Corn fell by 6.3% since midle January 2012, while cotton fell to more than 1 years on May 2012. Gross domestic product in the euro area will decline 0.3 percent this year, the European Commission forecast May 11. Greece will have the deepest contraction, with GDP shrinking 4.7 percent. Fifty-seven percent of investors said at least one nation will leave the euro at the end of the year, according to Bloomberg Global Poll published May 10.
Industrial output
Commodities may rebound as producers of raw materials can not meet increasing demand, said Adrian Day, president of Adrian Day Asset Management in Annapolis, Maryland, which oversees about $ 170 million of assets.
Palladium supplies will lag behind demand through at least 2016, UBS AG said on May 11. Barclays Plc is forecasting shortages of copper and tin this year. U.S. soybean stocks at the end of August 2013 will be 31 percent lower than the previous year, the U.S. Agriculture Department said May 10.
"Commodities remain a good long term investment given the background and the dovish central bank continues to unexpected supply disruptions," said Mihir Worah, who manages Pacific Investment Management Co. 's $ 22000000000 Commodity Real Return Strategy Fund from Newport Beach, California, in e- mails.
Money Flows
Investors pulled $ 815 million of commodity funds in the week ended May 9, according to data from the Cambridge, Massachusetts-based EPFR Global, which tracks the flow of money. That's the biggest outflows this year, said Cameron Brandt, director of research for the EPFR. Dana-gold and precious metals lost $ 467 million.
Gold is now only 1.1 percent higher this year at $ 1,584 per ounce in New York after removing most of its gains. These metals will rally to $ 1,840 within the next six months because he remains a "currency of last choice," said Goldman Sachs Group Inc. commodity analyst in a report May 9.
Gold bullish bets fell 20 percent to 92 498 contracts, the lowest since December 2008, CFTC data showed. Bet on a rally of silver fell 32 percent to 7159, the biggest drop since late December. Gold prices fell 3.7 percent last week, the highest in two months, as the dollar climbed, curbing demand for precious metals as alternative investments. Silver fell 5.1 percent to $ 28.89 per ounce.
Fort Shutters
Fortress Investment Group LLC (Pictures), the public private equity and hedge fund manager first in the U.S., said it would liquidate $ 500 million a commodity fund run by William Callanan after losing nearly 13 percent in four months.
The fort is the third commodity hedge fund shutter in the last six weeks. Billionaire trader John Arnold said in a letter obtained by Bloomberg on May 2 that it planned to close the Centaurus Energy Master Fund in Houston, and Pierre Andurand, who co-runs BlueGold Capital Management LLP, the fund $ 1 billion in London, said last month that client money will be refunded.
Industrial output
Commodities may rebound as producers of raw materials can not meet increasing demand, said Adrian Day, president of Adrian Day Asset Management in Annapolis, Maryland, which oversees about $ 170 million of assets.
Palladium supplies will lag behind demand through at least 2016, UBS AG said on May 11. Barclays Plc is forecasting shortages of copper and tin this year. U.S. soybean stocks at the end of August 2013 will be 31 percent lower than the previous year, the U.S. Agriculture Department said May 10.
"Commodities remain a good long term investment given the background and the dovish central bank continues to unexpected supply disruptions," said Mihir Worah, who manages Pacific Investment Management Co. 's $ 22000000000 Commodity Real Return Strategy Fund from Newport Beach, California, in e- mails.
Money Flows
Investors pulled $ 815 million of commodity funds in the week ended May 9, according to data from the Cambridge, Massachusetts-based EPFR Global, which tracks the flow of money. That's the biggest outflows this year, said Cameron Brandt, director of research for the EPFR. Dana-gold and precious metals lost $ 467 million.
Gold is now only 1.1 percent higher this year at $ 1,584 per ounce in New York after removing most of its gains. These metals will rally to $ 1,840 within the next six months because he remains a "currency of last choice," said Goldman Sachs Group Inc. commodity analyst in a report May 9.
Gold bullish bets fell 20 percent to 92 498 contracts, the lowest since December 2008, CFTC data showed. Bet on a rally of silver fell 32 percent to 7159, the biggest drop since late December. Gold prices fell 3.7 percent last week, the highest in two months, as the dollar climbed, curbing demand for precious metals as alternative investments. Silver fell 5.1 percent to $ 28.89 per ounce.
Fort Shutters
Fortress Investment Group LLC (Pictures), the public private equity and hedge fund manager first in the U.S., said it would liquidate $ 500 million a commodity fund run by William Callanan after losing nearly 13 percent in four months.
The fort is the third commodity hedge fund shutter in the last six weeks. Billionaire trader John Arnold said in a letter obtained by Bloomberg on May 2 that it planned to close the Centaurus Energy Master Fund in Houston, and Pierre Andurand, who co-runs BlueGold Capital Management LLP, the fund $ 1 billion in London, said last month that client money will be refunded.
USDA confirmed the corn outlook for sharply higher planted area, production and ending stocks for the 2012/13 season helped to pressure the market early in the day and drive December corn down to the lowest level since January 20th. May Corn finished up 1 1/2 at 644, 1/2 off the high and 7 up from the low. July Corn closed up 1 3/4 at 646 1/2. This was 7 3/4 up from the low and 3/4 off the high. May corn closed 1 1/2 cents higher on the session but down 1 1/4 cents for the week.
