EU Wheat Ends lower As Recession Worsens
EU wheat futures closed lower Friday, capping another dismal week, with Paris futures slipping to 2-1/2 year lows.
January Paris milling wheat closed down EUR1.25 at EUR123.50/tonne, with London May feed wheat falling GBP1 to GBP93.50/tonne, with just 85 lots moved.
As you can see from the London figures, trade was thin at these levels, with producers sitting tight until the new year, praying for a miracle from Santa perhaps?
The US jobs numbers were just that, numb-ers, shocking analysts who had been expecting something bad, but not as bad as the 533,000 bombshell that was released. 300-350,000 was the ballpark anticipated. The extra half million unemployed bringing cumulative job losses in the US this year to 1.91 million.
EU wheat continues to desperately need some export homes. Exports as of 26 November estimated at 9.9mmt, have now exceeded the 9.433mmt shipped during the whole of the 2007/08 campaign. That pace needs to be continued, but competition remains fierce, and slumping freight rates are opening up the global marketplace to every Thomaz, Dyck and Uri.
As pointed out Friday, it is interesting to note that the three front-months, Jan, Mar, May in Paris all closed at the same price of EUR123.50/tonne, offering no carry premium at all.
Ukraine farmers have planted around 8.5% less winter wheat this time round, with a 2009 area of 6.3m hectares (from 6.9m).
The demise of the pound may continue to help UK wheat prices a little, but for now the trend is still undoubtedly lower.
CBOT Comments
Corn
Corn futures closed with severe contract losses. Most contracts found themselves in unfamiliar prices when the closing bell rang Friday, heavy fund selling before year end initiated the selling pressure. December corn broke below $3 per bushel for first time since late 2006!! Crude oil has made new lows everyday this week and is dragging grains down; the dollar was higher and added to the pressure. Uncertainties still linger for the ethanol industry; ethanol giant VeraSun has not been at full capacity for more than 45 days now and continue to grind less corn. All bearish factors stated above are fueling the aggressive sell off Friday. Deliveries issued for December were 1,498 contracts. Dec -24 at 2.93.
Soybeans
Soybeans closed from 27 to 34 lower amid heavy index fund selling. Front month Jan closed below $8 for the first time in 17 months. Unemployment for November soared to multiyear highs at 6.7% renewing the ever real fears of a severe recession. Forecasts for rain showers in Argentina to aid crops weigh but Brazil remains dry. China to purchase 110,000 metric tonnes of US soybeans, China persists on being US's larger importer of beans. Broad commodity selling is spilling over into the soy complex forcing prices lower. Jan -27 at 7.83; Dec Meal -6.80; at 240.50 Dec BO -97 at 28.25.
Wheat
Wheat futures could not shrug off the bearish tone derived in the CBOT corn and soybean pits and closed lower at all three exchanges Friday. Stumbling crude oil and stronger dollar kept the lid on short covering rally. Deliveries issued for December were hefty and seen at 3,048 contracts. The ever lasting over hang of huge global production and abundant supply of less quality wheat substituted for feed has tanked US wheat futures of late. Dec CHI -10 at 4.57; Dec KC -7 at 4.89; Mar MLPS -11 at 5.61.
Ukraine Rapeseed Exports More Than Double
Oil World reports that Ukraine’s rapeseed exports more than doubled to 2.0 mln t in July to November 2008 from the 827,000 t exported in the same period of last year.
The main destinations were the EU with 1.8 mln (380,000) mt, Pakistan with 96,000 (221,000) mt, Turkey with 97,000 (126,000) mt and Israel with 20,000 (16,000) mt.
Paris Wheat Hits 2 1/2 Year Low
EU wheat futures are under pressure again, taking their lead from tumbling US markets, with January Paris milling wheat -EUR1.25, or 1%, at EUR123.50/tonne.
In earlier trade the contract fell as low as EUR122.25/tonne, a two and a half year low for a front month contract.
Astonishingly, Paris futures are now within sight of the EUR103/tonne intervention level. Who would have thought that six months ago?
Also of note is that as at the time of writing this post, January, March and May are all priced at EUR123.50/tonne. There is no carry premium at all, which would appear to indicate that there is not a lot of optimism that things are going to be improving from a demand perspective through the first half of next year.
New crop Nov is paying around a EUR10 premium over old crop at EUR133/tonne.
Another interesting point is that the Jan/Nov spread on UK feed wheat is £16.75/tonne, considerably more than EUR10. That would suggest to me that buying the Paris Nov and selling the London Nov and locking in the exchange rate must be worth a punt?
Farmer selling, of course, remains light at current levels, and that isn't likely to change this side of Christmas.
The interesting bit will be what happens once we get into the new year?
Pound Set For Record Weekly Drop Vs Euro
The pound is set for it's largest ever weekly fall against the euro after the BOE yesterday slashed interest rates to match their lowest levels ever.
The pound was at 86.35 pence against the euro at midday, trimming it's weekly loss to 4.75%, having posted a loss on the week of 5.5% at one point yesterday.
Against the dollar the pound was at $1.4685, posting a weekly loss of 4.6%.
The outlook for UK rates is still lower. The latest Reuters snap poll, following yesterday's BoE 100 bp rate cut, shows that a majority of survey respondents now look for the repo rate to bottom at 1.00% next year, from 1.25% in the previous survey. The market median is for a 50 bp rate cut next month, to 1.50%.
The dollar is steady ahead of this afternoon's US nonfarm payrolls numbers which are forecast to fall by aroun 300-350,000. That would mark the largest fall since a 431,000 decline in May 1980.
eCBOT Close/Early Call
eCBOT grains closed lower again on the overnight market, with beans ending the session with losses of around 5 cents, wheat down around 2 cents and corn 5-6 cents easier.
Still a plethora of bearish news continues to weigh on the market.
Corn and beans fell to 15-month lows and wheat hitting 18-month lows pressure by large global stocks and yesterday's disappointing export figures indicating that prices have not yet fallen enough to stimulate demand.
Despite the USDA reporting corn sales of 575,000mt to Mexico over the last few days, the malaise in the ethanol market has got traders back into the mindset that corn is just a feed ingredient after all. And with plenty of wheat and barley the world over corn needs to be priced to compete.
The Chinese government looks set to step up it's soybean buying on the local market to boost stocks and improve the rural economy. This may lead to some export business for the US to Chinese crushers.
In a similar vein, Chinese feed mills may also be in the market for wheat shortly, but with freight rates through the floor, the US will face stiff competition from Australia, Russia and beyond.
Pakistan is tendering for 500,000 wheat. Japan bought 72,000mt wheat.
Crude oil sits close to three year lows at $44.21/barrel.
Recession woes deepened and US stock markets slumped yesterday after the US Labor Department said the number of workers on jobless benefits hit a 26-year high last month.
Euopean stock markets are all lower at midday, with the FTSE down 0.91%, Germany's DAX down 2.59% and the French CAC40 down 2.75%.
Early calls for this afternoon's CBOT session: Corn futures are expected to open 4 to 6 lower; soybeans 4 to 6 lower; wheat 2 to 4 lower.
World Crop Weather Highlights
Sub-freezing temperatures and widespread snows are easing winter crops into dormancy across all of Europe, according to USDA's Joint Ag Weather Facility. Locally heavy rains in Italy and western portions of the Balkans, meanwhile, boosted soil moisture levels for emerging winter grains in the past week while dry weather in the Balkans region has allowed for late-season winter wheat planting.
In the FSU, above-normal temperatures are allowing for continued emergence of the winter grains across Ukraine and the Southern District in Russia. Most winter grain areas lack a protective snow cover, however, leaving them vulnerable to weather extremes..
In Southeast Asia, showers in Indonesia have been beneficial for rice and palm oil crops. Flooding persists, though, in minor agricultural areas of the northeastern Philippines. Showers have also caused delays in coffee and rice harvesting in Vietnam.
In South Asia, Tropical Cyclone Nisha brought heavy rain and gusty winds in the past week to Sri Lanka and southern India, halting groundnut harvesting and knocking maturing fruit off coffee trees.
In the Middle East, rain in Turkey and Syria boosted topsoil moisture for vegetative winter wheat and barley.
In Australia, widespread and locally heavy rain continued in eastern Australia, improving moisture supplies for summer crops but further delaying winter grain harvesting and raising concerns about crop quality. In western Victoria and South Australia, mostly dry weather favors rapid winter grain harvesting while wet weather in southern parts of the Western Australia wheat belt hampered harvesting.
