EU Proposes 'Banking Union'

The 17 countries that use the euro should set up a "banking union" that allows them to share the burden of bank failures, the European Union's executive arm said Wednesday, as worries grew about whether Spain has the financial strength to shield lenders suffering from a meltdown of its property market.  The European Commission called on the euro zone to allow its new rescue fund to directly prop up vulnerable banks—rather than pushing their home countries into full-blown bailouts.

Crude Options Volatility Jumps as Futures Drop on Stockpile Glut

Crude Options Volatility Jumps as Futures Drop on Stockpile Glut - Bloomberg

Crude-oil options volatility jumped as the underlying futures tumbled to a seven-month low on speculation U.S. crude stockpiles climbed to the highest level since 1990.  Implied volatility for at-the-money options expiring in July, a measure of expected price swings in futures and a gauge of options prices, was 30.34 percent at 4:55 p.m. on the New York Mercantile Exchange, up from 27.13 percent yesterday.

Japan Stocks Fall on Greece Exit Concern, Stronger Yen

Japan stocks fell, with the Nikkei 225 (NKY) Stock Average set for its biggest monthly drop in two years, as concern mounted on Greece’s possible exit from the euro and the yen extended gains, dimming the outlook for exporters.  Canon Inc. (7751), a camera maker that gets 31 percent of its revenue in Europe, fell 4.4 percent.  Hitachi Construction Machinery Co. (6305) dropped 4 percent on a report that Japan’s industrial output rose less than expected. Kansai Electric Power Co., Japan’s second-biggest power utility, gained 2.9 percent on a report that government may approve the restart of two of the company’s nuclear reactors next week.   The Nikkei 225 fell 1.8 percent to 8,474.57 as of the 11:30 a.m. trading break in Tokyo, heading for an 11 percent decline this month, the biggest monthly decline since May 2010. The broader Topix index slid 1.4 percent to 713.70, poised for a 1.2 percent retreat this week. The measure is headed for a nine-week loss, the longest such streak since September 1975.   “We just don’t know what will happen with Greece as different polls are coming out one after another, showing mixed signals,” said Isao Kubo, a Tokyo-based equity strategist at Nissay Asset Management Corp., which oversees about $63.5 billion. “Overseas factors and the rising yen are causing a sell-off.”

Spain’s Banking Rescue Should Become Example for Europe

Spain’s Banking Rescue Should Become Example for Europe - Bloomberg

Europe’s leaders can’t save their currency union without figuring out a way to salvage the region’s banks. Spain is a perfect place to start.  Perhaps no country better illustrates the mutually reinforcing links among the euro area’s banking, sovereign-debt and economic crises than Spain. Its banks are largely paralyzed amid concerns about heavy losses on real estate loans that, by various estimates, could require as much as 120 billion euros ($150 billion) in fresh capital to offset. Tight bank credit has in turn deepened the country’s economic slump, increasing banks’ potential losses and fueling fears that bailout costs will overwhelm the Spanish government’s already stretched finances. The longer the situation lasts, the worse it gets: Nervous investors pushed Spain’s 10-year borrowing rate as high as 6.7 percent Wednesday, up from less than 5 percent in early March.

Gold Poised for Worst Monthly Run in 13 Years on European Crisis

Gold Poised for Worst Monthly Run in 13 Years on European Crisis - Bloomberg

Gold is poised for the worst run of monthly losses in almost 13 years as concern that Europe’s fiscal crisis is escalating drove investors to seek the dollar as a haven over the precious metal.  Spot gold was little changed at $1,562.63 an ounce at 10:31 a.m. in Singapore, after climbing 0.5 percent yesterday. Bullion is 6.1 percent lower in May for its biggest drop this year as the dollar rallied 5.4 percent against a six-currency basket including the euro. A fourth monthly decline would be the metal’s longest run of losses since the period to August 1999.

Dimon $2 Billion Blunder Shows Capital Safer Than Swaps

Dimon $2 Billion Blunder Shows Capital Safer Than Swaps - Bloomberg

JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon railed against higher capital requirements last year at the same time his bank was using derivatives to hedge more than $1 trillion of loans and bonds.  Those bets, which led to $2 billion of losses, wouldn’t have been necessary if JPMorgan did what banks once did: rely on bigger capital buffers rather than credit-default swaps to hedge against souring loans. One hundred years ago the equity of U.S. lenders was about 20 percent of total assets, compared with 9 percent now, according to data compiled by the Federal Reserve. For JPMorgan, it was 7 percent last quarter.

JPMorgan CIO Swaps Pricing Said to Differ From Bank

JPMorgan CIO Swaps Pricing Said to Differ From Bank - Bloomberg

The JPMorgan Chase & Co. (JPM) unit responsible for at least $2 billion in losses on credit derivatives was valuing some of its trades at prices that differed from those of its investment bank, according to people familiar with the matter.  The discrepancy between prices used by the chief investment office and JPMorgan’s credit-swaps dealer, the biggest in the U.S., may have obscured by hundreds of millions of dollars the magnitude of the loss before it was disclosed May 10, said one of the people, who asked not to be identified because they aren’t authorized to discuss the matter.

OIL FUTURES: Crude Tumbles To Seven-Month Low

Oil futures fell more than 3% to finish at their lowest level in seven months as Spain's intensifying banking crisis prompted fresh worries about the future of the euro zone.  Light, sweet crude for July delivery settled $2.94, or 3.2%, lower at $87.82 a barrel on the New York Mercantile Exchange, the lowest settlement since Oct. 21.  Brent crude on the ICE futures exchange settled $3.21, or 3%, lower ...

