Is History Relevant Any More?

By Roy Smith, Market Analyst & Nebraska Corn & Soybean Farmer:

I have been studying grain markets for over 30 years. One of the most easily understood conclusions in that time is that April is the month when the yearly high in corn futures is most likely to come.

In soybeans, the yearly highs are often slightly later in early May. If there is going to be a huge weather rally the odds are that it will be in the summer, not in April. Nonetheless, on average April and early May are times to focus on for making sales of corn and beans.

The question that has come up in the last year or two is whether the old price patterns are relevant in this time of extreme prices. No one can say for sure until the opportunities are past. In most years, the seasonal highs are brought on by the trade trying to ensure adequate acreages of the various crops are planted and fears of planting delays caused by wet weather.

The current situation in the grain markets is similar to a typical year except at a much higher price level. It is difficult for a farmer to judge whether or not the prices are in the proper ratio to get the correct balance of the various crops. On the other hand, it is easy for a farmer to see how the weather is affecting planting progress.

I have my planter in the shop for maintenance and minor repairs. By Monday it will be ready to take to the field. In the past 24 hours, it has rained almost two inches at my farm. The soil was already saturated. The odds of getting any corn in the ground in the next few days are very slim. I can plant my few acres in three days, so timeliness is not a big concern. If this weather continues for another three weeks it will certainly be a big concern for most farmers.

Research I have done on my own and in cooperation with the University of Nebraska shows that forward contract or futures sales of new crop corn the first week of April has about 70 percent odds of being at a higher price than harvest time sales. Similar results can be expected for soybean sales made the first week of May.

This is a tough time to make decisions on grain marketing. This year is different mostly in the magnitude of the outcomes, either good or bad.

Wheat: downward spiral continues, focus switches to large new-crop supplies

Chicago wheat futures closed with heavy losses Friday night (May down 43c) in continuation of a downtrend ahead of new-crop.

Lingering doubts about tight old-crop stocks are being rapidly eroded as attention switches to abundant new-crop world-wide supplies.

The price differential between old & new crop had become so large that something had to give & it's old-crop thats doing all the giving.

As previously reported on this blog, the May/Nov differential has eroded considerably recently for Paris-based milling wheat futures, down from EUR45 at the beginning of March to EUR11.50 on Friday night.

London feed wheat futures have also seen the May/Nov differential reduce from GBP33 to GBP20 during the same period. However this still represents a huge price difference and further significant erosion can be expected over the coming months as harvest approaches & feed demand wanes.

Europe is expecting a massive wheat crop in 2008. It seems like a "no-brainer", why on earth wouldn't you plant as much wheat as was humanly possible with prices where they were last autumn?

The Ukraine has the stuff coming out of their ears. They need to get rid of another 7mmt across the summer just to fit 2008's harvest into the stores. Australia has got a potential record 27mmt crop on the way. That's 20mmt more than they use domestically. We here in the UK are expecting roughly 4mmt more than last year.

Add on top of that the US, Russia & the rest of Europe, why is there such a surprise then that wheat prices are falling?

With the state of the (world-wide) livestock industry don't expect any strength to come from that sector.

Oh, and summer is round the corner as well.

EU wheat slide continues

Nearby EU wheat futures continue to slide with May Paris-based milling wheat hitting EUR8 down this afternoon, extending losses from yesterday.

France still has "significant tonnage" available but while there's no fresh demand for their high quality wheat this is bearish for the market, said a Paris-based broker.

The May/Nov differential is now down to EUR11.75 from EUR45 on 1st March.

London-based feed wheat is also lower with nearby May down EUR5.50. Whilst the May/Nov differential has fallen from STG33 on 1st March to STG20 today, there is still room for further downside movement, said a London broker.

Latest UK trades/quotes

The rapemeal market is a bit of a conundrum, with spot material tight, particularly in the north. May onwards however is a different kettle of fish with crushers & shippers keen to get sales on.