Ending stocks were pegged at 1.616 billion bushels vs. 801 million this year and stocks/usage jumps to 12 per cent from 6.3 per cent this season. South Korea bought 55,000 tonnes of corn at their optional origin tender overnight. However, lows for the session were made early in the day and the market saw a solid recover as talk of China demand and ideas that demand for US corn could remain strong due to lower than expected production in South America helped to support.
Weekly export sales came in at 840,800 metric tonnes which was near the low end of trade expectations. As of February 16th, cumulative corn sales stand at 69.9 per cent of the USDA forecast for 2011/2012 (current) marketing year versus a 5 year average of 64.8 per cent.
Sales of 460,000 metric tonnes are needed each week to reach the USDA forecast. March Rice finished up 0.255 at 14.465, equal to the high and 0.245 up from the low.
Before looking at the upcoming USDA cattle on feed report, a few words are in order about the USDA Outlook forum currently under way in Washington DC. USDA is expected to issue its unofficial projection of grain supplies for 2012/13 during the outlook presentations and markets are paying close attention to some of their initial assumptions as they will influence the official estimates that will be released in May. In his presentation, the USDA chief economist Joseph Glauber will note that USDA expects farmers to plant about 94 million acres of corn this spring, 2.1 million acres more than the previous year. Combined wheat, corn and soybean acres are expected to increase by 5.6 million acres. Ethanol use also is expected to slow down and USDA now pegs ethanol demand for 2012/13 at 4.95 billion bushels compared to the current year estimate of 5 billion bushels. Increased acres, stagnant demand for ethanol and limited feed use (compared to prior years) will likely cause USDA to bolster its estimates for corn ending stocks in 2012-13. USDA now estimates corn prices for 2012/13 at $5 per bushel, down almost 20% from year prior. There is plenty that could go wrong this year and pressure prices higher but this will be first salvo in what promises to be another volatile year considering uncertainty about the size of current corn stocks, escalating energy prices and dry conditions in key corn production areas.
The upcoming cattle on feed report is expected to show that on feed supplies will likely be steady compared to the previous month although about 2.5% higher than a year ago. Despite the higher feedlot inventories, cattle prices continue to escalate as a larger portion of those cattle have yet to reach market weights. The supply of feeders outside of feedlots is tight and this is reflected in feeder prices which continue to hit record highs on a daily basis.
Feeder supplies are expected to remain tight in part because producers are expected to hold back a few more replacement heifers. As usual, analysts polled ahead of the report show a wide range of opinions regarding the number of cattle placed in January (see table). On average, they expect placements about 1.2% below year ago levels. Despite strong cattle prices outfront, feedlots are cautious about placing $160 feeders with $6+ corn. Cattle futures have surged higher in recent days (although they were down yesterday) as packers push through higher prices. The big question mark, however, is the outlook for cattle and beef prices after April 15. Will current record high beef values scare away retailers and force them to limit beef features into the grilling season? Last year cattle broke sharply in May and memories of those loses are still fresh. As for marketings, the analyst survey showed they expect feedlot sales about steady with a year ago. The steer and heifer slaughter data for January shows slaughter was only slightly lower than a year ago.
Ending stocks were pegged at 1.616 billion bushels vs. 801 million this year and stocks/usage jumps to 12 per cent from 6.3 per cent this season. South Korea bought 55,000 tonnes of corn at their optional origin tender overnight. However, lows for the session were made early in the day and the market saw a solid recover as talk of China demand and ideas that demand for US corn could remain strong due to lower than expected production in South America helped to support.
Weekly export sales came in at 840,800 metric tonnes which was near the low end of trade expectations. As of February 16th, cumulative corn sales stand at 69.9 per cent of the USDA forecast for 2011/2012 (current) marketing year versus a 5 year average of 64.8 per cent.
Sales of 460,000 metric tonnes are needed each week to reach the USDA forecast. March Rice finished up 0.255 at 14.465, equal to the high and 0.245 up from the low.
Before looking at the upcoming USDA cattle on feed report, a few words are in order about the USDA Outlook forum currently under way in Washington DC. USDA is expected to issue its unofficial projection of grain supplies for 2012/13 during the outlook presentations and markets are paying close attention to some of their initial assumptions as they will influence the official estimates that will be released in May. In his presentation, the USDA chief economist Joseph Glauber will note that USDA expects farmers to plant about 94 million acres of corn this spring, 2.1 million acres more than the previous year. Combined wheat, corn and soybean acres are expected to increase by 5.6 million acres. Ethanol use also is expected to slow down and USDA now pegs ethanol demand for 2012/13 at 4.95 billion bushels compared to the current year estimate of 5 billion bushels. Increased acres, stagnant demand for ethanol and limited feed use (compared to prior years) will likely cause USDA to bolster its estimates for corn ending stocks in 2012-13. USDA now estimates corn prices for 2012/13 at $5 per bushel, down almost 20% from year prior. There is plenty that could go wrong this year and pressure prices higher but this will be first salvo in what promises to be another volatile year considering uncertainty about the size of current corn stocks, escalating energy prices and dry conditions in key corn production areas.
