Nogger & his blog have gone fishing for a week. Back on 26th Aug. So meanwhile you will have to get your market info somewhere else!
The CBOT grains complex had another bad day at the office Friday closing lower across the board as evidence continues to emerge that commodities are not the "golden child" any more.
We got swept away in a wave of bullish hype which sometimes had little to do with market fundamentals, now we seem to be paying the price.
The dollar was up, crude was down, so too was gold & silver. It would have seemed strange to say it a year or two ago but now it seems almost normal, the grains complex had to move lower too.
September soybeans settled 53 3/4 cents lower at $12.11 1/2 and November
soybeans ended 55 cents lower at $12.19. September wheat dropped 40 1/4 cents to close at $8.24 1/4 per bushel and September corn ended down 28 cents to $5.29 3/4 per bushel.
Fundamentals. What are they?
Crude Oil fell more than $1 a barrel Friday as a strengthening dollar curbed the appeal of commodities as a hedge against inflation.
Oil has tumbled 23 percent from the record $147.27 a barrel reached on July 11. The U.S. Dollar Index in New York, which tracks the currency against six others, rose to its highest since January on speculation U.S. consumer spending will keep the world's biggest economy out of a recession.
Crude oil for September delivery fell $1.24 to settle at $113.77 a barrel on the New York Mercantile Exchange. Intraday oil touched $111.34 a barrel, the lowest since May 1.
Argentina's 2007-08 wheat planting is concluding with crop conditions improving from drought conditions earlier in the season. Farmers have planted 95% of the 4.7 million hectares forecast to be planted this season.
EU wheat futures closed lower Friday pressured by falling CBOT markets and lower crude oil.
November Paris milling wheat closed down EUR2.25 at EUR194.50/tonne and London November feed wheat closed down £2.00 at £125.50/tonne.
UK weather remains a concern and the milling/feed wheat premiums continue to widen as rains continue to fall.
Early reports from the UK point to higher than expected yields and lower than average proteins.
Competition from the Black Sea is fierce with Spain, Italy, Holland and even Ireland recently reported to have bought wheat from this region.
It is becoming clear that the UK will struggle to find export homes at current levels, as long as the weather continues as it has been recently there is likely to be a large quantity of low-quality feed wheat on the market this winter which will inevitably weigh on prices.
I had this crazy dream last night that someone was once offered £200/tonne for wheat and turned it down. Mad eh?
Grain futures were sharply lower in the overnight session, due in part to selling created by the recent rallies but also on spillover pressure from activity in outside markets.
Funds, taking their cue from the sell-off in commodities in Friday morning trade, were heavy sellers of grains, traders said.
Weak data for soybeans yesterday is still weighing on soybeans prices and the bearish mood is spreading to other commodities in the grains pit.
The December corn contract didn't quite reach its targeted $6.00 level before finding renewed selling interest, but with the dollar up and energies and metals sharply lower it would have been difficult for grains to post or hold gains of any type overnight.
eCBOT September corn closed 19 3/4 lower, soybeans 34 3/4 lower and wheat 21 1/4 lower.
Corn futures are called to open this afternoon's CBOT session 15 to 20 lower, soybeans 30 to 35 lower, and wheat 15 to 20 lower.
Reports are circulating that buyers have defaulted on up to a million tonnes of palm oil purchases after prices have fallen around $400/tonne recently.
Chinese, Indian & Pakistani customers are said to be the main culprits, and some of the consignments are said to have actually been shipped and are on the high seas now looking for a destination an informant said.
Soybeans fell sharply last night & in the overnight eCBOT market on news that China cancelled previously ordered US soybeans.
Weekly NOPA crush data released yesterday was the smallest July crush since 2004 which is adding to soybeans woes this morning.
Weakness in outside markets is also hanging over the market with crude oil down almost $2/barrel at $113.05.
eCBOT beans are currently around 42-43c lower, with spillover weakness into the other pits dragging corn 15-16c lower and wheat 20-24c down.
The pound fell Friday for an 11th straight day against the dollar, the longest run of declines in at least 37 years, on speculation an economic slowdown will spur the Bank of England to reduce interest rates.
BOE Governor Meryn King's comments earlier in the week that there was more pain still to come for the economy still hang in the air.
The pound fell to $1.8514 from $1.8698 yesterday to cap it's longest losing streak since at least Jan 1971.
The weakening currency underscores concern a slumping housing market is pushing Europe's second-biggest economy toward a recession. A drop in house prices in July brought the property market to a virtual standstill the Royal Institution of Chartered Surveyors said this week.
After being in positive territory for most of the day crude oil eventually fell late Thursday on speculation that fuel consumption declines in the U.S. will spread to other countries as their economies slow.
Suddenly focus seems to be on consumption, not sporadic supply disruptions. Things that would have sent crude soaring a few months ago are seeming to have little effect all of a sudden said one trader.
US gasoline demand was down 2.1 percent through July as record prices and slower economic growth cut consumer spending, an American Petroleum Institute report showed yesterday. Europe's economy contracted for the first time since the introduction of the euro almost a decade ago, a report showed today.
"The market is much more focused on demand destruction than on supply concerns," said Nauman Barakat, senior vice president of global energy futures at Macquarie Futureone analyst "The concern now is that the demand destruction in the U.S. will spread like a virus to other countries."
Crude oil for September delivery fell 99 cents to settle at $115.01 a barrel on the New York Mercantile Exchange.
Corn closed around 18c higher on forecasts for drier weather to hit the Midwest during the next two weeks.
In an astonishingly predicatable piece of rhetoric "shallow-rooted late-planted blah blah blah vulnerable corn" is seen withering in the ground by some "analysts."
I think they may have spelt that wrong.
Sep CBOT wheat closed 14 1/4 cents higher at $8.64 1/2 per bushel. Weekly exports remain surprisingly solid given the size of the crops elsewhere globally.
