EU Wheat Drifts Lower
EU wheat futures continued their slide Friday, weighed down by large production numbers, lack of export demand and the delay to the proposed rescue package in the States.
November Paris milling wheat closed down EUR3.00 at EUR165.75/tonne. November London feed wheat ended down GBP2.75 at GBP103.00/tonne.
EU farm union Copa-Cogeca said Friday that EU 2008/09 soft wheat production was expected to rise by about 23 percent to 136.86 million tonnes, while this year's maize crop was likely to increase by 31 percent to 63.37 million tonnes.
Toepfer this week pegged the EU soft wheat crop even higher at 139.4mmt.
"We simply don't seem to be able to price ourselves into any volume of export business at the moment, with most homes that we could supply being filled by much cheaper wheat from Black Sea origins," said Frontier in their latest market report.
In the UK reports indicate that late-cut wheat has certainly suffered both in quality and bushel weight which will continue to widen the differential between feed amd milling wheats.
EU Wheat Crop Seen Up 20 Percent
EU farmers should see a sharp upswing in their cereals crops for 2008/09 and turn out an overall 306.74 million tonnes of grain, up by 20 percent from last year, EU farm union Copa-Cogeca said on Friday.
Soft wheat production was expected to rise by about 23 percent to 136.86 million tonnes, while this year's maize crop was likely to increase by 31 percent to 63.37 million tonnes.
Oilseeds harvests are seen at 26.43 million tonnes, a rise of around 6 percent from 2007/08, Copa-Cogeca said.
CBOT Closing Comments
CORN
Corn futures closed lower in all contracts with nearby declining the most. Investors and traders remain nervous on an unstable financial market with politicians stall the passage rescue plan, presidential election politics are rumored to be behind the delay. Prices broke through some key resistance earlier in the week but failed to test on Friday some view the break through bullish, even though prices have declined some 20 cents since. Funds sold an estimated 5,000 CBOT contracts on Friday. Weather is friendly short term; however, more moisture is expected beyond the next 7 days possibly delaying harvest further. Farmers remain skeptical about production until they actually begin to get into fields to better assess yields. Dec -15c at 5.43.
SOYBEANS
Soybeans and other CBOT soy products finished lower Friday with meal receiving the most pressure. Freshly harvested beans widen basis, but fundamentals do have slight bullish tone not allowing beans to fall out of bed. Funds were net sellers of 2,000 beans, 1,000 meal, and 1,000 bean oil contracts. Weather is benefiting late maturing beans, allowing some harvest to take place. Crude oil was down about $1.30 also weighing in on prices. Nov -19 at 11.64 Oct Meal -8.40 at 315.00 Oct BO -37 at 47.40
WHEAT
Wheat futures lost double digit gains at the three different exchanges Friday. Wheat had spillover selling pressure from corn and soybeans, and was also effected by Congress delaying approval of their bailout plan as consumers and traders become uneasy prices may turn volatile next week. Funds were sellers of an estimated 3,000 CBOT contracts. Southern plains will be mostly dry with above normal temps, but some northern regions where winter wheat plantings are still underway may be delayed by scattered rains next week. Exports were disappointing for last week; with an increasing global supply export sales will be crucial for wheat prices in upcoming months. Dec CHI -20c at 7.16; KC -19c at 7.45; MLPS -16 at 7.89.
Western Australia Gets Promised Rain
A slow moving cold front has dropped temperatures more than 10 degrees through southwest WA and brought the best rain in months.
Perth recorded 21mm to 9am this morning plus another 12mm today, their best rain in 2 months.
Albany, on the southern coast has recorded 10mm in the same period. They also recorded a maximum today of just 13 degrees, 4 below average and a massive 14 degrees less than the 27 degrees they recorded on Wednesday. Perth reached just 17 today, more than 8 degrees less than the 25 degrees recorded yesterday.
Rainfall totals southwest of about Geraldton to Albany were the best since July, with widespread falls of 15 to 30mm.
Further rain is expected tonight, with another 10 to 20mm likely in some areas by Friday afternoon. Rain will also spread inland to the Central Wheat Belt, most of which has so far only seen small totals of less than 5mm.
Dollar Rises As Rescue Talks Breakdown
The dollar is firmer across the board Friday as news emerges that just when a final deal was within reach, US lawmakers fell short of securing agreement on the Treasury Department’s $700 billion rescue plan to shore up the financial markets.
Congressional leaders worked late into the night with Treasury Secretary Henry Paulson to finalize provisions only to have efforts dashed by Republican members of the House of Representatives who said the plan would mean too much of a commitment of taxpayers’ money and too great of an intrusion into private enterprise.
The dissenters circulated an alternative proposal, whereby the government would insure unstable financial institutions rather than outright buying their holdings of problematic assets.
A White House summit of key Congressional leaders, presidential nominees McCain and Obama, and representatives of the Bush administration called to show bipartisan effort to stave off catastrophe reportedly ended in a “shouting match”.
A partial deal had been agreed to in principle earlier this morning whereby the administration would get approval for half of the $700 billion it requested, with the rest subject to a Congressional veto.
At 7.45am BST the dollar was $1.8390 against the pound and $1.4639 against the euro.
Rescue Plan Stalls
Talks in Washington have so far failed to reach agreement on a massive $700bn (£380bn) government proposal to bail out the troubled US finance sector.
After several hours of talks with President George W Bush, Republican members of Congress remained sceptical.
The proposal would see the government buy bad debts from US banks.
A group of House Republicans led by Eric Cantor of Virginia said they wouldn't back a plan based on the approach outlined by Treasury Secretary Henry Paulson and backed by President George W. Bush and Democratic leaders.
Congressional leaders are to meet again on Friday morning to try to hammer out an agreement.
CBOT Closing Comments
CORN
Corn futures closed lower Thursday as little fresh news fed bulls and many traders have been had their hands in their pockets throughout the financial crisis anxiously awaiting a Congressional resolution plan. Funds were sellers of an estimated 2,000 contracts with renewed forecasts stating unlikelihood of damaging frosts in the next week or so and expectations of more clear and dry weather add pressure. USDA released export sales this morning of 547,800 tonnes which was slightly higher than trade guesses. Strength in the US Dollar Index also weighed in on futures as exports become less attractive. Dec -4c at 5.58.
