Its raining in all the wrong places
And its not raining in all the wrong places as well.
Chicago wheat jumped 4 percent Friday on speculation that U.S. winter crops emerging from dormancy may be damaged by persistent dry weather in the southern Great Plains and excessive precipitation in the eastern Midwest.
No rain will fall in western Kansas, the Oklahoma Panhandle and West Texas in the next week, Meteorlogix LLC said in a report today. Excessive rain from Arkansas to Ohio may flood more fields, lowering yield potential, the private forecaster said. Wheat prices have more than doubled in the past year, partly because adverse weather hurt global crops.
"Southwest Kansas, the Oklahoma Panhandle and northwest Texas really are dry,'' said Darrell Holaday president of Advanced Market Concepts in Manhattan, Kansas. "The weather's definitely the story.''
The western parts of Kansas, Oklahoma and Texas, where 54 percent of all U.S. winter wheat was planted from September to November, got no precipitation in the past month, National Weather Service data show. Meanwhile as much as six times the normal amount of rain was recorded in the eastern Midwest, including Illinois and Ohio, the largest U.S. producers of soft red-winter varieties.
Elsewhere the wheat crop in India may be damaged by rains in the main growing areas in the northwest region in the next two days, said S.S. Singh, a professor at the state-run Indian Agricultural Research Institute in New Delhi.
Meanwhile a Spanish drought, said to be the worst since 1912, is causing crop concerns there. Local officials say Barcelona will combat drought by importing water from other parts of Spain and neighbouring France from next month. The second largest city in Spain is trying to deal with the region's worst drought in decades by bringing enough water to meet Barcelona's consumption needs for five days at a cost of 22 million euros.
Corn closes down but outlook still bullish
My mystic guide Septic Peg called corn spot on at 2c down on tonight's close, and as she predicted this seems to have more to do with weekend profit-taking than anything else sifting through tonight's comments.
Whilst much of this week's post-USDA talk has centred around ideas that corn acreage will be larger than the USDA are saying, the weather doesn't seem to be doing anything to help that theory:
Heavy rains fell on portions of the Delta and Midwest Thursday & Friday, keeping farm fieldwork stalled, while slowing cash grain trade.
"Considerable rain was still falling early today, and additional widespread 1-2 inch rains are forecast east of a line from around Texarkana to just north of Memphis to near Norfolk, Va.," said Freese-Notis Weather.
The service warns forecast maps continue to indicate additional wet weather throughout the central U.S. for next week, as well.
"Given the current state of soils and the forecast for additional rain next week, clearly we are going to see nothing done for fieldwork through at least the first twelve days of this month," said Freese-Notis.
Forecasts point to a cycle of wet conditions for much of the Midwest, particularly for southern locations.
While there is still time, farmers in the heart of the corn belt have until May 5 to plant before yield losses are a concern. Producers in more southern areas, however, would like to be in the fields by now.
On Friday and Saturday, a swath of heavy rain will shift into the South and East and residual flooding will persist from the mid-South into the Ohio Valley. The threat for severe storms will shift from the lower Mississippi Valley to the southern Atlantic Coast, USDA Meteorologist Brad Rippey said.
Precipitation will also spread from the Pacific Northwest to the upper Midwest, with heavy snow possible this weekend in the upper Great Lakes. Wet weather will return to the central Plains and parts of the Midwest early next week, with additional flooding possible in the Midwest.
Bank of England: To Cut or Not to Cut Interest Rates
Of the 3 central banks holding monetary policy meetings next week, the Bank of England is the only one expected to alter interest rates. A 25bp rate cut is the current forecast even though the rate decision is really a close call.
The minutes from the last Bank of England meeting revealed that one of the main reasons why the BoE did not cut interest rates last month was because they were worried about how the market would perceive a back to back interest rate cut. Inflation has picked up since then and UK economic data has been mixed, but the growing reluctance by mortgage lenders to extend new loans may force the Bank of England to take further steps to ease monetary policy. Co-operative Bank joined First Direct in withdrawing all 2 year mortgages. Halifax, the nation’s largest mortgage lender is expected to follow suit in the coming weeks. Tighter credit conditions could put further pressure on the UK housing market which will lead to more losses and defaults. Aside from the BoE meeting, consumer confidence, industrial production and the UK trade balance will be released.
Market is signaling more corn acres
Purdue University agricultural economist Corinne Alexander says things have changed since the first of March when information was collected for the prospective plantings report and because they have changed, she’s recommending farmers re-evaluate their crop budgets again.
“Right now if you run the numbers from the March 31 prices its saying that for low quality land, land that gets 125 bushel corn, corn beats beans by $90 dollars an acre and on average quality land, 157 bushel per acre corn ground, corn beats soybeans by $140 dollars to the acre, and on high quality land, corn beats beans by $200 dollars to the acre, those are very strong incentives from the market to plant more corn,” said Alexander.
The Purdue ag economist says prices and weather will be the key indicators for farmers to be watching over the next several weeks.
Tonight's Chicago Close & Tomorrow's Grand National Winner...
After yesterday's disappointing performance by my spirit guide from beyond the grave I've told her (via the medium of a ouija board) to get a grip & shape up.
She has promised to redeem herself today by not only correctly predicting tonight's Chicago closes but she is also going to throw-in the first two home in tomorrow's Grand National for free!
So over to you Septic Peg....
....the voices are telling me that Cloudy Lane will start a worthy favourite for tomorrow's big race, trained by the son of Ginger "Red Rum" McCain, but that it's cramped odds don't represent any sort of value, even if it is my lucky No 26, I see it tiring on the run-in, there's something coming up on the outside....WHAT IS IT PEG....the voices, the voices....they see Oirish celebrations in Liverpool tomorrow....the mist is clearing....it's starting to get up, its......Snowy Morning romping home at 25/1. Second Cloudy Lane, distance two lengths.
