Commmodities

[Muthukali]

Milk Price Souring as Record Profit Spurs Expansion of Herds: Commmodities

Record dairy profits and milder weather are leading to a surge in milk supplies from Auckland to California, turning last year’s best-performing commodity contract into one of the worst of 2012.

Output in the U.S., the world’s largest producer, will advance 1.8 percent to a record 199.7 billion pounds (90.6 million metric tons) in 2012, the Department of Agriculture estimates. Futures traded on the Chicago Mercantile Exchange already fell 29 percent from a four-year high in August and may drop another 7.8 percent to $14.25 per 100 pounds by July, the median of six analyst estimates compiled by Bloomberg shows.

An estimated 30 percent jump in U.S. dairy exports led to the most profitable year ever for farmers, who expanded herds that now are the biggest since May 2009, USDA data show. Yields reached a record during an unusually mild winter. Supply is also rising in Australia and New Zealand, the largest exporter, and dairy was the only food cost tracked by the United Nations to decline last month.

“This blasted weather that most people have enjoyed, the dairy cows have really enjoyed it,” said Bill Brooks, an economist for INTL FCStone Inc. in Kansas City, who grew up on a dairy farm in Missouri and has covered the industry for two decades. “We’re going to see more milk production.”

Agriculture Index
Milk futures that jumped 31 percent last year, more than any of the 24 commodities in the Standard & Poor’s GSCI Spot Index, tumbled 10 percent since Dec. 30 to $15.45 yesterday. Only natural gas and arabica coffee fell more. The S&P GSCI Agriculture Index advanced 1 percent this year, as the MSCI All- Country World Index of equities rose 9.8 percent. Treasuries lost 0.6 percent, a Bank of America Corp. index shows.

U.S. dairy farmers had 9.236 million cows in January, the 14th herd expansion in 16 months, USDA data show. Each animal produced a record 21,345 pounds (9.7 metric tons) of milk last year. Fonterra Cooperative Group Ltd., the largest dairy exporter, shipped 246,000 tons in December, the most ever. Deliveries to its plants rose 9.8 percent in the eight months ended Jan. 31, the Auckland-based company said last month.

Rising supply may meet weaker gains in demand. China, the biggest buyer of U.S. agricultural products, is targeting economic growth of 7.5 percent, the lowest since 2004, Premier Wen Jiabao said March 5. The economy gained 8.9 percent in the fourth quarter, the slowest pace in 10 quarters.

Feed Costs
Declining milk prices and rising cattle-feed costs may require farmers to cull herds, reducing supply, said Chip Whalen, a vice president of education and research at Chicago- based Commodity & Ingredient Hedging LLC, which advises clients on managing commodity price swings. Corn futures averaged $6.78 a bushel in Chicago last year, the most in at least a half century. Record beef prices also may encourage more slaughtering.

“We’re going to go through another one of these cycles where we’re going to cull the herd,” said Shawn Hackett, the president of Hackett Financial Advisers Inc., a brokerage and consultant based in Boynton Beach, Florida. “We’re setting a stage for a significant slowdown in production growth, starting in the later part of this year,” said Hackett, who anticipates a rally to $18 in the second half of 2012.

While China may slow this year, the U.S. will expand 2.2 percent from 1.7 percent in 2011, according to the median of 79 economist estimates compiled by Bloomberg. U.S. consumption of fluid milk will reach 28.61 million tons this year, the highest since at least 1964, and cheese demand will advance to 4.83 million tons, the most since at least 1965, USDA data show. The U.S., with 4.5 percent of the global population, eats 32 percent of the world’s cheese production and drinks 6.2 percent of its milk, the department estimates.

Cull Herds
Farmers may be reluctant to cull herds. While losses this year may hurt some dairies, most are in better financial shape than in 2009 and 2010, so there won’t be a “wholesale decrease in cow numbers,” said Jon Spainhour, a broker and partner at Rice Dairy LLC in Chicago.

In 2009, the average for milk futures slumped to $11.56, a six-year low, before rebounding in 2011 to $18.55. Last year, the average dairy farm had net cash income of $239,800, the most ever, the USDA estimated Feb. 13, up from $158,100 in 2010 and $70,100 in 2009.

Exports were the “key factor” in last year’s rally, said Bob Cropp, an economist at the University of Wisconsin in Madison who has been studying the industry since 1966. U.S. dairy exports totaled $4.78 billion in 2011, up from $3.69 billion in 2010, according to the USDA’s Foreign Agricultural Service. Shipments will drop 2.2 percent in 2012, according to a report by USDA economist Milton Madison at a Feb. 24 forum in Washington.

Industry Projects
The industry is now facing more competition in export markets, said Brooks of INTL FCStone. Output in New Zealand, curbed by drought last year, may rise 8 percent to 10 percent this season, according to Southbank, Australia-based Dairy Australia, which raises levies from farmers to fund industry projects.

Production in Australia may rise 1.4 percent to 9.55 billion liters (2.5 billion gallons) in the year beginning July 1, the Australian Bureau of Agricultural and Resource Economics and Sciences said in a report March 6. Flooding last year limited output and disrupted transportation.

U.S. output is also rising on improving weather. The three- month period ended in January was the sixth-warmest-ever for that time of year, according to Brad Rippey, a meteorologist with the USDA. The four warmest all happened since 1998 and the other was in 1933-1934, the dust bowl era.

California Dairies
Milk production in California, the largest producing state, climbed 6.6 percent in January from a year earlier to 3.615 billion pounds, the highest on record for that month, USDA data show. There’s “milk coming out of our ears,” said Bill Schiek, an economist at the Dairy Institute of California in Sacramento, which represents processors in the state.

