Views on commodities and energy
It didn’t take long for Argentine farmers to lose their contented glow after defeating the government over a tax hike on soy exports earlier this year.
The calm that descended on the Pampas plains in the aftermath of the four-month farming conflict was predictably short-lived, and the disgruntled farmers are rattling their sabers again. While they haven’t said what they plan to do, the farm leaders have promised to announce their next move in the coming days.
Talks with the agriculture secretary have not eased their concerns over the state of the ranching industry, the dairy sector and the dreaded export taxes. Many farmers are worse off than with the higher rate, because they lost the rebates and subsidies that the government agreed to during the conflict.
This, coupled with the worst drought for decades and weaker grains prices due to the global financial turmoil mean the bad mood may be near breaking point in the countryside. Will they go on strike again? It’s hard to imagine. President Cristina Fernandez has successfully driven the farmers off the front pages and public sympathy does not look ready to rally behind them.
Gasoline shortages in North Carolina, Georgia, Tennessee, and parts of Florida have driven some consumers to desperate measures as they hunt for places to fill up. “Some people are even following tankers to the station and then they descend upon the station,” said Randy Bly, a spokesman for the AAA’s Auto Club South Chapter, Rebekah Kebede and Bernie Woodall report.U.S. gasoline inventories shrunk to the lowest level since 1967 after Hurricanes Gustav and Ike shut Gulf Coast oil refineries. Thursday, Energy Secretary Sam Bodman reiterated that the country was not seeking emergency fuel supplies from abroad.
Elsewhere in commodities:
The CFTC is probing the silver market, the wsj.com reports. In May of this year, the CFTC released a report finding no manipulation of the market. Yet Stephen Obie, acting director of the agency’s division of enforcement, tells the Journal the CFTC takes “the threat of manipulation in the futures and options markets very seriously and employ a number of measures to prevent, identify and prosecute it.”
Funding for two iron ore projects in Peru has been delayed because of the global financial crisis, Australian miner Strike Resources Ltd said on its website.
Top officials from the world’s largest fertilizer maker were in London this week trying to convince investors their stock has been unjustly thumped.
Potash Corp of Saskatchewan shares at the Toronto Stock Exchange have lost 30 percent of their value since a mid-June peak, even though prices for potash fertilizer continued their meteoric rise.
“Not that I’m whining about it, but we do have the lowest multiples we’ve ever had. Ever. And I’m not sure it reflects the true value of the company,” said Wayne Brownlee, the chief financial officer of Potash Corp, which plans to boost its potash capacity by 80 percent to capture higher prices.
Hedge funds fled commodities and unwound Potash Corp positions since June, Chief Executive Bill Doyle said.
Doyle continued to hold fast to his rosy outlook, noting producers are short on potash and prices should continue to rise this year, although not at the same rate as last year, when they tripled.
Grain prices should remain historically high, Doyle said, leaving farmers flush and able to pay more for fertilizer.
“Farmers will grouse that their costs are up. They are up, about $39 billion, but their receipts are up $50 billion. So the math works,” Doyle said.
And despite recent events rocking the world’s financial capitals, demand for grain will continue to grow, keeping pressure on supplies, Doyle said, unless the world economy slips into a depression.
“A lot of the people (in developing economies) who have this aspiration to eat better, I guarantee you, wouldn’t know what had happened to the investment banking community in New York,” he said. “It’s not high on their priority list, where food is.”
Photo: REUTERS/David Stobbe Potash is piled into a large storage facility which is then loaded into a train car and transported in Saskatoon, Saskatchewan in this December 2006 file photo.
Back-to-back hurricanes have hobbled a huge chunk of U.S. oil and refining production in the biggest hit to the energy sector since at least 2005, and the recovery is moving along more slowly than some energy analysts had expected. Commercial gasoline inventories in the world’s biggest energy consumer have dropped to their lowest on record due to the effects of the storms and pipeline problems have triggered shortages at the pumps in parts of the East Coast and Midwest. Energy experts have said the severe supply disruptions have kept oil prices buoyed above $100 a barrel despite overarching economic gloom that is hitting the global markets.
Click the buttons on the graph below to see the impact hurricanes Gustav and Ike have had on crude oil, natural gas, and refining production since Gustav swept into the Gulf of Mexico in late August.
U.S. crude futures are holding near $108 a barrel, as U.S. data shows that refinery utilization dropped to the lowest on record last week in the wake of Hurricane Ike. Crude stocks dipped by less than expected thanks to the lower demand from refineries.
“The EIA data shows you that demand looks abysmal. The crude import numbers are surprising. Going forward, I see inventories rising,” said Kyle Cooper, director of research at IAF Advisors.
The stronger dollar takes the air out an historic surge in crude futures Monday; gold too is off this morning. The spotlight on commodities trading trends continues; the Commodity Futures Trading Commission is reviewing the spike in oil on Monday.
Analysts say the wild swings in commodities prices don’t appear to be the work solely of investment funds, Rene Pastor reports today. “I have no problem with how the markets have acted and continue to act. That is not to say I always like what I see or do not feel the stress of the volatility, I sure do,” Jack Scoville, vice president of brokers the Price Group in Chicago, tells us.
So says Tom Knight of Truman Arnold in Texas of the near 16% surge in U.S. crude for October to $120.92 a barrel. Among other factors in the energy markets today:
Oil tops $100; Washington’s plans to mop up bad assets bolster oil trading. Yet open the lens a little wider on commodities trends and note that the Reuters-Jeffries CRB index is trading at its lowest level since last October.
“The growth we saw in emerging economies from 2004-2007 was extraordinary — we may not get to that level again,”Tony Dolphin at Henderson Global Investors tells Humeyra Pamuk and Jane Merriman in an analysis on commodities investing trends here.
Gold comes off but oil futures work to recoup $100 and at least one commodities-linked exchange is outperforming as central banks pump money into distressed markets. (Toronto’s benchmark stock index is rising over 2% at this moment. No such luck in Australia overnight and the reeling Russian market remains shuttered)
Still the banks crisis remains a potent presence. Energy trading heavyweight Morgan Stanley elected to withdraw from the Platts benchmark oil trading window in Asia on Thursday, steering clear of a possible test of its credit acceptance among counterparties.
Gold prices posted their biggest one-day rise in absolute terms since 1980
As financial worries spread, Russia halted stock and bond trading in a response to the worst market falls since 1998.
The White House may decide as soon as this afternoon whether to ask members of the International Energy Agency to release emergency gasoline and diesel fuel inventories into the U.S. market, Energy Sec. Sam Bodman tells reporters
Chinese Premier Wen Jiabao called a meeting of the cabinet to back plans for a national inspection of milk products, the UK Press Association reports.
A news website devoted to American politics picks up the threads in the oil market speculation story. Politico outlines the scope of the lobbying by the airlines-to-truckers backed “Stop Oil Speculation Now Coalition” and its new sparring partner, the Wall Street-backed “Coalition to Protect Competitive Markets”.
Regulation is in the air. Politico notes that gas stations owners have put out signs calling for customers to urge Congress to “take action against speculators”