On Wednesday January 12, 2011, 5:55 pm EST
Lower corn and soybean
output sends prices surging
DES MOINES, Iowa (AP) -- A
surprising drop in the U.S. corn and soybean crop sent grain prices surging to
their highest levels in 2 1/2 years Wednesday. The price increases stoked
concerns about higher food prices and tighter supplies of feedstock for food
and biofuels.
Wet weather and abnormally
high temperatures contributed to lower U.S. corn production in 2010, according
to a report from the U.S. Agriculture Department. The report also showed
declines in soybean, wheat and grain sorghum production.
March corn futures jumped 4
percent to settle at $6.31 a bushel. Soybean prices jumped 4.3 percent to
$14.15 a bushel.
The report confirmed
traders' fears that historically low stockpiles of grain and oilseeds could
leave little buffer in coming months as demand rises with a growing global
economy. Prices reached their highest points since the financial crisis of 2008
caused a collapse in global demand for food and fuel.
It can take months for
higher grain prices to work their way to the grocery store. Raw ingredients are
just a fraction of the cost for processed foods.
But companies like Hormel
Foods Corp. have already announced price increases of more than 3 percent this
year. Higher grain costs will put more pressure on them to pass costs along to
consumers.
Portugal clears bond hurdle
but outlook still dark
LISBON, Portugal (AP) --
Tensions over Europe's simmering debt crisis eased slightly on Wednesday as
ailing Portugal, viewed as the next candidate for a bailout after Greece and
Ireland, showed it can still raise money on international markets and the EU
proposed to boost the size and powers of its rescue fund.
But the relatively high
interest rate demanded by investors to lend Portugal euro1.25 billion ($1.62
billion) shows the country -- and the wider region -- still face an uncertain
outlook.
EU officials seemed to
accept the fact that the debt crisis is far from over and might even turn
nastier if debt speculators target larger economies like Spain.
The European Union's top
monetary official Olli Rehn said he wanted a precautionary increase in the
euro440 billion ($570 billion) bailout fund for debt-stressed eurozone countries.
Though Germany, the bloc's chief financier, has not yet committed to such a
move, he said discussions with the 17 eurozone governments are making progress.
Markets are worried the
existing fund might be too small and the euro currency become endangered if a
bigger economy like Spain, which makes up over 10 percent of the eurozone
economy, runs into financial trouble.
Fed survey: US economy ends
2010 on strong note
WASHINGTON (AP) -- The U.S.
economy ended last year on an encouraging note, with all parts of the country
showing improvements. Factories produced more, shoppers spent more and
companies hired more -- pointing to a stronger economy in 2011.
That's the picture that
emerged from the Federal Reserve's survey of economic conditions released Wednesday.
Still, risks loom.
Declining home prices and millions of foreclosures are depressing housing
markets around the country, the survey said.
Companies are also paying
more for materials including oil, food products, steel, textiles and chemicals,
the survey noted. However, competitive pressures prevented them from passing
those increased costs on to customers in the form of higher prices.
And even though employers
are slowly hiring more, workers lack bargaining power to win bigger paychecks
because of high unemployment, which is now at 9.4 percent.
Prices increases remain
tame. The Fed will monitor inflation as it reviews its $600 billion Treasury
bond-buying program, which is intended to boost the economy by lowering
interest rates, encouraging spending and lifting stock prices.
Fed Chairman Ben Bernanke
says he is optimistic that the economy will strengthen this year. But he warned
last week that it will take up to five years for unemployment to drop to a
historically normal level of around 6 percent.
Federal budget deficit
narrows to $80B in December
WASHINGTON (AP) -- The
federal budget deficit narrowed slightly in December compared to a year ago,
but the deficit for the entire year is still on pace to exceed $1 trillion.
The government ran a
deficit of $80 billion last month, down 12.4 percent from the previous
December, the Treasury Department said Wednesday. Through the first three
months of the current budget year, the deficit totals $370.8 billion, an
improvement of 3.1 percent from the same period a year ago.
Private economists expect
that the tax-cut package signed into law last month will lead to a much larger
deficit while also helping to boost economic growth.
The tax package provided a
one-year reduction in Social Security taxes for individuals and accelerated tax
breaks for businesses that invest in new equipment. It also extended for two
years Bush-era tax cuts.
The estimated cost of the
package is $858 billion, an amount that will be added to deficits over the next
two budget years.
Economists at Goldman Sachs
are forecasting that the deficit for the current 2011 budget year, which began
Oct. 1, will total $1.3 trillion, giving the country a third consecutive year
of $1 trillion plus deficits.
Geithner warns Beijing on
currency policies
WASHINGTON (AP) -- China's
currency is substantially undervalued and Beijing is moving too slowly to
fulfill its promise to let it rise, Treasury Secretary Timothy Geithner said
Wednesday.
Geithner said it's in
China's own interests to accelerate the pace of currency reform. He said the
undervalued yuan is increasing the risk of inflation that will harm Chinese
growth.
