European Wheat Planting: 50,000 Monkeys Can't Be Wrong

Despite world prices having halved, EU farmers will still plant wheat like crazed demons for the 2009 harvest according to a Reuters report, predicting just a "marginal decline in area."

The United Nations' Food and Agriculture Organisation said in its Food Outlook issued on Thursday that area planted for wheat in the EU would fall by just 2 percent, despite falling prices and high costs for inputs such as fertilisers.

German wheat plantings rose by an unusually high seven percent last winter and one analyst said more farmers could actually turn to wheat as safe haven.

"Wheat has the largest range of sales options from milling, animal feed to bioethanol," he said.

In the UK, Susan Twining of crop consultants ADAS, said wheat area in Britain was likely to be only about two to three percent lower. This would of course still leave wheat plantings at a comparatively high level after area in Britain surged by 13 percent to 2.075 million hectares last year.

The UkrAgroConsult agriculture consultancy said last week that winter wheat area in Ukraine decreased to 6.067 million hectares, four percent lower than forecast.

Meanwhile, most observers expected the French soft wheat area to stay close to the record 5 million hectares of 2007/08.

The International Grains Council said in a monthly report last week that world wheat plantings for the 2009 harvest would drop by just 1.8 percent to about 221 million hectares.

What's that expression, 50,000 monkeys can't be wrong?

US: GM And Ford Hemorrhaging Money

Reports released Friday indicate that US motor giants General Motors and Ford are hemorrhaging money at an alarming rate, as they become two of the companies hardest hit as the world's largest economy goes down the toilet.

GM reported a larger-than-expected loss of $4.2 billion in the third quarter on Friday. The company's revenue in the third quarter fell 13 percent, to $37.9 billion from $43.7 billion a year ago, because of weak demand in its core North American and European markets, it said.

The company also reported that it burned through $6.9 billion in cash during the quarter and ended the period with just $16.2 billion in cash reserves. That leaves the company just enough to see it through to the new year.

The motor giant admitted it "will fall significantly short" of the cash needed to run its business in the first half of 2009 unless economic conditions improve and the company gets aid from the federal government.

Earlier Friday, Ford Motors said it burned through $7.7 billion in cash in the third quarter, leaving it with $18.9 billion at the end of September. It reported a loss of $2.9 billion in the third quarter.

The CEO's of Ford, GM and Chrysler met with government representatives last week to discuss an emergency loan package, believed to be as much as $25 billion, to help the companies get through the worst vehicle market in 15 years and avoid going into bankruptcy protection.

USDA Report - What Is Expected

The November Crop Production Report comes out Monday and it will provide the final U.S. corn and soybean crop updates until January 2009. Traders have set their expectations in place for the data which will be out Monday at 13.30GMT before US markets open for the day.


On average, analysts expect the USDA to increase the corn yield slightly to 154.3 bushels an acre, from 153.9 bushels last month, pushing up 2008-09 production slightly to 12.066 billion from 12.033 billion bushels. New crop carryout is expected at 1.160 billion bushels, from 1.088 billion.


Average soybean production estimates are 2.916 billion bushels, lower the USDA's current forecast of 2.938 billion bushels. The average soybean yield estimate is 39.2 bushels per acre, below the USDA's 39.5 estimated in October. Analysts, on average, peg new-crop carryout at 189 million bushels, compared to the USDA's current estimate of 205 million bushels.


The average of analysts' estimates for U.S. wheat carryout in 2008-2009 is 594 million bushels, down from the USDA's October estimate of 601 million.

Argentina To Plant Record Soy Acres At Expense Of Wheat And Corn

Argentina's Agriculture Secretariat said Friday that the nation's farmers would plant a record 18.1m ha of soybeans for the 2008-09 crop. That figure is up substantially from the previous record acreage of 16.6m planted last season.

The figure represents an increase of 100% in area given over to Argentine soybeans in the last ten years.

Planting is currently 23% complete, the Secretariat added.

Soybeans are more popular than ever this season, due to a combination of lower input requirements relative to other crops, and also farmer mistrust of the government. After a difficult year, with long-running disputes between Argentine farmers and the government, the spectre of export bans on corn and wheat are always a possibility from the cash-strapped government. The threat of an export ban on soybeans is much lower.

The corn crop is seen at 67% planted, with 3.4m ha seen going into corn production this year. Output for the season ahead is seen at 18mmt, some 2.5mmt lower than 2007/08.

The wheat harvest in Argentina has just begun at around 5% complete. Final output is only expected to be in the region of 9.5 to 11mmt, the Secretariat says, substantially down on last seasons 16mmt due to lower plantings and drought.

EU Wheat Slips Lower In Quiet Trade

EU wheat futures slipped to close slightly lower Friday on another day of quiet, low volume trade.

Paris January milling wheat closed down EUR0.25 at EUR141.25/tonne. London November feed wheat fell GBP0.20 to GBP91.00/tonne.

Prices appear to have halted their recent steep declines and, although the general trend is still lower, prices are declining in pence rather than pounds.

In the UK, winter wheat planting is 85% complete according to the HGCA. Whether anyone from the HGCA has been up north recently is unclear. Here, plenty of land will be left fallow as it’s just too heavy and wet.

OSR planting has fared even worse, with many fields looking “awful” one North Yorkshire agronomist said this week. “We only got in 60 to 70 per cent of what we hoped to get drilled and of those crops that are in, not all will make it through the winter. The slugs, rabbits and pigeons will take their toll on what is already a small crop. If it is a hard winter, many oilseed rape fields just won’t make it,” he concludes.

Elsewhere, the Argentine wheat crop is now around 5% harvested and is expected to produce a crop of around 10-11mmt, some 5-6mmt below last season. This is partly due to lower plantings and also reduced yield due to drought.

The Australian crop is also seen lower than originally hoped for. ABARE cut it's estimate this week to 19.9mmt, citing a 'lack of spring rain'. Although that is still around 7mmt up on 2007, it's 3-4mmt less than had been anticipated earlier in the year. Output in South Australia and Victoria is now seen at levels only comparable with last season's drought-ravaged crop.

CBOT Closing Comments


Corn futures were pretty quiet during trade on Friday as expected ahead of Monday's USDA reports. Almost steady trade was credited to position squaring ahead of the crop production and USDA supply/demand report Monday. Trade is expecting less demand and a slight increase in yield but lower production due to less harvested acres. Crude oil did bounce slightly higher during trade and the dollar dipped giving that scenario price usually move higher in grains but was reluctant today. Harvest weather took a turn for the worse at the tail end of this week and should halt harvest in many regions of the CB till early next week. Dec -2 at 3.75.


Soybeans rallied towards the end of trade to post double digit gains in all contracts that traded Friday. Strength in crude oil and some bullish technicals boosted bean futures higher, and could receive fresh bullish news on Monday to prolong the short term rally. Deliveries were significant Thursday with 735 contracts posted against the Nov contract. Trade is looking for USDA to drop yield slightly in the Monday report but boost production due to with new found bean acres available for harvest. China was a large importer of beans last week helping bean exports stay above water. Nov +12 at 9.11; Dec Meal +8.90 at 271.70; Dec BO -27 at 33.90.


Wheat futures were mixed at the three different exchanges Friday but CHI was marked the only red in nearby Dec month. Wheat futures have been hammered by the realization that the world is on track to harvest the largest crop on record although Australia and Argentina may not participate as heavily as once anticipated. Short covering and weakness in the dollar help support prices lightly. US wheat for export has struggled to due higher currency and cheaper foreign wheat. The US dollar is supportive to grains at midday being off .55 points at 85.75. Crude oil pushed passed the $61/barrel to have gains on the day. Dec CHI -1 at 5.21; KC +5 at 5.68; MLPS +8 at 6.42.

US Jobs Data Awful; Over 10M People Unemployed

US unemployment shot to a 14-year high of 6.5 percent in October as another 240,000 jobs were cut, stark proof the economy is almost certainly in a recession.

The figures are even gloomier than expected. Analysts had predicted a rise of 220,000 to 6.3%.

The new snapshot, released Friday by the Labor Department, showed the crucial jobs market deteriorating at an alarmingly rapid pace.

Unemployment is now at it's highest level since March 1994, surpassing the high seen after the last recession in 2001.

The report also included revisions to the August and September reports, and they don't make for pretty reading. Employers cut 127,000 positions in August, its says, compared with 73,000 previously reported. And a whopping 284,000 jobs were axed in September, compared with the 159,000 jobs first reported.

So far this year, a staggering 1.2 million US jobs have disappeared. Over half of the decrease coming in the past three months alone.

Over 10 million people are now unemployed in the US, an increase of 2.8 million over the past year.

