EU Wheat Ends Lower In Quiet Trade
EU wheat closed a little lower Friday in a quiet trading session devoid of fresh news.
Paris May milling wheat closed down EUR0.50 at EUR137.00/tonne, and London November feed wheat closed down GBP0.75 at GBP121.50/tonne. An indication of just how quiet things were is that in London the only 92 lots traded all day.
In a market becoming increasingly dominated by outside influences, even they were few and far between Friday.
Crude oil was flat all day ahead of this weekend's OPEC meeting, and for once even the stock markets had little inspiration to offer with the FTSE, German DAX and French CAC all barely changed on the day.
Strategie Grains lowered their estimate for 2009 EU-27 wheat production this week by 1.5mmt from last month, citing lower plantings in the UK, Spain & France.
Export interest for EU wheat remains flat with Russia continuing to pick up any decent tenders with their seemingly inexhaustible supply of wheat. With the rouble having fallen by around a third against the dollar in the last six months, and the largest wheat crop since the collapse of the Soviet Union in 1991 under it's belt, we can expect them to remain ultra-competitive.
CBOT Closing Comments
Corn
March corn finished at $3.75, down 1 ¾ cents, December corn finished at $4.18, up 2 ¼ cents. Corn was the strongest in the grains complex supported by lower planting forecasts for 2009, a weaker dollar, and continued talk of a raising of the limit on ethanol inclusion in gasoline. Informa said that 2009 plantings will be 81.419 million acres, a decrease from their January estimate of 82.7 million, and 5.3% below last season's 85.982 million. Allendale also released their planting estimates for the coming season pegging corn at 85.406 million. Quite a lot more than Informa, and closer to the USDA's Feb Outlook Forum estimate of 86 million. Allendale say that 4.15 billion bushels of corn will go into ethanol production in 2009/10, up from 3.70 billion that the USDA estimate in 2008/09. Ending stocks for 2009/10 are projected at 1.295 billion from Allendale, sharply lower than the 1.740 billion estimated by the USSDA for the current 2008/09 marketing year. Stocks/usage is seen dropping to 10% by Allendale, from 15% in the current season.
Soybeans
March soybeans closed at $8.82 ½, down 16 ½ cents, March soy meal closed at $286.00, down $3.00; March soy oil closed at $29.80, down 31 cents. Informa estimated 2009 US soybean plantings at 81.502 million acres, an increase from their January estimate of 80.8 million, and 7.6% up on last season's 75.718 million acres. Allendale said that US farmers will plant a bit less at 80.439 million, but still 6.2% more than last year. Crucially Allendale peg 2009/10 ending stocks at 526 million bushels compared to the USDA's estimate earlier in the week of just 185 million in the current season. Stocks/usage is seen increasing from 6% this season to 17% next season by Allendale. The most striking thing about the soybean numbers is that both private firm's acreage estimates are a lot higher than the USDA's Feb Outlook Forum guess. By 3.4 million in the case of Allendale, and by 4.5 million in the case of Informa.
Wheat
March CBOT wheat settled at $5.06 ½, down 8 ¾ cents. Informa estimated 2009 US all wheat plantings at 59.7 million acres, and Allendale at 57.977 million. The latter figure is very close to last month's USDA Outlook Forum estimate of 58.0 million. The Allendale number is an 8.2% decrease from 2008. Even with a sharp drop in plantings Allendale still see 2009/10 ending stocks at 647 million bushels, a relatively small drop on the 712 million forecast for the current season by the USDA earlier in the week. One reason for that is that Allendale are using a yield of 44 bu/acre for the current crop despite the drought situation in the southern Plains. That is only modestly lower than last season's all-time record of 44.9 bu/acre and would make 2009 the third highest yielding year on record despite the drought.
eCBOT Close, Early Call
The overnight grains closed mixed, but mostly a little higher with beans up around 6 cents, and wheat & corn mixed but generally 1-2 cents firmer.
Asian stocks closed higher, European stocks are up and Wall Street is expected to follow suit.
After a volatile last few days crude oil is also higher up 69 cents at $47.72/barrel. OPEC meet at the weekend to discuss further production cuts.
The dollar is weaker, which may also add a wee bit of support at the opening.
For beans and corn this week's reductions in US ending stocks and strong weekly export sales should help under-pin the market.
For wheat the outlook for largely dry and significantly warmer US temperatures in the week ahead may also provide a degree of support.
The war of words in Argentina is stepping up a gear or two. That situation looks like it will only get worse with the Argy farm leaders promising to be in Congress next week in support of opposition legislation eliminating export taxes.
It seems highly likely that we can expect more boycotts on sales of grains and meat in a copy cat repeat of last year's action. That should add support to the nears in Chicago, keeping the physicals quite tight.
With European end-users only seemingly having scant forward coverage front-end premiums might be the name of the game over here this summer.
Early calls for this afternoon's CBOT session: Corn futures are expected to open 1 to 2 higher; soybeans 4 to 6 higher; and wheat flat to 1 higher.
Indian Grain Storage Threat
India faces a problem with it's 2009 wheat harvest, it's grain stores are carrying large quantities of wheat from 2008, says a report from Dow Jones.
"Farmers are queering up in front of offices of the federal procurement agency, Food Corp. of India, to complain about the inadequate storage," says the report.
It could actually prove to be quite a serious problem, as they are talking about having to store the new-crop wheat outdoors under plastic:
Full story here
Egg Fetches GBP25,000 On eBay
Most people who buy eggs from supermarkets or other retail food stores seek to always lay their hands on ones as large as possible, in order to get a better value for their money.
The ever-increasing demand for this type of products has prompted managers to offer bonuses to farms that can supply most such products. The downside of the whole deal is that the chickens laying them go to stress and pain in order to produce such large eggs, say animal welfare experts.