In South America, soaking rain brought needed relief from heat and dryness to most major farming areas of Argentina. But in southern Brazil, warm and dry weather reduced topsoil moisture for summer crop germination in southern Brazil, although conditions improved for maturing winter wheat. Beneficial rain continued for summer crops and coffee farther north.
AWB and ABB Confirm Merger
Australian grain giants AWB Ltd and ABB have confirmed that they will merge. By teaming up, the two together will be Australia’s largest wheat and barley exporter with an estimated value of $2 billion or more.
The two companies are widely regarded as a good fit in the newly deregulated wheat export market, and their chiefs, Gordon Davis (AWB) and Michael Iwaniw (ABB), have both said further industry consolidation is inevitable.
But the proposal, confirmed to the Australian Stock Exchange Friday, has aroused concerns among grain growers about potential for reduced grain handling and marketing competition, particularly in South Australia where ABB has most of its bulk handling network.
It is also set to put pressure on the big east coast grain handler, GrainCorp, to find a merger partner, or an acquisition strategy, to enable it to compete on a similar scale.
Just When You Thought All The Bearish News Was Already In The Market
The USDA report 207,000mt wheat sold for export last week, well below trade expectations for 350,000 to 550,000mt.
The USDA put corn exports last week at 391,900 tonnes, near the low end of trade estimates, and soybean exports at a only 359,800 tonnes, a marketing-year low and also well below estimates.
Stats Canada come out with some monster numbers on wheat, barley and canola. The 2008 Canadian wheat crop was forecast at 28.611 million tonnes, up 42.7 percent from last year.
The Canadian canola crop shows an increase of more than 3mmt on the 2007/08 crop of 9.529mmt, at 12.642mmt it is easily the largest in Canadian history.
China says it's southern provinces are to increase winter grain and oilseed planted area by 700.000 hectares, saying it has 9.3 million acres of unused land in the region that could be used for agricultural purposes.
Chinese soybean and rapeseed futures both hit limit down Friday.
Crude closes last night at a 47-month low of $43.67 a barrel, down $3.12 or 6.7%. Remember all the Septics moaning when gas prices hit $4/gallon, now it sells for as little as $1.35/gallon.
Australian wheat closes A$11/tonne down Jan '09, with some deferred months down as much as 7% or $20.40/tonne.
As of 1 November, grain stocks in Russia increased by 42% compared to the previous year – to the level of 61.8 mln tonnes, according to the Federal Service of State Statistics of Russia. The increase comes despite having exported 10 mln tonnes of grain already this marketing year.
Tainted Feed Discovered In Ireland
Animal feed tainted with the toxin PCB has been discovered on several farms in Ireland say the Irish Department of Agriculture, Fisheries and Food (DAFF).
PCB's, or polychlorinated biphenyls, are virulent organic pollutants that are principally present in food as a result of industrial processes.
Details of the source and extent of the contamination have not been released. The discovery was made “during routine monitoring of the food chain for a range of contaminants,” DAFF said in a statement.
CBOT Closing Comments
Corn
Corn futures closed with double digit losses Wednesday. Considerable losses in crude oil weighed in on CBOT grains. Broad base selling was the theme today has virtually every commodity was lower. US corn basis has improved roughly 10 cents in the last month but is still wider than previous years for the first week in December. USDA reported that 391,900 metric tonnes were sold for export last week, within trade estimates but on the bottom side. Bullish fundamental news for corn has been slim but Mexico has been aggressive buyer of US corn lately, buying nearly 600,000 MT tonnes just this week. Deliveries issued for December were 1,647 contracts. Dec -13 at 3.18.
Soybeans
Soybeans finished 18 to 20 lower as spillover selling pressured the soy complex lower. Several bearish factors pushed soybeans lower Wednesday; disappointing export sales last week, STATS Canada reported record canola production ( 32% increase from 07), and lower crude oil. USDA reported 359,800 metric tonnes were sold for export last week well below trade estimates and marks the lowest sales for this marketing year but was influenced by the shortened holiday week. China continues to purchase US beans, buying additional 133,000 metric tonnes. Only one delivery was issued for December meal but Dec soybean oil had 245 contracts. Jan -19 at 8.11; Dec Meal -.70 at 247.30; Dec BO -1.06 at 29.22.
Wheat
Wheat futures tumbled Wednesday with the front months losing double digits at the different exchanges. USDA reported 207,600 MT were sold for export last week well below trade estimates of 350,000 to 550,000 MT. STATS Canada reported wheat production of 28.6 MMT an increase of more than 12 MMT from the prior year, just another reminder of the magnitude of the record global crop of 680 MMT. Deliveries issued against the CBOT December contract were 3,351. Wheat, like corn has struggled to find any fresh bullish news to boost prices or at least underpin the market. Dec CHI -33 at 4.67; Dec KC -32 at 4.97; Dec MLPS -10 at 5.72.
Stats Canada Crop Estimates Above Expectations - Canola Record High
Stats Canada released their crop production estimates for 2008/09 today, with the three major crops of canola, wheat and barley all coming in above expectations.
The canola crop was pegged at 12.642mmt, compared to trade expectations of 11.10-12.50mmt, and almost a stunning 2mmt up on September's estimate of 10.87mmt. The canola crop shows an increase of more than 3mmt on the 2007/08 crop of 9.529mmt, and is the largest in Canadian history.
All wheat production was put at 28.611mmt vs trade ideas of 25.50-28.40mmt and 27.266mmt in September.
Barley is now seen at 11.781mmt, higher than the 11.20-11.70mmt estimated and 11.219mmt in September.
EU Wheat Falls, French Wheat Now Below EUR130
EU wheat futures continued to decline Thursday, with Paris-based milling wheat falling below the psychologically important EUR130/tonne mark.
By 1300 GMT January was trading EUR2 lower at EUR128.75/tonne, a level not seen on the front month contract since August 2006. January London-based feed wheat was GBP0.25/tonne lower at GBP91.00/tonne.
Spain has bought 120,000mt soft wheat from Ukraine according to reports. Another export order missed by UK wheat, even with an exchange rate at multi-year lows against the dollar.
In the UK wheat usage in animal feed increased by 6% in the year October 2007-October 2008, according to figures released today by DEFRA.
The total amount of wheat milled in the UK in the year from October 2007-October 2008 increased 4% to 503,000mt, they said. Of this, 414,000mt was grown in the UK, an increase of 8% on a year ago.
eCBOT Close/Early Call
eCBOT futures slumped again in the overnight market with soybeans closing with losses of 7 1/4 to 10 1/4 cents. Wheat was down 2 1/2 to 6 1/4 cents, with corn around 3 cents easier.
Falling crude oil was the main driving force again, with futures dipping below $46/barrel, close to 4 year lows. In addition metals skidded by their daily limits in Asia on continued worries that the global economic recession would dampen commodities demand.
Whilst that may well be true for commodities used to make mobile phones or plasma TV's, the same principle doesn't hold quite as true with food products, but there you go, you have to go with the flow.
Rains in Argentina have probably come too late to help the wheat crop there, but will certainly be beneficial for soybeans and corn.
The tail-end of the US corn crop is being hampered by snow and rain.
The Australian wheat harvest continues to be hampered by rain. There will certainly be less milling wheat down under than originally anticipated.
Morocco is tendering today for 300,000mt optional origin soft wheat. China may look to import more US or Australian wheat in the new year as those prices are more competitive than on the domestic market, analysts say.
Early calls for this afternoon's CBOT session: Corn futures are expected to be 2 to 4 lower; soybeans 7 to 10 lower; wheat 3 to 5 lower.
ECB Cuts Rates By Three Quarters
The European Central Bank cut it's interest rate by three quarters of a percent to 2.5% today.
Analysts had been anticipating a cut of between a half and three quarters.
EU base rates are now half a point higher than rates here in the UK.
The euro dipped slightly following the news to 86.41 pence against the pound, from an earlier all-time high of 86.93 pence.
Monsanto GM Soybean Gets EU Nod Of Approval
The EU Commission today authorised the use of Monsanto glyphosate Roundup Ready resistant GM soybean variety MON 89788 for use in food and animal feed, not for growing within it's 27 member countries for the next ten years.
In September, the Commission issued a similar 10-year import approval for a GM herbicide-tolerant soybean developed by Bayer CropScience, known as A2704-12.
