• Recently Written

  • BP 2008 review
  • Silver Cot Report (click on image)
  • US Mint rations Silver Eagles
  • Possible Russian Oil Play
  • Brazilian stock investing heating up
  • Industrial production Falls mainly from auto industry
  • Consumer credit continues to grow despite failing retail
  • Potential Soybean Trades
  • Corn may Extend Rally:
  • Soybeans set to gain on speculation as a farm strike in Argentina heats up:

• Categories

  • commodity news
  • commodity tools
  • Uncategorized

• Archives

  • June 2008
  • May 2008
  • April 2008

• Blogroll

  • Commodity Investing Basics - Learn the basics of investing in Commodities
  • Commodity Wealth - Your home for all news, analysis, and charts for the commodity markets
  • Free Commodity Newsletter - Free Newsletter about commodity investing

• Admin

  • Register
  • Log in
  • Wordpress
  • XHTML

• Search

The weaker US dollar prompted investors to continue to buy commodities increased fighting in Beirut added to concerns of the Middle East. These two forces increased the price of crude oil to near $126 a barrel last Friday. Many investors have started to buy commodities as an inflation hedge.
Previously oil surged to $78.40 per barrel on July 14, 2006 Israel attacked Hezbollah forces in southern Lebanon. Libya’s oil official last week blamed speculation as well as political conflicts for driving oil prices higher. He expects OPEC to have an early review of their output as OPEC pumps about 40% of the world’s oil. Furthermore, decreased business confidence in Germany and France which account for about half of the euro region economy have led to renewed speculation that the European Central Bank will reduce interest rates yet again this year. With lower rates of lending increased inflation will be seen in the euro zone. This could also increase the prices of commodities.

Rising soyoil off-take for biodiesel production is raising eyebrows within the industry, particularly with the economics of the market not showing justification for the rise. Data from the Census Bureau’s stocks report showing the second monthly increase in soyoil used in biodiesel consumption cropped up as the high cost of soyoil has left many biodiesel plants struggling to stay operational, industry analysts said. The Census Bureau reported soyoil used in methyl esters in February was 290.1 million pounds, rising 22 million over January. This marks the second monthly rise in biodiesel consumption, said Greg Wagner, analyst with AgResource Co. in Chicago.

Methyl esters is the chemical term for the conversion of soyoil or fats into biodiesel. The figure is the highest soyoil off-take of methyl ester in the last six months, with usage also dramatically higher than last year by a whopping 111.7 million pounds. The March stocks report is keenly anticipated, as analysts look to see if the uptrend in methyl esters usage continues, Wagner said. The industry has a historic tendency of not putting better than two months usage increases back to back, Wagner added. The U.S. Census Bureau is scheduled to release its March Fats and Oils: Production, Consumption, and Stocks reports May 1. “The industry can’t cash-flow biodiesel with soyoil at current prices,” said Michael Swanson, agricultural economist with Wells Fargo Bank in Minneapolis. With 60-cent-a-pound soyoil, and biodiesel priced on par with diesel fuel near $4.20 a gallon, it doesn’t provide a very good yielding operation, Swanson said. Rick Kment, biofuels analyst with DTN in Omaha, Neb., said a lot of biodiesel plants have cut back operations from where they were a year ago, “but the plants are still up and running, but producing at 25% to 40% capacity.” Despite the high costs of inputs, many plants remain open in an effort to keep fixed costs moving, and with long range outlooks for the industry to turn around, they want to be positioned where they can ramp up production to meet demand, Kment said. On average its takes between 7 and 8 pounds of soyoil to make one gallon of biodiesel. Soyoil prices fell sharply during March, dropping from a record high in the May future at 70.82 cents per pound to an intraday low of 49.18 cents by April 1. The collapse of soyoil values and a resurgent petroleum products market has worked to sharply retrace steeply unprofitable biodiesel margins, agricultural advisory/research firm AgResource Co. reported in a market note. “The losses which spiked at over 20 cents/BTU in late February appeared tantalizingly close to crossing the threshold into profitability,” AgResource said.

Argentina has closed the wheat export registry indefinitely due to tense negotiations with farm groups aimed at avoiding a repeat of a crippling three-week farm strike last month. “Due to the negotiations between the federal government and agricultural sector regarding the product involved, the suspension (of wheat exports) will be temporarily maintained until new a new course is defined,” the Agriculture Secretariat said in a letter to grain exporters, dated Friday. Government officials and farm group leaders are scheduled to meet Tuesday for talks regarding the wheat sector. The indefinite blocking of wheat exports follows a half dozen extensions of the closure since January, when the government announced that it would free another 2 million metric tons of wheat export from the 2007-08 crop. Exporters have already declared more than 7 million metric tons of 2007-08 wheat for export, according to the Agriculture Secretariat. About 10 million metric tons are expected to be available for export, according to the U.S. Department of Agriculture. However, tense relations with the farm sector had led the government to block the export of wheat and beef. In addition, corn exports are being slowed by procedural barriers at customs. At the beginning of this month, farmers called a 30-day “truce” to the 21-day strike that had stalled the flow of farm goods and caused acute food shortages in the capital Buenos Aires. The blockades were lifted to facilitate talks, but farmers say they’ll resume the strike at the beginning of May if talks with the government break down.
source: Dow Jones News

It appears that Sri Lanka is the latest country in Asia to feel the pain from the skyrocketing price of rice this year. The government now has taken steps to put in place a price ceiling on rice prices, unfortunately this ceiling price is below the cost at which the rice can be imported into the country. Looks like another example of a government failing to understand basic economics. Here is the article about Sri Lanka’s capping of rice prices.

When it comes to policy it seems like the US is king.  When it comes to energy however the US appears not to have a clue.  It is very critical for the US to get it right with huge increasing in the cost of oil and refining capacity at its peak, its going to be time for some tough decisions.  With the prices of all commodities increasing across the board its time, and the fed pumping out more money by lower interest rates we could see massive jumps in the cost of energy.  Despite these troubling concerns, nothing new has come out of Washington regarding these issues. 

With renowned Texan oil analyst ‘Zapata’ George Blake calling for $160 a barrel oil next week the US citizens will pay the lack of action from the government.  Environmental lobbyist groups have stopped the construction of several oil refineries as well as off shore natural gas terminals. 

It appears the government as well as much of the population are waiting for a massive catastrophe to occur before taking action.

According to Alliance Trust Research Centre a UK based market research firm commodity food price are at the highest point in 10 years. The price of fish has increased 12.6%, the price of vegtables 10.2% While these increasing prices cause a crunch in the pocketbooks of most people living in developed countries this price increase is causing more dramatic results in less developed nations. For example the tortilla price increased 60% this year in Mexico causing riots and government intervention. With the worlds population increasing at alarming rates, countries with unchecked population demand such as India could be the first to see serious consequences of these price increases after all this issue caused the downfall of India’s ruling party in both 1980 and 1998.

Commodity Wealth has a useful directory of commonly used terms that you will run into when you are first starting out trading commodities.  Commodity Glossary

← Previous Page