Corn (Source: CME)
US corn futures close slightly lower in a modest setback from record highs. Traders remain nervous about strong demand draining low supplies ahead of next fall's harvest and expect federal forecasters to slash their end-of-season inventory outlook in a crop report Friday. The government shocked traders and sent futures soaring starting a week ago by estimating supplies as of March 1 were lower than expected. "There's a general fear of selling [corn] in front of report, especially given what happened a week ago," says Chad Henderson at Prime Agricultural Consultants. CBOT May corn slips 4c to $7.59/bushel.
Wheat (Source: CME)
US wheat futures finish lower on profit-taking and a lack of spillover support from the corn market. Traders took money off the table after prices climbed recently with corn, which hit all-time highs. Corn closed lower, opening the door for wheat to pull back, traders say. Another strong earthquake in Japan added pressure by introducing uncertainty into the markets and raising concerns about a slowdown in demand, an analyst notes. CBOT May wheat falls 9c to $7.73 1/4 a bushel, KCBT may loses 16 3/4c to $9.22 3/4, MGE May sinks 13 3/4c to $9.40 3/4.
Rice (Source: CME)
US rice futures finish sharply lower on profit-taking and a lack of spillover strength from other markets. Rice seems overpriced as global supplies are ample, says a CBOT floor trader. Meanwhile, market participants on Friday will review the USDA's latest monthly crop report for a possible reduction in the government's export forecast. Rice had been climbing with wheat, but it fell 1.2%. CBOT May rice sinks 3.2% to $13.62 1/2 per hundredweight.
FAO: Food Prices Fall In March But Seen Rising Further (Source: CME)
World food prices fell in March for the first time in eight months, the United Nations' food body said, but it warned that prices may continue to rise this year as higher output may not be enough to replenish low stock levels. The Food and Agriculture Organization's food price index, which tracks a basket of food commodity prices, fell to 230 points last month, down 2.9% from its record peak in February but still 37% above the same time last year. International prices of oils and sugar dropped the most, with the oil and fat index falling 7% on month and the sugar index down 10% from the highs of January and February. The FAO's index of cereal prices also fell by a more muted 2.6% in March, in line with a slump in international grain futures markets after Japan's earthquake and ongoing concerns over turmoil in the Middle East. But David Hallam, director of the FAO's Trade and Market Division, said the respite doesn't mean a reversal of the trend that has seen world food prices hit successive highs this year.
Wheat prices, for example, have risen more than 25% from their March lows and corn futures hit a record high this week. "All of the factors which were leading to the prices going up over the last few months are all still there," he said. "We had something similar in 2007-08, when the stocks were run down to such a level when there are shocks in the market there's no safety valve there." Food price inflation has climbed to the top of the international political agenda after contributing to protests that have rocked the Arab world and toppled the rulers of Tunisia and Egypt earlier this year. The World Bank estimates 44 million people may have been pushed into poverty by the price rises, and aid agencies warn high food costs threaten millions more.
"With many poor communities already feeling the effects of higher food prices and grain stocks in the main food exporting countries at dangerously low levels, sighs of relief in response to today's announcement by the FAO would be premature," said Oxfam's policy advi sor Luca Chinotti. Yet while every major forecasting agency is expecting a rise in world food production next year, particularly in grains, doubt remains as to whether this will be enough to sate demand given low stock levels. The FAO said it expects world wheat production to rise 3.4% to 676 million tons in 2011-12, a more optimistic prediction than the International Grain Council's forecast of 673 million tons, but the FAO warned even this may not be sufficient to replenish inventories. "I think the market's pretty tight and because of this prices will stay high and volatile," said Prabhu Pingali, the deputy director of the agriculture development initiative at the Bill & Melinda Gates Foundation.
"Growth rates have been stagnant for so long that supply hasn't been keeping up with demand and we don't have enough buffer to manage the shocks coming into the system." And even with hopes currently high for next year's output, as farmers expand production in a bid to cash in on higher prices, further weather problems could still cause more production issues this season as they did last year, the FAO's Hallam said. "If you look back to this time last year everyone was looking forward to record harvests and even in the autumn some of the major producers and exporters where still expecting major harvests," he said. "It's still a bit premature until we get more hard information about plantings to say what's going to happen."
