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November 2011 Market Report
The ongoing economic problems in the EU led this month to the replacement of both Greek and Italian Prime Ministers and continued turmoil on commodity markets. The prospect of the return of recession to the EU has raised concerns over the future demand levels of a wide range of different commodities.
| UP | Down | ||
| Palm Kernel Oil (MY) | +19% | Cocoa Beans (LIFFE) | -13% |
| WMP (NZ) | +14% | Natural Gas (ICE) | -11% |
| Crude Oil (NYMEX) | +11% | Processing Potatoes (DE) | -8% |
| Rice (TH) | +5% | Milling Wheat (CBOT) | -7% |
| Frozen Conc. Orange Juice (ICE) | +4% | Aluminium (LME) | -6% |
| Pork (EU) | +4% | Garlic Powder (CN) | -4% |
All percentage changes in this report refer to price movements over the month of November.
Soft Commodities
Cocoa beans fell on ICE (-13%) and LIFFE (-13%) as West Africa is expected to produce a second successive bumper crop while demand from Europe, which consumes around 40% of the world's cocoa, may be affected by the ongoing economic problems within the eurozone. In the UK, the price premium of cocoa powder over cocoa butter, which had been increasing since June, narrowed last month as cocoa butter prices recovered (+6%) and cocoa powder continued to fall (-9%). Arabica coffee rose (+4%) on ICE and Robusta coffee was also up (+5%) on LIFFE. World coffee exports in the 2010/11 season, which ended in September, reached a record 103.1m bags, reflecting firm global demand. World sugar prices were down on LIFFE (-6%) and on ICE (-7%). This season is expected to produce a 4.46m tonnes global sugar surplus following bumper harvests in the EU and Russia. Sri Lankan tea prices rose (+9%) as prolonged unfavourable weather caused production in the seven months to October to fall 9.8% year-on-year to 184.2m kg. A recovery in Kenya's tea production, on the other hand, has weighed on prices there (-8%).
Oils & Fats
Price increases continued to be seen in palm oil, with prices up in Rotterdam (+1%) and Malaysia (+2%) as production has started to decline seasonally in the main growing regions. The return of La Niña weather patterns will bring heavy rain to the region which is likely to delay harvesting in the next few months. Soyabean oil fell on CBOT (-3%) and in Argentina (-2%), as global soyabean production has been revised slightly up from October's estimates to reach 258.9m tonnes due to larger crops expected in South America. Rapeseed oil prices rose (+1%) in Rotterdam as global supplies are expected to decline to a 3 year low. Rapeseed production in the EU is forecast at 19.1m tonnes in 2011/12, down 8% from last season. Sunflower oil fell (-1%) in Rotterdam as ample supply is expected this season. Prices of lauric oils strengthened sharply over the past month, with palm kernel oil up sharply (+19%) in Malaysia, while coconut oil rose further (+20%) in the Philippines. Olive oil fell slightly (-1%) in Spain.
Grains
US maize prices fell back (-7%) on CBOT, as demand for US maize exports has been slowing due to competition from alternative sources. Both feed wheat (-6%) and milling wheat prices fell (-4%) on LIFFE with milling wheat prices also down (-7%) on CBOT. The 2011/12 world wheat production forecast has been revised up 2.1m tonnes from last month's estimates to 683.2m tonnes, which would be close to the record crop seen in 2009/10. Barley prices rose in the EU for malting (+3%) but fell for feed quality (-2%). EU barley production in 2011/12 has been revised upwards from last season to reach 52.3m tonnes. Oats were down in the US (-8%) and Finland (-5%). Rice prices in Thailand have risen (+5%) as supply is limited due to flooding affecting the country last month. Furthermore, the government continues to buy unmilled rice at a considerably higher level than the market price. US rice on CBOT fell (-9%). Durum wheat of Italian origin fell (-5%) as supply remains ample.
