Commodity News Links

Noble Group getting crunched - warns of $1.8 billion loss

Health fading says T. Boone Pickens

Battle looming between U.S. dairy and Canada

Soy exports jump significantly for the week

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Trump to end Obama's curbs, make America great in energy again.

Could oil plunge below $40 per barrel

Supply disruptions increased demand from China driving copper higher

Demand for commodities drying up

Mark Mobius Likes Commodity Countries

Mark Mobius - Commodities in Emerging Markets

Emerging market guru Mark Mobius likes two things about investing in the BRIC countries, and that is consumers and commodities.

The head of Templeton Asset Management said he continues to look for strong performances from countries with strong natural resources and infrastructure and consistency in place to extract and distribute them.

With growing middle classes in BRIC nations, Mobius also likes industries prepared to service them like retail, banking and disposal product firms.

Anyone investing in BRIC economies need to have a longer term outlook to be successful says Mobius, as they are volatile and move up and down quite a bit.

Market timers and other need not apply here or you could get slaughtered from the short term fluctuations of the markets.

Mark Mobius - Commodities in Emerging Markets

Teck Resources (NYSE:TCK) Rises on Copper Concerns

Teck Resources Chile Copper Mines

Teck Resources (NYSE:TCK) had a nice gain of 3.2 percent as concerns over Chile copper drove up mining stocks around the world.

The good news is, depending on which side you're looking at it from, is copper mines in Chile were largely unaffected by the earthquake, and other than some temporary electric outages, should be operating at full capacity.

Now the question is whether other infrastructure in the country like roads are still able to transport the copper to its destinations. It seems there is little damage at this time to highways in the country, and so that shouldn't have a long-term effect either.

Other than some short-term problems, copper in Chile should be back online fairly soon, and abundant global inventories make it a rather mute point if it isn't a major disruption in copper supply, which at this time all indications are it isn't.

Teck Resources Chile Copper Mines

Charlie Munger Warns on America

Charlie Munger on Economics and America

Anyone reading Charlie Mungers parable over at Slate over the weekend should come away very sober, with the realization why precious metals like gold and silver, along with other commodities, will do well over the years ahead.

The parable by Charlie Munger attacked on two fronts. The first was the outrageous practices of the U.S. government which is out of control with its spending and taxation, and discourages entrepreneurs from flourishing when all they do is take wealth away from them and redistribute it like the growing socialist government and administration we now have.

On the private business side, Munger blasted the derivative trading of the banks which were a major part of the underlying problems many of us face.

While this is all true and accurate, we still face the consequences of the actions of the U.S. government and major banks no matter what is done in attempts to deal with the root causes.

This is why commodities will continue to be the major success story over the next decade or more, as real things will continue to be in demand, rather than things most people can't begin to understand.

Charlie Munger on Economics and America

Managed Commodity Assets Fall

Managed Commodity Assets Fall

Managed commodity assets fell for the first time in over a year, said Barclay's Capital, evidently based on worries over the global economy.

Overall commodity assets under management dropped to $245 billion, a $12 billion fall from the $257 billion from last month.

In what I think is a strange response to uncertainty, investors took close to $500 million out of exchange-traded funds, with the majority of that being funds backed by gold and a variety of other precious metals.

At a time when uncertainty should drive smart investors to gold, the idea that taking it out of gold and moving it to something else is ignorant and bizarre, although obviously a lot more was happening than only that in the overall commodity managed assets picture.

Managed Commodity Assets Fall

Commodities and Sovereign Default = Opportunity

Commodities and Sovereign Default

It's interesting to read what some think will be the ruin of commodities because of the potential sovereign default from a growing number of countries, including Greece, Ireland, Spain and Portugal.

Of course the problem with ignorant writers on commodities is they're clueless as to how you make money with commodities, which is when they're on the way up or on the way down, so whether the price is going up or down for commodities is irrelevant from that point of view.

These writers only think in terms of whether or not those trying to make money on commodity prices going up are going to get clobbered, not realizing or even in some case - even knowing, that you make money either way.

For those investing in commodities, it doesn't make any difference whether you make the money on upwards or downwards price movements.

