Commodity markets retreat on swine flu fears

Commodity prices retreated around the globe as fears grew about the highly contagious swine flue .

Crude oil prices fell. ICE June Brent was down $1.15 to $49.17 a barrel while Nymex June West Texas Intermediate dropped $1.30 to $48.84 a barrel.


“There is a risk that the flu scare will hit international aviation travel, which would have a negative impact on demand for jet fuel,” said Eugen Weinberg at Commerzbank.

He added: “Current low oil prices will cause Opec to maintain current production constraints or take steps to cut back output even further, which supports our view that crude oil will trade at US$70 a barrel by the end of the year."

Soy rose $.03 cents to $10.07 a bushel, steadying only after dropped $.35 cents in yesterdays session.

Copper fell 2.4% to $4,205.50 despite a fall in 5,000 tonnes of stockpiles according to the London Metal Exchange (LME).

Tin lost 3.6%, falling to $11,860 a tonne.

Nickel fell 2.6% to $10,860 a tonne.

Gold dropped below its 900 level to a spot price of $898 a troy ounce.

James Steel of HSBC said the gold market had failed to react positively to news of the swine flu outbreak for two important reasons.

“First, investors flocked mainly into the dollar and other safe haven currencies, rather than into gold. The subsequent rally in the dollar weighed on gold prices.

Argentina's Provinces to Share in Soy-Tax Revenues -- Latin American Herald

Argentina is creating a Solidarity Fund according to the Latin American Herald, in this article.

BUENOS AIRES – The Argentine government said on Thursday that the country’s provinces and municipalities will receive 30 percent of the revenue from a controversial tax on soy exports.

President Cristina Fernandez announced the plan in a meeting with governors and mayors at her official residence on the outskirts of Buenos Aires.


She told them she signed a decree enabling their jurisdictions to “co-participate” in the proceeds of the levy on soy exports that has sparked a year-long battle between her government and Argentina’s powerful agribusiness interests.

Fernandez said provincial administrations would share 30 percent of a “solidarity fund” financed from the 35 percent tax on exports of soy.

Copper in focus: Southern Copper Peru (PCU) updates

Southern Copper Peru - listed on the NYSE, under the ticker PCU (google finance info)



Southern Copper Peru has recently has seen its shares fall across all exchanges in which this Mexican Conglomerate trades-- There are many reasons and factors at play, however at the moment a mix of both the fact copper has recently declined in international markets, but also because, a important area of Peru, where Southern Copper operates is experiencing union strikes and are protesters who have blocked Peru's main roads the area.

Argentina witnessed la Presidente-- la Senora Kichner deliver a speech this evening about her own countries protesters blocked roads. I may not love their populist rhetoric or economic policy, but Mrs. Kirchner said something that makes sense... (translated from her speech shown on CNN espanol), "a select group of society can not paralyze the road and the country as a whole, they have no right to disrupt all the people's in their own self-pursuit."

I admit I may be butchering the speech in the moment but, the fact remains... In Latin America, roads are blocked and then the economy stops. Without infrastructure, or the preventing of people from using the little infrastructure that does exist, Latin America remains in a "catch 22." In situations where it socially may make sense to implement reforms, governments are forced to make concessions due to necessity.

Photos below are pictures of PCU's operations in Peru and links to available financial info-- via Google.com/finance and yahoo finance --> Southern Copper Peru (PCU)


















I recall being in Tarapoto, Peru, in the Peruvian province of San Martin in 2002. Rice workers had paralyzed the region because US subsidies had made their rice more expensive than the also available imported rice from the US. The protesters took over the town square over and as temporary tourist I had to rush through the back roads in the amazon to the Airport, and hide out in a back office until a flight could take myself and my family of 12 back to Lima.

Click here to view a article in English I was able to find about the incident.

It is ironic food prices are now so high, Tarapoto's Rice industry is now growing rice and actually making a profit, although US subsidies still aren't help the overall market. The fact and main point I am attempting to get across is that all it took for protesters to paralyze the region was to blockade one highway--leaving the city isolated. and disrupting economic activity in the rest of the region due to the fact major roads pass through Tarapoto, the biggest city in the region.

