Capesize Vessels Will Soon Load Ore, Oil, and

Other Brazilian Cargos

The global mining company Anglo American PLC  and Brazilian port developer LLX Logistica Sat  may open their iron-ore export terminal at the port of Acu in southeast Brazil for use by other Brazilian ore miners.

This plan will double capacity of the iron-ore export terminal to 100 million metric tons a year, depending on demand, including from other ore exporters, according to LLX Chief Executive Otavio Lazcano.

The port’s terminals could be opened up for use by iron-ore miners in Brazil other than Anglo if plans to rebuild a stretch of railroad owned by Vale. This would facilitate port access for miners from the currently land-locked Serra Azul iron-ore mining area in Brazil’s Minas Gerais state.

Lazcano added that the development of the Acu port is “strictly on schedule” and that two piers will start operations in the second half of 2013, shipping oil, iron ore and other cargoes. A total of 2.426 billion Brazilian reais ($1.33 billion) has so far been invested in the port, which is planned eventually to be Latin America’s biggest.

Iranian VLCC Delivers Fuel Oil To Singapore,

Sanctions Create Difficulties for Oil Traders

VLCC Hamoon, image (c) Gaspar-Luis Prieto

Iran is shipping fuel oil to Singapore using a supertanker from its own fleet as Western sanctions make it difficult for buyers to lift cargoes off Iranian coasts.

A Very Large Crude Carrier is expected to land in Singapore with about 280,000 metric tons of fuel oil.

The cargo was likely sold to European trader Vitol but this couldn’t be confirmed. A Vitol trader declined to comment.

U.S. sanctions don’t prohibit buying Iranian fuel oil, but they are making it difficult to lift the cargoes because shipping companies are finding it hard to insure vessels.

Traders say European participants like Vitol and Royal Dutch Shell PLC are likely to stop buying Iranian fuel oil in the months ahead before fresh sanctions imposed by the European Union come into effect July 1.

Singapore-based Kuo Oil won’t renew its term fuel-oil purchase contract with Iran, while Middle East trading major Bakri Trading Co. Ltd. stopped lifting Iranian fuel oil cargoes nearly six months ago as banks in Dubai refused financing.

The exit of a number of key participants is expected to benefit China’s state-owned oil trader Zhuhai Zhenrong, which until recently was seen lifting its own cargoes.

Traders expect Iran to begin regular shipments of fuel oil to Singapore where it can be sold to local or Chinese traders.

Forward freight prices :

Cape TC rates are basis an average taken for different routes. Same for Panamaxes, Supramax and Handies.  C4 is for a specific route for a Cape (150K Richards Bay to Rotterdam) and is quoted on a USD freight per MT (as opposed to a daily hire rate).

Cal 13, Cal 14 are calendar year 2013 and 2014.

Forward freight prices are going up in capsize vessels whereas supramax and panamax are decreasing. This is due to an increase of the Chinese importations mainly in Iron Ore which is shipping in large cargoes.

Moreover, major miners in Brazil have booked numerous ships.

On the over side, supramax and panamax markets had a slow week with owners struggling to find employment for their vessels.

Even if food shipments are not targeted under the sanctions, Iranian companies have been cut off the most global banking system making payments difficult and discouraging traders.

According to Tanveer Alam, a spokesman for the ministry of water and power, a delegation from Pakistan’s government will go to Iran in few weeks to see what is possible to do through the barter trade system as Pakistan would like to get fertilizer or iron ore in return.

Apart from Pakistan, Iran has approached India, and purchased wheat from Russia, Germany, Canada, Brazil and Australia to build up stocks.

Iran’s oil trade and Central Bank are targeted by the US sanctions to shut down their nuclear programme, regarding which Iran vigorously says it is for peaceful purposes (Reuters, 19.03.2012).

In parallel to Western sanctions against Iran, the grain harvest in Tunisia will be affected by recent floods which destroyed about 14’000 hectares of land devoted to the cultivation of cereals. The grain harvest will be impacted by these floods this year. The affected areas are Beja, Bizerte and Jendouba.

These areas which are among the most productive for grain cultivation in the northwest of Tunisia saw a heavy rainfall in the beginning of 2012. There were more than 1 million hectares planted. The country harvested 2.3 million tons of grain in 2011.

Tunisia, which has large areas of arid land, has to import much of the grain that its population of 10 million consumes. It imports mainly soft wheat and barley as it allocates most of its fertile and irrigated land to durum wheat.

