I've Had My Crystal Ball Out Again
You're an Argentinean farmer. Your wheat crop has just been decimated by drought. Your soybean and corn crops look like going the same way. Your cattle are dead or dying of thirst. The government don't seem to care. They are still taxing you to the hilt on agricultural exports. You've been on holiday throughout January, but those holidays are about to finish. The President is away overseas whilst the country is in the grip of the worst drought for over 100 years. The coming harvest, such as it will be, doesn't begin until March/April. You've got a bit of time on your hands, and the missus is giving you grief. What are you going to do??
Has anyone got any matches? I'm getting Déjà Vu here.
Buenos Aires Cereals Exchange Slashes Production Estimates
A bevvy of official estimates are now starting to appear, confirming what unofficial estimates have been saying for a while now - that this season's crops in Argentina look like coming in well below original projections.
It reminds me a little of the news reports on TV every night for the last six or eight months warning that "there is a danger that Britain is entering a recession."
Everybody knew we were in one, it just took a while for "official proof" to confirm it.
Well that's what seems to be staring to happen in Argentina now. The country is in the grip of it's worst drought for 100 years, and crop production estimates are being slashed.
The Buenos Aires Cereals Exchange said Friday that the recently harvested wheat crop produced 8.7mmt, 46% down on last season. The Argentine Ag Secretariat says things are even worse, that final production is in fact 48% down at just 8.3mmt, from 16mmt a year ago. Wheat export permit applications are now being rejected by the agricultural trade office Oncca.
The BACE goes on to say that soybean production in 2009 will be 17-25% down on 2008, giving us a crop in the region of 36mmt if we take the middle ground. That's 13.5mmt lower than the current USDA estimate. Private "unofficial" estimates I have heard of say that a crop as low as 30 million is on the cards unless they get significant rain soon.
For corn the Exchange say that production could fall even more, by 33-40% to around 13mmt, that's 5 million below that USDA at the moment.
The chill note is that the Exchange go on to say that without significant rains in the next few days yields for both crops could fall further.
The USDA attache is set to do his rounds and assess the situation next week ahead of their revised production estimates due out Feb 10. If this weekends rains disappoint, it could already be game over by then.
EU Wheat Closing Comments
EU wheat futures closed higher Friday, following strong gains in Chicago and a firmer dollar.
Paris March milling wheat closed up EUR2.75 at EUR152.00/tonne. London May feed wheat ended up GBP1.25 at GBP123/tonne.
UK futures were supported by the pound plunging to it's lowest levels against the US dollar since 1985.
In the UK the latest available customs data only runs to the end of November. That shows 1.65mmt of UK had already been exported as of that date, with about a third of that tonnage going to Spain.
Up to Jan. 20, EU-27 wheat export licences had been issued for 12.405mmt during this marketing season (July08/June09), a 250% increase from 3.537mmt as at the same time last season.
Although this highlights that exports are progressing well, they need to maintain this pace to avoid having a large carryover into next season.
The condition, and potential size, of next season's crop will start to become clearer over the next couple of months. Official estimates at this stage seem to range from a crop only 2-3% lower than 2008's to maybe up to 8-10% lower. Weather and the magnitude of fertiliser application in the spring will decide.
As you probably know I don't usually like to go with the crowd, I'm going for a 15% reduction on a combination of late plantings, poorer soil conditions and reduced inputs. Plus you can throw in some weather-related yield losses somewhere or other too.
CBOT Closing Comments
Corn
Corn raced higher from the off, buoyed by stronger than anticipated weekly export sales in excess of 1mmt. Futures retreated from session highs later in the day however as soybeans failed to break through technical resistance and fell away. The market is nervous ahead of what may, or may not, happen weather-wise in Argentina over the weekend. Monday's session should be interesting as traders discover the extent of any rains that may have fallen in Argentina and southern Brazil Sunday night. March corn finished at $3.90 1/2 , up 3 cents
Soybeans
Soybeans also raced higher early in the session before falling away at midday. As with corn weekly export sales were above expectations at nearly 1.33mmt, unlike corn this was just the latest in a string of strong weekly sales for soybeans. As the session wore on however the uncertain nature of weekend weather in South America encouraged traders to close out some positions after session highs failed to take out technical resistance levels. China has been a big buyer of US beans this last few weeks, however Lunar New Year celebrations begin next week, and that could kill Chinese export interest for a couple of weeks. March soybean settled at $10.09, down 3 cents.
Wheat
Wheat took off from the start supported by the first decent weekly export sales figures of 2009. Weekly exports came in at 413,300mt compared to trade estimates for 200-400,000mt. Fund shorts came under pressure as prices rose triggering buy stops which probably extended wheat's gains more that the fundamentals would have allowed. The Buenos Aires Cereals Exchange lowered it's estimate for final Argentine production for the recently harvested crop to 8.7mmt, that's a reduction of nearly 46% on last year. The Argentine Ag Secretariat peg the crop even lower at 8.3mmt, 48% down.
USDA Reports Impressive Weekly Export Sales
The USDA reported impressive weekly export sales across the full range of the grains sector Friday.
Soybeans had another strong week with net sales of 1,324,800 MT for MY 2008/09, against trade expectations of 750-950,000 MT.
Corn sales came in at 1,086,100 MT for MY 2008/09 - a marketing-year high - compared to trade ideas of 400-600,000 MT.
Wheat sales have been lagging recently, but they also came in above expectations at 410,300 MT vs the 150-350,000 MT anticipated.
For the record soymeal sales were 210,800 MT, compared to 75-150,000 MT expected. Soyoil was withing range at 7,500 MT.
In addition to these positive numbers the USDA also reported fresh sales today of 145,000 MT soybeans to China and 102,616 MT of corn to Japan.
EU/UK Wheat Export Pace
Up to Jan. 20, EU-27 wheat export licences had been issued for 12.405mmt during this marketing season (July08/June09), a 250% increase from 3.537mmt as at the same time last season.
In the UK the latest available customs data only runs to the end of November. That shows 1.65mmt of UK had already been exported as of that date, with about a third of that tonnage going to Spain.
Total grain export licences in the EU-27 have been issued for 18.45mmt, compared to 9.66mmt a year ago.
EU-27 Rapeseed Crush Up 14 Percent
According to Oil World, the total oilseed crush in the EU-27 reached 19.8mmt in the first six months of marketing year 2008/09 (July/June), 5% above the 18.9mmt crushed in the same period of the previous MY.