The upcoming cattle on feed report is expected to show that on feed supplies will likely be steady compared to the previous month although about 2.5% higher than a year ago. Despite the higher feedlot inventories, cattle prices continue to escalate as a larger portion of those cattle have yet to reach market weights. The supply of feeders outside of feedlots is tight and this is reflected in feeder prices which continue to hit record highs on a daily basis.
Feeder supplies are expected to remain tight in part because producers are expected to hold back a few more replacement heifers. As usual, analysts polled ahead of the report show a wide range of opinions regarding the number of cattle placed in January (see table). On average, they expect placements about 1.2% below year ago levels. Despite strong cattle prices outfront, feedlots are cautious about placing $160 feeders with $6+ corn. Cattle futures have surged higher in recent days (although they were down yesterday) as packers push through higher prices. The big question mark, however, is the outlook for cattle and beef prices after April 15. Will current record high beef values scare away retailers and force them to limit beef features into the grilling season? Last year cattle broke sharply in May and memories of those loses are still fresh. As for marketings, the analyst survey showed they expect feedlot sales about steady with a year ago. The steer and heifer slaughter data for January shows slaughter was only slightly lower than a year ago.
Commodity prices of corn at the farm level in North Sumatra (North Sumatra), experienced a surge to Rp 2,400 per kg, an increase of approximately 33.33% from the previous week worth Rp 1,800 per kg. The price increase is expected to make manufacturers reduce the supply of corn imports for livestock feed requirements.
Chairman of the Indonesian Corn Growers Association (Hipajagi) of North Sumatra, Sebayang Church said that since this week the price of corn has increased and this is a big advantage for farmers. Moreover, the current harvest is already entered in which the production will be abundant and sufficient to meet the needs of animal feed manufacturers.
"This is the result of our struggle who requested the manufacturer to reduce the supply of imported corn for their needs. And expect during harvest, the import is stopped first," he told MedanBisnis, Thursday (19 / 1).
He said corn imports that enter the surge in North Sumatra and without supervision. To that end, the government should limit the amount of imports that can be enjoyed dipetani sale price. "We asked for import post-harvest in the stop. Namely the January to March and July through September. If corn prices fell during the harvest, farmers' reluctance to raise the commodity and it is feared the more difficult the government itself," he said.
Moreover, added the Church, North Sumatra corn farmers also asked agarpemerintah set the reference price of corn again. Because, for three years, there has been no government set a benchmark price of corn, which can suppress speculative traders who could depress prices.
Farmer said he, need capital at least Rp 10 million per ha. This capital loan with an interest rate of 5% per month or about 25% to harvest.
While based on the data of Department of Agriculture of North Sumatra, until December 2011 corn production reached 1,239,178 tons of realization of the harvest area of 243,645 ha and 249,233 ha of planting. This figure is lower than Forecast Figures (Aramaic) III 2011 reached 1,240,528.
Kasubdis of Program Department of Agriculture of North Sumatra, Lusyantini say, the production target in Aramaic is indeed lower than Fixed rate (Roof) 2010 as many as 1,377,716 tons, up by 211,170 tonnes compared to corn production in 2009. "This increase is due to increase in harvest area of 27,040 hectares or 10.91%, and the yield per hectare also increased by 3.05 quintals per hectare, or 6.48%," he explained.
For Aram III, maize production in 2011 is estimated sebesar1.240.528 tons, down by 137,190 tonnes compared to production Roof in 2010. Decline in production caused by a decrease in harvest area of 31,052 hectares or 11.30%, while the yield per hectare has increased by 0.76 quintals per hectare, or 1.52%.
Food Livestock Association (GPMT) of North Sumatra, Bethman Siagian states, all corn production in North Sumatra in Indonesia and has absorbed entrepreneurs fodder. But supplies are lacking or are only able to meet 60% of needs. These conditions make the company should take in a complete lack of maize imports.
"Because kuranglah, so imported. We did not want to import as much risk and little hard though once in a while sometimes the price of corn imports cheaper than locally," he said.
Bethman Admittedly, it will not import if farmers are entering harvest season due to production generated a lot of farmers and factory-sufficient. Unfortunately, the abundant production did not last long even not occur in every month.
"Our needs continue to be met per month have about 50,000 tons," said Bethman. If the policy is stopped imports of corn, he added, will impact on prices of poultry, animal feed and this will burden the consumer society. Besides, farmers obtained maize production is not all used for animal feed only, but used other industrial needs.
-
Chairman of the Indonesian Corn Growers Association (Hipajagi) of North Sumatra, Sebayang Church said that since this week the price of corn has increased and this is a big advantage for farmers. Moreover, the current harvest is already entered in which the production will be abundant and sufficient to meet the needs of animal feed manufacturers.
"This is the result of our struggle who requested the manufacturer to reduce the supply of imported corn for their needs. And expect during harvest, the import is stopped first," he told MedanBisnis, Thursday (19 / 1).