Erith rapemeal fixings traded this morning at £189. Aug/Oct today quoted £156 (well below the last traded level of £158). Nov08/Apr09 now offered at £162.50 having traded at £165.50 earlier in the week.

Spot material in the north is tight with trades this week around the £202/204 mark.

Wheatfeed pellets continue to show signs of seasonal weakness. May which was trading ex South East mills last week at £134, now offered at £132 against values of £130. Jun/Sep offered £130 against values of £128, and Oct08/Apr09 quoted at £134.

Spot Liverpool soya hulls offered £140, May08/Apr09 traded yesterday basis £144.

Spot Liverpool wheat distillers grains available on resale £POA.

Spot/May Liverpool PKs traded yesterday £136, seller over.

Prairie meal available deld UK in bulk loads direct from the Continent, POA depending upon location, eg deld Yorks £565. Bags also available ex Humber area £590.

EU wheat futures slide - old crop premium plunges

Paris-based May milling wheat futures closed EUR4 lower yesterday and are a further EUR5 down as of 12.30BST today as traders roll out of old-crop.

The differential between old-crop May and new-crop Nov is down to EUR11.75 today, compared to over EUR30 just a week ago, and EUR45 at the beginning of March.

The new crop continues to struggle to attract a lot of activity in Europe and physical trade is dead, said a London-based broker.

"It will be quiet for the next few weeks as we wait for the new crop to grow and develop," said the broker.

With harvest in some areas of the Med only a month and a half away, and the strong euro impeding exports this trend looks likely to continue.

Early call on Chicago

Corn futures are expected to open 4 to 6 lower; soybeans 1 to 2 higher; wheat mixed. There does not seem to be much direction in these markets Friday morning, but with the weekend coming up some selling pressures should be expected.

Western Australia could have biggest grain crop ever

Western Australia state, the nation's biggest wheat producer, may grow its biggest grain crop ever should rain continue to fall during the growing season, CBH Group said.

Total grain output may be between 12 million metric tons and 16 million tons this year, said Michael Musgrave, operations manager for Perth-based CBH, the state's largest grain handler and marketer. The regions biggest crop so far was the 14.6 million tons produced in the 2003-2004 season, he said. Wheat usually accounts for 70 percent of the state's crop.

Farmers in Australia, the world's sixth-largest wheat exporter, are forecast to double output of the grain to 26/27 million metric tons this year to benefit from a 96 percent gain in prices. Growers will start planting wheat after "significant" rain in parts of the state, Musgrave said.

"We believe growers will be very aggressive in terms of planting," he said today in a phone interview. "We're planning for a 16 million ton crop at the high-end."

Parts of the state's wheat growing regions received "significant'' rainfall in the past 24 hours, Musgrave said. The amount of rain ranged from 5 millimeters to 20 millimeters on average, with bigger falls in some areas, he said. Growing regions in the north-east that have suffered drought in previous seasons also got good falls, Musgrave said.

Refco ex-pres in soapy bubble

Tone N. Grant, Refco Inc.'s former president, was convicted of securities fraud and other criminal charges at the U.S. District Court in Manhattan in a scheme to hide the commodities broker's financial troubles.

In its second day of deliberations, a jury of six women and six men found Mr. Grant guilty of conspiracy, securities fraud, wire fraud, bank fraud and money laundering. Mr. Grant, 64 years old, and his lawyers declined to comment. Mr. Grant, who is scheduled to be sentenced Aug. 7, could face life in prison on the charges.

The conviction comes nearly two months after former Refco Chief Executive Phillip R. Bennett and Robert C. Trosten, the company's ex-chief financial officer, pleaded guilty to criminal charges in the matter. Mr. Bennett is expected to be sentenced next month.

Prosecutors had alleged that Messrs. Bennett, Trosten, Grant and others at Refco schemed to hide the commodity broker's true financial health from its banks, auditors and investors from the mid-1990s to about October 2005. The firm's troubles included hundreds of millions of dollars in trading losses sustained by the commodities broker and by customers trading through its accounts.