And for Chicago Peg?
oh, erm not a lot of change really. Bit of pre-weekend book-squaring. 5 up beans, 2 down corn, 5 down wheat.
UK trades/views: nearby rape still flavour of the month
Following on from yesterday's theme, nearby rapemeal remains supported with ongoing availability issues forcing dealers & consumers into the market.
Spot Humber made up to £205 yesterday for promt collection. Spot Liverpool offers are non-existant. Erith fixings today are offered at £194, £2 up on yesterday's traded levels.
With consumers generally only having scant coverage for summer months (and May/July being offered at substantial discounts) there has been good interest in straight May material, which is now less than four weeks away.
Best offer for straight May on it's own in Liverpool today is £177, Humber £175 and Erith £172.
June onwards remains relatively friendless at the moment.
Early Call on Chicago
Corn futures are expected to open 1 lower to 2 1/2 higher; soybeans steady to 12 higher; wheat mixed. Trading activity was slow overnight as the weekend looms ahead. Traders are not finding new price direction.
Pound gets (short-lived) shot in the arm
The pound rose above $2 for the first time in a week, and is heading for a second weekly advance, as a rally in stocks boosted appetite for higher-yielding currencies.
The pound is poised for its biggest weekly gain in more than five years, as traders cottoned on to the U.K.'s 5.25 percent interest rate to buy its currency using cheaper loans from elsewhere. Britain's FTSE 100 Index of stocks rose the most in almost two years this week, climbing with equity markets around the world.
If the French want to kill themselves who are we to stop them?
No this isn't a belated April Fool this is really happening!
From The Daily Record:
BATTLING meat bosses are taking the Record's Save Our Mince campaign to Europe.
A delegation will meet Brussels bureaucrats in an attempt to persuade them to scrap plans to ban the sale of properly aged beef mince.
The Record revealed the crazy proposals last week. They were drawn up by former EU health commissioner Markos Kyprianou.
Scots butchers hang meat for up to 28 days to give it extra flavour before it is minced. But EU pen-pushers say it should be hung for no more than six days after slaughter, on health grounds.
They claim the change would cut the risk of the French poisoning themselves with steak tartare, which is raw mince.
Farmers and butchers were furious and vowed to fight the plan all the way.
New Zealand the latest country to question biofuel legislation
The future of the biofuel legislation currently before New Zealand's parliament, hangs in the balance following calls from the country's Parliamentary Commissioner for the Environment, Dr Jan Wright, for the bill not to proceed in its current form. International concern about the sustainability of biofuels and their true environmental and economic impacts, says Dr Wright, has heated up considerably in recent months – which signals a need for caution.
Biofuels are seen as a way of achieving both lower CO2 emissions and energy security. But Dr Wright does not believe the mechanisms allowed for in the Bill would deliver on these two goals. Biofuels appear to be carbon-neutral, because plants absorb carbon dioxide (CO2) as they grow, and this is equal to the CO2 emitted when the fuel is burned. However this does not account for the CO2 emitted during cultivation and processing into fuel.
"Lifecycle assessment of a wide range of biofuels shows large variation in CO2 emissions across fuels and, in some cases, across countries," says Dr Wright. "Ethanol from corn in the US, for example, is a very poor performer, with total CO2 emissions close to those of diesel."
The Biofuel Bill has no inbuilt mechanism for ensuring that biofuels used in New Zealand would emit significantly less CO2 over their lifecycle than fossil fuels, and would require an Order in Council to set a minimum standard.
"Just ensuring a positive net reduction in CO2 would not go far enough to make a New Zealand Biofuel Obligation worthwhile," says Dr Wright.
Tonight's Chicago close will be...
Forget the early call.
I've been playing with the ouija board and have made contact with a spirit guide who reckon's that she is able to tell me in advance what the close of Chicago is going to be. So over to you Septic Peg...
Tonight Nogger I see corn being the strongest leg of the complex, the voices tell me that decent export sales & concern over persistent cool & wet weather to continue for the next fortnight will see corn close around 10c higher....
...Beans & wheat however will not fare so well, despite a firmer opening beans will drift lower on ideas that the cold, wet weather may indeed lead to the USDA's acreage predictions being closer to the truth than many currently believe. Bean sales were also a little poor. Combined with rains in northern China relieving drought there I see beans closing 10-12c lower.
And for wheat, Peg? Well Nogger, like beans wheat's highest levels will be set early in the session but soybean weakness will also drag beans lower to close around 3c down.
Thanks Peg, any tips for the National? Ooooooooh, the voices are fading....
USDA Weekly Export Sales Report
This summary is based on reports from exporters for the period March 21-27, 2008.
Wheat sales of 267,200 metric tons were 30 percent below the previous week, but 3 percent over the prior 4-week average. Add to this sales of 121,100 MT for delivery in 2008/09 giving total net sales of 388,300 MT. This compares to expectations of 450,000 to 650,000 MT.
Corn sales of 704,400 metric tons were 11 percent above the previous week and 1 percent over the prior 4-week average. Add to this sales of 241,300 MT for delivery in 2008/09 giving total net sales of 945,700 MT. This compares to expectations of 550,000 to 750,000 MT.
Soybean sales of 184,800 MT were down 50 percent from the previous week and 42 percent from the prior 4-week average. Add to this net sales of 230,000 MT for delivery in 2008/09 giving total net sales of 414,800 MT. This compares to expectations of 350,000 to 750,000 MT.
