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After rising for almost three months, oil prices fell last week as fears of a possible US military action in Iraq became increasingly uncertain. In the London market, the benchmark Brent North Sea crude oil for December delivery dropped to $25.47 a barrel against $25.74 a week earlier. The threat of a US-led war on Iraq which might have caused disruption to the Middle East oil had sent prices rising to $30 a barrel earlier this year.
Meanwhile, a report published recently shows vast overproduction among Opec members. Opec members, excluding Iraq, pumped out 24.9 million barrels per day last month, a massive 3.2 million barrels more than agreed quotas.
According to reports by the Energy Information Administration, heating oil stocks in the US have fallen by as much as 2.2 million barrels recently. The US heating oil inventories are now lower than they were at the start of August. Generally a normal season build up amounts to a rise of 8 million barrels, but there has been no upward movement.
In the last week of October, coffee futures made healthy gains as the market worried about the impact of dry weather on the Brazilian crop. New York’s December contract was 68.50 cents a pound, on October 25, compared with a close of 62.60 cents on October 18.
In the next few days, as rains fell on parched producer regions in Brazil, it finally broke the back of the dry spell. On LIFFE, Robusta quality for January delivery rose to $721 a tonne on October 31, from $711 the previous week. On New York’s CSCE market Arabica for March delivery dipped to 68.25 cents a pound on October 31, from 70.45 cents the previous week.
Kenya’s coffee exports fell in the 2001-02 crop year, due to poor global prices, adverse weather that have discouraged farmers. The country exported 48,050 tonnes of coffee in 2001-02 (October-September) compared with 72,562 tonnes shipped in the previous season, affecting earnings. Kenya is famed for producing some of the world’s top quality Arabica coffee beans, which are grown in the highlands. But quality and quantities have suffered in recent years as the farmers have abandoned their coffee bushes or switched to other food crops due to poor earnings.
By the end of October, cocoa prices which had risen in earlier weeks because of high tension in Ivory Coast, subsidised as talks began between the government and the rebels. As peace talks opened it eased concerns about the supply outlook from Ivory Coast, the world’s largest producer.
On October 29, Liffe’s December contract fell 59 pounds or more than 4 per cent to close at 1304 pounds a tonne. There was a further fall and on Liffe, London’s financial futures exchange, the price of cocoa for December delivery fell to 1298 pounds a tonne on October 31, from 1422 pounds the previous week. On the CSCE, the New York futures market, the December contract dropped to $1927 per tonne from $2025.
The US wheat prices have fallen in recent days after Egypt did not place an order for 360,000 tonnes in the US market and instead took advantage of cheaper prices in France, Brazil also suspended imports, pressurizing the market further. The US wheat exports fell 46 per cent to 434, 300 in the week to October 24, when compared with the previous week.
Australia’s worsening drought is expected to reduce the country’s winter wheat crop by more than half to its lowest in nearly a decade and cut the country’s economic growth rate by nearly 20 per cent.
The Australian Bureau of Agricultural and Resource Economics (Abare), the government’s commodity forecasting agency, said that it now expected a wheat crop of just 10.1 million tonnes this year, down from an estimated of 13.45 million tonnes in its last crop report in September and from last year’s 24 million tonnes.
In all, the drought would cost the national economy A$5.4 billion (US$3 billion), up from the A$3.8 billion it had previously predicted, and cut growth by 0.7 percentage points in 2002-03. The government had been targeting growth of 3.75 per cent.
The estimate was even worse than many feared, with the wheat crop falling below the 11 million to 13 million tonnes predicted earlier this month by the AWB, the grain marketing body. Australia is one of the world’s three biggest exporters of wheat, selling some 16 million tonnes on international markets last year.
Gold prices, meanwhile rose last week, buoyed by renewed losses in major global equity markets which fell because of downbeat economic news from the US. Consumer confidence fell to a nine-year low and the third quarter economic growth was lower than expected, 3.1 per cent. Manufacturing data was lower than the forecasts and unemployment rate continued to rise. Gold prices were fixed at $316.55 per ounce on the London Bullion Market on November 1, against $313 the previous week.