SOYBEANS
Soybeans traded higher for much of Thursday but finished slightly lower in nearby November. Funds sold an estimated 1,000 bean contracts, 1,000 meal, and 1,000 Bean oil contracts. Meal was pushed lower with census data indicated a build up in meal supply. Census soy crush was a tad higher than trade estimates but pegged it pretty close, crushing 128.65 MB in August. USDA export sales totaled 612,500 tonnes which was within trade estimates. Weather remains favorable for later maturing beans for the next week and beneficial for harvesting. Nov -4 at 11.83 Oct Meal -4.20 at 323.40 Oct BO +7 at 47.77
WHEAT
Wheat futures closed mixed at the three exchanges in today�s trade. CBOT prices were softer despite funds buying 1,000 contracts. US wheat exporters were bypassed again as Egypt opted to buy 120,000 tonnes of Russian wheat. Export sales were below trade estimates at 294,400 tonnes, traders were expecting sales between 400,000 and 600,000. Dec CHI -2c at 7.27; KC +0 at 7.59; MLPS +1c at 7.98.
And Today's Bank Failure Is... Washington Mutual
Washington Mutual (WaMu) has been closed by its regulator, making it the biggest US bank to fail.
The Office of Thrift Supervision (OTS) stepped in to shut the mortgage lender before selling its assets to JPMorgan Chase for $1.9bn (£1.0bn).
The OTS said it was worried WaMu would run out of cash as $16.7bn of deposits had been withdrawn since 15 September.
WaMu was one of the lenders worst-hit by the collapse of the US housing market and soaring mortgage defaults.
"With insufficient liquidity to meet its obligations, WaMu was in an unsafe and unsound condition to transact business," the OTS said.
The bank had about $307bn of assets but only about $188bn of deposits.
Liffe/euronext futures slide
Grain futures on Liffe/euronext continued to drift lower Thursday as concerns over a U.S. rescue plan for the banking sector and the direction of the economy kept investors on tenterhooks, traders said.
European wheat futures followed the trend, with additional pressure from a rise in the euro that will make West European wheat less competitive in Tunisia and Egypt's wheat import tenders, whose results were expected in the afternoon.
U.S. crude oil fell below $105 a barrel on Thursday on lingering uncertainty about the proposed U.S. bank bailout plan and signs of slumping demand in top consumer nations.
Wheat prices were also pressured by profit-taking after a mini-rally this week on dry weather concerns in top exporters Argentina and Australia.
At 13.30BST Nov London feed wheat was £0.45 lower at £106.10/tonne, and Nov Paris milling wheat EUR2.75 lower at EUR168.75/tonne.
Paris rapeseed futures were also lower, down between EUR1.50-3.25 and Paris corn down EUR2.25-3.50/tonne.
USDA Weekly Export Sales
In it's regular weekly export sales report for w/e 18th Sept the USDA reported the following:
Wheat 284,300MT (vs expectations of 400-500,000MT)
Corn 547,800MT (300-700,000MT)
Soybeans 612,500MT (200-700,000MT)
Soymeal 62,400MT (50-125,000MT)
Soyoil 5,600MT (0-10,000MT)
Wheat sales were a marketing-year low, down 57 percent from the previous week and 41 percent from the prior 4-week average.
eCBOT Close/Early Call
eCBOT futures closed lower Thursday with wheat around 3c lower, corn 5c lower and soybeans down 10c.
Falling crude oil prices weighed on the grains complex after a report showed that US consumption averaged 19.5 million barrels a day during the past four weeks, down 6.6 percent from a year earlier, and the lowest since October 2003.
At 13.15 BST November crude was almost $2 lower at $103.91/barrel.
Trading was largely subdued with many participants sitting on the sidelines to await the outcome of the proposed US financial bailout.
In the export market, Egypt is seeking 55,000 metric tons of wheat at a tender today. Japan has cancelled its weekly tender.
Tunisia's state grains agency was tendering to buy up to 117,000 tonnes of optional-origin soft wheat, up to 92,000 tonnes of durum and up to 100,000 tonnes of barley, European traders said.
The corn and soybean markets could also face additional pressure in the weeks ahead as harvest begins, analysts said.
Early calls for this afternoon's CBOT session Corn futures expected to open 4 to 6 lower; soybeans 8 to 11 lower; wheat 3 to 5 lower.
EU children could consume three times legal melamine limit
Children who eat large amounts of confectionery and biscuits with high levels of milk powder could be consuming levels of melamine more than three times above prescribed EU safety limits the European Food Safety Authority (EFSA) said today.
But children with a mean consumption of products such as milk toffee, biscuits and chocolate containing milk powder would not exceed these levels, known as the tolerable daily intake (TDI) - which is set at 0.5 mg/kg body weight, the body added.
Europe’s top food watchdog delivered its assessment in the wake of the European Commission’s request for an evaluation of the health risk to its citizens following revelations over the widespread tainting of Chinese milk powder with melamine.
While no Chinese milk powder is imported directly into the EU, EFSA was urged to focus its appraisal on a wide range of imported products that use Chinese milk powder as an ingredient. These include baked goods, snacks and soups, chocolates and confectionary (e.g. milk chocolate), ice cream, infant formula, nutritional products for special use, reconstituted milks and other liquid beverages.
Japan Cancels Wheat Tender
Japan has cancelled it's normal weekly melamine, sorry wheat, tender for the second week running due to the recent contamination issues with rice. Japan's agriculture minister resigned last week over the scandal after an Osaka-based company was found early this month to have sold tons of tainted rice illegally for human consumption,
Japan feeling the economic nip in the air
The Japanese trade balance slid into deficit in August, according to data released Thursday, as sky-high oil prices ramped up import costs while exports slowed to a crawl, adding to the pain for an economy already teetering on the brink of recession, reports Reuters.
Excluding the month of January, when Japanese exports tend to drop on slower factory activity during the New Year holidays, the August results were the first monthly deficit since 1982, when Japan was reeling from the aftermath of an oil crisis.
