300 jobs lost as Leeds transport firm goes bust
(Yorkshire Post) -- A Leeds transport firm has gone bust with the loss of around 300 jobs. Macfarlane Transport is a victim of spiralling fuel costs which have left the £20m business unsustainable.
Joint administrators from accountants KPMG were appointed on Wednesday at the request of the firm's directors but were unable to sell the business as a going concern. It has now ceased trading.
Administrator Richard Fleming said: "It's very unfortunate that this long established business has been unable to survive and that large-scale redundancies will, inevitably, be a result."
He said the business had been hit by rising fuel prices and a competitive marketplace which had put its margins "under unsustainable pressure".
Every 1p increase in the price of fuel adds £600 a year to the cost of driving a lorry, according to the Road Haulage Association (RHA). The cost of diesel is around £1.30 a litre.
Leeds Chamber of Commerce executive director, Ian Williams, said: "This is one of the first high-profile businesses in the haulage sector that's gone under but underlines how tough things are at the moment in the transport industry."
Speculators driving US corn market, full impact of corn prices yet to hit consumers
Tim Jergenson, Barron County's agricultural agent, says most area farmers' corn was contracted six to 12 months ago at a price he estimates to be between $4 and $5 a bushel. Corn is selling for around $7 a bushel right now.
Corn prices have tripled in the past two years, according to a June 22 London Times Online article. Author Dominic Rushe attributed the spike to ethanol, floods, and maybe God's apocalyptic hand, in that order.
It's more complicated than that, say local agriculture experts. Randy Bina, general manager of the Barron County grain merchandiser United Ag Services, believes several other factors are contributing to record prices.
United Ag Services has the largest grain storage facilities in the county. They help farmers contract grain by buying grains for less than market price and storing them, then "shopping" the grains for farmers.
Trade on the Chicago Board of Trade determines the world market price for grains, and corn prices in Barron County move with that figure by the second, Bina explains.
Ethanol production is often blamed for driving up grain prices, but developing countries' increased demand for meat, and therefore the grains that feed livestock and poultry, adds to the overall demand for corn, says Bina, and the weak value of the dollar means American consumers competing in a global market must spend more to get less.
Although he says there's no way to quantify it, Bina personally believes market speculators-the same people allegedly driving up oil prices-are investing in commodities and causing prices to rise.
Minnesota market analyst Chris Steinhoff, of Country Hedging Inc., the commodities brokerage division of the national farmer-owned cooperative CHS, confirms that more investors are choosing commodities because "recent returns make it attractive."
Jennie-O Turkey Store, headquartered in Barron, is the county's largest buyer of corn. Grain buyer Gary Byl, of Rice Lake, agrees with Bina's assessment of the current market situation. He won't divulge how much area farmers will be paid for their contracted corn, but he says corn is "highly overvalued" at current prices, and market volatility, which has also increased fertilizer prices, isn't good for agriculture-or consumers.
"Index funds are pushing this market. The consumer hasn't even seen seven-dollar corn hit supermarkets. Just about every species of meat animal is being curtailed somewhere, some way," he says.
Byl won't say exactly how much corn Jennie-O has contracted this year. It's a "large amount" of what the company will require for feed, he says, but since the company enters into contracts with farmers on an ongoing basis, he anticipates rising turkey prices will hit grocery stores in the future.
Ukraine grain crop just keeps getting bigger
With the Ukrainian grain harvest well underway the size of the crop there is getting larger and larger. Latest figures from UkrArgoConsult peg this year's grain crop at 43.452mmt, around 3.5mmt higher than previously estimated and over 14mmt more than 2007.
The wheat crop is estimated at 21.83mmt, around 2mmt more than previously thought.
Grain exports are now forecast to reach 8.2mmt of wheat (up from earlier estimates of 7mmt) and 5 mmt of barley.
London flat bought for £175,000 last year is now worth less than £100,000
(Evening Standard) -- A property investor who bought a flat for £175,000 at the height of the housing boom has ended up in a negative equity nightmare after its value nosedived by almost 50 per cent.
