Commodities & Metals

Commodities Watch: Corn Prices Climb Again; EPA to Review Monsanto's Round-up Herbicide; Rio Tinto Expects to Produce More Iron Ore and Coal; Lumber Prices Have Collapsed (MON, SYT, DOW, DD, BASFY, RIO)

Our commodities coverage today looks at the bounce in prices following yesterday’s across-the-board drop and reports on a review of Monsanto’s best-selling herbicide. We also note some positive news on iron ore and coking coal production from Rio Tinto and look behind the curtain at the recent collapse of lumber prices.

Corn prices have turned back northward today, trading up more than $0.10 at $7.68/bushel. The crop set a new 33-month high of near $7.89/bushel on April 11th. Concerns over delays in spring planting and low inventories are pushing the prices up again today. With about 5 billion bushels of the US corn crop going to produce fuel ethanol, it should be no surprise that prices are booming. Ethanol production now drives demand for corn.

Reuters is reporting that the US EPA and its Canadian counterpart will begin reviewing a key, but controversial, chemical in Round-up, the herbicide developed and marketed by Monsanto Co. (NYSE: MON).  Glyphosate, the key ingredient in Round-up, was introduced in 1974 and is currently used world-wide to eliminate weeds in corn, soybean, and cotton fields. Non-farmers use the stuff to control weeds in gardens and lawns as well.

Monsanto’s patent protection on glyphosate ran out in 2000, and since then other fertilizer and farm products companies have released their own herbicides containing the chemical. Syngenta AG (NYSE: SYT), The Dow Chemical Co. (NYSE: DOW), E.I. du Pont de Nemours and Co. (NYSE: DD), and BASF SE (OTC: BASFY) are the other large makers of glyphosate-based products.

Glyphosate has come under attack for causing cancer, infertility, leading to the development of herbicide-resistant weeds, and causing changes to soil chemistry. Monsanto and other herbicide makers claim that glyphosate is safe and that its use should not be restricted because it is so valuable to farmers.

The US EPA will review the risks from glyphosate and has set a deadline of 2015 as the date for a decision on whether the chemical can continue to be sold or should be in some way restricted. The EPA’s review will include a number of studies indicating that glyphosate could contribute to spontaneous abortions and infertility in pigs, cattle, and other livestock. Monsanto rejects such studies as invalid, and reiterates its claim that glyphosate is safe.

Australian miner Rio Tinto plc (NYSE: RIO) expects to raise production of iron ore and metallurgical coal as it recovers from the damage caused by typhoons and heavy rains in Australia earlier this year. The company expects production of iron ore to rise from 184.6 million tons in 2010 to 191 million tons in 2011. Metallurgical, or coking, coal production is expected to rise to from 9 million tons in 2010 to 9.3 million tons in 2011, while thermal coal production is expected to fall slightly from 18.4 million tons to 18.2 million tons. Production of alumina is also expected to be slightly higher in 2011, but production of mined copper is expected to be lower by about -21%, at 539,000 tons.

After hitting a low below $270/thousand board feet, lumber prices are back up slightly today to $276/thousand board feet. Lumber prices hit a recent peak of around $342/thousand board feet in January. Lumber’s tumbling price is primarily a reaction to the slow pace of homebuilding in the US. Log exports to China and Japan have not closed the gap, although demand from Japan should pick up as the nation starts to rebuild after the earthquake and tsunami.

Paul Ausick