USDA Considers Cutting Weekly Crop Reports, Other Data (Source: CME)
The U.S. Department of Agriculture may cut its weekly crop progress reports, among other possible cutbacks, a government official said. Cutting the weekly reports, which give grains traders a sense of the development of the crop throughout the season, is "on the table," Jacqueline Moore, head of the USDA's National Agricultural Statistics Service's field crops division, confirmed in an interview. She said some cuts to NASS are a foregone conclusion, and that the department has a list of possible cuts. The weekly crop progress reports detail planting rates, crop development, harvest, as well as subjective condition ratings. "The concern is if does get cut, will it come back at all?" Moore said. "Because next year's budget doesn't get any better." The agency is also looking at cutting back on its June crop report, which gives a clearer picture of how many acres farmers planted of various crops. The agency might curtail the amount of surveying it does for that report, she said.
Government officials are bracing for a shutdown assuming Congress does not pass a budget by the end of the day Friday. Moore said the extent of the agency's cuts depend on the government's final budget, which remains up in the air. "Do we cut back on the samples we do, or do we not do the first month of a forecast?" she asked. Although the weekly reports are monitored by traders, they sometimes have little effect on the markets. Some traders criticized the reports last year, saying the subjective "good to excellent" ratings for various crops did not prove to be an accurate indicator of final yields. Still, Dan Basse, president of advisory firm AgResource Co., who first raised the issue at the conference, said the reports provide vital data for a breadth of market participants. Without such reports, the market would revert "back to the 1970s, when three or four major grain companies had all the information, and the rest of us are on the outside looking in."
Basse, presenting at an agriculture conference hosted by MDA EarthSat Weather, said he was lobbying the USDA not to cut the reports and asked participants to do the same. He said in an interview the USDA was considering cuts to a variety of other reports as well, ranging from cattle and pigs to nuts.
Favorable Summer Forecast For US Corn, Soy - MDA EarthSat (Source: CME)
U.S. corn and soybean farmers should enjoy favorable growing weather this summer, meteorologists said in long-range forecasts. Temperatures won't be as hot as they were last year in the heart of the U.S. corn and soybean belt, Kyle Tapley, a senior meteorologist with MDA EarthSat Weather, said at a conference on agriculture. Hot nighttime temperatures in the central U.S. helped cause disappointing crops in 2010, particularly for corn. The summer forecast also indicates favorable precipitation, Tapley said. His forecast was echoed by Citigroup meteorologist Jeff Manna. Both also agreed that drought in the southern U.S. Plains, which is causing problems for the current winter wheat crop, will persist. "I think the big concerns are going to be across the Southern Plains, where it's going to remain warm and dry," Tapley said. With U.S. corn supplies nearing their lowest level on record, analysts say U.S. farmers must produce strong crops both this year and next to replenish supplies.
While the winter wheat crop will already be harvested by summer, a drought in the South would stress corn, soy and cotton crops. Tapley said weather in the U.S. Delta would also be hot and dry this summer. Based on the forecast, corn yields will likely be higher this season, while wheat yields will be lower, Tapley said. He said total soybean production would be down this year due to reduced acreage, not weaker yields. Tapley added that China's corn and soybean yields will likely be lower this year due to dry conditions, and that a relatively weak monsoon season in India could hurt soybean yields.
Biofuel Makers Bounce Back From Bumps In The Road (Source: CME)
When Royal Dutch Shell PLC announced its $12 billion joint venture with Brazilian sugar-cane-ethanol producer Cosan Ltd. last year, it was a massive vote of confidence in a sector that has taken a battering over the last few years. Biofuel -- gasoline substitutes made from biological sources, such as sugar cane, corn and wheat -- enjoyed a big boom in the middle of the decade as concerns grew about greenhouse-gas emissions, oil-price spikes and energy security. But the global recession of 2008 hit biofuels badly by drying up investment and putting a lot of ethanol producers out of business. A huge spike in prices that year for food crops used to make the fuel also triggered a political backlash. The sector has recently begun to stabilize, and it attracted nearly $650 million in venture capital last year. World-wide production grew to more than 100 billion liters in 2010 from 16 billion liters in 2000.
