Big Harvest, Weak Global Outlook To Pressure China's Agriculture Prices Further (Source: CME)
China's agricultural commodity futures fell across the board in 2011, as private stockpiling, worries over a double-dip global recession and tightening domestic credit cast a pall especially on cotton, sugar and edible oils. That was in sharp contrast to 2010 when changing appetites drove sharp price increases in China's agricultural markets, as the Asian giant became the largest agricultural export market for the U.S., the world's biggest agricultural producer. The pressure on prices could continue next year as a big domestic harvest and an uncertain global outlook continue to weigh on sentiment. Last year's rally, underscored by China turning a net corn importer, fizzled this year on a range of factors dominated by broadly weaker global markets. Soybean futures fell 4.4% on year while corn was 3.2% lower on the Dalian Commodity Exchange in line with softer Chicago farm futures. Wheat fell 14.3% on the Zhengzhou Commodity Exchange.
Prices are likely to remain under pressure after China announced another record harvest in December, taking its grain output up 4.5% to 571.2 million metric tons. Still, underpinned by China's fundamentally strong demand, soybean and corn prices have declined by smaller margins than prices of other commodities such as cotton and edible oils. Weighed by an inventory glut, cotton prices fell sharply in the first half this year and have not recovered much since. Zhengzhou cotton is down about 26% this year, the steepest fall among major agricultural contracts. In comparison, prices nearly doubled in 2010. Edible oils prices also fell sharply this year, with palm oil futures down 19.3% and soyoil down 15.3%. "Since September, edible oil prices have fallen sharply and medium-to-smaller traders incurred broad-based losses, negatively affecting restocking demand," the state-backed China National Grain and Oils Information Center said Thursday.
Despite a mild rebound in prices recently, bulk edible-oil sales have remained sluggish, it said. Sugar futures on the Zhengzhou bourse fell 15.6% this year, pressured by the weakness in global sugar prices and massive imports. Near-month ICE raw sugar futures are around 23.12 cents now, down 28% on year following a global surplus. China will likely mark a fourth consecutive year of sugar output falling short of demand this year, Rabobank said. In the first 11 months, sugar imports rose 48% to 2.4 million tons, with the pace of imports accelerating in November to reach the second-highest monthly volume on record. Despite hopes among global corn exporters that China would sharply hike its corn imports, Chinese corn intake fell 24% in the first 11 months to 1.2 million tons. A bumper corn harvest has taken the pressure off depleted state corn reserves.
Corn (Source: CME)
US corn futures close lower on profit-taking and an improved South America weather outlook. The lower settlement ends eight straight days of higher prices. Midday weather forecasts showing more rain potential in southern Brazil and Argentina helped prompt profit-taking, traders say. Still, given gains of more than 60c recently, "this isn't much of a selloff," Leffler Commodities' Tom Leffler says. March CBOT corn ends down 4 1/2c to $6.38 a bushel.
Wheat (Source: CME)
US wheat futures end lower as the market tracked corn, which fell on rain in the South America weather forecast. Traders say wheat has little fresh news and weak demand, and is taking cues from corn. Both crops compete in world feed markets. CBOT prices remain at their highest levels since mid-November, but volume is light. Profit-taking across the grains complex after recent gains pressured prices. CBOT March wheat ends down 6c to $6.45 1/4 a bushel; KCBT March wheat closes down 1 1/4c to $6.98; MGEX March wheat down 7 3/4c to $8.55 1/4.
Rice (Source: CME)
US rice futures spring to the highest close in three weeks, rallying by the exchange's 50-cent daily limit amid concern about a storm in India. "Some traders are taking notice of a cyclone hitting the south of India and the possible damage to rice, corn and groundnuts," brokerage FCStone says. Market has tumbled in recent months due to poor export demand. CBOT Jan rice closes up 3.6%, or 50c, to $14.25 per hundredweight.
Wheat Drops, Halting Eight-Session Rally, as Demand for U.S. Grain to Slow (Source: Bloomberg)
Wheat futures fell on speculation that demand will slow from importers and U.S. processors after the longest price rally in four years. Futures surged 12 percent in the previous eight sessions, the longest rally since October 2007, on speculation dry weather in South America would cut grain supplies. About 13.5 million bushels of U.S. wheat were inspected for export in the week ended Dec. 22, 18 percent less than a week earlier, according to the government. Competition has increased for U.S. suppliers, as countries including Russia and Australia boosted output. Prices “have gotten into levels that start affecting economics,” Darrell Holaday, the president of Advanced Market Concepts in Wamego, Kansas, said in a telephone interview. “The competitiveness of the product becomes a little hard to justify.”
