Corn (Source: CME)
US corn futures end slightly lower, capping a week straight of declines and dropping 11% from last Friday's record high near $8/bushel. "The bears won this week," says Dave Marshall, an independent commodities broker in Illinois. Prices traded higher and lower during the session, eventually succumbing to continued selling pressure. CBOT July corn slipped 1 1/4c to $7.00 1/4 a bushel.
Wheat (Source: CME)
US wheat futures finish mixed as the markets stabilize after dropping sharply earlier in the week. Traders were assessing the ongoing harvest, which has pressured prices by bringing in fresh supplies. The harvest is revealing "outstanding protein levels" in the southern Plains, making the crop desirable to grain users, according to US Wheat Associates, a trade group. Harvest is quickly winding down in Oklahoma but expected to slow down in as it moves north into Nebraska. CBOT July wheat slips 1c to $6.72 1/4 a bushel; KCBT July rises 6 1/2c to $8.04 1/2; MGE May stumbles 3c to $8.97 1/4.
Rice (Source: CME)
US rice futures finish at a 1-month low as expectations for favorable weather pressure prices. Crops should benefit from rains in dry areas of the Mississippi Delta next week, analysts note. Conditions have already improved in producing state like Arkansas and Louisiana, according to federal data issued this week. The USDA will update its crop ratings Monday. CBOT July rice sheds 4c to $13.96 1/2 per hundredweight.
Brazil's Winter Corn Crop May Miss Output Forecast - Analyst (Source: CME)
Dry weather and late-season planting could cause Brazil's winter corn harvest to miss official output estimates, though the shortfall should be partially offset by a larger crop area, according to Rabobank. Conab, as the crop-forecasting agency of the Agricultural Ministry is known, estimated that Brazil's 2010-11 corn crop will reach 56.7 million metric tons, up 1.3% from a year earlier. The second crop, which was planted in March and will be harvested in the coming weeks, is expected to account for 21.7 million tons of corn, according to Conab's latest forecasts. Renato Rasmussen, Rabobank's grain and oilseed analyst in Brazil, said in an interview that scarce rainfall during much of April and May will likely hurt crop yields. He expects the winter harvest to yield around 17 million tons of corn, bringing the total for the 2010-11 crop year to 52 million tons. Corn growers took a gamble by planting corn late in the season, after a delayed soy harvest, when dry weather typically prevails, Rasmussen said.
"Although it was very risky to plant in such a late harvest, they decided to do it anyway because of the prices," he said. Until last week's rains in southern Brazil, the situation was looking even worse. Central-western Mato Grosso state, which didn't get a break from a drought, could still suffer a 30% to 35% drop in overall corn output, Rasmussen said. Likely helping to balance out some of the lost productivity is an 8.8% year-over-year increase in the planted area of corn, which Conab estimates at 5.71 million hectares for the second harvest.
Crusting Hurts Ontario's Corn Emergence -Report (Source: CME)
The development of corn planted in some of Ontario's heavier soils was being hampered by crusting soils, according to the Ontario Ministry of Agriculture, Food and Rural Affairs' field crop update for the week ended June 15. The crusting has resulted in emergence problems in those areas, the report said. Soybean development in the province ranges from the vegetative emergence stage to the trifoliate leaf stage, the report said. In dry areas plant emergence was seen as poor on fields that were not planted into moisture. Flea beetle pressure was described as high in select areas of the canola growing regions. The report also indicated that Swede Midge damage was also evident in certain canola fields. Most of the winter wheat crop in southern Ontario was now at or past the 75% heading stage and well into full flowering stage, the report said. The advanced fields were now past the window for fusarium control products.
There is a significant amount of white or bleached wheat heads reported in fields in areas of south-western Ontario. Advanced spring cereal crops were at the flag leaf stage of development and about 7 to 10 days before heading, the report said. First cut forage maturity was advanced.
