White House Proposes Slashing US Farm Subsidies (Source: CME)
The Obama administration is proposing to cut billions of dollars of farm subsidies and other spending from the U.S. Department of Agriculture's fiscal-year 2013 budget. The $23 billion USDA budget proposal--a 3% reduction in USDA spending for the fiscal year that begins Oct. 1--includes a complete elimination of the controversial direct-payment subsidy program as well as a reduction in crop-insurance subsidies and costly land-conservation programs. Cutting the subsidies now makes sense because farm revenue is at historical highs, according to the USDA budget proposal that the White House said will reduce the U.S. budget deficit by $32 billion over 10 years. Net farm income in the U.S. reached $110.9 billion last year, a 28% increase over 2010, according to government data. The USDA sends out billions of dollars to farmers in direct payments regardless of whether they need it and sometimes even if they aren't actually farming the land that is tied to the subsidies.
The Obama administration has previously proposed shaving the program that pays out roughly $5 billion a year to farmers, but opposition in Congress has remained strong. In June, Congress struck a provision from the FY 2012 spending bill that would have reduced the number of farmers in the U.S. who could collect farm subsidies by preventing any farmer with an adjusted gross income of more than $250,000 from getting direct payments. Farmers are now prevented from receiving those payments only if they have an AGI exceeding $750,000. About one million farmers on 260 million acres of land spread around 364 of 435 congressional districts currently collect direct payments, according to the USDA and the Environmental Working Group, a organization that wants to eliminate some farm subsidies and use the money to protect natural habitats.
"The direct-payment program provides producers fixed annual income support payments for having historically planted crops that were supported by Government programs, regardless of whether the farmer is currently producing those crops-or producing any crop, for that matter," the administration said in its budget proposal released. And many of the farmers who get the payments are already profitable, the White House said. More than half of the farmers who get them have an annual income of more than $100,000. But the White House also aimed reductions at the insurance companies that cover farmers. It costs the government about $10 billion a year to run a crop-insurance subsidy program that pays out about $7 billion to farmers in premium subsidies. The remaining $3 billion goes to private insurance companies and that is too much, the Obama administration said.
Subsidized crop-insurance companies collect a return on investment of about 14%, but that should be closer to 12%, according to a government study, and the reduction would cut government spending by $1.2 billion over 10 years. Another reduction--lowering the cap on administrative expenses that the government pays to insurance companies--would save about $2.9 billion over 10 years. Another area in USDA spending the White House wants to cut is conservation spending. There are too many programs that often overlap, it said. The Obama administration said it is now proposing "to reduce conservation funding by $1.8 billion over 10 years by better targeting conservation funding to the most cost-effective.
China Seeks Greater Agriculture Cooperation With U.S. -Minister (Source: CME)
China intends to pursue greater cooperation with the U.S. in food security, agricultural trade and joint research in agricultural science and technology, Agriculture Minister Han Changfu said, according to the transcript of an interview published on his ministry's website. Han made the remarks to the official Xinhua news agency ahead of Chinese Vice-President Xi Jinping's U.S. visit this week. In the interview, Han shared data on the bilateral trade that showed China running a trade deficit with the U.S. in the agriculture sector. In 2010, China imported $18.6 billion worth of agricultural produce from the U.S., accounting for 13% of total U.S. agricultural exports, Han said. China became the largest trade destination for U.S. agricultural products that year. In comparison, China exported $5.8 billion worth of agricultural produce to the U.S., 12% of its total agricultural exports. The U.S. is China's third-biggest agricultural export destination, Han said.
China is conducting an ongoing probe into U.S. exports of distillers' dried grains, a corn-based animal feed. Han didn't mention the issue in the interview, and didn't elaborate on the areas of cooperation he hoped the two countries would pursue.
USDA Budget Would Increase 2.5% in 2012 on Subsidies Before Cuts Kick In (Source: Bloomberg)
U.S. Department of Agriculture spending would rise 2.5 percent to $154.5 billion in the year starting Oct. 1 before crop-subsidy cuts kick in, beginning long-term reductions farmer aid, according to the budget President Barack Obama sent to Congress today. Ending so-called direct payments, paid to growers of major crops regardless of commodity prices, would save $22.7 billion through 2022. Total farm subsidies, including crop insurance and conservation, would fall $32 billion over the next decade, although spending by the agency that administers subsidies would rise 20 percent to $12.1 billion in fiscal 2013. Direct payments will end “because fiscal reality necessitates it,” Agriculture Secretary Tom Vilsack told reporters today in Washington after the budget was released. “We need a safety net, but that safety net’s going to change.”