Smithfield Foods Q2 Profits Slump
US meat producer Smithfield Foods is today reporting a 76% slump in Q2 2008 FY profits, citing sharply higher grain prices as eating into it's earnings.
Profits fell to $4.2 million, or 3 cents per share, from year-ago profit of $17.4 million, or 13 cents per share, the company reports.
Year on year sales rose to $3.15 billion from $2.75 billion, but spiralling corn and soybean costs trimmed profits, the company said.
Credit Suisse And Nomura Slash Jobs
Swiss bank Credit Suisse announced 5,300 job losses Thursday. It has already cut 1,800 jobs this year and said earlier this week it would cut 650 investment banking jobs in Britain.
Meanwhile Nomura Holdings said it would shed a thousand London jobs, meaning that the global financial sector has now seen over 150,000 jobs culled since September when Lehman Brothers filed for bankruptcy.
Credit Suisse said on Thursday it made a net loss of about 3 billion Swiss francs ($2.5 billion) in October and November.
Nomura, Japan's biggest brokerage, said the decision to cut as much as 22 percent of its London staff followed an internal review after the purchase of the Asian, European and Middle Eastern assets of Lehman Brothers.
BOE Cuts Interest Rates To Lowest In 300 Years
The Bank of England has cut interest rates by one percentage point to 2%.
The cut was widely anticipated by analysts.
UK interest rates are now at their lowest level since the BOE was founded in 1694 (they were also briefly at 2% in 1951).
The pound jumped immediately following the decision, suggesting that some participants had been expecting a cut of even more. Having touched an intra-day and 6 year low of $1.4470 in earlier trade, at 12.05pm GMT the pound was at $1.4626.
The ECB is expected to follow suit with a half percent rate cut shortly after 12.30GMT.
UK House Prices Fall At Fastest Rate In 16 Years - Halifax
UK house prices fell at their fastest rate in November for sixteen years, according to data from the Halifax Building Society released Thursday.
House prices plunged 2.6 percent in November from the previous month, following on from a 2.4 percent decline in October, they said.
That's ten straight monthly declines in a row, and the largest monthly drop since September 1992.
UK house prices are now back to the same levels they were in July 2005, according to the data.
The figures make depressing reading and add further encouragement for the BoE to drop interest rates later today. If they cut by a further one percent to 2% then that will be the lowest interest rate in the UK since the bank was founded in 1694!
UK: Morrisons Beats Q3 Forecasts, Set To buy Some Co-op Stores
Britain's fourth-biggest grocer, Wm Morrison, announced Thursday that it had beat third quarter sales forecasts. The company said sales at shops open at least a year, excluding fuel, rose 8.1 percent in the 13 weeks to Nov. 2. Analysts had been predicting growth of 7.1%.
The company also announced that it had agreed to buy 38 stores from the Co-operative Group for 223 million pounds.
Shares in Morrisons were up 3 points (1.2%) at 253.50 in early trade on the FTSE.
Tesco, Britain's biggest grocer, on Tuesday reported a 2.0 percent rise in like-for-like sales excluding fuel for the 13 weeks to Nov. 22. Number two Asda, owned by U.S. group Wal-Mart, posted a 6.9 percent increase for the three months ended Sept. 30, while number three J. Sainsbury reported a 4.3 percent rise for the 16 weeks to Oct. 4.
Is VeraSun Decision Another Nail In The Coffin For US Ethanol?
US corn growers are angry with VeraSun's decision, backed in court this week by US Bankruptcy Judge Brendan Shannon, to cancel contracts to buy corn through to Jan. 15 at seven of it's sixteen US plants. The company has also said it will cancel through to the end of Jan. at an eight plant.
Certainly, any farmers with corn sold to VeraSun at substantially higher levels than today's rates are going to be hopping mad. But the knock-on effects could have wider implications for the entire ethanol industry.
"This really has a lot of farmers upset," said one analyst. "What it is doing is creating a climate of distrust among farmers with ethanol plants because VeraSun is not the only organization that manufactures ethanol that is having difficulties right now."
Could this be the beginning of the end for the US ethanol industry? It could certainly be a factor in helping farmers with their planting decisions next spring. What's the point of growing corn? Inputs are way higher than soybeans. The market for crude oil has fallen out of bed. Gas at the pumps is cheaper without any ethanol blend than with. And if you do sell to an ethanol producer and the price comes down then they can just cancel the contract.
What would you do?
Russian Grain Export Pace
During the November 1-25 period Russia exported 1.32 mln tonnes of grains, including 1.19 mln tonnes of wheat, 129,000 tonnes of barley, 2,000 tonnes of rye, declared the Ministry of Agriculture of Russia.
From the beginning of 2008/09 Marketing Year, Russia has exported 9.99 mln tonnes of grains, including 8.92 mln tones of wheat, 1.06 mln tonnes of barley, and 9,000 tonnes of rye. In October, grain export volumes totaled 2.44 mln tonnes (2.19 mln tonnes of wheat, 2,000 tonnes of rye, and 249,000 tonnes of barley).
Western Australia Crops Also Weather Damaged
Whilst it has been widely reported in the media recently that crops in eastern Australia have suffered some losses and quality downgrades due to heavy rains, news is now emerging of similar problems in Western Australia, the nation's largest producing state.
The vast majority of wheat from this region gets exported, primarily due to the distance between it and the more heavily populated regions in the east, where the ASX milling wheat contract is based.
Western Australia's Department of Agriculture and Food reported Thursday that the harvest in the region has been delayed and damaged by poor weather, including heavy rains and hail.
Rainfall totals "well above normal for November" have fallen in many areas of WA's vast wheatbelt, they say, causing some crop losses and also quality downgrades similar to what has been witnessed in the east.
"Pre-harvest sprouting in wheat crops is causing some concern... (with a) significant proportion of cereals to be downgraded to feed" the report added.
The Department didn't put a figure of the quantity of grain affected. The state was forecast to produce 8.3mmt of wheat, 2.34mmt barley and 775,000 canola by Abare last month. Abare issues revised production estimates next week.
Crude Lower Overnight Close To 4 Year Low
Crude oil fell in overnight trade, close to multi-year lows, as demand from the US - the world's largest consumer - continues to fall despite prices having fallen almost 70% from their July highs.
At 7.30am GMT January crude was $1.10 lower at $45.69/barrel.
The average amount of fuel products such as gasoline and diesel supplied by refiners for the past four weeks was 7.9 percent less than a year earlier, according to a U.S. Energy Department report yesterday.
Although crude and gasoline stocks also fell, according to the same report, it is the petroleum products supplied numbers that the market seems to be focusing on.
Indeed, it's a complete contrast to earlier in the year when the hype-merchants were in full flow. Back then only bullish factors were taken into consideration, anything bearish was ignored or brushed to one side. We appear to have the exact opposite of those mechanics applying to the market today.
It is truly astonishing how all the market can see today is doom, gloom, economic despondency, falling demand, it's never going to end. Yet six months ago it was surging demand from India and China that too was never going to end, the boys at Golden Sacks and the likes were on a ticket to the moon.
Interesting times. There will be fortunes made and lost on this bear run, just as there were on the bull run. And the bottom will be just as difficult to call as the top was.
Sterling Wobbles Ahead Of BoE Announcement
It's same old, same old for the pound I'm afraid today. With the BOE set to possibly reduce interest rates by a full one percent according to most economists, sterling is looking vulnerable.
At 7.30am GMT the pound stood at $1.4708, down almost three quarters of a cent from a close at $1.4775 yesterday. At one point yesterday the British currency fell to $1.4666, it's lowest level since Nov 17th.
The ECB is also expected to lower interest rates today, but by a more cautious half point to 2.75%. That would leave a disparity between the UK and the Eurozone of three quarters of a percent, favouring a weaker pound viz-a-viz the euro. The euro rose to 86.15 pence against the pound in early trade, close to it's all time high of 86.60 set on 13th Nov.
EU Wheat Ends Slightly Lower In Quiet Trade
EU wheat futures closed modestly lower in quiet pre-Christmas trade with Paris January milling wheat futures ending down EUR0.25 at EUR130.75/tonne, and London May feed wheat closing unchanged at GBP96.75/tonne with just 62 lots moved all day.
It is normally very quiet in December, with farmers reluctant sellers unless substantial premiums can be made for some reason.
