The Fannie and Freddie Show Latest
(MarketWatch) -- The quick rescue for Fannie Mae and Freddie Mac hammered out on Sunday doesn't look like it'll be quite that quick.
Shares of Fannie and Freddie rose dramatically on Wednesday after five straight days of losses. But while shares of each company climbed by a whopping 31%, the rescue plan still appeared to have some political distance to go as of Wednesday.
"It's looking slower today than it did yesterday," said David John, an expert on financial institutions at the Heritage Foundation.
The plan got support from House Financial Services Committee Chairman Barney Frank, D-Mass., on Wednesday but Republicans in both the House and Senate have voiced skepticism about the plan, which would extend an unlimited line of credit for both companies for 18 months and give the Treasury the authority for 18 months to buy stock in both companies.
House and Senate lawmakers are aiming to pass a bill including the plan by the end of next week. That's not a moment too soon, says John.
"Some indication needs to be made and made quickly that Fannie and Freddie will not be allowed to fail," John said in an interview on Wednesday.
Concern about what one Republican senator called a "blank check" is one obstacle to congressional blessing of the plan to help the struggling companies. The other is the means by which to approve it.
Democrats are aiming to attach the measure to a housing bill that includes a $300 billion program to head off foreclosures, as well as long-debated regulatory reforms for Fannie and Freddie But Republicans are throwing cold water on that idea. House Minority Leader John Boehner, R-Ohio, has called for hearings about the aid plan and said it shouldn't be linked to the foreclosure program.
To be sure, Congress isn't known for its lightning-fast movements. But at the same time, analysts say, it'd behoove lawmakers to get their acts together to help the companies and help shore up confidence in the mortgage market.
"I think it will go through. I think there's a sense of urgency about this," said Peter Morici, a business professor at the University of Maryland. "Because it has to go," he said, citing the $5.2 trillion of home mortgages owned or guaranteed by both companies.
Not everyone is optimistic about passage, though.
"I think it's going to get slowed down," said Bob Moulton, president of the Americana Mortgage Group. "I think it's going to cost taxpayers a fortune," said Moulton, echoing concerns raised by some senators on Tuesday.
OECD Publishes Scathing Report On Biofuels
The OECD has today released a scathing report on biofuel policies in member countries. According to the report, Economic Assessment of Biofuel Support Policies, government support of biofuel production in OECD countries is costly, has a limited impact on reducing greenhouse gases and improving energy security, and has a significant impact on world crop prices.
The report says biofuels are currently highly dependent on public funding to be viable. In the US, Canada and the European Union government support for the supply and use of biofuels is expected to rise to around $25 billion per year by 2015 from about $11 billion in 2006. The report estimates that biofuel support costs between $960 to $1700 per tonne of greenhouse gases (carbon dioxide equivalent) saved.
Support policies include budgetary measures, either as tax concessions or direct financial support for biofuel producers, retailers or users. Blending or use mandates require that biofuels represent a minimum share of the transport fuel market and result in increased fuel costs to consumers due to the higher production costs of biofuels. Trade restrictions, mainly in the form of import tariffs, protect the domestic industry from foreign competitors but impose a cost burdon on domestic biofuel users and limit development prospects for alternative suppliers.
The report calls on governments to refocus policies to encourage lower energy consumption, particularly in the transport sector. It also calls for more open markets in biofuels and feedstocks in order to improve efficiency and lower costs. The report recommends a clear focus on alternative fuels that maximise the reduction of fossil fuel useage and greenhouse gas emissions. Further, research to accelerate development of second generation biofuels that do not require commodity feedstocks is suggested.
The reduction of greenhouse gas emissions is a primary reason for current biofuel policies but the savings are limited. Ethanol from sugar cane - the main feedstock used in Brazil – reduces greenhouse gas emissions by at least 80 percent compared to fossil fuels. But emission reductions are much smaller from biofuels based on feedstocks used in Europe and North America.
Biofuels produced from wheat, sugar beet or vegetable oil rarely provide emission savings of more than 30 to 60 percent while savings from corn (maize) based ethanol are generally less than 30 percent. Overall, the continuation of current biofuel support policies would reduce greenhouse gas emissions from transport fuel by no more than 0.8 percent by 2015.
The impact of current biofuel policies on world crop prices, largely through increased demand for cereals and vegetable oils, is significant but should not be overestimated. Current biofuel support measures alone are estimated to increase average wheat prices by about 5 percent, maize by around 7 percent and vegetable oil by about 19 percent over the next 10 years.
Taking into account the 2007 US Energy Independence and Security Act and the proposed EU Directive for Renewable Energy, 13 percent of world coarse grain production and 20 percent of world vegetable oil production could shift to biofuel production in the next 10 years, up from 8 percent and 9 percent in 2007, respectively.