In a further sign of trouble for an export-reliant economy, exports to the United States posted their sharpest fall ever from the same month a year earlier, while a Bank of Japan board member warned of more turmoil in the U.S. economy.
Freight: Atlantic Panamax Rates At 18-Month Low
The Atlantic market for panamax bulk carriers is experiencing a sharp fall as rates hit their lowest levels so far this year, and charterers hold back grain, iron ore and coal shipments, according to Lloyds List.
Panamax fronthaul and transatlantic voyage rates have retreated to levels last seen in early 2007, with the hammering seen this month forecast to continue, they say.
The transatlantic voyage rate has dropped from around $60,000 per day in late August to under $35,000 per day yesterday. Fronthaul rates are also down to $48,000 per day, well off the highs seen in late May of $112,000 per day, and around $70,000 per day commanded a month ago.
Even during the crash in dry bulk freight rates last January, transatlantic rates held up at around the $50,000 per day mark.
Shipowners who have redirected their panamax tonnage from the Pacific region into the Atlantic since August have contributed to the decline.
Overnight grains lower
The overnight eCBOT market is slightly lower this morning with corn around 3c easier, wheat 1-3c down and soybeans off around 6c.
Crude is under pressure after dropping 3.3 percent the past two days following a government report showing that US fuel demand declined to the lowest in almost five years last week.
Concerns about slowing world growth and worries over the will-they-won't-they proposed US rescue plan for the financial markets is also prompting some liquidation in commodities.
Dollar Falls On Fed Rate Cut Expectations, Recession
The dollar is lower in early trade Thursday as President Bush warned the U.S. may face a "painful" recession and traders bet on a Federal Reserve interest-rate cut next month.
The odds of the Fed lowering its 2 percent benchmark rate by a quarter-percentage point at its next Oct. 29 policy meeting were 80 percent yesterday, compared with 58 percent on Sept. 23, futures contracts on the Chicago Board of Trade showed.
Bush said in an address to the nation that without the rescue the U.S. will suffer "a long and painful" recession.
US housing data out later today is expected to show home sales declining, extending the worst housing slump in 17 years.
At 7.40am BST the dollar was $1.8621 against the pound from $1.8465, and $1.4760 against the euro from $1.4621 late in New York yesterday.
Australian Wheat A$8 Lower
Benchmark January ASX milling wheat is A$8 lower at A$309/tonne at 7am BST Thursday morning, taking its lead from sharply weaker Chicago wheat futures Wednesday night.
A weaker A$ vs the USD also looks like helping Australian exports this year, with a crop of around 22.5mmt expwected, around 9.5mmt more than 2007.
The weather outlook has also improved, with decent rains forecast for parts of WA to end the week.
The 30-day Southern Oscillation Index (SOI) has lifted sharply since the beginning of June, back up to +16.5 – a pattern that generally suggests better than average rainfall and a move to a La Nina pattern.
In parts of the northern Western Australian wheat belt and most of Queensland, chances are rising for above average rainfall, with the chance of higher than usual rainfall for October through December rising to between 65 and 70pc around Geraldton and through central Queensland.
On the flip side, farmers in far south-western Victoria and south-eastern South Australia have just 35-40pc chance of beating their average, however croppers in these areas are well set up with good subsoil moisture, so a drier finish does not spell disaster.
CBOT Closing Comments
CORN
Corn futures closed higher for the second consecutive day, although, the Dec 08 contract gained a mere 4 cents in the past two days, hardly a news flash. Outside markets limited upside potential in grains, crude oil and gold finished lower with the dollar bouncing higher. Funds were buyers of an estimated 3,000 CBOT contracts. Wet and cooler weather will delay harvest even further and increase the likelihood of not harvesting all eligible acres. Some forecast a freeze next week for the northern plains, but with 90% of the corn crop dented damage to yield may be sparse. Dec +2c at 5.63.
SOYBEANS
Soybeans closed unchanged in nearby contracts and slightly lower in deferred months. China reappeared on the buying field after being mostly absent since the Olympics buying 180,000 tonnes of soybeans from the US. Statistics for August US Census crush will be released tomorrow giving some fresh news to traders. Funds were net buyers of 1,000 beans, 1,000 meal, and 1,000 soybean oil contracts Wednesday. Harvest is gaining momentum adding to the supply and widening basis in harvest areas but damp cool weather is delaying combining in other regions. Nov +0 at 11.87 Oct Meal +2.30 at 327.60 Oct BO -4 at 47.70
WHEAT
Wheat futures were unable to hold any neutral to bullish support as nearby contract had double digit declines at the three different exchanges. Fundamentals remain bearish, funds sold an estimated CBOT 3,000 contracts with news that Iraq skipped US again this week and bought 200,000 tonnes of Russian wheat. Estimates of record large world crop continue to lean on prices but drought concerns exist in some southern hemisphere growing area. Dec CHI -20c at 7.30; KC -22c at 7.59; MLPS -14c at 7.96.
US winter wheat planting conditions 'ideal'
US winter wheat planting conditions are largely ideal, according to Nogger's spies on the other side of the pond.
Seeding of the winter crop was 22 percent completed as of Sept. 21, double the amount planted the prior week, the U.S. Department of Agriculture said Monday.
As much as six times the normal precipitation fell in parts of the southern Great Plains from Kansas to Texas in the past month, greatly improving soil moisture and planting conditions there.
Planting conditions in Oklahoma, the second-biggest winter wheat grower behind Kansas, are favourable for farmers, analysts say.
Even the normally very dry western plains have a good moisture base, for the first time in many years, Nogger hears.
Overall US winter wheat planting conditions are currently said to be 'very good' and Nogger's informant expects planted acres to be even higher than in 2007.
Crude drops as US stocks fall but so does demand
Crude fell Wednesday with November closing 88 cents lower at $105.73/barrel, despite having been around $2 higher earlier in the session.
Ideas that US stocks would fall on the back of pipeline shutdowns in the Gulf of Mexico proved correct. The Energy Dept said that supplies of crude oil fell 1.52 million barrels to 290.2 million in the week ended Sept. 19.
