Light Crude Oil

NEW YORK-Oil prices rose Wednesday on unexpected declines in U.S. crude-oil supplies and production.

Prices have slumped this month on renewed fears that the global glut of crude oil could last longer than investors initially expected. This comes as production in the U.S. and elsewhere continues to exceed consumption.

Wednesday's data offered some hints that the oversupply of crude oil is starting to shrink, but analysts warned that the trend might not continue and prices could resume their decline.

Light, sweet crude for September delivery settled up 81 cents, or 1.7%, to $48.79 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 8 cents, or 0.2%, to $53.38 a barrel on ICE Futures Europe.

Domestic crude inventories fell by 4.2 million barrels to 459.7 million barrels last week, the U.S. Energy Information Administration said Wednesday. Analysts surveyed by The Wall Street Journal expected stockpiles to be unchanged in the week.

Though refineries processed less crude into gasoline and other fuels compared with the week before, crude-oil inventories still declined due to a drop in imports and production.

U.S. crude-oil production fell by 145,000 barrels a day to 9.4 million barrels a day, the largest one-week decline since October 2013. Excluding Alaska, which saw a small rise in output, the drop totaled 151,000 barrels a day.

"The most interesting thing is the pretty big adjustment downward in crude production," said Dominick Chirichella, analyst at the Energy Management Institute. "In general, I think it's an overall positive report."

The EIA's weekly production figures are based on a statistical model, not reported production.

Prices erased some of their gains late in the trading session as the dollar strengthened on signals from the Federal Reserve that U.S. short-term interest rates could rise in the coming months. A stronger dollar can weigh on crude prices by making the dollar-priced commodity more expensive for foreign buyers.

Gasoline stockpiles fell by 400,000 barrels. Analysts had expected gasoline supplies to be unchanged. Gasoline futures rose 1.92 cents, or 1.1%, to $1.8224 a gallon.

Coffee

2015/16 Forecast Overview

World coffee production for 2015/16 is forecast to rebound 6.4 million bags from the previous year to 152.7 million due primarily to record output in Indonesia and Honduras as well as modest recovery in Brazil. Global exports and consumption are forecast at record quantities, drawing ending inventories to their lowest level in 4 years.

Brazil's Arabica production is forecast to improve 3.8 million bags to 38.0 million on favorable weather during most of the growing period, though January 2015 was drier than average in Minas Gerais and Sao Paulo, two regions that account for about 80 percent of output. This is in contrast to last year's prolonged drought and high temperatures that caused production to drop sharply during what would have normally been an on-year of the alternate bearing crop cycle. The Robusta harvest is forecast to decline 2.6 million bags to 14.4 million due to lower yields following below-average rainfall and above-average temperatures in Espirito Santo, where the vast majority is grown. The combined Arabica and Robusta harvest is forecast to increase 1.2 million bags to 52.4 million. However, with lower total supplies due to last year's stocks drawdown, bean exports are expected to drop 2.5 million bags to 30.0 million and ending stocks are forecast to decline 1.5 million bags to 4.3 million.

Vietnam's production is forecast to add 400,000 bags to total 28.6 million as yields improve on favorable weather. Between January and March 2015, the main coffee regions in the Central Highlands experienced seasonal dry and sunny weather, which is normal for this period, and trees were irrigated. The rainy season began as anticipated in April, which lead to good flowering and cherry development. Cultivated area is estimated nearly unchanged from last year following modest expansion in Lam Dong and Dak Nong Provinces and a slight contraction in Gia Lai Province. Over 95 percent of total output is Robusta. Bean exports are forecast 500,000 bags higher to 25.5 million, while ending stocks remain elevated.

Colombia's Arabica production is forecast up 500,000 bags to 13.0 million, the highest in two decades, following several years of below average output due to the spread of coffee rust and coffee cherry borer insect. Rust initially affected as much as 40 percent of the planted area but has since declined significantly following an aggressive tree renovation program, which has reached close to half of total area planted. Colombia is expected to rely on imported beans from Ecuador and Peru for just 20 percent of consumption, down from nearly 85 percent a few years ago. Bean exports are forecast to gain 500,000 bags to 11.5 million primarily on increased shipments to the United States and Europe.

