Global farm commodities plummeted on Friday on anticipations of swelling inventories following a bright picture painted by the US Department of Agriculture, while some key metals remained firm or skided slightly due to what the market perceived an easing of the European debt crisis.
Larger stock piles of key grains globally may squeeze export earnings of Indian traders who were allowed to ship wheat in September 2011 after more than four years to ease a storage crunch and who supply around 2.5 million tonne of corn annually, according to two grain traders, who didn?t want to be named. India is expecting another year of surplus grain production, at 245 million tonne, leaving scope for some exports.
US corn and wheat shed the most in three months, while soyabean was more or less stable. Corn contracts for the March delivery shed 0.49% to $6.08-1/2, after slumping by more than 6% on Thursday when the USDA released its report. Wheat futures for the March delivery on the Chicago Board Of Trade fell 0.37%to $6.02-3/4 per bushel, after sliding 5.6% on Thursday. March soyAbean gained just 0.06% to $11.83-1/4 per bushel.
Corn stocks in the US may touch 846 million bushels before this year?s harvest, much higher than the market?s expectations. US corn output touched 12.358 billion bushels in 2011, higher than the December estimate, while global production will be a record for a fifth consecutive year, the report said. Similarly, global wheat inventories will surge to the highest level since 2000.
Malaysian crude palm oil, too, fell on Friday as a bigger-than-expected forecast of oilseed production overshadowed initial apprehensions about rough weather dragging down supplies. Palm oil futures for the benchmark March delivery on the Bursa Malaysia Derivatives Exchange lost 1.3% to 3,160 ringgit ($1,009) per tonne in intraday trade. However, soyabean got some key support from continued worries about damages to the Argentine crop due to erratic weather. Stable or higher soyabean prices may boost earnings of exporters from India, which is expecting shipments of around 5 million tonne of soyameal in 2011-12.
Analysts said although the USDA report sent markets crashing temporarily, heavy rains in key exporter Malaysia may support edible oil prices, offsetting any gains in the long term to India. The country meets more than a half of its annual edible oil requirement through imports. In the metal segments, copper rose on Friday, after rallying to a more-than-two-month high on Thursday as fresh data about slowing Chinese inflation and two successful European debt auctions raised investor confidence that demand may see finally an uptick. The three-month copper contract on the London Metal Exchange gained 1% to $8,092 a tonne in intraday trade. Prices are marching towards a 5.6% gain this week, after two successive weeks of fall.
?Copper is rallying because people are starting to think that the crisis wasn?t as bad as it was believed to be, and this made the bear to cover short,? said Sudhir Bhalla, director of brokerage firm Ashlar Securities. ?We expect copper prices to remain firm and touch $9,100 per tonne by end-February or mid-March,? he added.
Since the base metals were among the worst-hit commodities due to the European crisis, they are recovering after the Spanish debt sale witnessed strong demand, analysts said. ?Now people are also expecting that an auction of the Italian bond later today will also see positive outcomes. Although everybody knows the crisis won?t be resolved overnight, there is a positive sentiment emerging in the market, which will drive the case for copper,? another analyst said.
Zinc and lead tend to follow copper although the two metals are usually less responsive to a global macro-economic crisis as such, the analysts added.
Three-month aluminium gained 0.2% at $2,167 from $2,162 on Thursday. Zinc lost 0.2% at $1,962 from $1,967, lead touched $2,040.25 from $2,035, tin was $21,150 from $21,070 and nickel rose to $19,870 from $19,700. Citing a Bloomberg report, analysts said China, the world?s largest aluminium producer, may idle its annual capacity by one third, the most in three years, because of soaring costs and prices correction. ?This may add pressure on the metal?s supplies and support prices. Such a move may also boost demand for copper,? one of the analysts said.
Ore with a 62% iron content stayed flat at $142.20 a tonne on Thursday, cost and freight delivered to China. The price had risen to its highest level since November 23 to touch $142.30 on Tuesday. Analysts said the rise might have hit the upper limit, with demand from biggest buyer China declining ahead of the Lunar New Year, offsetting any impact of weather-related supply concerns. Moreover, steady steel prices will likely prevent a sharp rise in the key raw material prices. Shanghai steel index remained unchanged at $142.2 per tonne on Thursday.
Steel production in India rose 7.5% between April and December from a year before to 52.06 million tonne, aiding a fall in imports as consumption moderates due to an economic slowdown, official data showed on Monday. Steel imports declined by 10.2% to 4.81 million tonne during April-December, while consumption moved slower than expected, up 4.4% to 50.86 million tonne. Exports grew 22.7% to 3.02 million tonne during the period.