Speculators Hike Commodity Wagers as Growth Improves (Source: Bloomberg)
Hedge funds increased bets on rising commodity prices to the highest since September on mounting confidence that growth in the U.S. will strengthen demand. Money managers boosted their combined net-long positions across 18 U.S. futures and options by 13 percent to 929,199 contracts in the week ended Feb. 7, Commodity Futures Trading Commission data show. That’s the highest since Sept. 20. Bullish wagers on copper rose to a six-month high, and soybean holdings jumped by the most this year. The Standard & Poor’s GSCI Spot Index (SPGSCI) of 24 commodities rose to a six-month high on Feb. 9, a day after the MSCI All- Country World Index (MXWD) entered a bull market, as indicators signaled accelerating growth. Fewer Americans than forecast filed claims for jobless benefits in the week to Feb. 4, and consumer confidence rose to a one-year high. Investments in commodities expanded for a seventh week, the longest streak since February 2009, data compiled by Bloomberg show.
Corn (Source: CME)
US corn futures dragged higher by a rally in the soybean market. Traders say corn was a "reluctant" follower of soybeans, which climbed amid worries about South America's crop. The markets are tied together because they compete for US acreage, and any increase in soy acreage based on higher prices could mean fewer corn acres, which is supportive to prices. Traders say USDA's baseline corn acreage projection of 94M, up from 91.9M in 2011, was mostly a nonevent for the market. Corn joins other commodities gaining as worries about Europe's debt crisis abate for now. CBOT March corn ends up 7 3/4c to $6.39 1/2.
Wheat (Source: CME)
US wheat futures rally on spillover support from corn and soy, along with help from outside macro markets. Wheat lifted by a strong rally in soybeans, which was fueled in part by South America crop concerns, along with broader support from a weaker dollar after Greece approved austerity measures. Optimism about increased export demand due to Black Sea disruptions, and increased domestic demand because of wheat's discount to corn, added to the support. Still, traders note world and domestic supplies are abundant. CBOT March wheat ends up 11 1/4c to $6.41 1/4 per bushel, KCBT wheat closes up 10 1/4c to $6.83 1/4 and MGEX wheat ends up 3 3/4c to $8.06 3/4.
Rice (Source: CME)
US rice futures end sharply higher, bouncing back after steep losses Friday and a broader downtrend. The market has sunk recently due to poor demand and ample supplies, but traders say downside is limited as weaker prices may discourage farmers from planting rice this season. CBOT March rice jumps 42c, or 3.1%, to $14.13 1/2 per hundredweight.
Australian Wheat Exports To China May Double In 2011-12 -Rabobank (Source: CME)
Australian wheat exports to China could double this marketing year ending Sept. 30 to 1.2 million metric tons as prices are low compared with U.S. corn, Rabobank said in a monthly agribusiness review. Australian Standard White grade wheat of 10% protein is particularly competitive. Recently, about 93,000 metric tons were exported to China, where it will likely be used as part of the feed ration for hogs, Rabobank said. Rabobank estimates output will hit a record 27.7 million tons this crop year ending March 31, while the Australian Bureau of Agricultural and Resource Economics and Sciences forecasts it will hit 28.3 million tons. Abares will review its production estimate Tuesday. Australia's annual domestic consumption is around 6 million tons, and the remaining grain is available for export. Rabobank estimates exports this marketing year will reach a record 21 million tons. "Prices continue to trade under international values as the large domestic stock position weighs heavily on the market," the bank said.
Last week, the Australian Bureau of Statistics reported December exports took total shipments in the current marketing year to 4.99 million tons, up 31% from 3.80 million tons a year ago. ASX March milling wheat futures deliverable port in New South Wales last settled at A$206.50/ton, or US$192.30/ton, down from A$270/ton early in September.
US wheat up 1.2 pct, corn firm on Greek austerity bill
SINGAPORE, Feb 13 (Reuters) - U.S. wheat rose 1.2 percent and corn gained 0.8 percent following losses last week, buoyed by hopes that Greece can avoid a default after lawmakers passed an austerity bill to secure a bailout.
"Last week we saw prices fall largely due to the economic concerns and USDA report, but today because of positive news from Greece, there is some support for the grain markets," said Lynette Tan, an analyst with Phillip Futures in Singapore.
Ukraine grain exports at 335,000 T Feb 1-9
KIEV, Feb 13 (Reuters) - Ukraine exported about 335,000 tonnes of grain, mostly maize, in the first nine days of February, Kiev-based ProAgro consultancy said on Monday, citing data from Ukrainian sea ports.
ProAgro said Ukraine had exported about 287,000 tonnes of maize and 40,500 tonnes of wheat. No figures for the same period of 2011 were immediately available.
Vietnam may stockpile 1 mln T rice to keep price up-state TV
HANOI, Feb 13 (Reuters) - Vietnam could stockpile 1 million tonnes of milled rice to prevent domestic prices from falling when supplies pick up during the harvest of the winter-spring crop, its largest, state-run Vietnam Television said on Monday.
