Soybeans Rise to 10-Month High After Record Crush in U.S.

Soybeans extended their climb to the highest level in more than 10 months after a report showed record demand from U.S. mills, boosting concern that supplies from the world’s second-biggest exporter would be reduced.

Soybeans for July delivery rose as much as 0.8 percent to $15.2025 a bushel on the Chicago Board of Trade, the highest price for a most-active contract since June 6. Futures were at $15.155 by 6:53 a.m. local time, rising for a fourth day and taking this year’s increase to 17 percent.

Processors crushed 153.84 million bushels in March, up 12 percent from a year earlier and the most for the month since at least 1998, the National Oilseed Processors Association reported April 15. Domestic stockpiles at the end of August will be 135 million bushels, less than the 145 million bushels forecast in March and below 141 million last year, the U.S. Department of Agriculture said last week.

Soybean prices are “supported by worsening tightness in U.S. soybean supplies,” Luke Mathews, a commodity Strategist at Commonwealth Bank of Australia, wrote in a note today. Slightly better-than-expected Chinese economic data has also supported “improved sentiment within the oilseed market and helped traders turn a blind eye to recent reports of Chinese soybean cancellations” and defaults, he said.

Importers in China, the biggest buyer, may default on as much as 2 million metric tons of shipments, according to the U.S. Soybean Export Council’s Beijing office. The country’s gross domestic product rose 7.4 percent in the first quarter, government data showed yesterday. The median estimate of analysts in a Bloomberg survey was 7.3 percent.

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Teck's Red Dog zinc mine 'operating as normal' after earthquakes

Two earthquakes, a magnitude 5.5 and a magnitude 5.4, struck near the Red Dog Operations zinc-lead mine in remote northwest Alaska, the U.S. Geological Survey said.

It said the quakes, which struck minutes apart, were centered just a few miles (km) southeast of Red Dog Mine, the world's largest producer of zinc, which is operated by Canadian mining company Teck Resources.

Teck Resources said on Friday its Red Dog zinc mine, the world's largest, in Alaska is operating as usual after two earthquakes struck a few miles from the site.

"Mild tremors were felt at Red Dog operations. There were no safety concerns and the mine is currently operating as normal," a spokesman said in an email. 

Russia Confirms Troop Build-Up Near Ukraine; Warns West, More Sanctions "Absolutely Unacceptable"

For the first time, Russia has confirmed that it has built up its military presence on the Ukrainian border (according to Agence France Presse). On the heels of the de-escalation and the West's threat of tougher sanctions (if Russia failed to abide by the new 'deal'), Kremlin spokesman Dmirty Peskov told Rossiya TV that "we have troops in different regions, and there are troops close to the Ukrainian border. Some are based there, others have been sent as reinforcements due to the situation in Ukraine." Reuters also reports that Washington statements "are unlikely to help dialogue," and further sanctions would be "absolutely unacceptable." It seems the 'deal' has done little to calm anything but the US equity market as Peskov blasted "You can't treat Russia like a guilty schoolboy."

The Daily Mail's latest update on suspected (now confirmed) Russian troop build-up

Reuters adds that President Vladimir Putin's spokesman, Dmitry Peskov, said, "Statements like those made at a high level in Washington that the United States will follow in detail how Russia fulfils its obligations ... are unlikely to help dialogue,"

"You can't treat Russia like a guilty schoolboy who has to put a cross on a piece of paper to show he has done his homework," Peskov said in an interview with Russia's First Channel. "That kind of language is unacceptable."

Russia's Foreign Ministry accused U.S. officials of seeking to whitewash what it said was the use of force by the Ukrainian government against protesters in the country's mainly Russian-speaking eastern provinces.

"The blame for the Ukrainian crisis and its current aggravation is unreasonably being placed on Russia," the ministry said in a statement.

"The American side is once again stubbornly trying to whitewash the current actions of Kiev's authorities, who have embarked on a course for the violent suppression of protesters in the southeast who are expressing their legitimate indignation over the infringements of their rights."

Sliding Chinese currency takes blame for gold price weakness

The price of gold ended the holiday-shortened week below the psychologically and technically important $1,300 level, losing almost 2% since Monday.

The sell-off was blamed on an easing of tensions between Russia and the West over Ukraine after marathon diplomatic talks on Thursday.

The gold price was also hurt by renewed profit-taking ahead of the Good Friday long weekend when many markets in the West are closed for trading.

Investors continued to pull money out of the SPDR Gold Trust (NYSEARCA:GLD), the world's largest physically-backed gold ETF accounting for some 40% of total holdings in the industry.

A new report suggests there may be other reasons for the recent weakness in the yellow metal: The slide in the value of the Chinese currency, the yuan, to levels against the US dollar last seen in February.

Copper being used in China as collateral for loans and to bypass the country's capital control regulations has long been a staple of the industry.

With the tight credit conditions inside the country, the practice has spread to iron ore and gold. Some estimates put the the portion of copper stockpiles used in finance deals as high as 80%, while 40% of iron ore inventories could be tied up for trade credit.