I hope in a general sense things improve-- both on the part of the protesters in Peru, who do deserve new benefits as a result of high commodity prices, but also for Peru as a whole which in reality suffers a great deal, proportionately speaking when events such as this occur.

Wealthy donors + Rice + Interactive Vocab Game -- beginning the day with a new tool to help the global poor cope with rising fuel costs

I decided to mix a bit of humanitarianism spirit and food aid along with the afternoon analysis today which today, concentrates on rising food prices.

Basic staples of nourishment (food), ranging from wheat, rice, corn, soy to chicken and beef are on the rise around the world. Commodity prices are in a bull market, few can argue that. Combining the factors of rising demand for everything from food, energy and base metals in emerging markets AND sky rocketing energy prices resulting from a variety of factors such as overall economic uncertainty, instability in the Middle East, and supply disruptions in the North Sea or Nigeria, have simply established an environment in which natural resources have proportionately speaking, become scarcer than ever before while demand and necessity for them remains strong.

Many will feel the affects of rising prices and inflation, in particular, the poor of the world. The global poor in large rely on basic staples like rice for a large portion of their diets. In terms of energy, most developing countries, unless they have substantial price controls in place, already pay higher prices per barrel of petrol than Americans in the US. A rise in the cost of gas for a taxi driver in Lima, Peru or in Cape Town, South Africa of 10-15% will be much far more painful for a Peruvian or South African than it is for American's filling their tanks this summer.

In an effort to help the poor of the developing world Poverty.com, has launched a sister website www.freerice.com where people can play a very addicting vocabulary game, where you simply choose the definition of a word displayed on the screen, if you choose correctly, the financial backers and advertisers of the site will donate rice to poor countries in exchange for your time. Defined on freerice.com as follows

FreeRice has two goals:

1. Provide English vocabulary to everyone for free.
2. Help end world hunger by providing rice to hungry people for free.

This is made possible by the sponsors who advertise on this site.

Whether you are CEO of a large corporation or a street child in a poor country, improving your vocabulary can improve your life. It is a great investment in yourself.

Perhaps even greater is the investment your donated rice makes in hungry human beings, enabling them to function and be productive. Somewhere in the world, a person is eating rice that you helped provide. Thank you.

The site in my opinion exploits the short attention span of the millions of people who spend way too many hours in front of a computer screen and are constantly searching for ways to distract themselves (myself included hehe).

Food prices have been on the rise in practically every corner of the world. Whether you’re a mother/father shopping for a family of 6 in the United States, and more importantly if you’re a mother/father providing for a family of 6 in the “global south,” which includes most the developing countries of the world.

Jimmy Rogers Commodity Index (RICI), was created in the 90’s to track the growth of commodity prices by Jim Rogers and has since become one of most well respected benchmarks / index for observing and tracking commodity price movements. It’s also a great index for investors who have used it as a means to identify investments in the commodity market. Growing (YTD) in 2008 by 25.86% while the S&P 500 Composite index is down -8.75% this year, the Nasdaq down -9.35%, the Dow Jones Comp down -8.47% (data gathered and accessed on June 13, 2008 from http://www.rogersrawmaterials.com/).

The Rogers Raw Materials Page describes the composition of the index in greater detail. Below is copy a excerpt of how the index is compiled, provided to give readers a general idea

“Rogers International Commodity Index® (RICI)® is based on monthly closing prices of a fixed-weight portfolio of the nearby futures and forwards contract month of international commodity markets. The selection and weighting of the portfolio is reviewed annually and weights assigned in the December preceding the start of a new year.”

This index is a great measure of rising costs. By rising costs, I mean the rising price of practically all goods in the global economy. The global economy is now beginning to show signs; or rather finally express signs that inflation is a potential threat to global growth and needs to be handled with care to ensure continued growth. Sadly, central bankers and countries around the world do not work together all too well yet, multi-lateral organizations lack the influence to organize a global effort—so countries around the world are raising interest rates in order to re-enforce their currencies strength, institutional investors are buying energy and gold to hedge their investments against the possibility of inflation, and even the US, EU, and UK have expressed signs there will be little possibility of further rate cuts, leaning instead towards increasing interest rates.