The drop in prices is no incentive to cut production for Ray Souza, who has 900 Holstein cows on his farm in Turlock, California. Farmers tend to react by increasing output because their costs remain similar, he said.

“We’ve never produced at this level before,” said the 65- year-old, who has been in the dairy business since 1973. “Cows produce more milk in the springtime than they do in any other part of the year. This spring seems to have started around the first of December.”

 

[Muthukali]

Gold Advances With Equities Before Federal Reserve Meeting, Greek Bailout

Gold climbed for the fourth time in five days, gaining alongside equities and commodities before a Federal Open Market Committee meeting and as Greece prepares to receive a second bailout. Platinum neared parity with gold.

Spot gold gained 0.2 percent to $1,705.40 an ounce at 10:26 a.m. Singapore time, after dropping 0.7 percent yesterday as the dollar advanced on better-than-expected U.S. economic data. Assets in exchange-traded products rose to a record 2,408.981 metric tons yesterday, according to data compiled by Bloomberg.

The metal had the biggest one-day drop since 2008 on Feb. 29 after Federal Reserve Chairman Ben S. Bernanke gave no signal of a third round of quantitative easing, or QE3, sending the dollar higher. The dollar was little changed today against a six-currency basket including the euro and yen.

“A lot of it is going to hinge on the Fed meeting later on today,” said Nick Trevethan, senior commodities strategist at Australia & New Zealand Banking Group Ltd. “I don’t think it will be thwarted on the downside unless Bernanke says something about no QE. The market’s quite happy sitting on the fence at the moment.”

Euro-area finance ministers yesterday signed off on a second Greek bailout and will give a formal approval on March 14, a day before the International Monetary Fund board votes on its contribution. That sent stocks and commodities higher today.

Spot gold of 99.99 percent purity on the Shanghai Gold Exchange traded little changed at 346.98 yuan a gram ($1,706.23 an ounce), paring an earlier 0.6 percent decline. Volumes for the benchmark cash contract were 3,906 kilograms yesterday, down from 4,205.60 kilograms on March 9.

Platinum Gains
Platinum prices climbed above gold for the first time since September yesterday on concern for less production in South Africa amid improving global auto sales. One ounce of platinum bought as much as 1.0007 ounces of gold yesterday, the most since Sept. 19, according to Bloomberg data. The so-called ratio was last at 0.9967.

Cash platinum advanced for a fifth day, the longest rally since October, gaining as much as 0.5 percent to $1,703 an ounce. It last traded at $1,699.25 an ounce, 21.3 percent higher in 2012 and was tied with silver to become the best-performing precious metal so far this year.

Holdings in exchange-traded products backed by platinum climbed 8.2 percent this year, compared to a 2.8 percent gain in silver ETPs. Spot silver gained 0.2 percent to $33.7175 an ounce, up 21.1 percent this year. Palladium was unchanged at $701.75 an ounce.

 

[Muthukali]

Oil Gains From One-Week Low on Speculation Economy to Boost Fuel Demand

Oil advanced from the lowest in almost a week in New York as investors bet fuel demand may increase amid signs of a strengthening global economy.

Futures gained as much as 0.6 percent after dropping 1 percent yesterday. U.S. retail sales probably rose in February by the most in five months, according to a Bloomberg News survey. China’s industrial output growth will pick up pace in March and April, a former minister of industry and information technology said. Oil has climbed this year amid concern that tension with Iran may lead to military conflict in the Middle East, where more than half the world’s oil reserves are located.

“The market will be comforted by an ongoing story of reasonable growth in the U.S.,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The retail sales figures will be keenly watched. The geopolitical risk is certainly a major factor that is clearly preventing prices from falling too far at this stage.”

Oil for April delivery rose as much as 66 cents to $107 a barrel in electronic trading on the New York Mercantile Exchange and was at $106.95 at 1:38 p.m. Sydney time. The contract yesterday fell $1.06 to $106.34, the lowest close since March 7. Prices are 8.2 percent higher this year.

Brent oil for April settlement was up 73 cents at $126.07 on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to New York-traded West Texas Intermediate was at $19.12 compared with $19 yesterday, the biggest gap based on closing prices since Feb. 6.

U.S., China Economy
U.S. retail sales probably rose 1.1 percent in February after a 0.4 percent gain in January, according to the median forecast of 67 economists surveyed by Bloomberg News before a Commerce Department report today. China’s slowdown in industrial production in the first two months of the year was due to seasonality and government controls, Li Yizhong said while attending legislative meetings in Beijing.

The U.S. and China are the world’s biggest oil-consuming nations, accounting for a total of 32 percent of the world’s use of the commodity in 2010, according to BP Plc (BP/)’s Statistical Review of World Energy.

U.S. crude inventories probably rose 1.9 million barrels last week to the highest in six months, according to a Bloomberg News survey of analysts before an Energy Department report tomorrow. Gasoline inventories likely fell 1 million barrels and distillate supplies, a category that includes diesel and heating oil, dropped 1.4 million barrels, the survey showed.

Crude prices are “on the high side,” Mohamed Al-Hamli, the United Arab Emirates oil minister said in Kuwait yesterday at the International Energy Forum. Prices are “a bit high” and should be at $100 a barrel, Oman’s Oil Minister Mohammed Al- Rumhy said in an interview at the forum.

International politics are pushing up oil and Angola would prefer to see London-traded Brent at $110 to $115 a barrel, according to Oil Minister Jose Maria Botelho de Vasconcelos. The IEF is a gathering of energy officials and companies from producing and consuming nations that takes place every two years.