This season looks like being no different to any other, with one UK compounder reporting that to buy ex-farm wheat at 'theoretical ex-farm levels' in the current climate is very difficult, if not impossible.
"Once it's in the barn, at this time of year they don't want to know," he said.
"It may be different in the new year, if they need the cash to buy fertiliser or pay for other inputs. Overall, though I expect things to be very quiet now until January," he added.
The falling value of the pound may help UK grain become more competitive for export, but buyers who want the quality we have, seem to be few and far between.
All in all, it looks like a stand off now until after Christmas, with both buyers and sellers seeming reasonably comfortable with their positions.
I think, however, if you put a gun to most people's heads and asked for a prediction on prices for the new year, around 75%+ would opt for lower.
Nogger isn't most people. The same 75%+ would have also voted for higher back in the spring.
Is there a Burtons round here??
Crude Closes At Lowest Levels Since Feb 2005
Crude oil fell, closing at the the lowest settlement since Feb. 9, 2005, after an Energy Department report showed that U.S. refineries curbed operating rates as the recession crimps fuel demand.
Crude oil for January delivery fell 17 cents, or 0.4 percent, to end at $46.79 a barrel in New York.
Energy Dept data showed that US refineries operated at 84.3 percent of capacity, down 1.8 percentage points from the week before. It was the biggest one- week drop since September, when hurricanes Gustav and Ike struck the Gulf Coast.
Crude-oil supplies fell 456,000 barrels to 320.4 million barrels last week, the department said. It was the first decline in 10 weeks. Inventories were forecast to climb 1 million barrels.
CBOT Closing Comments
Corn
Corn futures retreated after posting gains at midday but only closed modestly lower. Trade has been active but price movement has not. Little fresh news to fuel the corn market in any direction but the bearish trend still exists. USDA's chief economist is calling for nearly 90 million acres to be planted for corn next year and may be optimistic about that figure. Crude oil continues to make new lows this week and is currently trading around $46 per barrel. Deliveries issued against front month Dec were 1,971 contracts. The US Dollar is inching higher at midday limiting gains in grains and other commodities. USDA indicated that an additional 120,000 MT to Mexico. Dec -1/2 at 3.32.
Soybeans
Soybeans surrendered most of the gains that were marked during midday trade and closed moderately higher. The soy complex was mixed with beans and meal pegging gains but bean oil closed slightly lower. After crude turned south so did much of the soy complex. Argentina crop conditions are improving as they are trying to finish up planting now that rain has fallen over the past few days. Deliveries issued against Dec meal were a mere 2 contracts but Dec bean oil issued were lighter than the previous day at 634 contracts. Jan +3 at 8.30; Dec Meal +1.90 at 248.00; Dec BO -14 at 30.28.
Wheat
Wheat futures closed lower at the three exchanges and like corn and soybeans retreat from higher prices in earlier trade. Short covering helped to initially boost wheat futures at CBOT and KCBT but prices declined as a large fund was quoted liquidating long positions. Russia is attempting to develop a subsidy for wheat exports to guarantee shipments; the market has already been flooded with Black Sea wheat and has collapsed US wheat exports. Deliveries against CHI Dec contract were 3,499 contracts. Dec CHI -9 at 5.00; Dec KC -8 at 5.29; Dec MLPS -2 at 5.88.
EU Bans Chinese Baby Food Containing Soy
European Union regulators Wednesday banned imports of Chinese soy-based food products for infants and young children after the industrial chemical melamine was found in Chinese soybean meal, the EU executive said.
All Chinese consignments of baking powder, or ammonium bicarbonate, will also be tested for melamine, the statement added.
Feed Vessels Due Rotterdam/Amsterdam/Ghent
The following vessels are due to arrive in Rotterdam/Amsterdam and Ghent during December according to port authorities:
Vessel name Goods ETA
Amsterdam
London 2012 S.A. Soyameal/pellets 12.12.2008
Brillant Pioneer S.A. Soya/Citruspellets 15.12.2008
Racer S.A. Soya/Citruspellets 17.12.2008
Domina S.A. Soyameal/pellets 18.12.2008
Graeca Universalis S.A. Soyameal/pellets 19.12.2008
Excalibur S.A. Soyameal/pellets 26.12.2008
Flag Seaman Asia Palmkernelexpel. 28.12.2008
George L Asia Palmkernelexpel. 29.12.2008
New Castle Max S.A. Soyameal/pellets 29.12.2008
Clair S.A. Soyameal/pellets 31.12.2008
Rotterdam
Pontodamon S.A. Soyapellets 06.12.2008
Festivity Asia Palmkernelexpellers 08.12.2008
Daishowa Maru S.A. Soyapellets 17.12.2008
Garima Prem S.A. Soymeal/pellets 24.12.2008
Ghent
Federal Welland Canada Flaxseed 10.12.2008
Baltic Dry Index Extends Losses
The Baltic Dry Index, which measures dry bulk shipping rates on 40 routes across the world, fell for the eleventh straight day Wednesday, sinking 12 points to 672, it's lowest level since 1986, when the index hit an all-time low of 554.
Australia Takes First US DDGS Shipment
Australia’s first imported sample of U.S. distiller’s dried grains with solubles (DDGS), a co-product of U.S. ethanol production, successfully cleared inspections today after arriving at the Port of Melbourne on Nov. 25, according to the U.S. Grains Council. The shipment will be used in feeding trials which will be overseen by Australian feed supplier CopRice, a major supplier of feed ingredients, manufactured livestock and companion animal feeds.
“This is a major accomplishment for the Council and an exciting first step for CopRice,” said Mike Callahan, USGC senior director of international operations for Asia. “This has also shown that DDGS can meet the stringent regiments of Australia’s Quarantine and Inspection Service.”
UK: Snow Forecast Tonight For Much Of The Country
Parts of northern Britain could see snowfalls of 20cm (7.8in), weather forecasters are warning, says the BBC.
Blizzards are expected across most of Scotland, northern England and the north Midlands on Wednesday night and into Thursday morning.
Across southern England and south Wales, heavy rain is forecast to fall, but it could turn to ice in places it falls on cold ground.
Met Office experts said rush-hour driving on Thursday would be difficult.
A spokesman said: "We had weather warnings out this morning and it was an icy start for most of the UK.
"There is likely to be sun during Wednesday afternoon, but then in the evening temperatures will drop away and there is a weather system that will move in from the Atlantic.
"That will lead to snow in Northern Ireland, although it will turn back to rain after a couple of hours.
"The main risk is for falls of snow across the north Midlands, northern England and Scotland."
The spokesman added: "On higher ground we could see up to 20cm and lower down and in more populated areas 2cm to 5cm is likely [1in to 2in].
This is how things are forecast to look at 6am GMT in the morning:
In a predictable move Ladbrokes have slashed the odds of a London white christmas from an original offer of 7/1 to 11/4. Glasgow is 2/1 to see snow, from an opening quote of 8/1. Birmingham, Liverpool and Manchester are at 4/1.
eCBOT Close/Early Call
For once the overnight eCBOT had a quiet session, closing with little significant movement. Soybeans finished around 3c lower, with corn down a half or so and wheat mixed 1c higher to 2c lower.
For once, outside markets didn't show a lot of change either, with crude oil 37c higher and the FTSE, CAC and DAX all down less than 1%.
Some optimism remains that the grain sector will continue to divorce itself from these outside markets as they are less dependent on interest rates and business, said one trader.
Egypt bought 240,000mt wheat yesterday from Russia and France. Whist it was disappointing for US wheat that none of this went their way, it was encouraging to see Egypt buy substantially more than they originally tendered for, traders said.
Iraq was also said to have bought wheat in a tender, some of it from Canada, but also none from the US.
Australia's wheat crop keeps getting downsized and downgraded, which may help support prices a little, along with freight rates. The Baltic Dry Index yesterday posted it's 10th straight daily decline, close to it's 1986 low, and may yet set an all-time low this week, analysts said.
Early calls for this afternoon's CBOT session: Corn futures are expected to open 1 to 3 lower, soybeans 3 to 5 lower, and wheat 2 to 4 lower.
Chinese Corn Gluten May Be Responsible For Melamine-Tainted Milk In South Africa
The recently reported problem of melamine-tainted Nestlé infant formula in South Africa left everybody scratching their heads after the company said that the product was made in South Africa and contained exclusively locally produced ingredients such as fresh milk.