He said corn imports that enter the surge in North Sumatra and without supervision. To that end, the government should limit the amount of imports that can be enjoyed dipetani sale price. "We asked for import post-harvest in the stop. Namely the January to March and July through September. If corn prices fell during the harvest, farmers' reluctance to raise the commodity and it is feared the more difficult the government itself," he said.
Moreover, added the Church, North Sumatra corn farmers also asked agarpemerintah set the reference price of corn again. Because, for three years, there has been no government set a benchmark price of corn, which can suppress speculative traders who could depress prices.
Farmer said he, need capital at least Rp 10 million per ha. This capital loan with an interest rate of 5% per month or about 25% to harvest.
While based on the data of Department of Agriculture of North Sumatra, until December 2011 corn production reached 1,239,178 tons of realization of the harvest area of 243,645 ha and 249,233 ha of planting. This figure is lower than Forecast Figures (Aramaic) III 2011 reached 1,240,528.
Kasubdis of Program Department of Agriculture of North Sumatra, Lusyantini say, the production target in Aramaic is indeed lower than Fixed rate (Roof) 2010 as many as 1,377,716 tons, up by 211,170 tonnes compared to corn production in 2009. "This increase is due to increase in harvest area of 27,040 hectares or 10.91%, and the yield per hectare also increased by 3.05 quintals per hectare, or 6.48%," he explained.
For Aram III, maize production in 2011 is estimated sebesar1.240.528 tons, down by 137,190 tonnes compared to production Roof in 2010. Decline in production caused by a decrease in harvest area of 31,052 hectares or 11.30%, while the yield per hectare has increased by 0.76 quintals per hectare, or 1.52%.
Food Livestock Association (GPMT) of North Sumatra, Bethman Siagian states, all corn production in North Sumatra in Indonesia and has absorbed entrepreneurs fodder. But supplies are lacking or are only able to meet 60% of needs. These conditions make the company should take in a complete lack of maize imports.
"Because kuranglah, so imported. We did not want to import as much risk and little hard though once in a while sometimes the price of corn imports cheaper than locally," he said.
Bethman Admittedly, it will not import if farmers are entering harvest season due to production generated a lot of farmers and factory-sufficient. Unfortunately, the abundant production did not last long even not occur in every month.
"Our needs continue to be met per month have about 50,000 tons," said Bethman. If the policy is stopped imports of corn, he added, will impact on prices of poultry, animal feed and this will burden the consumer society. Besides, farmers obtained maize production is not all used for animal feed only, but used other industrial needs.
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Corn prices in Chicago may average $6.60 a bushel in the 2011-2012 marketing year, down from a previous estimate of $7.25, according to Morgan Stanley. Corn may be “one of the weaker commodities in 2012,” partly because of record supplies from South America in the first quarter, Hackett Financial Advisors said Dec. 2.
Corn prices in Chicago slipped 1.9 percent last week after the USDA on Dec. 9 raised China’s corn output estimate for this year by about 7 million tons from a previous outlook to a record 192 million tons, in line with China’s official estimate.
It’s “a joke” that the USDA adopted this figure given China’s limited yield and land, Feng said. Yigu projected 170 million tons, compared with 166 million tons by Shanghai JC and 189.2 million tons by Geneva-based SGS SA.
Corn prices in China will be “range-bound” between 2,200 yuan and 2,400 yuan a ton in the next few months, Yigu’s Feng said. China said Dec. 19 it would buy domestic corn to support farming. The policy effectively sets a price floor of about 2,200 yuan in Dalian, the price-setting center in China, said Feng. Shipping to Shenzhen from Dalian is about 40-60 yuan a ton, according to Shanghai JC.
The upper range of next year’s domestic price depends on feed demand from the livestock industry and corn processors, said Feng. The government may allow a gain of 100 yuan to 200 yuan for increased production costs, he said.
Corn prices in Chicago slipped 1.9 percent last week after the USDA on Dec. 9 raised China’s corn output estimate for this year by about 7 million tons from a previous outlook to a record 192 million tons, in line with China’s official estimate.
It’s “a joke” that the USDA adopted this figure given China’s limited yield and land, Feng said. Yigu projected 170 million tons, compared with 166 million tons by Shanghai JC and 189.2 million tons by Geneva-based SGS SA.
Corn prices in China will be “range-bound” between 2,200 yuan and 2,400 yuan a ton in the next few months, Yigu’s Feng said. China said Dec. 19 it would buy domestic corn to support farming. The policy effectively sets a price floor of about 2,200 yuan in Dalian, the price-setting center in China, said Feng. Shipping to Shenzhen from Dalian is about 40-60 yuan a ton, according to Shanghai JC.
The upper range of next year’s domestic price depends on feed demand from the livestock industry and corn processors, said Feng. The government may allow a gain of 100 yuan to 200 yuan for increased production costs, he said.
Commodity corn prices for December 2012 settled at $6.12 a bushel yesterday, while wheat for that month was at $7.505 a bushel. For the most- active contracts with delivery next month, corn was at $6.5325 and wheat was at $6.3875.
Global corn harvests are trailing demand for a third year, says the IGC, which includes more than 50 nations. Stockpiles may slide to 123 million tons this year from 131 million tons the previous year, it said in an Oct. 27 report. Wheat reserves will be 202 million tons, up from 195 million tons, it said.