Cyclical droughts have affected the North African country with an average annual crop of 1.7 million tonnes during the past decade (Reuters, 05.03.2012).

Bibliography

• Reuters, Pakistan okays 1 mln T wheat barter deal with Iran, Khaleej Times Online [online], 19.03.2012, http://www.khaleejtimes.com/DisplayArticleNew.asp?section=international&xfile=data/international/2012/march/international_march734.xml, [consulted on 27.03.2012].
• Reuters, Tunisia grain crop hit by floods: officials, Reuters Africa [online], 05.03.2012, http://af.reuters.com/article/investingNews/idAFJOE82401320120305, [consulted on 27.03.2012).
• CME Group, Agricultural Products, Wheat Futures [online], 27.03.2012, http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/wheat_quotes_openOutcry.html, [consulted on 27.03.2012].

Price curve[1]:

Last Tuesday, price for March delivery has climbed to 15.095 USD, the highest point since 3 months. This can be explained by the fact that the March contract is soon ending so, there is much more volatility.

Forward curve[2]:

Rough rice forward curve has the same shape as previous week. However, prices are starting at a higher price. Prices rebound because we are approaching the closing of March deliveries contract.

Others future exchange market:

China rice future market[3] – launched the 21th April 2009 early indica rice future[4]

The Zhengzhou Commodity Exchange (ZCE) is the first experimental futures market approved by the State Council. Being one of the four futures exchanges in China, the ZCE is under the vertical management of China Securities Regulatory Commission

[5]

[6]

Thailand rice future market – launched the 29th april 2011

Rice News:

Thailand[7]:

BANGKOK: Rice stocks in Thailand stand at the equivalent of 6.8 million tonnes of milled rice, according to Commerce Ministry data, and are set to go higher as a government intervention scheme will continue until the end of June.

The current level is just below the record high of 7 million tonnes of milled rice held in August 2009. It represents rice held as both milled and unmilled grain. The latest figure was given to reporters by Commerce Minister Boonsong Teriyapirom on Friday.

Singapore[8]:

Singapore is exploring the feasibility of hosting international futures trading in rice to stabilize prices across Southeast Asia for the politically sensitive commodity.

If successful, it would be the first regional rice futures product to be traded in Asia.

There are localized rice futures platforms such as in Thailand, Japan and China, but those futures are unable to represent the whole region due to lack of price correlation or dismal trading volume.

Government price intervention and a lack of liquidity are responsible for the low volume of trade in Thai rice futures, added Korbsook Iamsuri, president of the Thai Rice Futures Association.

Vietnam[9]:

Now that the new crop is available Vietnam’s exports should continue at a good clip, especially since Vietnamese rice is priced on par with Indian rice and Vietnam has strong logistics.  First quarter exports are now estimated at about 1.1 million tons with about 400,000 tons shipped in March alone, though that’s still down about about half from last year.  Local sources say since Decree 109 – which raised the standard of rice exporting companies to only those with the minimum capacity to husk rice at 10 tons per hour and have at least one storehouse with 5,000 tons of storage – the number of Vietnamese rice exporters has decline to about 150 from 200 with about 82 of the 150 large companies with membership to the Vietnam Food Association (VFA), 66 have licenses for 5 years and 79 have license for just a year as they wait to build mills and storage since the official deadline was extended to October 1, 2012. In the past, the Vietnamese rice industry has suffered from the inability to store much rice while they say India, Thailand, and Pakistan can store about half a year’s supply of rice. Right now, India has over 30 million tons stored and Thailand about 8 million tons, while Vietnam is only about half way on its target of 4 million tons.  With very little storage available, Vietnamese rice producers will be motivated sellers. This may keep world rice prices from advancing too high too fast.

[2] http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/rough-rice_quotes_settlements_futures.html

[3] http://english.czce.com.cn/Default.aspx

[4] http://english.czce.com.cn/DispDocument.aspx?dn=History.htm

[5] http://english.czce.com.cn/DispDocument.aspx?dn=ERContract.htm

[6] http://english.czce.com.cn/Products.aspx?Products=ER

[7] http://www.dailytimes.com.pk/default.asp?page=2012%5C03%5C24%5Cstory_24-3-2012_pg5_33

[8] http://blogs.wsj.com/searealtime/2012/03/28/singapore-explores-hosting-regional-rice-futures/

[9] http://oryza.com/Rice-News/14701.html

As we can see on the chart below, the aluminum spot price passed last week from $2190/MT to $2132/MT, so a decrease of $58/MT (2.65%).