Ukraine has harvested 25.5 million tonnes in the season that began June 1, Interfax reported, citing an unidentified official from the Agriculture Ministry. The USDA has predicted a crop of just 22 million tonnes.
As reported elsewhere on the Blog the Russian grain crop is looking substantially larger than "official" estimates. Maybe 13-15 mln larger.
In contrast soybeans took a bath with August settling 24 1/2 cents lower at $12.45 1/2. Crush data and export sales for beans were very poor.
EU wheat futures closed higher for the second day in succession to cap a tumultuous two day rally!
Paris November milling wheat ended up a whole quarter of a euro at EUR196.75 a metric tonne and London November feed wheat closed up a massive GBP1.50 at GBP127.50/tonne.
There's nothing much new really, rain is threatening what's left in the fields, quality is getting worse and the weather outlook is "mixed" at best.
Strategie Grains upped it's EU crop projections again, that's 8.7MMT extra in the last two months alone, mostly of low grade feed wheat.
Where is it all going to go? Nowhere if the Ukraine has anything to do with it.
The National Oilseed Processors Association said today that soybean demand from U.S. processors fell 6.7 percent last month after Argentina rescinded an export tax increase, ending a four-month dispute with farmers and reducing demand for U.S. vegetable oils and animal feed.
US crushers processed 133 million bushels of soybeans last month, down from 142.5 million in July 2007.
The USDA released their weekly export sales report at 13.30BST today, here's a note of what they reported vs trade expectations:
Wheat 650,300MT (400-750,000MT)
Corn 385,900MT old crop; 949,000MT new crop (700-1,100,000MT)
Soybeans -49,700 MT old crop; 119,200MT new crop (200-600,000MT)
Soymeal 51,300MT old crop; 45,100MT new crop (50-200,000MT)
Soyoil 25,500MT old crop; NIL new crop (0-15,000MT)
The corn figure stands out as being quite strong, whilst the soybean figure looks very poor against what was expected.
US banks repossessed almost three times as many US homes in July than a year earlier and the number of homes receiving a foreclosure notice jumped 55 percent as more homeowners defaulted on their mortgages in the face of falling prices, RealtyTrac, an Irvine, California-based seller of foreclosure data, said today in a statement.
Bank seizures rose 184 percent to 77,295, the steepest increase since reporting began in January 2005, More than 272,000 properties, or one in 464 U.S. households, got a default notice, was warned of a pending auction or were foreclosed on.
Strategie Grains has increased it's estimate for the 2008 EU grain crop to 299.7MMT, up 4MMT from last month's estimate of 295.7MMT.
They have now increased the crop 8.7MT in the last two months.
Wheat production is revised up 2.2MMt to 133.9MMT although they note that recent rains could have a negative impact on quality.
Corn production is revised up 1.1MMT to 59.7MMT.
Hungary's 2008 grain harvest is now expected to come in at 17.61MMT, an increase of over 8MMT on last season's 9.6MMT according to the Ag Ministry there.
The 2008 cereal crop has produced 8.61MMT (4.7MMT in 2007) of which winter wheat accounted for 5.62MMT (4MMT in 2007), and the corn crop is expected to yield 8MMT.
EU wheat futures are higher for the second day in succession Thursday following strength in CBOT futures overnight.
November Paris milling wheat is up EUR2.25 at EUR198.75 and November London feed wheat is £2 higher at £128 at 12.50pm London time.
The pound slid to a 22-month low against the dollar and was on track for its steepest monthly drop in over 11 years on Thursday as negative sentiment mounted on the economy, raising expectations for a rate cut.
The Bank of England's quarterly inflation report on Wednesday gave a gloomy prognosis for the economy, and said inflation would fall below the central bank's 2 percent target in two years if interest rates were held at 5 percent.
Inflation at more than double the Bank's target had kept expectations of rate cuts on the back-burner despite data showing the economy in poor shape and heading towards a possible recession.
But the central bank's suggestion that inflation is set to slide ramped up expectations for a rate cut by the end of the year, denting the currency's yield advantage.
At 12:54 p.m., the pound had recovered slightly to $1.8750, having earlier fallen as low as $1.8620, its lowest since October 2006. The euro was steady at 79.60 pence.
eCBOT grains closed firmer across the board on follow through buying from last night's limit up closes.
Corn closed around 6-7c firmer, soybeans mostly 12-13c higher and what up around 15-16c.
Early calls for this afternoon's session: Corn futures are expected to open 6 to 7 higher; soybeans 10 to 12 higher; wheat 15 higher.
The USDA release their weekly export sales report at 13.30BST today, here's a note of trade expectations:
BP says it has resumed pumping gas into the Baku-Tbilisi-Erzurum pipeline earlier today. It had stopped pumping gas into the pipeline on Tuesday because of security fears.
BP's Baku-Supsa oil pipeline - also shut down on Tuesday - remains closed as the company continues to assess the security situation.
In an unrelated closure the larger Baku-Tbilisi-Ceyhan line remains out of action after a fire earlier this month on the Turkish section of the line. BP says engineers are still trying to review the damage and no time has been set for the reopening of that line.
Just days after announcing the closure of two facilities in Clinton, Arkansas and in Bossier City, Louisiana, Pligrims Pride has announced the closure of another facility in Atkins, Arkansas.
The plant will close in 60 days, leaving workers without a job and many poultry farmers in dire straits.
Rodney Wyllia, a poultry farmer near Atkins, found out on 11 August that his contract with Pilgrim's Pride would soon end.
He said, "I was devastated because this is my main source of income for my family. It was just devastating to us. I was physically ill, literally. I just thought I was going to pass out. Once these chickens are shipped out in about four weeks this chicken farm will basically be out of business."
His wife, Amanda explained, "You get loans on your chicken houses to build them. We owe probably $400,000 at least on the chicken houses so if there is no chicken to supply them we have no income to pay that payment or live off of so it's very scary."