 

[Muthukali]

Palm Oil to Climb to Year High as Cooking-Oil Supply Drops

Palm oil, used in everything from candy bars to instant noodles, will advance 3.2 percent to the highest in more than a year by June as cooking-oil supplies drop to the lowest in more than three decades, a survey showed.

The tropical oil will gain to 3,500 ringgit ($1,149) a metric ton from 3,390 ringgit at the end of the midday session on the Malaysia Derivatives Exchange, according to the median estimate in a Bloomberg survey of 10 analysts and traders who attended a conference in Kuala Lumpur last week.

Inventories of palm, soybean, rapeseed and six other oils will drop below 30 days of consumption this year, the fewest since 1977, U.S. Department of Agriculture data show. Global food prices rose for a second consecutive month in February on higher costs for cereals, cooking oils and sugar, as shown by the index of 55 food items tracked by the United Nations’ Food and Agriculture Organization.

“The stocks-to-usage ratio is going to be much lower this year, so that will boost prices,” said Sandeep Bajoria, chief executive officer of Sunvin Group, a Mumbai-based commodities trader, who predicts a high of 3,700 ringgit.

Futures climbed as high as 3,395 ringgit today, the most expensive since June 6. Prices have gained 6.8 percent this year compared with a 1.4 percent advance in the Standard & Poor’s GSCI Agriculture Index of eight commodities. The commodity last reached 3,500 ringgit in March last year.

Mistry, Coleman
The UN food index increased 1.2 percent in February from a month earlier and the gauge of edible oils and fats rose 2.1 percent. The cost of food may remain near current levels in coming months as demand drains increased supply, Abdolreza Abbassian, a senior FAO economist, said March 8.

The edible oil may climb to a four-year high of 4,000 ringgit ($1,313) by June and then drop to $1,150 to $1,200 on a free-on-board basis, according to Dorab Mistry, director at Godrej International Ltd., who has traded the commodity for three decades. Michael Coleman, managing director at Aisling Analytics Pte, said last month the price may climb to $1,300.

While global palm-oil output is set to increase 2.3 million tons this year, that won’t be enough to counter lower production of other oils including soybean and rapeseed, Thomas Mielke, executive director Oil World, said March 7. Global soybean production may drop by 20 million tons to 245.53 million tons after drought hurt crops in South America, he said.

Malaysia, Indonesia
Palm oil output in Malaysia, the second-biggest grower, is expected to climb to 19.4 million tons this year from a record 18.9 million tons in 2011, according to the Malaysian Palm Oil Board. From March, output each month will be less on a year-on- year comparison due to a low output cycle, leading to “flat” growth of as much as 19 million tons in 2012, Mistry estimates.

Production in Indonesia, the largest grower, will increase by about 1.4 million tons to 26.5 million tons in 2012, he said.

With crude oil trading above $100 a barrel and signs that the U.S and European Union economies are stabilizing, palm oil may climb as more investors buy commodities, said Bajoria.

“There is so much liquid money throughout the world, through the hedge funds and the new money injected via the European central bank,” he said. “The money travels to the destinations where the best returns can come.”

 

[Muthukali]

Oil Trades Near 1-Week Low on U.S. Supplies, Saudi Pledge

Oil traded near the lowest price in more than a week in New York as investors bet that supply is ample after U.S. crude stockpiles rose and Saudi Arabia pledged to make up for any shortage in shipments from Iran.

Futures were little changed after falling 1.2 percent yesterday. Crude inventories at Cushing, Oklahoma, the delivery point for West Texas Intermediate oil, climbed to the highest level in nine months, according to the Energy Department. Saudi Arabia will make up any “perceived or real” shortfall, Oil Minister Ali al-Naimi said in Kuwait. Prices have advanced this year as the U.S. and Europe tighten sanctions against Iran over its nuclear program.

“The market has been trapped between $105 and $108 a barrel for a while now,” said Michael McCarthy, a chief market strategist at CMC Markets Asia Pacific Pty in Sydney. “We’re looking for the trigger to push us out of that range and that inventory figure does speak to the potential for a drop.”

Crude for April delivery was at $105.61 a barrel, up 18 cents, in electronic trading on the New York Mercantile Exchange at 11:43 a.m. Sydney time. The contract yesterday dropped $1.28 to $105.43 a barrel, the lowest close since March 6. Prices are 6.9 percent higher this year.

Brent oil for April settlement was at $124.93, down 4 cents, on the London-based ICE Futures Europe exchange yesterday. The European benchmark contract’s premium to New York-traded West Texas Intermediate was at $19.32 compared with $19.54 yesterday, the widest gap since Oct. 24.

Crude Stockpiles
U.S. crude supplies nationwide rose 1.8 million barrels last week to the highest level in six months, the Energy Department report showed yesterday. They were forecast to gain 1.6 million barrels, according to the median of nine analyst estimates in a Bloomberg News survey. The increase was the seventh in eight weeks.

Gasoline stockpiles fell 1.4 million barrels, the Energy Department report showed. They were forecast to decline by 1 million. Distillate inventories, a category that includes diesel and heating oil, slid 4.7 million barrels, compared with a projected drop of 1.5 million.

Oil markets are balanced and have ample output and refining capacity, Saudi Arabia’s al-Naimi said yesterday at the biennial International Energy Forum. Market volatility is caused by speculation, he told the meeting of producers and consumers. U.S. Energy Secretary Steven Chu said he is “enthusiastic” about Saudi willingness to produce more oil to help offset the effect of economic sanctions on Iran.

EU Sanctions Plan
The European Union is seeking to ban imports of products including petroleum oils and natural gas from Iran and to bar global bank-transfer messaging companies from providing services to entities subject to EU sanctions, according to a draft regulation obtained by Bloomberg.