So don't forget to include that in your decision making going forward, as potential significant price movements in commodities one way or the other are always potentially great opportunities to make a lot of money.

Commodities and Sovereign Default

Commodities Fall on Bernanke Statement

Commodities and Interest Rates

Commodities fell today as Ben Bernanke stated in House Financial Services Committee testimony that the interest rates on direct loans to banks may be raised sometime soon.

Bernanke was quick to add that the low interest environment overall isn't going to go away, and there will continue to be an "extended period" where that is the case.

Some commodity companies like Exxon Mobil (NYSE:XOM) and Freeport-McMoRan (NYSE: FCX) fell, along with copper, which dropped for the first time in the trading week.

Gold also fell as the U.S. dollar climbed slightly on the news.

Commodities and Interest Rates

Commodity Prices Drive Emerging Market Stocks Up

Commodities and Emerging Markets

Stocks reflecting emerging markets enjoyed their based gain in a couple of months as commodity prices helped them rebound as some are starting to believe the economic recovery is real and demand for raw materials will increase.

As a result, the MSCI Emerging Markets Index surged 1.8 percent to 957.11 at a little past 11:00 a.m. in London, the most dramatic increase since Dec. 1, 2009.

Other major indexes increased as well with the Russian Micex Index of stocks rising by 1.2 percent; the Shanghai Composite Index of China increasing by 2.4 percent; and the Sensex Index in India gaining 2.1 percent.

Commodities and Emerging Markets

Commodities VaR: Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS) and JPMorgan Chase (NYSE:JPM) Down 25 Percent from 2008 Highs

Commodity VaR Major Financial Institutions

In the midst of all the Obama proposal for restrictions on proprietary trading for commodities and other securities, it has been found via the data that financial institutions like Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS) and JPMorgan Chase (NYSE:JPM) have decreased their Value-at-Risk, or VaR, for commodities, by a minimum of 25 percent since their highs during the ongoing commodity surge in 2008.

That data is in reference to numbers crunched in the fourth quarter of 2009.

What VaR deals with is the confidence or willingness for a financial institution to trade in a particular market sector.

Even so, it's interesting that while the risk appetite seems to have declined some in the fourth quarter, commodities and currency investments helped some of the major financial institutions in America perform much better than they would have without those investments.

Volatile times right now will probably keep commodities in check for the short term, but almost every announcement one way or the other seems to push commodity prices in one direction or the other as uncertainty about true economic recovery, interest rates and what China will invest in commodities in 2010 has the commodity market skittish and seemingly all over the place.

Commodity VaR Major Financial Institutions

Commodity Buying Opportunity?

Commodity dip in prices

I think so. When you look at two of the best things that could have happened for those looking for a commodity price correction, you couldn't have had better circumstances than Obama and the Chinese leadership making the statements they did last week; both of which has a negative impact on commodities' outlook and prices.

The question is if the impact of their comments will be sustainable over a long period of time or commodity prices will continue their upward surge after many of them reaching highs recently.

It seems to me there is no way commodities over the long term will suffer long-term price decreases, although times like these are great opportunities to buy up even more raw materials going forward.

The only commodity to be cautious of concerning price is copper, which increased in price in spite of the thoughts communicated by the Chinese and Obama.

Taking everything into consideration, and even if China's leaders want to try to slow down their growth, commodities will be a huge story in relationship to China for some time to come, so when this nice dips happen, it's time to stock up again and increase our positions.

Rumor is a number of funds had been seriously thinking of decreasing their exposure to commodities. Hopefully they will and the story gets out everywhere, as it should help prices drop even more and give more opportunity to buy low.

Commodity dip in prices

Commodity Growth Down for Two Years Says World Bank Report

I'm not at all convinced that the report from the World Bank that commodity growth will be down over the next two years because of the economic crisis and the time it will take to come out of it.

The report states that a weakened recovery will have a negative impact on the price of commodities overall, but I think that will depend upon what the particular commodity is and what country they're talking about.

For example, they use growth rates related to developing countries over the next five to seven years as one measurement, stating they'll be fortunate if their economies growth at a rate of 0.2 percent to 0.7 percent lower than they are today.