Soymeal sales of 90,000 MT were 43 percent below the previous week and 35 percent under the prior 4-week average. There were no sales for delivery in 2008/09 giving total net sales of 90,000 MT. This compares to expectations of 100,000 to 175,000 MT.
Soyoil sales were 55,800 MT. This compares to expectations of 10,000 to 25,000 MT.
Early call on Chicago
Corn futures are expected to open 1 to 5 higher; soybeans 6 to 14 higher; wheat mostly 10 to 12 higher. Speculative buying pushed prices higher in overnight trade but volatile trade should be expected Thursday. Profit-taking could develop ahead of the weekend.
I feel it really could do anything tonight depending on whether the bulls or the bears take over. Last night's suspension of the Argy strike could pressure nearby beans as the session wears on.
Long-range forecasts call for a continuation of current wet, cool weather into mid-April could also pressure new crop beans and provide some support for corn.
Lets see if the export figures due out at 13.30BST give us any further help.
UK trades/views: nearby rapemeal tightens up
Nearby product continues to be what everyone is after as the UK weather continues cool & wet. Availability problems persist, the Argy strike might be over for the time being, largely due I suspect to farmer's desires to get on with the harvest. Even so it is still going to take the cavalry 5-6 weeks to get here, which gets us into mid May.
Nearby rape fixings in Erith, traded at £192 yesterday, and again this morning, offers are drying up at this price now. Talk of fixing cancellations in Liverpool is switching northern interest to the Humber (lorries to do Erith to the north are difficult to find & expensive). Spot Humber material reported traded yesterday £199 and £200, making £201 early this morning and up to £205 late morning, with shipper shorts buying.
It hasn't escaped traders notice that early May could present availability problems as well, and with May/Jul available at substantial discounts to spot material this has led to a spate of interest in FH May material.
There are odd resale parcels of nearby soya available in Liverpool for 44% & 48% material POA.
Malt residual pellets ex South East spot reported traded £140.
USDA Export Sales Expectations
The following are the pre-report expectations ahead of today's USDA Weekly Export Sales Report for w/e March 27th:
Wheat 300-700,000 tons; corn 500-900,000 tons; soybeans 300-600,000 tons; soymeal 75-175,000 tons; soyoil 10-30,000 tons.
Figures are expected out at 13.30 GMT.
US economy may contract - Fed
US Federal Reserve chairman Ben Bernanke has acknowledged for the first time that the economy may contract as home building weakens further, unemployment rises and consumer spending slumps. It now appears that real gross domestic product will not grow much, if at all, over the first half of 2008 and could even contract slightly, Bernanke said yesterday. He said the Feds emergency loan to Bear Stearns followed a warning the company would have to file for bankruptcy the next day resulting in a “chaotic” reaction.
For the majors, the policy official’s remarks led EURUSD to hold a long-term rising trend and rally over 100 points to 1.57. The pound, despite disappointing data of its own, took advantage of the weakened greenback to confirm a triple bottom and rally back to 1.99.
Yet another US ethanol Co having financial difficulties
Pacific Ethanol Inc., a California biofuels darling that boasts political connections and an investment from Bill Gates, is short on cash and suffering from higher corn and plant construction costs, which threaten to derail the once-promising biofuels maker.
The Sacramento company on Monday posted record-high sales but a larger-than-expected $14.7-million loss in the fourth quarter, reflecting a financial squeeze that has clouded prospects for ethanol producers nationwide.
Pacific Ethanol reported the loss just days after it shored up its depleted coffers with a $40-million cash infusion from Lyles United, a company whose affiliates have provided construction services to Pacific Ethanol and had previously lent it funds.
The Lyles investment provided a bit of good news for the company and helped remedy several violations of Pacific Ethanol's credit agreement with a group of lenders. The company recently postponed construction of its Imperial Valley ethanol plant, said it suffered from large construction cost overruns and admitted to having a "material weakness" in its financial controls -- problems it says it has since fixed.
Chief Executive Neil Koehler on Monday attributed the fourth-quarter loss primarily to sharply higher corn costs combined with lower prices for ethanol caused by industry overexpansion. Pacific Ethanol, like most other U.S. ethanol producers, makes its biofuel from corn.
For the three months ended Dec. 31, Pacific Ethanol's gross margins -- the difference between the cost of production and the selling price of the ethanol -- plummeted to 1.3% from 14.6% in the final quarter of 2006. For the full year, the margin slipped to 7.1%, down from 2006's margin of 11%.
The lower margins couldn't cover the company's debt and overhead expenses, Koehler said. The quarterly loss equaled 39 cents a share, well off average analyst expectations of a 17-cent loss, according to a survey by Thomson Financial. In the fourth quarter of 2006, the company lost $3.1 million, or 11 cents a share.
The margin crunch has taken a toll industrywide. Grain giant Cargill Inc. suspended plans for an ethanol plant near Topeka, Kan.; an ethanol producer in Illinois fell into bankruptcy protection; and VeraSun Energy Corp. scrapped plans for an ethanol plant in Reynolds, Ind. -- a community that had hoped to call itself BioTown USA.
Argentine Wheat Exports Set to Re-Open Next Week
Following the suspension of the farmers strike Argentina have wasted no time in announcing that they will begin accepting declarations for export of wheat on April 7. The first exports will be allowed on April 21.
The wheat export registry has been closed several times since last year. More than 7 million metric tons of the 2007-08 wheat crop has been declared for export. In January the Agriculture Secretariat announced that an additional 2 million metric tons of wheat would be made available for export over the next five months, but the export office has remained closed.