The volume, equivalent to 2 million tonnes of paddy and making up nearly a fifth of the crop output, would be kept aside for three months, the station said in a nationwide broadcast, citing the Vietnam Food Association.
Early glimpse of US crops may get second look
Feb 13 (Reuters) - A U.S. government report offering the first look at this year's crop s is expected to show farmers in the United States planting the largest area with corn since World War Two amid high prices and favorable weather.
The U.S. Agriculture Department baseline report, due out midday Monday, has historically had little impact since it is based on data from November and not on surveys from farmers that will be used for the more authoritative estimates issued in March.
Argentina early-planted corn hit by drought-gov't
BUENOS AIRES, Feb 10 (Reuters) - Argentina corn planted early in the 2011/12 season was hit hard by weeks of drought at the turn of the year, while recent rains have refreshed late-seeded crops, the Agriculture Ministry said in a report on Friday.
The South American country is the world's second biggest corn exporter after the United States and the prolonged dry spell has dimmed prospects that it will be able to replenish global supplies to make up for a disappointing U.S. crop.
Speculators up corn, soy long amid S. American worry
Feb 10 (Reuters) - Large speculators raised their net long stakes in Chicago Board of Trade corn and soybeans on signs of improving export demand for U.S. commodities and uncertainty about the crops in South America, regulatory data showed on Friday.
Noncommercial traders, a category that includes hedge funds, boosted their net long in corn by 17,521 contracts to 143,085 in the week ended Feb. 7, according to the Commodity Futures Trading Commission's weekly commitments of traders report.
Argentine wheat reform disappoints farmers, so far
BUENOS AIRES, Feb 10 (Reuters) - Argentine farmers say they are still being paid below-market prices for wheat despite a new government export system aimed at increasing competition among millers and exporters.
Growers had long urged President Cristina Fernandez to free the wheat market from a government-imposed quota system designed to ensure abundant domestic food supplies, but which they said benefited buyers at their expense.
Frost hits grain crops in parts of east Europe
SOFIA, Feb 10 (Reuters) - Freezing temperatures coupled with a lack of snow cover in some parts of eastern Europe have badly damaged winter sowings and will lower 2012 grain crops, farmers and meteorologists said.
A cold snap in early February, when temperatures plunged to minus 30 degrees Celsius, has damaged 40 percent of winter grain crops in major Black Sea producer Ukraine and is posing risks to sowings in smaller grain exporter Bulgaria as well as in the Czech Republic .
Cotton Merchants Seek US Government Support To Stem Defaults (Source: CME)
Some of the world's largest merchants of cotton are seeking support from the U.S. government to stem a wave of contract defaults that resulted from a sharp swing in the fiber's price last year. "We are looking for some assistance from the government any way we can get it," William May, president of the American Cotton Shippers' Association, told Dow Jones Newswires on the sidelines of a cotton conference in Fort Worth, Texas Saturday. "We've got millions of dollars worth of cotton contracts that...have not been executed." ACSA's members include Cargill Inc., Noble Group Ltd., Olam International Ltd., Allenberg Cotton Inc., a unit of French trade house Louis Dreyfus, and Ecom Agroindustrial Corp., among others, May said.
The total value of the defaulted cotton is still being tallied, but May said it is in the "hundreds of millions of dollars," and between 3 to 5 million bales. That figure would mean the defaulted contracts would represent 20-30% of the 15.67 million bales produced last fall by the U.S., the world's top cotton exporter. Cotton prices hit a record $2.27 a pound last March as demand soared and supply suffered amid bad weather in some grower nations like Pakistan. But prices tumbled when demand wilted at the high prices, falling nearly 60% by the end of 2011 from the record peak. Many mills cancelled cotton orders that had been placed at the higher prices as much as a year in advance. The price swing crushed margins at apparel companies, commodity firms and textile mills.
The Liverpool, U.K.-based International Cotton Association, which sets the rules for most of the world's cotton trade, said it received a record 242 requests for arbitration in 2011. Cotton mills and merchants prefer ICA arbitration over courts in each country because the process is often faster, more uniform and less expensive. Between 2000 and 2010, ICA said it received an average of 45 requests per year. But in a shift, ACSA said it will jointly seek support from the U.S. government along with the National Cotton Council, an industry group, and an association of U.S. cotton cooperatives, known as Amcot. The effects of the defaults have been felt since they began in the second quarter of 2011 and now into 2012. "This is going to be continuing probably, until all of these high-priced contracts are taken care of," said Phil Bogel, chairman of ACSA and a cotton trader at Toyo Cotton Co. in Dallas.
The cotton groups plan to meet with members of the U.S. Agriculture Department and the Office of the United States Trade Representative to ask for "government-to-government" meetings with countries whose textile mills have defaulted on contracts, May said.