While I completely agree that the so-called recovery is largely bogus, as the jobless rate in America "unexpectedly" fell again for the third straight week. I wonder how long this will remain "unexpected" and will be acknowledged as part of the ongoing recession?

But as far as it relates to commodity prices, I think this report is flat out wrong. Why? A five-letter word: China! Very few if any of the prices of commodities is dependent on any developing country. That's ridiculous to even think on.

China's demand for raw materials, energy and food will be the primary driver of commodity prices, with India being a much smaller, but significant player in that regard.

So to connect commodity price movements with any other country than China as the focal point of commodity price increases is to make yourself irrelevant.

Andrew Burns, lead author of the report, said this about the study: "As international financial conditions tighten, firms in developing countries will face higher borrowing costs, lower levels of credit, and reduced international capital flows."

In light of that I want to reiterate what I said above: developing countries are irrelevant to the price movement of commodities. Period! At least for many years into the future. They're completely irrelevant for the next couple of years for sure.

I have no doubt that developing countries will struggle, as the report states, but that isn't what's driving commodity prices in any way, shape or form.

Of course when you get down to it and give your attention to individual commodities, this breaks down as well, as gold is a protection against inflation and a place of safety. That will drive up the price of gold, and that should happen over the next couple of years, although the timing of any price movement can't be for sure.

Anyway, just look to China first, India, and to a lesser extent certain large industries like the housing market and auto industry in the U.S. as to whether raw materials' demand is growing.

But China is by far the best indicator, and as goes China over the next couple of years, so should go the price of commodities.

Commodity Price Growth

Commodity Prices Going Up 2010

Commodity prices going up 2010

Commodity prices going up is good for investors, and the trend should continue in general throughout 2010.

The question is why the prices are going up, and how that could impact the investing situation.

For consumers, this will probably be bad news, as well as a number of businesses, because the cost of doing business and inflation puts a damper on spending; both for business and consumers.

As usual China is in the midst of the commodity demand and price surge, and the question is whether the demand is real from the point of view of using the raw materials to build to exports products, or it's a trend to building up commodity reserves in anticipation of huge price increases in the future and to protect its currency from inflation eating up its value.

Some are already heralding this as a part of economic recovery, but I highly question that, as it can't be proven at this time the motivation behind China buying up commodities again.

There are fears the increase in commodity prices could cause Americans to cut back even more on spending in 2010, making any chance of a real economic recovery limited at best. Americans are already paying down debt and saving more, putting less into the economy, and if they have to pay more for gas and food, that will leave even less to spend on other products and services.

The major commodity to be concerned with is oil, although agricultural commodities and industrial commodity prices are rising as well. With recent past experience, if oil continues to rise, it could really wreak havoc on the market, as Americans will continue to be tight with their money and stay close to home.

If that happens, we'll see a continuation of what we've been experiencing over the last several years. Commodity prices are the key to the entire scenario and how it plays out.

Commodity prices going up 2010

Commodity Prices Increasing in 2010 Says IMF

Commodity Prices Increasing in 2010

The IMF just released its view on what the price movements of commodities will be in 2010, and in general, like me, they believe a stronger demand will push the prices higher as Asian markets start to rebound.

Thomas Helbling from the IMF Research Department added though that commodity prices would be tempered by higher stocks, which could keep prices in a number of cases from exploding upwards, but still should increase gradually.

Another factor of course is whether we're really in a recovery, and if that will translate into increased demand.

For the Asian markets that could be the case, although Western markets and the U.S. aren't anywhere near a recovery, contrary to mainstream press accounts.

Even so, the commodity price index of the IMF has risen by 40 percent from February 2009, and that was during what was considered a down year.

The commodity price index of the IMF should increase to much higher levels this year, even with commodity inventories high.

Over the long term the IMF expects commodity prices to remain high in general, and not fall down to historical levels.

Commodity Prices Increasing in 2010

Nat Rothschild Investing in Russian Alumninum Company Rusal

Rusal Aluminum

Nat Rothschild has made a deal to be a foundational investing in the Russian aluminum company Rusal, which will go public in January 2010. Rusal is controlled at this time by Russian billionaire Oleg Deripaska.