Shell says biofuels could make up as much as 20% of all transportation fuels in 30 years, up from about 3% now. The original biofuel was ethanol, made by fermenting sugar components of plant materials. Brazil has been producing it from sugar cane for decades. Ethanol largely made from corn sugars comprises nearly 10% of the gasoline pool in the U.S. As part of the post-2008 shake-out, much more research money is now flowing into so-called second-generation biofuels that, unlike ethanol, aren't made from food crops. They instead use feedstocks such as algae, municipal waste and grasses like miscanthus. While placing its big bet on ethanol, a fuel with its roots in the 1970s, Shell has backed away from more daring investments in algae-to-diesel and biomass-to-liquids. That reflects a hard-nosed calculation that such cutting-edge technologies are years, perhaps decades, away from being commercially viable.
Shell's head of downstream products, Mark Williams, said in a strategy update last year the company was faced with the "difficulty of taking these advanced biofuels to anything of scale." Great strides have been made on technology that converts sugars in plants into fuel. Although some demonstration projects for second-generation fuels are up and running, no commercial-scale conversion facilities have been built so far. Many analysts don't expect any before 2014 at the earliest. That has led to fears technical problems and cost issues may prevent advanced biofuels from becoming a viable form of energy, in the same league as solar and wind power. Such concerns could also deprive the industry of the kind of support from corporations or governments that will help it to grow. A key challenge is building a supply chain from scratch. "It's proving hard to develop the feedstock at an acceptable cost," says Susan Hansen, an analyst at Rabobank International.
"And the other problem is: where do you grow crops like miscanthus? How do you organize the logistics and transport from farmer to processing plant?" Policies have changed to reflect the scaling back of industry ambitions. In 2007, Congress passed a Renewable Fuel Standard which established a 100 million gallon nation-wide mandate for more advanced, or cellulosic, biofuel by 2010 rising to 16 billion gallons by 2022. Later, when it became clear U.S. producers would never meet that target, the 2010 mandate was slashed to 6.5 million gallons. Of the major oil companies, Shell has been one of the most aggressive investors in green alternatives to gasoline and diesel fuel, building up one of the largest portfolios of biofuels R&D projects in the business. It currently spends about $1.3 billion a year on R&D, with a significant chunk of that spent on biofuels.
Shell has invested in a Canadian cellulosic-ethanol company called Iogen Energy Corp., a biofuels start-up called Codexis Inc. and Wisconsin-based Virent Energy Systems, which transforms plant sugars from switch grass or wheat straw into fuel. But the Anglo-Dutch oil major has pulled back from some of its investments. In 2009 it sold its stake in Choren, a German biomass-to-liquids company after the full cost of scaling up its capital-intensive gasification technology became clear. "We realized the scale of these plants would be very, very big," said Mark Gainsborough, Shell's head of alternative energies. Then last year it pulled out of an algae-to-diesel venture called Cellana. Instead, its big bet has been on sugar-cane ethanol. In February last year, it announced its joint venture with Brazil's Cosan, the world's biggest producer of ethanol from sugar cane.
The move gave Shell exposure to the huge biofuels market in Brazil, where more than 80% of all new cars sold are flex-fuel models that can run on any mixture of ethanol and gasoline, and where as much as 21% of all transport fuel is from biofuels, compared with 4% in the U.S.
Putin: Russia To Restore Image As Reliable Grain Exporter - Report (Source: CME)
Russia will do everything possible to restore its reputation as a reliable grain exporter, the Interfax news agency reports, citing the country's Prime Minister Vladimir Putin. "I want to assure you that we will do everything possible to amend the situation on the grain market, to compensate supplies over the next few years and to restore our image as a reliable partner," Putin said. Russia--previously the world's third-biggest grain exporter--banned grain exports last summer, after the worst drought in more than a century slashed the Russian harvest by one-third and sent domestic food inflation soaring.