Iran’s oil exports will probably decline by 50 percent when the sanctions take full effect in July, according to the International Energy Agency. Shipments will fall by at least 800,000 barrels a day, David Fyfe, head of the IEA’s market and industry division, said by phone from Paris, citing discussions with market participants.

The “unreasonable measures” will raise costs for governments pursuing them and bolster Iran’s oil revenue, the Islamic Republic’s oil minister Rostam Qasemi said yesterday at the IEF meeting in Kuwait.

 

[Muthukali]

Gold Bulls Weakest in Two Months as Economy Gains: Commodities

Gold traders are the least bullish in two months after prices erased more than half of this year’s gain on speculation that a strengthening U.S. economy will dissuade the Federal Reserve from buying more debt.

Thirteen of 26 analysts surveyed by Bloomberg expect prices to gain next week and four were neutral, the lowest proportion since Jan. 20. Hedge funds cut bets on a rally by the most since August 2008 in the week ended March 6, Commodity Futures Trading Commission data show. Prices fell to an eight-week low March 14, 15 percent below September’s record, and are now below the 200- day moving average, a sign of more declines to some investors.

Gold slid and the dollar gained after Fed policy makers raised their assessment of the economy March 13. The Fed is unlikely to start new quantitative easing and may raise interest rates as early as mid-2013, according to UBS AG. Bullion doubled since debt buying began in December 2008 and rates fell to near zero. The combined market capitalization of global stocks jumped $5.5 trillion this year on mounting confidence about growth, data compiled by Bloomberg show.

“Everything’s beginning to look as if it’s turning the corner, we’ve passed the point of maximum despair,” said Nick Moore, the head of commodity research at Royal Bank of Scotland Group Plc in London. “A number of things which would have kept people with an eye on the upside for gold have now been neutralized. Gold can now settle back.”

Standard & Poor’s
Gold had risen as much as 14 percent to $1,792.70 an ounce by Feb. 28 on the Comex in New York, before tumbling 8.1 percent to $1,647.90 by yesterday. This year’s gain of 5.2 percent compares with an 8.7 percent jump in the Standard & Poor’s GSCI gauge of 24 commodities and a 12 percent increase in the MSCI All-Country World Index (MXWD) of equities. Treasuries lost 1.7 percent, a Bank of America Corp. index (MXWD) shows.

Open interest, or contracts outstanding, in U.S. futures declined to 440,548 on March 12, from 523,284 on Sept. 6, when prices reached a record $1,923.70. Hedge funds and other money managers had a net-long position of 145,997 futures and options by March 6, the fewest since the end of January, CFTC (.MMGCNET) data show.

That contrasts with investors in gold-backed exchange- traded products, whose combined holdings reached a record 2,410.2 metric tons on March 13 now valued at $127.7 billion, data compiled by Bloomberg show. Prices are rising for a 12th consecutive year and will reach $1,897 by Dec. 31, according to the average of 14 respondents in a survey at the Bloomberg Link Precious Metals Conference in New York on March 13.

Central Banks
The decline in prices may spur central banks to add more to reserves, RBS’s Moore said. They added 439.7 tons last year, the most in almost five decades, and may buy a similar amount in 2012, according to the London-based World Gold Council.

“After the dramatic drop this week and all month gold is due for a bounce,” said Adrian Day, the president of Adrian Day Asset Management in Annapolis, Maryland. “Given the massive monetary easing by central banks around the world this is a good environment for gold.”

Bullion climbed about 7 percent in the month through Feb. 28 after Fed Chairman Ben S. Bernanke said he’s considering additional bond purchases. The central bank bought $2.3 trillion of debt in two rounds of quantitative easing that ended in June 2011, during which gold appreciated about 70 percent.

Job growth in the U.S. over the past six months was the strongest since 2006, with March 9 data showing payrolls jumped by 227,000 in February, more than economists had anticipated. The 1.1 percent advance in February retail sales was the biggest in five months and the Bloomberg Consumer Comfort Index reached a four-year high in the week ended March 11.

Fund Futures
Gold generally earns holders returns only through price gains. Federal fund futures on the Chicago Board of Trade show a 13.8 percent chance the Fed will raise borrowing costs by the end of this year from the current range of between zero and 0.25 percent. The odds for an increase were 7.8 percent a month ago.

While physical demand from India, the second-biggest buyer in the fourth quarter, on March 14 was the most since January 2011, there was “limited” demand from other regions, Edel Tully, an analyst at UBS in London, wrote in a report yesterday.

The metal dropped below its 200-day moving average on March 6 for the first time since mid-January and is trading about $31 below that measure, a sign for some investors who study charts of trading patterns and prices to predict trends that a rout has further to go. The metal’s 14-day relative-strength index is at 38.9. A level of 30 indicates to some analysts who study such charts that a rebound may be due.

Copper Bears
In other commodities, nine of 22 traders and analysts surveyed by Bloomberg expect copper to drop next week and six were neutral. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, rose 13 percent to $8,575 a ton this year after declining 21 percent last year.

Eight of 16 people surveyed expect raw sugar to fall next week and two predicted little change. The commodity gained 9.2 percent this year to 25.44 cents a pound on ICE Futures U.S. in New York.

Sixteen of 27 people surveyed anticipate higher corn prices next week, while 18 of 28 said soybeans will advance. Corn rose 2.9 percent to $6.65 a bushel this year as soybeans climbed 13 percent to $13.6425 a bushel.

“Positive sentiment on the back of better-than-expected macroeconomics data is supporting the outlook” for commodities, said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland. “However, it needs to be proven if it’s investment driven or real end-user demand.”

 

[Muthukali]

Corn, Soybeans Rally to Six-Month Highs as China Demand Outlook

Corn and soybeans extended rallies to the highest prices since September on speculation that China may boost purchases from the U.S., the biggest producer of both crops.