Late export news may support US futures
Private exporters are reporting sales of 220,000mt US soybeans to China for the current 07-08 marketing year. There is also a report circulating of 120,000 US wheat sold to Egypt for the next marketing year 08-09 which begins 1st Sept 2008. U.S. exporters are required to report to the USDA sales of 100,000 tons or more of any commodity made in the same day to the same destination by 3:00 p.m. EDT (1900 GMT) the next business day, according to the USDA's Foreign Agriculture Service.
Corn/beans, whatever the USDA might say the jury is still out
Here's some comments from certain dark & dank parts of the internet that Nogger selflessly frequents for you his adoring public relating to the ongoing shall I/shan't I plant beans or corn debate.
Now I must stress that these comments aren't picked specifically to back up any particular theory or agenda. These are all but one of the last eight postings on this particular site. The reason I haven't posted the eighth is that it is incredibly long-winded & boring, and despite forcing myself to read it twice I still can't make head nor tail of what the bloke is saying.
Here's the other seven:
4/01 - Sibley County, Minnesota: Planning on planting 100% corn this year. Corn is going to be KING this year. I was lucky enough to lock in fertilizer prices back in December. For some reason I have not really had a yield drag on corn on corn and now with VT3 corn, this is going to even be more true!
4/01 - Northern Minnesota: Looking like a late spring up here. Unless the weather does a dramatic turn-around, it will be another 30 days before we can even get into the fields. Going with our normal rotation this year. May go with some additional acres in corn if the weather cooperates. Sounds like others are also having issues with weather around the country. With 7 million acres less corn this year than last and stable demand, corn may go the same route wheat took earlier this year once the commodities buyers figure out a late spring usually means reduced average yields. Have contracted ~ half this years beans above the $11, sittin’ on the rest….$3.50 diesel may get ugly this year !!!
4/01 - Central Nebraska: After today's planting intentions report looks like soybean acres will take a sharp cut
3/31 - North Central Indiana Fulton/Miami Counties: I recently heard a comment, "This is looking like 1983." (A few of you won't remember that.) In our area I would agree. It was a wet cold spring and then turned off hot and dry in June and July. We are what I would call fully charged on moisture in our area. Every time it rains even a couple of tenths we have water standing in any low area. In past years we have become spoiled with being able to start tillage in late March or by the first of April. That will not happen this year. We're not pushing the panic button here but it has become a concern. In the last 50 years I don't remember not planting a crop. I'll bet we plant one this year. All ya all be careful out there. Take your time, do it right and do it safe!
3/31 Central Minnesota: 100% corn this year. Looks like I made the right call based on what the CBOT is doing.
3/31 - West-central Minnesota: Been running some basic cropping scenarios in light of recent futures prices. Using current prices for triple stack seed, fertilizer and chemicals corn generates $202.75 more net profit per acre than soybeans. I am in an area where the corn to soybean yield ratio favors corn at about 3.8:1 and the corn to soybean price ratio has gone from a high of about 2.5:1 to 2.01:1 today. If prices fall another 20% corn is still generates $113.07 more profit than soybeans. Crop insurance guarantees and historical payouts also favor corn. This leads me to believe that acres could still be switched from soybeans to corn.
3/31 - Central Minnesota: 100% corn this year. Looks like I made the right call based on what the CBOT is doing.
Early call on Chicago
Corn futures are expected to open 5 higher to steady; soybeans 4 to 16 lower; wheat 1 to 10 higher. Wheat futures were pulled up by higher corn prices in overnight trade, but soybeans remained under pressure. Price volatility is still the name of the game.
Again a lot of talk this morning seems to centre around non-believing Monday's USDA report. The soy figure is too high, the corn figure is too low, not all the spring wheat will get in etc, it's too cold, it's too wet etc.
There is a further meeting tonight between the Argentine farm leaders to discuss their next course of action, and there is some talk that the strike may be called off/deferred. Even if this proves to be the case it will still be some time before normality returns and Argy product starts arriving in Europe again. This will likely keep spot physical prices firm for at least the next month or so.
Latest UK trades/quotes of interest
With the ongoing Argy strike most traders attentions are fixed on nearby soya & rapemeal availability.
Reported trades so far this morning include spot Erith rapemeal fixings being done at £192, and spot Humber material trading at £199. Spot offers ex Liverpool are hard to come by.
Aug/Oct Erith rapemeal has also been done today at £158.
Price indications for other months ex Erith are £169 for May/Jul and £166 for Nov08/Apr09.
Spot Liverpool any origin 44% soya quoted at £295 on resale, with 48% indicated at £305.
There's been some interest around in prairie meal today with resale quotes indicating £565/570 deld UK, depending on location, based on full loads tipped direct from the continent.
All prices subject to market fluctuations & to being unsold.
EU biofuels breaking news: cat seen eyeing pigeons, investors seen eyeing hills
EU member states are set to demand stricter sustainability criteria for biofuels made from agricultural crops in a bid to avert negative environmental side-effects linked to their mass production, according to a draft paper circulated by the Slovenian Presidency.
The draft suggests that governments have agreed that a Commission proposal requiring all biofuels used in Europe to deliver life-cycle CO2 savings (i.e. during production, transport and use) of 35% compared to conventional fuels.
The draft paper is the provisional outcome of discussions within a special biofuel working group, set up by member states in February in order to hammer out "core criteria" for the sustainable production of biofuels. The working group is due to present its final report to national experts on 4 April.
The idea is that the criteria, once finalised, would be included in two key pieces of future EU legislation aimed at promoting the use of biofuels in transport.