British Free Range Producers' Association chairman Tom Vesey, who owns farms totalling some 16,000 hens, says that it can “be painful to the hen” to produce large eggs. “There is also the stress, which is a big problem as it takes more out of hens to lay large eggs. It would be kinder to eat smaller eggs. Whenever I go to the Continent, people eat medium-sized eggs, yet here the housewife seems to be wedded to large eggs,” he said in The Times.
This extra large egg containing the very rare phenomena of what experts call "a breather ring" fetched £25,000 on eBay earlier this week:
US Weather Outlook
The central US is set for a trend towards much warmer weather next week, with temperatures by Wednesday hitting as much as 20 degrees above normal for mid-March, says Allen Motew of QT Weather.
These warmer temperatures will stimulate some jointing and making the HRW crop susceptible to an April freeze, Allen warns.
Drought and warmer temperatures at this time of year may also encourage wheat emerging from winter dormancy to "speed up" in an attempt to protect the species, developing fewer seed heads and ultimately providing lower yields.
Forecast temperatures for next Wednesday as departure from normal:
Wall Street Set To Open Higher
The grains complex seems to be becoming more linked to Wall Street than crude oil recently.
And Wall Street seems set to open higher this afternoon judged on stock futures and other Asian and European stock markets.
News that China "has a cunning plan" and is ready to throw more money into the kitty, whilst Japan's prime minister is calling for a new stimulus package seems to have restored a bit of confidence.
In Asian trade Japan's Nikkei jumped 5.15 percent, while Hong Kong's Hang Seng index rallied 4.37 percent.
London's FTSE, the French CAC and German DAX are all 1-2% higher this morning too.
Today's Cheltenham Gold Cup Winner
Will be a horse :-)
Required Reading
The Wall Street Journal runs this interesting story today Grain Costs Down, Groceries Not, which highlights much of what I have been banging on about on here for a while now.
Read in conjunction with this: Farm Commodities Could Soar Again pretty much sums up what I think could well happen in 2010.
Farmers the world over are responding to the current financial crisis in pretty much the same way - lower plantings and reduced inputs. In some cases that is because the economics don't stack up. In others it's down to lack of credit.
Lower global grains production in 2009 will tighten world stocks. With prices where they are currently, against a background of a continued lack of credit, plantings for the 2010 crops may well be significantly lower again.
Now that really is a recipe for very serious trouble next year, especially as we are bound to get a weather disaster or two along the way.
Meanwhile we continue to increase our fuel from food policies. Madness.
China Says It Has An Ace Up It's Sleeve
Chinese Premier Wen Jiabao said Friday that his government was ready to put forward new stimulus package at any time should the financial crisis worsen.
He said there was sufficient "ammunition" to add to the 4 trillion yuan ($585.5bn) two-year stimulus package already announced.
In addition to the 4-trillion-yuan package, China will also cut taxes by 600 billion yuan, raise the old-age pension for retired workers, hike the salaries of 12 million teachers, increase farmers' income and provide more subsidies for them. The country also plans to spend 850 billion yuan on reforming the health care sector within three years, said Wen.
And on top of that "we have prepared enough (further) ammunition and we can launch new economic stimulus policies at any time."
Wen said China faces difficulties in achieving the goal of 8 percent economic growth in 2009, but it is possible with "considerable efforts".
China still retains an estimated nearly $2 trillion in reserves to resist the economic downturn, but it has hitherto been reluctant to tap this last resort, preferring to rely on trade surpluses. After reporting earlier in the week that February's trade surplus fell to $4.84 billion, down from $39.1 billion in January, these are now dwindling.
Argy Farmers: The Gloves Are Off
Farmers in Argentina are back on the warpath exactly a year after they began strikes and roadblocks in protest against punative export taxes and government red tape.
Grass root groups are again camping on road sides, while leaders organize rallies in highly sensitive agriculture areas and promise to be in Congress next week in support of opposition legislation eliminating export taxes.
Meanwhile the war of words is hotting up nicely.
In a rally in Cordoba yesterday farm leaders rounded on Argy President Cristina Fernandez after, in an attempt to get the populace on her side, she accused the farmers of being “greedy” and “insatiable” and saying that they “couldn’t care less about the rest of Argentina”.
"I am the President and cannot do things alone we need the cooperation of the farmers yet nothing is ever enough to satisfy them," bleated the President this week.
“Farmers are not the insatiable rich which Mrs. Kirchner describes in her speeches,” said Argentine Rural Society president Hugo Biolcati. “Maybe if the lady travelled less in helicopter and more by land she could see the cracked soil and dust bowls, with starving cattle,” he added.
Of course the farm leaders themselves aren't shy of putting a bit of their own spin on the situation.
“We are in the ridiculous situation where international prices of commodities have plummeted but in Argentina they remain virtually unchanged for consumers because of the export taxes. A situation that will worsen in the coming crops because farmers won’t invest money or time in planting.” said Eduardo Buzzi from the Argentine Agrarian Federation.
“We would all like to know whose dinning table this government is protecting, certainly not that of the average hard working Argentine,” he added.
CBOT Closing Comments
Corn
March corn finished at $3.76 ¾, up 20 ¾ cents. Sharply higher crude oil, which finished more than 9% higher, and a robust weekly export sales number from the USDA helped corn from the start. This morning, the USDA released its weekly export sales report for the week ending March 5. Net sales of US corn exports were 1.09 million metric tonnes, a 38% increase from the previous week and above surveyed analysts’ estimates ranging 400,000 to 800,000 metric tonnes. Continued talk of more demand kicking in from an increase in the ethanol mandate also supported prices throughout the day.