Jilin Corn Center Wholesale Market reported yesterday that government purchases of domestic grain have plunged this year to 1.2 million metric tons from 11 million a year earlier, a sign of tighter supplies in China that will lead to a jump in imports. On the Dalian Commodity Exchange, corn futures jumped to a record today. Soybean imports may rise more than 20 percent in the first half of 2012, Grain.gov.cn said March 12.

“The rising markets are a reflection of traders expecting increased Chinese purchases from the U.S.,” Jerry Gidel, the chief feed analyst at Chicago-based Rice Dairy LLC, said in a telephone interview. “Rising meat demand is driving Chinese consumption of feed.”

Corn futures for May delivery rose 0.6 percent to close at $6.73 a bushel at 1:15 p.m. in Chicago, after touching $6.7375, the highest price since Sept. 22. The grain rallied 4.3 percent this week, the largest gain since the end of January.

Soybean futures for May delivery advanced 0.4 percent to $13.74 a bushel in Chicago, after touching $13.775, the highest since Sept. 15. The oilseed rose 2.7 percent for the week, the fifth straight and the longest weekly rally since November 2010.

Corn and soybeans may rally next week as unusually warm, dry weather and drought conditions in parts of the northwestern Midwest may threaten this year’s crops and encourage farmers to withhold supplies left from last year’s harvest, Tim Hannagan, a grain analyst for PFT Best Inc. in Chicago, said in a telephone interview.

The average premium for corn at export terminals near New Orleans has climbed 30 percent in the past year, government data show. U.S. inventories before this year’s harvest are expected to drop to the lowest since 1996, the Department of Agriculture said March 9. Soybean premiums are 4.2 percent higher than a year earlier.

“The export-pipeline supply of corn and soybeans will shrink the next few weeks because farmers will fear the weather will prevent building stocks to more comfortable levels,” Hannagan said. “March is a month when investors pour money into the grain markets before the start of the growing season.”

Corn is the biggest U.S. crop, valued at $76.5 billion in 2011, followed by soybeans at $35.8 billion, government figures show.

 

[Muthukali]

Gold prices for Saturday - Bangkok

The Gold Traders Association this morning announced the buying price at 23,755.72 baht per baht-weight for gold ornaments and 24,100 baht per baht-weight for gold bar.

The selling prices were set at 24,600 baht per baht-weight for gold ornaments, and 24,200 baht per baht-weight for gold bar.

 

[Isabella8688]

Milk Price Souring as Record Profit Spurs Expansion of Herds: Commmodities

Record dairy profits and milder weather are leading to a surge in milk supplies from Auckland to California, turning last year’s best-performing commodity contract into one of the worst of 2012.

Output in the U.S., the world’s largest producer, will advance 1.8 percent to a record 199.7 billion pounds (90.6 million metric tons) in 2012, the Department of Agriculture estimates. Futures traded on the Chicago Mercantile Exchange already fell 29 percent from a four-year high in August and may drop another 7.8 percent to $14.25 per 100 pounds by July, the median of six analyst estimates compiled by Bloomberg shows.

An estimated 30 percent jump in U.S. dairy exports led to the most profitable year ever for farmers, who expanded herds that now are the biggest since May 2009, USDA data show. Yields reached a record during an unusually mild winter. Supply is also rising in Australia and New Zealand, the largest exporter, and dairy was the only food cost tracked by the United Nations to decline last month.

“This blasted weather that most people have enjoyed, the dairy cows have really enjoyed it,” said Bill Brooks, an economist for INTL FCStone Inc. in Kansas City, who grew up on a dairy farm in Missouri and has covered the industry for two decades. “We’re going to see more milk production.”

Agriculture Index
Milk futures that jumped 31 percent last year, more than any of the 24 commodities in the Standard & Poor’s GSCI Spot Index, tumbled 10 percent since Dec. 30 to $15.45 yesterday. Only natural gas and arabica coffee fell more. The S&P GSCI Agriculture Index advanced 1 percent this year, as the MSCI All- Country World Index of equities rose 9.8 percent. Treasuries lost 0.6 percent, a Bank of America Corp. index shows.

U.S. dairy farmers had 9.236 million cows in January, the 14th herd expansion in 16 months, USDA data show. Each animal produced a record 21,345 pounds (9.7 metric tons) of milk last year. Fonterra Cooperative Group Ltd., the largest dairy exporter, shipped 246,000 tons in December, the most ever. Deliveries to its plants rose 9.8 percent in the eight months ended Jan. 31, the Auckland-based company said last month.

Rising supply may meet weaker gains in demand. China, the biggest buyer of U.S. agricultural products, is targeting economic growth of 7.5 percent, the lowest since 2004, Premier Wen Jiabao said March 5. The economy gained 8.9 percent in the fourth quarter, the slowest pace in 10 quarters.

Feed Costs
Declining milk prices and rising cattle-feed costs may require farmers to cull herds, reducing supply, said Chip Whalen, a vice president of education and research at Chicago- based Commodity & Ingredient Hedging LLC, which advises clients on managing commodity price swings. Corn futures averaged $6.78 a bushel in Chicago last year, the most in at least a half century. Record beef prices also may encourage more slaughtering.

“We’re going to go through another one of these cycles where we’re going to cull the herd,” said Shawn Hackett, the president of Hackett Financial Advisers Inc., a brokerage and consultant based in Boynton Beach, Florida. “We’re setting a stage for a significant slowdown in production growth, starting in the later part of this year,” said Hackett, who anticipates a rally to $18 in the second half of 2012.

