How Will Copper Respond to Rising Chile Energy Prices?

The top copper-producing country in the world is Chile by far, accounting for about 40 percent of all copper produced in the world.

Over the last three years in the country, electricity has risen by close to 400 percent; from 3.5 cents a kilowatt-hour to 35 cents a kilowatt-hour. That's like bread increasing from $2 a loaf to $20 a loaf.

The primary reason is the deal Chile made with Argentina to diversify how it generated electricity. The choice of piping in natural gas from Argentina was made, and in a short year-and-a-half, it became a disaster as Argentina broke their production contracts with Chile, choosing to redirect it to their own market.

As a result, Chile switched over to diesel, basically tripling the cost of generating electricity. A severe drought in the country has now made them more reliant on expensive diesel, increasing energy costs even more (less hydroelectric power).

The bottom line is it's having a strong impact on the copper market, as the cost of getting it out of the ground is increasing. That, along with China's continuous demand for copper, makes it look like it may go up in price for some time to come. It's definitely worth watching closely with these factors in mind.

From December 2007, the price has increased by 33 percent, standing at $3.95 a pound as of this writing. It could go much higher.

The Reasons behind the Escalating Rice Price

Here's a roundup of the news covering the spike in rice prices and supply.

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Behind the Run on Rice

Despite bumper crops in Vietnam and India, export limits and bans have created a global shortage and driven up prices

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Why have rice prices surged to record highs?

Asian rice prices have almost trebled this year and prices on the Chicago Board of Trade have risen more than 80 percent to hit successive record highs as export restrictions by leading suppliers fuel insecurity over food supplies.

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Rice and Wrong: Food Costs Flummox

Food prices are igniting riots in developing countries -- and quietly claiming a chunk of my family's bottom line.

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Rising price of rice sparks fears over supply, security

The price of rice -- a staple in much of the world -- is rising, bringing with it concerns about food security and worries about possible shortages. In the United States, the two biggest U.S. warehouse retail chains already are limiting purchases of the grain.

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Viet Nam wins rice tender in Philippines

The Philippines has announced auction results for rice supplies in which Viet Nam won with the highest offer of US$1,200 per ton for 100,000 tons of rice.

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Thai rice prices rise again despite CBOT falls

Thai 100 percent B grade white rice, the world's physical benchmark, was quoted higher on Friday, despite a 3 percent fall in rice futures contracts on the Chicago Board of Trade, Thai traders said on Friday.

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Commodities Reach New Highs, Reuters/Jefferies CRB Index Highest Since 1956

Commodities surged again today, as 18 of 19 raw materials in the Reuters/Jefferies CRB Index climbed. The index itself reached the highest levels since September of 1956, as it rose by 1.8 percent to 422.91. The CRB Index has enjoyed a gain of 18 percent so far in 2008.

The only commodity in the CRB Index not rising was natural gas.

Among records reached today were oil, which went as high as $119.90 a barrel, while gasoline futures, for the first time, passed $3 a gallon.

The euro also broke a record against the greenback, rising to $1.6019 on Tuesday.

"The weaker dollar was the key driver for commodities across the board today," said Evan Smith, who helps manage $1.5 billion at US Global Investors in San Antonio. "The bigger theme is that there is robust global commodity demand."

According to Citigroup, worldwide investments in commodities grew by over 20 percent in the first quarter, reaching $400 billion.

Chile Copper Strikes Could Cause Prices to Soar

In a strike over pay and benefits, workers in Chile copper mines have created the potential for price increases as global supplies could come under pressure.

Along with the shutdown of Codelco's El Teniente mine, the state also shut down the Salvador and Andina mines over the strike.

The largest underground copper mine in the world, El Teniente, has also been blocked by hostile miners. Chile produces about 40 percent of copper globally.

The copper production in Chile has already been hurt by electric shortages as a nationwide drought has created shortages in hydro-electric power generators, as water levels remain low.

Copper is expected to continue to grow at an annual rate of 3.7 percent through the next ten years, as demaand continues to increase. That would bring consumtion to 27 million tons.

With the slowing housing market in the U.S., China has now become the No. 1 consumer of copper in the world.

Cooper prices have soared by 28 percent so far in 2008, with projections spot copper could end the year at $4.10 a pound, or $9,000 a ton. In 2009, projections are it could reach $10,000 a ton.

