Commodity Blog

Commodity Prices – Wheat

Gold and silver erased this year’s gains as the credit crisis in Europe continue to weaken demand for raw materials. Talks about Greece exiting the euro-union are becoming more and more serious and some analysts even speculate about collapse of the eurozone. Traders seek a safe haven amid uncertainty and economic turmoil, but it looks like the dollar took the role of refuge that was traditionally attributed to precious metals. Gold was down from $1,541.40 to $1,535.80 per ounce on COMEX yesterday, reaching $1,533.80 intraday — the lowest price since December 29. Silver fell from $27.69 to $26.90 per ounce yesterday — the lowest settlement since December 29, while today it opened at$27.21.

Wheat jumped today for the fourth trading session as bad weather in various parts of the world threatened to curb output. Russia continues to suffer from drought and parts of Kansas suffer from the same problem. Russia is the world biggest exporter. Wheat is the fourth biggest US crop and Kansas is the biggest wheat-growing region of the United States. Wheat climbed from $6.3825 to $6.4325 per bushel as of 00:51 GMT on CBoT today.

Wheat posted the biggest gain in more than two weeks as adverse weather in the United States threatens to curb output. The US Department of Agriculture estimated that 52 percent of crops were in good or excellent condition as of May 13 the Kansas, the biggest US grower, down from 60 percent in the week before. Dry weather in parts of Russia and Ukraine is expected to further reduce supply of the grain. Wheat climbed from $5.9525 to $6.0700 per bushel as of 21:09 GMT on CBoT today, posting the biggest gain since April 27.

Oil and rubber fell on political turmoil in Greece. Greek political parties failed to form a new coalition government, resulting in new election. Polls show that many Greeks favor parties that stand against austerity measures demanded from the European Union and the International Monetary Fund in exchange for a bailout. Greece may leave the eurozone and the resulting fear harm markets. Futures for delivery of crude oil in June fell $0.8 to $93.98 per barrel on NYMEX, the lowest price since December 19. Brent crude advanced from $111.13 to $111.86 on ICE today. The futures for delivery of rubber in October tumbled as much as 5.1 percent to $3,317 per metric on the Tokyo Commodity Exchange, the lowest settlement for a most-active contract since January 6.

Oil climbed today, rising for the second day, as central banks of developed nations signaled that they may stimulate their economies. Janet Yellen, a member of the Federal Open Market Committee, suggested that the US economy needs stimulus despite signs of recovery:

I consider a highly accommodative policy stance to be appropriate in present circumstances. But considerable uncertainty surrounds the outlook, and I remain prepared to adjust my policy views in response to incoming information. In particular, further easing actions could be warranted if the recovery proceeds at a slower-than-expected pace, while a significant acceleration in the pace of recovery could call for an earlier beginning to the process of policy firming than the FOMC currently anticipates.

Masaaki Shirakawa, the Governor of the Bank of Japan, said that the central bank will perform “powerful easing”. The European Central Bank hinted that it may resume purchases of sovereign securities. Futures for crude oil delivery in May gained $0.94 to $103.64 per barrel on NYMEX. Brent was up from $120.08 to $121.79 per barrel as of 20:29 GMT on ICE today.

Corn gained for the first time this week and wheat advanced for the second consecutive session today on concerns that low temperatures may hurt crops in the United States. The USA is the largest exporter of both grains. Prices may yet fall as rains in Europe may boost plant growth. Corn climbed from $6.3750 to $6.4450 per bushel today on CBoT before trading at $6.3925. Wheat was up from $6.2925 to $6.3900 per bushel, following the advance to $6.4775.

Copper fell for the straight day today, reaching the lowest level since January. Yield for Spain’s bonds increased, causing concern that the debt crisis is spreading across the eurozone. China reduced its imports of raw materials, adding to signs of waning demand. Copper price was down from $3.6370 to $3.6290 per pound as of 22:28 GMT today on COMEX.

Wheat rose today on the forecast that cold weather in the United State will slow growth of crops. Many analysts believe that the prices may yet fall in the near future as the market is oversupplied. The International Grains Council predicted that global stockpiles will increase 7.1 percent to 210 million metric tons this year, while output will reach 681 million tons in 2013 — the level seen only twice in history. Wheat spot price rose from $6.2625 to $6.2800 per bushel on CBoT today. Yesterday, the price sank from $6.4175 to $6.2500 per bushel.

Corn jumped today after the US Department of Agriculture reported that inventories reached the lowest level in eight years. Wheat and soybeans also surged.

Corn stocks fell 8 percent to 6.01 billion bushels as of March 1 from a year ago. That was the lowest level in the period since 2004.

Wheat stockpiles fell 16 percent from the previous year to 1.20 billion bushels. That was the lowest level in three years.