Also signing on to the deal is Paulson & Co, the American hedge fund giant headed by John Paulson; Robert Kuok, a wealthy Malaysian-Chinese; and Vnesheconombank, or VEB, the Russian state development bank.

How the deal is set up is the four investors, including Rothschild, will be guaranteed shares when the company goes public in exchange for an agreement to not sell them over a period of several months.

The major listing will be in Hong Kong, and secondarily in Paris on January 29. Rusal expects to raise about $2 billion from the offering, which represents a 10 percent stake in the company.

For the most part the reason for the float is to raise money to pay down the enormous $17 billion in debt Rusal has. Most of that came from acquiring a number of businesses not too long before commodity prices fell.

Because the deal is considered highly risky, retail investors won't be allowed to participate in the IPO. Once the deal goes forward, Rusal will be the first Russian company listed on the Hong Kong exchange.

Rusal Aluminum

Banks Expanding Commodity Staff

With a look toward inevitable inflationary pressures, banks have been adding to their commodities staffs as they look to make some good money in the sector as faith in the U.S. dollar continues to plummet.

It is expected to be a banner and breakout year for commodities this year, as investors have more appetite for risk and economic uncertainty make commodity investing look good.

The reason why there is more appetite for risk in the midst of economic uncertainty is the growing demand for commodities, which will continue no matter what the economic circumstances are.

Real economic recovery seems to be happening in China, and so there is no doubt the middle class demand for goods will drive up the price of commodities, not only next year, but for several years ahead.

This is why large banks are ramping up their commodities units in order to perpare for this inevitable trend to continue, as the commodity bull market has been on hold in general during the economic crisis.

Another factor has been the derivative industry, which won't function like it has in the past, and won't be destructive to banks, but won't make them any money (for the most part) either. Bank commodity investment will continue to grow, along with their staffs, as a result.

Commodities | Crude Oil Prices Fall

Crude Oil Down on Rising Dollar

In what is expected to be the determining factor in ongoing price increases with gold and other commodities, the increase in value of the U.S. dollar resulted in crude oil prices falling to seven-week lows.

The advance of the greenback was the largest jump against the euro in over five months.

Prices for crude oil delivery for Junuary dropped 99 cent or 1.3 percent, to $75.47 a barrel on the NYMEX. That's the lowest numbers since October 14, 2008. Overall crude oil prices for the week fell by 0.8 percent, although they are up by 69 percent so far this year.

There are a couple of assumptions connected to the strengthening of the dollar, and both are far from being a confirmed reality. One is that the economy has in reality turned around; a very dubious and unproven assertion. Second, based upon that assumption, speculators are betting the Federal Reserve will increase interest rates.

Strange that one unproven assumption can then be invested in based upon a phantom reponse by the Federal Reserve to that assumption. Strange indeed.

While some say commodities have been shored up by the weakness of the dollar, that's not the entire story. It is definitely part of the commodity price increase story, but over the long term it's largely irrelevant.

Commodity demand is what will drive the prices of raw materials, food and precious metals going forward, not primarily the value of the dollar, although that will remain a factor.

The real long-term driver of commodity prices will be demand, and that demand will come from Asia primarily. Supply factors of course will also play a major role in commodity prices.

As expected, gold futures fell in conjunction with the dollar strengthening, falling by close to 4 percent to $1,168.50 an ounce on the Comex division of the NYMEX.

For the price of oil, Saudi Oil Minister Ali al-Naimi said they are happy with the price of oil being between $70 and $80, with a target of just under $75 a barrel.

Surprising larger U.S. oil inventories suggest the price of oil will probably fall until that changes, as there is plenty to meet current demand.

Crude Oil Down on Rising Dollar

Wheat Plunges, Oil and Copper Up

Wheat prices plunged by five percent, as global supplies keep the prices down. Other concerns are Australia may cancel its wheat export licenses at three of the large grain companies in the nation.

Another potential obstacle viewed by wheat investors was the possibility of increasing storage fees for wheat, which could effectively drive speculators out of the market.

Good weather for winter wheat has also brought fears that there will continue to be far too much wheat on the market to sustain a higher price of the months ahead. The December wheat contract dropped to $4.49-3/4 a bushel on the Chicago Board of Trade.