Reports circulating in the media this week suggest that Chinese-made corn gluten contaminated with melamine left over from the pet food poisoning scandal of 2007 has been imported into South Africa, and sold as recently as September 2008 for use in ruminant feed.
This latest finding still questions the widely held belief that melamine ingested by animals does not pass into the food chain, the industrial chemical is either excreted by the animal or is diluted to such an extent that any remaining traces are practically undetectable in human food.
Somerset Co-op Offers To Take On All Dairy Crest's Organic Suppliers
Following Dairy Crest's recently announced 4p/litre cut in the price it pays it's farm suppliers for organic milk, Somerset-based OMSCo, (Organic Milk Suppliers' Co-operative) has offered to take over all of Dairy Crest's 78 organic suppliers, who between them pump 90 million litres a year into the market, according to reports.
The co-op's 400 farmer members produce 300 million litres of milk a year and it is the main supplier to Yeo Valley, the country's largest organic yogurt maker.
The deal, put to the Dairy Crest farmers last week, is an all or nothing one – all the suppliers have to agree or it will not go ahead. But there were indications at the meeting that three quarters of the farmers were ready to make the move, with the rest wanting to see the small print first.
The proposed deal would give OMSCo control of about 90 per cent of the domestic organic milk market.
Dairy Crest, Britain's largest milk processor, blamed it's cut on falling demand for organic milk because of the squeeze on consumer spending.
The company is reputedly 20 million litres over-supplied – about £4.2m in a year – and has nowhere to sell it.
But embittered organic farmers say the processor has been victim of its own mismanagement – Dairy Crest has continued to recruit organic suppliers without, apparently, having a guaranteed outlet for what they would be producing.
Russian Ports Clogged With Undischarged Rail Cars
Over 35,000 undischarged cars including some loaded with grain and metal for export have become grid-locked in Russian ports, according to reports.
Vadim Morozov, RZD First Vice President, says the situation is the toughest in Novorossiysk Commercial Sea Port (NCSP) and Vostochny Port where 17,500 and 26,500 cars have clogged the railways.
In November 2008 car unloading reduced 23% against the norms due to severe weather conditions.
RZD said it would usually halt cargo transportation to ports in these condition, but in the current crisis situation RZD needs the revenure.
Strike Looms At UK's Leading Poultry Processor
Trade union Unite is to ballot its members at three sites in the UK's leading poultry processing company, 2 Sisters Food Group, for industrial action over low pay.
The Midlands processing plants receives birds cutting and packing from 2 Sisters primary sites in Lincolnshire, Norfolk, Devon and Scotland. The company currently processes about three million birds a week.
The union says that if Unite members vote to strike it would jeopardise the supply of poultry products to all of the major supermarket suppliers, and inevitably hit supermarket shelves over Christmas.
Unite added that 2 Sisters has proposed an offer of £214 per week.
This is just eight pence an hour above the minimum wage for staff, who work a 37.5 hour week usually on unsociable hours, split between morning and afternoon shifts, the union said.
Unite said it was a shocking level of payment proposed by the company, which does not reflect the hard work the staff put in.
US Auto Makers Up The Ante
The so-called Big Three US auto-makers GM, Ford and Chrysler asked the US government for a $25 billion bail-out to stay afloat a fortnight ago. They met with a muted response, and were told to go away & come back this week with a concrete plan to prove that this wasn't going to be yet more money down the drain.
This week they are back. GM says it needs $18 billion, Ford $9 billion and Chrysler, the smallest, $7 billion.
Are we keeping up here 18+9+7=34. Yes, in the last fortnight things have got so bad that an extra $9 billion is now required to keep the big three afloat. Congress surely has to be asking what's changed in the last fourteen days? How do we know that you won't need another $9 billion in another couple of week's time?
After getting slated for flying in three separate corporate jets to last month's meeting, all the CEO's have adopted a more modest mode of transport this week.
GM's Wagoner is scheduled to drive to Washington in a Chevrolet Malibu hybrid vehicle. Ford's Mulally in a Ford Escape hybrid and Chrysler's Nardelli was set to leave drive in one of Chrysler's hybrid SUV's.
All three are offering a wide range of swingeing cuts, from two of them taking $1 salaries, to freezing exec bonuses, reducing white-collar staff, selling off brands and promising to get back into profitability by 2011.
There is only a narrow window for Congress to settle on any aid package for the automakers. If a deal cannot be sealed by next Friday, then they have little choice but to wait until after the new Congress is sworn in.
For GM in particular that may be too late.
Footnote: The US auto industry as a whole Tuesday reported a seasonally adjusted annual rate of sales of 10.18 million cars and trucks, the lowest level since October 1982, according to Autodata.
CME Volume Heavily Down
CME Group announced Tuesday that November 2008 trading volume averaged 10.5 million contracts per day - a hefty 29-percent drop from November 2007, based on combined Chicago Mercantiel Exchange (CME), Chicago Board of Trade (CBOT) and New York Mercantile Exchange (NYMEX) volumes.
Trading in commodity futures - including corn, wheat, soybeans, livestock and dairy - averaged 724,000 contracts per day, down 12% from year-ago levels, CME Group stated.
Coincidence that isn't it? The likes of Golden Sacks exit the market and it falls out of bed.
Judge Rules VeraSun Can Cancel Corn Contracts
US Bankruptcy Judge Brendan Shannon ruled Tuesday that chapter 11 bankruptcy case VeraSun Energy Corp. can cancel contracts to buy corn through Jan. 15, if VeraSun gives 10 business days notice before delivery to cancel the said purchase contracts.
VeraSun said that the contracts relate mostly to buy corn for its U.S. BioEnergy plants. The company would also cancel contracts to buy corn for its Welcome, Delaware, plant through Jan. 31, but that contracts for its U.S. BioEnergy plant in Marion, South Dakota, were not included in the cancellation plans, the company said.
VeraSun lawyers said all eight of its U.S. BioEnergy plants, which were acquired earlier this year for less than $700 million, were in "hot idle," or ready to operate but not currently producing ethanol.
Pound Down Again
It's a familiar story of gloom and despondency. The pound is down again.
U.K. consumer confidence slid last month to the weakest in at least four years, according to a report. This will provide the BOE with a little bit more fuel to add to the fire, not that they really needed it, to cut interest rates further tomorrow.
At 10.30am GMT the British currency was $1.4713, having fallen as low as $1.4667 earlier, against last night's close of $1.4897. Sterling is now close to it's lowest since June 2002.
The pound started the week at $1.5340 and has now fallen 26 percent against the dollar this year, the most since at least 1972.
But on a brighter note, we are slightly firmer today against the Zimbabwean dollar, for those of you planing to spend Christmas abroad.
Blacklisted Indian Palm Oil Importers Rethink Defaults
Indian companies blacklisted by Indonesia after reneging on contracts with Indonesian CPO exporters, have begun taking delivery of the contracts at the original prices, according to reports.
Up to thirty Indian importers were blacklisted after delaying or defaulting and/or trying to renegotiate lower prices, industry sources said.
Around 100,000mt of palm oil was said to be involved after prices fell by two-thirds following the advent of the global credit crunch.
Rabobank Lowers Australian Wheat Output 1MMT
Rabobank has lowered it's 2008 Australian wheat production forecast by 1MMT to 19.5MMT.
In addition to the well-publicised problems with heavy rains is northern NSW and southern Queensland, causing quality downgrades, South Australia has also suffered quality and yield losses through dryness, they say.
Adds that "the uncertainty characterizing the market with the deregulation of the single desk this season," will make export pace slower than in previous seasons.
CBOT Closing Comments
Corn
Corn futures traded and closed near flat on a relatively quite day as a 'Turnaround Tuesday' was not present after significant losses occurred in commodities Monday. Most CBOT corn futures had only marginal losses. Lack of any real fresh news to drive corn out of range trade or to upside has let bears be aggressive and push prices to new yearly lows. Turmoil in financial markets and global economies has aided in bursting the commodity bubble and collapsing prices. Crude oil made new lows today, the lowest level since May '05. The US dollar did retreat during trading hours and attempted to buoy grains and other commodities. Mexico purchased 333,000 MT of US corn. Delivers issued against front month Dec were 1,850 contracts. Dec -1/4 3.32.