Significant increases came in the rapeseed crush, which was 10.4mmt, 14 percent higher than the 9.1mmt crushed at the same time last season. The sunseed crush was also up sharply, by 17% to 2.7mmt from 2.3mmt previously.
The soybean crush was 6.8mmt, down 9% from the 7.5mmt crushed a year ago.
Get The Bunting Out: We're In Recession
Thank Christ for that. We are now officially in a recession. So that hopefully means that I will never have to hear another newsreader say "fears are growing that Britain could be entering a recession," or something similar.
We are in a recession for the first time since 1991, after the economy shrank at the fastest pace for nearly 30 years in the fourth quarter.
Maybe now instead of worrying that we might be entering one, we can start figuring out how to get out of one?
On a very worrying note Gordon Brown admitted that he'd 'failed to see the looming economic crisis' - he must have been the only one then!
The pound fell to $1.3505 on the news, it also slipped below 1.06 against the euro.
London wheat was 75p higher as the pound sank to it's lowest level against the dollar since 1985.
On a brighter note, Everton did the League and European Cup Winners Cup double in 1985, so maybe this is a good sign?
Ukraine Grain Exports
Ukraine has exported around 14mmt of grain in the first seven months of the 2008/09 marketing year starting July, according to Ukraine's Deputy Ministry of Agrarian Policy, Yaroslav Hadzalo.
Hadzalo said that in the six months of the marketing year (from July 1 to January 1), exports came to over 13 million tonnes and almost 1 million tonnes in the first twenty days of January.
The ministry has now raised its estimate for total grain exports for the full marketing year by 2mmt to 25mmt.
Overnight Markets
eCBOT grains are a tad easier Friday, with beans down 1-2c, wheat 1-3c lower and corn 5-6c easier.
All eyes are on Argentina this weekend with a chance of rain Sunday/Monday. Rains were in the forecast last weekend too, and they largely failed to materialise. Most of the forecasts I am reading are using words like 'scattered' or 'isolated' or 'light showers' so I don't hold out too much hope for any serious drought-busting going on.
But the threat is probably enough to keep a lid on any rally attempts this side of the weekend.
Recession fears are also weighing on the market this morning. The USDA weekly export sales report, due out at 13.30GMT, may provide some pointers this afternoon. Trade estimates are: soybeans 750-950,000mt; corn 400-600,000mt; wheat 150-350,000mt; soymeal 75-150,000mt; soyoil 0-10,000mt.
South Korea bought 110,000mt of corn, half US and half South American in an overnight tender.
Pakistan is expected to buy 250,000mt of wheat over the weekend and possibly a further 150,000mt at the end of the month.
Australian ASX March milling wheat is A$3 lower at A$293.50/tonne.
Crude oil is under pressure after stockpiles rose dramatically yesterday, up 6.1m barrels against expectations of an increase of just 1.4m barrels. Crude stocks at Cushing, Oklahoma - the delivery point for NYMEX crude - were the highest on record at 33.2 million barrels. That's a lot of oil.
All this comes at a time when US refineries are only operating at 83.3% capacity, the lowest level for this time of year since 1991.
The pound appears to have arrested it's steep decline, flattening off around $1.3660 against the dollar and 1.0640 against the euro.
Official data due out later is expected to confirm that the UK is in recession, apparently. Shock, horror, that crept up on us unseen didn't it? I can't imaging that the official confirmation of what every man, woman & child in the country already knows should make much difference to the exchange, but you never know.
Argy Soy Latest
First the good news. There is some rain forecast for Sunday night/Monday morning in Argentina.
Second the bad news. It is not forecast to be a drought busting rain event.
Thirdly, more bad news. Even warmer and drier weather is forecast to return by the middle of next week.
Fourthly, analysts are finally starting to tentatively put some numbers on the 2009 crop. And largely it doesn't look pretty. Around 89% of original planting intentions for soybeans are so far in the ground. Some are saying that it won't get much higher than this.
According to Panagricola S.A. vice president Ricardo Baccarin, the Argy crop will produce around 41-42mmt in 2009, and production could fall even further without significant rains soon, he says.
We can be pretty sure that the USDA will reduce its estimate for Argy production significantly in their next report. The agriculture attaché in Argentina will begin scouting production potential in Entre Rios on January 26 and working outward through the 28th and have results on January 30th just days in front of the February 10th USDA crop report.
As we know, the favourite tactic of the USDA is 'be conservative' so a more modest production revision is likely, maybe say in the region of 46.5mmt, down 3mmt? More aggressive private estimates say that without rains we could easily have a crop number starting with a three. And the last number won't be a high one either!
CBOT Closing Comments
Corn
Corn opened lower and stayed there. The Energy Department released its Weekly Stocks Report for the week ending January 16. Weekly US Crude Oil Ending Stocks were up 6.1 million barrels, sharply greater than the expected 1.4 million. Losses were limited by the Argy drought although there is some rain in the forecast for Sunday night/Monday morning. March corn closed at $3.87 1/2, down 2 3/4 cents
Soybeans
Beans also finished lower, again the crude oil stocks data was bearish, but Argy weather concerns underpinned. Forecast weekend rains in Argentina may provide some relief for crops, without alleviating underlying drought conditions, analysts said. A return to hot, dry weather in Argentina is forecast by the middle of next week, giving uncertainty of any benefits the rains will bring. March soybean settled at $10.12, down 8 1/2 cents
Wheat
Wheat remains a follower. Spillover bearish pressure from the outside markets and spillover bearish pressure from corn and soy were the main reasons why wheat futures fell today. Japan and Egypt bought some US wheat in tenders this last day or two which was mildly supportive. March CBOT wheat finished at $5.66 3/4, down 5 cents.
EU Wheat Ends Higher On Currency
EU wheat futures closed higher Thursday as the dollar continued to rise against sterling and the euro, in theory making European wheat more competitive on the export front.
March Paris milling wheat closed up EUR1.75 at EUR149.25/tonne, and May London feed wheat ended up GBP2 at GBP120.75/tonne.
Futures were boosted in early trade by a higher close in CBOT Wednesday, the dollar moving higher throughout the morning provided additional support.
Egypt bought 60,000mt French wheat Wednesday, which also helped.
Although EU-27 winter wheat plantings are lower for 2009, sub-zero temperatures are thought to have so far offered little threat to dormant crops.