Geithner addressed a range
of economic policy issues at the center of U.S.-Chinese relations in a speech
advancing Chinese President Hu Jintao visit to Washington next week.
In addition to the currency
issue, he mentioned widespread theft of U.S. intellectual property in China,
Beijing's protection policies that hurt U.S. exporters, and accusations that
the government provides subsidies to Chinese businesses that violate World
Trade Organization rules.
Forecast sees job growth
lifting housing in 2011
ORLANDO, Fla. (AP) -- The
housing market could gradually begin to emerge from its doldrums this year,
industry experts said Wednesday, but their forecast depends on a steady ramp-up
in hiring and for the U.S. jobless rate to get no worse than it is right now.
And even if their outlook
proves true, a full housing recovery is still at more than two years away.
The forecast delivered at
the International Builders' Show in Orlando sees U.S. economic growth sharply
lifting home sales and residential construction over the next two years, but
from near-historic lows posted last year.
Many homebuilders, however,
remain unconvinced that a recovery is brewing this year. Most, like Lennar
Corp., at best see the market not getting any worse.
Still, forecasts by David
Crowe, chief economist for the National Association of Home Builders, and
Freddie Mac Chief Economist Frank Nothaft are cautiously optimistic.
Crowe's forecast hinges on
the U.S. jobless rate getting no worse than 9.4 percent and employment growth
accelerating to a pace of 200,000 jobs a month by the end of 2012.
Eurozone industrial output
up 1.2 percent in Nov
LONDON (AP) -- Industrial
output in the 16 countries that used the euro in November rose by a much
greater than anticipated 1.2 percent, official figures showed Wednesday --
shoring up hopes that the economic recovery in the eurozone continued into the
fourth quarter of the year.
The increase reported by
Eurostat, the EU's statistics office, was up on the 0.7 percent increase
recorded in October and represents the fastest pace of growth since August,
when output also rose by 1.2 percent.
November's increase was
much bigger than anticipated -- the consensus in the markets was only for a 0.5
percent gain.
The figures will likely
boost confidence that the eurozone economic recovery remains on course, largely
on the back of exports from Germany, Europe's biggest economy which today
reported it grew in 2010 at its fastest pace since 1990's reunification.
Trans-Alaska pipeline
restarted despite leak
ANCHORAGE, Alaska (AP) --
Oil is flowing through the trans-Alaska pipeline again, but at only two-thirds
the rate as it was before the line was shut down due to a leak.
The 800-mile pipeline was
restarted at 9:03 p.m. Tuesday night. By Wednesday morning, the pipeline that
transports about 13 percent of the nation's domestically produced oil was
carrying about 400,000 barrels of crude.
The pipeline was shut down
Saturday when a leak was discovered near a pump station at Prudhoe Bay.
The 84-hour shutdown turned
out to be the second longest since the pipeline began operating in 1977.
Fabrication work continues
on a bypass pipe since there is still a leak. In the meantime, officials say an
800-gallon containment tank is being used to capture spilled oil.
Judge adds probation to
Guidant device plea deal
ST. PAUL, Minn. (AP) -- A
federal judge signed off Wednesday on a plea agreement that calls for Boston
Scientific Corp.'s Guidant unit to pay $296 million for failing to properly
disclose changes made to some implantable heart devices, but added three years
of probation to the deal.
U.S. District Judge Donovan
Frank had rejected the plea deal last spring as insufficient. His acceptance
Wednesday came after Guidant filed papers giving him more information about its
compliance policies and community service programs.
Guidant has 10 days to pay
the fines and forfeiture fees.
Prosecutors supported the
plea agreement. They have called the $296 million in fines and forfeiture fees
the largest criminal penalty ever against a medical device company.
Guidant discovered a
short-circuiting problem in 2002 and 2004 with some of its defibrillators, a
problem that could render them unable to deliver the lifesaving jolts that
patients depended on. The company changed the devices but was accused of
falsely reporting on the changes or not reporting them at all, leaving doctors
and patients unaware of potentially dangerous problems.
The company eventually
pleaded guilty to two misdemeanors: submitting a false and misleading report to
the Food and Drug Administration about one defibrillator model and failing to
notify regulators about a safety correction to another line of devices.
By The Associated Press
The Dow Jones industrial
average rose 83.56 points, or 0.7 percent, to close at 11,755.44. That's the
Dow's highest close since Aug. 11, 2008.
The Standard & Poor's
500 index also reached its highest level since Aug. 28, 2008. The index gained
11.48, or 0.9 percent, to 1,285.96.
The Nasdaq composite rose
20.50, or 0.8 percent, to 2,737.33.
Benchmark oil for February
delivery rose 75 cents to settle at $91.86 a barrel on the New York Mercantile
Exchange.
In other Nymex trading in
February contracts, heating oil rose 0.98 cent to settle at $2.6186 a gallon,
gasoline futures fell 1.53 cents to settle at $2.4784 per gallon. February
natural gas futures gained 5 cents to settle at $4.531 per 1,000 cubic feet.
In London, Brent crude rose
51 cents to settle at $98.12 a barrel on the ICE Futures exchange.