Soybeans
March soybeans closed at $8.99, up 24 cents. the USDA reported soybean weekly export sales of 837,005 metric tonnes which was better than expected from surveyed analysts’ estimates ranging 300,000 to 500,000 metric tonnes. Crude oil was also sharply higher, as too was Wall Street, which also added support.
Wheat
March CBOT wheat settled at $5.15 ¼, up 16 ½ cents. The USDA released its weekly export sales report for the week ending March 5. Net sales of US wheat exports were 362,919 metric tonnes,a 27% increase from the previous week and falling within surveyed analysts’ estimates ranging 200,000 to 500,000 metric tonnes. Spillover strength came from the corn & soy pits, plus firmer crude oil & equities. Wheat also benefited from speculation that a persistent drought will damage crops in parts of the US. Significantly warmer weather over the next few days, with temperatures 15-20 degrees above normal, will stimulate some jointing and making the HRW crop susceptible to an April freeze, warned Allen Motew of QT Weather.
EU Wheat Closes Higher
EU Wheat futures closed higher Thursday in a relatively low-volume session.
May Paris milling wheat ended up EUR1.25 at EUR137.50/tonne, and May London feed wheat closed up GBP0.15 at GBP108.75/tonne.
Futures were lower early in the session but got dragged higher later on by firmer US markets and stronger outside influences.
Crude oil finished more than 9% higher at $46.30/barrel, which helped add some support.
Strategie Grains dropped their 2009 EU soft wheat production estimate by 1.5mmt, citing lower plantings in the UK, Spain & France. That may still be a bit conservative as the UK alone may account for more than that.
A surge in US futures, prompted by continued concerns over winter wheat crops in the southern Plains, also provided a late boost.
Overnight Markets
The overnight grains are up a little from last night's heavy losses with beans around 4-6 cents higher, and corn & wheat 1-2 cents firmer.
A weaker dollar and firmer crude oil lent a bit of support to the grains complex.
Although yesterday's USDA report was bullish for soybeans and corn, neither could hold onto early gains on Wednesday, dragged lower by the all too familiar doom & gloom mentality that is prevalent at the moment.
Talk of increased demand from the ethanol sector were backed up by the USDA yesterday cutting corn ending stocks due to a projected 100 million bushel increase in ethanol usage.
There are also strong suggestions that the US government will raise the limit on ethanol use in gasoline from 10% to nearer 15% sometime soon. That would certainly create more demand for corn.
Japan has bought 112,000mt of wheat in it's routine Thursday tender with 70,000mt of it being US origin.
Despite increased rain coverage and amounts this weekend Kansas and the majority of the HRW crop will see net drying for the week as well as next two weeks, according to Allen Motew of QT Weather.
Beneficial rainfall will cover Texas and the Gulf States during this same period while the Plains and Corn Belt see significant drying, which may be a good thing going into the Spring freeze-thaw period, he concludes.
EU Imposes Duties On US Biodiesel
After a year of dithering the EU has finally slapped import duties on US biodiesel in an attempt to prevent the ludicrous "splash and dash" practice, and halt the dumping of biodiesel on the European market by the US.
EU diplomats voted last weeky to place provisional import duties on US biodiesel and the decision has been formally announced today in the announcement came in the Official Journal of the European Union.
The splash and dash scam involves shipping biodiesel from Europe to the US where a "splash" of mineral-derived diesel is added, where the entire consignment then qualifies for a US subsidy. The fuel is then shipped back and sold below European prices.
Splash and dash is not illegal but makes a mockery of the environmental reasons behind the introduction of biofuels at the forecourt. It causes unnecessary shipping, increasing emissions of greenhouse gases whilst undermining European producers.
News Snippets
Waitrose has written to 1,000 of its suppliers to ask them to reduce their prices, according to the Telegraph. Waitrose's managing director, said that the requests had gone to suppliers of branded food and farmers in primary agriculture in the UK. The "upmarket" chain saw it's share of the UK grocery market shrink to 3.9% in the 12 weeks to February 22. Things are so bad for poor old Waitrose that it is being forced to introduce an "essential Waitrose" range where beans will come in a tin 500 at a time, rather than individually wrapped in gold leaf.
Britain's fourth-biggest food retailer Morrisons meanwhile continues to go from strength to strength. The chain which says it serves around 10 million shoppers a week from 375 stores, reports today a profit before tax up 7 per cent to £655 million, from £612 million a year ago. The retailer said that its share of the UK grocery market, based on data from research firm TNS, had risen to 12.3%. The company said that 550,000 more shoppers were visiting its stores each week and that it was enjoying particularly strong growth in its Value range of lower-priced food, where sales surged by 50 per cent.
BT meanwhile says it has frozen the pay of its entire 100,000-strong UK workforce. If any of it's employees are unhappy about it they've set up a special call-centre helpline to deal with their problems. Press one to go round in circles, press two to listen to some music, press three to hear how important your call is, press four to hear these options again. Maybe this might help bring a smile to their grim little faces: BT Call Centre. WARNING: Contains strong language! You will need your speakers on.
Argentina - Unrest Growing
Taxes on Argentine farm exports currently bring in around seven billion dollars a year for Argentina's cash-strapped government. The agriculture sector accounts for one third of national employment and two thirds of the foreign currency income. In short, the revenue the sector generates is a crutch that the government can't do without.
Argentine farmers are becoming increasingly agitated that the government are treating them as a "cash cow". Particularly after a year of drought cut 30 million of tonnes off grain and oilseed production and killed more than one million head of cattle, according to Eduardo Buzzi, the leader of the Argentine Farming Federation (FAA).
After meeting for four hours with Production Minister Débora Giorgi and Interior Minister Florencio Randazzo on Tuesday, the four main farm leaders told the press that results of their meeting were "scant".