Corn closes in on record peak, U.S. data eyed (Source: Reuters)
Chicago corn futures edged up to near record highs, as thin U.S. stocks and expectations of firm Chinese demand helped purge early losses ahead of key U.S. data later this week. "Corn prices will certainly remain elevated until the U.S. finds a way to ration demand" to deal with tight supplies, said Victor Thianpiriya, agricultural commodity analyst at ANZ in Melbourne.
Ukraine 2011 spring grain 30 pct sown - report
KIEV, April 7 (Reuters) - Ukrainian farms have sown 1.3 million hectares of early spring grain for the 2011 grain harvest or 30 percent of the forecast area, a senior agriculture ministry official was quoted as saying on Thursday.
Government newspaper Uryadovy Kurier quoted the head of the ministry's planting department Oleksander Demydov as saying farms planned to sow a total of 4.0 million hectares of early spring grains this year.
Argentina wheat output seen at 13 mln tonnes-attache
WASHINGTON, April 6 (Reuters) - Following are selected highlights from a report issued by a U.S. Department of Agriculture attache in Argentina:"Wheat production for 2011/12 is projected at 13 million tonnes, lower than in 2010/11. Harvested area is expected to increase by 300,000 hectares, but yields are estimated lower than last year's record. Harvested area with corn is also expected to grow in 2011/12, to 3.4 million hectares. Production is forecast to increase significantly at 25 million tonnes estimating average weather and yields.
Little rain in sight for parched US Plains wheat
CHICAGO, April 6 (Reuters) - The U.S. Plains wheat belt was warm and dry the past day with little to no rain expected the next week, adding more stress to a crop that is struggling from a lack of moisture, a forecaster said Wednesday.
"It's a terrible situation and it continues to worsen. We are looking at another surge in hot weather by the end of the week," said Mike Palmerino of Telvent DTN weather service.
Cocoa ends up as Ivory Coast's Gbagbo holds on
Cocoa futures ended firmer on Wednesday, recouping recent losses as the prolonged conflict between presidential rivals in top grower Ivory Coast failed to be resolved as quickly as hoped. Sugar futures reeled from investor liquidation, spread trade and arriving supplies from the harvest in the important center-south region of top grower Brazil.
India may consider allowing further cotton exports
NEW DELHI, April 6 (Reuters) - India is likely to consider allowing further exports of cotton due to prospects of a bumper crop this year, Farm Minister Sharad Pawar said on Wednesday, less than a week after the trade ministry withdrew incentives for overseas sales. India, the world's second-biggest cotton producer, has already allowed export of 5.5 million bales this season, a quota which has now been exhausted.
Brazil eyes ethanol reform, sugar companies hit
BRASILIA/SAO PAULO, April 6 (Reuters) - Brazil wants to tighten regulation of the domestic ethanol market to protect fuel supplies, a senior government official said on Wednesday, a move that could ripple through global sugar markets.
But a more appealing ethanol market could in theory hit sugar output as the two products compete for the same feedstock -- cane.
Mexico sees record 10/11 sugar exports on US demand
MEXICO CITY, April 6 (Reuters) - Mexico sugar exports will soar to record highs this season as cane growers and millers aim to meet increased demand from the United States, which is expecting a supply squeeze.
Carlos Blackaller, head of the national cane growers union, said sugar exports in the 2010/11 growing year would reach 1.3 million tonnes, slightly above U.S. Department of Agriculture (USDA) forecasts of 1.232 million tonnes.
Cocoa stores in Ivory Coast still useable
LONDON, April 6 (Reuters) - The almost half a million tonnes of cocoa that has piled up in top producer Ivory Coast, as months of sanctions halted shipments, is expected to still be fit for export despite heat and humidity, analysts said.
There have been fears that the cocoa was at risk of rotting.
Jonathan Parkman, joint head of agriculture at brokerage Marex Financial, told Reuters Insider television on Wednesday that 100,000-150,000 tonnes of cocoa was unhedged and that this could have a bigger impact on prices than the resumption of shipments.
Oil Trades Near 30-Month High in New York on Libya, Middle East Conflict (Source: Bloomberg)
Oil traded near the highest in 30 months in New York as a fire burned at Libya’s Sarir field, heightening concern that the conflict in North Africa and the Middle East will spread and curtail supplies from the region.
