Backup stories to our video update

CORN & CHINA

China to Buy 15 Million Tons of Corn in `New Era,’ Council Says, Citing Li
By Luzi Ann Javier – Jul 26, 2010

July 26 (Bloomberg) — Pauline Loong, politics and policy risk analyst at CIMB Securities in Hong Kong, talks with Bloomberg’s Haslinda Amin about the trade relationship between China and the U.S. Loong also discusses China’s currency policy. (Source: Bloomberg)

China may import as much as 15 million tons of corn in 2015 as demand outstrips local supply and the country enters a “new era” of buying from overseas, the U.S. Grains Council said, citing Shanghai JC Intelligence Co.

Imports may total 1.7 million tons this year and 5.8 million tons next year, the council said, citing Shanghai JC Chairman Hanver Li. Even with normal weather, the second-largest corn consumer won’t be able produce enough to meet demand as incomes rise, the council said on its website, citing Li.

China’s reemergence as a net corn buyer may help to drive global prices higher. Imports of 5.8 million tons would surpass China’s previous record purchases in the 1990s, according to U.S. Department of Agriculture data. Corn is used to make animal feed, with demand rising as consumers buy more meat and dairy products.

“The natural market to supply China in the corn space is certainly the U.S.,” Luke Mathews, a commodity strategist at Commonwealth Bank of Australia said, referring to the top producer and exporter. “China buying is certainly something that’s going to be supportive for global grain prices.”

Corn has risen 8.5 percent since April 27, a day before the USDA reported the first corn sales to China by U.S. exporters of at least 100,000 tons since 2001. The December contract on the Chicago Board of Trade narrowed losses today, trading 0.2 percent lower at $3.8375 a bushel at 1:15 p.m. in Beijing.

‘New Era’

“Demand for corn in China is simply outstripping the country’s production trend,” the council’s statement said, citing Li, who spoke through an interpreter. “A new era of China importing corn is here,” Li was cited as saying. A phone call by Bloomberg News to the head office of Shanghai JC Intelligence today was not answered.

The Asian nation had been a net exporter of the grain in recent years, including last year, when it sold 172,000 tons, compared with purchases of 47,000 tons, according to USDA data. China’s corn harvest totaled 164 million tons last year, down 1.2 percent, the statistics bureau said in May.

China’s previous record imports totaled 4.29 million tons in the year to September 1995, according to data from the USDA. Imports of 5.8 million tons may make the nation the fourth- largest buyer, overtaking Egypt, according to the department.

Corn imports by China, the world’s most populous nation, may surge to 10 million tons in 2015, according to a forecast earlier this month from Akio Shibata, chief representative for trading company Marubeni Corp.’s research institute. The company is Japan’s biggest grain trader.

Meat and Eggs

China’s expanding economy is boosting demand for meat, milk and eggs because as incomes rise people buy more food, Li said, according to the council’s Global Update report, dated July 22. Li was speaking at the group’s 50th annual board of delegates meeting. The council develops export markets for U.S. harvests.

The country had reached a “turning point,” Shanghai JC’s Li was cited as saying, referring to the period when China becomes a regular importer. Bad weather this year had cut output, local prices were rising and stockpiles were dropping, Li said.

The rising demand for food in China offered “an excellent opportunity” for increased corn shipments, Thomas Dorr, the grain council’s president, said last month. China may buy as much as 1 million tons over the next 18 months, Dorr forecast.

China has been selling corn from state stockpiles this year to cool local prices for immediate delivery that have risen 8.8 percent, according to data from Shanghai JC. At the same time, the nation has stepped up overseas purchases amid concern that the year’s crop may drop after bad weather.

“For now, imported corn will be limited, and will have limited impact on China’s domestic market,” said Yu Xiaomeng, an analyst at research company Beijing Shennong Net. Domestic crops looked fine, even with some weather concerns, she said.

To contact the Bloomberg News staff on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net; William Bi in Beijing at wbi@bloomberg.net

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SUGAR

Dryness may overtake wet as sugar threat

Dryness may overtake rain as the bigger threat to sugar supplies, Rabobank has warned, even as forecasts of wet weather helped prices to a fresh four-month high.

Traders blamed forecasts of more rain at Brazil’s seaboard for a rise in raw sugar to touched 18.66 cents a pound in New York, the highest for a near-term contract since late March.

The wet weather poses to cause further hold-ups for the queues totalling more than 100 ships waiting to take on sugar in Brazil, the top exporter, by forcing ships to keep hatches shut, and so preventing loading.

“The big end customers, the Middle East, Far East and so on, all pretty much depend on Centre South Brazil for their sugar,” Thomas Kujawa at Sucden Financial said, referring to the country’s top sugar producing region.

“Buyers are having trouble getting the sugar out, and that is what people are reacting to.”

Yield hits

However, further ahead, dry weather may dent supplies by accelerating the seasonal decline in the Brazilian harvest, Rabobank analyst Andy Duff warned.

“Although July has brought several days of very wet weather, there remains some concern that dry conditions this year may impact cane yields both towards the end of this season and next season,” he said.