Having thrown the farm leaders a sop of lower taxes on wheat and dairy products last week, the government this week offered concessions on honey and wool, steadfastly refusing to even discuss the main issue - the 35% tax on soybeans.
Farmers are also unhappy with the ONCAA (grain and livestock sales watchdog), which they say bogs them down with unnecessary red tape. Farmers complain that due to red tape they hardly get help the government promised them to mitigate the effects of the drought.
In Buenos Aires, the country’s richest province, farmers applying for state loans must sign an affidavit saying that they are not affected by the emergency. Otherwise, they say, they won’t qualify for credit.
Leaders are now calling on the grassroots to take to the roadsides Thursday to mark the first anniversary since they started an epic protest to press for their demands.
Hugo Biolcati, head of the Argentine Rural Society (SRA) said that the motto of today’s protest in the central Córdoba province will be "a year without responses".
The administration of President Cristina Fernández said that the protest and a main rally in the central Córdoba province "don’t contribute" to a solution.
EU Wheat Futures Close Lower
Paris May milling wheat closed Wednesday down EUR2.25 at EUR136.25/tonne, and London May feed wheat ended down GBP1.90 at GBP109.60/tonne.
The USDA raising US and world ending stocks added some bearish input to the spectre of Russia mopping up pretty much every export order going.
It was pretty much another day of doom & gloom all round, with a general air of depression dragging the market down.
Things will change, but exactly when that will be is unclear. We still have a large exportable surplus to dispose of, carrying wheat seems like a good idea if you can afford to do so and have the storage.
Consumers seem concerned that a relatively poor quality UK 2008 crop may end up getting carried (and mixed) in with the 2009 season crop. Unfortunately for them, the way current pricing structures are set up, that is likely to be what happens.
CBOT Closing Comments
Soybeans
May soybeans closed at $8.62, down 15 cents. Beans opened higher on strength from reduced ending stocks data from the USDA. However, sharply lower crude oil, which closed 7% down, soon weighed on futures prices. Poor economic news out of China pretty much put paid to ideas that it will lead the global economy out of recession. What soy it does require over the next few months is likely to go the way of South America it seems.
Corn
March corn settled at $3.56, down 10 ¾ cents. As with soybeans, corn got early support from a reduced ending stocks figure from the USDA when a higher one had been anticipated. Also, as with beans, heavily lower crude oil pressured prices lower as the session wore on. Higher global ending stocks data from the USDA also weighed.
Wheat
March CBOT wheat finished at $4.98 ¾, down 24 cents. Unlike the other grains wheat was down from the start pressured by higher ending stocks from the USDA. Global carryout was also raised, adding further downside. The chance of some rain prospects in the drought-affected US Plains also pressured prices lower.
USDA - The Actual Numbers
USDA U.S. Grains Carryout (Billion Bu)
Wednesday 2008-09 February
2008-09 Analyst 2008-09
estimate estimate USDA
Soybeans 0.185 0.200 0.210
Corn 1.740 1.811 1.790
Wheat 0.712 0.659 0.655
USDA World Carryover (MMT)
Wednesday February
2008-09 2008-09
estimate estimate
Wheat 155.85 149.96
Corn 144.6 136.7
Soybeans 49.95 49.87
USDA World Grain Production (MMT)
Wednesday February
2008-09 2008-09
estimate estimate
China corn 165.5 165.5
South Africa corn 12.0 10.5
Argentina corn 13.5 13.5
Australia wheat 21.5 20.15
Argentina wheat 8.4 8.4
EU 27 wheat 150.26 150.27
Canada wheat 28.61 28.61
China wheat 113.0 113.0
Russia wheat 63.7 63.7
Ukraine wheat 25.9 25.9
Brazil soybeans 57.0 57.0
Argentina soybeans 43.0 43.8
China soybeans 16.8 16.8
eCBOT Close, Early Call
eCBOT grains closed mixed, with beans around 6 cents firmer, corn down 1-2 cents and wheat 1-2 cents higher.
There was little fresh news out overnight from Argentina, with the meeting between the government and the farm leaders seemingly ending in stalemate. Whilst it looks like neither side is prepared to budge, the Argy farmers themselves don't seem quite so eager to strike this time round as they were a year ago. But strike they surely will. Maybe they are prepared to wait until after the harvest.
The eagerly awaited USDA report pegged soybean ending stocks tighter than had been expected. Corn stocks were also cut in a surprise move as an increase had been anticipated. Wheat stocks were raised as US exports continue to lag.
Taking a bit of a shine off the corn number was an increase in global ending stocks.
Japan is expected to buy 112,000mt of mixed origin wheat tomorrow with 70,000mt of it being US origin.
There may be some rainfall relief for some areas of Texas this week, with up to five inches falling in some parts, according to Allen Motew of QT Weather.
Overrunning rain and snow will also cross Oklahoma, Kansas and Nebraska on three of these days with the heaviest Friday and Sunday, he says. The HRW crop will see 20% coverage totaling 0.10-0.25 and 5% coverage (per the GFS) of 0.25-1.00in. This major overrunning rain event over the next five days will do little to advance 85-90% of the nation’s HRW crop, he concludes.
Early calls for this afternoon's CBOT: July corn called 3 to 4 cents higher. July soybeans called 6 to 10 cents higher. July CBOT wheat called 2 to 4 cents lower.
USDA Report Summary
The USDA S&D and stocks data pegged soybean ending stocks lower than anticipated at 185 million bushels, down from 210 million a month ago & trade expectations of around 195/200 million.
Corn ending stocks were also a surprise, being lowered to 1.74 billion bushels, down from 1.79 billion last month, when an increase to 1.8/1.81 billion had been expected.
Wheat stocks were increased from 655 million to 712 million. That seems to have caught most people unawares, as they were expected to be left around unchanged.
