Commodity Blog

Commodity Prices – Corn

Corn posted the biggest advance in more than a week on the anticipation of returning demand for the US supplies. According to the report of the US Department of Agriculture, the US exports of corn totaled 1.763 million metric tons in the week ended October 13, the highest level since March. Total sales for delivery before August 31 were 5 percent above the sales in the same period of the previous year, being at the highest level in four years. Settlement for corn jumped from $6.38 to $6.50 per bushel by 23:38 GMT today on CBoT.

The forecasts of good weather drove soybeans down. Dry weather in Brazil and rains in Argentina should boost harvest. The problems of Europe and the resulting worries also weighted down the oilseed. Soybean prices retreated from $12.2525 to $12.2350 per bushel today on CBoT.

The European crisis also caused the drop of rubber to the lowest level in 14 months. The leaders of European nations will discuss the situation in Europe at the summit this weekend. Some economists argue that the bailout fund will be boosted. Yet others speculate that the politicians won’t be able to reach an agreement and such speculation weight the commodity down. January future fo delivery of rubber slumped as much as 4.4 percent to 25,445 yuan ($3,985) per ton in Shanghai.

Commodities, including crude oil and corn, gained today as prospects for the US and European economies improved, making traders more willing to invest into riskier assets.

The speculation about recapitalization of the European Union banks and hopes that the European Central Bank would support the region’s economy reduced concerns about the debt crisis in Europe.

The sentiment about the economy of the United States improved after Federal Reserve Chairman Ben Bernanke signaled about possible implementation of another round of stimulating measures. The outlook for the American economy further improved after the ADP employment report showed the growth by 91,000 working places, compared to the median forecast of 76,000. The non-farm payrolls will be released on October 7 and economists think they will show an increase by 51,000 jobs. Employment was the major concern for the US policy makers for a long time and improvement of this sector is definitely a good sign.

Crude oil also gained as the US inventories decreased by 4.7 million barrels to 336.3 million barrels last week instead of rising by 1.0 million as was expected.

Futures for delivery of corn in December gained $0.1225 (2.1 percent) to $6 per bushel as of 10:22 on CBoT. November futures for delivery of crude oil jumped as much as $3.54 (4.7 percent) to $79.21 per barrel by 13:42 on NYMEX.

Agricultural commodities declined today as the negative effect of yesterday’s monetary policy statement of the US Federal Reserve continued to affect markets today. The Fed announced its plan to replace the short-term securities with the longer-maturity debt and spoke about the ”significant downside risks” for the US economy. China’s Purchasing Managers’ Index fell to 49.4 in September from 49.7 in August, reinforcing the pessimistic sentiment among traders.

The Standard & Poor’s GSCI Index slumped as much as 5.2 percent. Silver, copper and crude oil were the major contributors to the decline. The Thomson Reuters/Jefferies CRB Index of slid 4.4 percent to the lowest level in nine months.

December contract for delivery of corn slipped $0.3575 (5.2 percent) to $6.50 per bushel by 13:15 on CBoT, the biggest decline since October 1. November futures for delivery of soybean fell $0.375 (2.8 percent) to $12.83 per bushel, following the drop to $12.81, the lowest price since March 15. Futures for delivery of wheat in December dropped $0.33 (4.9 percent) to $6.3375 per bushel, the biggest fall since June 30.

Crude oil declined on the speculation the growing US fuel inventories and the signs of the global economic slowdown will decrease demand for fuel. The report of the Energy Department showed the gasoline stockpiles increased by 1.9 million barrels last week. Analysts predict that the government report today will show the industrial production almost stalled last month. October futures for delivery of crude oil fell $0.59 to $88.32 per barrel on NYMEX before trading at $88.68.

Corn fell as ethanol production in the US slowed, reducing demand. The report of the Energy Department showed the production in ethanol rose 6.9 percent in the first five month of 2011, compared with the 29.7 percent in the same period of 2010. The US Department of Agriculture predicted the global consumption of corn will fall to 505.1 million metric tons in September from 510.09 million tons in August. Contract for delivery of corn in December dropped 0.8 percent to $7.1875 per bushel on CBoT.

Signs of slowing global economy had a negative impact on markets. Copper and agricultural commodities were among losers.

Europe with all its problems is the main source of market pessimism. Finance ministers of Finland, Germany and the Netherlands will meet today to discuss Finland’s demand for collateral in a bailout for Greece. The Italian Senate will discuss the austerity plan, while the nation’s biggest union has called a strike.

The Standard & Poor’s GSCI Index of 24 commodities fell as much as 2.1 percent.

Some analysts think that copper may still rebound as supplies decline amid strike at mines and other problems.

December futures for delivery of corn dropped as much as $0.1325 (1.7 percent) to $7.4675 per bushel by 10:00 on CBoT. Futures for delivery of soybeans in November slipped $0.2775 (1.9 percent to $14.18 per bushel in Chicago. Futures for delivery of wheat in December subtracted 0.1775 (2.3 percent) to $7.5775 per bushel. Contract for delivery of copper in three months fell 1 percent to $8,870 per metric ton, the lowest intra-day price since August 25, before trading at $8,890.25 at 15:32 on LME.