The picture will become clearer in the spring.
Rising EU prices may encourage more farmers to apply fertilisers than had originally been anticipated.
For now, the jury is out on the EU crop for 2009.
Microsoft: 5,000 Jobs Go Out Of The Windows
It seems that even the mighty Microsoft isn't immune from the global meltdown afflicting the IT industry.
Announcing quarterly results that fell short of analysts estimations, the company said that it would cut up to 5,000 jobs in the next eighteen months, with 1,400 of them effective immediately. Not a happy vista for those.
"Economic activity slowed beyond our expectations in the quarter, and we acted quickly to reduce our cost structure and mitigate its impact," the company said in a statement. "We are planning for economic uncertainty to continue through the remainder of the fiscal year, almost certainly leading to lower revenue and earnings for the second half relative to the previous year."
Microsoft is the latest in a line of IT and electronics giants to see profits fall & announce job losses. Intel, Sony, Ericsson, LG, Motorola, Nokia and Dell have all slashed jobs and/or reported sharply lower sales and earnings in the last few weeks.
You can't eat a mobile phone can you.
US Jobless Claims Leap
The number of new jobless claims continues to rise rapidly as US companies continue to cut jobs at a furious pace.
US workers filing new claims jumped 62,000 last week to 589,000, compared to analysts expectations for an increase of only 26,000.
The total matches a 26-year high reached four weeks ago.
The number of people continuing to seek benefits is now 4.6 million, up sharply from 2.7 million a year ago.
The dollar had a little wobble shortly after the data was released, although it is clearly apparent that this isn't exclusively an American problem. Many large corporations such as Sony, Intel and Ericsson have announced global job losses in the last few days.
eCBOT Close/Early Call
The overnight grains closed steadier, with beans around 5c higher, wheat 3-4c firmer and corn up 1-2c.
The situation in Argentina continues to go from bad to worse. Not only has the wheat crop been almost halved, but it seems that farmers have scaled back soybean plantings quite sharply too.
With no rainfall in the forecast this side of the weekend and temperatures in the mid-90's corn & soybean crops are under severe stress.
Current forecasts indicate temperatures climbing into the upper 90's/low 100's range across Saturday/Sunday.
Brazil, in contrast, seems to be enjoying largely favourable conditions, with the possible exception of the far south.
China imported 3.297mmt of soybeans in December figures from their Customs reveal, that's a near 13% increase on the previous year.
Lunar New Year celebrations begin next week, however, so China could well be missing from the market shortly.
Crude oil is around the $43-44/barrel mark ahead of this afternoon's Energy Dept stocks data, which is a day later than normal due to the Martin Luther King holiday. It looks like the USDA weekly export sales report will also be a day late, so that won't be out until tomorrow.
It is interesting to note that there is now only a spread of around $2 between spot March and April. The differential between the front and second month had been running at $6-7 before the Feb contract expired.
Early calls for this afternoon's CBOT session: Corn futures are expected to open 1 to 2 higher; soybeans 4 to 6 higher; wheat up 2 to 4.
IT/Electronics Leading The Way In Job Losses
Chip maker Intel has said it is shedding 5-6,000 jobs by closing five factories in Asia & the US.
Microsoft's second-quarter results, due today, are widely expected to show a shortfall in the company's own targets, and analysts are predicting that major job losses will follow.
Swedish telecoms equipment Ericsson are cutting 5,000 worldwide as part of their restructuring after announcing a 31% drop in fourth-quarter profits.
Sony Corp. said that it expects to announce record losses for the year ending March 2009. The company is expected to make further job cuts on top of the 16,000 already announced late in 2008.
Motorola Inc., announced last week it would cut a further 4,000 jobs as demand languishes under the strain of the recession.
Nokia, the world’s biggest mobile-phone maker, has also revealed falling sales, with fourth quarter profits falling more than analysts expected.
Argy Drought Affecting Sunseed Production Too
Oil World has revised down its estimate for Argentina’s sunseed production in 2009 to 3.0 mln t from its previous forecast of 3.5 mln t. Last year, 4.4 mln t was produced.
Soy Production In Argentina 'Not Viable'
Argentine "Soy King" Gustavo Grobocopatel, the second largest arable farmer in Argentina after George Soros, said over the weekend in Buenos Aires "If soy export taxes remain at 35% and commodities don’t recover the prices of the early part of 2008, next year many people will be going bankrupt because with current costs oilseed production is not viable."
"As the income costs equation is currently structured, all farm production in Argentina becomes non viable," he added.
Grobocopatel said that farmers are in a strait-jacket of sliding export taxes and warned that current levels make it impossible to farm at a profit.
The government of Argentina on Tuesday, denied rumours suggesting they were going to lower the export duties of soy. Farm leader Eduardo Buzzi, said that a 5% cut of the soy tax is essential and that Argentine farmers "were are worse off than in the 90’s."
With the governments' wheat revenue looking badly hit in 2009, it doesn't seem very likely that a tax reduction will be on the cards for soy this year. They'd probably like to raise tariffs to balance the books, but we all know what happened last time they tried that!
VeraSun Reveals Only Four Of It's Plants Are Operational
If ever you wanted further proof that the US ethanol industry is an entire pack of cards waiting to collapse then here it is.
VeraSun, which is, or rather was, the second largest US ethanol producer says that only four of it's sixteen US plants are operational. The other twelve are all what VeraSun calls "hot idle" - ie not operational. Shut is one way of putting it, but hot idle sounds kind of sexy doesn't it?
"Hey Chuck, we're hot idle here & just waiting for the word to set this baby rolling."
"As soon as oil goes back up, corn prices come down, they double our tax break and Obama single-handedly turns the world economy round we're ready to go."
A Very Special Fertiliser Market Report
How many of these have you seen recently....
Mr X, Fertiliser Marketing Manager of Company Z PLC, says that there is just a very tiny window of opportunity left for UK farmers to get their fertiliser orders in whilst a few bits are left.
"The market is very tight indeed, we're running out actually, we can possibly take one or two more orders then we are closing the books," said Mr X.
"We're literally down to the last couple of bags, Russia, plant closures, no gas, economic worries, currency, blah, blah."
"World prices are still very high, we've dropped our price because we care about our customers at this difficult time."