Welcome to the hot seat Mr. President.

Dollar Declines Ahead Of Jobs Data

The dollar fell against the pound and the euro Friday on speculation a government report due out just after 2.00pm GMT will show that the US economy lost the most jobs since 2003, bolstering the case for the Federal Reserve to lower interest rates.

Speculation is mounting that the Fed will drop US interest rates by a half percent to just one half percent at its next meeting.

The dollar weakened to $1.2785 per euro from $1.2653 and $1.5805 from an intraday low of $1.5539.

Data due later today is expected to show that US payrolls fell by 200,000 last month, and the unemployment rate rose to a five-year high of 6.3 percent.

eCBOT Close/Early Call

eCBOT grains closed higher Friday supported by lower production forecasts in Brazil due to high input prices and short-covering ahead of next week's USDA report. Beans closed 10-12 cents firmer, with wheat and corn bouth up around 4-5 cents.

Lower Brazilian production forecasts for soybeans and corn from Conab helped support the market, with the soybean crop forecast at between 58.4 million and 59.3 million metric tonnes, down from between 60.1 million and 61.3 million tonnes last month.

Corn production in 2009 will fall to 54.3 million to 55.2 million tonnes, from 58.6 million tonnes, Conab said. That compares with the October estimate for a drop to 55 million to 56 million tonnes.

There is also an element of book-squaring ahead of Monday's USDA report.

Weekend weather is also supportive, with rain seen as hampering US farmers' attempts to wrap up the harvest.

Japan passed on a wheat tender yesterday after a Japanese trading company defaulted on sales of 20,000 metric tonnes to the government after the start of tougher food safety rules.

Early calls for this afternoon's CBOT session: Corn futures are expected to open 3 to 5 higher; soybeans 10 to 12 higher; wheat 3 to 5 higher.

Ukraine Grain Harvest 52.15MMT

With just a small amount of corn still left to cut, the Ukraine has harvested 52.15MMT grain in bunker weight aff 95% of the planted acreage according to Boris Supiganov of the Agriculture Ministry.

Final output in clean weight is expected to be around 51MMT the ministry said, substantially higher than last season's 29.3MMT, and 1.3MMT up on last month's estimate.

Ukraine remains a very aggressive exporter with the country's inflation rate, which is the highest in Europe, standing at 23.2% in October.

The Ukranian government is struggling desperately to bring inflation back under control and to stabilize the economy as part of a pledge to the International Monetary Fund who agreed this week to lend Ukraine $16.5 billion.

Baltic Dry Index Through The Floor

Every working day, the Baltic Exchange asks brokers around the world on how much it would cost to book various cargoes of raw materials on various routes—150,000 tons of iron ore going from Australia to China or 150,000 tons of coal from South Africa to Japan. Brokers are also asked to consider variables such as the type and speed of the ship and the length of the voyage. Based on the answers, a number is arrived at which represents the shipping costs. Take a bow the Baltic Dry Index.

The BDI was 11,793 on 21st May this year. Yesterday it was 815, posting an incredible decline of 93 percent.

Put simply, the cost of shipping has dropped through the floor. Sending a tonne of iron ore from Brazil to China in early June would have set you back more than $100per tonne, or around $15m per voyage. To book the same trip today would cost only slightly over $10 per tonne, or just $1.5m for the 70-90 day journey.

As if that wasn't dramatic enough, the drop in daily charter rates is even sharper. At the peak of the market, a 170,000-tonne Capesize bulk carrier was hired out at the eye-watering daily rate of $234,000. At the beginning of this week, it was $5,611 - a fall of nearly 98 per cent.

There are main two problems:

Producers are stuck with huge inventories. Post the collapse of commodity prices, no one is in hurry to build inventories. Also, with production cuts and factory shut downs, existing inventories have become a huge issue.

The credit crisis. No one wants to lend in current market environment. As a result, Letters of credit are not getting issued. They are required to load cargoes for departure at ports.

"You are getting very, very close to the cost of just crewing and running a ship. It can't go much lower than this without owners deciding they don't want their ships employed," said one London-based shipbroker.

Vietnamese To Clamp Down On Fake Fertiliser And Feed

Vietnamese Minister of Agriculture and Rural Development Cao Duc Phat has pledged to punish businesses producing and distributing counterfeit fertilisers, feed and pesticides.

The use of low-quality and fake agricultural materials is rife in Vietnam accounting for almost 30 per cent of domestic supplies in Tien Giang Province, 48 per cent in Hai Duong Province and 38 per cent in Lam Dong Province.

The current fine for marketing these products at just VND200,000-500,000 (US$12.5-31.25) for each offence, provides little deterrent for the companies and individuals involved.

As farmers often cannot avoid using counterfeit agricultural materials, this affects not only the productivity of their crops and livestock but also land and water resources, according to farmer Nguyen Thi Toan from Ha Noi City’s Thach That District.

"It is our responsibility that our farmers have to use the bad-quality and counterfeit fertilisers, pesticides and feed," said Phat.

Phat suggested applying stricter punishments like withdrawing business licences, suspending operations, publicising their names or even criminal charges.

Businesses caught producing and selling these materials should not only be fined but punished to a point that stops them from continuing the illegal practice, said Luong Le Phuong, deputy minister of agriculture and rural development.

Robert Wiseman Dairies Interim Results 2008

Financial Highlights

> Sales volumes up 2.6% to 765.3 million litres (2007 : 745.6 million)

> Turnover increased by 21% to a record £396.3 million (2007 : £327.6 million)

> Operating profit decreased by 31.0% to £13.3 million (2007 : £19.3 million)

> Operating profit per litre 1.74 ppl (2007 : 2.58 ppl)

> Earnings per share reduced to a loss of 13.84p (2007 : profit of 18.82p)

> Adjusted * earnings per share decreased by 36.4% to 11.13p (2007 : 17.50p)

> Interim dividend of 5.00p per share, an increase of 25% (2007 : 4.00p)

> Net debt lower than expected at £50.2 million (2007 : £44.0 million)

* In the current year there is a one-off deferred tax charge of £17.9 million arising from a change in legislation to phase out Industrial Buildings Allowances. In the prior year there was a deferred tax credit arising from the change in the corporation tax rate from 30% to 28% of £1 million.

UK: Winter Plantings Mostly Complete In 'Rough' Conditions

Winter wheat, barley and OSR plantings have been mostly completed in what one agronomist describes as "rough" conditions according to a report in the Farmers' Guardian.

Difficult field conditions lead to slow drilling progress in many areas, the report says. Still, around 90 per cent of the planned winter barley area and 85 per cent of winter wheat is now in the ground, according to ADAS.

“Some 90 per cent of what we had hoped to get in is now in, but 5 to 6 per cent of the land left to drill will be left fallow as it’s just too heavy and wet. We can’t see how to make money out of it at the current input prices,” said North Yorkshire agronomist, Patrick Stephenson.

OSR planting has fared less well, with many fields looking “awful” said Mr Stephenson. “We only got in 60 to 70 per cent of what we hoped to get drilled and of those crops that are in, not all will make it through the winter.

“The slugs, rabbits and pigeons will take their toll on what is already a small crop. If it is a hard winter, many oilseed rape fields just won’t make it,” he concludes.

VeraSun - One Giant Bet That Went Wrong

Details are emerging of how VeraSun, the ethanol firm that filed for Chapter 11 bankruptcy protection last week, got itself into so much trouble.

Abandoning its traditional use of short hedges in July, the firm, convinced that corn prices would continue to rise, entered into a number of "accumulator contracts" to cover corn requirements for the third and fourth quarters.

What's an accumulator contract?

A high-risk strategy that allows you to buy a specified volume of corn below the then-prevailing market price if prices rise, but also commits you to buying DOUBLE the intended volume at a set price if futures prices decline.

VeraSun said in a report filed with the Securities and Exchange Commission in September that strategy resulted in their incurring average corn prices between $6.75 and $7.00 a bushel in the third quarter, contributing to third quarter losses of $100 million.

More info here: Put it all on 33 black please

BA Profits Crash

Half-year profits at British Airways have fallen 91.6%, with the airline blaming "incredibly difficult trading conditions" for the plunge.

BA said pre-tax profit totalled £52m ($81.6m) between April and September, down from £616m a year earlier.

Willie Walsh, BA's chief executive, said the period would "be remembered as one of the bleakest on record. The period was hit by a crisis in the banking sector, record fuel prices and several airlines going out of business."

BA gave warning that the trading outlook remains very difficult because of the weakening economic climate.

The flag carrier also said that it had been hit by the falling value of the pound, which added around £100 million to costs this year, and it is likely to further compound its problems in the second half.

