Corn Plunges Most Since November, Wheat Falls as U.S. Reports Acreage Gain

Corn futures tumbled the most since November and wheat had the biggest plunge since January 2009 as the U.S. government reported grain acreage and inventories that topped estimates by analysts.

Corn futures for July delivery, the contract closest to expiration (and with no exchange-imposed limit) fell 69 cents, or 9.9 percent, to $6.29.

Wheat futures for September delivery tumbled by the CBOT limit of 60 cents, or 8.9 percent, to $6.1425 a bushel, the lowest for a most-active contract since July 29. The decline was the biggest since Jan. 12, 2009.

via Corn Plunges Most Since November, Wheat Falls as U.S. Reports Acreage Gain – Bloomberg.

Gazprom: contract shake up could herald change in gas market pricing

In an unprecedented move for the Russian energy giant, Gazprom has agreed to incorporate spot market prices in some of its long-term European export contracts. More significantly, the move potentially represents a structural change in gas market pricing mechanisms away from oil-linked contracts and toward a system that is more reflective of supply and demand fundamentals.

At the height of last year’s European  gas row, in which Gazprom and utilities battled about the liability for billions of cubic meters of gas, Gazprom chairman Alexey Miller staunchly refused to renegotiate with the likes of E.ON, GDF Suez or Eni on long-term gas contracts. The energy giant insisted that gas prices remained linked to the prevailing oil prices. However, after a few months and a $2.5 billion loss in sales , the world’s biggest gas producer has announced that it had indeed agreed to contractual changes with several European utilities. According to Gazprom’s director general of exports, Alexander Medvedev, “[The company] took into account the trends in the European market and the crisis.”

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Scrapping Record Fails to End ‘Nightmare’ for Shipowners: Freight Markets

Rates will remain below about $11,000 a day for the rest of the year, compared with a breakeven point of about $23,000, according to Johnson Leung, head of regional transport at Jefferies Group Inc. in Hong Kong.

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Commodities To Rally From Losing Streak according to Bloomberg

The last time that happened, the gauge surged 36 percent in the next six months.
Commodities will rebound from the worst losing streak since the end of 2008 because shortages of everything from copper to palladium to corn will boost prices even if economic growth slows, should history be a guide.

The benchmark Standard & Poor’s GSCI index is heading for a second monthly drop, led by declines in silver, coffee and nickel. The last time that happened, the gauge surged 36 percent in the next six months. Speculators are holding a net 1.1 million U.S. futures and options contracts to bet on higher prices, 37 percent more than the average of the last five years, data from the Commodity Futures Trading Commission show.

“The long-term perspective is that many commodities have supply constraints,” said Walter “Bucky” Hellwig, who helps manage $17 billion of assets at BB&T Wealth Management in Birmingham, Alabama, and favors gold because it will gain from financial stimulus by central banks and inflation. “That’s an environment where you want commodities in your portfolio.”

via Commodities Rallying From Losing Streak – Bloomberg.

Commodities Fall Most in Seven Weeks After Plan to Release Crude

Commodities dropped the most in seven weeks after the International Energy Agency announced plans to release emergency oil supplies and U.S. jobless claims rose more than economists forecast.

The Standard & Poor’s GSCI index of 24 commodities fell as much as 4.7 percent, the most since May 5, and was down 3.7 percent at 648.65 by 5:40 p.m. in London. Brent crude oil in London led the decline, falling 5.5 percent. The IEA will make available 60 million barrels of crude to alleviate possible shortages following the loss of Libyan oil.

The U.S. will release 30 million barrels from its Strategic Petroleum Reserve, as part of the IEA effort. U.S. jobless claims increased to 429,000 last week, exceeding the highest estimate in a Bloomberg News survey of 47 economists.

via Commodities Fall Most in Seven Weeks After Plan to Release Crude – Bloomberg.com.

Grains Plunge as Favorable Weather Reviving U.S., Europe Crops

Corn fell the maximum allowed by the Chicago Board of Trade, wheat plunged to an eight-month low and soybeans tumbled on signs that changing weather conditions may improve crop prospects in the U.S. and Europe.