While China may slow this year, the U.S. will expand 2.2 percent from 1.7 percent in 2011, according to the median of 79 economist estimates compiled by Bloomberg. U.S. consumption of fluid milk will reach 28.61 million tons this year, the highest since at least 1964, and cheese demand will advance to 4.83 million tons, the most since at least 1965, USDA data show. The U.S., with 4.5 percent of the global population, eats 32 percent of the world’s cheese production and drinks 6.2 percent of its milk, the department estimates.

Cull Herds
Farmers may be reluctant to cull herds. While losses this year may hurt some dairies, most are in better financial shape than in 2009 and 2010, so there won’t be a “wholesale decrease in cow numbers,” said Jon Spainhour, a broker and partner at Rice Dairy LLC in Chicago.

In 2009, the average for milk futures slumped to $11.56, a six-year low, before rebounding in 2011 to $18.55. Last year, the average dairy farm had net cash income of $239,800, the most ever, the USDA estimated Feb. 13, up from $158,100 in 2010 and $70,100 in 2009.

Exports were the “key factor” in last year’s rally, said Bob Cropp, an economist at the University of Wisconsin in Madison who has been studying the industry since 1966. U.S. dairy exports totaled $4.78 billion in 2011, up from $3.69 billion in 2010, according to the USDA’s Foreign Agricultural Service. Shipments will drop 2.2 percent in 2012, according to a report by USDA economist Milton Madison at a Feb. 24 forum in Washington.

Industry Projects
The industry is now facing more competition in export markets, said Brooks of INTL FCStone. Output in New Zealand, curbed by drought last year, may rise 8 percent to 10 percent this season, according to Southbank, Australia-based Dairy Australia, which raises levies from farmers to fund industry projects.

Production in Australia may rise 1.4 percent to 9.55 billion liters (2.5 billion gallons) in the year beginning July 1, the Australian Bureau of Agricultural and Resource Economics and Sciences said in a report March 6. Flooding last year limited output and disrupted transportation.

U.S. output is also rising on improving weather. The three- month period ended in January was the sixth-warmest-ever for that time of year, according to Brad Rippey, a meteorologist with the USDA. The four warmest all happened since 1998 and the other was in 1933-1934, the dust bowl era.

California Dairies
Milk production in California, the largest producing state, climbed 6.6 percent in January from a year earlier to 3.615 billion pounds, the highest on record for that month, USDA data show. There’s “milk coming out of our ears,” said Bill Schiek, an economist at the Dairy Institute of California in Sacramento, which represents processors in the state.

The drop in prices is no incentive to cut production for Ray Souza, who has 900 Holstein cows on his farm in Turlock, California. Farmers tend to react by increasing output because their costs remain similar, he said.

“We’ve never produced at this level before,” said the 65- year-old, who has been in the dairy business since 1973. “Cows produce more milk in the springtime than they do in any other part of the year. This spring seems to have started around the first of December.”

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[Muthukali]

Gold standard - Vietnam

Central bank scheme to attract gold deposits a tough sell

An employee counts some gold bars before he sells them to a customer at a gold shop in Hanoi

The State Bank of Vietnam wants to encourage residents to bank their gold instead of hoarding it at home, but this is easier said than done in the current situation, experts say.

While the move to have people deposit gold into banks is intended as a measure to stabilize the economy, experts are skeptical the policy will work, given the high inflation and policy shortcomings.

Central bank governor Nguyen Van Binh said there are between 300 and 500 tons of gold privately held by local residents that can be used for the economy.

“Management of the gold market should protect the right to keep gold assets, but the resources also have to be attracted and used for social and economic development, particularly during these tough times,” he said.

Under the new plan – expected to be announced soon – the government will not interfere in the market but will ask lenders to attract the gold held by investors. Banks are now allowed to trade gold on account.

More details of the plan have not been made public, but local lenders say the government is considering ways to attract gold deposits by offering better returns and security.

Last month, joint-stock lenders Eximbank and ACB hiked their interest rates on gold deposits to 3 percent from 1-2.5 percent. But this is not enough, apparently.

“I don’t like to deposit gold with banks. The interest rates are low, and procedures for depositing and withdrawing may take a lot of time,” said Nguyen Thi Sinh, a retired worker in Hanoi’s Hai Ba Trung District.

“It is better to keep gold at home. I can sell it any time, anywhere, when I need cash.”

Le Tham Duong of the Ho Chi Minh City Banking University said the interest rate on gold deposits should be set at a level where depositors feel they do not make a loss compared to deposits in dong and foreign currencies.

“In fact, the biggest concern of local people is if they would be able to withdraw their gold deposits before the due date to grab the opportunity and profit from selling the metal when its price soars,” he said.

Duong said historically, gold has always been on an upward trend, and may rise further this year. Analysts predict the metal could top US$2,000 or even $2,100 per ounce.

Bullion is climbing for the 12th straight year as investors seek to keep their wealth secure amidst volatility in stock markets, depreciating currencies, and the threat of inflation, Bloomberg said. Gold reached a record $1,921.15 an ounce last September.

Duong said many banks do not have transaction centers at all localities nationwide, especially in remote areas, preventing people from depositing their gold.

Lenders only receive deposits of gold bullion, and not many people want to convert their gold jewelry into bullion for the purpose, he said.

Former central bank governor Cao Sy Kiem said the central bank should issue gold certificates, which are allowed to be traded or mortgaged. This will help change the habit of holding gold assets among the Vietnamese people, and encourage them to bank the precious metal, he said.

People will sell or deposit their gold at banks only when the profit involved is higher than keeping it at home, said Truong Van Phuoc, general director of Eximbank. Thus, the most important task is to reduce inflation, which stood at 16.44 percent in February, he said.