Crude Rebounds From 19 Month Low Sub-USD60

Crude oil dipped to a 19-month low Friday, before rebounding as stock indexes rose and the U.S. dollar weakened, bolstering the appeal of commodities.

At 8am GMT December crude was $1.20 higher at $62.03/barrel, having earlier dipped to $59.97/barrel as Asian stocks weakened.

Crude has now lost almost 60% of its value since hitting an all-time high of $147.27 a barrel July 11.

Overnight Grains

Grains are firmer on the overnight eCBOT market, with wheat and corn around 5c firmer and soybeans up 8-13c.

Lower Brazilian production forecasts for soybeans and corn from Conab are helping support the market, with the soybean crop forecast at between 58.4 million and 59.3 million metric tonnes, down from between 60.1 million and 61.3 million tonnes last month.

Corn production in 2009 will fall to 54.3 million to 55.2 million tonnes, from 58.6 million tonnes, Conab said. That compares with the October estimate for a drop to 55 million to 56 million tonnes.

There is also an element of book-squaring ahead of Monday's USDA report.

Weekend weather is also supportive, with rain seen as hampering US farmers' attempts to wrap up the harvest.

Japan passed on a wheat tender yesterday after a Japanese trading company defaulted on sales of 20,000 metric tonnes to the government after the start of tougher food safety rules.

CBOT Close


Dec 08 futures closed below $3.80/bu for the first time in nearly 3 weeks. Funds were net sellers of 5,000 CBOT contracts in the pit. USDA reported export sales of 471,300 metric tonnes but was within trade estimates. Weather conditions are forecast unfavorable for the weekend as much of the CB should receive rain and some areas even getting snow. Field loss may be inevitable with heavy amounts of moisture and high winds, stocks will deteriorate and make it difficult to pick up all the corn. Dec -12 at 3.78.


Soybeans rallied back to finish higher on the day in the two front months after losing nearly 20 cents at midday. Nearby contracts were supported by higher bean oil, decent exports, and short covering. USDA reported export sales of 896,000 metric tones well within the trade estimates of 700,000 to 1,000,000 MT. China was the largest recipient, taking 642,500 MT which is almost 72% of total exports. Beans could receive some fresh bullish fundamental news when the WASDE report will be released Monday; trade is looking for a reduced projected soybean production number. Funds were net sellers of 1,000 beans and meal contracts. Deliveries were bleak with 14 against the November contract. Nov +4 at 8.99; Dec Meal -2.20 at 262.80; Dec BO +.15 at 34.17.


Wheat futures dropped double digits in most contracts at the different exchanges Thursday. Funds were quoted selling 2,000 CBOT contracts. Renewed strength in the dollar and weakness in crude oil push futures lower. USDA reported export sales of 379,300 metric tonnes which was on the lower side of trade estimates (300,000 to 500,000). Argentina may lower production than a year ago as drought weather declines yields. Even with some production issues in the southern hemisphere, US wheat futures have been unable to shrug the fact that the world should harvest a record wheat crop of more than 680 MT. Dec CHI -14 at 5.22; KC -13 at 5.63; MLPS -10 at 6.34.

Brazil's 08-09 Soy Crop 58-60MMT

With planting recently begun, opinions are divided as to the size of Brazil's next soybean crop to be harvested in the spring, with some analysts saying that farmers may plant less due to high input prices and lack of credit.

Brazil's Census Bureau, the IBGE, on Thursday put the 2008-09 soy crop at 59.8mmt, whilst Conab on Thursday estimated Brazilian soy farmers to produce between 58.3mmt and 59.3mmt.

Celeres and Oil World currently peg the crop at around 60mmt, similar to that of 2007-08.

The Conab estimate is down from last month's 60-61.2mmt.

Corn production is estimated by Conab at 54.3mmt to 55.2mmt versus 55mmt to 56mmt in October.

ECB Cuts Rates A Half

European Central Bank this afternoon cut benchmark interest rates by half a percentage point to 3.25 percent.

The move was widely expected. The ECB, as usual did not give any further explanation, so all the eyes were set on a press conference subsequently held by Mr. Trichet.

In it he said, "We were unanimous in thinking that the significant decrease of rates was appropriate in the present circumstances."

"We discussed several options. Options of diminishing rates by 50 basis points, options of diminishing rates by 75 basis points. All taken into account, after having checked and discussed the pros and cons of those different options, we decided unanimously it was appropriate to decrease by 50 basis points."

"I don't exclude that we could decrease rates again. Again, we are not precommitted in any respect, we'll do whatever is necessary to take into account the situation as it will unfold progressively," he added.

Fire Hits ABN Gainsborough Mill

Reports are circulating of a fire yesterday at an AB Nutrition feed mill in Gainsborough, which produces pig and poultry feed. It is understood that grain in a vertical conveyor caught fire and spread to small areas on the sixth and third floors of the building. The cause was believed to have been an overheated bearing in the mill's machinery. The fire was contained during the afternoon and the mill is understood to be back in production today.

eCBOT Close/Early Call

eCBOT grains closed mixed overnight with beans around 4c firmer, corn 3-4c lower and wheat 1-5c easier.

In a choppy session all products traded either side of the market, with currencies swinging around wildly ahead of the news from the Bank of England and European Central Bank.

Falling equities, weaker crude, harvest pressure and a firmer US dollar added downwards pressure to the grains complex.

Soybeans dipped below $9/bushel, before recovering slightly. Corn is now firmly entrenched below $4/bushel, with December closing at $3.87 overnight.

Dire US jobs numbers released yesterday highlighted the economic challenges facing Barack Obama a day after he won the race for the White House.

Fundamentals in the wheat market remained bearish, with large supplies around the globe and U.S. wheat more expensive than exports from competitors in Europe, Russia, Australia and Argentina.

Early calls for this afternoon's CBOT session: Corn futures are expected to open 3 to 5 lower; soybeans 2 to 4 higher; wheat 3 to 5 lower.

BoE: Well You Wanted Something Decisive, Cop This

In a shock move, the Bank of England has cut interest rates in the UK by one-and-a-half percentage points to 3%, the lowest since 1955.

There had been widespread calls from industry for a major cut as the country begins to face up to the prospect of a deep recession.

Few, however, had expected a cut as decisive as this.

It is the first time the Bank has cut rates by more than half a percentage point since gaining its independence in 1997.

The problem recently, however, has been getting British banks to pass on rate cuts to their borrowers.

Intriguingly, Lloyds TSB CEO Eric Daniels and bezzie mate of Gordon McBroon, has been quoted as saying that they will never charge borrowers more than 2% above Bank of England base rate. It's standard variable rate is currently 6.5%, will they deliver?

Further evidence that the UK is sinking into recession came with the news that in October UK new car registrations were down 23% on 2007.

UK: Yet More Housing Gloom

Hopes that the UK property market may be stabilising have been dashed by data revealing house prices slumped 2.2% last month, the biggest drop since May.

Prices, which fell 1.3% in September, are now 15% lower than last year at a seasonally adjusted £168,176, the largest drop since the series began in 1983.

"Housing market conditions remain challenging in the face of the significant pressures on householders' incomes and the reduction in the availability of mortgage finance since last summer," said Halifax chief economist Martin Ellis.

Chinese Mill Owner Arrested In Melamine Scandal

The owner of a mill that produced feed contaminated with melamine has been arrested.

At a press conference, police said that the owner of a poultry feed company in Shenyang, Liaoning Province, has been arrested after admitting he used melamine in the production process, which led to the contamination of eggs sold by the Hanovo Group, according to official sources.

A spokesman for Shenyang police said Gao Xingtao, head of the Mingxing feed factory, had been arrested, but did not specify the exact date.

Gao admitted to the purchase in July of 45 tons of protein products containing melamine that was added to the feed instead of the usual corn ethanol, which was in short supply, the report said.

The protein mix was used in the production of 287 tons of chicken feed, 212 tons of which was sold to Dalian Hanovo Enterprise Group, the firm that supplied contaminated eggs to Hong Kong in September.

Liu Kejun, a press officer with the police bureau told China Daily yesterday that the remaining 75 tons of tainted feed had been destroyed.

Wall St Set To Open Sharply Lower

Wall Street shares are set to open sharply lower Thursday, after hitting the skids on Wednesday as another round of troubling economic data spooked investors.

A dismal session in Asia spilled over into European stocks, which also turned sharply lower as market players worldwide braced for pivotal interest rate decisions from the European Central Bank and Bank of England.

The Heng Seng of Hong Kong fell 1,050 points, or 7 percent Thursday and Tokyo's Nikkei dropped 622 points, or 6.5 percent.

At 11 am GMT European stocks were also lower with the FTSE100, the DAX in Germany and the CAC in France all around 4% down.