The first is the Renewables Directive which asks that 10% of all transport fuel consumption in the EU be covered by biofuels by 2020. The second is the Fuel Quality Directive which would require fuel suppliers to reduce greenhouse gases emitted by their fuels throughout their life-cycle by 10% between 2011 and 2020, either by enhancing supply efficiency or increasing the proportion of biofuel they include in their fuels.
There is broad agreement that such sustainability criteria are necessary to avoid a situation whereby fuel makers focus purely on producing cheap biofuels with a low CO2 output during use, without any consideration for the potential environmental damage or the greenhouse gases emitted during their production and transport phases.
Dollar's recent rally may stall today...
Later today, Federal Reserve Chairman Ben Bernanke will testify on the economic outlook before the Joint Economic Committee of Congress.
Bernanke’s comments tend to spark volatility not only in the forex markets, but also in the equity and fixed income markets. Why? Risk trends.
At this juncture, the biggest market-mover for global assets tends to be related to the Federal Reserve (interest rates, inflation, the economy) and the US financial sector – and all of these points will likely be touched upon by Bernanke.
However, traders will react to whatever topic serves as his main focus. If Bernanke cites inflation as his predominant concern and indicates some worries about moral hazard coming into play, fed fund futures will likely shift quickly to cut back speculation of a 50bp cut on April 30 and instead move to only price in a 25bp reduction to 2.00 percent.
On the other hand, Bernanke could keep instability in the financial markets, tight credit conditions, and major downside risks to economic growth as his primary focus. This would not only sound extremely bearish, but it would also lead fed fund futures to quickly price in more aggressive rate cuts in the near term.
Chicago closing comments
After yet another volatile session grain & oilseed futures mostly bounced from recent steep losses to close with some decent gains on Tuesday night.
Wheat was the main loser, closing with further substantial losses, May CBOT ending 34c lower with it's first close below $9 since Jan 10.
There is a growing feeling that wheat is suddenly the weakest link of the complex with a realisation that it is much more of a global crop than soy/corn, and that in many cases (unlike soy/corn) the crop is already "in the ground" based on substantially higher prices several months ago.
The outlook looks conducive to a great crop as reported here many times recently with substantial gains in Europe, Australia, America & elsewhere.
Soy gained on speculation that Monday's planting estimates were likely overstated and that therefore recent heavy declines are overdone.
Corn posted only modest gains, if soy is overstated then corn must be understated was the theory there.
It's still very early days in the US, again as mentioned recently the USDA have an inclination to understate corn plantings by around 1.5m acres in recent years in the March report.
USDA Pig Report "Ugly" - Analyst
If US and Canadian hog producers needed any more cold water to shock them into full-scale contraction, Friday’s Quarterly Hogs & Pigs Report from USDA ought to do it, says Economist Steve Meyer.
The numbers are huge and point to record slaughter in virtually every time period one wants to discuss in 2008, he says.
The report showed that the pig herd expanded seven percent on a year-over-year basis. The reading showed wider growth in the pig population than experts had forecast, and suggested that cash prices for hogs would remain stubbornly lower. The trends also suggested that the expansion of supply wouldn’t be reversed anytime soon.
It will be critical for exports to continue to grow and for domestic pork consumption to remain high. Even at that, producers will now be looking at carcass-weight cash, negotiated prices no higher than the mid-$60s this summer, with quarterly averages barely reaching that level in the second and third quarters and falling near $60/cwt., carcass, in the fourth quarter.
The best descriptive term I can think of is “ugly.”
It now appears that producers who have not already priced a substantial number of pigs for 2008 will see rivers of red ink. It will take unprecedented demand, either from exports or domestic sales or, more likely, both to keep this from happening. I do not believe demand can be strong enough, quick enough. We are going to have to go through this and it will not be pleasant.
What is very troubling is that things could definitely get worse. Feed prices could get higher. Large beef supplies are in the offing and chicken and turkey production remains well above year-ago levels. Consequently, there will be substantial competition in the marketplace. Slowing economies may force consumers to trade down in their food choices, giving lower-priced poultry an advantage.
What can we do in the short run? Get those hogs to town as soon as they reach a weight that will not take a price discount. Feed prices are now high enough and hog prices low enough that those last few pounds are getting less and less profitable – to the point of, perhaps, losing money. The opportunity is still limited because we are still running near slaughter capacity each week, but some effort is warranted, given these levels of supply.
Early Call on Chicago
Corn futures are expected to open 1 to 3 lower; soybeans 30 to 70 lower; wheat mostly 18 to 25 lower. Bearish soybean outlooks slammed prices down hard again in overnight trade and they will trade sharply lower Tuesday, too.
Corn is struggling against a wave of selling in the other pits, despite a "bearish" acreage report. It was only bearish to the extent that it was the second HIGHEST acreage since 1949!
I think that the US WILL plant more corn acres than the USDA report shows. There are plenty of stories kicking around this morning along the lines of "we are gonna run out of corn", well I guess the bulls have got to try & find something to hang their hats on. They haven't even got the decency to wait for a proper weather scare! These boys have got to try & make their bonuses somehow, I wonder if anyone has ever explained to this new money the concept of selling it short?
Scream if you want to go faster!
Beans, beans, beans, beans, spam, corn & beans
When the USDA picked farmers brains on the first of March about 2008 planting intentions, they were thinking you would probably plant more soybeans. Prices were about two and a half times the price of corn, and as a matter of fact they could not remember when soybean prices were that high. Beans, beans and more beans all came to fruition Monday.
11.162 million acres more beans than 2007 popped up in the Prospective Plantings Report issued by USDA. That was an 18% increase in soybean acreage, all the while 2008 expected corn acreage dropped by 8% from last year, representing 7.586 million fewer acres. Both estimates shifted more than the market expected.