Maurice Conroy, who owns a string of buy-to-let flats, bought the studio in Pimlico last summer. But he has just had it valued by three agents who told him it would now only sell for £80,000 to £100,000.
He is one of a growing number of buytolet investors who are discovering the property market is not necessarily a safe alternative to a pension.
Mr Conroy, 43, from Chelsea, admits he paid over the odds for the flat a year ago, but said the news left him reeling.
"It's like being hit in the stomach," he said. "It's the biggest drop I've heard of and I scan all the property news. A £95,000 drop - that's 50 per cent. Even if it sold for £100,000 that's 40 per cent. I questioned the agents and they said they cannot value it at more than £1,000 a foot."
Two agents valued it at £100,000, while Hamptons International said it was worth no more than £80,000.
Russia Could Increase Grain Output 50% - Cargill
Russia has the potential to raise grain output by 30-40 million tonnes per year, a 50 percent increase from current levels, a top official in commodity trading group Cargill was quoted as saying on Thursday.
Greg Page, president and chief executive of leading U.S. trader Cargill, said in an interview with Russian business daily Vedomosti that his company may double investment in Russia to $1 billion in the next 5-6 years.
"I know that Prime Minister (Vladimir) Putin is convinced of the necessity of increasing grain production in Russia by 30-40 million tonnes," Vedomosti quoted Page as saying.
He said the increase could take seven to eight years to achieve, given Russia's size and climate conditions.
"If you look at the number of hectares and the quality of soil, if the soil is ready for production and if sufficient infrastructure and processing capacities are created, I do not see this goal as unrealisable for Russian farmers," he added.
Russia officially expects to harvest at least 85 million tonnes of grains this year, up from 81.8 million tonnes in 2007.
Page said that, according to United Nations' forecasts, global food consumption was expected to rise by 50 percent by 2030 and double by 2050, and Russia would account for a significant part of the increase.
"I am sure that the world needs Russian grain to improve the balance between supply and demand on the grain market," he said.
Russia, one of the world's top grain suppliers, exported around 13 million tonnes of grain in the 2007/08 crop year finished in June. The Russian Grain Union industry lobby has said the country is likely to increase exports to 17 million next season.
Page said Cargill had spent $500 million on Russian projects since it started working in the country in 1991, and could double the investment in the medium-term.
"I will not be surprised if we invest at least the same amount in the next 5-6 years," he said.
Record prices for crops such as wheat and maize this year have sparked a surge of investment interest for farmland in Russia and other countries of the former Soviet Union, which have massive untapped potential.
Troika Dialog, in a report issued last month, estimated the Commonwealth of Independent States had 13 percent of the world's arable land, yet grows only 6 percent of its crops and farms just 3 percent of the world's meat.
Nebraska corn grower Roy Smith reflects on things he thought he'd never see...
I got the check for my last increment of 2007 corn today. It was sold for $7.12 per bushel last Friday. The bins are clean. There is no more corn to sell just in case the price goes higher. I can add $7 cash corn to the list of things I thought I would never see in my farming career.
This year marks 40 years of farming for me. When I began, corn was $1, soybeans were $2.50 or less. Nitrogen was about a dime per pound. We did not use any phosphate or potash. Herbicide use was limited, but the total cost of weed control was less than $10 per acre. It usually included one cultivation.
About four years later the price of everything escalated. By 1973, the normal price for corn was over $2 and soybeans $5. Of course, input prices went up accordingly. By the end of the 1970s we were no better off than we had been with lower prices. This assumes that land prices rose accordingly. For those who owned their land the situation was somewhat better then for those of us who rented.
I always figured that the move to higher plateau was a once in a lifetime event. Now it appears that was not the case. The situation today has a lot of similarities to the economic shift of 35 years ago. At least today I have my small land base paid for so I am not affected by land inflation.