What the trade didn't see coming was that US consumption averaged 19.5 million barrels a day during the past four weeks, down 6.6 percent from a year earlier, and the lowest since October 2003.
The implications for crude don't look good in the coming weeks. Switch supply back on in the aftermath of Gustav & Ike, and keep demand at current levels, and we are going to be looking at some big stocks increases round the corner.
If the proposed US financial bailout doesn't emerge, or gets watered down, the we could be back below $100/barrel before you know it.
EU wheat closes around unchanged
EU wheat futures closed around unchanged levels Wednesday as uncertainty surrounds world financial markets, keeping traders reluctant to commit one way or another.
Paris November milling wheat closed flat at EUR171.50/tonne and London November feed wheat closed GBP0.30 higher at GBP106.55/tonne.
"I think the majority of people are on the sidelines right now because no one knows where these markets are going or might go right now," said one dealer.
Glencore's confirmed sale of 100-200,000MT Russian wheat seemed to weigh on the US market as traditionally they would have expected to get that business a trader said.
US wheat prices had been climbing the last few sessions on concerns about dry weather in portions of Australia and Argentina's wheat growing areas, leaving the wheat market vulnerable to a profit-taking setback in continued volatile dealings.
eCBOT Close/Early Call
eCBOT grains closed higher overnight supported by firmer crude oil.
Wheat closed with gains of 4 1/2 to 7 1/2 cents, corn up 7 to 10 cents and soybeans 17-19 cents firmer.
A tight balance sheet for soybeans and the prospect for further US output reductions from the USDA in the months ahead are seen as supportive for beans.
Crude oil climbed above $109 a barrel on Wednesday as forecast of a drop in U.S. crude stocks this afternoon more than offset doubts about the U.S. government's financial rescue plan.
At 12 noon BST November crude was $2.49 firmer at $109.10/barrel.
Early calls for this afternoons session: Corn futures expected to open 7 to 10 higher; soybeans 15 to 20 higher; wheat 5 to 8 higher.
EU wheat edges higher in cautious trade
EU wheat futures are modestly higher Wednesday morning, in line with Chicago, traders said.
European prices have moved only slightly this week as market operators have adopted a wait-and-see approach in the light of the turmoil on financial markets.
"(European) markets are holding back, with very cautious positions being taken, in view of the international financial crisis whose impact is hard to gauge," French analyst Agritel said in its daily note.
"In the short term, commodities markets are going to remain very closely tied to oil and the dollar," it added.
At 12 noon BST London November feed wheat was GBP0.75 higher at GBP107/tonne. November Paris milling wheat was up EUR2.25 at EUR173.75/tonne.
Western Australia Wheat Latest
Significant rains are forecast for Western Australia's wheatlands Thursday/Friday which could go a long way towards making this season's crop.
WA typically accounts for around 40-45% of national production and is a major exporter.
Output in the state this year may match 2003's record 11mmt according to some analysts.
However, temperatures in parts of the region fell to an unusually cold -1 to -3 Monday night. It is not yet clear if any crop damage was caused.
Farmers in the far north of the state are expected to begin harvesting wheat in the next 10-14 days, and last weekends rains plus what is forecast for this week should finish the crop off nicely, a dealer said.
China To Import Fewer Soybeans As Harvest Starts
Chinese soybean imports are expected to slow for the remainder of the year as the country's soybean production takes off, state media report.
"China's soybean imports in the next few months will not be as heavy as the volume seen entering the country in August," soybean market expert Zhang Liwei, from the National Grain & Oil Information Center (NGOIC), told Xinhua news agency.
"This is because a much larger output is expected from the harvest of this year's domestic soybean crop, which is due to start later this month, compared to last year. However, we still expect this year's soybean crushing volumes to climb on previous months."
China imported 3.83 million tons of soybean in August. The Ministry of Commerce earlier this month predicted that the country's soybean imports for September would be down 26.6 percent on the August volume to 2.81 million tons.
According to the NGOIC, China's soybean production in the 2008/2009 season is expected to increase by 3 million tons from the previous season to 17.5 million tons.
Gordon Is A Moron
In possibly his most stunning piece of hapless mismanagement yet, Gordon Brown has agreed to sell British Energy to the French.
Éléctricité de France has agreed to buy British Energy for £12.5 billion, the companies confirmed Wednesday, in a deal that gives the French company a dominant role in the British nuclear power industry.
The French utility EDF will gain control of eight British nuclear plant sites with potential for building new reactors.
EDF said it was also in discussion for Centrica, the owner of British Gas, to take a 25 percent stake in that as well.
What's next Gordon? Why not sell them the Isle of Wight and be done with it?
Ethanol Producer Bets On New Production Method
Paul Woods traces the origins of Algenol Biofuels to his college days in the mid-1980s, with the idea of alternative energy sustained by memories of the oil embargo of the prior decade.
At around that time, gasohol started taking root in the U.S., but then it quickly faded as oil prices fell.
But Woods stayed at work on the idea of using algae to produce ethanol. Along the way, Woods managed to build up and sell his natural-gas company, United Gas Management, and channel those resources into algae. He formed Algenol in 2006 along with Craig Smith and Ed Legere.
Now, armed with patents, several test facilities around the world, and some $70 million in private backing, Woods is targeting his first large-scale ethanol production facility with output that may rival that of some of the category's largest U.S. players.
Algenol inked a partnership with BioFields, which has committed $850 million to build an industrial-scale ethanol facility in Mexico on 102,000 acres of desert located near the Pacific coast and not far from Cabo San Lucas.
"We don't use farm land, we don't consume any food and [we use] no fresh water," reported Woods, who has said hopes to bring the plant on line by the end of next year. "It's time to focus on California, Texas and Florida. We want to have a major plant on U.S. soil. Cheap energy is a matter of national security."
Woods holds a half-full plastic bottle of Gatorade sideways to illustrate the functioning of the firm's 5-feet-by-20-feet plastic holding tanks. Using a patented algae, Alegenol fills each tank with seawater and places the water-based plant inside.