At the University of Illinois, Extensions’ Darrel Good says soybean supplies should be able to meet the demand, “If 74.8 million acres are planted, harvested acreage might be near 73.8 million. With a national average yield near 42.5 bushels, the 2008 crop would total about 3.14 billion bushels, 115 million more than the level of consumption expected during the current marketing year. Current price relationships suggest that actual planted acreage of soybeans in 2008 should fall short of intentions.”
Since the survey was taken by USDA in early March, the bean market has lost $3 and the report was met with a 70 cent limit down move on Monday. The bean:corn ratio is now less than 2:1. Continued weakness in the bean market may turn some acres back to corn by the time planting time rolls around.
Early shout: Beans plunge further in "panic selling"
Soybeans continued the overnight session where they left off last night's limit down move with spot May hitting over 90c lower before rebounding slightly to stand 81 1/4c lower at 08.10am UK time, for a loss of $1.51 1/4 since the USDA figures were released yesterday afternoon.
"We're seeing panic selling," Katie Dean, senior economist at Australia & New Zealand Banking Group Ltd., said by phone from Melbourne today. "There were lots of speculators coming into these markets over the last couple of months looking for quick and easy returns."
The price of the oilseed has dropped 16 percent in four days and yesterday capped its first quarterly loss in six quarters.
May meal is a further $23.40 down overnight, wiping $43.40 off it's value in less than 24 hours. Soyoil is also substantially lower at 217 points down for a net loss of 567 points in the same timeframe.
May wheat is 9c lower this morning, adding to last night's 60c plunge. Whilst lonely little corn is struggling to stand firm, he barely managed it last night closing around 5-6c huigher, this morning currently posting losses of around 3c.
Wheat: Game Over??
Even with much needed rains missing the every-dry regions of the western central and southern Plains, the wheat market buckled last week, and is getting much more selling pressure to start off this week. The continuous drum-beating of a potential record world wheat crop has just been too much for this well worn bull market. India reporting that they expect to procure enough wheat from their farmers and not have to import wheat also was a disappointment for the bulls.
Today's plantings report showed total wheat plantings slightly higher than analysts' estimates at 63.8 million acres, which had a negative slant to it. But the quarterly stocks report was a surprise as well with wheat stocks at 710 million bushels, above even the highest trade estimate. Suddenly stocks aren't quite as tight at they seemed.
With the downward momentum already in place before this report, the negative numbers didn't give the bulls any fuel. And again, even with a large region of key growing areas under severe stress, this market is struggling to maintain even minor rallies - if you can call $1.20 a minor rally. I still have to stretch my mind sometimes to put things in perspective with these massive price levels.
Nevertheless, I think we can still expect a great deal of price volatility as we move through the growing season. I also continue to think that our long term highs are in place for wheat, and quite possibly for the soy complex as well. For wheat, if we get a weather scare, it will be an opportunity to get some sales on the books. For soybeans, however, a weather scare will hold much more bullish ramifications, so the jury is still out on that one. Corn still has bullish fundamental base, but can it stand alone if wheat and beans are breaking - likely not.
Spring wheat could be a much different fundamental story, however, than winter wheat. Even with the projected increase in acres, most of the spring wheat region is severely dry, making it difficult to project a big spring wheat crop and/or burdensome supplies. But can spring wheat stand on its own if winter wheat stocks are surging and prices are dropping -likely not.
For me, the bottom line is that unless you get a major weather issue in a major producing region of the world, then wheat prices are very likely headed much lower. While the US western Plains' weather problems are certainly nothing to toss aside, they are not enough to pull prices higher, especially when the rest of the hard winter wheat of the plains is in very good shape. And while some of the soft red wheat may be under water, those potential losses are not enough to offset the significant increase in soft red plantings last fall.
Argy bargy olive branch??
Argentina's government unveiled a package of measures on Monday to help small farmers in a bid to end a 19-day-old farm strike against a tax hike on soy exports.
Economy Minister Martin Lousteau said small-scale farmers would be given a rebate on soy and sunflower export taxes as well as compensation for transport costs for those in far-flung areas. "We must differentiate for small farmers," he said in a televised speech.
Lousteau said the government would offer refunds on export taxes equivalent to the loss that these smaller producers have incurred since the tax was raised under a new system introduced on March 11, when it provoked farmers to block roads and withhold supplies.
Vowing to challenge the heavy concentration of soy production in the hands of a few large producers, Lousteau said the measure would cover 80% of all producers, those who produce just 20% of the country's total output. Additionally, special transport subsidies will be given to small producers in Argentina's more distant, poorer northern provinces.
And in what he said was a bid to shift more production to traditional products, Lousteau said cheap credit plans would be offered to dairy producers.
As with the measure announced on March 11, which put in place a sliding-scale soy export tax rate based on international prices - and which initially boosted it from a fixed rate of 35% to 46%, according to the prevailing international price for soy - Lousteau argued that the latest measures were consistent with an attempt to reduce the dominance and concentration of big soy producers.
He spoke in advance of President Cristina Fernandez, whose much-anticipated speech comes as Argentines faces ever-growing food shortages in supermarkets and stores.
Meanwhile Argentine border police cleared a roadblock in the central province of Entre Rios, allowing trucks stranded by the country's longest farmers' strike to get through as the government seeks to end food shortages. Roadblocks in other parts of the country continued, and the farmers cleared from the Entre Rios roadblock pledged to mount protests elsewhere.
Chicago closing comments
Well the bears got the close they wanted with the soya complex pretty much locked in limit down.
