Market Report: Falling food price piles pressure on Glencore

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Amid all the noise about the fall in metals prices, the slump from soft commodities — anything from wheat to cattle — has flown somewhat under the radar.

But it might come as a surprise to some that the price of coffee is among the year’s biggest fallers, down around 40%, while wheat and lean hogs, the source of most of the pork in the US, have dropped more than 30% each.

Cargill, the world’s biggest agricultural trader, has felt the heat, forcing it to cut 4000 jobs and shake up the management to deal with the downturn.

It also has repercussions for commodities giant Glencore, which is searching for a buyer to sell its agriculture business, encompassing grains, oilseeds, cotton and sugar, as part of chief executive Ivan Glasenberg’s efforts to trim the Footsie firm’s huge debt pile.

Investec, the broker which caused the share price to dive 30% in a day in September, said getting the best possible price for the agri-business is “ever more crucial” with the price of metals falling further, putting more pressure on the balance sheet. 

Glencore shares recovered 1.07p today to 89.9p, ending a nine-day losing streak, as other miners turned early losses into gains, providing respite for the bruised sector a day after iron ore futures slumped to their lowest in four months and copper hit new six-year lows. 

Rio Tinto put on 24.5p to 2238.5p, while Anglo American rallied 3.35p to 434.35p, but fears of more terrorist attacks hit tourism stocks, causing the FTSE 100 to fall 27.75 points to 6241.01.

Antofagasta rose 9.5p to 482p after Goldman Sachs took a shine to the Chilean copper miner, upgrading the stock from sell to neutral. 

The broking heavyweight also sent shares in Hunting to the top of the mid-cap index, up 15p at 330p, by slapping a conviction buy recommendation on the oil services firm.

Esure reversed 9.2p to 244p as broker Peel Hunt called the top for the Sheilas’ Wheels owner after a 23% surge this year when it removed its buy rating.

Former FTSE 250 oil firm SOCO International plunged 29.75p or 17% to 148.25p after a below-par start to its well offshore Vietnam.

The H5 well was the company’s next big hope after being forced last year to retreat from Virunga in the DRC, Africa’s oldest national park, after a WWF campaign.

Shares in AIM-listed Telit Communications rallied 9p to 189p after it became the latest target for short-selling hedge fund Ennismore, which made a packet on the demises of Globo and Quindell. 

Ennismore has taken a 1.12% short position on the Israeli firm, which makes products such as GPS antennas — a £3m bet that the shares will fall, causing the stock to drop 17% yesterday.

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November 18, 2015 |
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