commodities watch

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    Commodities Watch:

    February 24 – Bloomberg (Jeff Wilson): “Soybean futures in Chicago soared to their highest price in more than 15 years as hot, dry weather threatened to damage crops in Brazil and Argentina at a time of surging demand for soy-based animal feed and vegetable oil. Brazil’s soybean production may fall as much as 11 percent and Argentina’s may drop 7 percent after a heat wave expected over the next two weeks…”

    February 26 – Bloomberg (Joe Carroll): “Natural gas traded in New York had its biggest gain in two weeks after the U.S. Energy Department reported higher-than-expected demand for stored reserves of the most widely used U.S. heating fuel. Utilities took 164 billion cubic feet of gas from storage last week, the department said. Only one of 19 analysts surveyed by Bloomberg expected a withdrawal of more than 160 billion cubic feet. If storage declines proceed at a normal pace, inventories will end the winter heating season 18 percent below the five-year average. ‘People are finding out there is a very real supply problem in North American natural gas,’ said Darcel Hulse, president of liquefied natural gas at Sempra Energy… ‘These markets are tighter than they’ve been in 20 years,’ said Steven Parla, director of energy research at Foresight Investment Solutions… ‘We’re going to continue to see structurally higher and more volatile prices.’”

    February 25 – Bloomberg (Claudia Carpenter): “The 5,500-pound bundles of copper plates in Mario Casiano’s three New Orleans warehouses will be gone by the end of this week, and the 38-year-old metals manager for Pacorini USA said remaining inventories at other storage depots in the city will disappear by August. Surging demand for wire, pipes and electronic parts already has emptied copper warehouses in Singapore, Barcelona and Hamburg. New Orleans is home to the largest copper pile monitored by the London Metal Exchange, which says global inventories fell 65 percent in the past year to the lowest since 1998… ‘Inventories are dropping now at really a rapid pace,’ said Thomas Baack, a 20-year veteran of the copper business who is the chief statistician at the International Copper Study Group in Lisbon. ‘The problem is if suddenly prices go up and people realize they might go up for a while, they might all scramble to cover their needs and suddenly all the available metal is gone.”

    February 21 – Financial Times (Kevin Morrison): “John Meyer, a metals analyst at Numis, offered advice to investors this week when he wrote: ‘We recommend investors buy anything copper: you could go down to B&Q and buy copper pipes before the price goes up; or an air conditioner - most of it is copper piping; buy the new Toyota hybrid car - it uses twice as much copper as a conventional car, so its raw material price is going up. It’s also environmentally friendly. But don’t melt your copper coins yet – they’re made of cupronickel so there’s not much copper in there.’”

    February 26 – Bloomberg (Christopher Donville): “The rising price of steel threatens the solvency of some U.S. construction companies, the Associated General Contractors of America said. ‘Steel-price increases have been sudden, steep and devastating,’ Ken Simonson, the…association’s chief economist said… The price of hot-rolled steel imports has soared 73 percent this year to $570 a short ton… ‘I worry that these price spikes are going to cause bankruptcies and job losses,’ said Simonson, who said the cost of steel for a single bridge project has risen by $15 million since the construction contract was signed. Construction contractors are also being squeezed by increases in the price of copper, plywood, natural gas and petroleum products such as diesel fuel and asphalt, he said.”

    The CRB index surged 4% this week, with a y-t-d gain of 7.6%. The best I can tell, the CRB index traded today at the highest level since July 1984. The Goldman Sachs Commodity Index rose 4.7%, with y-t-d gains of 7%. This week’s commodity performance was all the more impressive in the face of a stable-to-stronger dollar. Cooper rose to an 8-year high, with prices up 30% already for 2004. April Crude Oil ended the week at $36.16, up 5.5% for the week.
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