Soybeans inventories were up 10 percent. Still, prices rose as US farmers plan to sow 73.902 million acres this year, 1.4 percent less than in 2011 and the lowest in five years.

Rabobank International wrote in its report today:

Given the long season ahead and the risk of weather disruptions along with low inventories, the outlook for soybean and corn crops remains bullish.The upside risk is considerable, and if crop potential is threatened by weather, we would expect prices to visit new highs.

Corn price climbed from $6.0550 to $6.4400 per bushel on CBoT today. Soybeans advanced from $13.5450 to $14.0200 per bushel in Chicago, while the intraday high of $14.1600 was the highest price since September 12. Wheat surged from $6.1525 to $6.5875 per bushel today.

Commodities declined after a report showed that the eurozone economy contracted. Eurostat reported that eurozone gross domestic product fell 0.3 percent in the fourth quarter of 2011. The negative data hurt most commodities, including crude oil, corn, sugar, and wheat.

Crude oil also declined on the speculation that the European Union may resume negotiations with Iran about the Iranian nuclear program. Forecasters predict that today’s report will show an increase of the US stockpiles, adding to the downside factors for crude. As of agricultural commodities, experts forecast that supply will outpace demand for most of crops, decreasing prices even further.

April futures for crude oil delivery traded at $104.99 per barrel on NYMEX today after falling $2.02 to $104.70 per barrel yesterday. Brent traded near $122.12 per barrel on ICE today after yesterday’s drop from $124.27 to $122.32. Corn fell from $6.6475 to $6.5600 per bushel before trading today at $6.5800 on CBoT. Sugar was down from $0.2462 to $0.2406 per pound on ICE at yesterday’s trading session. Wheat was at $6.5325 per bushel on CBoT today, while it was down from $6.6625 to $6.5600 yesterday.

Wheat fell today, following yesterday’s decline, on forecast that global inventories will rise to a record. Estimates of the US Department of Agriculture show that stockpiles may reach a record 213.1 million metric tons in 2011–12 marketing year. Some analysts predict that inventories may swell to 220 million tons next marketing year. Wheat traded at $6.3900 per bushel as of 1:32 GMT today on CBoT after falling yesterday from $6.4400 to $6.4075.

Crude oil continued its rally to an annual record as fears of recession in Europe eased. German business sentiment improved more than was predicted by economists. Additionally, US jobless claims remained unchanged last week, signaling that the US jobs market is stabilizing. April for delivery of crude oil jumped 0.8 percent to $108.69 per barrel in electronic trading on NYMEX before trading at $108.61. Brent crude traded at $124.14 per barrel on ICE today, following yesterday’s advance from $122.75 to $124.20, reaching $124.50 intraday, the highest price since May 3.

Wheat was falling for the second trading session today on signs that there will be enough stockpiles to counter damage that adverse weather has done to supplies. The US Department of Agriculture estimated that world wheat inventories will rise to 213.1 million metric tons before the 2012 harvest in the Northern Hemisphere, 6.2 percent above last year’s figure.

Wheat also fell with other commodities on bad news from Europe. Bailout for Greece was postponed as Greek leaders rejected additional budget cuts that other members of the European Union demanded. Most traders were unprepared for such turn of events as it has looked almost certain that Greece would receive aid.

Wheat fell from $6.4575 to $6.2925 per bushel as of 20:40 GMT today on CBoT.

Wheat rose today to a monthly high on concerns that cold weather in Europe will hurt output. Temperatures in Ukraine may fall below 15 degree Fahrenheit, threatening crops, especially those not covered with snow. At the same time, Russia is considering a tax on exports.

Additionally, wheat was rising with other commodities on speculation that Greece is making progress in debt-reduction discussions. The European leaders agreed about sanctions on countries with high budget deficit.

Wheat price climbed from $6.4475 to $6.6625 per bushel as of 21:24 GMT today on CBoT after reaching $6.6750 — the highest since January 3.

Crude oil and gold, as well as other commodities, jumped after the Federal Reserve maintained interest rates near zero and pledged to keep borrowing costs record low at least till late 2014. Such move was considered a ”light” version of quantitative easing. It weakened the dollar and boosted commodities priced in the US currency. March for delivery of crude oil advanced $0.66 to $100.06 per barrel on NYMEX. Brent went higher from $110.45 to $110.74 per barrel on ICE today as of 6:41 GMT. Gold was up from $1,666.50 to $1,711.00 yesterday and traded at $1,710.80 today on COMEX.

Wheat was also higher on dwindling Russian stocks. Inventories of some Russian regions declined by more than 50 percent, while other regions shipped almost all of their supplies as exports picked up. Wheat climbed from $6.4075 to $6.4650 per bushel on CBoT today.