Hedge funds betting on corn to rally
The glut of corn that's been driving down prices is finally starting to ease, and hedge funds are betting that will help spark a rally for the commodity.
U.S. corn inventories are expected to drop before the 2018 harvest as farmers curb plantings and demand stays robust, the Department of Agriculture said Friday. The inventory decline would be the first since 2013 and signals that the four-year rout for prices could be over.
Money managers have stayed bullish on the grain for five straight weeks, the most positive streak since July. Midwest growers are cutting acreage in favor of other crops, including soybeans. That's helping to breathe life back into the corn market, especially amid near-record production from ethanol makers.
"You can't say demand's been bad by any stretch," said Fiona Boal, director of commodity research at London-based Fulcrum Asset Management LLP.
The corn net-long position, or the difference between bets on a price increase and wagers on a decline, increased 8 percent to 92,216 futures and options contracts in the week ended Feb. 21, according to U.S. Commodity Futures Trading Commission data released three days later. That's the highest since mid-July.
American reserves will drop to 2.215 billion bushels before the 2018 harvest, the USDA said Friday at its 93rd annual Agricultural Outlook Forum in Arlington, Va. That's down from 2.32 billion this season. Inventories are declining as production is forecast to fall 7.1 percent.
-- Bloomberg News
Pending home-sales index falls 2.8%
WASHINGTON -- Fewer Americans signed contracts to purchase homes last month as rising prices, higher mortgage rates and a dwindling supply of available homes appeared to frustrate many potential buyers, especially in the West.
The National Association of Realtors said Monday that its seasonally adjusted pending home-sales index fell 2.8 percent to 106.4, the lowest level in a year.
The decline suggests that higher mortgage rates, which have risen by about a half-percentage point since the presidential election, may be starting to bite into sales. And the number of homes for sale has fallen to near-record lows, forcing many would-be buyers to bid up prices. The combination of higher prices and rising mortgage rates are making homes less affordable.
These trends are apparent in the regional data. The pending home-sales index in the West plunged 9.8 percent in January and is now slightly below where it was a year ago. The West includes some of the highest-priced housing markets in the country, particularly San Francisco, Seattle, and Denver. The sharp decline in that region suggests some of those markets could be starting to cool.
Contract signings also fell in the Midwest, while rising in the Northeast and inching up in the South.
-- The Associated Press
Saudis to invest $7B in Malaysia oil hub
KUALA LUMPUR, Malaysia -- Malaysian Prime Minister Najib Razak said Monday that oil company Saudi Aramco will invest $7 billion in an oil processing hub in Malaysia, making it the single largest investor in the Southeast Asian country.
The announcement came on the second day of a visit by Saudi King Salman, who is on a multination tour to strengthen economic ties with Asia.
Najib said Aramco and Malaysia's national oil company Petronas, which is leading the project, will sign the agreement today.
"This is a significant investment," Najib told a news conference after meeting with the king. He said Aramco's investment is a "strong vote of confidence" in Malaysia's economy and that bilateral relations are at an "all-time high."
The refinery complex is being developed for $27 billion in Malaysia's southern Johor state bordering Singapore and is scheduled to begin operating in 2019. It includes a refinery that will have the capacity to process 300,000 barrels of oil a day.
-- The Associated Press
Shell to stand pat on oil sands assets
Royal Dutch Shell PLC is unlikely to take on new oil sands projects as it maintains a grip on costs after crude's crash forced competitors to write down Canadian reserves.
While Shell's existing oil sands operations generate strong cash flows, the expense of developing new projects discourages more investment, Chief Executive Officer Ben Van Beurden said in an interview.
Oil sands, the reserves of heavy crude found primarily in northern Alberta, lured investors in the past decade as oil's surge above $100 a barrel made the difficult extraction process economic. But they've fallen out of favor after the subsequent market collapse as companies dump expensive projects amid fears that competition from low-cost crude could strand costlier assets.
"All of those are reasons we are unlikely to develop new oil sands projects," Van Beurden said in London. "There are no plans for growth capital to be invested in oil sands."
Exxon Mobil Corp. slashed reserves after removing the $16 billion Kearl oil sands project in Athabasca from its books last week. A day earlier, ConocoPhillips said that erasing oil sands barrels had reduced its reserves to a 15-year low. In 2015, Shell itself took a $2 billion charge as it shelved an oil sands project in Alberta, and last year sold other assets in the area for about $1 billion.
-- Bloomberg News
Business on 02/28/2017