China’s demand situation will still be the key driver for aluminum pricing. If we refer to data from the last months, we can see that price seems to be set stable around $2300/MT and $2150/MT, but specialists predict that the price will slightly increase during Q2 and end up at $2600/MT by the end of 2012.

So, despite the fact that the aluminum price decreased of 2.56% this week, the rise in manufacturing indexes in China and India may encourage sales of cars and consumer appliances, leading to higher demand for aluminum.



Source: http://www.lme.com/aluminium_graphs.asp

Aluminum forward curve

We can notice that the shape of the forward curve is exactly the same since the beginning of the year. Several aspects tend to explain that the LME aluminum price is in contango. First of all, the power of China as the main consumer and its weakening economy which sustains its decreasing demand. A second explanation could be the inventory level which is really high, despite a slight decrease these last days.

Source: http://www.lme.com/aluminium.asp

Aluminum key to future Coca Cola success

The giant company of Coca Cola plans to double its business by 2020. This will have a huge impact on aluminum because of the cans used for this effect.

Coca Cola is one of the biggest user of aluminum with 150 million cans and bottles of aluminum sold every day. The company is counting about 1.8 billion consumers per day and has the objective of doubling this number by 2020. Aluminum is one of the key for this future success since it is inevitable to use it. Therefore, it must remain affordable, sustainable and needs innovation. The company believes that aluminum is the future for their products, and will replace all glass bottles for all the drink industry. The company added that one of the benefits of aluminum is its recyclability and that is what Coca Cola is targeting.

This will have a huge impact on the aluminum market. Indeed, if Coca Cola is doubling its production, the demand of aluminum will increase and that will have an effect on prices which will increase as well (if inventories stay at the same level).

Source: http://www.aluminiumtoday.com/news/view/aluminium-key-to-future-coca-cola-success/aluminium-news/

Why is aluminum used for soda cans?

There are three main reasons in order to explain why aluminium is used for soda cans. The first one is because aluminum is lightweight, the second one is its extraordinary strong feature and finally this metal has the benefit of not being rusted. Moreover it is important to pinpoint that there is more aluminum than any other metals on earth. Aluminum accounts for more than 7% of earth’s crust.

New packaging was sought in 1940 for carbonated beverage because of carbonation. In fact carbonation creates natural pressure and it became hard for metals to handle it. The implication of this high pressure was to use more of these metals and because of that it had made tough storage and transport. Leaks can also occur. So the alternative to resolve these problems was aluminium with its extraordinary strong feature.

The second problem was the corrosive traits of carbonated beverages. This problem was eating away at the tin can and because of that the beverage quality was ruined. Aluminum could resolve this problem thanks to its non-rusting properties.

Packaging is one of the most important product’s features that a company has to handle with. Coca cola said on his website: “Packaging adds value to our product by increasing shelf life, minimizing breakage, reducing transportation and handling costs, safeguarding public health, providing product information and creating consumer convenience”. In this sought it was implied that ideal metal was aluminum.

Finally, recycling is a trend that all companies would like to incorporate in their production’s process. It is why aluminum is used, because as the Can Manufacturing Institute said: “Perhaps the most critical element in the aluminum can’s market success was it recycling value”. It was proven that there is no difference between virgin aluminum and recycled one. However it takes 20 times less energy to produce it. So aluminum is economical for manufacturing companies but it also saves resources. In fact, Can Manufacturing Institute confirms that “on average 54% of each new aluminum can is made from recycled aluminum”.

Source : http://www.ehow.com/about_6459700_aluminum-used-soda-cans_.html

Starbucks, which is the largest coffeehouse company in the world, with 19,435 stores in 58 countries, is expanding into the fast-growing energy drink category and plans to add manufacturing jobs in the United States, the world’s biggest coffee chain said at its annual shareholder meeting in Seattle on Wednesday.

Energy drink market in 2008

Starbucks’ new line of “Refreshers” beverages targets the $8 billion U.S. energy drink market that includes products such as Red Bull and Rockstar. The beverages include caffeine and fruit juice.
The fruit-flavored drinks are made with a virtually flavorless extract of green, unroasted coffee, and pack less caffeine kick than coffee drinks made from roasted beans.

Starbucks returned to profit growth in 2010 after a two-year restructuring that involved cutting costs and closing nearly 1,000 coffee shops around the world.
Starbucks has also announced plans to create roughly 150 jobs by investing nearly $ 180 million to build a new factory in Augusta, Georgia, and to expand an existing roasting plant in Sandy Run, South Carolina, to add packaging capability.

