Copper Traders Turn Bullish as Inventories Drop to 2009 Low: Commodities

February 10th, 2012

Futures Trading – Copper traders turned bullish for the first time in seven weeks on mounting confidence that global growth will strengthen, diminishing stockpiles after a year in which mine production fell by a record amount.

Thirteen of 25 analysts surveyed by Bloomberg expect the metal to gain next week and three were neutral. Hedge funds and other money managers are holding their biggest bet on rising prices since early August, Commodity Futures Trading Commission data show. Inventories tracked by the London Metal Exchange are already at a two-year low after global mine output dropped by 200,000 metric tons in 2011, Barclays Capital estimates.

Investments (.CMDOI) in commodities expanded at the quickest pace in six years in January on increasing confidence economies will skirt another recession, data compiled by Bloomberg show. Higher demand comes at a time when producers are struggling to keep up, as lower ore grades, strikes and slower-than-expected mine developments limit supply growth. Barclays anticipates a third consecutive copper shortage in 2012 and another one next year.

“Copper is always a forward looking indicator of where the economy is going to be,” said Dan Smith, an analyst at Standard Chartered Plc in London. “Things are improving in the financial markets, people are becoming more bullish.”

The metal rose 14 percent to $8,673.50 a metric ton this year on the London Metal Exchange, the best start since 2008. The Standard & Poor’s GSCI gauge of 24 commodities added 4.8 percent and MSCI All-Country World Index (MXWD) of equities gained 8.9 percent, entering a bull market from its October low. Treasuries lost 0.6 percent, a Bank of America Corp. index (MXWD) shows.

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February 9th 2012

Futures Trading – The world’s first global black pepper futures contract will go live on February 10, with its launch by the Singapore Mercantile Exchange (SMX), the first trans-Asian multi-product commodity and currency derivatives exchange.

According to exchange sources, this would be “SMX’s first agricultural commodities futures contract, aimed at creating a global benchmark for a commodity predominantly produced and exported from the Asia-Pacific region to the West.”

Vietnam is the largest producer and exporter of black pepper, with 33 per cent and 43 per cent global share respectively, and thus features as the basis delivery centre of the SMX futures contract. The basis grade is origin-neutral 550 g/l black pepper, considering Indonesia, Malaysia and India are also major exporters of the commodity.

So far, India was the only country that conducted futures trading in pepper at the national level exchange through the electronic media, that could be accessed and viewed all over the world. However, from Friday, Singapore’s international exchange would trade pepper to be delivered out of Vietnam bonded warehouses, which means the activity on that exchange would be restricted to Vietnamese pepper alone.

Vietnam has large quantities of pepper — more than 1.25 lakh tonnes — and the bulk of its exports of late have been for 500 g/l faq quality, ever since pepper prices have risen in recent times. There are certain restrictions/controls on the import of such pepper into the US in line with the US/FDA standard and, therefore, it is observed that except for the US, all the other importing countries import the 500 g/l faq grade pepper because of its competitive price in the current high-priced market, the trade here claimed.

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February 3rd, 2012

Futures Trading – Investments in commodities are expanding at the quickest pace in six years on signs of rising economic growth, even as JPMorgan Chase & Co. and Goldman Sachs Group Inc. warn that some prices have rallied too fast.

The number of futures contracts on 24 commodities from oil to copper rose 9.3 percent last month, the most since January 2006, according to data compiled by Bloomberg. Speculators are the most bullish since November, Commodity Futures Trading Commission data show. Gold and silver had the best start to a year since 1983, orange juice posted its biggest rally in more than three decades, the LMEX gauge of six industrial metals rose the most since 2006, and cattle futures advanced to a record.

Raw materials are rebounding from the first annual drop in three years on growing signs the world will skirt another recession and reports that manufacturing is expanding from China to India to the U.S. Investors are betting record-low U.S. interest rates and China’s efforts to shore up growth will bolster demand. The optimism is being tempered by Europe’s widening debt crisis, with the International Monetary Fund warning it could derail the global economy.

“The economic news has been good, and people were underinvested, and that’s a recipe for markets to rise,” said Jess Gaspar, a managing director of Commonfund Asset Management in Wilton, Connecticut, which oversees $25 billion of assets. “If the economy continues strong and central banks continue with monetary easing, then that would be very bullish for risky assets and for commodities in particular.”

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