China Adds Argentina's Farmlands To Its Commodities Shopping List (Source: CME)
Chinese investment is flooding into Argentina as the Asian giant expands its global commodity hunt from the raw materials used in industry to the foodstuffs needed to feed its 1.3 billion citizens. China's investment in Latin America hit $15.6 billion during the 12-month period through the end of May, nearly three times greater than the year-ago period, consulting firm Deloitte said in a report. Of that amount, Brazil received about 60% and Argentina close to 40%. During the last three years, more than 70% of China's investment in the region went to energy and minerals, but farming is attracting more attention as the country seeks to fill its bowls from foreign fields. China already buys the bulk of Argentina's soybean exports, its top crop and largest source of export revenue. Soybeans are mainly used as livestock feed in China, where meat consumption is rising along with personal incomes. At the same time, urbanization is shrinking the amount of arable land available in China.
Last week, China's largest farming company, Heilongjiang Beidahuang Nongken Group, inked a joint venture with Argentina's Cresud SA to buy land and farm soybeans. Cresud is one of Argentina's top agriculture firms with control over more than 1 million hectares (2.47 million acres) of farmland that produce grain, cattle and milk. Heilongjiang Beidahuang's chairman, Sui Fengfu, told Dow Jones Newswires in March that the company plans to buy 200,000 hectares of overseas farmland this year, and that Latin America is a key target. The company is already farming 2 million hectares of land outside China. Heilongjiang Beidahuang is also spending $1.5 billion to lease and develop farms on 300,000 hectares in Argentina's Rio Negro Province. Over a five- to 10-year period, the company plans to grow wheat, corn, soybeans, fruits, vegetables and wine grapes for export to China. The Cresud and Rio Negro deals appear aimed at avoiding a backlash against foreign ownership of farmland in Argentina.
President Cristina Fernandez has introduced legislation limiting land purchases by foreign individuals and companies to 1,000 hectares in rural areas. Heilongjiang Beidahuang's incursion in agriculture comes hot on the heels of heavy Chinese investment in Argentina's oil sector. In February, Occidental Petroleum Corp. sold its local assets to China Petroleum & Chemical Corp. for $2.5 billion. Last year, China's Cnooc Ltd., in partnership with Argentina's Bridas Corp., agreed to buy a 60% stake in Pan American Energy from BP PLC for $7.1 billion. China's hunger for raw materials has also led it into mining, with MCC Minera Sierra Grande SA, a unit of state-run China Metallurgical Group, buying the Sierra Grande iron mine in Rio Negro Province in 2006. The mine, which had been shuttered since 1991, made its first shipment of iron-ore concentrate to China in February.
Deloitte predicts that Chinese investment will continue pouring into Latin America, but expects a diversification in the future into other industries such as manufacturing, infrastructure and finance. Though its growing exponentially, China's investment still makes up a relatively small share of total foreign direct investment flows to the region. Foreign direct investment in Latin America grew 40% on the year to $113 billion in 2010, and is expected to rise 15% to 20% this year, according to the U.N.'s Economic Commission for Latin America and the Caribbean.
OECD Sees A Decade Of High, Volatile Food Prices (Source: CME)
Food prices will be up to 30% higher on average over the next decade as slowing grains production fails to keep pace with rising demand, the Organization for Economic Cooperation and Development said, but it said financial speculation has no long-term effect on food prices. Price volatility, which has plagued agricultural markets in recent years, is also set to become commonplace as lower output gradually erodes world stocks, the OECD said in a joint report with the United Nations' Food and Agriculture Organization. And with climate change expected to make yields vary far more wildly from year to year and world stocks expected to fall, the report said that feeding the world's almost 1 billion hungry people will become harder. "A slow-growing supply set against expected high demand underlines the projection of high and more volatile agricultural commodity prices," said the report.
Ministers from the Group of 20 industrialized nations are expected to announce next week plans to create a global database on food production and stocks, to mirror existing schemes in oil markets. The OECD and the FAO backed the need for improving transparency through better forecasting, but stopped short of arguing that financial investors were responsible for driving up food prices in the long term. "High levels of speculative activity in futures markets may amplify price movements in the short term although there is no conclusive evidence of longer term systemic effects on volatility," they said. Instead, they argue that the rise in prices is likely to be driven by an increasing imbalance in fundamentals. A forecast 30% increase in the price of poultry and 20% increase in pigmeat, for example, is down to growing consumption by developing world's rapidly-expanding middle class, they said.