The European Central Bank is expected to cut its key interest rate by 50 basis points later today, although some are holding out for a full percentage-point cut, hoping that policy makers will send a clear, decisive message that they are prepared to combat economic weakness.

The stark reality of recession may compel the Bank of England to do the same, but most analysts are expecting a 50 basis point cut.

ADM Price Fixing Fine Should Be Cut

A multi million euro fine imposed on ADM for its part in a price fixing cartel should be cut to "just" EUR29.4m, according to an advisor to Europe's highest court yesterday.

In 2001 the European Commission fined five companies a total of 135 million euros ($120.5 million) for participating in a price-fixing and market-sharing cartel in citric acid between 1991 and 1995.

The original decision: Jim'll Fix It

Today's news: Who said there's no such thing as bad publicity anyway?

Tate And Lyle Interim Results For Half Year

Tate & Lyle have announded their interim results for the six month period to 30th September 2008. Sales grew by 25% to £1,698 million (£1,359 million), group operating profit increased by 3% to £150 million (£145 million) and profit before tax was 4% higher at £128 million (£123 million).

Full report here

Soybean Prices Below Cost of Production In Brazil - Cordonnier

According to respected private analyst Michael Cordonnier, the cost of soybean production in Brazil is now higher than the current market price of beans.

In his weekly newsletter he says that input prices are up 43 percent from a year ago as of Sept. 1, whilst selling prices are down some 46 percent since June this year.

Cordonnier quotes a Mato Grosso ag economic institute that calculated the cost of production for soybeans in that state was in the region of $8.27 to $9.19 per acre, assuming yields of 43.5 bpa; given costs of getting those beans to a crusher or export facility of $2.50 to $3.25, breakeven is someplace between $11 to $12.50, well below last night's May 09 futures close of $9.27 3/4.

Despite the current price disparity Brazil is still expected to produce a crop of around 60mmt in 2009, similar to that of 2008.

Overnight Grains

Overnight grains are mostly lower, adding to last night's steep declines, as declining equities in the US and Asia, and poor US jobs data re-enforced concerns that the global economy was headed toward recession, curbing demand for food, feed and fuel.

Just after 8am GMT eCBOT corn was 3-4 cents lower, with wheat around 6 cents easier and soybeans hovering around unchanged.

Data released last night showed that US companies cut 157,000 jobs in October, the most since November 2002 and bigger than an estimated drop of 102,000, according to ADP Employer Services.

A firmer dollar in early trade this morning, making US exports less competitive, also isn't helping the grains complex.

Asian stock markets fell by around 6-7% overnight. The Nikkei 225 Stock Average slumped 622.10, or 6.5 percent, to close at 8,899.14 in Tokyo. Hong Kong's benchmark Hang Seng index also fell, erasing three days of gains, after earnings forecasts by Cathay Pacific Airways Ltd. reignited concern the global economy will worsen. The Hang Seng Index lost 1,108.80, or 7.5 percent, to 13,731.36 as of 2:57 p.m. local time.

Japan is expected to buy 96,000MT of US wheat in a tender later today.

IMF Loans Ukraine President USD16.4 Billion To Buy A New Dress

The International Monetary Fund (IMF) has approved a $16.4bn (£10.3bn) loan to Ukraine to bolster its economy, shaken by global financial turmoil.

The financial body said it would make $4.5bn immediately available as part of the two-year package.

The IMF has agreed loans to several nations recently in an effort to restore their economies. Hungary and Iceland have both reached agreement with the IMF over loan deals in the last few weeks.

The Ukraine President Viktor Yushchenko said the money would be put to good use. Firstly, he wants a new halo and some more make-up, possibly a nice dress and some shoes and a lovely matching handbag that he's had his eye on for a while.


Euro, Sterling Blindfolded And Up Against The Wall

The Euro and the Pound retreated from their US session highs in overnight trading as the forex market prepares for rate cuts from the European Central Bank and the Bank of England.

The Euro traded lower in the overnight session, settling in a choppy 50-pip range above 1.2840 having touched as high as 1.3115 in New York hours. Sterling followed suit, retreating from highs near 1.62 to rest above the 1.58 mark.

The UK economy shrank -0.5% in the third quarter according to NIESR, a London think tank, meaning the economy has likely officially (unofficially we all know we are in one) sunk into recession. Citing the poor result and the “intensifying banking crisis”, NIESR’s chief economist Martin Weale called on the Bank of England to cut interest rates by half of a percentage point at today’s meeting. Mervyn King and company may yet one-up demands for monetary easing, with overnight index swaps pricing in a 75 basis point cut when policy is announced at 12:00 GMT.

Some analysts are calling for even more decisive action and asking for a cut of one full percentage point. A one percentage point reduction would be the biggest rate cut in 15 years, and comes amid growing anger that banks are not passing on improved terms to lenders.

The Bank has not made such a large cut since it was made independent in 1997; the last time it sanctioned a one percentage point reduction was during the early-1990s slump that followed Black Wednesday.

The ECB, staring at the first euro zone-wide recession since its inception in 1999, is seen certain to cut its benchmark rate by half a point to 3.25 percent, its lowest in two years. But interest rate traders are pricing in a 75 basis point cut.

A half-point reduction would match the October 8 emergency cut made in unison with the Fed and other major central banks. A larger reduction would be the ECB's biggest ever.

EU Wheat Follows US Lower

EU wheat futures closed lower Wednesday, pressured late in the session by a sharply weaker CBOT market.

Paris January milling wheat closed down EUR3.25 at EUR143.25/tonne. London November feed wheat ended down GBP0.75 at GBP90.25/tonne.

Volume was light and British and French farmers are reluctant sellers at current levels. Still, London wheat finally seems to have levelled off around the GBP90/tonne mark after months of steep declines.

London Feed Wheat Nov '08 Future:

Wild fluctuations in the currency markets are making for choppy trade, with the pound moving as much as 4-5 cents in a day against the dollar several times over the last few weeks.

The forex markets are bracing themselves again this morning for changes in base rates from the BoE and ECB. The pound has fallen from $1.62 yesterday afternoon to around $1.58 in early trade Thursday morning.

Although European wheat may now have a slight edge on US grain, Russia and Ukraine are still eager sellers for any export business that is around from North Africa and the Middle East.

CBOT Closing Comments - Fireworks!

There were indeed some fireworks Wednesday, as all the grains markets took a heavy battering, led lower by crude oil following Barrack Obama's US presidential election win. Obama, who favours a windfall-profit tax on petroleum producers and boosting renewable energy, is seen as a bearish President as far as the oil market is concerned.


Corn futures closed Wednesday's trade with steep losses in most contracts. Funds were quoted selling an estimated 7,000 contracts in the pit almost awash from Tuesday's trade. Ethanol profitability and financial concerns did ration demand for the 07/08 marketing year as total production came below USDA's estimates at 8.2 billion gallons. The Presidential election is over; traders will resume trading now that they know who will be in office. Weather turns ugly for the rest of the weekend and most likely halting harvest as snow and rain is forecast for much of the CB. Crude oil is selling off at midday down about $5 and is trading in the $66-$67 range. Dec -22 at 3.90.


Soybeans finished at least 50 cents lower in every contract that was traded throughout July '10. Funds sold an estimated 5,000 beans, 2,000 meal, and 3,000 bean oil contracts. Deliveries against the Nov contract are very minimal at 32. The dollar backed off from early morning lows and was near steady when the closing bell rang. Crude oil was about $5 lower during trade Wednesday at $65 per barrel, weighing in on prices as well as some profit taking from yesterday's impressive gains. Bean harvest should be near complete next Monday when USDA releases crop progress report as farmers rush to get the last of the beans out of the field before unfavorable weather hits. Nov -54 at 8.94; Dec Meal -12.80 at 265.00; Dec BO -1.95 at 34.02.


Wheat futures closed down 30 cents or more at CHI and KC and 24 cents lower at MLPS in the Dec '08 contract. Funds were net sellers of an estimated 4,000 CBOT contracts which added pressure to that exchange. Demand remains weak as wheat is plentiful around the world and possibly cheaper else where. Taiwan reportedly purchased 52,850 metric tonnes of US wheat. Drier weather has forced the Australian Government to reduce their wheat production estimate to 19.91 MMT which is down from the September guess of 22.46 MMT. Dec CHI -35 at 5.37; KC -32 at 5.76; MLPS -24 at 6.44.

Fire Puts ADM Elevator Out Of Action For 2-3 Months

Last weeks fire at the ADM grain elevator in Destrehan, Louisiana, will put it out of action for 2-3 months the company has said.