Banks say they guarantee the interests of gold sellers, and will buy the metal at the international prices. However, gold prices in the domestic market are often higher than that of the world, economist Duong said.

The price of gold in Vietnam has risen more than 6 percent this year.

To stabilize the gold market, the State Bank of Vietnam is considering a regulation that allows the Saigon Jewelry Company, a dominant processor and trader, exclusive rights to engage in gold bullion business under central bank control.

 

[Muthukali]

Gold prices for Tuesday - Bangkok

The Gold Traders Association this morning announced the buying price at 23,755.72 baht per baht-weight for gold ornaments and 24,100 baht per baht-weight for gold bar.

The selling prices were set at 24,600 baht per baht-weight for gold ornaments, and 24,200 baht per baht-weight for gold bar.

 

[Muthukali]

Oil Rebounds From Biggest Drop in Three Months

Oil rebounded from the biggest decline in three months after a report showed crude stockpiles falling in the U.S. Prices dropped yesterday as Saudi Arabia said it may boost supplies.

Futures gained as much as 0.5 percent after sliding 2.3 percent yesterday. U.S. crude supplies shrank by 1.4 million barrels last week, according to the American Petroleum Institute. The Energy Department may say today that inventories climbed by 2.2 million barrels, a Bloomberg News survey showed. Saudi Arabia can increase output by 25 percent immediately if needed, Oil Minister Ali al-Naimi said. Prices have risen this year on concern that tension with Iran threatens supplies.

“When we get big draws or builds the market will take it and move, but then it’ll come back to reality,” said Jonathan Barratt, chief executive of Barratt’s Bulletin, a commodity markets newsletter in Sydney.

Oil for May delivery rose as much as 57 cents to $106.64 a barrel in electronic trading on the New York Mercantile Exchange and was at $106.62 at 12:18 p.m. Sydney time. It dropped $2.49 percent yesterday to $106.07, the lowest close since March 15. The April contract, which expired at the end of floor trading, fell $2.48 to $105.61. Front-month prices are 7.9 percent higher this year.

Brent oil for May settlement was at $124.40 a barrel, up 28 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to New York-traded West Texas Intermediate was at $17.78.

Gasoline Stockpiles
U.S. gasoline stockpiles slid 1.4 million barrels last week, API data showed. The Energy Department report will probably show they declined 2 million barrels, according to the median of 11 analyst estimates in the Bloomberg survey.

The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

Brent crude rose 11 percent last month, the biggest gain in a year, amid concern that European Union and U.S. sanctions against Iran’s nuclear program will disrupt Middle East oil exports. Iranian shipments slipped 45,000 barrels to 3.45 million barrels a day in February, according to data compiled by Bloomberg. The nation has threatened to shut the Strait of Hormuz, a transit route for a fifth of the world’s supplies, in response to an embargo.

Saudi Arabia has the capacity to produce 12.5 million barrels a day and will pump about 9.9 million barrels a day this month and in April, al-Naimi told reporters yesterday at the Ritz Carlton hotel in Doha, Qatar.

“If you believe Hormuz will be closed, I will sell you the Empire State or the Egyptian pyramids,” al-Naimi said. “I want to assure you that there is no shortage of supply in the market.”

 

[Muthukali]

Crop prices tumble on an annual basis - Thailand

Thailand's farm price index contracted by 16% year-on-year in February as a result of falling prices for several commodities, especially rubber and cassava.

Last month's index, measured by prices at farm sites, was 157.33 points, compared with 187.44 in February 2011. Compared with the previous month, however, the index edged up by 0.5%, says the Office of Agricultural Economics (OAE).

Prices of major products such as rubber, cassava, oil palm and chicken were down, largely on slower demand abroad.

The average selling price of raw rubber sheet in the domestic market was 174 baht a kilogramme last February but fell to 110 baht last month as China delayed imports after slow car sales in January.

The export price of smoked rubber sheet slipped to 114 baht per kg, down by 57% year-on-year.

Apichart Jongskul, secretary-general of the OAE, said the government's plan to use a 15-billion-baht fund to salvage rubber prices would be a factor pushing up domestic prices.

Droughts in many plantation areas in China, coinciding with the low season for production in Thailand, could further increase prices in future.

Cassava faces a similar fate when buyers in China delay import shipments due to abundant stocks of tapioca chips.

Local traders are also concerned that the government may dump tapioca products from its mortgaged stock into the market, causing them to delay their daily purchases.

The OAE noted market prices for paddy last month were not strong even with a state-intervention plan.

Mr Apichart attributed the condition to small orders from foreign buyers.

The Kasikorn Research Center has forecast the March rice index to fall for a second month on slow exports.

The OAE reported the index of prices rice farmers received last year was 184.32 points, up by 4.9% year-on-year, while the export index was 171.02, up by 10.4%.

But the export price index in February narrowed by 2.2% to 173.64 from january, while farmers improved slightly by 1.8% to 192.22 points.

 

[Muthukali]

Gold prices for Wednesday - Thailand

The Gold Traders Association this morning announced the buying price at 23,695.08 baht per baht-weight for gold ornaments and 24,050 baht per baht-weight for gold bar.

The selling prices were set at 24,550 baht per baht-weight for gold ornaments, and 24,150 baht per baht-weight for gold bar.

 

[Muthukali]

Gold prices for Thursday - Thailand

The Gold Traders Association this morning announced the buying price at 23,695.08 baht per baht-weight for gold ornaments and 24,050 baht per baht-weight for gold bar.

The selling prices were set at 24,550 baht per baht-weight for gold ornaments, and 24,150 baht per baht-weight for gold bar.