Beans closed down their new daily 70c limit and were trading around a further 20c lower in synthetic trade. Oil closed it's extended limit, a monster 350 points lower (oil limits were extended by virtue of a 250 pt limit down close Friday) and were around a further 20 points lower in synthetic trade. Meal closed down the $20 limit on the first five positions and was trading a further dollar or two lower in kerb trade.
Wheat closed at or close to limit down in the first half dozen positions (-60c), although it seems fairly widely accepted that the USDA figures were not as bearish for wheat as they were for the soy complex.
Corn managed to buck the trend, as widely expected, although never quite managing to be strong enough to avoid spillover weakness from the other pits, closing with modest gains of around 4-8c having managed to get to within 4-5c of it's daily 30c limit. Early in the session the May price reached $5.88, the highest ever for a most- active contract.
By virtue of the soy complex settling at their respective lower daily trading limits, price limits tomorrow will expand for all three legs of the complex. Soybean daily limits will expand to $1.05 per bushel, Soymeal limits expand to $30.00 a short ton, and limits on soyoil expand to 550 points, or 55 cents, per pound.
Oil has now dropped 29%, or more than a staggering 2,100 points in just four weeks!
Cool, wet weather continues to hamper corn planting progress & there is now a real feel that despite coming out with a soybean planting estimate higher than anything being touted in the trade, the end figure could in fact be even higher.
The big questions now are can beans continue to fall whilst corn continues to rally? How much narrower can the bean/corn ratio get? And conversely of course, can corn manage to buck the trend in the face of rising production of beans & wheat given the question mark over continued strong demand from the ethanol sector? A sector that depends almost entirely on the US government maintaining the current level of tax breaks for the product AND the EU continuing to allow the US exploit it's "splash & dash" policy.
If corn is going higher then that certainly isn't going to help demand from the ethanol sector, especially given the current economic climate, against a backdrop of US plants being shelved on a weekly basis.
Post USDA: "So where do we go from here?"
Possibly more than any other plantings report in memory the 2008 intentions report released a short while ago was expected to be a signal indicator for the grain trade.
The markets have been obsessing over the “battle of acres” in the United States — the world’s top grain exporter — given record high grain prices over the past year fueled by world crop shortages, exploding biofuels production and soaring export demand, all driving food inflation.
So today’s report will likely light some more fireworks, especially after the big sell-off in Chicago Board of Trade markets on Friday as traders seemed unwilling to hold long positions going into the report. As if the grain market needs more fireworks given the unprecedented rallies and volatility seen in Q1 2008, the last day of the quarter should make sure the grain trade closes their March 31 books with a bang.
When the dust settles after the report, the grain market will settle into the more usual uncertainty offered by its traditional most influential player: Mother Nature. If the Midwest stays cool and wet in April, there’s always the possibility for some intended corn acres getting switched to soybeans, a later planted crop. If, of course, US farmers can actually procure the seed.
I pointed out on this blog last week that there has been a strong trend over the last few years for the USDA to up it's final acreage figure for corn by around 1.5m acres between it's March & it's June report. Whether that will happen this year is anybody's guess.
So for now, we are expecting beans well down this afternoon (Mar 1st stocks were also higher than expected) and corn substantially higher (Mar 1st stocks were lower than expected). How long these two can move in opposite directions is also anybodys guess. They have already been posturing this way during the last few weeks with corn closing steady 5-6c higher on Friday despite beans dropping 50-60c.
Wheat is also an interesting conundrum all of it's own. The acreage & stocks figures here were also a little higher than anticipated and it too is called modestly lower this afternoon. However, unlike beans & corn, for wheat the Americas aren't the only shops in town.
The European market doesn't seem to like today's figures too much, French milling wheat futures which were bumbling along slightly lower pre-USDA have dropped sharply EUR11.25 lower as I type. London feed wheat is down around £3-4. Rapeseed futures too have suddenly plunged EUR16.
I expect to see wheat end much lower tonight than the 5-10c lower currently being touted around. Soybeans are likely to flirt with limit down at some point, and quite likely to end there I'd guess unless corn can generate some spillover strength.
Some early reports are suggesting corn could hit limit up. Corn limit up, soybeans limit down in the same session, not sure if we've ever seen that before. Tonight could be the night.
Early Call On Chicago
Corn Called Up 20-30c, Soy Dn 40-50c, Wheat Dn 5-10c.
U.S. farmers intend to plant 74.8 million acres of soybeans this spring, an 18 percent increase, lured by sky-high market prices, while cutting back by 8 percent on ethanol-darling corn, the government said on Monday.
The soybean crop could total 3.1 billion bushels, the third largest on record, and corn (maize) plantings of 86 million acres could yield 12.2 billion bushels, the No. 2 crop, based on the Agriculture Department's projected yields and the usual amount of shrinkage from plantings to harvested area.
Wheat plantings of 63.8 million acres, up 6 percent, could produce a crop of 2.3 billion bushels. USDA said cotton plantings would tumble by 13 percent, to 9.39 million acres, the smallest plantings since 1983.
USDA Report: Soy acres much higher than expected
This is a summary of today's eagerly awaited USDA 2008 planting intentions & March 1st stocks report:
corn acreage at 86.014 million vs avg trade guess of 87.387 million and 93.6 million in 2007,
soybean acreage at 74.793 million vs avg trade guess of 71.526 million and 63.631 million in 2007,
all wheat acreage at 63.803 million vs avg trade guess of 63.625 million and 60.433 in 2007.
March 1 stocks:
corn at 6.859 billion bushels vs avg trade guess of 7.076 billion bu.,
soybean stocks at 1.428 billion bushels vs avg trade guess of 1.352 billion bu.
wheat stocks at 710 million bushels vs avg trade guess of 668 million bushels.