Pilgrim's Pride expects to close its facility in Atkins indefinitely around 10 October. The corporation says the decision comes as a result of soaring feed costs and an over-supply of chicken on the market.
Production may be resumed at some time in the future if market conditions improve the company stated.
Dairy farmers say Tesco risks sparking another damaging price war after it launched a new cut-price milk line. Britain's biggest retailer has started selling branded Fresh 'n' Lo milk at £1.06 for a two-litre carton, 10p below the price charged by its closest rival.
The move has brought immediate condemnation from Farmers For Action.
David Handley, its Monmouth-based chairman, said it threatened to wipe out all the progress made over the past 18 months in obtaining better prices for milk producers.
"The last time we saw this happen was in 1995/96 when Tesco decided to take on Asda, and we all know what happened then, the sky fell in for a lot of dairy farmers" he said.
Tesco is being supplied with the milk by Robert Wiseman Dairies which has recently opened Europe's most modern processing plant near Bridgwater.
But Mr Handley said milk producers were in no financial state to get caught up in a discount war.
"I really thought we had turned the corner, that the supermarkets had at last got it into their heads that if they want security of supply from British milk producers then they need to be paying a sustainable price" he said. "There was a huge fall-out of dairy farmers the last time this happened and the exodus hasn't stopped yet.
"With rising prices squeezing profits a lot of farmers are already questioning whether it's still worth getting up to milk the cows.
"The prospect of another price war will simply convince thousands more of them that it isn't."
Arla Foods amba has today announced half-year results in line with expectations. Net profit for January to June 2008 was DKK 481 million (£50.63 million).
Despite the good result, the company is operating in a challenging environment with a number of factors impacting on earnings. The cancellation of EU export subsidies in the first half of 2007 resulted in the company losing substantial revenues, coupled with foreign exchange rates falling significantly below those for the same period last year.
In the Middle East consumers are still uncertain about Danish products and this remains a concern. Finally, rising cost inflation and higher energy prices continue to put pressure on earnings for both Arla and its farmers.
Offsetting these challenges, an improvement in earnings has been achieved due to the company working to seek recovery of higher costs from its customer base to offset inflationary pressure on milk and commodities. In addition, the benefits from the extensive rationalisation programmes of recent years are being realised.
Commenting on the half-year results Peder Tuborgh, CEO of Arla Foods amba said: “We anticipate that 2008 will be more profitable than 2007, however the market will be more volatile with frequent price variations – partly due to the elimination of the EU’s regulatory mechanisms. The pressure on the price will be maintained during the second half of the year.“
Crude oil rose for a second day after a U.S. Energy Department report yesterday showed a bigger than anticipated decline in inventories of gasoline as refiners shut units and imports fell.
Gasoline supplies dropped 6.39 million barrels to 202.8 million barrels last week, the biggest decline since October 2002 when tropical storms disrupted Gulf of Mexico output. Gold, silver and nickel also rebounded on speculation declines since July were exaggerated.
Crude oil for September delivery rose as much as 96 cents to $116.96 a barrel, and was at $116.86 at 08.50 London time on the New York Mercantile Exchange.
The coy old Ruskies are at it again. Not content with snatching foreign privinces evidence is emerging that their 2008 grain crop is going to be much bigger than the official estimate of 85MMT.
According to Nicholas Demianov, the head of marketing department of International Grain Company, the company recently renewed it's forecasts for the grain crop in Russia and increased it to 98 mln tonnes. Add to that nearly 9.3 mln tonnes of wheat, barley and oats that remained from last year crop and we have alarge exportable surplus on out hands here.
Grains export will total 17.5-18 mln tonnes of wheat and 2.5-3 mln tonnes of barley according to Demianov. The wheat export figure is substantially higher than the official estimate of 14-15 mln tonnes. In the 2007 marketing year Russia exported 12.75 mln tonnes of grain.
As of August 11, Ukrainian farmers had harvested grains and legumes throughout 11.2 mln ha.
To date, they have harvested 6.51 mln ha of wheat, or 92% of forecasted value. The total wheat harvest was 24.46 mln tonnes.
This is substantially higher than the 20 mln tonnes originally forecast.
3.94 mln ha of barley were harvested (94% of forecasted value). The total barley harvest was 12.56 mln tonnes.
347.100 ha of rye were harvested (75% of forecasted value). The total rye harvest was 794.700 tonnes.
198.700 ha of peas were harvested (97% of forecasted value). The total peas harvest was 480.300 tonnes.
eCBOT grains are higher this morning on follow through buying from last night's limit gains.
Corn is around 8-10c firmer, soybeans up 10-17c and wheat up 12-14c.
Corn appears to have hit a floor around $5/bushel and is moving higher on ideas that lower prices have stimulated demand.
South Korea, the world's third- biggest corn importer, is to buy up to 155,000 metric tons of U.S. corn for feed production in its first purchase of the grain in almost five months after corn prices declined.
The Korea Feed Association, the country's largest grain buying group, issued a tender to buy as much as 110,000 tons today, following a 45,000-ton purchase yesterday by a smaller importer, industry officials said.
The entire complex is also supported by broad=based commodity buying with crude oil closing firmer at $116/barrel last night and following through to trade at $116.72/barrel this morning.
Soybean supplys remain tight and the late-planted crop is going to be vulnerable to any weather scares between now and harvest.
Wheat is steadier on spillover strength from beans and corn. Traders will be looking to this afternoon's USDA weekly export sales report to maintain recent export pace.
EU wheat futures closed firmer, rallying late to or near daily highs as CBOT surged.
November Paris milling wheat ended +EUR8.50 at EUR196.50/tonne and London November feed wheat closed +£3.75 at GBP126.00/tonne.
