[R-G] Biggest Dive for Commodity Prices in 28 Years

[Yoshie Furuhashi]

<http://www.ft.com/cms/s/0/c6ad4a96-5f62-11dd-91c0-000077b07658.html>
Biggest dive for commodity prices in 28 years

By Javier Blas, Commodities Correspondent

Published: August 1 2008 03:00 | Last updated: August 1 2008 03:00

Commodities prices suffered their largest monthly drop in 28 years in
July as crude prices nose-dived more than $20 from an all-time high of
$147.27 a barrel.

The Jefferies-Reuters CRB index, a global commodities benchmark, lost
10 per cent, its largest monthly decline since it fell 10.5 per cent
in March 1980, amid worries about lower economic growth damping demand
for raw materials.

Natural gas, corn, wheat and freight costs plunged last month between
10 and 30 per cent, although from record levels. However, lead, used
in car batteries, surged almost 25 per cent on tight supplies.

The fall in energy and agriculture prices will be welcomed, if
persisted, by central banks facing rising inflation. But commodities
have provided false price signals this year, with the CRB index
falling 6.3 per cent in March only to rebound strongly. In spite of
last month's fall, analysts are split on whether the commodities
prices have set a peak for the year. But the general bullish outlook
is, nevertheless, cracking, with Deutsche Bank's strategists warning
today that oil prices would fall below $100 a barrel by the start of
next year. West Texas Intermediate fell $2.69 to $124.08 a barrel in
New York.

"We expect the short-term cyclical factors that drove the price of oil
from $60 to $145 over the past year to reverse in the coming 12
months," said Marcel Cassard, of Deutsche Bank.

"The impact of the decline in commodity prices on global inflation
will be significant."

Lehman Brothers is also forecasting lower oil prices, while Goldman
Sachs, Merrill Lynch and Barclays Capital continue to be, in different
degrees, bullish.

Ed Morse, head of commodities research at Lehman Brothers, said:
"Fundamentals are weakening, particularly in the oil market."

Investors have been worried about a deteriorating economic outlook and
signs of fresh crude oil supplies arriving from Saudi Arabia.

The International Monetary Fund has warned that although the global
economy weathered the crisis during the first half of the year,
"global growth is expected to decelerate significantly in the second
half of 2008".

Traders warned the key commodity indices and energy markets closed the
month below the previous month's opening, resulting in a strong
technical bearish signal, which could trigger further sales in August.

Commodities, Page 36

<http://www.imf.org/external/np/speeches/2008/031708a.htm>
The Financial Market Crisis and Risks for Latin America
Presentation by Anoop Singh
Director, Western Hemisphere Department, IMF
At the Conference on "The Euro: Global Implications and Relevance for
Latin America"
Sao Paulo, Brazil, March 17, 2008