The soybean acreage figure stands out as being more than half a million acres more than the highest trade estimate and more than three million above the average trade estimate.
The corn figure, whilst not below the lowest trade estimate is towards the lower end of what was expected.
Liffe/Euronext wheat at 2 month lows
Liffe's Paris milling wheat and London feed wheat futures are lower, with nearby contracts matching or setting 2-month-lows. "There is not a lot of demand for feed wheat and French wheat exports to north Africa are not as strong as people expected," says a broker. Adds that market is waiting for USDA report for further direction. Paris May is -EUR3.50 at EUR246/ton. London May is -GBP1 at GBP178/ton.
Please drink more strong lager - Urgent appeal
Soaring commodity costs and falling sales of its premium lager have forced Inbev, the Belgian brewing giant, to axe up to 250 jobs at two Stella Artois breweries in Lancashire and Wales.
Up to 166 workers in Samlesbury, Lancashire, and 80 in Magor, south Wales, face redundancy after an operational review by Inbev. A consultation process with affected employees has started. Unions and workers' representatives have vowed to fight the move, which the GMB union described as "shocking".
Brewers are under intense pressure after wheat prices have doubled over the last year. Hops prices are predicted to rise by 150 per cent this year. The increase is down to poor global harvests, increased demand from India and China and a spike in demand for biofuels. Due to intense competition in the beer sector, the brewery has been reluctant to pass the price increases on to drinkers.
Inbev said that brewing would continue at the sites, but with fewer staff. It said that the review was part of "normal" business operations, "particularly in today's economic environment with rising raw materials, packaging and energy costs".
Sales are also under pressure. Alan McVann, the GMB's convener at the Samlesbury site, said that sales of Artois have dropped by 10 per cent over the last year as customers have opted for less expensive, weaker lager. Samlesbury employs 380 people, meaning that the proposals will affect almost half the workforce.
Syngenta gets GA21 maize approval
Syngenta welcomed Friday's EU authorisation extension of the group's GA21 genetically-modified maize and said the the approval could help boost sales, a spokesman said.
'We welcome today's decision. While we are unable to give specific sales figures, today's authorisation will make import easier and my thus contribute to better sales,' the spokesman said Friday.
The sale of GA21 in processed form had already been authorised in the Europe Union. The commission said Friday's decision extends the authorisation of products derived from GA21 to maize grains and thus allows imports from third countries where this GMO is cultivated. GA21 is not approved for cultivation in the EU.
Meanwhile Romania has said it will join six other member states in banning the only EU-approved genetically modified (GM) crop.
Romanian environment minister Attila Korodi has called for a halt on planting MON810, a corn produced by US biotech company Monsanto, saying that the country's biosecurity committee would look at possibly implementing a ban on 15 April.
Pound bombs as credit crisis worsens
The pound is down to $1.9850 this morning after U.K. banks forecast that the credit market turmoil will last at least until the end of the year, twice as long as they predicted three months ago, according to a CBI survey.
Lending conditions will worsen in the next six months, leaving banks with "significantly'' higher borrowing costs, according to the quarterly survey of financial firms.
The rising cost of capital will herald a "prolonged period of slower growth,'' McCafferty said. Forty percent of companies surveyed said their difficulties in raising money will hold back development, up from 24 percent in the previous quarter.
Sterling slipped to a record low against the euro Monday, extending its losing streak after figures showed British house prices fell for the sixth consecutive month in March.
Housing market research company Hometrack on Monday said UK house prices fell by 0.2 percent this month to stand just 0.4 percent higher from a year ago, further denting sentiment on the UK economy.
India's wheat stocks ample
India has reported wheat stocks at the start of the new marketing year (Apr 1st) at 5.5mmt, 1.5mmt more than the government's recommended mininum requirement of 4.0mmt.
It's purchases so far for the new crop marketing year stand at just 100,000mt. With the country's harvest in full swing expected to produce a crop of around 75mmt, and wheat apparently flooding into government owned warehouses after increasing the price paid to Indian farmers, it looks like India aren't going to be rushing to make any purchases on the world market anytime soon.
USDA Report: it's not even out yet & already it's old hat
The thoughts of one US trader.....
On Monday morning at 7:30 a.m. Central Time, the USDA will release the much-anticipated 2008 crop acreage estimates.
However, step back and keep the big picture in perspective. Corn and bean acres could switch by a few million acres. The real driving force behind this year's price movement will be weather.
We are not discounting the importance of the Acreage Report, but when taken into context, if corn acreage is down (let's say 2 million acres less than expected), this could equate to a change in production of 300 million bushels. Comparing this to a 13 billion bushel corn crop, it is a rather small percentage change. However, we do acknowledge that a 300 million bushel change, if taken directly from the carryout number, could mean a rather large percentage change on projected ending stocks. Weather events could change production by billions of bushels.
Once the acreage number is released after 7:30, it may take all of about 10 minutes before the second guessing begins. As an example, early March saw significantly higher energy and bean prices. Are these elements already factored into the bean acreage number or not? In addition, much will depend on spring weather as well. While it is probably too early to talk about planting delays, if you are in the Ohio Valley and have saturated soils, the idea of potentially switching corn to bean acres has at least entered your thoughts this past week. As spring wears on and weather permits (or does not permit) planting, that may have just as big an impact for farmers to change their minds for planting this winter.
With heightened volatility and increased limits, expect fireworks. In the end, one good rain in July could be worth 3 to 5 billion bushels of corn production. Monday's acreage changes, if any, could equate to about 10% of what weather could change for production in the year ahead.