Central America and Mexico account for one-fifth of the world's Arabica production, and coffee rust continues to hamper output for most of these countries. Although the region's production is forecast to increase 750,000 bags to 16.7 million, the rebound is driven by Honduras where rust-resistant trees from recently renovated land reach maturity and propel output to a record 5.9 million bags. Nicaragua is forecast 5 percent higher to 2.2 million bags as a result of good weather during the bloom as well as the addition of output from recently renovated land. Mexico, Guatemala, and El Salvador are expected unchanged at 3.3 million bags, 3.2 million bags, and 700,000 bags, respectively, as these countries continue to struggle with rust and output remains below their pre-rust level. Costa Rica is forecast nearly 5 percent lower to 1.4 million bags as reduced rainfall lead to delayed flowering and lower yields for a second consecutive year. Bean exports for the region are forecast to gain 600,000 bags to 13.6 million as a result of higher exportable supplies in Honduras. Approximately 40 percent of the region's exports are destined for the United States, followed by 35 percent to the European Union.

Indonesia's production is forecast to gain 2.2 million bags to a record 11.0 million on favorable weather during the flowering and fruit set period, though the harvest in some regions could be delayed due to late rains. Yields from the previous two harvests were low because of excessive rain during the fruit set period. Over 85 percent of production is Robusta. Bean exports are forecast to rebound 1.4 million bags to 6.5 million on higher available supplies. India's production is forecast to add 100,000 bags to 5.2 million mostly on higher Robusta output in Karnataka, the largest coffee producing State. Arabica is forecast nearly unchanged following last year's 15 percent weather-related drop. Bean exports are forecast up slightly to 3.5 million bags.

Ethiopia's Arabica production is forecast unchanged at 6.5 million bags where it has remained the last 4 years. Similarly, bean exports are forecast unchanged at 3.5 million bags, with the remainder consumed domestically.

The European Union accounts for nearly half of the world's bean imports and is forecast to increase 500,000 bags to a record 45.5 million. Top suppliers include Brazil (30 percent), Vietnam (24 percent) and Honduras (6 percent). Ending stocks are forecast to remain unchanged at 12.0 million bags.

http://www.fas.usda.gov/psdonline/circulars/coffee.pdf 

Orange Juice

The above table shows the production components used for the 2010-2011 through the 2014-2015 forecast seasons. Bearing trees are estimated at the beginning of each forecast season using the most updated tree inventory with an allowance for expected attrition. Revisions are made to the historic series where applicable. Fruit per tree is the weighted average obtained from the annual Limb Count survey conducted during a ten-week period from mid-July to mid-September. Survey averages for each tree age group within an area are weighted by the estimated number of bearing trees for each age group. Fruit size measurements and drop observations are obtained from monthly surveys. The average drop percentages are from the final month used in the forecast model. Average fruit sizes were also obtained from the same survey period and have been converted in the table to estimated number of fruit needed to fill a 1 3/5 bushel box. These four factors are the primary components used in the initial October forecast and in following months up to the "cut-off" for each fruit type.

CASHEWS - The Cashew market continues to be a roller coaster.  Spot pricing hit near all-time highs in the last three months.  Pricing has retreated somewhat but still remains above the level where it was before this recent run up of the market.  Importers indicate spot pricing should remain stable for the near term.  Importers also indicated stable near term pricing three months ago immediately before the market spike so actual future market movements remain very much an unknown. 

PEANUTS - Spot Peanut pricing remains firm for 2014 crop through October.  Demand for blanched nuts continues to outpace available blanching time and is supporting higher pricing.  Harvest of the 2015 crop should begin in September.  Forward contract pricing though 2016 for the new crop is currently soft.  Shellers are basing forward pricing on a perfect outlook for the new crop.  Too much or too little rain or temperatures outside the ideal range in the next 6 weeks will drive changes in future prices.  At this stage, future pricing has much more upside potential than downside.

ALMONDS - The effect of the drought in California continues to weigh heavily on industry supply.  The most recent USDA subjective Almond estimate, released at the beginning of this month, estimated the 2015 crop at 1.85 billion pounds.  This is 12% below the 2.1 billion pound estimate given at this time last year for the 2014 crop.  Both spot market pricing and pricing for the few available new crop contracts jumped overnight upon release of this news.  Many shellers are accepting offers for near term sales only as they anticipate pricing will only continue to rise.  There is nothing on the horizon short of double digit demand reduction that would put any downward pressure on the market.

Top 

FILE - In this June 25, 1998 file photo, a Caltrans bulldozer terraces a sliding hillside below the condemned home above Pacific Coast Highway near Las Flores Canyon Road in Malibu, Calif. The home and at least one other at the top of the slide was scheduled for demolition. It can be both godsend and catastrophe. In California, they're counting on it to end a more than $2 billion drought and in Peru they have already declared a pre-emptive emergency, reinforcing protection against devastating flooding. It's both an economic stimulus and a recession-maker. And it's likely to increase the price of coffee, chocolate and sugar. (AP Photo/Reed Saxon, File)

WASHINGTON (AP) - In California, they're counting on it to end an historic drought; in Peru, they've already declared a pre-emptive emergency to prepare for devastating flooding. It's both an economic stimulus and a recession-maker. And it's likely to increase the price of coffee, chocolate and sugar.