Starbucks share

Green coffee bean extract:
Green coffee bean has strong anti-oxidant properties similar to other natural anti-oxidants like green tea and grape seed extract. The benefits are the following : Weight loss, High blood pressure benefit, Improved blood vessel action, circulation.

Green coffee bean extract is made from the green beans of the coffea Arabica plant. There are two types of coffee plants, arabica and robusta… the arabica is higher in quality and higher in chlorogenic and caffeic acids, two primary compounds responsible for anti-oxidant activity.
Boiled coffee drinks contain cafestol which is associated with the negative effects of using coffee as a stimulant, this is not present in green coffee beans or the extract.

Forward Curve:

Sources

http://www.cftc.gov/marketreports/commitmentsoftraders/index.htm

https://www.igmarkets.com/news/reuters/getReutersNews.htm?storyID=rtr.USN:20120323220307nL2E8EN10C&rs=eba938f34a269a07fbb538d9c58870994365bc9f519bfb37b8d5cf8e7f7acf75&locale=fr_FR&timezoneOffset=2

http://www.raysahelian.com/greencoffee.html

China imports of Iron Ore Fines 62% Fe spot (CFR Tianjin port) USD/metric tonne.

Iron ore prices with 62 percent iron content increased by 0.2 percent to $145.2 a ton on Friday according to Steel Index. This is the first time for 4 months that the price iron ore is over 145$ per ton. It is mainly due to tight supply from Australia, because cyclones continue to affect it. These weather conditions are likely to continue until April said Australian meteorologists.

Traders in Shanghai said that low-grade of iron ore, cheaper, is more attractive at this moment and it comes mostly from its Indian neighbor. We think that the complicated supply in Australia may encourage Chinese to order in India or high price of iron ore with 62% content encourages importers to buy lower quality to save money.

Considering China’s growth revised downwards and economic uncertainties of the European Union, prices are likely to fall during this year.

News

The online trading platform of iron ore that will launch the CBMX (China Beijing International Mining Exchange) is starting to interest the major miners. Vale, Rio Tinto Group and BHP Billiton Ltd which represent 70% of iron ore production are going to sign agreements to sell iron ore through China’s new spot trading platform, said the Steel National Association.

After giving up the principle of annual reference price of iron ore, miners and steelmakers were first to apply the principle of quarterly price based on spot prices of the previous quarter. But the market has gradually adopted a monthly price while more and more traders used daily spot.

Having a realistic and transparent price is important for traders, because the increase in volatility of iron ore market leads them to hedge their positions. This financial operation requires detailed information on the market; it is why providing transparency in trading via the new electronic platform will show a more realistic preview  of the supply and demand of iron ore market.

Futuresmarket

This is the Iron Ore 62% Fe, CFR North China (Platts) Swap Futures. The graph below shows the iron ore futures curve:

The Futures curve is almost exactly the same as the previous week and still in backwardation. By the end of April, bad weather (cyclones) in Australia should end; this will allow the Australian miner to increase their iron ore supply.

The increase of iron ore supply will influence its price; it is going to decrease because stocks were low, so they caused higher price previously. Moreover, demand from emerging countries is weaker than usual; this could bring prices down in the medium term.

Sources

http://www.bloomberg.com/news/2012-03-22/vale-rio-bhp-to-join-china-s-spot-iron-ore-platform-cisa-says.htmlVale, Rio, BHP to Join China’s Spot Iron Ore Platform. 22^th March 2012.

http://www.cmegroup.com/trading/metals/ferrous/iron-ore-62pct-fe-cfr-north-china-platts-swap-futures_contract_specifications.htmlIron Ore 62% Fe, CFR North China (Platts) Swap Futures.– 25^th March 2012.

http://www.bloomberg.com/quote/TSIPIO62:INDChina import Iron Ore Fines 62% Fe spot (CFR Tianjin port) USD/metric tonne. 26^th March 2012.

http://www.reuters.com/article/2012/03/23/markets-ironore-idUSL3E8EN1CS20120323 Iron Ore-Shanghai rebar falls on weak demand growth concerns. 23^th March 2012.

Prices recap

In New York, May futures contracts end up at $2,295 per ton, a drop of $61 compared to the last settlement. The price went below the 100-day moving average at $2,326 per ton. The drop is partly due to a firmer dollar, reported Reuters.

The ICE warehouses reached 5.3 million bags on March 27, the highest amount since 1986. The forward curve remains in a quite flat contango.