Wheat gained today as adverse weather in the US decreased potential yield. Ivory Coast also has bad weather and cocoa advanced on concerns about supply.

Last week’s storms brought lesser amount of precipitation to some areas of the US, while some areas were avoided by rains altogether. Allen Motew, meteorologist with QT Weather, some parts of west-central Illinois, northern Iowa and southern Minnesota received less than 25 percent of normal precipitation since August 1.

Ivory Coast also has problems with drought, but in addition crops suffer from lack of sun and low temperatures. The plants need mixture of sunny and rainy weather, whether currently they receive neither.

December futures for delivery of cocoa rose $43 (1.4 percent) to $3,047 per metric ton by 12:17 on ICE. December futures for delivery of corn went up $0.0925 (1.3 percent) to $7.345 per bushel as of 13:15 on CBoT.

Corn and wheat retreated today on the forecast rains will help boost growth of the crops. Previously traders were concerned that drought would damage plants. Now forecasts promised rains in the US Midwest over next several days. December futures for delivery of corn fell $0.08 (1.1 percent) to $7.175 per bushel at 11:40 on CBoT. Contract for delivery of wheat in December slipped $0.1525 (2 percent) to $7.4275 per bushel.

Rubber erased some of its losses as the threat of adverse weather reducing supplies from Thailand overshadowed concerns about possible slowdown of the global economic growth. 60 percent of Thailand’s south received heavy rainfalls. Rubber is still down over the trading session as the yen strengthened, reducing attractiveness of commodities prices in the Japanese currency, and oil fell 1 percent to $86.70 per barrel. January delivery for rubber subtracted 1 percent to 33,745 yuan ($5,283) per metric ton on Shanghai Futures Exchange.

Gold futures retreated from the record, showing the biggest drop in 7 weeks, after COMEX boosted margin requirements. CME Group Inc. (owner of COMEX) increased margin required to trade gold contracts by 22 percent. As a result, traders liquidated their positions en masse. The situation reminds the one with the silver earlier this year, when the increase of margin requirement put an end to the impressive rally of silver and caused a hit to the precious metal, from which it still hasn’t recovered. Gold looks too strong to fall in a same way. Moreover, the margin increase occurred when the yellow metal had a clearly bullish trend, while silver was caught by the CME decision during a correction. Still, caution is advised. December futures for gold delivery fell $32.80 (1.8 percent) to $1,751.50 by 13:39 on COMEX.

Corn, soybeans and wheat gained today as the US Department of Agriculture cut its forecast for harvest. The USDA decreased its estimates compared to July predictions because of excessively hot weather in parts of the US. Estimates for corn were lowered by 4.1 percent, for soybeans by 5.2 percent and for spring harvest of wheat by 5.2 percent. December futures for delivery of corn rose $0.255 (3.7 percent) to $7.14 per bushel as of 13:40 on CBoT. November futures for delivery of soybeans gained $0.3025 (2.3 percent) to $13.3175 per bushel. Contract for delivery of wheat in December advanced $0.1375 (1.9 percent) to $7.33.

Most commodities declined today, reacting to the downgrade of the US credit rating by Standard & Poor’s on Friday, while gold posted a new record, rising above $1,700.

All three major agencies (Moody’s Investor Service, Fitch Ratings and Standard & Poor’s) signaled about possible downgrade of the US credit rating in the future, while S&P actually cut the rating one step to AA+ and kept the outlook on ”negative”. This move erased any optimism that had remained on markets and caused a drop of most commodities. Gold, on the other hand, took its chance and jumped to yet another record.

The MSCI All-Country World Index of stocks dropped 1.1 percent. The S&P GSCI index of 24 commodities fell as much as 2.8 percent.

December futures for delivery of gold gained $49.90 (3 percent) to $1,701.70 per ounce as of 9:06 on COMEX after earlier it reached the all-time high of $1,718.20. Futures for delivery of corn in December fell 14 cents (2 percent) to $6.8775 per bushel at 10:16 on CBoT. Contract for delivery of soybeans in November went down $0.2025 (1.5 percent) to $13.1575 per bushel. September contract for for delivery of crude oil slipped as much as $3.28 (3.8 percent) to $83.60 per barrel by 11:43 on NYMEX.

The severe drought in Texas, US, is bringing the hay crops to the lowest level in more than a century, pushing the feed prices for the dairy and beef producers up. Texas produces not only cattle but is also the biggest growing region for hay, which is used as the cattle feedstock across the whole country.

Price of some varieties of hay rose more than 50 percent during the last 12 months. The ongoing worst ever recorded drought destroys the grass and forces farmers to opt for more expensive cattle feed — mainly corn.

It’s estimated that this year, only one crop of hay will be collected compared to three crops harvested during normal years. The farmers are expected to harvest 57,605 million acres of hay this year — the lowest level since 1909. The corn is currently sown on 92,282 million acres — the highest post World War II level.

Corn futures is currently trading at $676.25 per bushel on CME as of 15:18 GMT today — up 0.26 percent during the day.