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Commodities Briefing 09.May 2013

Posted on 09 May 2013 by VRS |  Email |Print

China’s voracious demand for every conceivable raw material — oil, steel, soybeans, gold, to name a few — once seemed to spell a future of endlessly rising commodity prices and falling living standards in developed nations. This was a Malthusian vision of scarcity: rising demand from the growing economies of the emerging world would couple with shrinking supplies to drive up the prices of natural resources. Gas prices would never come back down; gold would cost thousands of dollars an ounce.
The response, for many, was to bet big on China. Because it is hard to buy directly into China, many bought into the commodities that were being sucked into the gaping maw of the country’s economy: oil from Russia, iron ore from Australia and so on………………………………………..Full Article: Source

Posted on 09 May 2013 by VRS |  Email |Print

The commodities hedge fund industry is bleeding money. The average fund lost 0.8 per cent in the first quarter of the year, according to a closely watched index compiled by brokerage Newedge.
The losses come after commodities hedge funds lost 3.7 per cent in 2012, the biggest decline in more than a decade, according to the Newedge Commodity Trading Index. The average commodities hedge fund already lost 1.4 per cent in 2011, a significant change from the typical gains of 20-40 per cent per year in 2000-08………………………………………..Full Article: Source

Posted on 09 May 2013 by VRS |  Email |Print

Stanley Druckenmiller, the billionaire hedge-fund manager who returned an average of 30 percent a year from 1986 through 2010, said the long rally by commodities is over as China switches to consumption-led growth rather than investing in infrastructure.
“We think a decade of commodity demand is over,” he said today at the Ira Sohn Investment Conference in New York. “It’s a poisonous cocktail when you look at commodities going forward.” Druckenmiller, who said in August 2010 that he was returning cash to his clients and would focus on his own investments, is betting against the Australian dollar, which he said will “come down and come down hard.”……………………………………….Full Article: Source

Posted on 09 May 2013 by VRS |  Email |Print

Don’t think of the commodities swoon as just a correction after years of outsized gains. The party’s over and the decline is just starting, according to Stanley Druckenmiller. In his Sohn Investment Conference presentation, Druckenmiller said the 2002-2011 gains for commodities were an anomaly and that the declines of the past couple of years are the norm.
Why? China, he said, which embarked on an unprecedented investment program that caused the spike in commodity prices; in one slide, Druckenmiller suggested that 50% of all global demand from 2002 to 2011 came from china………………………………………..Full Article: Source

Posted on 09 May 2013 by VRS |  Email |Print

The best investment idea at Ira Sohn 2013 could be all about shorting everything that’s associated with the voracious Chinese demand for commodities, a symptom of policies that attempted to quell–but really just put on hold–the effects of the financial crisis.
Stanley Druckenmiller, former managing director of Soros Fund Management, said commodity producers were fooled in 2008, when the Chinese government injected 4 trillion yuan (at the time, $586 billion) in stimulus into the Chinese economy. That created a false demand for goods and for the raw materials to make them………………………………………..Full Article: Source

Posted on 09 May 2013 by VRS |  Email |Print

While child labour remains a cause for concern in coffee and cocoa production in the developing world, global buyers of these commodities are also worried about the ageing workforce. Many smallholder farmers are growing older and their offspring are abandoning rural areas, and the question is how to make commodities farming appealing to younger people.
Most statistics point to a demographic shift in rural areas. In one study for Cadbury, on cocoa farmers in the Ashanti, western, south and eastern regions of Ghana, the average age of the farmers was 51………………………………………..Full Article: Source

Posted on 09 May 2013 by VRS |  Email |Print

Change in regulation causes UK asset management firm to shut its doors to Ucits investors. UK-based global macro manager Cantab Capital Partners is set to close its $320 million commodities trading strategy due to concerns over the impact of new investment restrictions.
The Cambridge-based company intends to formally shut the CCP Quantitative UCITS Fund on June 30 2013………………………………………..Full Article: Source

Posted on 09 May 2013 by VRS |  Email |Print

US crude oil inventories are increasing across the board. Commercial crude stocks in the US are sitting at 395 million bbls, an all-time high level and only 37 million bbls away from what Bank of America Merrill Lynch estimates to be tested maximum storage capacity.
True, stocks at Cushing, Oklahoma—the pricing point for WTI—fell to 49.8 million bbls in the last available report, briefly pushing prices above $96/bbl. But as other sites fill up, the Oklahoma hub may now hold nearly 45% or 16 million bbls of the country’s total tested spare capacity, a report from the Bank noted………………………………………..Full Article: Source

Posted on 09 May 2013 by VRS |  Email |Print

Is the U.S. holding too much crude oil in its rainy-day reserve? After the Arab oil embargo of 1973, the major industrialized nations agreed to build emergency stockpiles to guard against supply shocks and prolonged price spikes.
The U.S. and other major oil consumers pledged through the International Energy Agency to hold oil reserves in government or commercial hands equal to at least 90 days “cover” of net oil imports………………………………………..Full Article: Source

Posted on 09 May 2013 by VRS |  Email |Print

Things are upside down in the gold market. Valuations are irrationally low, while global consumerism fuels demand and supply comes up short. Lawrence Roulston, editor and publisher of Resource Opportunities, advises people to trust their guts as well as the numbers when weeding through prospective investments.
In this interview with The Gold Report, he skirts around conspiracy theories regarding the recent gold sell-off and keeps his advice simple: lower expectations, get rid of poorly performing investments and load up on the companies going cheap. If you push against the trend, you might come out with your feet on the ground………………………………………..Full Article: Source

Posted on 09 May 2013 by VRS |  Email |Print

Britain is blessed in having an integrated economy and the ability to depreciate sterling. The eurozone, by contrast, is cursed by its fragmented nature, internal contradictions and fixed exchange rates for individual members.
Stuff like this is said a lot in the UK. Lord Lawson, a former chancellor, even argued this week Britain would be better off outside the EU. We should be more careful………………………………………..Full Article: Source

Posted on 09 May 2013 by VRS |  Email |Print

The $1.4 billion worth of tax relief had been planned for July 2015 as compensation for the fixed carbon tax converting to a market-based emissions trading scheme.
The Government had expected the carbon price to rise from about $25 to $29 a tonne. But next week’s Budget is tipped to slash that prediction to about $15. It means the cost of tackling pollution will be halved, but it will also punch a $4.5 billion hole in the Budget for 2015. ……………………………………….Full Article: Source

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