LME dropped 0.6 percent to $6,895 per ton by 15:21 in Shanghai.

Corn slid and soybeans went down as the dollar gained, curbing the attractiveness of commodities as an alternative investment. Analysts says that the strong dollar “is encouraging some speculators to reduce long positions”. March futures for corn delivery went down $0.055 (1.4 percent) to $3.945 per bushel as of 10:32 on CBT. March futures for soybean delivery slid $0.1075 (1.1 percent) to $9.9775 per bushel in Chicago.

Crude oil rose as the dollar dropped and on speculation about global economic restoration. A rising dollar cut demand for commodities as an alternative investment. February delivery for crude oil gained $0.62 (0.8 percent) to $74.34 per barrel by 13:13 on the New York Mercantile Exchange.

Latest commodity prices (ICE, NYMEX, CME) as of 17:35 GMT:

Oil (Brent) — $72.61
Gold — $1,085.25
Silver — $17.00
Palladium — $357.00
Platinum — $1,412.50
Copper — $6,893.00
Aluminum — $2,243.00
Nickel — $17,800.00
Zinc — $2,438.00
Cocoa — $3,285.00
Sugar — $26.21
Corn — $397.25
Soybean — $37.90

Wheat slid today on concern that growing global inventories will cut demand for supplies from the U.S. Analysts forecast that global supplies will rise as much as 17 percent to 190.9 million tons by May 31st. March futures for wheat delivery slid $0.03 (0.6 percent) to $5.25 per bushel by 10:12 on the Chicago Board of Trade.

Orange-juice futures jumped to a highest rate in 23 months on expectation that citrus yield may decline in Florida, the second largest grower of the fruit in the world. Orange harvest in Florida is expected to fall 17 percent compared to the last season because of drought and low temperatures. Analysts say that Florida may produce 135 million boxes of oranges in the year ending June 30th, the lowest total in three years. March futures for orange-juice delivery climbed $0.0375 (2.8 percent) to $1.381 per pound as of 10:56 on ICE.

Latest commodity prices (ICE, NYMEX, CME) as of 17:40 GMT:

Oil (Brent) — $73.59
Gold — $1,091.52
Silver — $17.02
Palladium — $361.50
Platinum — $1,428.49
Copper — $6,930.00
Aluminum — $2,270.00
Nickel — $17,995.00
Zinc — $2,442.00
Cocoa — $3,264.00
Sugar — $25.87
Corn — $401.25
Soybean — $38.44