Commodity Risk Economic Calendar 3rd – 6th Jan 2012

(All times GMT):
Tuesday 3rd January
09:30 – UK Manufacturing PMI: The November manufacturing index totalled 47.6, a 0.2 point increase compared with October (the second consecutive month of manufacturing contraction), down from 62 as recently as February 2011. The December manufacturing index is forecast as 47.30.
15:00 – U.S. ISM Manufacturing PMI: The ISM index rose to 52.7 in November, up from 50.8 in October; the index has yet to fall below 50 during 2011 (indicating a contraction in activity). The December manufacturing index is forecast to increase to 47.9.
19:15 – FOMC Meeting Minutes: Report available here

Thursday 5th January
13:15 – ADP estimate of US non-farm payroll: The ADP report will provide an estimate for the U.S non-farm private employment change during the month of December with a higher than expected reading being bullish for the USD (5 of the last 6 readings have been higher than the consensus forecast); The December estimate is forecast at 375k.
15:30 – EIA Crude Oil Market Report: the EIA (Energy Information Administration) will publish its weekly report on the U.S oil and petroleum market for the week ending on December 30th; in the previous report crude inventories fell by 3.9mmbbl to 327.5mmbl. The Latest report will be available here.
20:30 Cotton On-Call: Call cotton refers to physical cotton traded whose price has yet to be fixed. The latest report available here.

Friday 6th January
13:30 – US Non-farm Employment Change: November data showed a net 120k increase in employment up from 80k in October. December data is forecast to increase by 150k.
20:30 Commitment of Traders report: provides a breakdown of the previous Tuesday’s open interest. Report will be available here.

For more detailed information please see the Live Economic Calendar

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CRUDE 108.86 +1.52%; COTTON 92.19 +0.91%

Brent Crude increased on the latest commitment of futures traders report that showed that bets on increasing oil prices rose by over 7% in the week to 27 Dec and encouraging headline results in Asian purchasing managers indices, released yesterday.

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Does the Baltic Dry Index offer a sober view of the global economy and the outlook for commodity prices?

Long seen as a barometer of global economic activity the Baltic Dry Index (BDI) halved in value between June and September 2008 from a high of over 11,400. Then Lehman Brother’s went bankrupt and the BDI continued to plummet to around 700 by the end of 2008 as shippers were faced with the combination of a sharp drop in demand for the key commodities making up the BDI (cotton, iron ore, grains etc), an oversupply of vessels and a significant tightening in the availability of credit to finance commodity transactions and trade.

Fast forward three years and many of the factors that followed the drop sharp drop in the BDI in 2008 are present again. Over the past 12 months the BDI fell from 3,000 to 1,000 in February 2011. Since February however the BDI has risen by around 90% to 1,900 in mid-December, during the same period when many commodities including cotton saw prices crash in value. While the decline in the BDI to its low of 1,000 in February 2011 can be seen as being a good indicator of future weakness in commodity prices the recent rebound suggests the current drop in commodity prices may have run its course.

As the Euro debt crisis has escalated and concern over exposure to sovereign debt has forced banks to reduce their exposure and increase their capital some of the key linchpins to global commodity trade to be affected have been the French banks such as BNP Paribas and Credit Agricole. Commodity traders and shippers alike have expressed concern that sharply reduced credit availability from these banks has will impact on global trade in commodities. The recent increase in the BDI may suggest, that at the moment, these concerns have been overblown. But if concerns do escalate, the Baltic Dry Index may be the first warning of something more serious.

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