As I said yesterday, it doesn't surprise me to see wheat carryout increased, given the relatively slow pace of US exports recently. Thirty nine weeks into the marketing year exports are running around 75% of the USDA's target figure. That is behind "normal" pace of around 80% at this time of year.
On another bearish note for wheat world ending stocks were raised from 149.96mmt to 155.85mmt. Global corn ending stocks were also increased to 144.6mmt from 136.7mmt.
There weren't too many changes to world production numbers. South African corn was upped 1.5mmt to 12mmt, Australian wheat increased from 20.15mmt to 21.5mmt and Argy soybeans decreased from 43.8mmt to 43mmt.
I'd call the numbers bullish soybeans, modestly bullish for corn and bearish wheat.
China In Your Hands
The global recession might be hitting China harder than expected. Many had been pinning their hopes on the Chinese economy to help drag the rest of the world out of the current malaise.
Chinese Premier Wen Jiabao announced an official 2009 growth target of 8 percent just last week.
Today, however, new figures just released show that China's exports fell much more sharply in February than anticipated. Exports dropped 25.7% from a year ago, against expectations of a decline of just 5%.
The country's trade surplus shrank from $39.1 billion to just $4.84 billion, analysts had been expecting a $27.3 billion surplus.
Nailed On Cert For Day Two At Cheltenham
It will be full of pissed-up Oirish people drinking Guinness saying things like "look at the wee jockey fella over dere, he looks just like a wee leprechaun so he does, Oi tink I'll have fifty euros on him wi' Paddy Power, so I will". Watch it on the telly instead.
Ukraine: Caught Between A Rock And A Hard Place
Welcome to the Ukraine, the country with the lowest credit rating in Europe. S&P last month cut Ukraine's long-term foreign currency rating to CCC+, seven levels below investment grade, or equivalent to that of Pakistan.
S&P defines Ukraine's credit rating as “currently vulnerable to nonpayment, and is dependent upon favourable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.”
The average Ukrainian wage fell by 16.8% in January (to UAH 1,665 per month) over the level of December, according to the State Statistics Committee. Meanwhile year on year inflation was running at 22.3% in January. That's right, incomes are dropping like a stone, whilst the cost of living is sky-rocketing.
In addition to the drop in real wages (and the rise in unemployment), there is a problem with unpaid salaries. As of Feb. 1, 2009, the volume of unpaid salaries and wages was up by 35.7% compared to January 1.
This week the Ukraine ordered 17 of the country's largest banks not to sell the local currency, the hryvnia, at a weaker level than the exchange rate set by the central bank in a bid to arrest the currency’s alarming tumble against the dollar.
The Ukrainian hryvnia has fallen more than 40 percent against the dollar in the past six months. That makes it the second weakest currency in the world, a dubious honour eclipsed by only the Zimbabwe Dollar. This has caused the central bank to drain a third of its foreign reserves in an attempt to arrest the decline.
The country is set receive a $16.4 billion bailout from the International Monetary Fund, but only on the condition that it avoids further depletion of reserves.
Exactly how it manges to do that, whilst keeping the currency at the state-imposed exchange rate of 7.98 per dollar will take some doing.
No wonder companies like Landkom are scaling back their operations in Ukraine. And as for your average farmer, it would seem that agricultural inputs such as fertiliser and pesticides are going to be out of the question for most, no matter how much they'd like the dollars that higher yields would bring.
It would seem that there are possible comparisons to be drawn here all across eastern Europe too. The Polish zloty and Hungarian forint are also down by around 40% against the dollar since last July, with the Czech koruna, the Russian ruble and the Romanian leu down by around a third.
Tesco Cuts Wiseman Contract, Ups Arla
Robert Wiseman says it is confident that it will exceed profit forecasts for the current financial year to April 2009.
Things don't look quite so rosy for 2009/10 however, following news that Tesco is to reduce the amount supplied by the group in it's own-label milk from 60% to 50%.
The Tesco cut, which takes effect in May, is expected to amount to a not insignificant 40 million litres of milk.
Arla meanwhile will see their share of Tesco's own-label milk increase from 40% to 50%.
CBOT Closing Comments
Corn
March corn closed at $3.66 ¾, up 9 ½ cents. Corn benefitted from ideas that the ethanol mandate may be raised from 10% to 12-13% or more. Rain-saturated fields around the Midwest due to recent showers which will delay new crop plantings gave some support as well.
Soy
May soybeans settled at $8.79 up 2 cents. Beans gained support from stronger crude and ideas that a mandate for more ethanol inclusion from a pro-ethonal President will help soy demand.
Wheat
Wheat gained on short-covering and a lower US dollar. March CBOT wheat finished at $5.22 ¾, up 9 ¾ cents. Concern remains over US crops in the Southern Plains. Tomorrow's USDA report is expected to show little change for wheat ending stocks.
Argy Meeting Latest
Early reports from Argentina suggest that Tuesday's meeting has ended without any significant progress being made on a reduction of the export tax on soybeans.
It's no huge surprise, the government have made their position clear on this one, we all know that they can't afford to give up the soy tax, they need it to at least attempt to balance the books.
Last week's concessions are already looking like the sop they were, a fudge around the main issue.
Even last week's agreed tinkerings haven't actually been implemented yet, that gave the farmers something else to complain about.
Neither side seems prepared to budge. "Perhaps they are nostalgic over times when the government was easy to handle, times when things always ended in measures that went against the people," said Fernandez on television after the meeting.
So, where do we go from here, is it down to a strike I fear? - as Haircut 100 would say.
Wheat, It's The New Money!
EU wheat futures closed a relatively quiet session higher with Paris May milling wheat ending up EUR0.25 at EUR138.50/tonne and London May feed wheat closing up GBP1.70 at GBP111.50/tonne.