Ingredients
In Europe, US sourced peanuts continued to rise (+3%) over the month. Prices have almost doubled since the start of the year as the US crop is forecast to shrink 12% year-on-year to 1.24m tonnes in 2011/12 due to drought in the mid-west. Increases were also seen for peanuts from Brazil (+2%) and Argentina (+1%). The majority of nuts have received support from rising demand, particularly in the Far East among the growing middle class. Spanish almonds (+8%), Turkish hazelnuts (+5%) Indian cashew nuts (+4%) and Chinese pine nuts (+9%) were all up over the month. In dried fruit, Turkish dried apricots were down (-10%) while prices rose for both dried figs (+2%) and raisins (+1%). Desiccated coconut prices were up (+1%). Tapioca starch saw considerable rises (+12%) in Thailand, the world's main exporter. Export demand for the starch has been strong, with shipments from the country up 4% year-on-year at 1.93m tonnes in the nine months to September. In spices, black pepper was stable (+0%), remaining at more than double its year-ago level as annual production is expected to fall 2% this year. In India, cumin (-6%), ginger (-5%) and cardamom (-7%) all fell while turmeric rose (+1%). Chinese garlic powder fell (-4%).
Fruit
Apple prices fell (-5%) in the EU owing to good growing conditions increasing availability from France. EU pears were up (+5%) after bad weather in central-north Europe damaged the quality of the fruit and reduced fresh availability. Oranges fell (-13%) in the EU as large Spanish and Egyptian varieties began to come through to replenish volumes. Bananas rose (+4%) in Germany, as unfavourable weather conditions in main growing countries has limited availability. EU lemon prices fell (-11%). Grape prices rose (+17%) in the EU amid fears that volumes may run short over the festive period although Spanish produce is reported to be ample. Raspberries declined (-11%) as good quality Spanish varieties continue to be in good supply. Frozen orange juice prices rose (+4%) on ICE, as earlier increased exports from the US have left stockpiles low due to increased demand in the lead-up to winter.
Vegetables
Potato prices fell (-4%) in the EU on average as the main crop is coming through, with sharp declines seen in Spain (-11%) and Germany (-8%), which have benefited from an increase in growing area and higher than average yields. Onions fell (-9%) in the EU due to increased availability thanks to good yields seen in the Netherlands, UK and Spain. Carrots fell (-2%) in the EU as supply and quality has been good. Broccoli prices fell (-13%) in Spain as new season produce started to enter the market. EU lettuce prices rose sharply (+15%) due to heavy rain in the main growing regions of Spain affecting supply. EU cauliflower prices fell (-6%) on average as the mild weather has brought crops forward. UK salad, beef and cherry tomato prices fell (-15%) as the Spanish crop has started to come through. Pepper prices rose sharply (+20%) on average as the supply moves from the UK and the Netherlands to Spain and Morocco. Brussels sprouts fell sharply (-19%) in the UK as the Lincolnshire harvest has begun and the quality is very good.
Meat & Poultry
EU beef deadweight prices generally rose last month, touching record highs amidst tight global supplies and robust world demand. Most countries within the EU saw price rises with Irish (+8%), German (+3%) and UK deadweight beef (+2%) all up, while Dutch prices were largely unchanged and French prices fell slightly (-1%). Liveweight cattle futures on CME fell (-1%) while beef prices in Brazil also continued to weaken with liveweights down (-2%). Uruguayan deadweight prices however rose (+2%) as reduced cattle stocks have led to a decline in Uruguayan supply. EU lamb ended up on average (+3%), with increases seen in the UK (+7%), Germany (+5%) and France (+1%). Dutch lamb prices fell slightly (-1%). Strong demand from the Asian markets caused New Zealand lamb prices to rise (+4%). Pig prices firmed in the EU, with EU deadweight pork reference prices up (+4%). EU pork prices have been supported by a fall in pig numbers in the EU and EU piglet prices fell slightly (-1%) due to low demand. EU deadweight chicken prices fell (-1%) aided slightly by a fall in the cost of feed. However, Thai (+2%) and Brazilian liveweight chicken prices rose (+5%) and Chinese market prices also strengthened (+6%). For fish, cod fell (-10%) aided by record Norwegian exports while farmed Atlantic salmon rose (+10%) as current low prices are prompting an increase in demand.
