Commodity Blog

Posts Tagged ‘Thailand’

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.

Sugar prices fell to the lowest level since September as specialists forecast that exports from Thailand, second biggest shipper in the world, will increase. Cocoa and coffee also fell.

Thailand may export 7 million metric tons of sugar this season, and that would be a record. Analysts are afraid that surge of exports can create oversupply on the global markets.

At the same time, demand for the sweetener may decline as Asian countries are expected to slow their economic growth. India and Brazil signaled that they are considering another round of interest rate increases, while China continues its attempts to rein the rapidly growing inflation.

July for raw sugar delivery fell as much as $0.007 (3.2 percent) to $0.2135 per pound by 14:00 on ICE, following the drop to $0.2133, the lowest price since Sept. 10. Futures on raw sugar lost 34 percent this year.

July contract for cocoa delivery slipped $60 (1.8 percent) to $3,211 per metric ton at 11:58. Futures on Arabica coffee for delivery in July dropped $0.1165 (3.8 percent) to $2.945 per pound.

Sugar continued this week’s decline with another bearish day today, as the industry specialists commented that the commodity price is capped at no more than $25 per 100 pounds.

Thailand, the world’s second biggest sugar producer after Brazil, increased its annual output by 37 percent. Meanwhile, Goldman Sachs forecasts that the price for sugar will reach $20 per 100 pounds during the next 6 months, compared to the February all-time high of $36.08 per 100 pounds.

This soft commodity was a major hit until February this year and is in a constant downtrend since that time, contributing to a monthly decline of food prices globally. Cheaper sugar is also a perfect stimulus for the food companies such as the US based Kraft Foods Inc. and Swiss Nestle SA to increase production, while the former had previously lowered profit forecasts due to the elevated commodity prices.

Sugar futures with delivery in May is now trading near $23.68 per 100 pounds as of 15:17 GMT on ICE, down from $24.39 or almost 3%.

Wheat rose today on speculation that floods may decrease supplies of the grain. This summer crop was harmed by droughts, now wet weather became an issue. Floods in Thailand and Australia threaten global supply and increase demand for the commodity. March futures for wheat delivery rose $0.085 (1.1 percent) to $7.485 per bushel by 13:15 on CBoT.

Cocoa supplies are also threatened, though not because of nature’s, but by humans’ actions: namely, because of a political tension in Ivory Coast. The Constitutional Court said that the ruling of Ivory Coast’s electoral commission to name Alassane Ouattara a winner of the election, which was held on November 28th, was invalid. Last night at least six people were killed and 17 were wounded in a shooting at the party office of Ouattara. March delivery for cocoa added $110 (4 percent) to $2,868 per metric ton at 14:00 on ICE.

Rubber jumped in Tokyo to the highest level in three week on concerns that bad weather will disrupt supplies. Cyclones and monsoon caused deaths in Malaysia, Thailand and Vietnam, also threatening to halt shipments of rubber from these countries. Floods caused some major rubber markets in Thailand to close. Futures for rubber delivery rose 1.9 percent to 33,250 yuan ($4,991) per ton in Shanghai.

Oil gained higher than $85 level today after the US Federal Reserve announced its $600 billion Treasuries-purchase program. Total US motor gasoline inventories decreased by 2.7 million barrels last week. Analysts say that next resistance level is $87 but it may be easily passed, considering weakness of the US currency after the announcement of quantitative easing by the Fed. December delivery for crude oil went up $0.43 (0.5 percent) to $85.12 per barrel on NYMEX.

The rice futures rallied today as the investors bet that the huge discount of this commodity’s prices compared to other grains will spur the demand and growth. As both wheat and corn may seem overbought to many investors to rally further, the funds are turning their heads to rice, which is currently the worst performing of all grains this year.

The floods in Pakistan and the drought in Thailand also contribute to the better outlook of the rice futures at least for the next few weeks. While wheat rose by about 100 percent since June this year, rice dropped about 1/4 of its price, resulting in the widest price gap since early 2008 for these two commodities. The traders believe that the current price may go up by almost a third by the end of the year and suggest looking at supply as the main moving factor. If the weather continues to press on, the rice will continue to rally.

September rice futures is trading near $11.27 per 100 pounds as of 15:37 GMT on CBoT. It rose from $10.94 or more than 3 percent today.

Sugar prices tend to be unpredictable, as they demonstrated at the first half of this year, slumping dramatically instead of rising, as traders expected. Recently the prices showed signs of some recovery, though. So, where do we stand now, what can we expect? In fact, sugar prices again show unpredictability as analysts provide completely different opinions on this matter. Such turn of event isn’t surprising, as the prices very dependent on weather, which itself quite hard to predict.

On the positive side, we had dry weather in June, import levy in India and outlook for stable demand. Drought might damage crops in Thailand, reducing yield by 10–15 percent. Some experts say that adverse weather may harm next-year harvest in Brazil too. Even in case of big harvest, Brazil may experience problems with delivering it to foreign importers, as it’s currently unable to load sugar on all ships waiting in ports. India may impose 40 percent tax on imports, supporting the price. India may actually keep its supplies from global markets to meet the local demand.

On the negative side, outlook for growing supplies makes it unlikely for sugar price to rise significantly. Indian tax, while supportive for the price, unlikely to boost it higher than current level. India expected to produce about 26 million metric tons of the sweetener, from which around 500,000 tons might be exported. Forecast for Brazilian harvest for the most part shifted from promising lower supplies to predicting higher output. Brazil’s output may climb 14 percent to as high as 41 million tons. Economists say that global deficit would shift to surplus of about 5 million tons in the next season.

All in all, there is no reason to expect major upswing of sugar prices. The prices expected to remain for the most part in the $0.15-$0.18 range. Price of $0.13 can be considered a good buying opportunity.

Cotton and soybeans dropped today on signs of increasing output. U.S. farmers planted cotton on the area, 19 percent wider compared to the previous year. The soybeans seeded area will be 1.8 percent wider compared to the last year and will reach the all-time record, while combine output of Brazil and Argentina will grow by 37 percent. December delivery for cotton slid $0.0051 (0.7 percent) to $0.7762 per pound as of 9:50 on ICE. November futures for soybean delivery slipped $00325 (0.4 percent) to $9.0875 per bushel by 11:03 on CBoT.

Raw sugar climbed to the weekly high level on forecast that output in India would be reduced by adverse weather. Production in Thailand may also fall; it expected to decline by 13 percent. October delivery for raw sugar rose $0.0041 (2.7 percent) to $0.1569 per pound as of 11:50 on ICE Futures U.S.

Copper rebounded today as the concern for the global recovery eased after the report about the increased manufacturing in the U.S. Chicago PMI index value of 59.1 in June indicated an increase, as figure above 50 signals about growth. September futures for copper delivery gained $0.0165 (0.6 percent) to $2.947 per pound at 12:20 on COMEX.