Rains contine to present UK farmers with harvesting problems and quality is becoming a serious issue.
That is likely to prevent feed wheat from rallying too much relative to milling grade wheats.
On the feed wheat export front strong competition from Eastern Europe & the Black Sea will oontinue to compete with UK wheat.
Corn futures closed up the 30 cent limit in all contracts from Sep 08-Sep 09. Stronger outside markets such as crude oil helped the rally in corn. Corn was not the only grain seeing sharp price gains as wheat and soybeans enjoyed limit gains up, broad commodity buying and long term short covering was believed to add support. Funds were large buyers, buying an estimated 12,000 contracts.
Soybeans futures were 70c limit up in all trading contracts besides August. Soybeans followed the rallies in crude oil and other grains. Soy products also seen limit gains in most months. Beans have bullish fundamentals as US ending stocks remain tight. Soybeans are oversold and technical buying is helping support soybeans. Funds bought an estimated 6,000 contracts.
Wheat futures surged as they responded to limit gains in row crops. At all three trading exchanges seen contracts limit up, although most of the action was not in nearby contracts. Funds bought 7,000 contracts at CBOT. Wheat remains the most volatile grain market of late, and has some speculators entering cautiously. Wheat charts also appear technically oversold, giving bulls the edge over the bears on Wednesday. Concerns about quality of foreign wheat crop production have sparked some global buying in the US helping to support wheat prices. Spring wheat crop conditions continue to be weighed on by unfavorable hot/dry weather. Chicago Sept wheat closed +60c.
eCBOT grains futures closed firmer overnight with corn around 2-3c higher, beans up around 5-6c and wheat up around 4-5c.
Modest follow-through buying from last night's stronger close was a feature overnight as crude oil seems to have stabilised around $113/barrel.
Note however that there is data due out later today from the EIA for weekly US crude, gasoline & distillates stocks which may affect crude this afternoon.
Any significant movment in crude is likely to spill over into the grains/oilseed markets.
Early calls for this afternoon's sesion are: Corn futures are expected to open 2 to 3 higher; soybeans 3 to 5 higher; wheat 3 to 4 higher.
The Pound fell nearly 100 points after BoE Governor stated that the U.K. economy faces a difficult, painful adjustment and that the “balance of risks are on the downside”.
The central bank leader would go on to say that although near term inflation risks remain elevated, that a sharp decline in growth will reduce the medium term risks of price stability and that expectations are that consumer prices will return to their 2% target within two years.
The pound hit $1.8757 shortly after the comments.
China has seen phenomenal growth in the last ten years. All we ever read about is the price of (insert any chosen commodity here) is up because of Chinese demand. From steel to soybeans, copper to corn it's all down to Chinese growth.
Since 1998 China's GDP has grown at about a 10% annual real growth rate, and it's economy more than tripled in size (in real terms). There were no recessions, just expansion. The origins of China's tremendous growth are well known: large population migrating from low (farming) to higher productivity (manufacturing) activity, cheap labour, a capitalism-friendlier communist government, and insatiable demand from the US, the EU and the rest of the developed world for cheap goods.
The Chinese model has been driven by three things - investment, exports and consumption.
Investment growth has weakened because banks are less willing to lend due to the credit crisis.
Chinese growth has largely been driven by the manufacturing sector; historically its industrial production grew at a faster rate than GDP. The manufacturing industry is very capital intensive. Building factories requires a large upfront investment. High commodity prices and rapid wage inflation has driven those costs up. Once a factory is built the costs of running it are to a large degree independent of the utilization level - they are fixed.
Bank debt and underground finance companies that charge very high interest rates are the predominate sources of capital in China. Large piles of debt (financial leverage) combined with high fixed costs (operational leverage) create a very high total operational leverage.
Total operational leverage in China is elevated further as factories are built to accommodate (percieved) future demand. This type of thinking results in tremendous overcapacity when demand cools.
In 2005 NY Times ran an article entitled China, New Land of Shoppers, Builds Malls on Gigantic Scale, it talked about the biggest shopping mall in the world that happened to be in Dongguan, China. The article said:
"Not long ago, shopping in China consisted mostly of lining up to entreat surly clerks to accept cash in exchange for ugly merchandise that did not fit. But now, Chinese have started to embrace America's modern "shop till you drop" ethos and are in the midst of a buy-at-the-mall frenzy.... by 2010, China is expected to be home to at least 7 of the world's 10 largest malls... Already, four shopping malls in China are larger than the Mall of America. Two, including the South China Mall, are bigger than the West Edmonton Mall in Alberta, which just surrendered its status as the world's largest to an enormous retail center in Beijing."
Fast forward three years and you find a very different story: the biggest mall in the world - the South China mall, with space for fifteen hundred stores, only has a dozen stores open for business - it is empty. Shoppers never materialized, much like the spectators at the current Olympic Games.
The weakness in the US and European economies will temper demand for Chinese made goods. China is already showing first signs of slow down - inflation is increasing and rate of real growth is decreasing.
Rising commodity prices, such as we have seen over the last couple of years, are starting to have a tremendous impact on Chinese inflation. The average American family spends 15% of their household budget on food, whereas the Chinese spend 37%. It is obvious therefore that an increase in the price of wheat or rice or soybeans will have a greater impact in Chinese consumption (and inflation) than it will in the US.
If food inflation is having an effect on consumption in the West (and it is), imagine the effect in China where they spend more than double the amount of household income on food than we do.
The US and Europe can cope with energy and food inflation a lot better than China and other developing nations, as we spend a lot less on food and energy as a percent of our income and have a lot more discretionary income.
One economist likens the Chinese economy to the bus from the movie "Speed". In the movie the bus is wired by a villain (played by Dennis Hopper) with explosives, and will explode if its speed drops below 50 miles per hour. The Chinese economy has 1.3 billion unsuspecting people on board. It could blow if economic growth drops below its historical pace.