Poll Says Commodity Price Surge Largest Economic Threat

Those responding to a Financial Times/Harris poll said the greatest economic threat to American and European economies is the rising price of commodites.

Out of people responding from six countries, only those from Italy didn't name commodity prices as the biggest economic threat. Other countries included in the poll were the United States, France, Spain, Germany and Britain.

A large number of participants in the survey also concluded they didn't have confidence their governments would be able to handle the economic challenges.

In America, 50 percent said they were "not confident at all."

This is of course the right thing to think, as government interference always brings unintended consequences that linger for years, many times creating new problems or exasperating the old.

Canadian Dollar Rebounds

The Canadian dollar has been down for a couple of weeks, but rebounded strong today as exports increased and the stock index surged. The loonie gained against 14 of the 16 major currencies today, as gold and oil prices posted gains.

Jeff Rubin, chief economist at CIBC World Markets said the Canadian dollar should increase in strength against the U.S. dollar, probably rising to 95.2 cents per U.S. dollar this year.

He added concerning the U.S. economic downturn that "The energy- and resource-rich Canadian economy will manage to sit out this U.S. recession."

As he said, all this is related to the increasing and long-term demand for commodities, which should keep Canada's economy strong for the next couple decades at least.

Commodity News Weekend Roundup

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COMMODITIES-Grains drop but oil ekes out gain on late bounce

Grains dropped Friday on profit taking ahead of the weekend, pulling corn further below the record hit this week, and gold also slid as cautious investors lightened their load on new signs of problems in the U.S. economy.

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Latest On Commodities: Tax Break

It’s the final weekend before Uncle Sam comes to collect his dues. AND, I have just one thing to say to everyone who finds him/herself knee-deep in old receipts, cross-eyed from punching calculator keys – Think Happy Thoughts.

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Commodities Wrap: Chicken Cuts

Chicken Producer Cuts Production Due to High Grain Costs, Prices Likely to Remain High

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Shorts, Commodities Lift These ETFs to Top

The top 10 ETFs for the quarter were dominated by funds that employed short strategies and funds invested in natural gas and copper.

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Canadian Currency's Link to Commodities Is Weakening, RBC Says

The Canadian dollar's link to commodities has been weakening as investors shift their focus to the global economic outlook amid the credit turmoil rooted in U.S. subprime mortgages, according to RBC Capital Markets.

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Forget gold, silver, bronze: the winner is aluminium

RIO TINTO's chief economist, Vivek Tulpule, says commodity prices could exceed the record prices they are fetching amid the rapid change of China and India.

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Market 360: A weekly wrap of US equity markets, commodities, currencies, and more

Commodities

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Commodities Leap the Highest in 2 Weeks; Records for Corn, Oil, Gas

After U.S. government reports confirmed supply for energy and grain can't keep up with the demand, commodities surged the most in two weeks, led by record-breaking prices for corn, oil and gasoline.

"Supplies for a lot of different commodities are dwindling as demand has gained globally," said Michael Pento, a senior market strategist at Delta Global Advisors in Huntington Beach, California, which manages about $1.5 billion. "I'm bullish on all commodities."

Crude oil leaped as high as $112.21 a barrel, while corn ended at $6.16 a bushel, as inventory fell below anticipated levels.

Setting a new record was gasoline futures as well, climbing to $2.8228 a gallon, a reflection of what it costs wholesale.

Global Investment in Commodities Surges to $400 Billion

In the first quarter of 2008, worldwide investment in commodities surged by over 20 percent to reach the $400 billion mark, as investors fled the U.S. dollar and sought a hedge against inflation, said analysts at Citigroup Inc.

The commodity indexes also enjoyed a healthy bump, as investment in them for the first quarter increased by around $40 billion, to reach $185 billion. That was more than the entire commodity index investment of 2007.

After the indexes, trading advisors were the largest group investing in commodities, as they added $94 billion to the commodities market in the first quarter, over 18 percent since the end of 2007.

Hedge funds were next, accounting for $75 million in commodity holding, an 25 percent increase in the first quarter.

EFTs added another $46 billion to the commodity sector, increasing 31 percent since the end of the year.

Many think the surge is unsustainable, and there will probably be a general pullback over the strong recent quarter. At the same time it could offer opportunity for investors in the overall sector as well.

Weekend Commodity News

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Natural Gas Rises as Falling Dollar Lifts Appeal of Commodities

Natural gas advanced as the dollar fell against the euro, lifting the appeal of commodities as an alternative investment.

