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Grain Prices

Russia may limit grain exports this autumn if domestic prices rise sharply, Economy Minister Andrei Belousov said Friday, Russian newswires reported.

“The question of shutting off the export of grain is one of the dynamics of the domestic price for grain. We are currently monitoring that trend. Given such trends, it’s entirely possible that the government will decide to limit exports,” Mr. Belousov was quoted as saying.

Government ministers had previously insisted that restrictions on exports won’t be enforced, despite a widespread drought that has damaged this year’s grain harvest. The government estimates that this year’s harvest will range between 72 million and 73 million metric tons, down from a record 94.2 million tons last year.

In 2010, the government introduced an export ban after a severe drought that resulted in a harvest of just 61 million tons, sending prices soaring worldwide.

Metals

Shanghai Futures Exchange copper prices fell by 0.6% on the week as lacklustre manufacturing data from China and Europe saw investors lock in profits.

The January copper contract settled at 59,740 yuan ($9,432) per tonne on Friday September 21, inching up 10 yuan from Thursday, but 350 yuan lower from last Friday. SHFE copper inventory rose for a second week to 166,829 tonnes, up 10,428 tonnes or 6% from last week.

The Fed’s actions provide a further boost for gold, which is a hedge against inflation. Gold is up 13 per cent from its July lows on the back of QE3. Its price has been linked to growth in the global money supply – the greater the flow, the more gold is valued. With global money supply now expected to reaccelerate as monetary policy is eased across the world, we forecast further gains for gold.

Oil

The Dubai Mercantile Exchange (DME) Oman Oil contract fell by 2 percent over the last seven days, trading at around 110 U. S. dollars per barrel. The sharpest week decline since August 1 was based on two reasons. Firstly, doubts among international investors came up that the positive effects the U. S. Federal Reserves’ third round of monetary easing (QE3) to stimulate the economy would prevail over mid-term.

Even after the Bank of Japan joined the Fed’s initiative on Wednesday by pumping up its asset-purchasing by 10 trillion Yen (128 billion U. S. dollars) to 55 trillion Yen (698 billion U. S. dollars), oil headed downwards. Secondly, Saudi Arabia said Wednesday it will increase domestic oil production from 9.9. million barrels per day to 10 million barrels, which represents a 30-year high “because recent increases were not justified,” a Saudi official told the Financial Times.

But some members of the organisation of oil exporting countries, the OPEC, like Algeria, Iran and Venezuela oppose production increases because they need high oil revenues to deal with tough challenges in their domestic economies.

Already in January this year, before the European Union imposed an oil embargo against Iran, to force the country a more weaker stance on its nuclear energy program, which came into effect in July, Tehran has warned Riyadh not to increase production rates. Then at the Opec meeting on ministers’ level in June this year in Vienna the cartel decided to keep the combined production at 30 million barrels per day, mostly due to the opposition of the aforementioned “renegade members” to step up the volume. Since June, the DME Oman contract surged by a around a third in value.

Others, such civil airliners, who heavily depend on fuel, might not agree. Akbar al-Baker, CEO of state-owned Qatar Airways said Tuesday in Doha that his carrier suffered “a small loss” in the last financial year which ended March 31 2012, without elaborating on the exact amount. On June 12, Emirates Airline CEO Tim Clark even called the surge in oil prices “criminal”, after the Dubai- based flagship-carrier suffered a 72 percent profit decline in the financial year 2011/2012, blaming mostly high jet fuel prices. “Give us a Brent price of 80 U. S. dollars (which translates into a DME Oman contract of around 72 U. S. dollars) and the world economy will start moving again,” said Clark.

While the struggle for the “right price” between producers and consumers is an old affair, the new rift in the OPEC became most visible this week.

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