Investors should buy corn futures that expire in December 2012 and sell wheat for the same month to profit as prices are set to converge, said Ian Bowler, who runs a hedge fund that’s beaten returns in the industry.
While corn’s shrinking stockpiles will boost the grain, global wheat supplies are ample, said Singapore-based Bowler, who helps run the Henderson Agricultural Fund. Investors may capture the spread between those two contracts -- currently about $1.35 a bushel -- as the gap narrows, he said.
His call reflects projections from the London-based International Grains Council, which expects corn reserves to shrink to a five-year low in the year to June 30, while wheat stockpiles climb to the highest in a decade. Any shocks in the corn market may spur shortages, said Bowler, co-manager of the fund with Sydney-based Phil Pyle. Bowler helps managed $160 million and the fund is part of Henderson Global Investors.
“You don’t have a lot of corn and you have a lot of wheat,” said Bowler, who has traded financial derivatives for two decades. The Henderson Agricultural Fund returned almost 27 percent in the first nine months, compared with an average loss of 4.8 percent for commodity hedge funds in the same period, as measured by the Newedge Commodity Trading Index.
Corn for delivery in December next year on the Chicago Board of Trade was $1.385 a bushel cheaper than wheat for the same month at the close yesterday. That’s not far from the 10- year the average of $1.45, according to Bloomberg calculations.
“Over time, that differential should roll and we should end up with the situation when corn and wheat are again trading at close to parity,” said Bowler.
Goldman Sachs Group Inc. (GS) expects wheat to become more expensive than corn, according to its Nov. 2 forecasts for the two commodities in three, six, and 12 months. Wheat may be 25 cents per bushel more costly than corn in three months, 35 cents more expensive in six months and 50 cents more costly in a year, according to the report.
A higher storage rate for wheat in Chicago may discourage index funds from holding long-term positions as the fees “effectively put pressure” on costs, said Bowler.
The maximum storage charge for holders of Chicago wheat shipping certificates rose to about 20 cents a bushel per month from May 18 from about 17 cents, CME Group Inc. (CME), operator of the Chicago Board of Trade, said in April. The highest rate for corn is about 5 cents a bushel, according to CME.
Bowler, who cycles about 50 kilometers (31 miles) on a return trip along Singapore’s east coast every Monday morning, started his career as an options trader on the Sydney Futures Exchange in 1991. He traded his own book for 10 years before joining Sydney-based Attunga Capital Pty Ltd. in 2008.
Henderson Global Investors, the London-based asset manager that oversaw 74.4 billion pounds ($119 billion) as of June 30, completed a takeover of Attunga Agriculture Trading Ltd. in October, said Bowler and Henderson spokesman Richard Acworth. Attunga Agriculture was one of two hedge funds run by Attunga Capital, founded in 2005 by Ian Gibson and partners.
The agricultural fund trades grains, sugar, canola and “a bit” of palm oil, said Bowler. The fund, which can take as much as $500 million, returned 22 percent in 2008, 9 percent in 2009 and 4 percent last year. Pyle, 50, grew up on a dairy farm in Victoria State and together with Bowler handles the fundamental analysis.
Global corn harvests are trailing demand for a third year, says the IGC, which includes more than 50 nations. Stockpiles may slide to 123 million tons this year from 131 million tons the previous year, it said in an Oct. 27 report. Wheat reserves will be 202 million tons, up from 195 million tons, it said.
Investors should buy corn futures that expire in December 2012 and sell wheat for the same month to profit as prices are set to converge, said Ian Bowler, who runs a hedge fund that’s beaten returns in the industry.
While corn’s shrinking stockpiles will boost the grain, global wheat supplies are ample, said Singapore-based Bowler, who helps run the Henderson Agricultural Fund. Investors may capture the spread between those two contracts -- currently about $1.35 a bushel -- as the gap narrows, he said.
His call reflects projections from the London-based International Grains Council, which expects corn reserves to shrink to a five-year low in the year to June 30, while wheat stockpiles climb to the highest in a decade. Any shocks in the corn market may spur shortages, said Bowler, co-manager of the fund with Sydney-based Phil Pyle. Bowler helps managed $160 million and the fund is part of Henderson Global Investors.
“You don’t have a lot of corn and you have a lot of wheat,” said Bowler, who has traded financial derivatives for two decades. The Henderson Agricultural Fund returned almost 27 percent in the first nine months, compared with an average loss of 4.8 percent for commodity hedge funds in the same period, as measured by the Newedge Commodity Trading Index.
Corn for delivery in December next year on the Chicago Board of Trade was $1.385 a bushel cheaper than wheat for the same month at the close yesterday. That’s not far from the 10- year the average of $1.45, according to Bloomberg calculations.
“Over time, that differential should roll and we should end up with the situation when corn and wheat are again trading at close to parity,” said Bowler.
Goldman Sachs Group Inc. (GS) expects wheat to become more expensive than corn, according to its Nov. 2 forecasts for the two commodities in three, six, and 12 months. Wheat may be 25 cents per bushel more costly than corn in three months, 35 cents more expensive in six months and 50 cents more costly in a year, according to the report.