Soybeans
Soybeans carried selling pressure over from Monday�s sharp decline in futures and closed with double digit losses in several contracts Tuesday. Trade flirted with 18 month lows and closed below $8.30/bushel in the front month. Crude oil lost $2 per barrel during most of trade today weighing in on soy futures along with the news of South American crops being aided by much needed rainfall over that past few days. Deliveries issued against Dec meal were a mere 2 contracts but Dec bean oil issued 2,035 contracts. Exports have underpinned beans and remain ahead of last year's pace. Jan -19 at 8.27; Dec Meal -6.20 at 246.10; Dec BO -.69 at 30.42.
Wheat
Wheat futures closed steady to higher at the different exchanges on Tuesday. Spring wheat in MLPS led the other exchanges and posted 10 cent plus gains in contracts. Wheat was not pulled lower by CBOT soybeans or the slight declines in corn futures despite the loitering fact of abundant supplies of wheat world wide; excess supplies are flooding the feed market and putting pressure on corn as well as wheat. Foreign wheat importers persist on buy passing US for cheaper wheat else where and weigh on prices. Deliveries against CHI Dec contract were 3,659 contracts. Dec CHI +0 at 5.09; KC +1 at 5.37; MLPS +11 at 5.90.
Ford CEO Says He Will Work For A Dollar To Get Govt Money
The Big Three US car makers face Congress later this week in a desperate effort to secure government money to help them stay afloat.
All three came in for heavy criticism last month, appearing genuinely shocked that the bailout wouldn't be a formality.
The irony that all three had flown to Washington in separate corporate jets to beg for money seemed lost on them.
At that meeting all three were quizzed on their willingness to work for a symbolic one dollar salary, as the head of Chrysler famously did in the 1980's in exchange for financial assistance from the US government.
"I think I'm OK where I am," was the cagey answer of Ford CEO Alan Mulally.
He subsequently seems to have realised the severity of the situation and had a rethink, now saying that he too would join Robert Nardelli, COE of Chrysler, on the lofty sum of $1/year. There is no word at the moment if Rick Wagoner of GM is also wiling to capitulate in the name of the cause.
Mulally has even gone a step further, saying that Ford will cancel it's management bonuses and sell all five of it's corporate jets in exchange for a $9 billion credit line.
Squirm.
Egypt Buys Russian/French Wheat
Egypt's state owned wheat buyer the General Authority for Supply Commodities (GASC) has said it has bought 240,000mt of wheat in a tender concluded Tuesday.
GASC had originally only tendered for 55-60,000mt, but often tenders for just one cargo and then buys more.
It is understood that the purchase consisted of both 120,000mt each Russian and French wheat at prices ranging from USD163-171 FOB, equivalent of around GBP108-114.
The news provided French wheat futures with a shot in the arm. Paris March milling wheat currently +EUR0.75 at EUR131.50/tonne.
Baltic Dry Index Sinks Even Lower
The Baltic Dry Index, which measures dry bulk shipping rates on 40 routes across the world, sank 16 points to 684 points Tuesday. The index has plummeted 94% from its all-time record high of 11,793 points late May, and is now at it's lowest level since September 1986. The index has fallen 167 points, or 20% in the last month alone, which may help stimulate world demand for grains from importing nations.
US Auto Makers Submit Plan To Congress
One of these each do?
FTSE100 Recovers Led By Tesco
The FTSE100 turned higher in midday trade, with strong performances from the likes of supermarket giant Tesco and Thomas Cook outstripping weakness in banks and miners, and with Wall Street seeming set to rally later this afternoon.
At 1pm GMT, the FTSE100, having briefly dipped under 4,000 in early deals, was up 29.26 points at 4,094.75.
Tesco was a major blue chip gainer, up 27.7p at 315.7p after the UK's biggest retailer hit its forecasts with a 2% rise in Q3 underlying UK sales and said its new discount range is helping to boost sales volumes and customer numbers. The news from Tesco surprised many analysts who had predicted flat to lower sales.
The news helped promote Morrisons, up 7p at 244.75p, but Sainsbury fell 8475p at 274.5p.
Holiday operator Thomas Cook gained 7.9p at 170.1p after revealing a strong profit performance and giving an upbeat assessment on current trading.
eCBOT Close/Early Call
eCBOT grains closed mostly higher Tuesday helped by rebounding stock markets recovering from early losses on spillover weakness from last night's Wall St crash.
Crude fell to fresh 3 1/2 year lows of $47.36/barrel, but currently stands around $2 above those levels.
Soybeans closed 3-5c higher, with wheat up 4-6c and corn up 1/4c.
The grain market appears to be trying to distance itself from outside influences and get back to trading the fundamentals. Crude and equities have exerted a much greater influence over ag commodities recently than had previously been the case. It will be interesting to see if the grains can manage to extricate themselves from this situation.
The chart below shows the % change over the last three months for crude relative to the grains complex:
The gradual drift away from the influence of crude oil is there for all to see. Out of interest the spike in the price of beans near the beginning of the chart was the day that spot beans closed something like five times their normal daily limit up move on the day the September contract expired due to a technical squeeze.
So, lets report on a few fundamentals & hope that they might actually start to become a bit more relevant from now on.
USDA data released Monday showed wheat inspections were at 19.808 million bushels for the week ended Nov. 27. This is slightly above expectations of 14-19 million bushels and 2.6 million bushels above last week's levels.
Egypt and Japan are back in the market this week. The US will be hoping to repeat last week's success and grab another slice of the Egyptian action.
The Australian crop seems likely to contain 1-2 million tonnes less milling wheat than anticipated due to harvest rains in the SE.
Recent Argy rains may have come too late to help the wheat crop there, which is expected to come in around 10mmt compared to 16mmt a year ago.
The CWB said that world plantings in 2009 will be 3% lower.
Large speculators reduced their net short positions in CBOT corn and wheat futures and options in the week ended Nov. 25 and increased their net long position in soybeans, according to government data released on Monday.
Early calls for this afternoon's CBOT session: Corn futures are expected to open steady; soybeans 3 to 5 higher; wheat 4 to 6 higher.
Chinese Government Moves Throw Domestic Soybean Market Into Disarray
The domestic Chinese soybean market has been thrown into disarray by the government's plans to shore up prices by buying up to 3 million tonnes from local farmers, trader say.
Crushers say that the price being paid by the government is around 1,000 yuan ($145.90/tonne) higher than the price of imported soybeans from the US. Consequently local farmers will not sell to the crushers unless they match the government price. This has brought trade to a standstill as crushers consider whether to import US beans.
Heilongjiang province, China's largest producing region, grows only non-GMO sybeans however, and crushers are worried that the government might impose some kind of import restriction on GMO soybean imports.
"This leaves the crushers caught between a rock and a hard place," said one trader. "They can't afford to match the government's price, yet if they do sign import deals then they still might not be able to take delivery of US beans once they arrive."
But it's not just the crushers who are complaining.
Farmers are scrambling with each other to take advantage of the government scheme. Heilongjiang is expected to produce almost 9 million tonnes of soybeans this year. With the government having already bought one million tonnes, and set to buy a further 1-2 million in the province, where is the rest going to go if the crushers buy imported beans?
China Says Six Dead In Melamine Scandal, Almost 300,000 Sickened
China's Health Ministry said six babies may have died after consuming tainted milk powder, up from a previous official toll of three, and announced a six-fold increase in its tally of infants sickened in the scandal - to nearly 300,000.
It was the first time since Sept. 21 that health authorities have revised the total number of babies sickened by milk powered adulterated with the industrial chemical melamine. The previous total was about 50,000.
Ukraine Oilseeds Production 2008/09
UkrAgroConsult estimates Ukraine now to produce 6.0 mln t of sunseed in marketing year 2008/09 (July/June). This is up from the previous forecast of 5.5 mln t and last year’s 4.7 mln t. Crush is now expected at 5.4 (5.1; 4.5) mln t and exports at 550,000 (400,000; 75,000) t.
The country's rapeseed production estimate was left unchanged at 2.8 (last year 1.1) mln t as well as the crush at 385,000 (210,000) t and the exports at 2.4 mln (875,000) t.
Soybean production is still seen at 860,000 (700,000) t, crush at 430,000 (300,000) t and exports at 325,000 (300,000) t.
Canadian Canola Supply And Demand 2008/09
Oil World estimates Canada’s canola production in the marketing year 2008/09 (Aug./July) at 11.7 mln t which is up from the 9.6 mln t produced in the previous year.