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RPT London shares close up, strong commodities overshadow weak U.S. data

Leading shares closed firmer Friday, near the session high, as strength among commodity stocks overshadowed initial disappointment over a bigger-than-expected fall in non-farm payrolls data in the United States.

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Commodities Wrap: Grain Prices Rise

Concern over whether there will be enough corn to meet demand this year led to record-high prices this week, while wheat prices surged on fears bad weather could damage crops.

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Corn hits record in broad rally despite firmer dlr

Corn closed up after hitting record highs for a second straight session on Thursday, pulling other agricultural markets along in a rally, and copper joined gold on the ride up too despite a firmer dollar.

Soft commodities like coffee, cocoa, sugar, cotton and orange juice ended higher as well.

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European Markets Rise, Led By Commodities

The European markets rose on Friday, capping the biggest weekly gain in a year, as mining stocks rallied on broker upgrades and heavily weighted energy stocks gained on rising crude oil prices.

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Silver News Around the Web

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Weekend Corn News Roundup

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Oil News Around the Web

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Keeping up with Ethanol: News Around the Web

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Keeping up with Gold News: Weekend Roundup

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Weekend Eye on the U.S. Dollar

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The Weekend Wheat News

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India may Expand Ban on an Increasing Number of Futures Items

With commodities attracting more speculators across the world, some countries, like India, are making some changes in order to combat rising prices not connected to normal market forces.

Some of the specific futures trading items they are considering banning are potatoes and edible oil, which has risen in price considerably because of futures speculators. Inflation in India is at a 13-month high.

Last year the Indian government added rice and wheat to the futures that can't be traded.

Those involved with commodity exchanges and traders feel this isn't a good idea, because it probably won't have much impact on food prices.

“The futures trading ban may not have any impact on edible oil prices, as international prices and imports duties determine the prices,” a trader said.

Along with foods delisted in futures trading, things like coal, steel, iron, jute drugs, petroleum products and auto-related accessories are not included in futures trading in India at this time.

Stronger U.S. Dollar Hammers Dollar-Denominated Commodities

Most of the major commodities plunged today, as stronger-than-expected manufacturing and retail news in the U.S. pushed the U.S. dollar higher.

It didn't matter if it was energy, agriculture or metals, they were all hit by the strength of the U.S. dollar today.

"The ever-weakening dollar had prompted many a fund to pile money into the sector since September last year, pushing values of some commodities well beyond fundamentals," said Jon Nadler, senior analyst at Kitco Bullion Dealers. "But now, as the dollar is staging somewhat of a comeback, even if a temporary one, the niche is being drained of money quite fast."

This looks like it'll be the way of life for investors over the next year or two, as the continual ups and down of the U.S. dollar, as well as unknown short-term condition of the U.S economy, continues to cause huge fluctuations in the market.

More commodity news around the Web

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Gold Falls Below $880 for First Time in 2 Months

The correction in the gold market continues, as the ongoing rise of the U.S. dollar and migration toward equities has pummeled the precious metal.

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Silver Producers' Shares Plunge as U.S. Dollar Strengthens

The U.S. dollar continues to wreak havoc in the overall commodities market, as prices plunge in response to the greenback's recent strength.

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U.S. Dollar Gains Triggering Commodity Selling and Losses

The U.S. dollar gained some strength today, as manufacturing data from the United States, as well as retail sales in the U.S. increasing last week helped prop it up.

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Congress Shifts Attention to Oil Executives, Gas Prices

In what I believe is an attempt to simply assign blame and get the attention of the public away from their dissatisfaction with Congress and their poor performance, Representatives made a big show of "grilling" oil company executives about the profits the companies have made.

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Wheat Prices Drop as Dollar Strengthens

Wheat and other commodities continue to fall on the assumption the strengthening U.S. dollar and equities market will continue to rise.

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Nebraska Corn Growers Planting 6 Percent Less Acres Than Last Year

Citing a report from the U.S. Department of Agriculture, Nebraska Farmer reported that farmers in the state would be planting about 6 percent less acres in corn this year than in 2007. Last year there were 9.4 million acres planted, against the 8.8 million projected for 2008.

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Ethanol Plant Planned for Albany with $350 Million Price Tag

Plans for a new ethanol plant is in the works for Port of Albany, which will cost as much as $350 million.

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