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 6th, 2012

Wheat futures gained for the first time in three sessions on speculation that cold weather in France, Germany and Ukraine will damage dormant crops.

Temperatures reached minus 15 degrees Celsius (5 degrees Fahrenheit) in France’s Alsace and Lorraine regions yesterday, according to forecaster Meteo France. In northern Germany, where some fields lack a protective layer of snow, soil temperatures have dropped below minus 8 degrees Celsius, Deutscher Wetterdienst said. Cold weather in the Black Sea region also has hurt crops.

“There’s been a lot of talk about the cold in Europe and in Russia and Ukraine,” Larry Glenn, an analyst at Frontier Ag in Quinter, Kansas, said in a telephone interview. “Traders still remember two years ago when everything was OK, then they had a terrible harvest. They remember how much any loss to production can mean to prices if it comes out of Europe and the Black Sea area.”

Wheat futures for March delivery gained 1.2 percent to close at $6.685 a bushel at 1:15 p.m. on the Chicago Board of Trade. The price, down 2 percent in the previous two sessions, has dropped 22 percent in the past 12 months.

Ukraine, the biggest grain grower in the Black Sea region after Russia, will need to replant at least half of its winter crops after freezing weather this week, Tetiana Adamenko, the head of agro-meteorology at the country’s national weather center, said on Feb. 3.

Damage known as winter kill caused by freezing weather will probably be average as snow cover protected some plants in parts of Bulgaria, where temperatures fell below minus 30 degrees Celsius, FCStone said in a report today.

The outlook for European soft wheat remains positive, and “there is little reason to believe that from a European perspective it will be greater than seasonal averages,” said Jaime Nolan-Miralles, an FCStone risk analyst.

- Tony C. Dreibus in London at Bloomberg.

February 9th, 2012

Gold futures climbed to the highest level of the day on Thursday, as the U.S. dollar weakened after European Central Bank President Mario Draghi confirmed reports that Greece had finally agreed on a package of austerity measures.

Gold futures on the Comex division of the New York Mercantile Exchange, for April delivery traded at USD1,748.65 a troy ounce during early U.S. morning trade, gaining 1%.

It earlier rose by as much as 1.15% to trade at a session high of USD1,751.15 a troy ounce.

Gold futures were likely to find support at USD1,712.65 a troy ounce, the low from February 7 and short-term resistance at USD1,754.65, Wednesday’s high.

According to government sources, Greek Prime Minister Lucas Papademos declared that an agreement was reached and endorsed by the major Greek political parties on a set of new austerity measures needed in order to secure a second bailout package.

ECB President Draghi later confirmed the news at his press conference after the ECB’s policy meeting, in which it kept interest rates on hold at 1%.

“I got a call from the Prime Minister of Greece that an agreement has been reached and has been endorsed by the major parties,” Draghi said.

The news came only hours before a meeting of euro zone finance ministers in Brussels to discuss the Greek EUR130 billion bailout.

The news helped lift the euro to an eight-week high against the U.S. dollar, while the dollar index, which tracks the performance of the greenback against a basket of six other major currencies, declined 0.26% to trade at 78.51. 

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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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