"There is nothing left for sale anywhere on the international market, its all gone. Luckily though we've got seventeen vessels of the stuff on the way to the UK as we speak. But that's all sold, honest. Twist my arm, we could probably squeeze a few more orders in before prices go up next month. If you don't order it today, you won't get it."
"And whilst we're at it that drive needs doing, have you ever thought about a conservatory? That pointing looks awful, the whole lots going to fall down at any minute. I've got a lorry load of tarmac you can have for half price. Look at the state of that guttering. You can have all your gas & electric for half of whatever your paying now. It's a special offer that ends today. Oh look, I've only got one left. We're virtually giving it away. It pays for itself after three months. Only one careful previous owner. Don't worry about that, it'll soon wash off. Come on I'm trying to do you a favour here Guv, and I'll even throw in a pigs dick for the dog," he added.
Two Sentenced To Death In Melamine Scandal
Two men have been given the death sentence for their involvement in the Chinese melamine in baby milk scandal.
The female former boss of the Sanlu group at the centre of the scam has got away with life imprisonment.
Other former Sanlu executives were given jail sentences of varying terms.
General Business News - Incl Video
Sony announced overnight that it expects to post a 260 billion yen ($2.9 billion) loss the the current financial year. This has shocked a market anticipating a loss of around 100 billion yen, and it would be the company's largest loss ever. In December Sony announced it was cutting 16,000 jobs world-wide, it now says it will announce details of further restructuring later today.
Apple on the other hand reported a record net profit of $1.61bn (£1.15bn) and posted record revenue of $10.7bn for the quarter to the end of December.
'There will be only two London-listed banks left by the end of 2009,' says the Telegraph today: here
Morrisons report a sales increase of over 8% over Christmas as shoppers tightened their belts and moved into lower-priced foodstuffs.
The FTSE has opened higher, with the banks being three of the top four gainers. RBS up 16.8%, Lloyds up 15.3% and Barclays up 10%. Cranswick appear amongst the top ten losers, down 2.4%.
The pound is up from a 23-year low of $1.3620 hit yesterday at around $1.39.
Overnight Markets And The Beginning Of The End For Kirchner?
eCBOT grains are narrowly mixed in what, for once, has been a relatively quiet and stable overnight session, with wheat 2-3c higher and soybeans & corn down 1-2c.
In Argentina there is still no rain in the 24 hour forecast for the soy and corn areas highlighted:
The Argy Ag Secretariat yesterday lowered its estimate for corn & soybean plantings due to the drought. Bean area was cut sharply to 16.5 million hectares (41 million acres) from a previous estimate of 17.8 million hectares. Corn area was cut more modestly from 3.5 million hectares to 3.4 million.
Now that the Argy wheat harvest has been completed, the Ag Secretariat reduced its estimate for final production to 8.3mmt. This is a huge decrease on last season and leaves the country with very little to offer on the export arena for the whole of 2009.
As a side issue, very little wheat to export also means sharply lower revenues for the Kirchner-led government. If the soy and corn crops prove to be similarly drought afflicted, and I think they will, this is going to blow a massive hole in the Argy budget this year. The strikes and civil unrest of 2008 will start to look like a walk in the park. Bye bye Mrs Kirchner.
Japan has bought 157,000mt wheat overnight, as expected, 90,000mt of it US material. Egypt also bought wheat late yesterday afternoon, some of it also being US origin. It's nothing that much to write home about, US weekly export sales will be scrutinised later this afternoon to see if they throw up any pearls of wisdom.
Weekly export sales for soybeans have been very strong so far this year, the trade will be hoping that that trend continues later today. Meanwhile, South Korea is seeking to buy 165,000 tons of corn today.
Australian wheat futures are higher overnight with front month ASX march milling wheat A$6.50 higher at A$296.50/tonne, A$45.50 up from the contract low set mid-December.
CBOT Close
Corn
March corn finished at $3.90 1/4, up 6 3/4 cents. Support came from the release of lower acreage estimates from Argentina for corn, soybeans and lower final production numbers for wheat. The report noted that corn crop areas are forecast to decrease to 3.4 million hectares from 3.5 million, and that high yields are 'unlikely.' Weather in Argentina continues to go from bad to worse meanwhile with only light showers in the forecast, Crude oil also finished higher which added to the bullish tone.
Soybeans
March soybean closed at $10.20 1/2, up 28 1/2 cents. Beans where the leader again today as rains in Argentina continue to be very thin on the ground. A reduced planted area in Argentina was also supportive. The Ag the Secretariat stating that the soy crop area is forecast to be 16.5 million hectares from 17.8 million. USDA AMS this morning reported 37.03 million bushels of soybeans inspected for exports for the week ending 1/15/09. This is an increase of 37.23% from the previous week and an increase of 1.4% from that time last year. This reflects the continuation of strong US soy export demand which provided further bullish support to soy futures.
Wheat
March CBOT wheat settled at $5.71 3/4, up 21 3/4 cents. Spillover strength from soybeans helped wheat, as did a modest sale of 60,000mt to Egypt. Lower production estimates from Argentina was also supportive as was a slightly weaker dollar.
EU Wheat Futures End Mixed
EU wheat futures closed mixed with Paris March milling wheat ending down EUR1.00 at EUR147.50/tonne, and London May feed wheat ending up GBP0.75 at GBP118.75/tonne.
London wheat benefited from the pound's shortcomings, with reasonable consumer interest on talk that $1.30 was on the cards over the next week or so. Having fallen by 12 cents against the dollar already this week, who's to say it can't happen?
A weak sterling is obviously pushing prices higher for competing raw materials in feed rations. It should also be helping make UK wheat more competitive abroad.
There is precious little evidence of this so far however. Egypt bought a combo of French, US and Russian wheat in a tender today which buoyed markets on the continent somewhat, but UK wheat was never really in the frame due to quality issues.
EU winter temperatures have warmed up for the time being, reducing fears of winter kill.
Argentina: Wake Up And Smell The Coffee, Before It Runs Out
The Argy Ag Secretariat has slashed its 2009 wheat production estimate to 8.3mmt following a year of drought conditions in the country.
This is the lowest estimate yet for the current crop, and is 7.7mmt lower than the output in 2008 of 16mmt.
I think that this graphically highlights exactly how bad things are in Argentina, a situation I believe that most of the trade has so far been ignoring.
Yes the global economy is in very bad shape. But for heavens sake wake up & smell the coffee. Before it runs out.