The Destrehan elevator is the largest of four facilities operated by ADM in Louisiana, with storage capacity of 6,432,000 bushels.

"We intend to meet all of our obligations to customers," said David Weintraub, director of external communications for ADM. "Currently, we are operating out of our St. Elmo facility, which will be sufficient to ensure continuity of operations. Since 2005, ADM has used this facility as a grain elevator and export house."

What a great headline it would have made if the fire had been at the St. Elmo facility instead! We know a song about that don't we children?

Corn Products Set To Pull Out Of Bunge Merger

The board of directors of Corn Products International Inc. on Nov. 5 said it plans to withdraw its recommendation to be merged with Bunge Ltd.

Under terms of the agreement first announced in mid-June, Corn Products has the right to withdraw or change its recommendation to adopt the merger agreement following at least five days notice to Bunge.

If Corn Products opts to take either of those steps, Bunge then has the right to require that Corn Products hold a meeting of its shareholders to vote on the adoption of the merger agreement or to terminate the merger agreement and seek reimbursement from Corn Products for up to $10 million of Bunge’s expenses in connection with the merger.

Bunge announced last month that both companies had agreed to push back their special shareholders meetings to vote on their proposed merger until mid-to-late December.

Bunge’s share price closed at $110.70 on June 23, the day the merger was announced, while Corn Products closed at $42.90. Bunge’s share price opened at $45.31 on Nov. 5, down 59%, while Corn Products opened at $25.40, down 41%.

"We are disappointed by the Corn Products board’s decision," said Alberto Weisser, chairman and chief executive officer of Bunge. Adding that they, "have no intention of revising the terms of the transaction." They now "intend to evaluate carefully, with the best interests of Bunge’s shareholders in mind," he said.

IGC Sees 2009 World Wheat Acreage Declining

Wheat acreage worldwide is projected at 221 million hectares (546 million acres) in 2009, down 1.8% just from 2008, the International Grains Council (IGC) has said.

The IGC said plantings are expected to contract even though seeding activity "is making good progress" in the Northern Hemisphere this fall.

Acreage in the five leading exporting nations was projected by the IGC at 75.2 million hectares (179 million acres), down 2.6% "as farmers switch to alternative crops after this year’s large outturn."

In a breakdown of conditions and projections by regions, the IGC said wet weather in the southern Plains caused delays in the U.S., but conditions were improving for the emerging crop. Delays in the harvest of the canola crop in Canada have set back wheat planting there.

Good conditions prevailed in the European Union, but the IGC said declines in ex-farm prices may reduce wheat area.

Warm weather promoted extra winter grain growth ahead of dormancy in Russia and Eastern Europe, the IGC said. Rains encouraged emergence and growth. In Ukraine, heavy rains delayed planting, and lower prices and higher input costs were expected to reduce planted area.

China enjoyed weather conducive to planting except in northern regions, where work was delayed by wet weather, the IGC said.

Heavier planting was thought possible in India, where an increase in minimum support prices was anticipated. Pakistan, similarly, was expected ton increase plantings.

London House Prices Falling At Record Pace

House prices in London are falling at a record rate and even the super-rich are beginning to feel the pain as prime central London properties have shown a dramatic collapse.

Prime residential prices in Central London fell in October by 3.9%, the fastest rate of decline on record.

Since the peak of the market in March this year, prices have fallen by 13.4%, with the six monthly decline in prices (May to October) showing what can only be described as a dramatic collapse, a fall of 12.4%.

According to research compiled by property consultants Knight Frank, all areas of the capital have been hit, with only a minor difference in the rate of decline between houses and flats, whose respective falls were 3.8% and 4.0% in October.

Chinese Edible Oil Imports Plunge

The nosedive in China's soybean oil and palm oil import in September has stirred up worries over oilseed and oil consumption of China, one of the world major oil consumers.

According to the recent data released by China Customs China's import volume of soybean oil in September decreased 40 percent year on year to reach 205,870 tons, and that of palm oil fell 31 percent to 439,571 tons.

"The current declining trend of China's oilseed and oil market is not greatly related with the supply," said an official with China Vegetable Oil Company, "but has close relations with the financial situation, bio-fuel, and futures market of CBOT."

Nothing to do with defaulting on high-priced goods then?

US Elect Barrack Houdini For President

There seems to be a feelgood factor around this morning from what I am reading and seeing on TV. Obama is in, in a predictably easy landslide. Who wouldn't vote for him? He's going to conduct the broadest overhaul of the U.S. economy since Franklin D. Roosevelt's New Deal. About the only thing he hasn't got is a white horse.

Beyond job creation and big investments in public works, Obama intends to shift the tax burden back toward the wealthy, roll back a quarter-century of deregulation, extend health-care coverage to all Americans and reassess the U.S. government's pursuit of free-trade deals. And that's only on Monday.

Now don't get me wrong, I like Obama. I'd much prefer him to the McCain & Palin package. And I hope he succeeds, as it will be of benefit to us all. It just isn't going to be easy. In fact it's going to take a miracle.

Its a bit like taking over at Newcastle, there's so much sh!t gone on before that is going to be very difficult to undo. As it is, Obama will likely become the biggest deficit spender in US history. Analysts forecast the budget shortfall may triple to $1 trillion in 2009 as costs mount for financial-industry bailouts started in Bush's final year in office.

Obama has proposed a $175 billion stimulus package that will do everything from creating jobs to fixing bridges. He proposes investing $150 billion over 10 years in clean energy initiatives that he says would create 5 million new jobs. He'd also push automakers and consumers to get a million fuel- efficient hybrid vehicles on the road by 2015.

Other proposals include a fund to invest in manufacturing research, new job training programs and an infrastructure investment bank that he says will create up to 2 million jobs.

And to deal with the credit crunch, Obama's advisers have called for the Treasury to hasten its recapitalization of banks with the $700 billion Troubled Asset Relief Program.

And to top the lot, low and middle-earners will see their taxes cut.

I wish him luck, he's going to need it.

Crude Lower On Obama Victory

Crude is around $3 lower this morning following Barack Obama's landslide election victory in the US.

Obama, who favours a windfall-profit tax on petroleum producers and boosting renewable energy, is seen as a bearish President as far as the oil market is concerned.

"He's made no bones about the fact he wants to wean the U.S. off Middle East oil and he's willing to put more effort into renewables like photovoltaic and wind power," said one trader.

"Crude rose 10% yesterday, and is now giving up some of those gains," he added.

Meanwhile, OPEC continues to do it's bit to support the market. Saudi Arabia, the white man of OPEC, has cut crude supplies to some customers `"significantly" after last month's meeting, Reuters reported.

Algeria's energy ministry ordered state-owned oil company Sonatrach to lower output by 71,000 barrels a day as of Nov. 1, state-run Algerian Press Service reported.

Nigeria has cancelled at least four crude cargoes originally scheduled to load in November and December.

The US Energy Dept issues revised stocks data at 10:35 a.m. Washington time today.

Overnight Developments, Obama In, Dollar Up, Grains Down

Grains are lower overnight after the dollar rose following Barack Obama's election victory. The dollar is firmer on speculation Obama's victory in the US presidential election will accelerate policies to revive the world's biggest economy.

Crude oil also fell as Obama, who favours a windfall-profit tax on petroleum producers and boosting renewable energy, was elected the 44th U.S. president.

At 9.30am GMT crude oil was around $3 lower close to $67.50/barrel. Soybeans were 11-12c weaker, with wheat and corn both down around 6-7c.

The dollar rose to $1.58 against the pound from a low of $1.61 yesterday.

Now that the election is out of the way, market participants are waiting for a government update early next week on supply and demand to see any revisions in output forecast in the US.

The U.S. Department of Agriculture is scheduled to release its fourth survey-based production forecasts for corn and soybeans on Nov. 10 at 13.30GMT.

ABARE Cuts Canola Output 20 Pct

ABARE has cut its 2008 Australian canola output estimate by around 20% to 1.3mmt. That is 320,000mt lower than last months estimate of 1.62mmt.

"A lack of spring rainfall across Victoria, South Australia and southern New South Wales has resulted in a marked deterioration in the major winter crops," the Canberra-based government forecaster said in the report.

ABARE Cuts Australian Wheat Output Estimate

ABARE has cut its 2008 Australian wheat crop production estimate to 19.9mmt from 22.5mmt last month, citing a lack of rainfall in the south east.

Victoria has been particularly badly affected, with ABARE slashing output there by almost half to 1.4mmt. South Australia and southern New South Wales have also been hit, it said.

Still, overall wheat production is still seen around 7mmt more than in 2007.

In a separate statement the South Australia Department of Agriculture said total grain output in the state would be 4.74mmt, 13% lower than last month's estimate. Wheat production is seen similar to 2007 at 2.34mmt, it said.

