The US Department of Agriculture (USDA) revealed Friday that the US biofuel industry would consume one third of the country's corn crop in the 2008-09 season – or 4 billion bushells – up from about 22.9% in the 2007-08 crop year, or some 3 billion bushells.
That's despite many of these plants running at a loss, or making small profits. The US Government's 57c a gallon subsidy is keeping the 150-plus plants in operation across the country. US corn prices rose to a record of more than $US6.30 a bushell before ending down a cent on the day at $US6.29.25.
That's up 76% in the past year before easing. Because of the strong rise in ethanol use and expected high levels of exports, US corn stocks are forecast to drop to their lowest level in 13 years.
That is very tight and could leave consumers exposed if there's a drought or some other production problems. Besides financial investors buying oil and selling the dollar, more concerns about Nigerian production helped keep oil prices firm on Friday.
June oil futures rose $US2.27, or 1.8% on Friday to a record closing price of $US125.96 a barrel on the New York Mercantile Exchange. The contract hit an intraday day high of $US126.27 Friday. Prices rose 8.3% last week, the largest weekly gain in more than a year.
In London June Brent crude rose $US2.56, or 2.1% to end at a record $US125.40 a barrel on the ICE Futures Europe exchange. The contract touched a record intraday high of $US125.90. Unrest in Beirut didn't help confidence as gun battles raged across western and southern parts of the Lebanese capital between the Shiite group Hezbollah and the Government's army.
The American Automobile Association said that US regular gasoline, averaged a record $US3.671 a gallon on Friday. Comex gold rose in New York, capping the biggest weekly rise since February, on worries about rising energy costs and the impact on the US dollar and inflation.
June gold futures rose $US3.70 to $US885.80 an ounce on Friday to be up 3.2% over the week, the best gain since late February. July silver futures rose 4c to $US16.91 an ounce in New York. The price has risen 13% this year, but like gold is well under the all time highs hit earlier in the year.
Gold has dropped 14% since March 17, when the euro and oil set previous highs. The euro set another record of $US1.6019 on April 22 and crude oil is up 12% since its intraday high on March 17, with around 8% happening last week. US wheat futures fell after the USDA said world production of the grain will rise to a record, rebuilding inventories.
US winter wheat is estimated to rise 17% to 1.78 billion bushels, compared with last year's freeze-damaged harvest, with world wheat production for the year starting June 1 rising 8.2% to a record 656 million tonnes, boosting global reserves before next year's harvest by 13%.
But that depends now on hiccups in major grain growing countries: Australian production is forecast to hit $24 million tonnes in 2008-09, compared to less than 14 million tonnes in 2007-08. There are already concerns being expressed about forecasts of very dry weather this winter in major growing areas in Australia.
July wheat futures dropped 17.5 USc, or 2.1%, to $US8.045 a bushel on the Chicago Board of Trade. Wheat hit a six month low of $7.765 on May 1. The price of the most-active futures fell 0.6% last week, the fifth straight weekly decline.
Wheat hit a record $US13.495 a bushel on February 27, as world inventories were forecast to drop to 110 million tonnes on May 31, the lowest level since 1978.
US wheat stocks are forecast to more than double to 483 million bushels by May 31, 2009, from this year's projected 239 million bushels. Soybeans meanwhile rose after the USDA lifted its estimate of exports for this year and said domestic demand will surge, offsetting an expected rise in production.
Exports will rise 15% to 1.05 billion bushels in the year that begins September 1, the USDA said on Friday. American processors are forecast to use a record 1.85 billion bushels of soybeans this year to make livestock feed and vegetable oil.
US traders said there is now no margin for error or drought problems in the US, Brazil or Argentina (the major growing countries) and there could be rationing for exports later in the year if there is a problem.
July soybean futures rose US48c, or 3.7%, to $US13.58 a bushel on the Chicago Board of Trade on Friday, The price rose 4.1% last week. Soybean prices are up 85% in the past year, reaching a record $US15.8625 on March 3.
Rising demand from China and higher crude-oil prices driving demand for corn and other biofuel sources (such as palm oil and canola) are helping put a rocket under soybean prices.
US production will rise to 3.105 billion bushels from 2.585 billion last year and an estimate in February for a 2.95 billion bushel crop. The crop would be the second-biggest ever, behind the record harvest of 3.188 billion bushels in 2006.
A stand off between farmers and the high taxing Argentinean Government has flared again in soybean producing areas with export stocks cut by a strike. Comex copper futures fell for a second weekly decline, as London Metal Exchange stocks rose the most in more than two years.
Figures out Friday showed a 10% rise in LME monitored stocks to 121,275 metric tons. Supplies rose 11% last week, helping send copper prices down 2.7%. July copper futures dropped US7.1c to $US3.7165 on the Comex division of the New York Mercantile Exchange on Friday. (The metal is still up 22% so far in 2008.)
Supplies monitored by the Shanghai Futures Exchange rose 10% last week (it was a holiday interrupted week across Asia). Copper futures prices jumped by 12% on May 5 as preset buy orders triggered a surge. The metal reached a record $US4.2605 a pound on that day and has since fallen 13%.
Peru's Mining Federation, representing 28,000 miners, has called a national strike for tonight, our time. The unions voted to approve the walkout in February and held two national strikes last year, cutting output. Peru is the third-largest copper producer.
Wool prices in Australia, the world's largest producer and exporter fell to a nine- month low last week on slowing demand in the US and Europe.
Benchmark prices fell A20c, or 2.2% last this week to $A8.84 a kilogram. That was the biggest weekly fall in 10 weeks and the lowest price since August last year. Prices are down 12% this year.