For crude oil, it gained 13 cents a barrel in New York, after it fell 8 percent over the last couple of days. It finished at $66.02 a barrel on the New York Mercantile Exchange.

Copper futures in the U.S. enjoyed a 1 percent gain, after a couple of rough sessions over the last couple of days, losing about five percent of its value during that time. December contracts finished at $2.7405 a pound, an increase of 3.10 cents on the COMEX metals division of NYMEX.

Copper on the London Metal Exchange rose by $40 to end the day at $5,990 a ton. Most of that increase came from a drop in inventory at the LME warhouses by 175 tons over the day before.

Jim Rogers: Commodities and Inflation

Commodity Prices Rising

Talking about the historical pattern that arises when governments print money, Jim Roges said that there's no doubt that commodity prices will continue to rise as a consequence of those ongoing practices.

Not only is America printing money, Rogers notes, but the whole world is, and that will fuel commodity price increases for some time into the future.

Another factor will be the locked up credit markets which disallow farmers from getting loans, as well as other commodity-related sectors like mining companies.

So even if none of that was happening, Rogers has asserted in the past that the emerging markets in China primarily, and secondarily the other BRIC countries, would have driven up commodity prices on their own. Now with these other factors added in, it looks like this will have an even more dramatic impact on commodity prices rising.

Commodities Still Hot - Jim Rogers

The commodities rally seems to have paused. The Rogers International Commodity Index has come off 13% since June 12. This pullback, essentially as I can see, is because of tin, energy and silver even as some of those agri commodities like orange juice, sugar and cotton have done well. What are your expectations going forward for commodities?

That's the way I know you know about commodities. You read The Economic Times and your ET TV. So, you know that the markets always have corrections whether they are going up or down. Nothing goes straight up or down forever. So, it's having a normal correction. In my view, the best place to be is in real assetscommodities, because if the world is going to recover, they (commodities) will recover first because of the shortages and if the world economy is not going to recover, they are still the best place to be, because governments around the world are printing huge amounts of money. So, if you got to own something, I don't much to own besides commodities.

In India, we are getting worried about the monsoon. We are looking out of our windows and not finding any clouds, and there is also talk about El Nino weather formation. Is this something you would advise investors to keep an eye on?
Of course, I would. The world's inventories of food are at the lowest they have been in decades. We haven't have had any serious weather problems around the world for several decades as a matter of fact. So, with fairly good weather, we have been having bad harvest or we have been consuming more than we have been producing. Can you imagine what's going to happen to the price of agriculture if we have bad weather around the world?

The last time we met here in Mumbai you had a sachet of sugar in your pocket and you pulled it out to underscore your point of impending shortage about agri commodities. You have been right about sugar as far as we can see from the price charts. What are you hiding today in your pockets? A silver coin, a hip flask full of crude oil, may be?

I do actually have a silver coin in my pocket. I don't know how you knew. I also have a gold coin, but the silver one is probably my better play. If I were a bright young man, I would be buying sugar now and silver, given the state of the world. That's not a recommendation, but I am just saying I do own some silver. Silver is cheaper than many things on a historic basis and I do own some silver. The dollar has fallen almost 10% since the beginning of the stocks rally in March. Commodities have risen 94% of the time that the dollar has fallen. A very strong correlation. Do we expect the dollar decline and the commodity run-up, therefore, to continue? It's not always a strong correlation. You are right; there has been (a correlation) in recent months, recent years even. But no, there are many times when the dollar and commodities go entirely separate ways. So, don't get it into your head, and I know many times that the press do have it in their head that commodities and dollars go opposite ways. I am not terribly bullish on the dollar in long term. US dollars are a terribly flawed currency and down the road I hope I don't own any US dollars. I still own some of them at the moment, but it's not getting better for the US. The dollar any way is getting worse. The fundamental for commodities continue to improve. The fundamentals for the US dollar do not continue to improve. They are deteriorating.

Are you still sticking to your prediction of a currency crisis sometime in a year or two?

Yes. The world is full of currency imbalances and economic trade imbalances would have to be resolved or corrected, one way or the other. Unfortunately, given the state of politicians and it's not just the current state of politicians, but politicians throughout history have usually got things wrong. So, we are going to have some problems in the currency market. I don't know when. May be not. I may be wrong. But having seen that sort of thing before in history somebody would have to pay the price whether it's the pound sterling or the US dollar or the rupee, I have no clue. No idea where it’s going to stop, but we are going to have problems in the currency markets.