Argentina has just finished harvesting a wheat crop almost half of last years. It has also just finished planting a soybean crop in the same ground, in the same drought situation, with a twelve month deficit of soil moisture. Exactly how well do you think that that is going to yield? With no water and no fertiliser?
Incidentally, Argentina was the world's fifth largest exporter of wheat last year. With a domestic consumption of around 7mmt, in 2009 it now has an exportable surplus of just 1.3mmt, a third of that of the UK!
The Ag Secretariat also today lowered the soy planted area to 16.5m ha from 17.8m ha and for corn to 3.4m ha from 3.5m ha.
Argentine soybean production in 2009 could be 15-20mmt down on current projections from the USDA.
The Brazilian crop is holding up comparatively well, but take 15-20 million off the table, that is one very significant reduction in global supplies.
Egypt Buys 178,000 Wheat In Tender
Egypt wheat buyer GASC says it has bought 178,000mt of mixed origin wheat in a tender concluded Wednesday.
The wheat purchased was roughly split three ways comprising French, US and Russian wheat, all around the $190/tonne FOB range.
The original tender was only for 55,000mt, but Egypt frequently buys more wheat than originally tendered for.
eCBOT Close/Early Call
eCBOT grains closed mixed, with wheat 4-5 cents higher, soybeans 3-4 cents lower and corn down 2-3 cents.
Early calls for this afternoon's CBOT session: Corn futures are expected to open 1 to 3 lower; soybeans 3 to 4 lower; wheat 2 to 3 higher.
There is still no sign of much rain for the soy and corn growing areas of Argentina, which should underpin bean and corn losses.
Not that beans need much underpinning with export sales very robust this past few weeks. In other export/tender news:
Taiwan bought 99,000mt US/Brazilian corn in a tender. Japan may need to buy 1mmt US corn in the remainder of Q1 according to some reports. That's good because there's precious little support coming from the ethanol sector.
Assorted wheat tenders are also kicking around, with Japan expected to buy 157,000mt wheat tomorrow, 90,000mt of it coming from the US. Egypt and Pakistan are also in the market, although the chances of them buying US wheat probably aren't great.
South Korea is also seeking to buy a total of 146,000mt of soybean meal today.
Landkom Scaling Back Ukrainian Agricultural Operations
Ukrainian wheat and oilseed producer Landkom International Plc has said it is cutting its Ukraine workforce by around 350 and halving the number of expatriate and UK-based staff. The move comes as "agricultural markets both in Ukraine and globally have sharply changed over the last six months," it says.
The firm said it was focusing its resources on its most fertile and profitable land, based around five core farms in the west of Ukraine.
This will involve retaining 75,000 hectares out of the current land bank of 115,000 hectares.
Ukraine grain and oilseed production soared in 2008 following favourable weather and a big increase in plantings to take advantage of record-high prices.
Big Banks 'Technically Insolvent'
The big US and UK banks are all "technically insolvent" experts warn.
Shares in the big banks have been under pressure all week as fears grow that the government could 'do a Railtrack' by simply confiscating the banks without paying compensation to shareholders.
At the moment Lloyds and RBS seem to be the "bookies favourite" candidates for nationalisation.
However experts warn that nationalisation of the two banks would increase national debt enormously, from 45% of GDP to about 300%. RBS alone has liabilities of nearly £2 trillion.
Meanwhile in the US much-touted economist Nouriel Roubini recently said that US banks are also "insolvent" and credit crisis write-downs there will total $3.6 trillion.
"If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion," added Roubini.
Bank of America's purchase of Merrill Lynch could be the ruin of it, analysts say. The bad assets of the brokerage firm were apparently both huge and well-hidden by management, the brokerage firm's board, or the auditors.
Citigroup's shares yesterday fell to a 17-year low just a few days after announcing a $8.29 billion loss, twice as much as analysts estimated.
There's going to be more tears before bedtime over this lot.
Dairy Crest To Cut Its Milk Price In February
Dairy Crest has announced that it will cut the price it pays its suppliers for milk from next month.
Customers on its standard liquid contract will see a 1.75p/litre reduction, while those on the Davidstow contract will have their price cut by 1p/litre.
The announcement follows similar cuts made by Arla and First Milk earlier this month.
As with those two milk buyers, Dairy Crest blamed the cuts on falling dairy commodity markets and difficult trading conditions in the current economic climate.
Wynnstay Reports Impressive Financial Year
Wynnstay Group has reported impressive results for its financial year ended 31st Oct 2008, driven by the agricultural and retail divisions.
In agriculture operating profits jumped by 112 per cent to £3.89m, whilst in retail operating profits almost doubled to £2.53m thanks partly to acquisitions.
Group profits were also helped by agricultural stock gains of £1.4m and a £600,000 profit from an acquisition.
The Group reports turnover of £235m (+50%), generating a pre-tax profit of £5.11m (+67%) and earnings per share of 29.26 pence (+49%).
New Legislation Will Allow BoE To Print More Money In Secret
The Bank of England will be able to print extra money without having legally to declare it under new legislation, heightening fears that the Government will secretly pump extra cash into the economy.
The Government is set to throw out the 165-year old law that obliges the Bank to publish a weekly account of its balance sheet. The Banking Bill, which is currently passing through Parliament, abolishes a key section of the law laid down by Robert Peel's Government in 1844.
The supposed reason for the reform, which means the Bank will not have to print details of its own accounts and the amount of notes and coins flowing through the UK economy, is to allow the Bank more power to overhaul troubled financial institutions in the future.
However, some have warned that it means: "there is nothing to stop an unreported and unmonitored flooding of the money market by the undisciplined use of the printing presses."
Forget Blue Monday, Today Is Brown Wednesday
Figures today show that unemployment rose by 131,000 in the Sep/Nov quarter, taking the number of people out of work to 1.92 million. The number claiming jobseeker's allowance increased by 77,900 to 1.16 million, according to the Office for National Statistics. Unemployment in the Sep/Nov quarter stood at 6.1%, the highest in a decade, and will surely be significantly higher now.
Meanwhile the number of job vacancies fell to 530,000 in the October-December quarter, the lowest figure since the Office for National Statistics began keeping records in 2001.
Mortgage lending fell by 30% in 2008 the Council of Mortgage Lenders said today.
Meanwhile the inflation rate declined to 3.1 percent in December from 4.1 percent the month before, the biggest drop since records began in 1997.