The current situation raises political risk in China and also the chances that government (social) intervention will rise. This also puts in doubt the significant development of a Chinese middle class, at least in the near future.
The US Energy Information Administration said yesterday that US demand for crude oil had fallen by 800,000 barrels a day in the first half of the year, the largest decline for 26 years. It blamed slower economic growth and higher petrol prices.
The falling oil price has brought some relief to US motorists with the price of a gallon of fuel falling below $4 for the first time since late May. The regular Lundberg survey of filling stations found the average cost of unleaded petrol has fallen by 15 cents over two weeks to $3.85. High prices have been causing soul-searching in car-dependent parts of America.
In some areas, employers have allowed staff to compress their workload into intensive four-day weeks to reduce commuting costs. Several towns have switched police patrols onto bicycles, charities have had to cut back on meals on wheels and rail services have reported a surge in passenger numbers.
Irish Times -- Farmers handed out free cans of Guinness in Dublin yesterday to protest over the price they receive for malting barley, a crop they say they will not grow again unless they get higher prices for doing so.
Irish Farmers' Association president Pádraig Walshe said Guinness had argued it does not buy grain from farmers but from the maltsters, Greencore Malt.
"But the fact is that 95 per cent of our malt is purchased by Guinness and I am telling them now that unless we get the same price as last year, €205 per tonne, farmers will not grow the crop next year," he said.
"The price on offer to growers of €165 a tonne is jeopardising future supplies. Given the scale of the increase in their input costs, growers must maintain a margin or they will not produce a crop.
"If Guinness want to keep the Irish harp on the pint of stout, they will have to pay a realistic price to Irish malting barley growers, and Diageo and Greencore Malt cannot continue to take growers for granted," he said.
As the 300 protesting farmers handed out cans of Guinness to the public, Mr Walshe said he wanted to get the message across that farmers received just over one cent for each pint of the brew.
"Every year Guinness put 2-3 per cent on the price of a pint. Last March they added an additional 3.5 per cent to the pint and before the year is out they are adding a further 2 per cent," he claimed.
IFA grain chairman Colum McDonnell said the justification used by Diageo, which manufactures Guinness, for increasing the price of a pint higher raw material costs. "Yet their main supplier Greencore Malt is cutting the price paid to malting barley growers by over 20 per cent," he said.
Mr Walshe said Guinness had prided itself on its worldwide reputation as a premium Irish product and a company with tradition. "Now it is putting malting barley growers out of business," he said.
Over the past 10 years more than 5,000 growers had gone out of the business and the 250,000 tonnes of quality malt required by Guinness were being produced by only 3,000 growers, he added.
"We are not being greedy. We are facing rising costs of over €40 per tonne on fertiliser and oil costs. We are seeking last year's price but I believe if we do not get it, then no farmer will plant the crop next year," he said. Diageo Ireland rejected the IFA claims.
"Diageo does not buy malting barley from growers but purchases finished malt from malting companies. It has no role whatsoever in negotiations regarding the price of malting barley - these are a matter for growers and malting companies.
Crude oil rose for the first time in four days Wednesday morning as the U.S. dollar weakened, bolstering the appeal of commodities as a hedge against inflation.
Crude oil for September delivery rose as much as 98 cents, or 0.9 percent, to $113.99 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It traded for $113.80 at 8:27 a.m. London time. Yesterday, futures declined $1.44, or 1.3 percent, to settle at $113.01, the lowest close since May 1.
The overnight grains markets are firmer across the board this morning as the USDA report becomes history & traders begin to focus their attention further ahead.
Corn prices are up from recent near-six months lows on ideas that prices around $5/bushel rather than $8/bushel will stimulate demand.
Yesterday's USDA numbers pegged world consumption at a record high 799.7 mln tonnes reducing global reserves as a percentage of consumption to the lowest since 1974.
Corn futures are currently up around 4-5c in overnight trade.
Soybeans are up after the USDA projected lower than anticipated US production, amidst concerns that although current weather patterns are favourable, cooler temperatures now may mean cooler temperatures ahead in September. That could mean frost which would be bad news for the late developing crop.
Bean futures are up around 13-16 cents on eCBOT this morning, adding to last night's gains of around 17-18 cents.
Wheat is also modestly higher, around 4-6 cents up, following corn & soybeans to a degree but also supported by recent strong export sales numbers from the USDA despite burgeoning world supplies.
The corn market shrugged off the USDA coming out with quite bearish 2008 US production numbers of 12.288 billion bushels & a yield of 155 bu/acre, the second-highest on record. Both numbers were well above trade estimates, yet the corn complex managed to throw off it's initial lower opening to close higher.
September corn closed up 11 3/4 cents to $5.09 per bushel.
Many traders feel USDA missed the mark and have overstated yield and production and are "selling the rumour, and buying the fact."
After dropping $3/bushel from recent record highs breaking through and staying below $5 is proving a difficult nut to crack.
As with soybeans, the trade is concious that we have a late maturing crop here & that is going to leave it vulnerable to early frosts, much more so than normal with crop development 2-3 weeks behind normal.
CBOT soybeans closed with decent gains Tuesday after the much-awaited USDA crop report underpinned the market my pegging 2008 US production at 2.97 billion bushels, slightly lower than trade estimates of 3.001 billion.
USDA lowered the yield to 40.5 bu/ac down from 41.6 in July but increased harvested acres to 73.3 up from July's estimate of 72.1 million acres
November soybeans ended 18 cents higher at $12.18/bushel and December soymeal closed $11.50 higher at $332.00/ton.
The USDA put US soybean ending stocks for 2007/08 at 135 million bushels, the tightest since 2003.
The market was overdue a correction after recent steep declines but overall the trend remains bearish a trader said.
Whilst nearby weather remains largely nonthreatening the market could work a little lower yet, but the threat of early frost significantly damaging late-planted beans will likely prevent this market working much lower.