London May contracts dropped £13 to finish at £1,513 per ton. The forward curve is humped: it starts in a contango until December 2012. Then it changes to a backwardation trend for March 2013 contracts.

News

The International Cocoa Organization, the intergovernmental group representing the commodity’s leading producers and consumers, is considers relocating its headquarters from London to Ivory Coast, the world’s top grower. Negotiations about moving the ICCO headquarters out of London to Abidjan have been on the cards for about a decade due to high London rents.

Since its inception in 1973, the ICCO has been headquartered in London, home to the benchmark NYSE Liffe cocoa futures contract. The relocation to Abidjan will be on the agenda at the organization’s semi-annual meeting in Ecuador next week.

President Alassane Ouattara, is offering to house the ICCO in Abidjan rent free for ten years during which the organization would build its offices in the capital. The Ivorian president has already shown his motivation in the country most important industry with the reforms introduced earlier this year (forward-selling auctions of cocoa, aimed at improving price stability and guaranteeing its farmers a greater share of revenues).

After uncertainty surrounding the auctions, which, had contributed to the volatility in the cocoa price in the latter part of last year, the largest buyers have started to participate in the transactions.

However, the issue has remained up in the air due to years of civil war and security issues in the Ivory Coast, while countries including Ecuador and Ghana have also expressed interest in hosting the organization. Nevertheless, Ivory Coast will probably win the bid, as both parties would have more to gain by working together than with any other country. First, the ten years rent free mentioned earlier is something that the ICCO can’t put aside in its decision, and then Ivory Coast being the world’s top grower of cocoa, it would not only make sense to relocate the headquarters there but it would also create a vote of confidence in the country which will greatly benefit the country and the cocoa commodity itself, especially after the civil war. We could see it as a win-win operation.

Sources

http://www.reuters.com/article/2012/03/28/markets-softs-idUSL2E8ESH4J20120328

http://www.ft.com/intl/cms/s/0/87eae5c2-7438-11e1-9951-00144feab49a.html#

http://www.businessguideghana.com/?p=5436

http://www.ghanamma.com/2012/03/ghana-faces-ivory-coast-stiff-competition-in-hosting-icco-headquarters-report/

http://www.reuters.com/article/2012/03/28/markets-softs-close-idUSL2E8ESW1420120328

http://www.cmegroup.com/trading/agricultural/softs/cocoa.html

http://www.euronext.com/trader/summarizedmarketderivatives/summarizedmarketderivatives-3676-EN.html?euronextCode=C-LON-FUT

Figure 1: Corn spot market

In Argentina, FETRA which is a group of Argentinean truckers specialized in grain transportation are blocking the access in Bahia Blanca and Rosario, the two principal export hubs of the country (Merco Press). Truckers are protesting for two main reasons. Firstly, they do not get paid when they have to wait for all those days waiting to discharge grains in Rosario or Bahia Blanca. Secondly, they would like to get paid more quickly. Indeed, they need to wait between 90 and 120 days before getting paid while the farmers usually get paid within one week (Boursorama). FETRA was already negotiating with the government but the spokesman of FETRA says, “The government has not kept any of its promises” (Merco Press).

Figure 2: Bahia Blanca and Rosario grain export hubs empty

Forward curve

Figure 3: Corn forward curve
♣ CLICK on the forward curve to get more information ! Please note that there is no regularity on the x-base line.

According to Commodity Online, corn futures price fell this week reaching 638.2 USD for May 2012 in this weeks’ curve (purple curve) which is 3.79% lower than the last week’s curve (the green one). The Reason is earlier planting and therefore, a favorable harvest between the end of August and the beginning of September. According to the corn specialist John Kruse, about 35 percent of the crop has already been planted (Delta Farm Press). This Situation isn’t common, for instance, producers in western Kentucky usually plant corn around April 1, and eastern Kentucky between April 10-15. Actually, farmers who plant before April 1 take a lots of risk because in most of the US states if a natural disaster such as flood occurs before the 1st April, they will not be reimbursed by their insurance (Southeast Farm Press).

China’s import

China ranks 3rd in U.S. corn purchases, accounting for more than 12% of all export sales, behind Japan (6.9 million MT) and Mexico (5.45 MT). Total U.S. exports of corn, however, are running slightly behind last year with accumulated sales as of March 15 at nearly 22.6 million MT, compared with corn exports of more than 23.4 million MT a year ago.