Corn Traders Extend Bullish Bets on South America Crop Damage: Commodities (Source: Bloomberg)
Corn traders are bullish for a fifth consecutive week on speculation that dry weather in South America is damaging crops, boosting demand for U.S. supplies at a time when stockpiles are predicted to shrink to a 16-year low. Nineteen of 25 traders surveyed by Bloomberg expect corn to advance next week. Lower-than-average humidity and dry soil will curb crop development in Argentina and southern Brazil through at least Jan. 7, according to T-Storm Weather LLC, a forecaster in Chicago. Argentina is the world’s biggest corn shipper after the U.S. and typically starts reaping its grain in March.
While prices doubled in the past two years as record demand eroded inventories, corn fell as much as 27 percent since the end of August as the U.S. forecast the biggest-ever global harvest. The grain rallied 10 percent in the past two weeks on mounting concern that South American weather will undermine that prediction and drive stockpiles lower. Argentina and Brazil are expected to produce 90 million metric tons, enough to supply the 27-nation European Union for 17 months, USDA data show.
China Industrial Corn Consumption May Slow (Source: Bloomberg)
Industrial use of corn in China, the second-biggest consumer, may grow at the slowest pace in at least five years as the economy cools, curbing the need for imports, said state-affiliated researcher Cngrain.com. The amount processed may expand by 5 percent in the year ending Sept. 30 to 55 million metric tons, compared with 11 percent last year, Cngrain.com analyst Zhang Zhixian said in an interview on Dec. 27. The researcher is owned by China Grain Reserves Corp., which manages state grain inventories. Lower Chinese demand for imported corn may pressure prices in Chicago, which have tumbled 17 percent since Aug. 31 on high global grain supplies and concern that Europe’s deepening debt crisis and a slowing global economy may sap demand. China’s economy will grow 8.5 percent next year, down from 10.4 percent in 2010, the Organization for Economic Cooperation and Development projected on Nov. 28.
Soybeans May Open Lower as Rain Forecast for Brazil Crops; Wheat May Fall (Source: Bloomberg)
What follows are opening calls for U.S. grain and oilseed markets.
-- Soybean futures may open 7 cents to 10 cents a bushel lower on the Chicago Board of Trade on speculation that rain in southern Brazil and Paraguay will revive yield prospects, Jim Gerlach, the president of A/C Trading Co. in Fowler Indiana, said in a telephone interview. Soybean-oil futures are expected to open 0.3 cent to 0.5 cent a pound lower, and soybean-meal futures may open $2 to $3 lower per 2,000 pounds.
-- Wheat futures may open 2 cents to 4 cents a bushel lower on the CBOT, the Kansas City Board of Trade and the Minneapolis Grain Exchange on speculation that U.S. exports will slow after the grain posted the longest rally since October 2007 and the dollar rose to a 15-month high against the euro, making American supplies more expensive on world markets, Gerlach said.
Taiwan Plans More Soybean Imports In Containers On High Bulk Prices (Source: CME)
After canceling a recent bulk tender due to rising prices, Taiwanese importers plan to buy soybeans in containers, which costs around 10 cents a bushel less, trading executives said. "We...plan to buy containerized cargoes if the prices continue to rise," said an importer in Taipei. The Kaohsiung branch of Taiwan's Breakfast Soybean Procurement Association Wednesday scrapped a tender to import 60,000 metric tons of soybeans, citing high prices. Traders said Cargill made the lowest cost-and-freight offer, around a premium of $2.069/bushel over the March contract on the Chicago Board of Trade. Soybean prices are rising due to unusually dry weather in major producing regions of South America, where crops are in the development stage, with CBOT futures hovering around a six-week high. The March contract is trading around $12/bushel. Taiwan is world's fifth-largest importer of soybeans after China, the European Union, Japan and Mexico, buying close 2.5 million tons a year.
India Food Ministry Wants Rice Exports To Continue (Source: CME)
India's food ministry is in favor of continuing rice exports as the country's stocks are at a comfortable level, Food Minister K.V. Thomas said, dropping an initial plan to limit the shipments. The government hadn't specified any limits on the quantity to be shipped when exports of rice and wheat were allowed Sept. 9, but the minister as well as some officials had previously said that no more than 2.0 million metric tons each of wheat and rice may be shipped so as to ensure sufficient stocks before the government introduces a food security law that is currently before parliament. "Our view is that more non-basmati rice can be exported as production is huge and stocks are comfortable," Thomas told Dow Jones Newswires, immediately after an internal meeting at the food ministry to assess the stock position. India shipped 1.6 million tons of rice between Sept. 9 and Dec. 27, and exports are expected to reach 2.0 million tons by February, traders say.