As the algae grows, Alegenol will tap into carbon dioxide from a nearby power plant and funnel it into the tanks. The algae takes the gas and converts it into oxygen and evaporated alcohol, which is then removed and concentrated for use as fuel.
Unlike other algae players that make diesel oil by processing algae itself, Algenol doesn't spend time or energy removing the algae. It uses the ethanol vapors that the plant emits.
Algenol forecasts sales from the Mexico plant by the end of 2009 at price levels comparable to other U.S. ethanol makers. It says the plant will have a capacity of 1 billion gallons per year, much of which will be transported by ship to Mexican oil refineries nearby to be blended into gasoline.
Iraq Buys Russian Wheat From Glencore
Glencore has today confirmed a Russian wheat sale to Iraq of between 100-200,000MT at $300/FOB.
The exact quantity is still to be confirmed say Glencore.
Overnight grains - 'Is there a pilot in the plane?'
Grains are firmer in the overnight eCBOT market this morning with wheat around 4-5c higher, corn up 2-3c and soybeans around 8c firmer.
Beans have recovered slightly from last night's lower close, supported by firmer crude oil ahead of this afternoon's Energy Dept stocks data.
However, a weaker Brazilian Real may favour increased plantings of South American beans.
There is still a lot of uncertainty around surrounding the US rescue plan for financial markets, and until that is resolved everything remains "in limbo."
"We can't get on with the game, because nobody knows what the new rules are," said one trader.
It will be interesting to discover if the new rules cover large speculative involvement.
French analyst Agritel summed it up nicely in a note to clients entitled "Is there a pilot in the plane?"
I wish I'd have thought of that one. Still, FBI Probing Fannie was all my own work, that's more my level I think!
FBI Probing Fannie
The FBI is investigating Fannie Mae, Freddie Mac, Lehmans and AIG and some of their senior executives for evidence of mortgage fraud according to CNN.
The FBI did not provide specifics but said the inquiries were part of a broader probe, CNN said.
An FBI official confirmed the it is looking at 26 cases of potential corporate fraud related to the collapse of the U.S. mortgage lending industry.
The investigations will attempt to discover if anyone was guilty of providing "misinformation," CNN said.
Crude Up On Anticipated Stocks Data
Crude is higher this morning on expectations that a government report due out at around 3.30pm BST will show U.S. crude and fuel inventories declined last week and on reports of an explosion at a petrochemical storage site in Texas.
At 9.30am November crude was $1.74 firmer at $108.35/barrel.
US Bailout Plan - Its Happened All Before
The planned US bailout has parallels to a similar operation carried out by Finland, Sweden & Norway in the early 1990's.
The upshot of that rescue bid was a deeper recession and surging unemployment. The benefits took five years to filter through to the economy.
Full story here
CBOT Closing Comments
CORN
Corn futures closed higher on Tuesday however most contracts traded lower for most of the day. Funds were buyers of an estimated 2,000 CBOT contracts. Traders kept a close eye on Secretary Paulson and Chairman Bernanke as they answered questions from congress today regarding the Government �bailout�. The dollar rallied on short covering lower at midday on a typical turnaround Tuesday. Crude oil finished softer on the day after impressive gains yesterday. Corn received support late in the day from rallies in wheat futures. Dec +1c at 5.60
SOYBEANS
Soybeans traded lower throughout the day but closed off of early morning lows. Profit taking from yesterday�s impressive gains weighed in on prices as well as lower crude oil and a higher dollar index. Benign weather also weighed in on soybeans along with weakness in the Brazilian Real. Basis is widening as harvest ramps up, supplying new crop beans into a tight supply chain. Few short term threats of a damaging freeze should benefit late maturing beans. USDA says 44% of the bean crop is dropping leaves, a bit behind the 64% average.. Nov -18 at 11.87 Oct Meal +2.00 at 325.30 Oct BO -181 at 47.74.
WHEAT
Wheat futures received a late advance from some technical buying and some short covering. However wheat did not trade high all day, morning prices were choppy to say the least, on profit taking and shakiness in the US financial sector keeping traders on their toes. USDA released that US has sold 116,000 tonnes for 2008/2009. Winter wheat plantings are lagging a little behind the 5 year average but should have adequate soil moisture to germinate the seed. South Korea bought 22,500 tonnes of US wheat. Argentinean wheat will require additional rains to keep yield potential at average as their crop is shooting heads. Dec CHI +12c at 7.50; KC +7c at 7.81; MLPS +12c at 8.11.
EU wheat down as reality sets in
EU wheat futures closed lower Tuesday as market participants begin to realise that the Great US Rescue Package is maybe not all it was hyped up to be.
Paris November milling wheat ended down EUR0.50 at EUR171.50/tonne, and London November feed wheat closed down GBP0.75 at GBP106.25/tonne.
The initial wave of euphoria that followed the recently announced US rescue plan has now waned, and the markets are focusing on the reality of poor demand and quality concerns said one trader.
"Fundamentally there is no change, we have a huge crop to dispose of and nobody wants it," he added.
You Can't Eat Gold, And You Can't Drink Crude
I think if I was a Lehman's employee (or ex-employee to be more accurate) right now I'd be checking my underarm for signs of the kind of news that not even your best friend passes on.
I'd be asking "why were/are the government prepared to bail out everybody else and not us?"
I think that the answer is that having already stumped up the cash to bail-out Fannie & Freddie, the government thought "we can't keep doing this, enough is enough"
Lehman's were in the wrong place at the wrong time. The subsequent down draught from letting them go to the wall was so severe that it seems that the US government reconsidered, and are currently looking to take on board just about every failure and hard luck story going.
The collapse of the US economy is at stake (and pretty much by default that of the rest of the world). Who is going to foot the bill? From where I'm sitting it looks like the US banks losses may well be dwarfed by the future losses incurred by the US homeowners who aren't defaulting on their mortgages.
And at some point not too far away this has to have a serious very impact on consumer spending. And the US economy is driven by consumer spending.
If you want to pull your money out of the US economy where do you put it when even the banks aren't safe anymore?