Coffee premiums set to weaken;sugar shrugs off India
SINGAPORE, Feb 13 (Reuters) - Coffee premiums are likely to soften in Asia this week because of recent gains in London futures, while steady demand will keep the sugar market alive despite rising supply from second-largest exporter Thailand, dealers said.
"In terms of economics, it probably doesn't make sense for them to hold on to coffee stocks, as the large pile-up would generate pressure on prices when the stocks are finally released for selling," said Lynette Tan, an analyst with Phillip Futures in Singapore.
China Jan cotton imports 326,500 T, down 17 pct - report
BEIJING, Feb 13 (Reuters) - China's cotton imports in January totalled 326,500 tonnes, down 17 percent from a year earlier, to an industry website said on Monday, citing customs data.
Cotton imports last month fell 59 percent month on month, said the report on a website operated by China National Cotton Reserves Corp.
Ivorian cocoa reform on right track -W.Bank
ABIDJAN, Feb 11 (Reuters) - Efforts to implement Ivory Coast's reform of its cocoa sector are on the right track and could mean the West African country meets the conditions for debt relief by June, World Bank officials said during a visit on Saturday.
The reform of the top world grower's cocoa sector is meant to provide its farmers with a minimum price for their produce and is a key condition for debt relief under the IMF-World Bank Heavily Indebted Poor Country (HIPC) scheme - a vital part of its bid to rebuild after last year's post-election conflict.
NCC sees US 2012 cotton plantings at 13.63 mln acres
NEW YORK, Feb 12 (Reuters) - Industry group the National Cotton Council forecast on Saturday that U.S. 2012 cotton plantings would reach 13.63 million acres, down 7.5 percent from 2011.
"The expected drop in cotton area is consistent with current market signals. Since 2011, cotton prices have weakened relative to competing crop such as corn, soybeans and peanuts," NCC Vice President Gary Adams said in an annual survey release on the group's website.
Euro Coal-Prices dip again, stockpile space fills
LONDON, Feb 10 (Reuters) - Prompt physical coal prices slipped by around 75 cents for the third day running, despite freezing European weather that has boosted gas and power values due to a surge in heating demand, because utilities have little available storage space.
European utilities are running out of stockpile space at the key import hub of Amsterdam-Rotterdam-Antwerp and so are hesitant about taking the opportunity of buying prompt cargoes, which are $10 a tonne cheaper than forward, and placing them on stocks to use later in the year.
Brent rises above $118 after Greece passes bill
SINGAPORE, Feb 13 (Reuters) - Crude prices rose above $1, supported by a weaker dollar and expectations of a revival in demand growth, after Greece approved an austerity bill to secure a second bailout.
"Oil has been trading in a tight range for the past couple of weeks and we're now moving towards the higher end of the range," said Victor Shum, senior partner at oil consultancy Purvin & Gertz. "I don't expect we're going to rally ahead in a big way...with protests raging everywhere in the country, it's not exactly an image of confidence."
US oil demand to be sluggish for years: Lee Raymond
OSLO, Feb 10 (Reuters) - The United States may be living through 10 years of sluggish growth that does little to boost domestic oil demand in the short term, the former head of oil supermajor ExxonMobil told Reuters.
Lee Raymond, 73, is renowned in the industry as the chief executive and chairman of Exxon from 1993 to 2005, including after its merger with Mobil in 1999 to form the world's largest listed oil company. The South Dakota native is today a director of bank JPMorgan Chase , among other positions.
Oil Drops From Five-Week High on U.S Stockpiles, European Debt Downgrade (Source: Bloomberg)
Oil dropped from the highest price in almost five weeks on speculation fuel demand may falter as crude supplies rise in the U.S., the world’s biggest consumer of the commodity, and Europe struggles to tame its debt crisis. Futures slipped as much as 0.5 percent after closing at the highest since Jan. 10 yesterday. An Energy Department report tomorrow may show stockpiles increased a fourth week, the longest run of advances since April, according to a Bloomberg News survey of analysts. Moody’s Investors Service cut the debt ratings of six European countries and revised its outlook on the U.K.’s and France’s top Aaa rating to “negative.” Oil for March delivery slid as much as 45 cents to $100.46 a barrel in electronic trading on the New York Mercantile Exchange. It was at $100.59 at 10:35 a.m. Sydney time. The contract yesterday rose 2.3 percent to $100.91 for the biggest gain since Jan. 3. Prices are 19 percent higher the past year.
Iron Ore-Shanghai rebar hits 1-month low, ore may fall more
SINGAPORE, Feb 13 (Reuters) - China steel futures fell to their lowest in nearly a month on Monday, reflecting thin demand in the world's No. 1 consumer that has restrained its appetite for raw material iron ore.
Shanghai rebar futures bucked gains in other commodities, fuelled by news that Greek lawmakers passed an austerity bill which put Athens closer to securing more funds to avoid a debt default, reviving investor interest in risk assets.