In 2007 the state produced 4.88mmt of grain, with wheat output at 2.35mmt.

EU Wheat Futures Narrowly Mixed In Thin Trade

EU wheat futures are narrowly mixed in quiet, thin trade Tuesday with November Paris milling wheat EUR0.50 higher at EUR145.50/tonne and January London feed wheat up GBP0.60 at GBP93.75/tonne.

A choppy dollar ahead of the US presidential election is making trade difficult, if things weren't tricky enough already. Crude oil can't seem to make its mind up either today flitting either side of last night's close of $63.91/barrel.

Likely changes in EU interest rates Thursday is keeping participants on the sidelines. A one percentage point drop by the BoE and ECB could send the pound and euro sharply lower improving export chances.

The HGCA say that 90% of the planned UK winter barley crop and 85% of the planned winter wheat acreage is already in the ground. Unfortunately they don't seem to be telling us what size these actual planned acres are in relation to 2007 plantings of 0.42m hectares and 2.07m hectares respectively.

UK rapeseed plantings are likely to be 10-20% down on last years 0.599m hectares, they say.

eCBOT Close/Early Call

eCBOT grains ended a choppy session on the positive side, despite trading lower for large parts of the morning.

Soybeans closed 4-6c firmer, with wheat up 2-3c and corn ending 4-6c higher.

Choppy crude oil sent futures this way and that, as did a fluctuating dollar and uncertainty ahead of the US presidential election.

FC Stone released some production numbers lower than the last USDA estimate yesterday, but that was also the case last month. Informa are out later today, and they were higher than the USDA for both corn and soybeans last month.

There is very little incentive to get traders opening up new positions ahead of the election and next week's revised USDA report, and this afternoons session will likely be a quiet affair.

Japan are tendering for their usual 96,000MT US wheat today.

Early calls are: Corn futures are expected to open 2 to 4 higher; soybeans 4 to 6 higher; wheat 2 to 4 higher.

ABF Comments On AB Agri's Contribution To FY Results

The following is an extract from ABF's FY ended 13th Sept 2008 annual results statement:

AB Agri, our agriculture business, had a very strong year during which the combination of its trading skills, market knowledge and customer relationships enabled it to outperform a market characterised by extremely volatile raw material prices.

European grain prices doubled during the first half of the year and low grain stocks worldwide, unpredicted weather events and heavy trading in the commodity markets resulted in unprecedented levels of daily price volatility. Stronger feed prices were sufficient to offset higher raw material and energy costs, lower volumes of molassed sugar beet feed and increased production costs in our ruminant feeds business.

Frontier is our grain supply joint venture. It has a strong balance sheet, access to working capital and superior market knowledge which differentiate it from its competitors. Through its leading market position, unique centralised operating structure and national trading system, it was ideally placed to manage the extreme price volatility during the year on behalf of its grain customers and farmer suppliers. Moreover, higher cereal and oilseed prices encouraged an increase in UK sowings resulting in a more buoyant market for Frontier’s fertilisers, seed varieties and crop protection products. As expected, the business has now concluded an agreement to supply Vivergo with over one million tonnes of feed wheat for its bioethanol facility.

We are establishing an increasingly international presence in the high technology, high added-value feeds market which specialises in micro-feed ingredients that enhance nutrient absorption and provide a better return for farmers. Sales of feed enzymes by AB Vista were particularly buoyant with several new products launched and a doubling of the number of countries served over the last two years. New sales offices in the US, Mexico, India and China were established during the year.

Our feeds business in China was relatively untouched by the widely reported natural disasters that occurred there. We achieved strong sales growth in each of the species markets that we supply. Our mill building programme is continuing and on completion will deliver a 20% increase in production capacity.

AB Agri is taking a central role in a number of schemes to promote sustainable agricultural practice. The first Carbon Trust accredited, greenhouse gas reduction model for dairy farms was launched to Sainsbury’s dairy suppliers and our WildCare scheme on biodiversity, which we operate in conjunction with Waitrose, was awarded the Green Apple Award for “Environmental Best Practice”.

VeraSun Not The Last Merely The Latest

VeraSun Energy Corp, the largest publicly traded US ethanol company with 14 distilleries across eight states, said on Friday it was seeking bankruptcy protection.

It certainly isn't the first ethanol company to run into difficulties. Gateway Ethanol and Greater Ohio Ethanol both declared bankruptcy early last month.

Renova Energy LLC, a company that owns a partially built 20 million-gallons-per year ethanol plant in Idaho, declared bankruptcy in the summer, following Kansas-based Ethanex Energy Inc who declared bankruptcy in March.

So VeraSun becomes the largest and latest ethanol producer to run into trouble after corn and crude prices have halved from summer highs. It seems likely that there will be more casualties along the way, as US capacity is already higher than the government's mandate of 11.1 billion gallons for next year.

Pacific Ethanol shares are down 90 percent since their twelve month of $9.88 in December, and closed at one dollar Tuesday on Nasdaq. Shares of Aventine Renewable Holdings Inc, which closed on Tuesday at $2 on the New York Stock Exchange, have lost 85 percent of their value since hitting a 52-week high of $13.65 in December.

Melamine Now Found In Fishfeed

This melamine scam just keeps getting bigger and bigger, and it's clearly been going on for years.

Reports that melamine scrap which sells for $100-120/tonne was being used to pad out protein counts in the aquaculture industry first surfaced five years ago, according to Xinhua news agency.

Pieces of melamine displayed by a worker. The melamine is ground into a powder and added to animal feed as a filler to keep costs low.

"It's easier to mix melamine into fishfeed than it is in other feedstuffs because melamine is a powder, whereas soy meal, used in feed for pigs and poultry, comes in flake form," Wang Changmei, analyst with China Feedstuff Industry Association told Interfax.

The melamine powder has been dubbed "fake protein" and is used to deceive those who raise animals into thinking they are buying feed that provides higher nutrition value.

"It just saves money," says a manager at an animal feed factory in China. "Melamine scrap is added to animal feed to boost the protein level."

The practice is widespread in China. For years animal feed sellers have been able to cheat buyers by blending the powder into feed with little regulatory supervision, according to interviews with melamine scrap traders and agricultural workers here.

Many animal feed operators advertise on the Internet seeking to purchase melamine scrap. And melamine scrap producers and traders said in recent interviews that they often sell to animal feed makers.

But the scandal is nothing new, eighteen months ago the New York Times ran a story containing this snippet:

“Many companies buy melamine scrap to make animal feed, such as fish feed,” said Ji Denghui, general manager of the Fujian Sanming Dinghui Chemical Company, which sells melamine. “I don’t know if there’s a regulation on it. Probably not. No law or regulation says ‘don’t do it,’ so everyone’s doing it. The laws in China are like that, aren’t they? If there’s no accident, there won’t be any regulation.”

DEFRA: Deny Everything Forlornly Reel Along

What's DEFRA and Adrain Chiles got in common?

Adrain Chiles new book is called "We don't know what we're doing." Amazon

I imagine that working in DEFRA's offices is a bit like that.

Just after it comes to light that the two head honchos have just one farm between them in their constituencies, it has now been revealed that they have wasted more than £26m on failed IT projects in the past five years, according to the Farmers' Weekly.

More than £12m of it was blown on an abandoned program to produce a database of all the department's electronic information, while an initiative to manage licences for protected animals was scrapped after £4m was spent.

That might sound like a lot to you and me, but it's still relatively small beer to this inept bunch of clipboard-wielding nancy boys. They also still face EU fines of about £300m for the mistakes made by their Rural Payments Agency in January this year.

Makes the £350,000 on taxis story pale into insignificance now doesn't it?

Russian Grain Harvest 107-108MMT - RGU

According to the Russian Grain Union, the net grain yield is to amount to 107-108mn tons in 2008.

Grain carry-over stocks are expected at the level of 22mn tons as of 1 July 2009.

Currently the price for grain in the country have decreased by around 70-80% from the highs of 2007, it says.

Class three milling wheat is worth about RUR 5,700 (US$ 243.00) per tonne (from RUR 8,700 in January 2008). Feed grain is worth around RUR 3,200 (US$136.50) per tonne (from RUR 7,800), it says.

Chinese Defaults: From Sweet To Sour

A Reuters report says that "The spectre of commodity defaults looms large in Asia as buyers walk away from deals sealed before the price plunge, and analysts fear the worst is yet to come, compounding the woes of industry hit by tighter credit."

The report goes on to say that international buyers have defaulted on contracts for palm oil, rubber, cocoa beans, rice, iron ore and soybeans signed before the plunge in commodity prices.