Precious metals and crude seem to be flavour of the week, followed by grains. Yet these are driven by a strong world economy, if and when the US economy goes down the pan, the world economy goes with it.
The US government appear to have got themselves caught between a rock and a hard place, pretty much now obliged to take on any bank failure that pops up. How many independent US banks will there by left by Christmas?
And if more banks continue to fail how much more pain will US homeowners have to endure? It seems like a no-brainer to me that consumer spending will be slashed. And that spells doom and gloom for the rest of the world too.
eCBOT Close/Early Call
eCBOT grains closed lower with corn around 3-4c easier, wheat around 3c lower and soybeans off around 16-20c.
The move was seen as a correction from recent sharp increases as investors fretted over whether a U.S. bailout plan could revive confidence in the financial system.
Concern about the cost and lack of details about Washington's $700 billion bailout is worrying the market, which got swept away in a wave of relief when the idea was first mooted last week.
Crude oil is around $2 easier after also posting sharp gains the last few sessions.
Wheat is the stronger leg of the complex at the moment whilst question marks still remain over Australian & Argentine production.
Meanwhile late-planted and slow-maturing US corn and soybeans remain vulnerable to any possible frost scares that may come along over the next few weeks.
Whilst all these factors are combining to "muddy the waters" it seems like more extreme volatility is the name of the game for the remainder of the week.
The single most important factor from here on in is Bernanke's Big Bailout. What form will it take? When will it happen? How much will it finally cost? And what are the longer term implications for the US economy?
Early calls for this afternoon's CBOT session: Corn futures are expected to open 3 to 5 lower; soybeans 15 to 20 lower; wheat 3 to 5 lower.
Shares slide amid bail-out fears
European shares have fallen Tuesday, following sharp drops in Asia, amid wrangling in the US over the massive $700bn financial bail-out plan.
Doubts over how soon the rescue plan can be applied have emerged from both the Democrats and Republicans.
While the bail-out package was generally welcomed when it was made official last week, there are concerns about how the $700bn plan will come into effect in practice. The White House says Congress must back the rescue plan to stop wider economic harm.
At 12 noon the FTSE 100 was 2.78% lower at 5090.91. Banks were amongst the biggest losers with HBOS down more than 15%, with Bradford & Bingley hot on it's heels down 14.16%
Pound Breaks Above $1.86
The US Dollar weakened against the sterling and the Euro Tuesday on the back of the US government's proposed $700 billion injection to bailout struggling financial companies.
"There is a growing feeling that $700 billion is just the start and that they would need to put in more to further stabilize the market." said one dealer.
The Euro gained in strength, posting its largest gains this year. Yesterday's huge rally in oil also helped the single currency. At 12 noon London time the euro was $1.4766.
Sterling is stronger on the news coming out of the US despite weak data coming out of the property market. Sterling went through $1.86 to a high of 1.8633 and is currently at $1.8555.
UK: Mortgage approvals 'at new low'
UK mortgage lending by the major banks fell to a record low in August, with approvals for house purchases 64% lower than a year ago.
The British Bankers' Association (BBA) said that 21,086 mortgages had been approved for house purchases, down from 58,564 in August last year.
The BBA said that falling property prices and the state of the economy would continue to have an impact.
Tate & Lyle loses sweetener case
Tate & Lyle has lost a court case to defend its Splenda artificial sweetener from Chinese manufacturers producing generic competitors, reports the BBC.
Its shares dropped by 12% in early trading after the ruling by a judge at the US International Trade Commission.
Analysts say the ruling will allow manufacturers to compete against Tate & Lyle in the market for sucralose - the sweetener's generic name.
The firm is to appeal, asking for a decision by the full commission.
Splenda, a sweetener with no calories, makes up almost 25% of the firm's profits, analysts say.
EU May Consider Re-introduction Of Cereal Import Tarriffs
EU Agriculture Commissioner Mariann Fischer Boel has said that she was keeping the door open to restore import tariffs on cereals "if needed."
"We are following the market closely, week by week, to see how things are developing," she said.
"The prices are different in different regions of the European Union, therefore there are some tensions in some areas. We have not definitely abandoned the possibility of coming back to the issue," she added.
The EU suspended tariffs on most grain imports at the start of the year, and that decision was subsequently extended to the 2008/2009 (July-June) season. However, grain prices have fallen considerably since then and some EU countries are calling for import duties to be restored.
Dutch feed sector extra alert on melamine
After the Chinese Government announced to carry out extra checks for the presence of melamine in animal feed, the Dutch Product Board for Animal Feed (PDV) also took extra measures to prevent melamine entering the The Netherlands.
PDV will do extra checks on melamine among the GMP+ feed companies in the Netherlands. It will also check dairy products which are intended for animal feed.
The extra checks for melamine in animal feed came after melamine was found in baby milk powder in China. As of yet, over 50.000 children in China have been affected by melamine and many children are in a serious health condition.
Kazakhstan harvested 15.5 mln tonnes of grain so far
Kazakhstan expects to harvest nearly 17 mln tonnes of grain, measured in bunker weight, Akulbek Kurishbaev, the Minister of Agriculture, said on September 22.
As of September 22, Kazakhstan had harvested grain and legumes throughout 14.4 mln ha, or 92% of planned area, he said. Further, grain crops in the country totaled 15.5 mln tonnes.
Nearly 92% of grain at elevators corresponds with 1-, 2-, and 3-grade grains. This will make Kazakh grain popular on the world market, compared to the smaller share of Russian and Ukrainian quality grains, the Minister said.
Australian Wheat Gets Rain
Parts of NSW, Queensland and Western Australia received crop-boosting rains across the weekend and Monday weather-watchers say.
Saturday, Sunday and Monday saw severe storms bring heavy rain to southeast QLD and northeast NSW with some areas getting in excess of 30mm.
Rain spread almost throughout inland New South Wales yesterday and last night bringing the best falls in months to many.
Each inland district had at least one location gaining more than 10 millimetres. The Southern Tablelands, South West Slopes and North West Slopes and Plains, had widespread falls of 15 to 40mm.