It's El Nino - most likely, the largest in well over a decade, forecasters say. A lot more than mere weather, it affects lives and pocketbooks in different ways in different places.

Every few years, the winds shift and the water in the Pacific Ocean gets warmer than usual. That water sloshes back and forth around the equator in the Pacific, interacts with the winds above and then changes weather worldwide. This is El Nino. Droughts are triggered in places like Australia and India, but elsewhere, droughts are quenched and floods replace them. The Pacific gets more hurricanes; the Atlantic fewer. Winter gets milder and wetter in much of the United States. The world warms, goosing Earth's already rising thermometer from man-made climate change.

Peruvian sailors named the formation El Nino - the (Christ) Child - because it was most noticeable around Christmas. An El Nino means the Pacific Ocean off Peru's coast is warm, especially a huge patch 330 feet (100 meters) below the surface, and as it gets warmer and close to the surface, the weather "is just going to be a river falling from the sky," said biophysicist Michael Ferrari, director of climate services for agriculture at the Colorado firm aWhere Inc.

Around the world, crops fail in some places, thrive elsewhere. Commercial fishing shifts. More people die of flooding, fewer from freezing. Americans spend less on winter heating. The global economy shifts.

"El Nino is not the end of the world so you don't have to hide under the bed. The reality is that in the U.S. an El Nino can be a good thing," said Mike Halpert, deputy director of the U.S. National Oceanic and Atmospheric Administration's Climate Prediction Center.

This El Nino officially started in March and keeps getting stronger. If current trends continue, it should officially be termed a strong El Nino early in August, peak sometime near the end of year and peter out sometime next spring. Meteorologists say it looks like the biggest such event since the fierce El Nino of 1997-1998.

California mudslides notwithstanding, the U.S. economy benefited by nearly $22 billion from that El Nino, according to a 1999 study. That study found that 189 people were killed in the U.S, mainly from tornadoes linked to El Nino, but an estimated 850 lives were saved due to a milder winter.

A United Nations-backed study said that El Nino cost Bolivia, Colombia, Ecuador, Peru and Venezuela nearly $11 billion. Flooding in Peru destroyed bridges, homes, hospitals and crops and left 354 dead and 112 missing, according to the Pan-American Health Organization. The mining industry in Peru and Chile was hammered as flooding hindered exports.

Though this year's El Nino is likely to be weaker than the 1997-1998 version, the economic impact may be greater because the world's interconnected economy has changed with more vulnerable supply chains, said risk and climate expert Ferrari.

Economic winners include the U.S., China, Mexico and Europe while India, Australia and Peru are among El Nino's biggest losers.

On average, a healthy El Nino can boost the U.S. economy by about 0.55 percent of Gross Domestic Product, which would translate more than $90 billion this year, an International Monetary Fund study calculated this spring. But it could also slice an entire percentage point off Indonesia's GDP.

Indonesia gets hit particularly hard because an expected El Nino drought affects the country's mining, power, cocoa, and coffee industries, said IMF study co-author Kamiar Mohaddes, an economist at the University of Cambridge in London.

The expected El Nino drought in parts of Australia has started and may trim as much as 1 percent off of the country's GDP, said Andrew Watkins, supervisor of climate prediction services at the Australian Bureau of Meteorology.

Tony Barnston, lead El Nino forecaster at the International Research Institute for Climate and Society at Columbia University, cautioned that while El Nino has predictable effects and this one is strong, what happens next is not exactly certain.

But Peruvians are worried. Abraham Levy, director of Ambiental Andina, which advises businesses on meteorology- and hydrology-related issues, believes this El Nino could lead Peru into recession. Important export crops such as mangos and asparagus that grow in coastal valleys are already being adversely affected by the unseasonably high temperatures, said Levy.

"The export mango crop has not yet flowered," he said. "And if we don't have flowers we don't have fruit."

And then there's the flooding. Peru declared a pre-emptive state of emergency this month for 14 of its 25 states, appropriating some $70 million to prepare. Hilopito Cruchaga, the civil defense director in Peru's northern region of Piura, said authorities are clearing river beds of debris, reinforcing river banks with rock and fortifying reservoir walls. Sandbags and rocks are also being piled on some river banks.

"If the sea stays this hot at the end of August I'm afraid we're doomed," he said.

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Bajak reported from Lima, Peru.

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Online: NOAA's El Nino page:

http://www.cpc.ncep.noaa.gov/products/precip/CWlink/MJO/enso.shtml 

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Seth Borenstein can be followed at http://twitter.com/borenbears 

Frank Bajak can be followed at http://twitter.com/fbajak