Rising demand from biofuels and the increased use of grains for feed are also expected to push up cereals prices by a fifth as production growth slows to 1.7% a year due to stagnating yields in the developed world, down from 2.6% over the previous decade. Wheat yields are predicted to increase only 0.8% a year, leaving production and consumption on an even keel at 746 million metric tons. Production of rice, the staple grain consumed in Asia, is expected to increase to 528 million tons by 2020, a rate of only 1.3% a year. "Weather-related crop yield variations are expected to become an even more critical driver of price volatility in the future," the report said. Yet the bodies shied away from predicting any shortfall in output of major grains, forecasting that global coarse grain production will rise 18% by 2020 to 1.321 billion tons by 2020, the same pace as consumption.
They said that any slowdown in output in the developed world is likely to be made up for by rising production in emerging countries, particularly in Latin America and Eastern Europe. "The projections confirm the continuation of the gradual shift in agricultural market share from developed to developing countries," they said. Still, they noted that external influences, such as oil and the movement of currencies, will have a growing influence on food prices and are likely to drive volatility in the markets in the years ahead. By 2020 biofuels are projected to absorb 13% of global production of coarse grains, primarily corn, 15% of vegetable oil and some 30% of sugar.
Funds Reduce Long Positions in Commodities in Bet Global Growth to Decline (Source: Bloomberg)
Funds reduced bullish bets on commodity prices for the first time in four weeks as Greek’s debt crisis spurred speculation that global growth will decline, curbing demand for raw materials.
World Faces Century of Hunger Without Farm Deal, France’s Le Maire Says (Source: Bloomberg)
The Group of 20 countries must reach an agreement at a meeting of farm ministers in Paris next week to avoid the 21st century from becoming “the century of hunger,” French Agriculture Minister Bruno Le Maire said. France, as president of the G-20 this year, is proposing a shared database on food stocks and harvests, a forum on export restrictions, emergency stocks in food-deficient countries and regulation to reduce commodity-price swings, Le Maire said.
Corn Stocks Plunging to 1974 Low as China Adds Brazil-Sized Crop to Demand (Source: Bloomberg)
Even a fifth consecutive year of record global corn harvests will fail to meet demand for food, fuel and livestock feed, reducing world stockpiles to the lowest in two generations. Consumption will rise 3 percent in the next marketing year, a 16th consecutive annual gain that saw demand jump 66 percent, according to U.S. Department of Agriculture estimates. Inventory will drop to 47 days of use, the fewest since 1974, the data show. Waterlogged fields in the U.S., the largest exporter, will curb yields, Goldman Sachs Group Inc. says. Corn may jump 36 percent to a record $9 a bushel if conditions worsen, Morgan Stanley says.
Oil Declines for Second Day on Concerns Over European Debt, Global Economy (Source: Bloomberg)
Oil declined a second day in New York on speculation a slowing global economy and Greece’s debt crisis will lead to lower fuel demand. Futures fell as much as 0.4 percent today after the biggest weekly decline in six weeks. European governments weighed withholding half of Greece’s next 12 billion-euro ($17.2 billion) aid payment to maintain pressure on the government to slash its debt. Japan’s exports fell 10.3 percent in May from a year earlier. Economists surveyed by Bloomberg News forecast an 8.4 percent drop. A report tomorrow may show U.S. home sales last month slid to the lowest this year.
Crude Oil Falls to Near a Four-Month Low on European Debt Crisis, Economy (Source: Bloomberg)
Crude oil dropped to the lowest price in four months in New York on doubts European efforts to resolve the Greek debt crisis will succeed, and on concern of reduced economic growth and fuel demand. Futures fell 2 percent as Greek Prime Minister George Papandreou attempted to get the country’s parliament to pass austerity measures needed for a bailout. The International Monetary Fund cut its forecast for U.S. growth in 2011. Oil tumbled 6.3 percent this week as U.S. manufacturers turned pessimistic and fuel consumption dropped.
Gold May Drop as Growth Risk Hurts Commodities (Source: Bloomberg)
Gold is poised for a second weekly decline as growing evidence of an economic slowdown and the dollar’s strength curb demand for commodities. Immediate-delivery gold dropped as much as 0.3 percent to $1,525.73 an ounce before trading at $1,526 at 2:35 p.m. in Singapore. The metal lost 0.3 percent this week after a 0.7 percent drop the previous week. The August-delivery contract decreased 0.2 percent to $1,527.60. Cash silver lost 2.4 percent this week and was set for a third weekly decline.