Although in economic theory this should do the trick, the problem is more complicated than many are capable of realizing. Yes… easy money for years has contributed to inflation, but more than anything it’s the fact capacity for production is no longer what it was when you consider the growth of countries such as China and India.

Food related commodities included on the Rogers index and their respective weights: Wheat (7%), corn (4.75%), Live Cattle (2%), Coffee (2%), Rice (0.5%), soybean oil (2%), lean hogs (1%), Sugar (2%), azuki beans (0.25%), Canola (0.67%) Orange Juice (0.66%), soybean meal (0.75%), and barley (0.27%). Personally I feel the only under-represented staple would be rice which deserves far more weight within the index considering how many billions of people in the world eat it on a daily basis. Together food related commodities comprise 21.72% of the index. Energy, metals and wood related commodities comprise the rest.

The world is in a correction phase in which consumers, producers and governments are going to have to adjust and adapt to a new global environment—where wasteful consumption is no longer an option. People must adjust to higher prices as other people in emerging markets demand the same things people in wealthier societies have enjoyed for quite some time.

Reflecting in brief upon my own dissertation on China’s growing interest in South America, observe China’s rising demand for soy and meat, only 2 of the commodities mentioned above and only 1 of the major developing markets in the world. Yes many argue China proportionately holds the most influence as the fastest growing and biggest emerging market, China is by no means the only large growing market.

Commodities in Focus -- Energy, food and metals grab world attention as prices continue to sour and supply problems emerge

Fitch analyst calls for new investment as oil prices soar - Regional

by Nathan Crooks

Business News Americas
http://www.bnamericas.com/news/privatization/Fitch_analyst_calls_for_new_investment_as_oil_prices_soar

Tuesday, June 10, 2008

High international oil prices should encourage oil companies that operate in Latin America to invest in new projects, Gianna Bern, senior director and oil and gas analyst for Fitch Ratings Latin America Corporate Finance, told BNamericas.

"In Latin America, governments have been the one of the biggest beneficiaries of high crude oil prices in terms of taxes and royalties," Bern said.

For example, Venezuela, Ecuador and Bolivia have increased their take of oil profits in recent years. Brazil and Colombia are mulling plans to increase the state's gains from oil production as well.

"Having said that, at US$135/b WTI, now is the time for the oil companies to invest and pursue those projects that they wouldn't ordinarily," she said in reference to West Texas Intermediate prices. "The economics become compelling."

The analyst, meanwhile, does not see an end to high oil prices in the short term.

"High crude oil prices are driven by a fundamental imbalance in the global market between crude oil supply and demand. Supplies are not able to keep up with rising demand, primarily from non-OECD countries," she said.

The Organization for Economic Cooperation and Development (OECD) includes 30 member countries, including Mexico.

"There could be upward pressure on crude prices until there is more of a market balance which could take months, if not longer, for additional supplies to hit the market," Bern continued.

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Grow more food or starve: FAO
Commodity Online
http://www.commodityonline.com/news/topstory/Grow-more-food-or-starve-FAO-9365-3.html

NEW DELHI: Want to beat the food crisis? Go for more investments in the agriculture sector and grow more food.

That is what United Nations Food and Agriculture Organization (FAO) has to advise the countries across the world.

If you don’t listen to FAO, your population will starve. That is the clear message came from Rome after a summit on food crisis there.

“There is an urgent need to help developing countries and countries in transition to expand agriculture and food production, and to increase investment in agriculture, agribusiness and rural development from both public and private sources,” the FAO summit declaration said.

Donors and International Financial Institutions are urged to provide balance of payments support and budget support to food-importing, low-income countries. Other measures should be considered as necessary to improve the financial situation of the countries in need, including reviewing debt servicing as necessary.

The final declaration also called on governments to assure United Nations agencies the resources to expand and enhance their food assistance and support safety net programmes to address hunger and malnutrition, when appropriate, through the use of local or regional purchases.