Firmer US grains and crude oil lent support ahead of tomorrow's USDA supply & demand report.
There seems to be a general consensus that carrying old-crop wheat isn't a great deal of threat at the moment. Maybe too many people are reading this blog?!
Certainly it looks like UK production will be sharply lower in the coming season, so if you don't need the cash there is little incentive to sell at current levels.
On the continent, the euro looks all set for a dying swan-like performance so there maybe isn't too much reason to sell French wheat either.
I understand all the arguments about large exportable surpluses, the lack of export demand, Russia has a seemingly inexhaustible supply of wheat that they are ready to sell at any price, and that the world is dying a slow & painful death.
All I am saying is that with interest rates at an effective zero rate and output in the US, Europe, Canada etc seen sharply lower in 2009, I'd rather have wheat in the silo than the cash in the bank.
Wheat, it's the new money!
EU Commission Approves GMO Rapeseed
The EU Commission has voted to approve the import of of a hitherto banned variety of genetically modified oilseed rapeseed, known as T45, developed by Bayer AG.
The decision opens the door for EU rapeseed imports from Canada where the variety is grown, and comes after months of stalemate between various EU government departments.
Now approved, the authorisation will last for ten years, T45 can now be used in food and animal feed products, but not grown commercially in the EU.
eCBOT Close, Early Call
The overnight grains closed higher with beans leading the way finishing with gains of around 12 cents. Corn closed 3-4 cents higher, with wheat up 1-3 cents.
A firm crude oil market and positioning ahead of tomorrow's USDA S&D report provided some support, even though no major shocks are likely to be in store, only minor "tweaks" to ending stocks.
Beans remain the driving force as US farmers hold onto their stocks waiting, and hoping, for higher prices.
That is squeezing nearby basis levels higher (the premium at which physicals trade over futures markets).
News late tonight/early tomorrow morning from the Argy farm leaders meeting with the government will be eyed for any signs of conflict. That could add further premiums at the front end.
Once tomorrow's report is out of the way attention will start to focus on US farmers planting intentions. The jury still seems to be out on that one. I'd have thought that lower corn and sharply higher soy would have been the order of the day but recent reports suggest that that may not be the case.
Despite the lower inputs associated with beans over corn early reports seem to be suggesting that US farmers will plant as much corn as last season, and maybe even a bit more.
Perhaps they are pinning their hopes on the government raising the limit on ethanol inclusion in gasoline. If it is increased that could put a bit of a fire under the corn market. If they get their wish and corn shoots up I wonder if they'd sell it this time?!
Early calls for this afternoon's CBOT session: Beans up 10-12 cents, wheat up 2-4 cents, corn up 3-5 cents.
US Wants More Ethanol In Gas
Agriculture Secretary Tom Vilsack says that he'd like to see the limit on the amount of ethanol that can be mixed with gasoline increased from 10 percent "fairly quickly".
The Environmental Protection Agency were asked last week to up the amount to 15 percent by US ethanol producers.
Vilsack himself goes even further saying that he sees no reason why this can't be increased to 20 percent in the not too distant future.
Unsurprisingly, the proposals met with the rapturous approval of US farmers, eager to see another ethanol-fueled price boom.
Such a move would simultaneously save the planet, provide thousands of new jobs, stimulate the economy and do everything short of promoting world peace, they say.
And it seems like Vilsack & Obama largely agree with them.
That's just what we need to get us out of a global recession, soaring world food prices. Again.
USDA S&D Report Expectations
The USDA are set to release their latest revised Supply & Demand report at 13.30GMT Wednesday.
The general consensus is that soybean ending stocks are likely to be revised down, corn revised up a tad and wheat left around unchanged.
It wouldn't surprise me however to see wheat carryout increased a little, given the relatively slow pace of US exports recently. Thirty nine weeks into the marketing year exports are running around 75% of the USDA's target figure. That is behind "normal" pace of around 80% at this time of year.
Brazil has begun buying Russian wheat, which had a reputed USD60/tonne price advantage over US wheat, according to media reports from Sao Paulo.
Against a background like that it is difficult to envisage anything other than US export pace slowing rather than gaining ground in the last thirteen weeks of the marketing year.
Corn ending stocks will probably be higher, reflecting slumping demand from the ethanol sector in the face of burgeoning crude oil inventories.
Bean carryout is expected lower due to largely better than anticipated exports.
Trade expectations:
Corn ending stocks are guessed at 1.8 billion bushels on average, up slightly from 1.79 billion last month in a range of 1.71-1.84 billion.
Soybeans are seen at 195 million bushels, down from 210 million last month and a range of 123-220 million.
Wheat stocks are forecast at 656 million, vs 655 million a month ago and in a range of 625-680 million.
Pound Remains Under Pressure
Where do we start? After yesterday's shafting by the banking sector, a raft of poor economic data has the pound under pressure again this morning.
January manufacturing output in the UK was down 2.9% on the previous month against expectations of a 1.4% fall, data issued today reports. Year-on-year output has now declined 12.8% compared to an analysts' consensus of 11.7%.
January industrial production was down 2.6% on the month, compared to a consensus of 1.2%. That pegs year-on-year industrial production down 11.4% compared to expectations of a 11.7% drop.
Meanwhile the housing market goes from bad to worse with property sales now at their lowest level in at least 31 years.
In the three month period Dec/Jan/Feb, estate agents averaged just three sales per month, the lowest since the Royal Institution of Chartered Surveyors' survey began in 1978.
The pound fell to a 5 1/2 week low of 92.18 pence against the euro and just shy of yesterday's six week low against the dollar to $1.3763 against the US dollar, before recovering slightly to 91.76p and $1.3834.
