Commodity Risk Economic Calendar 16th – 20th Jan 2012

(All times GMT):

Monday 16th January

13:00 – ECB President Draghi speaks: Following S&P’s downgrade of French and Austrian sovereign debt last week and bank deposits at the ECB reaching record levels, expect his speech to set the tone for market sentiment at the start of the week.

21:00 – China GDP estimates: Over the past year annual GDP growth has slowed from 9.8% in 2010Q4 to 9.1% in 2011Q3. Recent PMI data show manufacturing output contracted in November, the first time since 2009 so a slowdown in GDP in 2011Q4 is likely. 2011Q4 data is forecast at 8.8%. The latest data can be found here. A better than expected estimate may be bullish for commodities on improved demand in China.

Tuesday 17th January

05:00 – German ZEW Economic Sentiment Index (6 month economic outlook): Business sentiment declined from 15.7 in February 2011 to -55.2 in November 2011 (a negative figure indicating pessimism) before improving slightly to -53.8 in December. A further improvement in sentiment is expected in the January report to -49.2. The latest data can be found here.

05:00 – Bank of England Governor speaks.

Wednesday 18th January

04:30 – UK claimant count change: This data measures the change in the number of people registering unemployed over the month. The claimant count has fallen from 37.1k in August 2011 to 3k in December. The claimant count is forecast to rebound slightly to 8k in January, see report here.

09:00 – IEA monthly oil report: Updated outlook for the oil market in 2012 and 2013 available here.

Thursday 19th January

08:30 – US month-on-month consumer price inflation (CPI): CPI is forecast to rise by 0.2%. A higher than expected reading may be taken as being bullish for the USD.

08:30 – US initial jobless claims: Measures the number of people who have registered unemployed during the past week. The latest week is forecast at 385k, down from 399k the previous week. A higher than expected reading is bearish for the USD. Latest data available here.

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 January 13th. The Latest report will be available here.

Friday 20th January

04:30 – UK retail sales (m-o-m): Retail sales are forecast to rise by 0.6% and will be a key bit of information to see how the high street has fared over the Christmas period. The latest data can be found here.

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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Commodity price volatility seen as key global risk in new report

Last week saw the publication of the World Economics Forum Global Risks 2012 report, a report based on a survey of 469 experts from industry, government, academia and civil society that examines 50 global risks and the latest in a series of reports from different institutions aiming to categorise how risks are changing over time.

The 50 global risks were divided into 5 categories: economic, environmental, geopolitical, societal and technological. Although all 5 categories may present a risk to the correct functioning of a supply chain, the category ‘economic’ addresses those areas that are of greatest concern in terms of likelihood and impact in the area of macroeconomics and so has the most bearing on managing commodity risk in global supply chains.

In terms of likelihood the survey participants ranked chronic fiscal imbalances as the key economic risk for 2012 followed by commodity price volatility. As current developments out of Europe testify, fiscal imbalances may have wide ranging impacts including financial failure, geopolitical failure and societal risks relating to the collapse of governments and international trade. Meanwhile commodity price volatility was seen as both highly likely while also having a great impact due to the way that it directly impacts and magnifies other key risk categories – particularly geopolitical and societal. Indeed highlighting its importance, commodity price volatility is the only risk that has featured in the top 5 risk impacts in the last 6 surveys.

Many of the risks identified, particularly in the economics category have many cross-overs with other risks. This is certainly the case with ‘hard landing of an emerging economy’. This risk was deemed by the survey participants to have a relatively low likelihood of occurring while also being of relatively low impact. I believe this is an underestimation both in terms of likelihood and impact.

Environmental impacts have also had a large impact over the past year in terms of managing commodity risk in global supply chains, the Japanese earthquake and Thai floods being prime examples.  Interestingly survey respondents rated man-made environmental risks such as rising greenhouse gases, failure to adapt to a changing climate and environment mismanagement as being more likely to occur and having a greater impact than natural disasters.

While highlighting the key risks people know about today, their interconnectivity and identifying means of mitigation is an asset to any business, it is those high impact, low probability risks, or ‘black swan’ events that businesses should also plan for. While the survey behind the report did offer participants a means of identifying a key risk which wasn’t one of the 50 identified by the authors the report would benefit from a greater discussion of these largely unforeseen events.

http://www.weforum.org/issues/global-risks

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Morning markets: CRUDE 112.11 +0.77%; COTTON 95.58 -0.11%; BDI 1105 -7.38%

Cotton prices were broadly unchanged after the USDA published its estimates for 2011 crop production yesterday and revised cotton production down by 1%.

Crude prices rose following increased tensions in Nigeria due to strike action. At present no crude output is affected.

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