Still, soybeans still appear to be inextricably linked to crude oil & will continue to follow that market closely.
CBOT September wheat closed 3 1/2 cents lower at $7.90 1/4 per bushel Tuesday, supported by a late rally in corn.
Record high world production numbers from the USDA pressured wheat sharply lower at the opening.
The USDA raised its forecast for world 2008-09 production by 6.5 million tons from it's July estimate to a record 670.8 million tons. Major increases coming from the EU-27, India, Russia, Ukraine, and the US.
US 2008-09 carryout was increased to574m bushels when the trade had been anticipating a decrease to 528m bu.
The increase in carryout might be related to cheaper corn, with wheat no longer competing with corn as feed, but wheat has roughly -$1.50.bu basis while corn is around $0.40/bu. and that might suggest the contrary. Hot and dry weather remains a problem for much of the Northern Plains, stressing the spring wheat crop.
The current pace of US exports remains strong in the face of increased global supply and should prevent the market from falling much further a trader said.
EU wheat futures closed lower Tuesday with Nov Paris milling wheat down EUR0.75 and Nov London feed wheat down £1/tonne.
Persistent rain, particularly in the UK, continues to threaten wheat quality & is pushing feed wheat lower relative to milling grade wheats.
In the UK nearby availability is also being affected with spot material commanding some hefty premiums according to some.
Certainly anything that has been cut this last week or two is likely to be high in moisture and will need careful handling & drying.
The USDA raised it's global 2008-09 wheat crop forecast by 6.5 million tonnes from last month to a record-high 670.8 million tonnes. EU-27 output was increased 1.5mmt.
US CORN: 12.288 billion bu.; trade expected 11.986 billion bu. -- compares to 11.715 bil. bu. in July; 13.074 bil. bu. in 2007.
US BEANS: 2.973 billion bu.; trade expected 3.001 billion bu. -- compares to 3.00 bil. bu. in July; 2.585 billion bu. in 2007.
US ALL WHEAT: 2.462 billion bu.; trade expected 2.459 billion bu. -- compares to 2.461 bil. bu. in July; 2.067 bil. bu. in 2007.
2008-09 U.S. CARRYOVER
CORN: 1.133 billion bu.; up from July proj. of 833 million bu.
BEANS: 135 million bu.; down from July proj. of 140 million bu.
WHEAT: 574 million bu.; up from July proj. of 537 million bu.
GLOBAL PRODUCTION HIGHLIGHTS
ARGENTINE BEANS: 46.5 MMT; down from July est. of 47.0 MMT -- 2008-09: 49.50 MMT; up from July proj. of 48.0 MMT.
BRAZIL BEANS: 61.0 MMT; unch from July est. of 61.0 MMT -- 2008-09: 62.50 MMT; down from July proj. of 64.0 MMT.
ARGENTINE WHEAT: 16.0 MMT; unch from July est. of 16.0 MMT -- 2008-09: 13.5 MMT; down from July proj. of 14.5 MMT.
AUSTRALIA WHEAT: 13.04 MMT; unch from July est. of 13.04 MMT -- 2008-09: 25.0 MMT; unch from July proj. of 25.0 MMT.
CHINA WHEAT: 109.86 MMT; unch from July est. of 109.86 MMT -- 2008-09: 114.0 MMT; unch from July proj. of 114.0 MMT.
CANADA WHEAT: 20.05 MMT; unch from July est. of 20.05 MMT -- 2008-09: 25.0 MMT; up from July proj. of 24.5 MMT.
EU-27 WHEAT: 119.25 MMT; down from July est. of 119.48 MMT -- 2008-09: 143.17 MMT; up from July proj. of 141.7 MMT.
CHINA CORN: 151.83 MMT; unch from July est. of 151.83 MMT -- 2008-09: 153.0 MMT; unch from July proj. of 153.0 MMT.
ARGENTINE CORN: 21.0 MMT; unch from July est. of 21.0 MMT -- 2008-09: 22.0 MMT; down from July proj. of 23.5 MMT.
SOUTH AFRICA CORN: 12.0 MMT; up from July est. of 11.5 MMT -- 2008-09: 11.5 MMT; unch from July proj. of 11.5 MMT.
BRAZIL CORN: 57.5 MMT; unch from July est. of 57.5 MMT -- 2008-09: 57.0 MMT; unch from July proj. of 57.0 MMT.
The figures are a mixed bunch to my mind, the most striking feature being rather bearish on corn.
2008 Corn production at 12.288 billion bushels is well above the average trade estimate of 11.986 billion. Yields were increased to 155 bu/acre, again above what the trade was expecting.
The soya numbers are a little bullish and the wheat numbers neutral.
Early calls are corn futures to open 10-15 cents per bushel lower, soybeans are seen starting 5-7 cents higher, and wheat is expected to open 2-4 cents higher.
The question will now be will corn drag the rest of the complex lower with it?
2008/09 USDA Aug Avg Trade Est USDA Jul
Corn 1.133 1.004 0.833
Soybeans 0.135 0.141 0.140
Wheat 0.574 0.528 0.537
Corn 1.576 1.598 1.598
Soybeans 0.135 0.131 0.125
Crop USDA Aug Avg Trade Est USDA July
Corn 12.288 11.986 11.715
Soybeans 2.973 3.001 3.000
All Wheat 2.462 2.459 2.461
Winter Wheat 1.875 1.873 1.864
Spring Wheat 0.501 0.510 0.507
USDA -- Global oilseed production for 2008/09 is projected at 416.1 million tons, down 1.2 million tons from last month, but still record high. Soybean production for Brazil is reduced 1.5 million tons to 62.5 million tons due to lower area projections reflecting sharply lower soybean futures prices. Argentina soybean production is raised 1.5 million tons due to a record 49.5 million tons on higher area. Projected area is raised partly due to the impact of dry weather on winter wheat planting in the main soybean producing areas. India soybean production is projected at 9.1 million tons, up 0.4 million based on higher area. Planted area reported through late July indicates higher-than-expected soybean plantings this year. Ukraine rapeseed production is raised 0.4 million tons to 2.8 million based on higher yields reported during harvest. Global sunflowerseed production is projected higher due to increased harvested area for Argentina, Russia, and Ukraine.