Meanwhile, much of the Southwest Land Division of Western Australia can expect soaking rain from Wednesday night to Friday night with widespread falls of 15 to 30 millimetres likely.
Benchmark January ASX wheat closed A$4 lower at A$314/tonne.
Overnight grains mixed
Overnight grains are mixed so far this morning on eCBOT with wheat 3-4c higher, corn 3-4c lower and soybeans around 10c easier.
Wheat is benefitting from the dollars demise in the fallout from US plans to inject up to $1 trillion into the financial system to prevent meltdown.
Corn and beans are weaker on a technically-inspired sell-off following heavy gains the last two sessions.
About 33 percent of US corn was mature as of Sept. 21, down from 76 percent a year earlier and the prior five-year average of 63 percent, the USDA said yesterday in a report. An estimated 44 percent of the soybeans were dropping leaves, a prelude to drying down for harvesting, compared with the prior five-year average of 64 percent, the report said.
Crude Retreats From Monday Highs
Crude oil is modestly lower in early trade Tuesday, retreating from the highs set in yesterday's historic price surge.
There is still a lot of uncertainty over the wider implications of the US rescue package and exactly when it will be approved and implemented.
In addition some traders were booking profits after yesterday's steep rise.
Crude oil for November delivery declined as much as $1 to $108.37 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $108.51 a barrel at 07:54 a.m. London time. Yesterday, the contract rose $6.62 to $109.37 a barrel.
Oil demand in the United States, the world's biggest consumer, is running about 4 percent below last year, according to the latest government data.
But news of Saudi Arabia trimming its supplies, ongoing unrest in Nigeria, and higher-than-expected Chinese imports should support oil prices, analysts said.
US Regulator To Review Monday's Crude Oil Activity
The CFTC has said it will review Monday's wild NYMEX trading session for any evidence of wrong-doing.
The U.S. crude oil expiring October contract soared by $16.37 to settle at $120.92 a barrel. At one point, the contract was up by $25.45 a barrel, or 24 percent.
A CFTC spokesman said they "will scour today's trading activity to determine whether anyone engaged in illegal manipulative activity."
Why use your own money to scam the market when you can use a government handout, eh?
CBOT Closing Comments
CBOT grains closed sharply higher led by soaring crude oil and a heavily weaker dollar.
The great US bailout is seen ending the dollar's three month rally, which may in turn lead to US grains becoming more competitive on the export arena.
November crude leaped $7/barrel yesterday on hopes that the rescue plan would improve the outlook for energy demand. Expiring October, which traded $25 higher, settled up 16 percent at $120.92/barrel. Yes, you did read that correctly!
Corn closed around 16-18c firmer, wheat around 20c higher and soybeans up 61 1/2 to their 70c limit on deferred months.
This Bailout Thing
How the hell is pumping $700 billion to $1 trillion (depending on who's figures you believe) into the markets really going to make any difference at the end of the day?
Why is crude up $17/barrel on the back of it? The idea that the lower prices we've seen will stimulate & increase consumption is surely just pie-in-the-sky.
The average consumer isn't suddenly going to start buying more petrol because the pump price has come down a few pence. Their decision was made when oil almost hit $150/barrel. The SUV has been sold & the Corsa is on the drive.
Unemployment is still rising (ask ex-Lehman's employees), as is the cost of living. Home fuel bills are still going up. I don't see half of Americans suddenly leaving the lights on all night thanks to the Fed throwing cash at Wall St.
And I certainly don't see the mortgage company sending out letters saying "Dear John, don't worry about the mortgage this month Bernanke's paid it."
It all seems like a massive knee-jerk reaction to me. Once reality kicks in, we'll all be back to square one. Except the US government will be $700 billion plus behind where they were last week.
Still that's Obama's problem.
EU Wheat Futures Post Modest Gains
EU wheat futures posted modest gains Monday with Paris November milling wheat closing up EUR2.00 at EUR172.00/tonne. London November feed wheat finished up GBP0.50 at GBP107.00/tonne.
Firmer outside markets helped wheat, with crude oil and metals both firmer.
However, a sharply weaker dollar on the back of the proposed $700 billion US rescue package for the financial markets will do little to help EU export ambitions.
UK wheat quality remains a problem,in the north in particular, and it is difficult at this stage to see where all this extra low grade wheat will go.
Strong competition from the Black Sea remains, plus a large EU corn crop is about to come onto the market.
Fundamentally, nothing much has changed. Large crop, low prices.
US Soybean basis dives as harvest finally gets underway
The US soybean harvest has finally got underway, sending basis premiums sharply lower as empty supply pipelines are slowly replenished.
Farmers as far north as Michigan and Minnesota are said to have begun harvesting over the weekend, encouraged by hefty spot premiums.
Farmers in the southern Plains and Delta were also able to resume harvesting at the weekend following heavy rains produced by Hurricane Ike.
Spot premiums are said to have declined as much as 80c Monday and are currently averaging 61 3/4c under the Nov future.
Is US Wheat Profitable?
Yes it is, but only just is the answer according to economists Alan May, Jack Davis, and Matthew Diersen of South Dakota State University.
Total US production costs are expected to rise from $217 in 2008 to $309 next year, with 70% of the increase due to fertilizer price, they say. Consequently, they are recommending soil tests to determine fertilizer needs more accurately. Based on a 50 bu. yield and a $7.50 market price, gross revenue would be $375 per acre. With production costs estimated at $309, they project a return to labour and management of $65.85 per acre.
If prices were to fall to $6/bushel then wheat would fail to break even. The South Dakota economists say despite larger wheat supplies, those supplies will be tight enough to support prices above $6 for the balance of this year.
In the US winter wheat planting conditions are currently said to be very good and some analysts expect acres to be higher. Howver they say that they'll likely see more winter wheat grazing as well, so harvested acres are a little harder to determine. Plantings are slightly behind normal because of the hurricane rains throughout the southern and central plains. Even the very dry western plains have a good moisture base, the first time in many years.
eCBOT Closes Higher On Stunning US Revelations
eCBOT futures closed higher, buoyed by ideas that the "Great US Bailout" will stimulate the economy and put an end to the financial crisis.