UK Meat Exports Increase Sharply On Weak Sterling
A weak pound and ongoing investment have driven a substantial increase in exports of British meat over the past year, according to UK levy bodies..
EBLEX says that demand for British beef is rising fast in the Netherlands, Ireland, Belgium and Italy. The latest export figures show that a total of 81,000 tonnes of beef was exported from the UK in 2008, a 36% rise on 2007 figures.
Lamb exports are up too, with a total of 86,000 tonnes of sheep meat exported in 2008, up by a quarter from 69,000t the previous year. There was increased trade in UK sheep meat with all major EU marketplaces last year, particularly with France, where exports rose by 19% to 60,000 tonnes.
An increase in the volume of prime lamb cuts exported to the French market in 2008 meant that the value of sheep meat exports rose by a massive 43% to £260m.
UK lamb now accounts for 46% of total imports into France - a positive development in light of the fact that household purchases of lamb in France fell by 8% last year.
The beef and lamb figures come following a BPEX Ltd announcement that the value of pork exports has hit an impressive £160m. Exports of fresh and frozen pork have soared by 20% over the last year, while bacon exports have grown from 12,000 tonnes to more than 33,000 tonnes and exports of offals are up 18%.
Brazil Buys Russian Wheat
Brazil has begun a purchasing program to cover some of it's 2009/10 wheat import needs from Russia, according to media reports from Sao Paulo.
The country has bought 25,000 tonnes of Russian hard wheat for delivery to Brazil’s northeast in May, as Brazilian mills prepare to find alternatives to scarce Argentine wheat this year.
Argentina typically supplies Brazil with 95% of its wheat import needs, but with the Argy harvest down to around 8.3mmt from 16mmt last year, Brazil is having to look outside Mercosur for an estimated 2mmt of wheat in the 2009/10 season. Half of that is expected to come from Russia.
The Russian wheat was priced at around a USD60/tonne discount to US hard wheat, the reports said.
US Wheat Conditions Decline - USDA
The USDA reported worsening conditions in the major wheat growing states of Texas, Oklahoma and Kansas in it's weekly report last night. These three states grow almost half of the US winter wheat crop, with Kansas alone accounting for nearly a quarter of the nation's crop.
KANSAS saw the percentage of the crop rated good/excellent fall five points from a week ago to 45%. The poor/very poor category is now 17%, up two points from last week. Most of Kansas remained dry this previous week, said the USDA, with only counties in the Central and Northeast reporting precipitation. Topsoil moisture is rated as 27 percent very short, 35 percent short, 37 percent adequate, and 1 percent surplus.
OKLAHOMA received virtually no rain last week, continuing the decline of small grain crop conditions from dry weather, the USDA said. Good/excellent is down two points to 21%, whilst 43% of the crop is now rated poor/very poor.Oklahoma
TEXAS the northern part of the state received just trace amounts of rainfall while the rest of the state observed little to no moisture, the USDA said. Just 10% of wheat is rated good/excellent with 63% in the poor/very poor category.
EU Wheat Closes Mixed
EU wheat futures closed mixed Monday, with May Paris milling wheat ending up EUR0.75 at EUR138.25/tonne, and London May feed wheat closing down GBP2.20 at GBP109.80/tonne.
Paris wheat gained support from a stringer US close Friday, whilst London fell on ideas that Friday's close of around GBP4/tonne higher was overdone.
Still, a sharply weaker pound on the back of bad news all-round from the UK banking sector may under-pin UK wheat, at least for now.
The outlook for the euro isn't much better mind, with today's Daily Telegraph reporting a sizable increase in short-selling on the euro vs the dollar in anticipation of a sharp downwards move from the single currency.
I'd like to be short on both (the pound and the euro) viz-a-viz the dollar, so maybe we will see Paris & London wheat rise if I am right.
Wednesday's USDA report seems unlikely to throw up too many surprises for wheat.
The main bullish factor that seems likely to send wheat higher over the next few months will probably be the gradual realisation that world production is set to shrink quite sharply in 2009.
CBOT Closing Comments
Corn
March corn settled at $3.57 ¼, up 4 ½ cents. US export inspections for the week ending March 5 came in at 40.6 million bushels, well above trade expectations. Crude oil was also higher which helped corn, although a firmer dollar put a lid on potential gains. Brazil will produce 14% less corn this season, according to CONAB, with the harvest coming in at 50.3mmt. Corn ending stocks are expected to increase slightly in Wednesday's USDA report.
Soybeans
March soybeans finished at $8.81, up 2 cents. Cash soy bids around the Midwest and Gulf are firm with light farmer selling. This sign of stronger US soy cash markets gave additional support to soy complex futures. Stronger crude oil also lent support, although a firm dollar limited gains. CONAB said that the Brazilian soybean crop will come in 4% or 2.3mmt lower than last season at 57.6mmt. Some private estimates say that 55mmt is nearer the mark. Tomorrow's meeting between the Argy government and farm leaders may provide a few pointers. US ending stocks are expected to decrease slightly in Wednesday's USDA report.
Wheat
March CBOT wheat closed at $5.13, down 3 ¼ cents. Bearish pressure came from updated weather forecasts calling for chance of showers during the next few days in drought-stricken HRW wheat crops areas of the southern Plains. Lower US and Canadian output for 2009 supports, although America continues to miss out on many of the sizable global import tenders.
Hot Tip For Day One At Cheltenham
If you are travelling in the area, try to avoid the A435. It's likely to get very busy.
eCBOT Close, Early Call
The overnight grains closed higher, with beans and corn around 6c firmer and wheat up 2-3 cents.
Brazil will produce 14% less corn this season, according to CONAB, with the harvest coming in at 50.3mmt they say. The soybean crop will come in 4% or 2.3mmt lower than last season at 57.6mmt, they add.