A higher storage rate for wheat in Chicago may discourage index funds from holding long-term positions as the fees “effectively put pressure” on costs, said Bowler.
The maximum storage charge for holders of Chicago wheat shipping certificates rose to about 20 cents a bushel per month from May 18 from about 17 cents, CME Group Inc. (CME), operator of the Chicago Board of Trade, said in April. The highest rate for corn is about 5 cents a bushel, according to CME.
Bowler, who cycles about 50 kilometers (31 miles) on a return trip along Singapore’s east coast every Monday morning, started his career as an options trader on the Sydney Futures Exchange in 1991. He traded his own book for 10 years before joining Sydney-based Attunga Capital Pty Ltd. in 2008.
Henderson Global Investors, the London-based asset manager that oversaw 74.4 billion pounds ($119 billion) as of June 30, completed a takeover of Attunga Agriculture Trading Ltd. in October, said Bowler and Henderson spokesman Richard Acworth. Attunga Agriculture was one of two hedge funds run by Attunga Capital, founded in 2005 by Ian Gibson and partners.
The agricultural fund trades grains, sugar, canola and “a bit” of palm oil, said Bowler. The fund, which can take as much as $500 million, returned 22 percent in 2008, 9 percent in 2009 and 4 percent last year. Pyle, 50, grew up on a dairy farm in Victoria State and together with Bowler handles the fundamental analysis.
Corn fell the most this month and soybeans dropped to the lowest price in almost three weeks as a rally in the dollar eroded prospects for U.S. exports and reduced the investment appeal of commodities.
The dollar advanced against all its major peers after MF Global Holdings Ltd. was suspended from conducting new business with the New York Federal Reserve and the Chicago Mercantile Exchange limited the firm’s customer trading to liquidation only. The Standard & Poor’s GSCI Index of 24 commodities fell as much as 1.6 percent amid concern European leaders will struggle to contain the region’s debt crisis.
“Concern about erosion of demand is weighing on the markets,” Greg Grow, the director of agribusiness at Archer Financial Services Inc. in Chicago, said in a telephone interview. “The uncertainty about European debt and the MF Global situation boosted the dollar and shifted the flow of money away from riskier assets.”
Corn futures for December delivery fell 2.2 percent to $6.405 a bushel at 10:36 a.m. on the Chicago Board of Trade. A close at that price would be the biggest decline since Sept. 30. Before today, the grain rose 11 percent this month on speculation that demand would improve.
Soybean futures for November delivery declined 1.4 percent to $12.0825 a bushel, after touching $12.035, the lowest since Oct. 11.
The U.S. is the largest producer and exporter. Corn is the biggest U.S. crop, valued at $66.7 billion in 2010, followed by soybeans at $38.9 billion, USDA data show.
The dollar advanced against all its major peers after MF Global Holdings Ltd. was suspended from conducting new business with the New York Federal Reserve and the Chicago Mercantile Exchange limited the firm’s customer trading to liquidation only. The Standard & Poor’s GSCI Index of 24 commodities fell as much as 1.6 percent amid concern European leaders will struggle to contain the region’s debt crisis.
“Concern about erosion of demand is weighing on the markets,” Greg Grow, the director of agribusiness at Archer Financial Services Inc. in Chicago, said in a telephone interview. “The uncertainty about European debt and the MF Global situation boosted the dollar and shifted the flow of money away from riskier assets.”
Corn futures for December delivery fell 2.2 percent to $6.405 a bushel at 10:36 a.m. on the Chicago Board of Trade. A close at that price would be the biggest decline since Sept. 30. Before today, the grain rose 11 percent this month on speculation that demand would improve.
Soybean futures for November delivery declined 1.4 percent to $12.0825 a bushel, after touching $12.035, the lowest since Oct. 11.
The U.S. is the largest producer and exporter. Corn is the biggest U.S. crop, valued at $66.7 billion in 2010, followed by soybeans at $38.9 billion, USDA data show.
Top commodity information news 2011
-MF Global Draws Down on Credit Lines as Moody’s Cuts to Junk
-Copper Traders See Rally Ending as China Use Slows: Commodities
-Restaurants Lift Prices to Catch Food-at-Home Inflation: Retail
-China’s Pork Imports May Rise to Record on Low U.S. Prices
-China Buys 500,000 Tons Australian Wheat, Grain.Gov.Cn Says
-China to Sell Corn, Feed Wheat on November 1, Center Says
-Australia 2011-12 Wheat Output at 25.05 Million Tons, NAB Says
-Argentina to Authorize Up to 400,000 Tons of Wheat for Export
-Ukraine Grain Exports Reach 4.4 Million Tons, Interfax Says
-Palm Oil Drops as Investors Sell After Rally to One-Month High
-Thailand Floods May Delay Rice Exports, United Nations Says
-MF Global Draws Down on Credit Lines as Moody’s Cuts to Junk
-Copper Traders See Rally Ending as China Use Slows: Commodities
-Restaurants Lift Prices to Catch Food-at-Home Inflation: Retail
-China’s Pork Imports May Rise to Record on Low U.S. Prices
-China Buys 500,000 Tons Australian Wheat, Grain.Gov.Cn Says
-China to Sell Corn, Feed Wheat on November 1, Center Says
-Australia 2011-12 Wheat Output at 25.05 Million Tons, NAB Says
-Argentina to Authorize Up to 400,000 Tons of Wheat for Export
-Ukraine Grain Exports Reach 4.4 Million Tons, Interfax Says
-Palm Oil Drops as Investors Sell After Rally to One-Month High
-Thailand Floods May Delay Rice Exports, United Nations Says
Corn prices soared to record levels earlier this year because of limited supplies. On Monday, corn was trading at $7.30 a bushel. Food prices could rise next year because an unseasonably hot summer is expected to damage much of this year's corn crop. While that's down from the peak of $7.87 a bushel reached on June 10, it's still nearly twice the price of corn at the end of July 2010.