Hot weather next week in the U.S., the world’s largest exporter of all three crops, may be shorter than forecast, aiding newly planted corn and soybeans, according to World Weather Inc. Rain is forecast in Ukraine and Russia, and moisture this month in Europe may limit wheat-crop damage caused by drought in France and Germany, Alfred C. Toepfer International GmbH, a grain trader, said in a report.

via Grains Plunge as Favorable Weather Reviving U.S., Europe Crops – Bloomberg.com.

Cheap Labor in China Coming to an End

“We’ve seen our wage costs in China go up nearly 50 percent in the last two years alone,” said Charles Hubbs of Guangzhou Fortunique, which is a medical supply company for some of the United States’ largest health care companies. “It’s harder to keep workers on now, and it’s more expensive to attract new ones. It’s gotten to the point where I’m actively looking for alternatives. I think I’ll be out of here entirely in a couple of years.”

Years ago, several U.S. manufacturers moved production plants to China in an effort to cut labor costs. However, the age of cheap labor in China is ending as annual wages for manufacturing workers continue to grow, and now, some of the larger plants in China are looking for a new home.

But where will plants go to next? Countries like India, Laos, Cambodia and Vietnam are a few options for cheap labor. Also, some companies like Wham-O, a toy company, are returning to the U.S. Last year, Wham-O moved 50 percent of its Frisbee and Hula Hoop production to the U.S. According to a study by the Boston Consulting Group (BCG), China’s average wage rate was 36 percent of the United States’ in 2000, and by the end of 2010, this “gap” shrunk to 48 percent. By 2015, BCG predicts it will be 69 percent.

via DailyTech – Cheap Labor in China Coming to an End.

Analysis: Eurozone Labor Costs Rose Faster Than Expected In 1Q

The annual increase in Eurozone labor costs accelerated sharply in 1Q to +2.6%, boosted by a pick-up in wage costs and especially employer payroll contributions, Eurostat said Monday.

Most analysts had expected a more moderate annual rise of 2% at most.

After bottoming out in the middle of last year, labor costs gains have now recouped over half the slowdown from the previous high of 3.5% in the spring of 2009, but they are still far below the pre-crisis peak of 4.3%.

Stronger labor cost increases in 1Q reflected both faster wage gains, up 2.3% on the year after +1.4% in 4Q, and a spike in non-wage costs, which include social security contributions and employment taxes, to a two-year high of 3.6% — double the rise in 4Q.

via Analysis:Eurozone Labor Costs Rose Faster Than Expected In 1Q | iMarketNews.com.

Natural Gas Declines to Seven-Week Low on Moderating Weather

Natural gas for July delivery fell 8.7 cents, or 2 percent, to $4.325 per million British thermal units on the New York Mercantile Exchange, the lowest settlement price since May 20. The futures dropped 9.1 percent this week, the first weekly decline since the five-days ended May 20.

June 17 (Bloomberg) — Natural gas futures fell to a seven- week low on forecasts of moderating temperatures that may reduce demand for the power-plant fuel.

Natural gas posted the first weekly decline since mid-May after forecasters including Commodity Weather Group LLC in Bethesda, Maryland,
predicted mostly normal temperatures in the central U.S. from June 22 through July 1.

via Natural Gas Declines to Seven-Week Low on Moderating Weather – Businessweek.

How Steel Prices Drift Lower

Usually one or more of the mills who had announced price moves begin undercutting the existing price levels in order to fill their order books. The mills who move first are generally well known within the industry as they are committed to keep their equipment (furnaces, etc.) running full.

Earlier today I had a conversation with a service center executive I have known for a good portion of my personal steel career. We were discussing the flat rolled steel market and the specific pricing policies of one mill in particular (to remain nameless). What I found interesting, is the discussion turned to the pattern used by domestic steel mills which ends up breaking down flat rolled steel prices causing the market to drift lower.

The pattern, or cycle, goes something like this…

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