Commodities Watch: Copper Stockpiles Falling in China; Weather Concerns Push Up Corn Prices; Silver, Gold, and Sugar in Brief (FCX, BHP, ADM, VLO, CORN, SLV, GLD, SGG)

Today’s commodities news starts off with a drawdown on copper from bonded warehouses in Shanghai. There are also new doubts about the US corn crop, and we finish up with a brief take on silver, gold, and sugar.

At the beginning of May, stockpiles of copper in Shanghai’s bonded warehouses had reached a record high. Since then as much as 20,000 metric tons have been sold, putting current copper stocks at around 630,000 metric tons. Major copper producers Freeport McMoran Copper & Gold Inc. (NYSE: FCX) and BHP Billiton plc (NYSE: BHP) could get a bit of bump if demand for copper in China regains some strength.

Some analysts says that the drawdowns are the result of an upturn in seasonal demand. Spot prices seem to back that up, as copper futures in Shanghai are now in backwardation, where nearby contracts are more expensive than forward contracts.

Copper is also used by some Chinese companies as collateral for loans. The government has raised interest rates and reserve requirements several times in the eight months, tightening credit in an effort to cool the country’s inflation. Some buyers of copper have been re-exporting the metal without ever moving it out of the bonded warehouses, thus avoiding the value-added tax. The government has essentially halted this by adding still more regulations, but that hasn’t stopped the more creative financiers.

German copper mining company Arubis believes that China’s demand for copper will stay firm even as the country tries to deal with inflation. Demand in Europe is also expected to remain strong as the European economy, at least in Germany and France, continues to expand. Arubis thinks that the overall global economic recovery is too strong enough to overcome weaker demand for copper in China.

Weather-watching is as much a part of farming as are tractors, and now it seems that continuing wet weather in the US Midwest will lead farmers to give up on plans to plant more corn this year. Only about 40% of the US crop was seeded as of last week, and acres not planted by the end of this week are likely to be planted in soybeans.

For wheat growers, the problem has been drought. More than 40% of the US winter wheat crop is rated poor or very poor by the US Department of Agriculture.

Corn prices have risen to $6.85/bushel today, but has stayed lower, at around $7.28/bushel. Archer-Daniels-Midland Co. (NYSE: ADM) and Valero Energy Corp. (NYSE: VLO), the top ethanol producers in the US, could feel the effects of higher prices even as ethanol stocks are high right now. The Market Vectors Agribusiness ETF (NYSE: MOO) is up slightly today, to $52.83, in a 52-week range of $35.62-$57.93. The PowerShares DB Agriculture Fund (NYSE: DBA) is down about -1%, to $32.13, in a 52-week range of $22.85-$35.58. The Teucrium Corn Fund (NYSE: CORN) is up about $0.5%, to $42.50, in a 52-week range of $23.79-$48.77.

Silver and gold prices are down slightly today, probably on recovering strength in the US dollar. Silver is trading at $34.65/ounce in the late afternoon, and gold is at $1,494.40/ounce. The iShares Silver Trust (NYSE: SLV) is up about 2.5%, to $34.15, in a range of $16.94-$48.35. The SPDR Gold Trust (NYSE: GLD) is down less than -1%, to $145.59, in a 52-week range of $113.08-$153.61.

Sugar is also up slightly today following news that 2011-2012 production is expected to exceed demand by about 3 million metric tons. The iPath DJ-UBS Sugar Total Return Sub-Index ETN (NYSE: SGG) is down about -0.5%, to $69.29, in a 52-week range of $38.85-$104.98.

Paul Ausick