It may not surprise you to hear that Chinese buyers are said to be the main culprits, the credit crisis having provided a perfect opportunity for buyers to attempt to walk away from high priced contracts.

In one extreme case a British scrap metal dealer said he was abducted and held for several days while seeking $1.2 million (740,000 pounds) in payment from customers in Ningbo, eastern China.

Meanwhile in Indonesia it's sellers who are defaulting. Coffee exporters there crucially normally agree on export commitments but delay decisions on prices until after beans have been delivered. Defaults are now rife after London futures dropped to a 17-month low recently.

Today, an Indonesian bank is reported to have seized more than 10,000 tonnes of beans from an exporter in Sumatra following a repayment dispute.

ABF Financial Year Results

ABF's results for the year ended 13th Sept 2008 were released today.

Financial Highlights:

  • Group revenue up 21% to £8.2bn
  • Adjusted operating profit up 7% to £664m
  • Adjusted profit before tax up 3% to £632m
  • Adjusted earnings per share up 4% to 54.9p
  • Dividends per share up 4% to 20.25p
  • Net investment in capital expenditure and acquisitions of £710m
  • Net debt of £791m
  • Operating profit level at £554m, profit before tax up 4% to £527m and basic earnings per share down 3% to 45.2p

George Weston, Chief Executive of Associated British Foods, said:

“These good results demonstrate the resilience of the group. Consumer spending in many parts of the world has been under pressure for some months. Despite this, Grocery, Agriculture and Primark all delivered strong sales and profit growth. While faced with a general economic downturn, we remain committed to the group’s expansion and development, most notably in Sugar and Primark.”

Crude Oil Lower

Crude is slightly lower in early trade, after plunging 6% of its value yesterday, after a report showed that US manufacturing is contracting and fuel demand is heading south with it.

The US is the worlds single largest consumer of crude oil and any downturn in manufacturing will likely have implications for oil demand.

At 7.45am GMT December crude was $63.68/barrel, 23 cents down on last nights close. Futures fell nearly $4/barrel yesterday. Prices are now down around 33 percent from a year ago.

US fuel demand is currently running around 8-10 percent lower than a year ago according to recent data from the Energy Department.

Next year's oil price forecast was cut to $58 a barrel from $73, while the estimate for 2010 was reduced to $78 from $98 at Credit Suisse. The forecasts are for Brent crude.

OPEC, producer of more than 40 percent of the world's crude, continues to threaten production cuts to help bolster prices. As we know what OPEC says, and what OPEC does, are two entirely different things. Even so, what do cuts matter when demand is falling faster? The cartel is next due to meet on Dec. 17 in Algeria.

Overnight Grains Lower On Dollar

Overnight grains are lower this morning on the eCBOT market as a broadly firmer dollar threatens to curtail any increased demand on the export front created by recent price falls.

At 7.30am GMT soybeans were in the main around 8-9c lower, with corn down a couple of cents and wheat 10-11c easier.

The dollar is up against the euro and sterling on speculation that the ECB and BoE will lower interest rates this week, possibly by as much as one percent, in an attempt to cushion the impact of a slowing economy.

At 7.30am the dollar was $1.2641 against the euro and $1.5679 against the pound. The pound peaked at $1.6397 in early trade yesterday, with the euro reaching $1.2897.

The USDA said last night that although the pace of the US corn harvest continues to lag, soybean harvesting is now pretty much in line with the five year average. The corn harvest is 55% done compared to the average 79%. Soybeans though are 86% in the bin, against an average of 89%.

Meanwhile the USDA said 67% of the US winter wheat crop was rated good to excellent, up from 55% a year ago.

FC Stone Monday dropped its 2008 US corn production estimate to 11.99 billion bushels, down from the firms last month estimate of 12.026 billion bushels. Soybean output was raised from 2.889 billion bushels to 2.916 billion. Both estimates are below the current UDSA projections.

The USDA is scheduled to release revised estimates on Nov. 10th.

CBOT Closing Comments


Corn futures closed higher but did come back down off of highs posted earlier which were near 20 cents higher at one point. Ethanol giant VeraSun announced they will file for chapter 11 bankruptcy over the weekend but rumours of this has existed for quite some time and played little in trade. USDA reported export inspections of only 17.245 million bushels which was below trade estimates of 25-29 MB. Start of the month positioning and long term shorts maybe electing to cover positions. Weather has been favoruable for corn harvest but reports of wet corn still in the field was backed by USDA's report this afternoon when they indicated that only 55% of the crop was harvested, that is better than the week prior of only 39% but lags the 5 year average of 79%. Dec +1 at 4.03.


Soybeans finished only pennies higher at the close but were also about 20 cents higher at one point during trade. USDA reported better than expected inspections of 49.399 million bushels, trade estimates were 35 -40 MB. Deliveries posted against the Nov bean contract were 712. Although corn harvest maybe sluggish for last week bean harvest has almost caught up to the 5 year average, Monday afternoon USDA indicated that 86% was harvested and the five year pace is 89% complete. Crude oil is currently down $3.55 to $64 per barrel and dollar has pushed .42 points higher residing at 86 points roughly. Nov +3 at 9.28; Dec Meal +2.20 at 275.20; Dec BO +1.14 at 34.74.


Wheat futures did sustain their rally unlike corn and soybeans. Futures traded higher at the three different exchanges throughout the day and were lead by CHI in the nearby Dec contract. Taiwan issued a tender for 52,850 metric tonnes of US milling wheat but a slow down in exports has been noted for the new marketing year. USDA reported 13.243 MB for export inspections and was below trade estimates of around 20 MB, USDA also stated that winter wheat planting was 90% complete with 76% emerged both lag the 5 year average by 2 percentage points. Wheat futures rallied despite the constant of bearish fundamentals, record world wheat crop of 680 MMT slowing of economies and possible recessions around the globe. Dec CHI +25 at 5.62; KC +24 at 5.97; MLPS +17 at 6.65.

USDA Crop Progress

The USDA estimate US corn harvesting at 55% complete as of Sunday, up from 39% last week, but down from the average of 79%.

The soybean harvest was 86% complete, up from 76% last week but down from the average of 89%, the USDA said.

The USDA said 67% of the US winter wheat crop was rated good to excellent, up from 55% a year ago.

FC Stone Drops Corn Estimate And Raises Soybeans

FC Stone Monday dropped its 2008 US corn production estimate to 11.99 billion bushels, down from the firms last month estimate of 12.026 billion bushels.

Soybean output was raised from 2.889 billion bushels to 2.916 billion.

Both estimates are below the current UDSA projections.

The USDA in October estimated 2008 U.S. corn production at 12.033 billion bushels, and soybean production at 2.938 billion bushels.

The USDA is scheduled to release revised estimates on Nov. 10th.

In 2007, US corn production was 13.074 billion bushels, and soybean production last year was 2.585 billion bushels.

EU Wheat Closes With Modest Gains

EU wheat futures closed modestly higher in thin, low volume trade Monday. London January feed wheat closed up GBP0.35 at GBP93/tonne with just 81 lots moved, whilst Paris November milling wheat finished EUR1.00 higher at EUR145.00/tonne.

Gains in Chicago wheat lent some support, as did a resurgent dollar.

The Baltic Dry Index fell to its lowest level since 2001 Monday, signalling freight rates should be attracting interest from foreign buyers.

However, sharply higher world production, as confirmed again last week by the IGC, will surely cap gains for the time being.

It seems likely that we are in for a quiet week, with the US election tomorrow, and likely changes in EU interest rates Thursday keeping participants on the sidelines.

Same Story, Different Day: Sterling Sharply Lower

In a what is by now becoming a familiar start to the week, the pound crashed Monday afternoon, losing more than four cents on the day, slipping below $1.60 as the FTSE100 gave up early gains.

Talk that the BoE may go the whole hog & hit the market with a full one percent drop in interest rates Thursday put sterling on the defensive. Meanwhile risk appetite remains low.

The FTSE100 slipped into negative territory by mid-afternoon after news that the UK's manufacturing sector shrunk for the sixth month in a row in October.

eCBOT Close/Early Call

eCBOT grains futures closed firmer, but generally well off session highs, as crude oil eased back throughout the morning eroding earlier double digit gains.

Soybeans closed around 8c firmer, having hit highs of around 23c up in early trade. Wheat has closed around 10c firmer, having peaked around 20c higher. Corn closed with nominal gains of just a cent or so, 7c off session highs.

Palm oil in Malaysia closed up the exchange imposed limit on short-covering, which lent some support to soybean oil which closed over 120 points firmer.

Firmer Asian stock markets provided early support, as did initially higher crude oil. However, lingering worries over the health of the global economy pushed oil prices lower, as traders ignored advancing stock markets and focused on fears of slipping demand.