USDA -- Global 2008/09 wheat production is projected at a record 670.8 million tons, up 6.5 million from last month and 60.2 million higher than last year. Increases for EU-27, India, Russia, Ukraine, and the United States more than offset reductions for Afghanistan and Argentina. EU-27 production is increased 1.5 million tons. India production is raised 1.6 million tons in line with government estimates. Production for Russia is raised 3.0 million tons reflecting increased harvested area and higher expected winter wheat yields as indicated by harvest results to date. Ukraine production is raised 1.0 million tons despite a small reduction in harvested area as a result of recent flooding in western growing areas. Harvest results indicate higher yields for winter wheat in Ukraine. Production is lowered 1.0 million tons each for Afghanistan and Argentina. Severe drought and lack of snow melt for irrigation have sharply reduced harvested area and yields in Afghanistan. In Argentina, continued dryness in central growing areas, as well as uncertainty about government export policies have reduced planted area.
Overnight markets jostled for position ahead of this afternoon's important USDA crop report.
News of a ceasefire in the Russian/Georgian dispute removed some support from crude oil, althought the situation is far from resolved. Crude hovers around the $113/113.50 level.
eCBOT corn closed mixed with nearby months just about in positive territory 1/4c to 3/4c higher.
Wheat was also mixed 1 1/4c higher to 6 1/2c lower.
Soybeans closed around 5-6c easier.
Calls for this afternoon's opening will depend heavily on what the USDA have to say at 13.30BST.
Pilgrim's Pride Corporation announced Monday that it will make idle its chicken processing plant in Clinton, Arkansas and its further-processing facility in Bossier City, Louisiana.
Both moves, which are expected to be completed within 60 days, are part of the company's ongoing effort to operate more efficiently and return to profitability amid high feed costs and an oversupply of chicken on the market.
Pilgrim's Pride plans to keep both plants idle until it believes that industry margins can be sustained at more normalized levels of profitability should these or our other production cutbacks be reversed.
The idling of the two plants will eliminate a total of approximately 600 positions. Pilgrim's Pride will provide transition programs to employees whose positions are eliminated to assist them in securing new employment, filing for unemployment and obtaining other applicable benefits.
The company attributed today's announcement to the continued imbalance in supply and demand in the US chicken industry, which has led to market prices for breast meat that are unusually weak for the peak summer grilling season. Market pricing for breast meat is currently at $1.33 per pound, well below the prior five-year average for August of approximately $1.63 per pound, and significantly below the average price of more than $1.80 just four years ago.
"Over the past six months, Pilgrim's Pride has taken a number of proactive steps to strengthen our competitive position amid a very difficult operating environment," said Clint Rivers, president and chief executive officer.
"These steps include the production cutbacks for the second half of fiscal 2008, the closure of a plant in North Carolina and seven distribution centers, and the consolidation of our tray-pack operations in El Dorado, Ark., to six other case-ready sites. Those changes, when combined with today's announcement, will result in the elimination of nearly 2,300 positions.
"With Labor Day approaching and no indication that the actions taken to date by Pilgrim's Pride or other industry members are having a positive effect on selling prices for our products, it is now clear that more significant, decisive action is necessary.
"In addition, EPA's disappointing decision to reject the request for a partial waiver of the 2008 Renewable Fuel Standard for corn-based ethanol assures that high grain prices are here to stay for the foreseeable future.
Farmer's Guardian --The UK biofuel industry is dominated by imports that that fall short of basic environmental standards, the Renewable Fuel Agency (RFA) has revealed.
In its first monthly report since the UK introduced the Renewable Transport Fuel Obligation in April, the RFA said that biofuels accounted for 2.14 per cent of UK road fuel against a target for the year of 2.5 per cent.
But it admitted that only 19 per cent of the biofuels met its environmental standards compared to a target of 30 per cent.
Just 7 per cent of the biofuel used on British forecourts came from UK sources.
On a positive note the RFA said that 42 per cent greenhouse gas savings were achieved, although that the figure excluded the emissions from indirect changes in land-use considered in the recent ‘Gallagher Review’.
Dr Sue Armstrong Brown, the RSPB’s head of countryside and species conservation, said: “This report is even worse than we feared and shows what a shambles the UK’s biofuels’ policies have become.
“Here is yet more proof, direct from a UK government body, that voluntary environmental and social standards just aren’t working. These standards must be strengthened and made compulsory before targets are raised any further.”
The RFA said that it was working with the Government to bring in compulsory sustainability criteria that would include the indirect effects of biofuel production.
It said that the current monthly reporting process was vital to draw up a picture of the UK biofuel industry before it could develop its sustainability framework.
The 2008 wheat harvest in Moldova has increased threefold compared to the previous year. The crop totaled 1.3 mln tonnes against 425.000 tonnes of the previous year, when grain croppage halved due to drought, declared Anatoly Gorodenko, the Minister of Agriculture and Food Industry.
Food wheat totals more than 400.000 tonnes of grains of 2008-crop. The number is sufficient to supply annual food grains consumption of Moldova.
Despite a 6% lower acreage the French 2008-09 rapeseed crop will reach a record high of 5.0 million metric tons according to the French Ministry for Agriculture and Fisheries.
French 2008-09 cereal production is seen 16% up on the year at 68.9 million metric tons, according to the French Ministry.
French wheat production was forecast at 37.0 million tons, up from the previous forecast of 36.6 million tons and 20.2% up on last season.