Exports are expected to reach 6.1 (5.8) mln t and crush 4.4 (4.1) mln t. This should result in higher ending stocks of 2.5 (1.5) mln t.
As Baltic Dry Index Continues To Fall, The World Is Getting Smaller
The Baltic Dry Index, which measures dry bulk shipping rates on 40 routes across the world, sank to 700 points Monday. The index has plummeted 94% from its all-time record high of 11,793 points late May.
The collapse is said to be a result of the financial crisis, a dispute between Chinese steel mills and Brazilian ore producers and slowing economic demand.
"The sudden and extreme lack of demand for freight has left everybody stunned," said a spokesman for the Baltic Exchange.
It now costs less to ship goods across the world than at any time since 1986.
Reuters report that "the average time-charter rates on four top export routes traded under $3,000 per day last week for Capesize merchant ships, the largest class of vessel. That compared with around $234,000 per day in June."
This really does make the world a level playing field.
Overnight Market Developments
The overnight eCBOT market is mixed, with beans and wheat a couple of cents firmer and corn a couple lower.
Crude is again firmly entrenched below $50 at $47.95/barrel as more evidence emerges that the global recession is going to get substantially worse before it gets better.
US stocks closed sharply lower last night and Asia has picked up on that theme this morning, with Japan's Nikkei falling 6.4%, and Hong Kong's Hang Seng dropped 4.9%.
Stock markets in South Korea, the Philippines, Taiwan and Singapore also fell.
The FTSE100, the French CAC40 and German DAX have all opened around 1% lower in early trade,
There are some signs that the grains sector is managing to divorce itself a little from these outside markets.
Wheat is a little firmer though, after the Canadian Wheat Board said that it expects world plantings to be 3% lower next season, that is almost double the figure estimated by the IGC last week, and to my mind still a bit ambitious.
Even with plantings down "just" 3% it is the final production numbers that are going to be of more importance. As mentioned last week, on the balance of probability, yields could be significantly reduced in 2009, leading to a sharply lower world output.
Japan is looking for 72,000mt of US/Canadian wheat in a tender this week.
The Eastern Australian harvest is now said to be running around three wheeks behinds schedule, after more heavy rains battered NSW and southern QLD at the weekend. Trade estimates are that somwhere in the region of 1-2mmt of wheat will be downgraded to feed as a result of these rains.
Of an estimated 40-50% of the northern NSW crop still to be harvested, at least 60% is likely to be downgraded, one analyst said. With feed wheat around A$100/tonne cheaper than milling wheat, this will have a significant impact on farm incomes in the region, he added.
The pound is lower again, fresh from yesterday's largest one-day drop in percentage terms since 1992, hurt by falling stocks and data showing the slump in housing and manufacturing is deepening.
At 9.15am GMT the British currency was $1.4830 against the dollar from $1.4884 late yesterday. It was at 85.06 pence against the euro from 84.67 pence yesterday.
The BOE and ECB are both expected to cut interest rates further later this week.
Certainly it would seem that the outlook for the pound isn't too rosy at the moment. This of course will mean that falling feed prices in USD terms, won't necessarily be translated into lower prices here in the UK. It may also provide some degree of support to domestic wheat futures.
CBOT Closing Comments
Cor
Corn futures closed several cents lower Monday, pressured down by outside markets. Corn futures fell to their lowest levels since Oct '07. USDA inspected 32.58 million bushels of corn for exports are slightly higher than last week but significantly below one year ago. Deliveries issued against front month December totaled 1,600. Sharp declines in crude oil and a stronger US dollar are pressuring grains at midday. Fair harvest weather last week should of allowed farmers to to almost complete harvest for the year despite the holiday. Dec -16 3.32.
Soybeans
Soybeans finished with steep losses but failed to take out the Oct lows by a mere 3 cents in the front month. Heavier trade volume and softer outside markets allowed soybeans to dive nearly 40 cents lower. The entire soy complex was pressured lower. USDA inspected 37.45 million bushels versus 40.91 MB last week but was inside trade estimates. Crude oil traded about $5 lower around $49/barrel and weighed in on prices. Jan -37 at 8.46; Dec Meal -3.70 at 252.30; Dec BO -1.47 at 31.11.
Wheat
Wheat futures are unable to shrug off spillover pressure and bearish outside markets and closed with 20 cent plus losses at the three different exchanges. CBOT wheat futures declined the furthest as CBOT corn and soybeans weighed. Deliveries issued against the Dec CBOT wheat contract totaled 3,593. USDA reported wheat inspections for export of 19.8 million bushels, which was within trade estimates and is considered neutral lending no support or pressure to current prices. A majority of the winter wheat crop is in good/excellent condition. Dec CHI -32 at 5.09' KC -27 at 5.35; MLPS -21 at 5.78.
Pound Posts Largest One Day Drop Vs USD Since 1992
Sterling fell sharply against the dollar Monday, as yet more bad economic data points towards a prolonged recession and further interest rate cuts.
The pound was down 5.2 cents to $1.486, its largest one day fall in percentage terms since sterling crashed out of the Exchange Rate Mechanism (ERM) in 1992.
Sharp falls in the FTSE 100 index - down 5.2% on Monday - also served to undermine the currency.
The pound was also down 3.5 cents against the euro, at 0.851 euros.
The poor economic data increases the likelihood that the Bank of England will cut interest rates on Thursday.
HSBC confirmed on Monday it is cutting 500 jobs across the UK, while carmaker Aston Martin announced it will cut 300 full-time and 300 temporary jobs.
Mortgage approvals also fell in October, according to figures released by the Bank of England, suggesting house prices may fall even further.
EU Wheat Crashes Lower On Outside Markets
EU wheat futures closed lower with Paris March milling wheat closing -EUR3.75 at EUR130.75/tonne. London January feed wheat fell GBP0.65/tonne to GBP92/tonne.
Sharply lower crude oil and equities markets set the tone from the off, with crude crashing through the $50/barrel level after OPEC deferred a decision to reduce output until its next meeting on Dec. 17.
European and US stocks were also down heavily, with the FTSE100, German Dax and French CAC 40 all down more than 5 percent.
The pound had a torrid day, posting its largest one day fall in percentage terms since sterling crashed out of the Exchange Rate Mechanism (ERM) in 1992.
This helped limit losses on London wheat as it should make UK wheat exports more competitive. Even so there is precious little export business around at the moment.
Farmers remain reluctant sellers at current levels, and are unlikely to return to the market now until after the new year.
By then however, some may have their hands forced, as they may need to sell to generate enough cash to pay for fertiliser and other inputs.
Some, on the other hand, may decide to reduce their fertiliser application rates, running the risk of sharply lower yields in 2009.
Pilgrim's Pride Files For Chapter 11
Embattled US chicken producer Pilgrim's Pride, the nation's largest, has finally bitten the bullet and filed for chapter 11 bankruptcy protection Monday.
A Pilgrim's spokesman said the company was reorganizing and not liquidating its assets. It also said it has received a commitment for up to $450 million in debtor-in-possession financing, arranged by the Bank of Montreal.
The company controls about 24 percent of the US market, and is a large chicken producer in Mexico, where it also has three production facilities.
Pilgrim's, which employs around 50,000 people, has been struggling along weighed down by high feed costs, falling meat prices and $2.72 billion in debts. It had been forced to negotiate a waiver from it's creditors three times in the last few months. The last waiver expired today.
A company that files for Chapter 11 gets 18 months of court-supervised protection from its creditors while it reorganises.
The Pound Is The New Leeds United
After posting it's largest weekly gain in eight years last week, sterling reverted to type Monday, plunging the best part of 4 cents on declining interest rate expectations and a 16 year low in manufacturing activity.
The increasing expectations that the BoE will cut their benchmark rate by 100 bps at their December 4th policy meeting started the Pound’s weakness before the weaker manufacturing data accelerated its decline. Inflation is expected to fall below the Central Bank’s 2% target and mounting deflation concerns has fueled the MPC’s aggressive easing policy. Meanwhile, mortgage approvals fell to its lowest level on record at 32,000 as the housing market continues to weaken dragging the economy into a severe recession.
At 1pm GMT the pound was $1.4983, having closed at $1.5340 Friday.
Of course things could be worse, you could be a Leeds supporter.