Light, sweet crude for December delivery traded as high as $69.19 before falling back. By noon in London it was down 43 cents at $67.38 a barrel in electronic trading on the New York Mercantile Exchange. The contract settled at $67.81 on Friday, up $1.85 following a late-session surge on the back of a Wall Street rally.

Speculators may be wary about taking large positions this week, ahead of another round of interest rate cuts expected from the world's major central banks and Tuesday's US presidential election, which could set direction for the dollar and markets.

A US manufacturing survey due later today is expected to show sluggish activity extending into October, reinforcing views that the US economy is indeed in recession.

So we could be in for a volatile week on the exchange front after the dollar chalked up its biggest monthly gain in more than 17 years in October.

The USDA will release its weekly crop progress report after tonight's close. Last Monday the USDA reported US corn harvested was 39% complete and the soybean harvest at 76% complete.

Early calls for this afternoon's CBOT session: Corn futures are expected to open 1 higher; soybeans 8 to 10 higher; wheat 7 to 10 higher.

EU Wheat Futures Flat

EU wheat futures appear to have flattened out and are trading in a sideways pattern for the time being, as farmer selling remains light at current depressed levels.

November Paris milling wheat is EUR0.50/tonne higher at EUR144.50/tonne. Trade is sluggish with just 725 lots traded. There has been no trade yet on nearby months in London feed wheat.

A stronger dollar has now pushed below $1.26, from $1.2735 Friday, which is providing some support, as too is a firmer eCBOT market.

Still, with crop conditions in the US plains for newly planted wheat looking promising, and the Australian harvest just about underway, upside potential seems limited and any rallies should probably be sold into.

UK: Meat Consumption Falling

Data on consumer buying pattern throughout the United Kingdom indicates an overall fall in the purchase of meat and poultry for the 12-week period upto 9 Septenber 2008 when compared to the same period in 2007. According to a Livestock and Meat Commission (LMC) bulletin, total meat and poultry consumption has fallen by 10 percent with the largest fall recorded in the beef category, 24 percent.


Beef continues to have the largest market share of the meat and poultry category at just below 50 per cent. This is six per cent less than the same period last year. In terms of quantity of beef consumed, total beef purchased in the 12 week period up to 7 September 2008 as compared to the same period in 2007 fell by 24 per cent to 3.9 million kgs from 5.1 million kgs. The average price per kilogramme increased to £6.10 (an increase of 17 per cent). Perhaps significantly, the only cut within the beef category showing an increase in quantity sold was mince with an increase of 2.3 per cent.


Lamb market share of the meat and poultry sector has shown a one per cent increase to 18 per cent from 17 per cent. There has also been a marked increase in the number of people purchasing lamb with the data showing that 43 per cent of consumers are buying lamb product, an increase of 13 per cent. The most dramatic increase in cuts of meat has been lamb mince as compared against cuts from all categories, with sales up by 37 per cent.

Other Meats & Poultry

Bacon and Sausages are the categories showing the highest increases in consumption. Although one of the smallest categories in the sector with total sales being just three per cent, the quantity of bacon purchased has increased by 20 per cent to 421,000 kgs and the spend for these purchases is up 47 per cent to £2.4 million.

Ukraine Grain Exports Slow

Ukraine's grain exports slowed during October to 2.0mmt, from 2.8mmt in September Juriy Melnik, the Minister of Agrarian Policy, said Friday.

The country has very few export commitments so far beyond November, so farmers should make more active sales to domestic consumers, he said during a conference in Poltava on October 31.

Earlier the Ministry forecasted the level of grain exports from Ukraine in this MY at 22.6 mln tonnes.

Asian Stocks Close Mostly Higher

The stock markets across the Asia-Pacific region closed mostly higher on Monday, with the exception of China, as Wall Street's gains on Friday boosted investor confidence. However, fears of recession still loomed large, as South Korea unveiled a stimulus package to cushion the blow from the financial crisis. The Chinese stock market fell to a new two-year low on the back of gloomy manufacturing data, extending October's losses. The Japanese market remained closed on account of a public holiday.

The Australian stock market rallied 5%, led by banks and miners, as expectations for an interest rate cut by 50 basis points on Tuesday increased. Hong Kong's Hang Seng closed 2.7% higher at 14,344.37; Taiwan's Taiex closed up 2.6% at 4,995; Singapore's STI closed 5.0% at 1,883; Indonesia's Jakarta Composite Index closed up 7.6% at 1,352; Malaysia's KLCI closed up 35.7 points at 899; and India's Sensex closed up 5.6% at 10,337.

New Technology To Allow Increased Rapemeal Usage In Feed

With rapemeal prices running at an histrorically low 50% or less the price of soymeal, cramming as much rape into the ration as possible makes obvious sense. BOCM claim to have a way of increasing a typical 50:50 rape soya blend to 60:40 or even 70:30 without reducing protein quality.

With abundant supplies of cheap feed wheat kicking around they reckon they can also cram a bit more of that into the ration too. Sounds like a good idea to me.

The Commission Cheque Is In The Post!

VeraSun Files For Chapter 11

VeraSun, one of the USA's largest ethanol producers, filed for Chapter 11 bankruptcy protection on Friday. The move, says the company, follows a series of events which have impacted on its liquidity and will give it the opportunity to reorganize under the protection of the Chapter 11 filing.

Commenting on the situation Don Endres VeraSun's CEO said; "Today's filing allows VeraSun to address its short-term liquidity constraints as we navigate historically challenging market conditions while we focus on restructuring to address the company’s long-term future. We appreciate the loyalty of our employees, customers and suppliers during this challenging time."

Explaining its downturn in fortunes the company said that it suffered significant losses in the third quarter of 2008 from a dramatic spike in its corn costs, reflecting in part costs attributable to its corn procurement and hedging arrangements, and historically unfavorable margins. Beginning in the third quarter, worsening capital market conditions and a tightening of trade credit resulted in severe constraints on the company’s liquidity position. Faced with these constraints, VeraSun and 24 of its subsidiaries filed their chapter 11 petitions to facilitate access to additional liquidity while they reorganize to take better advantage of VeraSun’s position as one of the nation's largest producers of ethanol.

US Feed Samples Test Positive For Melamine

Thirty samples of animal feed in the US are reported to have tested positive for melamine in the past 4-6 weeks. The international diagnostic testing lab, Romer Labs, says that the feed was all imported to the US from China and all came from the same un-named Chinese company.

Marks Profits Set To Cause Few Sparks

Marks & Spencer, Britain's biggest clothing retailer, is set to post a 34 percent drop in first-half profit on Tuesday, hit by a deepening consumer downturn and self-confessed mistakes at its food business, says Reuters.

The 124-year-old mainstay of UK retailing is expected to report profit before tax and one-off items of 296.5 million pounds ($482.4 million) for the six months ended September, according to the mean forecast of 11 analysts in a Reuters poll.

That would be the worst first-half performance since 2004 and down from 451.8 million in the same period last year.

Full-year profit forecasts for M&S continue to fall, with the average now standing at 683 million pounds, down from about 1 billion at the start of the year, according to Reuters Estimates.

China To Tighten Rules On Melamine

China has finally said it will get tough on what appears to be the routine addition to melamine into animal feed.

"The ministry will tighten its supervision of the feed industry and crack down on producers who add melamine to their products," the China Daily quoted Wang Zhicai, head of the Agriculture Ministry's livestock division as saying over the weekend.

Wang acknowledged that the ministry issued a regulation in June last year banning the addition of melamine into livestock feed. They were clearly aware it being a problem then it would therefore seem. He didn't elaborate on why they have done nothing about the continued practice since.

In a further twist, the Chinese company blamed for selling the original batch of melamine-tainted eggs to Hong Kong is now suing its feed provider, according to the official People's Daily newspaper.

Overnight Grains Firmer

Overnight grains are steady in early trade on the eCBOT market, with corn up around 7c, wheat 10-12c firmer and soybeans 22-23c higher.

A weakening dollar is encouraging the belief that demand will pick up. Ideas that firmer crude oil and stock market gains will revive the ailing commodity markets is also helping gains this morning.

Corn gained 7.7 percent last week and soybeans 7.6 percent, the first time they've managed to post an increase in five weeks.

Wheat is firmer on ideas that recent price drops have been overdone. The CBOT price plunged 21 percent in October, the biggest monthly decline since February 1986.

A Bloomberg survey reports 20/35 analysts anticipate that corn prices will rise this week. For soybeans 23/35 predict a rally on speculation that government interest-rate cuts and banking bailouts around the world will boost food and feed demand in 2009.