The U.S. Department of Agriculture estimates a surplus of 672 million bushels of corn will be left over at the end of next summer. The estimated surplus is down from last month's forecast and well below levels that are considered healthy.
This spring, farmers planted the second-largest crop since World War II. But high temperatures stunted the plants.
More expensive corn drives food prices higher because corn is an ingredient in everything from animal feed to cereal to soft drinks. It takes about six months for corn prices to trickle down to products at the grocery store.
Traders worry that grain shortages could return next year because of the damaged crops.
Farmers are expected to have a surplus of 920 million bushels when the harvest begins next month, the USDA said. That's roughly a 26-day supply of corn, slightly less than the previous month's estimate.
But the USDA said the corn surplus could dwindle next fall to about a 19-day supply. A 30-day supply is considered healthy.
When crop reserves are low, market prices can jump quickly, said Scott Irwin, an agriculture economics professor at the University of Illinois. When reserves are at adequate levels, a decline in grain supplies tends to cause prices to rise modestly. But when reserves are unusually low relative to demand, short-term supply disruptions can cause prices to jump exponentially, Irwin said.
In part, that's because unlike with other goods, rising food prices generally don't cause people to buy less food. Rather, they typically cut spending on other things so they can keep the diets they're accustomed to. Prices tend to stay high until demand finally slackens.
A smaller surplus drove corn prices higher earlier this year. Global demand for corn, soybeans and wheat has outstripped production for the last 10 years. Surpluses, vital to a stable food supply, have shrunk.
The U.S. Department of Agriculture estimates a surplus of 672 million bushels of corn will be left over at the end of next summer. The estimated surplus is down from last month's forecast and well below levels that are considered healthy.
This spring, farmers planted the second-largest crop since World War II. But high temperatures stunted the plants.
More expensive corn drives food prices higher because corn is an ingredient in everything from animal feed to cereal to soft drinks. It takes about six months for corn prices to trickle down to products at the grocery store.
Traders worry that grain shortages could return next year because of the damaged crops.
Farmers are expected to have a surplus of 920 million bushels when the harvest begins next month, the USDA said. That's roughly a 26-day supply of corn, slightly less than the previous month's estimate.
But the USDA said the corn surplus could dwindle next fall to about a 19-day supply. A 30-day supply is considered healthy.
When crop reserves are low, market prices can jump quickly, said Scott Irwin, an agriculture economics professor at the University of Illinois. When reserves are at adequate levels, a decline in grain supplies tends to cause prices to rise modestly. But when reserves are unusually low relative to demand, short-term supply disruptions can cause prices to jump exponentially, Irwin said.
In part, that's because unlike with other goods, rising food prices generally don't cause people to buy less food. Rather, they typically cut spending on other things so they can keep the diets they're accustomed to. Prices tend to stay high until demand finally slackens.
A smaller surplus drove corn prices higher earlier this year. Global demand for corn, soybeans and wheat has outstripped production for the last 10 years. Surpluses, vital to a stable food supply, have shrunk.
Forecasts last week predicted more rain in Argentina, a major corn and soybean exporter. But the rains appear to be lighter than expected, stoking fears that dry weather will hurt yields in that country, said John Sanow, an analyst with Telvent DTN in Omaha, Neb.
Corn and soybean surpluses are low, so traders are anxious about any disruptions to global supplies. Demand from livestock producers and ethanol refiners has risen faster than farmers' ability to boost yields.
The March soybean contract gained 36.5 cents to settle at $12.33 Monday. March wheat gained 17 cents to $6.4175 a bushel. The March corn contract rose 8.5 cents to end at $6.52.
In other trading, metals prices were mixed.
February gold lost $8.70 to finish at $1,608.10. Silver for March delivery gained 9.9 cents to end at $28.782 an ounce.
March copper dropped 1.9 cents to $3.416 a pound. April platinum rose $21.40 to settle at $1,429.60 an ounce and March palladium gained $3.85 to $617.85 an ounce.
In energy trading, crude oil lost a quarter to settle at $101.31 a barrel. Heating oil rose 0.28 cents to finish at $3.073 per gallon and gasoline futures rose 0.74 cents to end at $2.759 per gallon. Natural gas fell 4.8 cents to finish at $3.05 per 1,000 cubic feet.
., says University of Illinois Agricultural Economist Darrel Good.