Pilgrim's Expects USD802 Million Loss In Q4 As Deadline Approaches
Pilgrim’s Pride Corp., the largest U.S. chicken producer, said it expects to report a monster fiscal fourth-quarter loss of $802 million partly because of an impairment charge from the purchase of Gold Kist Inc., reports Bloomberg.
For the full 2008 fiscal year, Pilgrim's Pride anticipates reporting a net loss of $998.6 million, or $14.40 per share, on net sales of $8.5 billion.
Pilgrim's secured a third temporary waiver from it's lenders last week, which expires noon (CDT) today.
On Friday Pilgrim's filed a formal Notification of Late Filing with the Securities and Exchange Commission (SEC) that its annual 10-K report will be late.
The 10-K is a comprehensive summary report of a company's performance that must be submitted annually to SEC.
Typically, the 10-K contains much more detail than the annual report. It includes information such as company history, organizational structure, equity, holdings, earnings per share, subsidiaries, etc.
eCBOT Close/Early Call
eCBOT grains started the new month in similar vein to November, lower. Indeed November was the fifth straight months of declines in the grains complex on speculation that a slumping global economy will reduce demand for meat, milk and eggs.
Soybeans and wheat closed the overnight session around 15 cents lower, with corn down around 5 cents.
Crude oil is a couple of dollars lower around $52/barrel, after OPEC over the weekend deferred a decision to cut production to boost prices to it's next meeting in Algeria later this month,
Early calls for this afternoon's CBOT session: Corn futures are expected to open 4 to 6 lower; soybeans 13 to 16 lower; wheat 13 to 16 lower.
London Scottish Bank Goes Under
London Scottish Bank, the lender which specialises in customers with poor credit histories, plunged into administration this morning after regulators stopped the group from accepting customer deposits, reports the Times.
In a statement, LSB said it had sought an administration order yesterday and that Ernst & Young had been appointed as administrator.
London Scottish specialises in offering fixed-rate savings accounts and loans to customers with poor credit histories.
With around 10,000 savers, the bank has some £250 million in customer deposits and employs around 700 people.
In the six months to April 2008, it unveiled losses of £7.4 million.
The government pledged that no savers would lose money as a result of the bank’s collapse, even if their savings exceeded the £50,000 limit set by the Financial Services Compensation Scheme.
Ag Commodities Set To Be Star Performer Of 2009
Agricultural commodities are set to lead the way in 2009, outperforming metals and crude oil, some analysts are starting to say.
A bad crop year for coffee in 2009, could see the world run dry, they add.
It would appear to make sense that if anything is going to stage a price recovery then food commodities should be the first to do it.
A by-product of the current malaise that the world presently finds itself in is significant cutbacks in fertiliser and insecticide applications. Sales of fertiliser in Brazil for example were down by more than a third in October compared to a year ago. That potentially leaves crops perhaps more vulnerable in 2009 than they have ever been. This could mean significantly lower yields on many agricultural commodities next season.
Scare-mongering bollox or astute forward thinking?
"When everyone's a buyer, let them have it. When everyone's a seller, take it off their hands."
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Yes, We Have No Bananas
Despite its unmistakably phallic appearance, it hasn't had sex for thousands of years. The world's most erotic fruit is a sterile, seedless mutant -- and therein lies a problem.
The original banana was first harvested from the jungles of Southeast Asia over 10,000 years ago. But its Stone Age discoverers had to chew on hundreds of hard seeds that provided the banana with its ability to reproduce and evolve new traits in an ever-changing landscape.
Thanks to Mother Nature (also known as evolution), occasional bananas grew without seeds. These were eagerly devoured but also widely cultivated by planting cuttings, leading eventually to a world of sterile bananas. Over time, banana crops became ancestors of these few seedless individuals, and the original, wild strains of banana have almost all been cleared.
But now fungal disease called Black Sigatoka is threatening the global banana crop. First observed in Fiji in 1963, this new virulent epidemic has spread throughout Asia.
Growers in Central America are waging a chemical war to keep their banana crops healthy, and consequently bananas are arguably one of the most heavily sprayed crops worldwide. Women in Costa Rican banana-packing plants reportedly suffer double the average rates of leukemia and birth defects, and many male banana pickers become sterile.
Even though the most toxic chemical, called dibromochloropropane, was banned, many other fungicides are still used generously, in hopes of keeping Black Sigatoka in check. Only one dirty boot traipsing in Asia and then flying to Costa Rica will be enough to transplant the spores to the new world. It is only a matter of time, given the mobility and carelessness of human travelers.
Other plants have similarly lost their sex lives due to industrialized agriculture. By this process, growers lose nature's plasticity, otherwise known as the gene pool, that allows plants to combat future diseases or enemies.
Grapes, coffee, tomatoes and soybeans have all been reduced to one or two dominant strains planted throughout the world, making them extremely vulnerable to disease. Humankind has not been prudent about saving wild stocks of these important plant species. Wild stocks may be the only salvation to a future harvest, since they contain the genetic variability that may counter disease and insect attacks.
So, banana lovers, it may be time to develop an appetite for an alternative fruit. The future of bananas is in jeopardy because humankind has created a monoculture of sexless, genetically identical bananas that may not be genetically capable of survival.
UK Mortgage Lending Slumps
Mortgage lending collapsed in October, as it dived by nearly 70% over the month to reach the second lowest figure on record, the Bank of England has said. Skip related content
Just £459m was lent during October, well down on September's £1.49bn and only 6% of the level for October 2007.
Also, mortgage approvals fell to 32,000 in October, matching August, which was the lowest since records began nearly a decade ago.
Australia Battered By Weekend Rains
More than 120 millimetres (4.7 inches) of rain has fallen since Friday in parts of northwest New South Wales -- a major wheat growing region.
At least one million tonnes out of an expected 20 million tonne crop were likely to be downgraded from prime quality to feed grade, officials said on Monday.
They said some crops in parts of the eastern states of New South Wales and Queensland that grow prime quality wheat had been severely damaged by wet weather last month which continued into the weekend.
Crops in the southern part of Western Australia were also at risk because of wet weather at harvest time.
"There's a lot of crop damage, anything that's left will be downgraded," said Gavin Warburton, a crop analyst at private consultancy Australian Crop Forecasters.
Mr Warburton said the rain was not likely to affect the size of the harvest but crop quality was a significant issue.
Warburton said that before rains damaged crops between 12-13 million tonnes of wheat had been expected to available for export from the 2008/09 harvest.
Brazilian Soy Planting Progress
The 2008/09 Brazilain soybean crop is 75% planted as of Nov. 27, according to consulting firm AgRural.
This is slightly behind last year's pace of 77%, they added.
AgRural said Mato Grosso state, Brazil's leading soy producing state, has planted 97% of its soy for 2008-09. Planting in Parana, the No. 2 producer, was 89% done, they said.
AgRural estimates that Brazil will harvest 61.8 million metric tons of soybeans in 2008-09.
China's 2008 Grain Output Reaches Record Levels
China's 2008 grain production is set to reach record levels in 2008, coming in at around 525mmt, according to the official Xinhua News Agency.
Output in 2007 was said to be "in excess of 500mmt" and production in 2006 was 497.45mmt.
This year marks the fifth year in succession that China's grain output has increased year-on-year, itself also a record.
Crude Down As OPEC Delays Production Decision
Crude oil fell below $53 a barrel in New York after OPEC deferred for another two weeks a decision to reduce output.
Slowing global growth means demand will be “much lower” than expected a month ago, OPEC said in a statement after the group’s Nov. 29 meeting in Cairo.
"Market assessments indicate that the market has around 2m barrels per day of oversupply," Iran's oil minister, Gholamhossein Nozari, said yesterday. "In Algeria we will have to make a decision to establish balance between supply and demand."
The cartel meet again in Algeria in a fortnight. As the meeting in Cairo this weekend illustrates, there are unmistakable signs that the group is struggling to maintain its unity.
The Gulf states, led by Saudi Arabia, are unwilling to approve further supply reductions before other members of the cartel - particularly Iran and Venezuela - follow through on previous commitments to cut output.
At 8.45am GMT crude was $2.31 lower at $52.12/barrel.
Brazilian Farmers Feeling The Pinch
Cash-strapped Brazilian farmers are feeling the economic pinch, cutting back on fertilisers and other inputs as loans dry up. Bunge have cut back advance payments to farmers by 70% on a year ago, and farm machinery is being repossessed as growers fail to make debt repayments.
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