 

[Muthukali]

Gold price stabilises as Fed eases reins

The global gold price will this year likely remain close to last year's high of US$1,930 an ounce, as the US Federal Reserve shows no intention of injecting more cash into the US economy, says MTS Gold Futures.

Chairman Kritcharat Hirunyasiri said the gold bar price in Thailand is expected to touch 27,000 baht per baht-weight.

MTS has added five gold-shop partners to expand its customer base and serve the Asean Economic Community from 2015, possibly doubling revenue growth, he said.

The company is seeking an additional 30 gold shops by year-end and promoting its online gold trading channel.

Managing director Nuttapong Hirunyasiri said MTS plans to lift the country's gold bar quality to regional standards.

Dr Kritcharat said the company expects to be granted a full licence to trade derivatives products from the Thailand Futures Exchange in the third quarter.

"We expect our market share to improve to 20% this year from 17%," he added.

 

[Muthukali]

Spot Gold, Futures Pare Advance After China Manufacturing Data

Gold for immediate delivery was little changed at $1,651.75 an ounce at 10:35 a.m. Singapore time, paring an earlier advance of 0.4 percent, after a report showed China’s manufacturing data may contract for a fifth straight month in March. April-delivery metal was also little changed at $1,650.60 an ounce, trimming a 0.4 percent gain.

 

[Muthukali]

Gold Falls on Concern Economy Is Slowing as Dollar Gains

Gold futures dropped to the lowest since January as signs of slowing growth from China to Germany sent the dollar higher, curbing demand for the precious metal. Palladium slumped the most this year.

The Standard & Poor’s GSCI Index (SPGSCI) of 24 raw materials fell as much as 1.6 percent after Germany’s manufacturing and services industries unexpectedly weakened and a report showed China’s manufacturing may contract for a fifth straight month in March. The dollar rose as much as 0.4 percent against a basket of six currencies.

Weaker industrial output “in Asia and Europe lead to a stronger dollar, and lately the dollar has been a strong driver of gold prices,” Bernard Dahdah, a London-based analyst at Natixis Commodity Markets Ltd., said in an e-mail.

Gold futures for April delivery fell 0.5 percent to $1,642.50 an ounce at 1:44 p.m. on the Comex in New York, after touching $1,627.50, the lowest since Jan. 13. Still, prices are up 4.8 percent this year.

Jewelers in north and east India, the world’s biggest bullion importer, will continue a shutdown to protest higher taxes, leaving about half the nation’s stores closed, according to a trade group. Jewelers held the first nationwide strike in seven years after the government raised taxes on imports and on non-branded jewelry last week.

“With physical demand not at full strength and waning investor enthusiasm, the potential for further downside in gold remains exposed,” Leon Westgate, an analyst at Standard Bank Plc, said in a report.

Silver futures for May delivery tumbled 2.7 percent to $31.345 an ounce on the Comex. Earlier prices touched $31.09, the lowest since Jan. 20.

On the New York Mercantile Exchange, palladium futures for June delivery declined 5.5 percent to $651.05 an ounce, the biggest fall for a most-active contract since Dec. 14. Earlier, prices fell to $650.40, the lowest since Jan. 18. Platinum futures for April delivery retreated 1.7 percent to $1,612.10 an ounce.

 

[Muthukali]

Ausiris plans to double gold trade to over B200bn in 2012 - Thailand

Ausiris Co, a gold trader, plans to double bullion and futures trading this year, says chief executive Boonlert Siripatvanich.

Boonlert Siripatvanich (second left), the chief executive of Ausiris Co, and Tanasin Gleeblumjeak (second right), the managing director of subsidiary Ausiris Futures Co, show gold bars at a briefing yesterday.

The company, a member of the Thailand Futures Exchange (TFEX), said gold trading volume in Thailand has been growing steadily despite price fluctuations.

Ausiris reported 108 billion baht in trading last year. This year's target of 200 billion baht represents a four-fold rise.

It had a market share on the TFEX of 10-12% last year. It expects that share to double if it reaches its new trading target.

"We plan to be No.1 in retail gold bar trading and gold futures trading within 10 years," said Mr. Boonlert.

Ausiris yesterday announced it will open five new branches this year, doubling the total.

It also plans to expand to neighbouring countries such as Laos, Myanmar and Malaysia over the next two or three years.

Ausiris has developed a trading platform that allows investors to buy a wide range of products through a single trading account.

Clients can invest via the platform in gold bars, gold futures and gold exchange traded funds.

Mr Boonlert said the company will apply for a full TFEX licence next month so it can trade all products on the exchange.

He said the price of gold will continue to be volatile this year on uncertainties in the EU and the US.

Gold prices may fall, and the metal may trade within a range of US$1,550 to $1,600. It could also rise as high as $1,920. The strategy for now is to accumulate for the medium to long term.

"The price of gold is closely related to market conditions, interest rates and the economy," said Mr Boonlert.

Usara Wilaipich, a senior economist at Standard Chartered Bank (Thailand), said problems remain in the US and Europe even though the situation has improved in the short term.

However, the market is disappointed with US reluctance to launch a third round of quantitative easing.

Ms Usara said in the short term, the US dollar and interest rates should be watched.

If the dollar strengthens, then investors will likely sell higher-risk assets in Asia.

"The portfolio adjustment is expected to happen in the second quarter. Also, hedge funds will unwind positions in gold in favour of the US currency," said Ms Usara.

 

[Muthukali]

Gold prices for Friday -Thailand

The Gold Traders Association this morning announced the buying price at 23,604.12 baht per baht-weight for gold ornaments and 23,950 baht per baht-weight for gold bar.

The selling prices were set at 24,450 baht per baht-weight for gold ornaments, and 24,050 baht per baht-weight for gold bar.