With Chinese corn prices increasing relative to U.S. prices, economics favor China importing more corn. China has also been importing dried distillers grains to be used as a mid-protein supplement replacing a portion of both corn and soybean meal in livestock rations.

China’s activity as a corn importer has helped support U.S. corn prices by removing some supply from the market, but often people underestimate the Chinese government’s ability to fuel supply gains by creating incentives for Chinese farmers.

Sources

Articles

Internet

Price in cent per bushel in US$                                                                                                                           Financial Times

The bad forecast concerning the soybeans crop in South America has a lot of implications not only on prices of the soybeans market but also on markets that are related to this industry.

As we can see on the graph above the price of the Soybeans is actually getting higher and higher due to the bad forecast concerning crops in the South American producing countries, mainly Brazil, Argentina and Paraguay that are affected by some bad weather conditions. Those bad forecast concerning the futures crops not only have a significant impact on the price of the commodity itself but have also an impact on fertilizers companies.

As soybeans is an agricultural commodity, farmers that are the producers have the choice each year whether to replant soybeans or another agricultural commodity such as corn for instance. And as the price of soybeans is actually really high due to the bad productions “Global soybean production estimates tumbled to 245.1 million metric tons, 6.4 million tons lower than last month and 19.2 million tons lower than last year, which is the largest year-to-year decline ever.” farmers are really incited to plant soybeans and bought more related fertilizers for the next year and this has a big impact on income of the main fertilizers companies Mosaic (MOS), Potash (POT), Agrium (AGU) and CF Industries (CF). It could also have an impact on the price of their stocks.

Soybeans Futures price curve

On the analysis of the futures prices we still on the same matter. As we already noticed last week, the troubles related to bad weather conditions in south America are stilling impact in the upcoming contract months. Until July 2012 we could see that the curve follows a step contango to then start to switch to Backwardation. Again as we said last week, soybeans market – as a big part of agricultural commodities – is drive by supply and demand and we could understand that the decline in prices after July is related to the “maybe” optimistic predictions about the US harvest which generally starts in September.

——

Sources

Financial Times. Market Data Commodities Performances [on line] March 20, 2012 http://markets.ft.com/research/Markets/Commodities (consulted on the 20th of March 2012)

Seeking Alpha. Is Record Decline In Global Soybean Production Bullish For Fertilizer Stocks? [on line] March 19, 2012 http://seekingalpha.com/article/443371-is-record-decline-in-global-soybean-production-bullish-for-fertilizer-stocks (consulted on the 20th of March 2012)

CME Group. Soyabean Futures quotations [online] March 22, 2012

http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/soybean_quotes_openOutcry.html

About.com commodities. Soybean Planting and Harvest Seasons [online] March 22, 2012 http://commodities.about.com/od/profilesofcommodities/a/soybean-growing.htm

 However, the drop doesn’t only apply on wheat but also on other dollar-denominated soft commodities such as corn and soybean futures. People tend to buy much less commodities when a currency is climbing. Turning on wheat, soft red winter wheat for May delivery for instance, which is the most traded contract, will start down in each wheat market. CBOT will open down seven cents to nine cents; in parallel Kansas City Board of Trade and the Minneapolis Grain Exchange also have seen their wheat futures dropped by 1%. The trend is likely to continue as U.S currency climbs and exporters have less buying power. The consequence of that is a rise in speculation on prices to fall for wheat.

As it can be noticed from the wheat futures’ graph below, May 12 is effectively at the bottom of the slope. Then curve goes slightly contango because of the long term weather. As a report published on Tuesday mentioned, “winter wheat crop could be vulnerable to a cold snap this spring” that could be another reason of the increase. On the other hand, wheat stocks in general were estimated last month to be at all time highs. 

According to the United States Department of Agriculture, which issues weekly estimates of world supply and demand positions for agricultural commodities, the main reason for the rise in inventories is a revision in Kazakhstan, where wheat consumption had declined in the previous year.

Bibliography

• Troy Media, Wheat inventories hit record [online], http://www.troymedia.com/blog/2012/02/13/wheat-inventories-hit-record/ (21.03.2012)

• McFerron Whitney, Wheat Futures Decline as Rains May Improve Great Plains Crops [online], http://www.bloomberg.com/news/2012-03-21/wheat-futures-decline-as-rains-may-improve-great-plains-crops.html (20.03.2012)

• DJ US WHEAT OUTLOOK: Futures Seen Falling On Weather, US Dollar [online], http://news.tradingcharts.com/futures/0/1/175641510.html (21.03.2012)