Besides the price of corn today, I did not think I would ever see 200 bushel per acre dryland corn in eastern Nebraska. In 2004 I had a field that went over 225 bushels across the scale. I did not think I would see gasoline at $4.00, but it is there. I wonder what the next shock will be?
When I began farming I set a goal for what my net worth would be when I reached age 65. When I reached that birthday, I had achieved more than double what I had set for a target in 1968. However, I have some neighbors who are paying $5000 a month for nursing home care. What I thought was a secure retirement may not be so secure after all. I think I will just farm until I drop and save all of that money for long term care.
It is hard to see what might happen in the near future, let alone in the long term. I sold the last of my corn this week for three reasons. First, for the past several years it has been my policy to have everything priced by July 1. This strategy has saved me from a lot of grief over the years because at some point every summer the trade stops focusing on old crop and looking for new crop. When that happens, the price usually drops. Secondly, the talk of the government changing regulations on commodity speculation is seldom positive for grain prices. Any such action will eventually have a depressing effect on prices.
Third, the Fourth of July weekend has frequently been a turning point for grain prices. Sometimes prices turn higher. More often they turn lower. That is especially true when there has been a sustained rally in June. With prices where they are, the risk of holding through the long weekend is greater than if prices have been working lower through the past month. At any rate, I can brag about selling $7 cash corn for a while! If prices continue higher, I have all of this year's production to sell. Right now the crop prospects on my farm look very good.
Oil steady above $145 in Asia on Saudi declaration
(AP:BANGKOK, Thailand) Oil prices remained near record highs above $145 a barrel in Asia after Saudi Arabia's oil minister suggested his country doesn't plan to boost production.
Light, sweet crude for August delivery was up 23 cents at $145.52 a barrel in Asian electronic trading on the New York Mercantile Exchange, midafternoon in Singapore. Crude futures rose to $145.85, a record high, in New York on Thursday before settling at a record finish of $145.29 a barrel.
Oil prices have risen more than 50 percent so far this year.
Saudi Arabian Oil Minister Ali Naimi said Thursday in Madrid that the world's biggest oil exporter had no immediate plans to boost crude output because there was no need to do so. Naimi said Saudi Arabia is ready to raise production if the kingdom determines supply-and-demand fundamentals have changed. But for now, "all our buyers are satisfied and happy," he said.
Gains by the dollar Thursday against the euro helped keep oil prices from rising further. The greenback strengthened after the European Central Bank raised its benchmark interest rate an expected quarter point but signaled it didn't expect additional rate hikes that might further boost euro.
US car makers- the Big Three to become the "Not-So-Big-Two?"
(The Economist) -- THIS week shares in General Motors (GM), America’s biggest carmaker, fell below $10, valuing the giant firm at little more than $5.6 billion. The last time GM’s share price was this low, the Cadillac Eldorado had yet to grow fins and Volkswagen’s Beetle was a funny-looking novelty on American roads. That was in 1954.
Things are just as gloomy elsewhere in Detroit. Ford has abandoned all hope of returning to profit, as promised, in 2009 and appears to be bracing itself for a loss in 2008 even bigger than last year’s $2.7 billion. And on June 26th Chrysler was led to deny rumours that it was preparing to file for bankruptcy, after drawing down a $2 billion credit line from its owners, Cerberus Capital Management, a private-equity firm (see article), and Daimler.
It was not meant to be like this. At the beginning of the year both Ford and GM were expecting the credit crisis to knock sales in the first half, but they were still cautiously optimistic that they would soon reap the rewards of their expensive and painful turnarounds. Along with Chrysler, they had just secured a big package of concessions from the carworkers’ union that went a long way to closing the cost gap with the “transplants”—the lean, non-union factories operated in North America by their Asian and European rivals.
Independent reports by J.D. Power and Harbour showed that Detroit was also fast catching up with the Japanese on quality and productivity. GM’s new Chevrolet Malibu, declared North American Car of the Year in January, was seen as the first domestic product in years to give Toyota and Honda a run for their money in the fierce market for mid-size saloons.