Later today the Fed will also unveil it's plans to solve the Middle East problem and promote world peace. It is also rumoured that they have found a cure for the common cold, know the secret of eternal life and can strike a match on a jellyfish.
Corn closed around 10c firmer on the news that Treasury Secretary Henry Paulson will jump through a flaming hoop live on CNN at 2.30pm this afternoon.
Soybeans finished around 32c firmer on the back of Ben Bernanke's plans to swim the Atlantic, whilst wheat managed to post gains of 14-19c as it was revealed that George W Bush can shit gold bars.
Early calls for this afternoon's CBOT session: Corn futures are expected to open 8 to 10 higher; soybeans 30 to 35 higher; wheat 15 to 20 higher.
Bradford And Bingley Takeover Rumours
Bradford & Bingley shares rallied on the stock market Monday morning on speculation that the troubled lender could be taken over, despite analysts urging investors to shun the company.
Shares in B&B soared by 17% in early trading before settling around 8% higher at 30p, a 2.25p rise.
The jump came on the back of a strong rally on Friday, and followed reports that three foreign banks – Santander, ING and NAB – could step in to acquire B&B.
Australian Wheat Exports Seen Up 84%
Australia's 2008/09 wheat exports are seen up 84% in 2008/09 to 13.6mmt, from 7.4mmt in 2007/08, according to ABARE.
In it's latest report released Monday, ABARE say that the country is still on line to produce a wheat crop of 22.5mmt this year provided that the crop gets further spring rainfall.
Australian wheat prices are forecast to average A$325/tonne, down from $362/tonne last year due to global production increases, they say.
ABARE project 2008/09 world wheat production at 672mmt, up from 609mmt.
Chinese Baby Milk - Do You Want Interior Or Exterior?
Hot on the heels of the tainted baby milk scandal comes news that melamine is being widely used in China to give livestock feed the appearance of higher protein content.
Melamine, a chemical normally used in plastics, is rich in nitrogen - an element often used to measure protein - and can be used to disguise diluted milk.
The banned chemical was found illegally mixed into many baby milk formula brands by some dairy manufacturers, including the Hebei-based Sanlu Group, to fool inspectors.
Last year, the chemical hit the headlines when melamine-laced food additives produced in China and later used in pet food were blamed by US officials for the deaths of dogs and cats there.
In the aftermath of the pet food scandal, regulators ordered that from May all livestock feed be tested for melamine in accordance with Ministry of Agriculture standards.
However, mainland authorities have been under fire since admitting that dairy products were not subject to melamine testing before the Sanlu powdered milk contamination scandal began to unfold, even though such checks had been ordered on livestock feed since May.
First Milk Delivers Strong Set of Results
First Milk has posted its 2007/08 results showing increases in turnover, operating profit and profits before taxes, which CEO Peer Humpheys describes as 'very good'.
* Group turnover up 24% to £602m (2007: £484m)
* Operating profit up to £9.66m (2007: £0.52m)
* Profit before tax up by £5.5m to £3.5m (2007: £2.01m loss)
* Processing interest payment of £1.85m made to members
Russian Grain Harvest 98.4MMT Off 82%
The Russian grain harvest is seen at 98.4MMT as of 22nd Sept off 82% of planted area. Wheat harvested to date is 56.6mmt from 81.5% of planted area, and barley 22.7mmt off 88% of planted area.
Despite the figures, the Ministry of Agriculture of Russia has repeated its previous total grain harvest forecast of 95-100 mln tonnes, with exports totalling 20-25 mln tonnes, according to Aleksey Gordeev, the Minister of Agriculture.
Overnight markets - grains leap on dollar, crude
Grains are sharply higher on the overnight eCBOT market following crude oil and spurred on by a weak dollar.
Crude is near a two week high on speculation that the US government's rescue package for the ailing financial markets will help improve waning demand.
The Bush administration yesterday widened the scope of its $700 billion rescue plan to include assets other than mortgage- related securities. The changes may make the cost of the bailout significantly higher than originally planned.
The implications for the US balance sheet are immense and rather than fixing the problem, the whole thing has a look of one of the most costly cock-ups in history.
Bush appears to want to go out in some sort of blaze of glory leaving the incoming President to pick up the pieces.
And it looks like there will be a lot of pieces to pick up that's for sure.
Nogger's prediction: give it a couple of weeks and the US will be just as deep in the financial brown smelly stuff as before, only $1 trillion more in debt than before. How much good money will they continue to throw after bad if this one doesn't work?
It seems like not everyone agrees. Crude has leapt $14/barrel since early last week.
This morning beans are 38-39c steadier, corn up 9-10c and wheat up 17-18c. The dollar is taking a pasting which will make US grains more competitive on the export market, but apart from that nothing has fundamentally changed really.
Crude Rises On Ideas Bailout Will Increase Demand
Crude is higher in early trade Monday on speculation that the U.S. government's proposed $700 billion rescue plan for the finance industry will spur demand.
I can't see it myself, in fact if anything the great rescue plan could ultimately have the opposite effect, dragging the US further into recession.
October crude, which expires today, is up more than $2 at $106.63/barrel.
Dollar Gets Battered
The dollar is taking a battering Monday morning as investors weigh up the costs of the US financial rescue plan.
The implications of spending $700 billion on soured mortgage-related assets and providing $400 billion to guarantee money-market mutual funds may end the rally that began in June and drove the U.S. currency up 10 percent versus the euro.
"The downdraft on the dollar from the hit to the balance sheet of the U.S. government will dwarf the short-term gains from solving the banking crisis," said one analyst.
At 9.50am London time the pound stood at $1.8434.
Today's US Banking Shock
It seems like there's big shock banking news out every Monday at the moment, and today is no exception.
The last two major US investment banks Morgan Stanley and Goldman Sachs have changed their status to become bank holding companies, allowing them to take deposits from investors.
The changes should enable them to raise more funds by opening commercial banks and will also give them access to Federal Reserve support.
Both banks filed requests with the Federal Reserve to change their status, and late on Sunday, the Fed announced it had granted the requests.
