Wheat prices are soaring again

Because of a drought around the Black Sea, wheat production in countries like Russia and Ukraine will be down this year. At the same time in the U.S., an unrelated drought affecting corn in the midwest is also impacting wheat.

In southern Russia breadbasket, the spring drought is still going on. As a consequence, harvest is expected to be down by 20-25%. In Ukraine, it will be even greater. Countries around the Black Sea account for 20% of world wheat trade, so when their harvest is poor, prices are soaring.

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Glut of raw materials for plastics and synthetic rubber lowering prices

Ethane at the Mont Belvieu, Texas trading hub, a traditional pricing benchmark, sold for 28.4 cents per gallon Tuesday, down from a peak average of 89 cents in October, according to Platts research. Propane at Mont Belvieu sold for 79.65 cents per gallon, down from $1.47 a gallon in October.

The weak prices, which may last for several years due to a mismatch between supply and demand according to many market observers, could provide an unexpected hit to earnings and cash flow for many exploration and production companies.

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Argentina: Drought after Flood

One month after the southwestern province of Buenos Aires, the heart of the Argentine agricultural power, has been under water, Argentina is now facing a drought, leading analysts to revise soybeans production forecast down.

The Ministry of Agriculture estimates the soybeans production at 42.9 million tons this year, but professionals from Bolsa de Comercio de Rosario, the Rosario Board of Trade, and the first international port for soybeans, are more pessimistic. They expect around 40.5 million tonnes, against 52 to 53 million tons forecasted in spring.

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Aluminum: China is running out of bauxite

Addicted to Indonesian bauxite, Chinese aluminum companies need to diversify their sources of supply or develop local production. Eventually, this supply issue should lead to an increase in China aluminum imports.

China has been dependent on imported iron ore to meet the needs of its steel industry development. This caused soaring prices for iron ore and metallurgical coal in the last ten years.

A parallel can be drawn with bauxite. Over the last 5 years, ever-increasing volumes of bauxite have been imported to feed aluminum refineries in China. The aluminum companies have decided to refine bauxite themselves rather than buy aluminum because of significantly lower investment costs in China.

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Surplus for lead and zinc

The International Lead and Zinc Study Group (ILZSG) released on June 18 its supply and demand data for Q1 2012. The study group found an oversupply for both metals: zinc and lead.

The gap between supply and demand reached 121,000 tons for zinc, against 191,000 tons last year for the same period. The extraction is increasing in most producing countries, especially India, Ireland, Russia and Mexico. Consumption has meanwhile increased by 1.4% worldwide, despite a decline of 8.2% in Europe following the economic downturn.

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Chinese steel giants slash prices as demand slumps

Steel prices are under pressure from weak market demand, and the price cuts also show steel companies are trying to deal with bumper inventories since the beginning of this year, said Liu Yuanrui, an analyst at Changjiang Securities Co.

Baosteel Group Corp., Wuhan Iron & Steel Co. Ltd. and Anshan Iron & Steel Group Corp., China’s steel giants, have lowered ex-factory steel prices for July by 130-300 yuan per ton.

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Oil Plunges 4% as Part of Broader Commodities Rout

Commodities like copper and crude oil are often seen as a barometer for industrial activity and, as such, the strength of the world economy. The steep price drops in both over the past few months, with oil down around 30% and copper off 15% since March, are sending a worrying signal about the depth of the global economic problems.

Oil prices plunged 4% to below $80, part of a broad selloff in commodities, sending an alarming signal about the health of the global economy.

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Rare earths: China counter-attacks

In response to the case filed with the WTO by its trading partners, the United States, European Union and Japan, China’s State Council on Wednesday issued its first white paper on the controversial rare-earth metal sector .

Before the case actually goes in litigation at the WTO, China wants to justify its export quotas for rare earths, which have multiplied some of those metal prices by 10 times in the past 2 years. In its White Paper, the Chinese government explains its desire to consolidate an industry with a multitude of small companies not only extracting the rare earths materials, but also proceeding to their separation in appalling conditions for human safety and the environment.

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IMF Report on Fiscal Policy to Mitigate Climate Change

IMF helps make carbon pricing the new normal.

Europe does it. Australia does it. Even northeastern-situated states do it. Everyone’s doing it. Let’s do it. Let’s tax carbon.

For me, that is an important message in IMF Managing Director Christine Lagarde’s historic speech yesterday and in the release of a new IMF primer on how to raise the price of greenhouse gas pollution.

This is an interesting response to a recent report released by the International Monetary Fund on Fiscal Policy to Mitigate Climate Change .

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Corn and soybean prices up on US news

The crop conditions for corn and soybeans have deteriorated further in the U.S., according to data published by the U.S. Department of Agriculture on June 18th. Only 63% of corn harvest is evaluated as “good” to “excellent”, against 66% a week earlier and 70% last year. For soybeans, these figures rise to 56%, against 60% last week and 68% in 2011.

These evaluations suggest lower yields than the previous forecast, which expected a U.S. corn production of 375.7 million tonnes and 87.2 million tonnes of soybeans for 2012-2013. Crops, especially in the Midwest, are affected by dry weather.

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