Thomas said there will be sufficient stocks to meet the proposed food security law even after continuing rice exports, but the final decision on the subject will need to be taken by a ministerial panel. India has nearly double the foodgrain stocks it needs under buffer stock requirements and has been finding it difficult to store grains as the new crop comes in, leaving large quantities stored in fields at the mercy of weather. The country had 54.72 million tons of wheat and rice stocks as of Dec. 1. The government allowed exports partly to ease the pressure on storage facilities. Any decision by the ministerial panel on allowing further exports will mainly depend on whether it feels there would be enough stocks left to meet the proposed food security law that guarantees cheap foodgrains to the majority of the population. No date has been fixed yet for the panel's meeting.
Traders have also been lobbying for continuing the rice exports, arguing that the wheat offtake for shipments has been poor, leaving scope for more rice sales from the country's granaries. The prospect for wheat exports has faded as local prices have inched above international rates. Also, expectations of a good winter-sown wheat crop means the country can easily allow export of another 2.0 million tons of rice, said a food ministry official, who didn't want to be identified.
Cyclone To Hit India's Southern Tamil Nadu State; May Damage Crops (Source: CME)
A severe cyclone is likely to hit parts of southern India Friday morning, which could damage some of the standing crops of rice and corn, the weather department's chief said. "We expect the cyclone Thane to be severe in four districts of Tamil Nadu," Ajit Tyagi, director general of the India Meteorological Department, said at a news conference. The cyclone may also cause some rains Friday in the western state of Maharashtra, the country's top sugar-producing province, Tyagi said.
Western Australia's Big Wheat Harvest Buoyed By Record Northern Crop -CBH (Source: CME)
A record crop in the northern Wheatbelt of Western Australia state is underpinning the state's second-largest harvest of winter grains on record, Cooperative Bulk Handling Ltd. reported. Deliveries of wheat, barley, canola and other winter grains to unlisted Perth-based CBH, which dominates storage and handling in Western Australia, reached 12.65 million metric tons on Wednesday, eclipsing the previous second-largest intake, set in the crop year ended March 31, 2006, of 12.5 million tons, the company said in a weekly harvest report. To date, around 92% of CBH's in 2011-12 intake--estimated at 13.5 million tons, more than double 2010-11's drought-reduced harvest--has been received, CBH said. Typically, 70% of the harvest is wheat and deliveries to CBH account for 90% of total state production--nearly all of which is exported. Grain receivals in the northern Geraldton Port zone have reached 3.4 million tons, easily exceeding the previous record of 2.6 million tons set in 2003-04, it said.
CBH General Manager Operations Colin Tutt said that though the harvest is one of the largest on record, it is also one of the most challenging. "We have seen significant weather delays [and] quality issues," he said, also citing a reduction in the performance of rail in hauling grain to port. "Although the harvest has been pleasing from a production [yield] perspective, with low grain prices and deteriorating grain quality due to inclement weather events, there will be growers in some districts struggling to make a profit, which is the disappointing part of such a high-production year," Tutt said. Separately, Viterra Inc. reported the harvest in South Australia slowed in the week ended Sunday due to wet weather, with the company, which dominates upcountry storage and export logistics in that state, having received 6.2 million tons of winter grains.
Harvest continues in the state's southeast, with grain receivals proceeding from growers who have finished harvesting but held grain on farms, helping fill the strong export shipping program, it said in a weekly harvest report issued Wednesday.
Corn, wheat snap 8-day rally; soy falls for 2nd day
SINGAPORE, Dec 29 (Reuters) - Chicago wheat slid 1 percent, while corn lost 0.8 percent as the grain markets snapped eight straight sessions of gains on risk aversion which weighed on equities and buoyed the U.S. dollar.
"Right now it seems like a bit of risk off environment as we are seeing that across the equity markets," said Adam Davis, a senior commodity analyst at Merricks Capital in Melbourne.
Cyclone could damage south India coastal crops-weather office
NEW DELHI, Dec 29 (Reuters) - Rice, groundnut and maize crops in coastal areas of southern India could be damaged by a cyclonic storm which is currently expected to hit land on Dec. 30, the Indian Meteorological Department said on Thursday.
"Storm is expected to damage the standing rice, groundnut and maize in coastal districts of Tamil Nadu (state) and rice and groundnut in coastal Andhra Pradesh" state," the weather office said on its website.