In the US the cash market remains tight with farmers reluctant sellers of physical soy.
Later in the week all eyes will be on the Argy farm leaders meeting with the government tomorrow, and the USDA's latest S&D estimates on Wednesday.
Crude oil is almost $2 firmer at $47.43/barrel which may support, but the dollar is stronger which may cap gains. Crude is gaining from ideas that another sharp cut in production by OPEC is on the cards later in the week.
The US weather outlook is mixed with cold & wet pushing in later in the week.
Ag Canada cut it's Canadian wheat production estimate to 23.95mmt down 16% from 28.61mmt last year and more than a million tonnes below it's last estimate in January.
Early calls for this afternoon's CBOT session: July corn called 3 to 6 cents higher. July soybeans called 5 to 7 cents higher. July CBOT wheat called 2 to 4 cents higher.
Pound Takes A Mauling
The pound looks a bit like Clarissa Dickson-Wright with no make-up on at 7am after a heavy night on the pop today.
Having been administered a severe beating with the ugly stick by the ailing UK banking sector, the pound fell to $1.3744 against the dollar and 91.41 pence versus the euro.
News of Lloyds selling a majority stake to the government sparked a run on banking shares. Lloyds' shares fell to 38.70 pence, it's share price has collapsed from around 260 pence in September when the ill-advised merger with rival HBOS was announced. HBOS subsequently posted a massive £10.8billion last year.
HSBC, in the midst of a £12.5bn rights issue, fell 27.75p, or nearly 8%, to 333 pence. Europe's biggest bank had already slumped 24 per cent last week, wiping £15billion from the company's stock market value.
Short-sellers are betting on HSBC's shares continuing to weaken in the wake of the bank's deeply discounted rights issue to raise a record £12.5billion at 254 pence.
Barclays didn't escape, they were down 11.57% to 57.30 pence, on ideas that they will follow Lloyds into the Asset Protection Scheme.
Royal Bank of Scotland were around 8% lower at 18.2 pence.
Texas Asks For Drought Disaster Aid
Texas Governor Rick Perry asked for disaster relief assisstance from the federal government on Friday for drought-stricken farmers across the state.
Parts of south and central Texas including the ranch lands around San Antonio and the state capitol Austin are suffering from their most severe drought on record, exacerbating the woes of the state’s cattle industry already been laid low by the country’s deepening recession.
Extreme drought conditions also exist across many other areas of the parched state, according to the U.S. Drought Monitor.
"Governor Rick Perry today requested that the U.S. Department of Agriculture provide disaster relief assistance for Texas farms and ranches that have suffered economic and physical losses as a result of severe drought conditions," Perry’s office said in a statement.
"If Perry’s statewide request is approved, qualified farm operators in all Texas counties will be eligible for low-interest emergency loans from the USDA. The agency also offers additional programs, such as technical assistance, to eligible farmers," the statement said.
Drought is also gripping much of the rest of the U.S. southwest, threatening farmers and water supplies in fast-growing cities.
In California, Governor Arnold Schwarzenegger last Friday declared a statewide drought emergency, urging the state’s cities to impose mandatory conservation measures to cut urban consumption by 20 percent.
Monday Morning Grains
The grains markets are firmer Monday morning, adding to friday night's gains, with beans, wheat and corn all mostly 4-5 cents firmer.
US farmer selling remains light on soybeans forcing the cash basis higher. The USDA are out Wednesday with their latest S&D estimates, and some analysts are forecasting a cut in soybean ending stocks by around 25 million bushels.
The ongoing dispute between Argy farmers and the government is also keeping the nearby cash market tight as farmers their also sit on their hands, and their beans!
I wonder if we are starting to see a bit of a trend developing here?
Argy farm leaders meet with the government there again tomorrow when the thorny subject of the soybean export tax will no doubt be on the menu. As the government have already clearly stated that they will not be moving on the issue (because they desperately need the tax to pay the bills), it will be interesting to judge the farmers' mood after this one.
US wheat remains under threat from drought in the Southern Plains.
US Wheat Latest
Kansas, which accounts for almost a quarter of all US winter wheat production, is on the radar screens this morning as the winter-wheat crop emerges from dormancy and increases tillering. Drought in Texas is spreading north through Oklahoma and into the state.
Abnormally dry conditions now cover 64% of the state, according to Allen Motew of QT Weather.
The past week saw highly variable weather conditions with some sub-freezing weather, record warmth, strong winds, rain, tornadoes and hail, he says.
The week ahead will be just as interesting with a brief warm-up before cold settles in with the chance of snow later in the week as temperatures will be far below normal by late this week, he adds.
Monday Morning Roundup - Pretty Grim
The British Chambers of Commerce say that 3.2 million people in the UK, or a tenth of the workforce, will be out of work by the second half of 2010. Official unemployment figures are rising and currently stand at 2 million.
The government has taken a 65% controlling stake in Lloyds Banking Group, which could rise to 77%, for underwriting £260m of the bank's toxic assets. Shares in Lloyds fell 14 percent on the news early Monday as investors dumped the stock.
Crude oil has climbed close to the highest in six weeks in New York this morning on speculation that OPEC will decide to reduce output further in an effort to trim stockpiles and lift prices when they next meet in Vienna on March 15. Crude hit $46.76/barrel in early trade Monday.
The euro trades close to a one-week high against the dollar on speculation the European Central Bank will slow the pace of interest-rate cuts, helping to attract investors to its higher yielding rates.
The pound has fallen to a six-week low of $1.3939 against the dollar and a 24-day low of 90.47 pence against the euro weighed down by the news on Lloyds and the BCC's unemployment forecast.
On a brighter note, Everton beat the Smoggies 2-1 to book a place in the semi's against a load of no-hoper showboating ladyboys from Manchester.