Speaking about the growing social threat from rising food prices at the opening of the summit, FAO director general Jacques Diouf said: “What is important today is to realise that the time for talking is long past. Now is the time for action.”

The declaration also called for development partners to participate in and contribute to international and regional initiatives on soaring food prices and assist countries to put in place the revised policies and measures to help farmers, particularly small-scale producers, to increase production and integrate with local, regional and international markets.

Also recommended by the declaration are initiatives that moderate unusual fluctuations in food grain prices. “We call on relevant institutions to assist countries in developing their food stock capacities and consider other measures to strengthen food security risk management for affected countries,” FAO said.

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Is Nymex admitting to speculation in crude oil? By Sreekumar Raghavan MUMBAI: The debate is still raging on what is causing the crude to rise. It is going from one extreme to the other. Some blame it on high speculation, others on demand-supply imbalances and forecasters predicting it would rise to $200. The actions of world’s largest commodity derivatives exchange, The New York Mercantile Exchange, Inc. during the past two days indicates the possibility that speculation is indeed beyond allowable limits. In the case of oman crude oil, the margins were raised from $8300 to $9500 on June 9. For members it was raised from 9,130 to 10,450 and for customers from 11,205 to 12,825. On June 10 it was further revised to 11,500, 12,650 and 15,525 for clearing members, members and customers respectively. It has announced margin changes for its crude oil and related futures contract even though no explanation has been provided for such actions by Nymex or market regulator Commodity Futures Trading Commission. Among the contracts attracting higher margins from now include: July to December 2008 crude oil, crude oil calendar swap, MiNYTM crude oil futures, Nymed MACI index futures, natural gas, oman crude among others. July-December Contracts Margins for the July to December 2008 crude oil, crude oil calendar swap, and crude oil financial futures contracts will increase to $8,750 from $7,750 for clearing members, to $9,625 from $8,525 for members, and to $11,813 from$10,463 for customers. Margins for all other months will increase to $8,500from $7,750 for clearing members, to $9,350 from $8,525 for members, and to$11,475 from $10,463 for customers. The margins for the July through December NYMEX miNYTM crude oil futures contracts will increase to $4,375 from $3,875 for clearing members, to $4,813 from $4,263 for members, and to $5,906 from $5,231 for customers. Margins for all other months will increase to $4,250 from $3,875 for clearing members, to $4,675 from $4,263 for members, and to $5,738 from $5,231 for customers.The margins for the NYMEX MACI index futures contract will increase to $1,742 from $1,550 for clearing members, to $1,916 from $1,705 for members, and to$2,351 from $2,093 for customers. Natural Gas Margins for the first and second months of the natural gas, natural gas penultimate financial, and natural gas last day financial futures contracts will increase to $8,250 from $7,500 for clearing members, to $9,075 from $8,250 for members, and to $11,138 from $10,125 for customers. The margins for the third and fourth months will increase to 9,000 from $8,000 for clearing members, to $9,900 from $8,800 for members, and to $12,150 from $10,800 for customers. Margins for the fifth to ninth months will increase to $9,250 from $8,500 for clearing members, to $10,175 from $9,350 formembers, and to $12,488 from $11,475 for customers. The margins for the 10th to 21st months will increase to $6,000 from $5,500 for clearing members, to $6,600 from $6,050 for members, and to $8,100 from $7,425 for customers. Margins for the 22nd to 33rd months will increase to $4,750 from $4,500 for clearing members, to $5,225 from $4,950 for members, and to $6,413 from $6,075 for customers. The margins for the 34th to 45th months will increase to $4,500 from $4,250 for clearing members, to $4,950 from $4,675 for members, and to $6,075 from $5,738 for customers. Margins for all other months will increase to $4,000 from $3,750 for clearing members, to $4,400 from $4,125 for members, and to $5,400 from $5,063 for customers. The margins for the first and second months of the NYMEX miNY natural gas and Henry Hub swap and penultimate swap futures contracts will increase to $2,063 from $1,875 for clearing members, to $2,269 from $2,063 for members, and to$2,784 from $2,531 for customers. The margins for the third and fourth monthswill increase to $2,250 from $2,000 for clearing members, to $2,475 from$2,200 for members, and to $3,038 from $2,700 for customers. Margins for the fifth to ninth months will increase to $2,313 from $2,125 for clearing members, to $2,544 from $2,338 for members, and to $3,122 from $2,869 for customers. The margins for the 10th to 21st months will increase to $1,500 from $1,375 for clearing members, to $1,650 from $1,513 for members, and to $2,025 from $1,856 for customers. Margins for the 22nd to 33rd months will increase to $1,188 from $1,125 for clearing members, to $1,306 from $1,238 for members, and to $1,603 from $1,519 for customers. The margins for the 34th to 45th months will increase to $1,125 from $1,063 for clearing members, to $1,238 from $1,169 for members, and to $1,519 from $1,434 for customers. Margins for all other months will increase to $1,000 from $938 for clearing members, to $1,100 from $1,031 for members, and to $1,350 from $1,266 for customers. The margins for the Henry Hub swing swap futures contracts will increase to $2,063 from $1,875 for clearing members, to $2,269 from $2,063 for members,and to $2,784 from $2,531 for customers.

