Monday, December 31, 2012

Soft Commodities Fall Hard In 2012

More manipulation of the news for commodities; they ran it up and now it comes back down. Aivars Lode

Most markets were very good to bulls this year. Soft commodities, however, were a painful exception.
In a sharp shift from the supply concerns of 2011 that had lifted prices of raw sugar, cotton and arabica coffee to multi-year highs, overstock was king in 2012.
Futures of arabica coffee, the world’s most widely consumed variety, plunged nearly 37% – one of the steepest declines across commodity markets – on ICE Futures U.S. this year. The culprit: big production.
The International Coffee Organization expects record global coffee output in the 2012-13 crop year, which started in October, to the tune of 146 million bags. Brazil, the source of around one-third of the world’s coffee, reaped a record crop this past season of 50.8 million bags.
The South American nation, also the world’s biggest sugar producer, was also partially responsible for a drop futures of the sweetener. Raw-sugar prices dropped 16% this year, after Brazilian mills ramped up production following unseasonable rains at the start of the harvest in May. The International Sugar Organization in November forecast a 6.2 million-ton surplus in the 2012-13 year, started Oct. 1, with world production at a record 177.6 million tons.
Cotton prices also saw a steep decline, as weak global demand on the heels of a violent price swing in 2011 and ample supplies of the fiber pressured the market. The U.S. Department of Agriculture expects the world to end with a record 79.4 million bales at the season’s end on July 31. Cotton futures lost 18.1%, settling Monday at 75.14 cents a pound.
The bulls don’t have much cause to clink their glasses for tonight, either, since there isn’t much to lift prices on the horizon.
“Until (consumers) work down these surpluses, it’ll be pretty tough to rally,” says Jack Scoville, a vice president at Price Futures Group.

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