But the carmakers have been ambushed by the disastrous housing market and, above all, by the soaring cost of fuel. Falling house prices have persuaded many people to put off buying a new car, and petrol at over $4 a gallon is radically changing demand. Detroit is still stuck with model ranges heavily biased towards the big, thirsty sport-utility vehicles (SUVs) and pickup trucks that raked in the profits when petrol cost half of today’s price.
The Big Three were certain that America’s love affair with go-anywhere, do-anything, gas-guzzling trucks would never end—so much so that both Ford and Chrysler pinned their hopes of recovery on new versions of their bestselling pickups, the F-150 and Dodge Ram respectively.
But that conviction has lately been shattered. Figures released this week show that sales of cars and light trucks in America in June fell by 18% compared with the same period a year earlier. Chrysler’s sales were down by a stunning 36%, pushing its market share below 10% for the first time in decades. Ford dropped by 28%. Despite flinging costly rebates at the market, GM’s sales were still down by 18%. Even Toyota, which was widely expected to overtake GM for the first time last month, took a 21% hit, as it struggled both to sell its big Tundra pickup and to keep up with demand for its popular fuel-sipping hybrids. Honda, by contrast, which unlike Toyota and Nissan has never offered Americans chunky pickup trucks, actually increased its sales by 1.1% thanks to a 26% rise in sales of its economical passenger cars.
Unless there is sudden reversal in the price of oil, Japanese and South Korean brands will make big gains in market share both this year and next. Their North American factories are more flexible than Detroit’s are and there is capacity to be tapped back home. Although GM and Ford make some fuel-efficient cars, such as the Chevrolet Cobalt and the Ford Focus, dealers complain that supply is limited and that customers tend to opt for Japanese or South Korean brands when trading down.
GM, Ford and Chrysler are each reacting to the crisis in different ways, but with the same aims—to reduce the speed at which they are burning cash, and to accelerate the arrival of more fuel-efficient models. Ford is slashing its salaried workforce, delaying the launch of the new F-150 by two months because dealers cannot shift the outgoing model, and converting an F-series plant in Mexico to build the relatively tiny new Fiesta, which Europeans will get this summer—more than a year before American buyers.
GM has gone further, closing four truck and SUV factories and putting its Hummer brand up for sale. Analysts reckon GM’s $20 billion cash pile is being depleted at a rate of $1 billion a month, making it a near-certainty that it will have to tap shareholders for new funds before long. And this week Chrysler said it would slash production of the Dodge Ram and shut one of its two North American minivan factories. Chrysler’s minivans have long been regarded as the firm’s “crown jewels”, but sales this year have suddenly slowed.
So just how bad are things for the Big Three? Their survival has been in doubt before. But two things are different this time. The first is that the carmakers’ finance arms used to bring in cash even in hard times. That is not happening now. More buyers are defaulting on their car loans, and the resale value of SUVs and pickups has collapsed so catastrophically that the finance offshoots are losing huge sums on vehicles returned after lease.
The second change is that it seems increasingly unlikely that consumers will eventually shrug off the high price of fuel and return to their old buying habits, which means that Detroit’s old business model is now obsolete. Jim Farley, Ford’s head of global marketing, describes the market as crossing a “watershed”. The problem is that the smaller, more efficient cars that buyers now want, and which will come on stream in a year or two, are far less profitable for both manufacturers and dealers. Denny Fitzpatrick, a GM dealer in California, observes that he makes more money selling ten Chevy Tahoes (a bloated SUV made by GM) than he does selling 50 Honda Civics (a compact car).
GM and Ford can at least take some comfort from their well-run foreign operations, which are benefiting from growing demand in China, Russia and Brazil. But Chrysler has no such cushion. Worse, it is planning to replace only half its fleet in the four years after the 2009 model year (compared with Honda’s 72% replacement and Nissan’s 80%). John Murphy of Merrill Lynch believes this is “an active decision by the new owners to rationalise the product portfolio in advance of a break-up or sale”. It may not be long before the Big Three become the Not-So-Big Two