Gordon McBroon's £100 billion extra to bailout British Banks is already looking like a drop in the ocean.
RBS shares set the ball rolling shortly after the announcement Monday, weighing in with a £20 billion loss, and seeing it's shares fall by two-thirds. Lloyds joined the party yesterday with it's shares declining by as much as 47% at one stage.
Today it's Barclays turn, with it's shares falling as much as 35% already this morning.
Investors are panicking to get out before the whole lot get nationalised.
Analysts working for RBS told the City that "the domestic UK banks are technically insolvent on a fully marked-to-market basis".
Jim Rogers, a veteran US investor, said the UK economy was "finished". Telling Bloomberg: "I would urge you to sell any sterling. It's finished. I hate to say it, but I would not put any money in the UK."
BOE Minutes Reveal Blanchflower Voted For 100bps Cut
The release of the minutes of the Bank of England's Jan 8 meeting revealed that David Blanchflower voted for a interest rate cut of a full one percent.
The vote was split 8-1, with Blanchflower the only dissenter, the rest of the panel voting for a cut of a half point.
A half point cut could still have a "significant effect on the income of many businesses and households," according to the minutes.
It was also mentioned that a more aggressive stance, as favoured by Blanchflower, might spook the markets, damaging the economy further.
Wheat Vessel Sinks Off Marseille
A Turkish vessel carrying 3,000mt of wheat from the French port of Marseille bound for Livorno in Italy has sank overnight.
The Gunay 2's ten man crew all managed to escape unharmed.
That's one way of getting rid of your unwanted surplus I suppose.
On second thoughts, what a brilliant idea! Lets dump, sorry load, 3 million tonnes of wheat bound for Italy and scuttle the lot in the Med. Where there's blame there's a claim. Sorted.
Overnight Markets
It's all looking as clear as mud on the overnight eCBOT session, wheat is around 5c higher, with corn and beans flirting either side of unchanged.
Crude isn't doing a lot either after the expiry yesterday of the Feb contract, front month now is March - currently $40.84/barrel.
Rain still stubbornly avoids soy and corn areas of Argentina.
There are various wheat tenders kicking around which may explain wheat being a bit steadier.
Egypt is seeking to buy at least 55,000mt of wheat today. Japan plans to buy 157,000mt of the grain tomorrow, comprising a mixture of US, Canadian and Australian wheat. Pakistan is expected to conclude a tender for 250,000mt any origin wheat this week.
In addition South Korea is seeking to buy a total of 146,000 tons of soybean meal today.
Japan, the world's biggest corn importer, may still need to buy 1 million tonnes of the grain for March shipment according to media reports. Japan buys almost exclusively from the US.
A sharply weaker pound may be supportive to UK wheat futures as the day wears on.
Unemployment data and the BOE minutes are both due for release at 9.30am, don't be surprised to see more bad news and the pound under further pressure later in the day.
Pound Falls To Lowest Since 2001 Vs Dollar
The pound is down again, hitting its lowest levels against the US dollar since 2001 after two days of bombardment for British banks.
The minutes from the BOE's Jan 8 meeting are due for release at 9.30 am today, they are expected to reinforce the view that UK interest rates will continue to decline.
With interest rates now at 1.5% there is a little room left for further reductions before all the bullets have been fired. Another half point cut is on the cards at the beginning of February methinks.
After that, we are down to "alternative tactics" to kick-start the economy. Mervyn King said that the MPC may need to prepare for "a range of unconventional measures" taking the form of BOE purchases of financial assets.
Unemployment for December are also due out later this morning. They are expected to show the highest number of single month job losses since March 1991.
Live forex rates can now be found on the right of this blog.
CBOT Closing Comments
Corn
March corn futures settled lower in Tuesday's session. Early in the afternoon session, corn futures were slightly higher supported by news concerning continued drought conditions in key corn crop areas of Argentina. Though some crop areas received light precipitation over the weekend, it wasn?t enough to alleviate the harming effects to corn development. A rising US Dollar Index towards the end of corn trading was enough bearish pressure to wipe out early gains and made corn futures settle in negative territory for the day. Ethanol futures settled unchanged to slightly lower this session. March corn settled at $3.83 1/2, down 7 1/2 cents.
Soybeans
March soy complex closed lower this session. March soybeans futures closed lower on the day mainly due to a rising US Dollar Index and developing sentiment that China will soon sharply decrease its purchases of US soy exports. Continued drought conditions in key corn and soy crop areas in Argentina (though some areas received light precipitation this past weekend) wasn't enough bullish support to US soybeans to place soy futures in positive territory. Brazil received much beneficial rains for their soy crop recently. March soy meal futures closed lower partly due to warmer weather in the Midwest following Arctic conditions. This past week the frigid cold weather slowed livestock weight gains. Soy oil closed lower from a rising US dollar Index even though crude oil closed higher in today's session. March soybean closed at $9.92, down 28 cents; March soy meal closed at $309.00, down $7; March soy oil closed at $33.81, down 78 cents.
Wheat
March wheat futures in all three wheat exchanges finished lower for the day. A higher US Dollar Index throughout wheat's trading session was the main bearish pressure to wheat futures. A bearish day in the stock market added further outside market pressure to wheat. Concerns over potential damage to wheat crops in the Midwest have settled off due to warmer and drier weather forecasted this week. This and spillover from corn and soy supplemented the bear pull to wheat futures. March CBOT wheat finished at $5.50, down 28 1/4 cents. March KCBT wheat finished at $5.79 3/4, down 29 1/4 cents; March MGEX wheat finished at $6.29 1/2, down 23 1/4 cents.
EU Wheat Futures End Lower As America Declines
Early gains by EU wheat futures were eroded late in the session as America came in sharply lower. Paris March milling wheat traded down EUR2.50 at EUR148.50/tonne, whilst London May feed wheat ended down GBP0.50 at GBP118/tonne.
UK futures had been higher in early trade with sterling down around 10 cents against the dollar on the back of poor domestic banking data.
However, CBOT wheat came in sharply lower which eroded early gains sending wheat into negative territory at the close.
Despite all the furore over currency UK wheat still needs to find some very significant export homes, and this simply isn't happening.
Nogger's Take On Everything - They'll Be Putting Bread On eBay Before Long
The High Street banks are penny shares, the pound is down 10 cents in a day and a half and there are P45's and administration orders falling like confetti.