This week a report by the World Gold Council said Chinese firms could have locked up as much as 1,000 tonnes of gold in financing deals.

DailyFX explains the dynamic of how this could push down the gold price:

Gold has been used for some even more complex and lucrative structures surrounding the skirting of capital controls

"The highest USD/CNY fixing rates in months may have forced the unwinding of some extremely overleveraged positions. Although the systems of financing are often complex as we saw with copper, gold has been used for some even more complex and lucrative structures surrounding the skirting of capital controls.

"In regards to the depreciating Yuan, political pressure continues to build with Treasury officials warning the Chinese not to weaken the Yuan for their economic benefit. Meanwhile, the daily reference rates out of the PBoC continue to move higher toward the ominous 6.25 mark. That is said to be the level where a large concentration of leveraged financial vehicles may experience some serious stresses."

Another indication that there may be lots of gold on offer in China is the disappearance of premiums paid on the Shanghai Gold Exchange.

From premiums that topped out at $37 when gold was trading around $1,200 last year, traders are now offering gold at a discount or a couple of dollars above to the quoted London spot price.

Driven in part by a weakening yuan discounts on gold in China widened to as much as $9 an ounce below when the price were headed towards $1,400 in March.

Chalco to Halt 600,000-tpy Aluminum Capacity, 800,000-tpy Alumina Capacity

Aluminum Corporation of China Limited (02600) (Chalco) announces that, given the massive over-capacity of electrolytic aluminium, the depressed market price of products and higher cost of electricity of enterprises at present, it has determined to implement flexible production arrangements for certain electrolytic aluminum and alumina production lines, which involve temporary shutdown of production capacity of 600,000 tonnes of electrolytic aluminum and 800,000 tonnes of alumina, respectively.

Chinese Base Metal Demand Thaws but Stocks Still High: Barclays

Chinese base metals demand has begun to thaw, with downstream orders rebounding and factories sourcing raw material. However, inventories remain high, and demand needs to strengthen further for the market to rebalance, said Barclays in a research note.

According to Barclays, last week Chinese market participants indicated metal demand had begun to pick up in China. Factories reported a moderate bounce in orders that allowed them to source more raw materials. Tax-paid spot copper premiums in Shanghai recovered to $29/t in April, in contrast to a $6/t discount in March. SHFE futures also shifted to backwardation, a sign of a tighter market.

Behind these price signals was a seasonal rebound in industrial activities. While sentiment turned sharply negative during the copper price sell-off in mid-March, activities were in fact picking up gradually. The State Grid Corp of China awarded two rounds of tenders in March, and other infrastructure projects also went under way. At the same time, government reassurances that China could deliver growth began to steady sentiment. A stabilizing USD/CNY after steep CNY depreciation has also helped.

However, demand is still best described as lukewarm rather than red-hot. YTD State Grid transformer tenders were still 13% lower y/y, and tight credit continues to constrain a variety of activities, from construction to property sales. The government, while promising to fast-track projects and provide state funding, has carefully managed expectations and avoided relaxing monetary policy too quickly.

March import data remind us there is still a lot of inventory to digest, though stock levels have largely stabilized. Preliminary data from China put unwrought copper and semi imports at 420Kt in March, implying roughly 295Kt of refined copper. Q1 unwrought copper and semi imports stand at 1.34Mt, the second-highest Q1 imports in history. While arrivals should begin to thin in coming months, reflecting soured financing appetite, bonded inventories are still high. On the other hand, recent feedback suggests that inventories have only inched up slightly since March, as outflows from the warehouses to the domestic market roughly offset imports and smelter deliveries to the warehouses. Still, Chinese demand needs to pick up more strongly for the market to rebalance.

Crude Alert: Gartman Is Now Long Oil

Having been stopped out of his "long punt" in copper futures (which are, we remind readers, levered via margin and not a simple cash percentage loss of capital), world-renowned (for something) Dennis Gartman has issued his latest missive - ultimate contrarian call - advice... "we are sellers this morning of copper and buyers of crude oil, one relative to the other, with the problems in China weighing upon the former while crude has held impressively as other commodity prices have fallen." Crude oil longs beware... prepare to be Gartman'd.

Via Dennis Gartman,

We were stopped out of our copper position yesterday, losing 1.2% on the position, which when compared to the 10-15% movements we’ve seen recently in NFLX or TSLA or others such as that seems rather inconsequential but is important nonetheless. Those not out should be out... now.

[deflecting the futures-contract - and thus 10-20x levered via margin - 1.2% loss in copper with a 10-15% gain in unlevered risk positions in NFLX and TSLA (a magical catch we suppose) seems a little disingenous to us - but we digress]

NEW RECOMMENDATION: Indeed, we are sellers this morning of copper and buyers of crude oil, one relative to the other, with the problems in China weighing upon the former while crude has held impressively as other commodity prices have fallen. As we write, June WTI crude is trading 103.79 and July copper is trading $3.0010. We’ll have stops in tomorrow’s TGL, but we’d not wish to risk more than 2% on this rather unusual spread position.