France's barley output is now forecast at 12.0 million tons, a 26.7% increase from 2007-08.
Corn production was pegged at 14.6 million tons little changed from 2007-08.
eCBOT futures closed mixed, mostly a touch higher in a modest bounce from Friday night's steep losses. Beans closed mostly 3-5 cents firmer, corn around 1c higher and wheat 1-2 cents lower.
Early calls for this afternoon's session are: Corn futures are expected to open steady to 1 higher; soybeans 3 to 5 higher; wheat 1 to 3 lower.
Following the announcement issued on 16 July 2008, Wynnstay, the agricultural and retail group, reported Friday that it has exchanged contracts to acquire the remaining 50% of the issued share capital of Welsh Feed Producers Limited not already owned by the Group.
WFP is a manufacturer of ruminant animal feeds and Wynnstay has been involved with the business as a joint venture for nearly 10 years.
The Group is acquiring the balance of the issued share capital of WFP for a gross cash consideration of £1.43 million payable on completion. Additionally, existing loan stock of £1.34 million held by the vendors and others will be redeemed in tranches prior to 30 September 2008. The acquisition is expected to be completed on 15 August 2008.
WFP is based in Carmarthen in South-West Wales and is a leading supplier of ruminant animal feeds for dairy farmers in the region. As milk production in the UK has consolidated over recent years, South-West Wales has become an increasingly important milk producing area and tonnage at WFP's plant continues to increase. Production has also been helped by the capital investment made in the mill over the course of 2007 which has enhanced product quality and output. Full ownership of WFP will enable Wynnstay to integrate the business within its existing Feed Division and to introduce further operational efficiencies. For the year ended 30 September 2007, WFP recorded profit before tax of £133,300. As at 30 September 2007, WFP's net asset value was £349,400.
At the same time, Wynnstay is undertaking a placing to raise £3 million before expenses by the issue of 1,200,000 new ordinary Wynnstay shares at a placing price of 250p. The net proceeds of the Placing will be used both to finance the acquisition and for working capital purposes. The new ordinary Wynnstay shares will rank pari passu in all respects with the existing ordinary shares and their admission to trading on AIM is expected to take place on 14 August 2008.
Ken Greetham, Chief Executive of Wynnstay, said, "We are delighted to be acquiring Welsh Feed Producers in full. WFP is a leading feed manufacturer in the increasingly important South Wales Milk Field and we look forward to working with the business to integrate it successfully within our existing Feed Division and to establish our core brand in the area.
The integration should bring benefits to both Wynnstay and WFP as we further strengthen our market share and widen our geographic distribution base."
FWi -- British poultry producers are facing an uncertain future, with retailers insisting they use GM-free feed at a time when supplies are dwindling and prices are soaring. If this stand-off continues producers may end up losing significant amounts of money through paying premium feed prices, or face losing their market for chickens and eggs.
Most of the UK's non-GM soya comes from Brazil, which harvested 40% non-GM varieties this year - a volume which is likely to drop to just 20% next year, says Martin Humphrey, feed sales director at Humphrey Feeds. There is a certain inevitability about where we're going - there is less and less non-GM soya being planted in the world. As long as availability reduces, the premium will increase, and it will become harder and harder for the supply chain to accept that price.
It is also becoming more difficult to keep GM and non-GM supplies separate, he adds. Cross-pollination in the field and shared handling facilities present myriad opportunities for contamination.
Certain elements in poultry feed are also already allowed to be from GM sources, including vitamins, enzymes, synthetic amino acids and oil, says Mr Humphrey.
Only one of the three main soya importers has guaranteed supplies of GM-free soya until next April, and it is struggling to get producers to commit to buying that far ahead. They're saying it is too expensive to keep feeding, says Scott Wellcome, general manager of Bunge UK. We might not have a UK market if my customers are losing money hand over fist.
GM-free soya is trading at about £30/t over GM varieties, and that premium is only going to rise as availability tightens, he adds. Bunge is importing about 300,000t of non-GM soya this year, out of the total UK market of 800,000t.
Brazilian farmers will plant next year's soya harvest this autumn, and will opt for whatever is most economic for them to grow, says Mr Wellcome. Although some will still choose to grow GM-free soya, they are increasingly moving towards GM varieties. Bunge is, therefore, not guaranteeing GM-free supplies from May 2009 onwards.
Soya meal is also just a by-product of the crop, which is primarily grown for oil, says Robert Newbery, chief poultry adviser at the NFU. The premium required to encourage farmers to plant GM-free varieties must, therefore, be significant. The idea that this little problem in the UK is going to stimulate planting is just nuts. The situation is getting more and more crucial.
GM-free soya is adding about 5% to the cost of feed, which makes up half the cost of a chicken.
As of August 8, Ukrainian agrarians harvested 36.63 mln tonnes of grains and grain legumes, average yield totaled 34.4 c/ha, reported the media-department of Ministry of Agricultural Policy of Ukraine.
Agrarians harvested 23.08 mln tonnes of wheat, 685,000 tonnes of rye, 12.04 mln tonnes of barley, 477,300 tonnes of peas and 2.84 mln tonnes of rapeseeds.
Well, we didn't see that one coming did we? As mentioned on here recently the figures coming out of Russia didn't add up. Just like the Ukraine crop this is one that's going to keep getting bigger methinks. This is translated from Russian so excuse the slight pigeon English. This won't be the last of the increases you mark my words....
Ministry of Agriculture of Russia will increase grains and grain legumes croppage forecast after August 20 this year.
Earlier Ministry forecasted 85 mln tonnes of grains crop, but now forecast will grow, declared Aleksey Gordeev, Minister of Agriculture, on August, 8.
New grains forecast of Ministry of Agriculture will total 88-90 mln tonnes, reported market participants, but officials haven't confirmed the figures yet.