What the hell is going on and where is it all going to end? Suddenly the word crisis doesn't seem anything like enough to describe the current situation.
The banking crisis looks like it's going to drag the pound lower, much lower, but we aren't the only ones in a mess by any means. The entire world is in the biggest mess in living memory, and it isn't going to get better anytime soon.
Exactly how we get out of this situation is something for the politicians to sort out. And sorting it will also surely sort out the men from the boys. It's certainly something beyond the remit of yours truly.
So what's gonna happen in the meantime? If we are talking agri-commodities I'm bullish. Very bullish.
The grains have quite successfully divorced themselves from crude oil. This trend has been going on since around October & has been mentioned on here several times since. I haven't got the time right now to publish a chart to illustrate the point, if you want to see a fairly recent chart go here: Are Crude And Soybeans Getting Divorced?
It is of course only a fairly recent phenomena that we automatically expect grains to follow crude. A trend brought in by the ill-conceived biofuel from food industry.
A by-product of the global economic meltdown we are witnessing now, I think, will be to throw up the next big challenge that lies ahead: food shortages.
You can cut demand for oil, iron ore, concrete and copper all you like. We can all stop buying iPhones and 42" plasma TV's, the one biggest certainty we can say now is that the one thing that will continue to grow, despite whatever happens in the remainder of 2009 and beyond is population.
And people have to eat.
Another by-product of the current predicament, potentially, is reduced inputs.
Throw into that mix the explosive ingredient of a serious crop failure or two and we might all be queuing outside the bakeries.
It might be worth considering at this point that we have just seen an Argy wheat crop come in some 45% lower than last season due to drought. the first serious weather problem anywhere in the world since the Australian wheat disaster in 2007.
What happens this year if we get a serious problem in the northern hemisphere? US, Russian, EU-27 and Chinese winter wheat plantings are already significantly down. What will production be like with lower inputs AND a weather problem?
Incidentally, Argentina has been in a serious drought situation now for twelve months. Unofficial information coming my way tells me that the 2009 soybean crop could finish up nearer 30mmt than the current predictions from the USDA et al of around 50mmt.
Sounds crazy? Why? The wheat crop IS 45% down, why can't the soybean crop be down a similar amount as well?
That's my lot. I've got a slightly past-its-best thin sliced loaf here if anyone wants it. If not it's going on eBay.
Not So Much A Piggy Bank As A Penny Bank
Following on from RBS's near 66% drop yesterday, Lloyds TSB and Barclays have joined in the fun this morning as fears mount for the future of the entire UK banking industry.
Lloyds shares were down 25% at midday, trading at less than 50p each, having earlier plumbed to 33.8p, a 20 year low.
Barclays are also in the penny-bank club hitting a 17 year low of 70.5p.
By contrast, RBS shares soared to the dizzy heights of 13.1 pence.
The entire market is in meltdown with any one, or all, of the big banks now being seen as prime candidates for nationalisation.
The banks new motto: Be sure your sins will find you out.
Vion Cutting 820 UK Jobs
Dutch-owned food group Vion are cutting 820 jobs in the UK, the BBC are reporting.
Link to full story here: Vion
Something Fishy?
Fish is the most frequently faked food Americans buy. In the business, it's called "species adulteration" — selling a cheaper fish such as pen-raised Atlantic salmon as wild Alaska salmon.
When Consumer Reports tested 23 supposedly wild-caught salmon fillets bought nationwide in 2005-2006, only 10 were wild salmon, reports USA Today. According to an article published earlier today, the rest were farmed.
The news organisation goes on to claim that in 2004, University of North Carolina scientists found 77 per cent of fish labeled red snapper was actually something else. "Last year, the Chicago Sun-Times tested fish at 17 sushi restaurants and found that fish being sold as red snapper actually was mostly tilapia".
"It's really just fraud, plain and simple," Gavin Gibbons of the National Fisheries Institute, told USA Today.
What's Liverpool Rape And Russian Gas Got In Common?
They've both doubled in price in the last couple of weeks!
Russian gas supplies are flowing to Europe again through Ukrainian pipelines after two weeks of cuts and supply disruptions.
But don't go getting carried away that this is the end of the dispute. Ukraine is a very unhappy bunny, being forced by the Russian state-owned Gazprom to pay $360 per 1,000 cu metres for Russian gas compared to $179.50 last year.
On top of that Ukraine's gas prices will be subject to a quarterly review, AND if Ukraine misses one payment to Gazprom it must then pay upfront for supplies thereafter.
You don't have to be Boris Spassky to figure out that poor old cash-strapped Ukraine is going to be defaulting sooner rather than later, sending the whole thing kicking off again.
Oil Dives As Storage Disappears, Russia Switches Gas Back On
Any remaining unfortunate long-holders are once again taking a pasting on crude oil with the February NYMEX contract set to expire later today.
Storage at Cushing, Oklahoma - the delivery point for crude futures - is said to be full to overflowing, making taking delivery of purchases very difficult and expensive.
The Feb contracts last official settlement was $36.51 on Friday, it currently stands at $33.94, more than $6/barrel lower than March.
The entire sector is under pressure after the ongoing dispute between Russia and Ukraine over gas supplies appears to have been resolved. At least for now.
The ceasefire in Gaza has also removed a factor that had been supportive for crude. At least for now!
Pakistani Feed Mills Closed Due To Bad Smell
Capital Feed Mill and HB Feed Mill based in Pakistan, have both been closed down by the Pakistan Environmental Protection Agency for contravening health laws with regards to smells & wastage, according to media reports.
Exactly how bad a Pakistani feed mill must smell to get closed down for it is the first question that springs to mind.
I wonder what our chums at DEFRA would make of it if it was over here is the second?
Russian Wheat Exports Slowing
Despite seemingly picking up just about every export enquiry in the market, the pace of Russian wheat exports is actually slowing.
Data released today from the Federal Customs Service says that exports have steadily slowed from 2.631mmt in September, to 2.416mmt in October, to 1.56mmt in November to just 1.4mmt in December.
Total exports for the current marketing year which runs July/June now stand at 10.7mmt, only 2% ahead of last years pace, despite a bumper crop.
Overnight Markets
The overnight markets are mixed this morning trying to reconcile the negative impact a firmer dollar and weak crude, with the bullish effect of the continuing drought in Argentina.