Furthermore, sugar beet crops in the European Union and Russia look set to fall short of early hopes, hurt by the drought which is slashing their farmers’ grain yields.

“Both [countries] are large importers,” Mr Duff said.

“Unless offset by improved production prospects elsewhere, these developments effectively increase the market’s vulnerability to any shortfalls in Brazilian and Indian production.”

The widespread expectations of a return of global sugar production to surplus, compared with demand, in 2010-11 was “vulnerable”, he added.

Crop revisions

The comments came as the Russia Sugar Producers’ Union lobby group warned that it might cut its forecast for domestic sugar output, blaming dry weather for slowing root development in beet crops.

In Brazil, Datagro, the sugar an ethanol analysis group, cut by 500,000 tonnes to 32.9m tonnes its forecast for sugar production in the Centre South, citing dry weather in May and June.

Plinio Nastari, the Datagro president, said: “The effects of the drought should start to become clearer from here out, especially with the late maturing cane that will be harvested from October through December. It is very underdeveloped.”

However, higher plantings have are raising hopes for India, where Uttar Pradesh Sugar Mills on Friday forecast that sugar production in Uttar Pradesh, the country’ top cane-growing state, would jump by 35% in 2010-11.

New York’s October raw sugar contract closed down 0.2% at 18.31 cents a pound, with white sugar for the same month closing up $0.50 at $559.20 a tonne in London.
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GOLD

WEEKEND INVESTOR

July 23, 2010, 8:27 p.m. EDT
Bullion buyers bank on gold coins
Precious metal glitters for investors seeking to hedge financial chaos

By Claudia Assis, MarketWatch

SAN FRANCISCO (MarketWatch) — Apart from a New York City phone book listing, gold dealer Manfra, Tordella & Brookes, Inc. does no advertising. Lights are on all day because the shop sits in a basement.

Yet MTB, as the firm is known, has never been busier. Every day, people find their way to the Manhattan store with one thing in mind: getting their hands on gold bullion coins, as soon as possible and as much as possible, before the financial Armageddon they fear renders the dollars in their pockets worthless.

Welcome to the world of bullion coin investing, a business that has soared alongside the popularity of gold despite its disadvantages. The world’s thirst for gold coins has risen more than sovereign government mints can quench it, with demand on track this year to outpace 2009, itself a record.

Bullion coin investing may cost you
Investing in bullion coins has risen alongside gold’s popularity, catering to a small subset of investors who want physical possession regardless of how much more they may pay. Claudia Assis reports.

The coin craze is part of gold’s growing investment allure, based on fears of currency debasement, inflation, a debt debacle in Europe, and rising debt levels in the U.S. But the boon has also brought the practices of some retailers in the industry to question, with at least two U.S. companies under investigation for allegedly misleading consumers.

Bullion run

Bullion coin investing caters mostly to a subset of investors who want physical possession of gold and regard anything else as lesser investments, no matter how much more they have to pay, ounce per ounce, over gold futures prices or the difficulties they are likely to face when unloading their bullion.

Long having captured the hearts of a few in the periphery of the investment world, gold has won over some of Wall Street’s elite. Investment stars such as Paul Tudor Jones, of giant hedge fund Tudor Investment Corp. and John Paulson, of Paulson & Co., all have invested heavily in gold in recent years.

Investing in bullion coins is not to be confused with investing in collectable coins, although both are manufactured and sold by mints across the world. Bullion coins are valued entirely for their metal content, not for their collectible value or the denomination hammered on them. For many, they are an affordable and portable way to invest in gold.

It’s no coincidence that May was one of the best months in recent memory for the bullion coin business, and gold in general. It was also the month that concerns about a European debt crisis reached their highest note, and gold hit its first nominal record high since December.

“It’s been unbelievable. May was phenomenal,” with June sales and so far July a bit slower but still way above average, said Michael Kramer, one of the owners of MTB.

Precious-metals research firm GFMS estimated that 229 metric tons of gold coins were sold in 2009, up 22% from the 187 metric tons of 2008 and almost 70% from the 135 metric tons that moved in 2007.

“It looks as though we are going to surpass 2009,” said Phillip Newman, research director of the U.K.-based firm.

The U.S. mint ran out of some bullion coins last year and in 2008, and the Austrian mint added a third shift to catch up on their stocks. In his Manhattan store, Kramer caters to about 45 coin buyers a day, up from fewer than 10 a day in previous years, as the firm’s forte is wholesale.

MTB is one of only eight authorized firms in the U.S. able to purchase U.S. Mint bullion coins directly and sell them to coin shops nationwide and abroad. The U.S. Mint does not sell bullion coins to the public, as it does with commemorative and other coins.

Europe’s Week Ahead: BP and Shell report
European markets will get their first chance to react to the bank stress tests, with the latest earnings from BP, Royal Dutch Shell, Deutsche Bank and UBS all likely to be closely watched.

In addition to the new swarm of retail customers, MTB saw heightened interest from European coin retailers. “They couldn’t find enough coins in Europe, and they were buying from us.”

