Commodity Corner

Views on commodities and energy

Beef off menus, on agenda in Argentina

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If there’s one thing that gets Argentines hot under the collar, it’s rising beef prices, so it’s not surprising that surging costs at the butcher shop are ringing alarm bells at the presidential palace.
    Local TV stations are reporting a collapse in sales and some angry steak lovers have even set up a Facebook group to promote a one-week beef-eating strike. Some cuts have gone up by as much as 50 percent since the start of the year, according to local media, forcing government officials to play down the hikes as a temporary blip and blame their old enemies — the farmers.
    Economy Minister Amado Boudou has blamed recent rains for the price rise, saying ranchers are keeping their animals out grazing on the lush Pampas pastures instead of sending them to market.
    President Cristina Fernandez, who enthusiastically promoted pork as an alternative to beef by comparing it to Viagra last month, also pointed a finger at the weather, but took a pop at ranchers too.
    “It’s true, beef’s gone up. It’s gone up a lot, as has the price the farmers are getting,” she said this week, drawing an angry response from farm leaders, who said short-sighted government policy and middlemen were the real villains.
    The government has curbed exports on-and-off for years to keep a lid on the cost of the nation’s favorite food and the current spike in prices has raised the specter of fresh disruption to shipments from the country, a leading exporter.
    But as beef becomes increasingly unaffordable, some Argentine shoppers might be taking the president’s pork recommendation a lot more seriously.

from Global Investing:

Start building the bunker

They keep telling us that the recession is over so maybe now's the time to start worrying about inflation. That's the view many wealthy investors are already taking, reasoning that a little bit of the yellow shiny stuff will provide some comfort as we start piling our cash into wheelbarrows to do the weekly groceries shop.

It is gold exchange traded commodities (ETCs) that have seen the biggest investor inflows this year so perhaps it's not surprising that the gold price broke through $1,000 an ounce this week.

Grain markets flashing warning signs

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Another food price spike could be on the horizon, analysts told Reuters. 
 
Consider these factors:
* Grain prices, led by soybeans, have been up since March. 
* South America’s crop is expected to be a disappointment. Crops in both Brazil and Argentina have a poor outlook. In fact, the U.S. Agriculture Department steadily lowered its forecast for Argentina’s soybean crop throughout the year.

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* Many will be looking to the United States to come through with a big crop. But U.S. soybean stocks began the 2009/10 marketing year at a five year low. That means there’s not a lot of surplus to keep prices level if there’s any type of disruption in supply or weather calamity.

from Global Investing:

Deflation to jump the shark?

The recent spate of shark attacks on Australian beaches could mark a turning point in global deflation and signal a change in fortunes for some beleaguered emerging economies, if Nomura strategist Sean Darby is to be believed.

Speaking at a Nomura investors forum, Darby said a chance sighting of a shark on Sydney's famed Bondi Beach three weeks ago made him realise that prices of grain and other soft commodities -- punished of late by global recession fears -- could be due for a rebound.

Oil and the dollar no longer linked

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The correlation between oil prices and the dollar seen since the third quarter of 2007 has weakened. Investors had sold the dollar as U.S. economic prospects dimmed and bought oil as a hedge against inflation and uncertainties in the supply of raw materials. The relationship eased late last year as fundamental pressure from slumping demand and the slowdown of the overall economy pushed oil lower independent of the actions of the dollar, and analysts said the link might not return in the near term.

Plotlines: Gold falls vs oil, a murky inflation signal

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Gold’s oil-buying power is at its lowest in three years. (The chart shows the price of oil rising relative to the price of gold.) Hedge funds and other traders who play the gold/oil spread could be taking profits. Otherwise, this is hard to explain, since gold is considered a leading indicator of inflation.

In the past two weeks, crude oil prices rose to a record near $120 a barrel, while the spot price of gold fell from around $950 to $870 an ounce. Today an ounce of gold buys 7.65 barrels of oil. When gold was near $1,000 an ounce earlier this year, an ounce bought more than 10 barrels of oil. Gold’s weakest point relative to oil was in 2005 around 6 barrels.