In what looks like being a volatile session after a three day weekend, beans are down around 7c, wheat down 1c and corn up 2-4c as I type. Check the latest movements on the right as things look like they could vary quite considerably this morning.
The drought in Argentina is ongoing, with earlier maturing corn the first crop under most threat. With the wheat crop already down the toilet, analysts are now predicting a total 2009 Argy grain crop of 'just' 80 million tonnes, 20 million below last year.
Soybeans are down a little as some analysts (but not me) seem to think that there is still long enough left for timely rains to help achieve a decent crop. But what do I know?
India, expecting another bumper wheat crop in March/April, has said that it may lift its ban on wheat exports once the harvest is complete in May.
Japan is seeking 157,000mt of US/Canadian and Australian wheat in a routine tender Thursday.
The Australian Oilseeds Federation has increased its estimate on canola output this year to 1.62mmt, up 10% from its previous forecast, and double last years production.
Crude oil is down $3.71 at $32.80/barrel as the global economic meltdown continues to eat away at demand.
Wow - Have You Seen The Pound?
Have you seen the pound this morning? Oh, my giddy aunt, it's below $1.40 against the dollar.
Nogger, being the consummate professional, has spend half an hour trying to find out when it was last this low. And I had to go along way back to find the answer, all the way back to January 2001 in fact.
UK banking shares took a battering yesterday, with RBS announcing the largest ever corporate loss for a British firm of £20 billion, comfortably beating the previous record set by Vodaphone of "just" £15 billion.
Official figures for December, due out later today, are expected to show that inflation fell to below 1%, from November's annual rate of 3%, raising fears of deflation.
To add to the general feeling of doom and gloom Burberry announced this morning that it will close it's Rotherham factory, axing 290 jobs.
The pound fell to $1.3975 just after 9am GMT, a full 9 cents lower than where it started the week yesterday morning.
We are also down against the euro at 1.0780.
EU Wheat Ends Higher Monday On Argy Worries
EU wheat futures closed higher as weather in Argentina continues exceptionally dry and hot.
Paris March milling wheat closed up EUR2.50 at EUR151/tonne, whilst London May feed wheat ended up GBP2.50 at GBP118.50/tonne.
We have an interesting situation developing in the wheat market, with burdensome stocks counteracted by a potentially lower outlook for next season crops.
Forex concerns are also to the fore with sterling suffering a torrid day after Alastair Darling confirmed another £100 billion rescue package for UK banks, only to find that RBS announced £20 billion of losses later during the day.
The pound dropped around 4 cents against the dollar on the day.
RBS Shares Plunge By Almost Two Thirds
Shares in Royal Bank of Scotland tumbled by almost two-thirds after it announced a loss of over 20 billion pounds ($30 billion), the biggest loss in British corporate history.
That's one fifth of this mornings announced government lifeline gone by lunchtime on day one!
At 2pm GMT shares in RBS were down 56.2% at 15.2p, having hit a 23-year low of 12.2p earlier in the day.
UK Jul/Nov '08 Compound Feed Production Down 4Pct
According to the DEFRA, compound feed production in the UK (excluding Northern Ireland) amounted to 3.63 mln t in the first five months of marketing year 2008/09 (July/June), 4% below the 3.72 mln t produced in the same period of the previous MY.
Cattle feed output was 1.52 (1.57) mln t, that of pig feed 593,000 (684,000) t and of poultry feed 1.11 (1.11) mln t.
Ingredients used included 1.07 (1.12) mln t of wheat as well as 287,000 (270,000) t of barley, 65,000 (51,000) t of corn, 14,000 (10,000) t of corn gluten feed, 272,000 (291,000) t of rapeseed meal, 447,000 (470,000) t of soybean meal, 79,000 (75,000) t of sunmeal, 61,000 (85,000) t of beet pulp pellets and 115,000 (132,000) t of molasses.
Argentine Government Launch Aid Package For Stricken Farmers
The government of Argentina purchased 300,000 bales of alfalfa, from the province of San Juan in the far north west of the country on Saturday, in a move to launch a 50 million pesos (US$16.6 million)drought relief fund, for distressed farmers who are victims of the worse drought in the nations history.
The alfalfa will be distributed to the smallest livestock farmers over the next two weeks in order to attempt to save livestock. The farmers will also be given seeds, in order to plant early grass for the summer as part of the package.
La Pampa, the largest cattle producing region of Argentina, has been suffering a shortage of rain since March of last year.
Illegal Pork Syndicate Gets The Chop
Chinese police have broken up an illegal syndicate in the Chinese city of Guangzhou that was selling pork from diseased pigs processed with a highly toxic pesticide, according to local newspaper, Epoch Times.
It has been reported that the operation introduced several tonnes of tainted pork into the market every day for a year and a half. Some of the pork came from pigs that had apparently died of foot and mouth disease and ear disease, according to Chinese officials.
The group were buying a diseased pig at 50 to 200 yuan (US$7- 29), and selling for 1600 to 2500 yuan ($234-366) after processing. Most of the spoiled pork was sold to small restaurants, street vendors, canteens or even meat packaging factories.
Monday Morning Roundup
Not a lot fresh first thing today, there is no eCBOT or CBOT today as it's Martin Luther King Day in the US.
Crude oil is trading however, and is slightly lower on the old chestnut of weak demand and bulging supplies.
It doesn't seem that Argentina got much in the way of drought relief over the weekend, with highs of 95-101 and only scattered showers. There's not much in the 24 hour forecast either (main soy area highlighted in red):
Brazil fared somewhat better, with more widespread showers and thunderstorms.
The Philippines bought 40,000mt Ukraine feed wheat as a substitute for high-priced domestic corn. Wheat imports are tariff-free, whilst there is still an import tax on corn.
Australian ASX March milling wheat is A$2 higher at A$288.50/tonne.
The pound is weaker after Alistair Darling announces throwing another estimated $100 billion at the UK banks, on top of the $250 already committed.
Personally, I'm all for poking the board of directors of the banks in the eye, and would like to volunteer my services to do so if asked.
The board at Lloyds TSB, for example, are said to be "resisting" the government upping their stake to 50% from 43%. I bet they are too, nobody likes to see their cash cow taken away do they?
Supervision and regulation aren't words that these boys are very keen on. But when you run around behaving like former Royal Bank of Scotland boss Sir Fred Goodwin, what do you expect?