The Austrian mint, which, alongside Canada’s mint and the U.S. Mint is a top mint by sales, had to add a night shift to its two day shifts to counter delivery delays of two to three weeks and depletion of stocks.

“We did run out of stocks, we were living off our daily production.” said Kerry Tattersall, director of marketing at the Vienna-based mint. The third shift was recently discontinued after the mint built up its inventory.

Risky insurance

Ongoing fears about the pace of the global recovery have only given gold more momentum, with futures prices hovering just below $1,200 an ounce and the consensus looking for $1,300 an ounce before the year is out.

Gold coin buyers already pay $1,300 and beyond for their morsel of shiny metal. Premiums for coins are around 5% to 10% for one-ounce coins, and higher for lesser-weight coins.

In contrast, gold bars, which are cheaper to produce, carry premiums half as expensive. In gold investing, the premiums for coins are only higher than premiums paid for jewelry, where prices also reflect fashion, artisanship, and other factors.

“Coins are unable to give you the most bang for your buck,” said Jon Nadler, an analyst with Kitco Metals Inc., a dealer of coins and other bullion products. “Secondly, you are going to have questions about liquidity … it’s not going to be as easy as you think to sell them.”

Coin owners are also exposed to total loss in case something happens with their storage arrangements, Nadler said. Even bank safes are not covered in case of catastrophes and physical damage to the buildings that house them, to say nothing about the danger of home burglaries.

The financial breakdown scenarios invoked by some die-hard gold coin and bar buyers also don’t work for Nadler. With the collapse these scenarios envision, “you probably need lead, not gold. And who’s going to make you change?”

Gold watch

Most buyers are not concerned with small change or exit strategies. Some people sell their coins to raise emergency cash, but most are in for the long run and eschew the ups and downs of the futures markets and exchange-traded funds, which are “paper gold,” said Parker Vogt, owner of Camino Coin, LLC, a retailer in Burlingame, Calif.

In recent months, two Southern California coin retailers have drawn attention for the allegedly high premiums charged to customers and their sales tactics.

Earlier this week, Santa Monica’s City Attorney’s Office announced an investigation into Goldline International and Superior Gold Group, both based in the city, after receiving dozens of complaints in the past two months. The city said the Los Angeles County District Attorney’s Office is also involved and the investigation is in its early stages.

In May, Rep. Anthony Weiner (D-N.Y.) requested that the Securities and Exchange Commission and the Federal Trade Commission investigate Goldline, a frequent cable television advertiser. The agencies haven’t yet responded.

Weiner accused the company of high-pressure sales tactics “and tall tales about the future of gold to sell overpriced coins that can be bought somewhere else for cheaper,” according to a report produced by Weiner’s office. The average Goldline markup was above 90% the melt value of the coin, the report said.

Goldline executive vice president Scott Carter said in a telephone interview that the company takes the complaints made to the City of Santa Monica seriously, but they represent only a fraction of Goldline’s thousands of transactions.

Congressman Weiner’s contention of price gouging is also unfounded, he said, as Goldline charges premiums of 35% for its highest-priced collectible products and the average 5% to 10% for bullion coins.

“The allegations are inaccurate,” Carter said of Weiner’s report. Clients are offered “comprehensive” disclosure documents and must review a risk information package before doing business with Goldline, he said. The company has a seven-day, full-refund policy, one of the most generous in the industry, he added.

At Superior Gold Group, Managing Partner Bruce Sands said in an email that he was “not aware” of either Santa Monica’s or Los Angeles County’s investigations.

“We have a full compliance department which is a third party verification,” Sands said.

“We record every call to make sure any decisions made by a potential client is documented,” he added. “Potential and current clients call the Superior Gold Group of free will with concerns about economic market conditions and look to precious metals as a hedge for diversification. We also have any and all clients sign an account agreement that outlines our terms of service to process their order(s).”

There are alternatives to coins, even for those willing to pay the premiums for physical gold. A few companies offer vault storage for bars purchased, and the Perth Mint sells gold certificates, with the metal sitting in vaults in Western Australia.

Some exchange-traded funds also offer physical gold, including SPDR Gold Shares (CONSOLIDATED:GLD) , iShares Comex Gold Trust (CONSOLIDATED:IAU) , ETFS Physical Swiss Gold Shares (CONSOLIDATED:SGOL) and Sprott Physical Gold Trust (CONSOLIDATED:PHYS) though actually taking delivery can be costly. See related story.

For some, the portability of coins is their best feature. Kitco’s Nadler recalls buying gold coins from Iranian and Vietnamese refugees in Southern California.

The ability to buy less than one ounce is also a big draw. A similar coin craze swept the world in 1999, as some feared a social breakdown — and inoperative ATMs — caused by the Y2K bug.

Yet there’s no denying that, for many buyers, tangible coins simply carry an emotional appeal. If customers are investing a big chunk of their money, MTB’s Kramer said, “they want to see what they are getting. They don’t want to see a piece of paper.”

A Resource Trader Rewind video from January 2nd, 2007 Kevin talks about gold setting up to explode higher, p.s. This is when gold was at $640 or so, those were the days. Watch Here!