Columbia wheat harvest looks promising
Wheat harvest is getting started in the Mid-Columbia and officials are optimistic about what they see. "It's going to be a good quality year," said Damon Filan, manager of Tri-Cities Grain. Harvest is about on time this year, he said, and business is starting to pick up.
It's hard to tell at this early stage what yields farmers will get this year, said Tom Mick, CEO of the Washington Wheat Commission. But "the winter crops look very good," he said.
Many of the state's 2.1 million acres of wheat land produce soft white wheat, but farmers also grow hard red winter and hard red spring wheat, Mick said.
Chris Shaffer of Walla Walla is a long-time wheat farmer and grows mostly soft white wheat. The cooler spring weather this year could produce a slightly higher than average yield, he said.
Ukraine exports over 700,000 tonnes of grain in two weeks of new marketing year
Ukraine over the first two weeks of the new marketing year (from July 1 to July 14) exported over 700,000 tonnes of grain to foreign markets, according to Agriculture Minister Yuriy Melnyk.
From July 1 to July 14, from the start of the new marketing year, over 700,000 tonnes of grain was exported," he said at a press conference in Kyiv on Tuesday.
He said that the present pace of growth in exports is in line with the grain supplies usually made to foreign markets in peak periods.
The minister said that the government plans to promote grain exports, which would help to maintain the stability of prices on the market and free up grain storage facilities.
Earlier, the ministry forecasted that grain exports in the 2008/2009 marketing year would be 13.5-14 million tonnes. That would be around 10 million tonnes up on the 2007/2008 marketing year's 3.7 million tonnes.
Ukraine: grain stocks totalled 5.4 mln tonnes as of July 1
As of July 1, 2008, at the Ukrainian agricultural enterprises (except small ones) engaged in storing and milling of grains, grain stocks totaled 5.4 mln tonnes, up 29% as compared to the same date of 2007, reported State Statistics Committee of Ukraine Wednesday.
Wynnstay Group PLC - Possible Acquisition
The Board of Wynnstay, the agricultural and retail group, announces that it has entered into non-legally binding heads of agreement relating to the acquisition by Wynnstay of the balance of the issued share capital of Welsh Feed Producers Limited not already owned by the Group.
Wynnstay currently owns 50% of the issued share capital of WFP, an animal feed manufacturing business based in Carmarthen, South Wales. A further announcement will be made if and when this transaction is completed.
eCBOT Close/Early Call
Wednesday's CBOT session is seen opening with corn futures expected 2 to 4 cents lower, soybeans 6 to 10 lower and wheat 5 to 7 lower.
Corn and wheat were lower for much of the overnight eCBOT session, but soybeans were mostly firmer before selling off late to also close in negative territory.
September beans closed 9 3/4c lower at $15.18 1/4, Sep corn 3 1/2c lower at $6.44 3/4 and Sep wheat 7 1/4c lower at $8.03 3/4.
Favourable US weather, wheat harvest pressure, weaker crude oil and spillover economic pressures from outside sectors are all bearish influences today a trader said.
However the market remains nervous as crude could bounce this afternoon depending on the latest stocks data from the EIA, the trader warned.
UK cereal harvest kicks off
The UK cereal harvest has kicked off this week with winter barley being cut in several areas. With crops ready in many areas, it’s just a matter of getting the weather to get on with it, says the Farmer's Guardian.
Some growers have made a start in the south west, according to Owen Cligg, trading director at farmer-owned business Wessex Grain, based in Somerset: “We’ve had a bit of barley offered to us from Dorset,” he said. “And we did hear of some cut in Somerset for own use.” However, rain has held up progress. “Feed barley would have been ready last week, but the rain kept it off,” said Mr Cligg.
Martin Cook trader at Grainfarmers in Cheltenham reported a slow start. Growers in the area were 'just nibbling at a bit of barley'. “They’ll get going at the end of the week if the weather stays fine,” he said.
In Germany, about 40 per cent of the barley harvest is complete, but yields are reported to be highly variable, ranging from five tonnes per hectare in the west to eight tonnes in the east. The wheat harvest is likely to begin next week.
"Harvest is not in full-swing everywhere, but it is underway in many places," said a Paris-based dealer. "Quantities will be there, but so far quality is hit or miss."About 80% of the French winter barley crop has now been harvested with farmers quickly turning to rapeseed and milling wheat, according to the dealer.
The dealer added that so far quality in southern Italy had been good, but is much more variable in the North.Export business remains quiet and there has been some local price pressure in parts of southern Europe due to some supplies of Black Sea wheat coming in.Egypt bought 240,000 tons of wheat Tuesday, but the optional origins didn't include E.U. wheat.
In Poland, total cereal production at 25.5 million tonnes is forecast to be at least 1.7 million tonnes lower than last year. Good progress has been made in Hungary and Romania, but there are some concerns over grain quality.