What’s your view on global equities now? Do you think emerging markets’ premium over developed country markets has gone a way too high?


I don't pay any attention to things like emerging markets premium. You talk about it on TV, but every market is different. Why can't I just go out and buy emerging markets when it is likely to go broke. Every market is different, every country is different, every economy is different and every sector of the economies is different. Just because you are in an emerging country does not mean you are going to make money if you get the wrong sector. I have not bought any stocks anywhere in the world in the last couple of years except China. I did buy some Chinese shares back in October-November. I have not been buying anything other than that for some time. I have been worried about the world economy, about the world stock markets. If you got to be somewhere and if there is going to be a recovery, it will show up in commodities best of all, and if there is not going to be any recovery, commodities are still a better place to be.

So what are you buying nowadays?

If you want to put in your money somewhere, put it in commodities. That's the only thing I bought recently. I have bought some yen and swiss francs. If you know enough about currencies to figure out who is going to benefit, if I am right about the currency turmoil coming, then you can buy some of the currencies and if you think that the rupee is the place to be, then you can buy some rupees.

Long-term inflation expectations in the US as reflected by the five-year forward breaking rates on treasury inflation protected securities. Those have hardened considerably since the beginning of the year. That's also your view, right? Too much money in the financial systems and monetary authorities the world over don't have a credible plan to withdraw liquidity?
I cannot conceive of lending money to the US government for 30 years in US dollars for 3, 4, 5 or 6% interest. It's just inconceivable to me that I would let them have my money for 30 years and they would pay me back someday in US dollars at such a low rate of interest. I expect problems in the bond market. I don't know when. I am not sure about the bond market. I was short in the bond market, but I got out. I expect to see serious problems in the bond market down the road.

In the near term, markets seem to be more concerned about growth than they are about inflation. The difference between the 10-year and the two-year bond yield in the US has narrowed some 40 basis points since early June. Unlike you Jim, people are actually going out and buying long maturity treasuries because they don't see growth, don't see inflation. So, what do say to these bond buyers? Good luck?

When you see anomalies like this in the market, you are supposed to take advantage . The spread is very low. So, why would anybody buy a 10-year when he can buy a two-year ? Not worth the extra risk to go out 10 years. I would urge people to keep their wits. Now, granted Mr Bernanke and the US are buying a lot of government paper and driving the price up. That's why I am not sure. He has got more buying power than I do, at least for the foreseeable future. So, you are seeing longer bonds going up. That gives you an opportunity to get out if you own them or think about selling them short if you don't own them and know how to sell short.

Interview with Jim Rogers from India Times

Commodities | Commodity Loan Repayment Rates

Payment rates for a number of commodities will be the recipients of a new USDA repayment program, in an attempt to offer a more stable system for making a decision on "non-recourse marketing assistance loan repayment rates and loan deficiency payment rates," according to a press release from the USDA.

Included in the commodities that could benefit from the latest system would be feed grains, wheat, mohair, pulse crops, wool and oilseeds. Commodities not being affected by the change are cotton, peanuts and rice.

Supposedly the new system will keep fluctuations in the loan repayment rate from swinging too widely, and will 'moderate' those actions.

Taking into account the 2008 Farm Bill, the loan repayment rate could in reality be anything, as it's determined by either the average market prices over the prior 30 days, or any type of alternative method a Secretary of Agriculture decides.

In mid April, the USDAs Commodity Credit Corporation will list the repayment rates from the last month for wheat, corn, grain sorghum, soybeans, barley, oats, canola, flaxseed and sunflower seed.

During the same period, evidently the Commodity Credit Corporation will also list a repayment rate in relationship to the last five days.

The existing method of determining repayments is based on the market rates of the day before. Now it will be the lower of the two methods mentioned.

There are other elements of the 2008 Farm Bill which eliminated the Secretary of Agriculture from establishing loan and repayment rates for other cops as well. Some crops will have loan repayment rates based on U.S. grade #1.