Corn, Soy Called to Open Higher on Dry Weather; Wheat May Gain

What follows are opening calls for U.S. grain and oilseed markets, which open at 5 p.m. on the Chicago Board of Trade.
-- Corn futures may open 1 cent to 2 cents a bushel higher on the Chicago Board of Trade because of dry weather in parts of the U.S. Midwest including Iowa and Illinois, the biggest growers of the grain, in the past week, Jason Britt, the president of brokerage Central States Commodities Inc. in Kansas City, Missouri, said by telephone.
-- Soybean futures may open up 1 cent to 2 cents a bushel in Chicago on the lack of rain during the past week in the U.S., Britt said. Soybean-oil futures are expected to open steady to 0.1 cent higher, and soybean-meal futures may open $1 to $2 higher per 2,000 pounds.
-- Wheat futures may open 2 cents to 3 cents a bushel higher on the CBOT, the Kansas City Board of Trade and the Minneapolis Grain Exchange on speculation that the price, which has dropped 3.9 percent on the CBOT in the past two days, will make the grain more attractive to users and speculative investors, Britt said.

NY coffee and cocoa end at multi-month troughs

Arabica coffee futures closed at a 21-month low on Wednesday, and U.S. cocoa ended at a 4-1/2-month trough as investors sold their riskier assets and fled to safety in treasuries on concern about Spain's economy. Raw sugar finished down a shade after a choppy session.

Stevedores strike at Brazil's biggest port

Stevedores at Brazil's largest port, Santos, went on strike on Wednesday, threatening delays to shipments of coffee, sugar and other commodities and manufactured goods, the port authority said.  A port spokesman could not immediately confirm the reason for the strike nor its planned duration but said it mostly affected container ships while loading of liquid cargoes was continuing as normal.  Senior representatives from the stevedores' association were not immediately available for comment. They are expected to meet on Wednesday morning to discuss the stoppage, one shipping operator said.  Brazil is the world's No. 1 producer of coffee and sugar and the harvest for both is in its early stages.

Oil slides three percent on worries over euro zone, China

Oil fell more than 3 percent on Wednesday on the threat to petroleum demand from a spreading euro zone debt crisis as China signaled it is not planning a large economic stimulus.  Rising borrowing costs for Spain and Italy and the latest poll showing a lead for Greece's left-leaning, anti-austerity parties ahead of next month's elections added to concerns about the region's economy being enveloped in the debt turmoil.  As crude futures headed for double-digit percentage losses for May, equities and other commodities, like industrial feedstocks platinum and copper, also felt pressure from the worsening expectations for the euro zone economy.

Gold prices hit by pain in Spain

Gold Comex futures bounced back 1.3% at the end of last week but lost all the gains on Tuesday after U.S. workers came back from the Memorial Day long weekend. Gold futures reached as high as $1,582.4 upon New York opening on Tuesday but plunged about 2% as EUR/USD started to slide below 1.25. Intraday on Tuesday crude oil futures also tracked the trading pattern of Euro/dollar and plunged as much as 2%, ending at $90.76. S&P went up 1.1% while Stoxx is flat week-to-date.  Gold futures were trading in the range of $1,569 to $1,583 in Asia and London on Monday, higher than last week's close, as investors were relieved that the pro-bailout New Democracy Party in Greece was leading in all six opinion polls last weekend.

Estimate corn yields, beginning now

We have had two weeks of crop ratings for corn, with a decline in condition to 72% good to excellent from 77% good to excellent a week ago.  That was the USDA’s crop progress report on Tuesday.  While various Corn Belt state’s corn crops are going down in quality, this is the time of year that yields need to be determined.  On May 21, USDA reported the condition of the corn crop was 79% good to excellent in Illinois, 70% good to excellent in Indiana, and 81% good to excellent in Iowa.  However for the current week, those conditions had declined in Illinois to 72%, in Indiana the decline was to 66%, and to 77% in Iowa.  University of Illinois agricultural economist and marketing specialist Darrel Good says the most important aspect of corn yields at this time of the season is timely planting...

SoyBeans, Market Analysis, Agricultural Markets

With rain in the forecast and the outside markets unfavorable, the CME Group corn, soybean, and wheat futures markets have dropped to start Wednesday.  At the open, the July corn futures trade 4 1/4 cents lower at $5.58, while the Dec. contract trades 2 cents lower at $5.15 1/2. The July soybean contract is trading 18 cents lower $13.68 3/4, while the Nov. 2012 contract trades 7 cents lower at $12.86 3/4. The July wheat futures are trading 5 cents lower at $6.51 1/4. July soyoil futures trade down $0.63 at $49.44. The July soymeal futures opened $3.70 per short ton lower at $408.70.

Monsanto Says Profit to Top Estimates on Higher Seed Sales

Monsanto Co. (MON), the world’s largest seed company, said third-quarter profit will exceed analysts’ estimates on rising sales in the U.S., Brazil and Eastern Europe. The company also boosted its full-year forecast.  Profit in the three months through May will be $1.57 to $1.62 a share, excluding costs from a legacy tax matter, St. Louis-based Monsanto said today in a statement. That tops the $1.29 average of 16 estimates compiled by Bloomberg.  Monsanto raised its forecast for earnings in the 12 months through August to $3.65 to $3.70 a share, excluding the tax issue, settlement of pollution claims and discontinued operations. The company in April forecast $3.49 to $3.54 a share, and the average estimate of 17 analysts was $3.56.
Chairman and Chief Executive Officer Hugh Grant said he expects the company will increase earnings by a “mid-teens” percentage in fiscal 2013. Third-quarter results were driven by genetically modified corn in Brazil, higher sales of soybeans and corn in the U.S. and better-than-expected gains in Eastern Europe, Monsanto said.