“One factor that has contributed to higher prices is adverse weather in parts of Argentina and southern Brazil during a critical phase of crop development. Periods of extremely high temperatures and well below average levels of precipitation in December have threatened both the corn and soybean crops in those areas,” Good says.
The adverse weather followed very favorable weather conditions in November. The weather pattern in those areas has been similar to that of 2008-2009 when corn and soybean production was substantially reduced in Argentina, he says.
“Some beneficial rainfall in the dry areas is expected this week, but the forecast calls for a return of hot, dry weather next week. It is difficult to assess potential corn and soybean production in Argentina and Brazil, but the pattern of production estimates in 2008-2009 might provide some guidance,” he notes.
In early December 2008, the USDA judged 2009 corn production potential in Argentina at 710 million bushels. The final production estimate was nearly 17% smaller at about 590 million bushels, he says.
The 2009 Brazilian corn crop was forecast at 2.1 billion bushels in December 2008, but actual production was nearly 5% less at 2 billion bushels. In early December 2011, the USDA forecasted the 2012 Argentine corn crop at about 1.14 billion bushels, Good says.
If production is eventually reduced by 17%, as it was in 2009, the crop would come in at about 950 million bushels. Similarly, the USDA has projected the 2012 Brazilian corn crop at about 2.4 billion bushels. If production is reduced by 5%, the crop would total about 2.3 billion bushels, he says.
“A 2012 South American corn crop that is 290 million bushels smaller than the current forecast would likely lead to larger U.S. corn exports in both the 2011-2012 and 2012-2013 marketing years,” Good says.
In December 2008, the USDA projected 2008-2009 marketing year U.S. corn exports at 1.8 billion bushels. Exports were 49 million bushels larger than the forecast, equal to about 22% of the reduction in the size of the South American crop from the December 2008 forecast, he says.
“This year, USDA projects U.S. corn exports at 1.6 billion bushels. A 290-million-bushel reduction in the size of the South American crop could boost U.S. exports by as much as 65 million bushels. The increase, however, might be smaller due to the abundance of feed grains and wheat in the rest of the world,” Good says.
Corn and soybean surpluses are low, so traders are anxious about any disruptions to global supplies. Demand from livestock producers and ethanol refiners has risen faster than farmers' ability to boost yields.
The March soybean contract gained 36.5 cents to settle at $12.33 Monday. March wheat gained 17 cents to $6.4175 a bushel. The March corn contract rose 8.5 cents to end at $6.52.
In other trading, metals prices were mixed.
February gold lost $8.70 to finish at $1,608.10. Silver for March delivery gained 9.9 cents to end at $28.782 an ounce.
March copper dropped 1.9 cents to $3.416 a pound. April platinum rose $21.40 to settle at $1,429.60 an ounce and March palladium gained $3.85 to $617.85 an ounce.
In energy trading, crude oil lost a quarter to settle at $101.31 a barrel. Heating oil rose 0.28 cents to finish at $3.073 per gallon and gasoline futures rose 0.74 cents to end at $2.759 per gallon. Natural gas fell 4.8 cents to finish at $3.05 per 1,000 cubic feet.
., says University of Illinois Agricultural Economist Darrel Good.
“One factor that has contributed to higher prices is adverse weather in parts of Argentina and southern Brazil during a critical phase of crop development. Periods of extremely high temperatures and well below average levels of precipitation in December have threatened both the corn and soybean crops in those areas,” Good says.
The adverse weather followed very favorable weather conditions in November. The weather pattern in those areas has been similar to that of 2008-2009 when corn and soybean production was substantially reduced in Argentina, he says.
“Some beneficial rainfall in the dry areas is expected this week, but the forecast calls for a return of hot, dry weather next week. It is difficult to assess potential corn and soybean production in Argentina and Brazil, but the pattern of production estimates in 2008-2009 might provide some guidance,” he notes.
In early December 2008, the USDA judged 2009 corn production potential in Argentina at 710 million bushels. The final production estimate was nearly 17% smaller at about 590 million bushels, he says.
The 2009 Brazilian corn crop was forecast at 2.1 billion bushels in December 2008, but actual production was nearly 5% less at 2 billion bushels. In early December 2011, the USDA forecasted the 2012 Argentine corn crop at about 1.14 billion bushels, Good says.
If production is eventually reduced by 17%, as it was in 2009, the crop would come in at about 950 million bushels. Similarly, the USDA has projected the 2012 Brazilian corn crop at about 2.4 billion bushels. If production is reduced by 5%, the crop would total about 2.3 billion bushels, he says.
“A 2012 South American corn crop that is 290 million bushels smaller than the current forecast would likely lead to larger U.S. corn exports in both the 2011-2012 and 2012-2013 marketing years,” Good says.
In December 2008, the USDA projected 2008-2009 marketing year U.S. corn exports at 1.8 billion bushels. Exports were 49 million bushels larger than the forecast, equal to about 22% of the reduction in the size of the South American crop from the December 2008 forecast, he says.
“This year, USDA projects U.S. corn exports at 1.6 billion bushels. A 290-million-bushel reduction in the size of the South American crop could boost U.S. exports by as much as 65 million bushels. The increase, however, might be smaller due to the abundance of feed grains and wheat in the rest of the world,” Good says.