Mexico dry bean output seen down due to drought-attache
Dec 28 (Reuters) - Following are selected highlights from a report issued by a U.S. Department of Agriculture attache in Mexico:
"The marketing year 2011/12 dry bean production estimate is lowered by 220,000 tonnes to 600,000 tonnes as a result of drought, lower yields, and lower-than-previously estimated planted area. The Secretariat of Economy is expected to issue a year-long 100,000 tonnes dry bean duty-free import tariff rate quota in early 2012 to compensate for the domestic production decline. Corn, sorghum, wheat, and rice supply and demand estimates remain unchanged."
Russia 2011 grain exports seen at 22.6 mln tonnes-attache
Dec. 28 - Following are selected highlights from a report issued by a U.S. Department of Agriculture attache in Russia:
"In July - November 2011 Russia exported over 15 million tonnes of grain, including 12.8 million tonnes of wheat and 1.7 million tonnes of barley. However, in November 2011, price competition in the world grain markets increased with low-priced Argentine wheat entering key Mediterranean markets.
La Nina dryness cuts Argentine corn forecasts
BUENOS AIRES, Dec 28 (Reuters) - Argentina's 2011/12 corn crop will be smaller than initial forecasts due to dry weather linked to La Nina, but production should still reach a record, analysts say.
The lowest estimates, figuring in losses caused by the La Nina climate phenomenon, remain higher than the record 23 million tonnes of corn harvested in the 2010/11 season.
Russian 2011 grain crop seen at 93.8 mln T - AgMin
MOSCOW, Dec 28 (Reuters) - Russian 2011 grain crop is preliminarily estimated at 93.8 million tonnes, up from 61 million tonnes in the drought-hit 2010, but down from 97 million in 2009, the Agriculture Ministry said on Wednesday.
This volume will allow Russia to cover all domestic needs and to export 25 million tonnes of grain in the 2011/12 crop year, the ministry said in a statement.
Ukraine grain exports at 1.65 mln T Dec.1-26
KIEV, Dec 28 (Reuters) - Ukraine exported 1.65 million tonnes of grain between Dec. 1-26 against 1.81 million tonnes in the same period in November, analyst UkrAgroConsult said on Wednesday.
The consultancy said in a report the volume included 1.22 million tonnes of maize, 380,000 tonnes of wheat and 50,000 tonnes of other cereals.
Sugar below 3-week peak, robustas above 2-month low
LONDON, Dec 29 (Reuters) - ICE raw sugar futures eased in early trading and hovered below the prior session's three-week high, while arabica coffee and cocoa dipped, and robustas were weaker and above a two-month low, pressured by a big crop in top producer Vietnam.ICE benchmark raw sugar futures dipped on light investor selling and book-squaring, trading below Wednesday's a three-week peak, and were pressured by big crops in the EU, Russia, Ukraine, India and Thailand.
Brazil's Bahia cocoa main crop now past peak
BRASILIA, Dec 28 - Warehouse deliveries in Brazil's top cocoa-producing state Bahia slowed in the week to Dec. 25 from the previous week, data from Bahia Commercial Association showed, marking the start of the harvest's declining phase.
"Arrivals from Bahia have started to diminish but still maintained a volume that is the highest for the Christmas week of the last 15 years," said Bahia-based cocoa analyst Thomas Hartmann.
Cocoa Drops for Fifth Day on Supply Outlook; Sugar, Cotton Futures Climb (Source: Bloomberg)
Cocoa fell for a fifth session on signs that supplies will be ample as Europe’s debt crisis threatens economic growth. Sugar, cotton and orange juice gained, while coffee slid. In the week ended Dec. 18, cocoa deliveries to ports from farms in Ivory Coast, the world’s biggest producer, rose 14 percent from a year earlier to 578,368 metric tons, a document from the industry’s regulator showed. Purchases from farmers in Ghana, the second-largest grower, rose 4.3 percent in the first nine weeks of the current season, the Ghana Cocoa Board said. “Prices have weakened on supply ideas, especially from western Africa, where arrivals and export declarations are running ahead of last year,” Jack Scoville, a vice president for Price Futures Group in Chicago, said in an e-mailed report.
Cameroon raises cotton price to curb smuggling
YAOUNDE, Dec 28 (Reuters) - Cameroon state firm SODECOTTON has increased farmgate raw cotton price by 27.5 percent for the current harvest in an effort to dissuade farmers from smuggling their produce to neighbouring Nigeria, a spokesman said on Wednesday.SODECOTTON said it will pay farmers 255 CFA francs ($0.50)per kg of cotton this season from 200 CFA per kg in the previous season.
