Commodities took a pounding on Friday with gold down heavily, copper slumping in late trading, oil off and major agriculturals weaker as an important market update on plantings in the US market is set to be released tonight.
New York May crude oil futures fell $US1.96 to $US105.62 a barrel on Nymex (oil prices hit a record $US111.80 in electronic trading 10 days ago).
Comex April gold fell to $US936.50 an ounce, almost $US100 an ounce under its all-time trading high of $US1,033.90 an ounce the week before last.
But the biggest factor in the coming week will be tonight’s release of the USDA’s plantings report.
It will send the prices of wheat, corn and soybeans (and things like livestock, soybean oil, other edible oils and ethanol) all over the place while analysts assess the implications.
They are expected to show that corn farmers are planning a big switch to wheat and soybeans: which could be matched by cotton farmers continuing their recent switch to soybeans.
Soybeans, wheat and corn prices have all hit all time record prices in the past month or so, driven mostly by a combination of speculative interest, falling world stocks, rising consumption from China and India, and drought and production problems in Australia, Argentina, the US and parts of Europe.
While corn prices have been high, the gains on soybeans and wheat have been even greater (wheat prices have more than doubled in the past year).
Should there be a switch from corn to wheat and soybeans that could also hurt the attractiveness of ethanol which has been hurt by record prices for corn in the past few months: between 50 and 60 plants in the US maybe idled as profit margins on ethanol shrink. A jump in corn prices will also put pressure on Mexican food prices where corn and corn flour is a dietary staple
US market analysts think that many US farmers will not maintain corn or expand their plantings of the grain
They expect farmers to chase $US13 a bushell soybeans (they have been much higher) or the $US9.80 a bushell that soft US wheat is selling at (Prime hard spring break making wheat is selling for up to double that level). Wheat prices have been over $US13 a bushell this year.
Corn is selling at $US5.50 a bushell, having been as high as just over $US5.70 earlier this month.
Corn is by far the biggest US agricultural crop and is a big export: US stocks of wheat, corn and beans are at 40 to 60 year lows.
According to Reuters on the weekend, US analysts on average were predicting this year’s corn acreage at 87.387 million acres, down 6.2 million acres from 2007’s 93.6 million, which was the biggest corn area in over 60 years.
Soybean plantings are estimated by analysts on average at 71.721 million acres, up from 63.6 million last year.
In Chicago on Friday, soybeans fell more than 4%, and wheat fell 25c a bushell ahead of the USDA’s report.
Bloomberg said in its report that its survey shows growers planting 12% more soybeans than a year ago, 6.2% more wheat and 6.7% less corn.
Bloomberg said that about 71.7 million acres in the US will be planted with soybeans, up from 63.6 million last year, and 14.1 million acres will be seeded with spring wheat. Corn plantings could total 87.3 million acres, down from 93.6 million last year which was the most since 1944.
Corn prices are up 44% over the past year, corn 60% and wheat has more than doubled, despite the recent sell down.
Very wet weather and a damp spring is not helping plantings in corn areas: soybeans are planted later and this could prompt more farmers to switch.
A shortfall in corn this year would follow last year’s short supplies of quality world wheat and soy crops, which caused prices to spike to record levels and contributed to rampant inflation in food prices domestically and abroad.
Argentinian farmers have called off their strike to try talk to the country’s government over higher taxes and charges designed to keep more beef, soybeans and wheat inside Argentina.
Gold fell more than 2% in the broad commodities sell-off on Friday.
Other metals and major soft commodities traded lower, with investors taking profits before the end of the quarter.
Gold fell to $US926.50 before rising to $US936.50 in late New York trading.
Copper in London was heading higher but in New York it dipped $US4.15c to $US3.8315c a pound. It was still up 7% for the week. Despite Friday’s fall, oil still finished the week with a 3.7% gain.
Silver futures for May delivery fell 59.5c, or 3.2%, to $US17.955 an ounce. It’s up 21% this year and around 6% over the week.
Sugar futures in New York fell on Friday and for the second straight week, because of India’s plans to boost exports and speculation high taxes will keep shipments to Russia from increasing.
May sugar futures fell 0.40USc, or 3.3%, to 11.73USc.
Sugar futures rose 50% in the three months through February but have slumped 20% so far this month because of concerns that global production will exceed demand.