Milk & Dairy
Butter prices in the EU decreased (-6%) on average following the downtrend in world prices. An increase in the rate of release of butter from the EU Private Storage Aid scheme has led to increased supply. WMP fell in the EU (-2%), but ended up in New Zealand (+14%) as global demand was encouraged by the earlier low prices. SMP prices fell slightly on average in the EU (-1%), but rose in New Zealand (+11%) despite milk production being at its seasonal high. Liquid milk prices rose slightly (+1%) in both the UK and Italy. UK milk deliveries amounted to 1062.2m litres during October, a decrease of 1.3% compared to October last year. However, deliveries for the UK 2011/2012 season to date are up 0.6% on this time last season. Cheddar prices fell in the UK (-2%) due to increases in production, but prices were up in the US (+11%) and in New Zealand (+5%). Edam, Emmental and Gouda all rose (+1%) on average in the EU. London wholesale egg prices increased (+14%), with EU eggs up (+11%) as sellers maintain higher asking prices due to expected consumer demand increases at this time of year. EU whole liquid egg was up (+15%), with whole powdered egg also up (+7%).
Energy
Brent crude oil prices rose slightly in November (+2%) despite tight fundamentals due to concerns over the deepening eurozone crisis and slowing growth in China. Light sweet crude oil moved up sharply on NYMEX (+11%) on the news that infrastructure constraints that had led to a surplus of oil in the Midwest is set to be resolved, shrinking the price differential between Brent crude and NYMEX crude. Petrol prices were down in the EU (-3%), while diesel was steady. Heating oil rose seasonally in Europe (+2%) and on NYMEX in the US (+2%). Prices of natural gas fell steeply in Bacton (-13%), ICE (-11%) and on NYMEX (-8%) on improved supply and as winter outlook was revised to show milder weather. EU coal prices fell (-2%) on lower global demand. Electricity prices fell in the UK (-12%) in line with declining primary energy costs.
Chemicals & Plastics
EU naphtha fell slightly (-1%) due to weak domestic demand and a lack of export opportunities. EU ethylene was also down (-4%). Prices of aromatics declined in Europe as demand softened due to lower industrial activity in the region: benzene (-10%), xylene (-4%) and paraxylene (-7%). Lower demand led to a drop in most EU plastics, with LDPE (-4%), PP (-2%) and HDPE (-1%) all down. Plastic prices were also subdued in Asia as weakening demand forced producers to operate at reduced capacity with LDPE (-2%), and PS (-3%) both down, while HDPE rose only slightly (+1%). Fertiliser prices softened with US urea (-4%) and diammonium phosphate (-1%) both down.
Pulp & Paper
World pulp output slowed significantly in October, reflecting weakening world demand. Pulp shipments dropped 17% from the September figure, down 648,000 tonnes to 3.2m tonnes. Delivered NBSK was down in the US (-3%), but EU NBSK prices recovered a little in the last week of November (+2%). BHK pulp prices also fell in the US (-3%), China (-6%) and Europe (-1%). Packaging demand has weakened in the EU and prices have fallen through November. Orders have slowed and the combination of the approaching seasonal lull and further weakening of the economic outlook do not give much hope for any near-term improvement. EU kraftliner (-2%), testliner (-4%) and waste-based fluting (-4%) were all down.
Metals
The worsening economic outlook from the eurozone caused metal prices to fall in most markets, although there were some signs of improvement starting to be seen in the US. On the LME, declines were seen in aluminium (-6%), copper (-6%), tin (-7%) and nickel (-9%), while a slight rise was seen for lead (+1%). US prices for hot rolled (+2%), cold rolled (+1%) and stainless steel (0%) firmed slightly. EU prices for hot rolled (-5%), cold rolled (-5%) and stainless steel (-3%) fell. Steel prices were mixed in China with hot rolled up (+1%) while cold rolled remained steady (0%) and stainless steel was down (-3%). Prices slipped for coal (-4%) while iron ore costs firmed (+11%) as inventories in China are reported to be low.
Others
Baltic Capesize (+13%), Silver LME (-7%), Nylon chips CN (-8%), Wool AU (-10%), Cotton IN (-14%).
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