Heating Oil
Margins for the first month of the heating oil, New York Harbor heating oil calendar swap, and heating oil financial futures contracts will increase to $10,000 from $9,000 for clearing members, to $11,000 from $9,900 for members, and to $13,500 from $12,150 for customers.

Margins for the second month will increase to $9,500 from $8,500 for clearing members, to $10,450 from $9,350 for members, and to $12,825 from $11,475 for customers. Margins for the third through ninth months will increase to $8,750 from $8,000 for clearing members, to $9,625 from $8,800 for members, and to $11,813 from $10,800 for customers. The margins for all other months will increase to $8,000 from $7,500 for clearing members, to $8,800 from $8,250 for members, and to $10,800 from $10,125 for customers.

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Margins for the first month of NYMEX miNY heating oil futures contract will increase to $5,000 from $4,500 for clearing members, to $5,500 from $4,950 for members, and to $6,750 from $6,075 for customers.

The margins for the second month will increase to $4,750 from $4,250 for clearing members, to $5,225 from $4,675 for members, and to $6,413 from $5,738 for customers. Margins for the third through ninth months will increase to$4,375 from $4,000 for clearing members, to $4,813 from $4,400 for members,and to $5,906 from $5,400 for customers. Margins for all other months will increase $4,000 from $3,750 for clearing members, to $4,400 from $4,125 for members, and to $5,400 from $5,063 for customers.

Margins for the first month of the RBOB gasoline, RBOB financial, and RBOB calendar swap futures contracts will increase to $8,750 from $7,750 for clearing members, to $9,625 from $8,525 for members, and to $11,813 from $10,463 for customers. The margins for the second to fourth months will increase to $8,250 from $7,250 clearing members, to $9,075 from $7,975 for members, and to $11,138 from $9,788 for customers. Margins for the fifth to11th months will increase to $7,500 from $6,500 for clearing members, to $8,250 from $7,150 for members, and to $10,125 from $8,775 customers.Margins for all other months will increase to $7,250 from $6,250 for clearing members, to $7,975 from $6,875 for members, and to $9,788 from $8,438 for customers.

Margins for the first month of the NYMEX miNY RBOB gasoline futures contract will increase to $4,375 from $3,875 for clearing members, to $4,813 from $4,263 for members, and to $5,906 from 5,231 for customers. The margins for the second to fourth months will increase to $4,125 from $3,625 for clearing members, to $4,538 from $3,988 for members, and to $5,569 from $4,894 for customers. Margins for the fifth to 11th months will increase to $3,750 from $3,250 for clearing members, to $4,125 from $3,575 for members, and to $5,063 from $4,388 for customers. Margins for all other months will increase to$3,625 from $3,125 for clearing members, to $3,988 from $3,438 for members, and to $4,894 from $4,219 for customers.

If indeed, $25 of the present crude prices are on account of speculation, as suggested by some experts, will Nymex actions result in a fall in prices in near future? That itself can be cause for a speculation.

Meanwhile, a query related to increased margins from Commodity Online is awating reply from Nymex and CFTC