Ivorian cocoa buyers seek end to grinders tax break
ABIDJAN, Dec 28 (Reuters) - Major buyers of Ivorian cocoa have urged the government of the world's top producing nation to cut a 20-year old tax break given to local grinders, arguing the incentive handed grinders an unfair market advantage.
Members of an international and local buyers association, which includes France-based commodities firm Sucden and leading cocoa trader Armajaro, said in a letter to Ivorian authorities the tax benefit distorted the market.
Mosaic cuts fertilizer output due to weak prices
Dec 28 (Reuters) - Fertilizer producer Mosaic Co said on Wednesday it will cut production of phosphate, a key nutrient used for crop production, because prices have fallen to unsustainable levels.
The Minnesota-based company said it would cut its planned production of phosphate by 250,000 tonnes over the next three months, blaming economic uncertainty for a drop in prices. It said it still expected record global demand for fertilizer in 2012.
US gasoline demand up over Christmas holiday
Dec 28 (Reuters) - U.S. retail gasoline demand rose sharply last week from the previous week as Americans hit the road for the Christmas holiday, but demand was down from the same week in 2010, MasterCard said in its weekly SpendingPulse report on Wednesday.
Last week's gasoline demand rose 7.7 percent compared with the previous week, MasterCard said, but demand was 1.6 percent lower than it was a year ago.
Oil Heads for Third Yearly Gain on Iran Tension, U.S. Economy Speculation (Source: Bloomberg)
Oil rose for a second day, heading for a third yearly increase, on speculation that escalating tension in the Middle East may disrupt supplies as a recovery in the U.S. economy bolsters demand. Futures advanced for the eighth day in nine, extending this year’s gain to 9.2 percent. A U.S. State Department spokeswoman yesterday called Iran’s threats to shut the Straits of Hormuz “irrational behavior.” About one-sixth of global supply travels through the seaway. The country faces sanctions on its crude exports and a possible boycott by European oil buyers over its nuclear program. Prices gained yesterday after U.S. jobless claims fell to a three-year low. Crude for February delivery gained as much as 19 cents, or 0.2 percent, to $99.84 a barrel on the New York Mercantile Exchange. It was at $99.74 at 8:20 a.m. Singapore time. Prices climbed 15 percent in 2010. This year’s gain would be the smallest since 2006 when the contract increased 0.02 percent.
Oil above $107, US stocks and Iran in focus
LONDON, Dec 29 (Reuters) - Oil held above $107 a barrel as investors looked ahead to a U.S. supply report expected to show a drop in crude stocks and as Iranian threats to halt a vital oil trade lent support.
"Worries over Iran are supportive. The market is up even though the API stats were bearish, so people may be waiting for the EIA," said Christopher Bellew, an oil broker at Jefferies Bache.
Thailand, Cambodia aim for offshore oil development
PHNOM PENH, Dec 29 (Reuters) - Offshore oil and gas reserves in disputed waters of the Gulf of Thailand could take up to a decade to tap, despite progress between Thailand and Cambodia towards restarting talks on joint development, Thailand's energy minister said on Thursday.
The two countries are keen to reach an agreement on joint exploration and development of the Overlapping Claim Area (OCA) in the Gulf, which has been delayed by political upheaval in Thailand and sometimes deadly border disputes.
Vietnam 2011 crude oil output rises 1.1 pct y/y -govt
HANOI, Dec 29 (Reuters) - Vietnam produced an estimated 15.18 million tonnes, or 305,000 barrels per day (bpd), of crude oil this year, a rise of 1.1 percent from 2010, the government said on Thursday.
December's output reached an estimated 1.42 million tonnes, up 4.0 percent from the same month last year, the General Statistics Office said in its monthly report.
Gold Slides to Five-Month Low as Stronger Dollar Erodes Investment Demand (Source: Bloomberg)
Gold, on the brink of a bear market, posted the longest slump since March 2009 as gains in the dollar reduced demand for precious metals as alternative assets. The dollar climbed as much as 0.6 percent against the euro as an auction of Italian bonds fell short of the government’s target. Gold, down 12 percent in December, is headed for the biggest monthly drop since October 2008, compared to the greenback’s almost 3 percent gain against a six-currency basket. “The developments in Italy have perked up the dollar, and that is pushing gold down,” Sterling Smith, an analyst at Country Hedging Inc. in St. Paul, Minnesota, said in a telephone interview. “I expect gold to remain in negative territory this week.”