Refco sought bankruptcy protection in 2005, shortly after the company announced it had discovered $430 million in debt owed to a private entity controlled by Mr. Bennett.

Spanish pig producers squealing

SPAIN - Spanish pig industry association Anprogapor says its members are struggling with rising feed costs. It estimates that 15 per cent of the 70,000 pig producers in Spain have now ceased production.

Production costs are currently around €1.20 per kilo of delivered weight, while market prices half-way through 2007 were reaching around €0.90, says a report in All About Feed.

Anprogapor says the situation is unsustainable and says that around 200,000 sows have been taken out of production. The result has brought an increase in market prices, but it's not high enough for more farmers to reach profitable levels.

USDA weekly exports sales - wheat disappoints

In it's regular weekly export sales report the USDA cited wheat sales well below trade expectations at 308,400 MT (129,200 MT 2007-08 and 179,200 MT new crop 2008-09). This was well under trade estimates of 450,000 - 750,000MT.

Soybean sales at 408,200MT (all 2007-08) were in line with expectations of 200,000 - 500,000MT.

Corn sales were 922,400MT (almost all 2007-08), compared with expectations of 600,000 - 900,000MT.

Early call on Chicago

Corn futures are expected to open 3 to 5 higher; soybeans 12 to 15 higher; wheat mostly 10 to 13 higher. Weather continues to support grains and soybeans Thursday morning with more rain headed into the Corn Belt. However, reports of better wheat crops worldwide may limit wheat gains.

Turkish Min Sees 08 Wheat Output Up Over 10% On Yr-IHA

ANKARA (IHA)--Turkey expects 2008 wheat output to rise more than 10% on year, Agriculture Minister Mehdi Eker told a news conference Thursday, the Ihlas NewsAgency, or IHA, reported. Turkey's 2007 wheat production fell 13.9% to 17.2 million metric tons, the Turkish Statistics Institute, or TUIK, said in late March.

Strategie Grains sees 2008/09 EU grain output up 33.8MMT

Strategie Grains is forecasting 2008/09 EU27 grain production at 289mmt, up 33.8mmt from 2007/08's 255.2mmt.

Soft wheat output is seen at 128.5mmt, 15% up on last season's 111.6mmt.

An even bigger percentage increase comes in corn production which is seen 22% up in the coming season at 57.3mmt.

Barley production is seen at 61.5mmt, a 7% increase on 2008/08.

UK News: Faccenda lays off 450 (no pun intended)

Soaring wheat and fuel costs have been blamed for the decision to close a UK chicken processing plant with the loss of 450 jobs.

Faccenda Group announced the factory in Wiltshire, in the south west of England, could shut in September as part of restructuring plans.

The company, the UK’s second largest chicken processing outfit, said it will invest £5 million at three other sites instead.

A Faccenda statement said the market for processing and supplying chicken had become increasingly challenging and it had to cut costs to remain competitive.

Managing director Ian Faccenda was quoted as saying: "We're operating in a very competitive market, where the cost of wheat and fuels has increased enormously in the past year. We have to make changes for the long-term health of our business.

"We recognise the high level of commitment and hard work shown by our staff at Sutton Benger, many of whom have been with us for a long time and we will do all we can to support them.

"While this has been a difficult decision for us to take, by restructuring now, we're strengthening the business for the future."

Never a frown with Gordon Brown (pun intended)

Over the past year, Britain has seemed to succumb to an awkward introspection. Embarrassed by the difficulties of winning in Iraq and consumed by the jockeying for position at Westminster, the Government of Gordon Brown has, by comparison with that of his predecessor, been conspicious by its absence on the world stage. On issues ranging from climate change to Nato expansion, the Middle East peace process and the atrocities in Darfur, other heads of government have made the running. Tony Blair may, in Douglas Hurd's famous phrase, have had a tendency to punch above his weight. Mr Brown has tended to punch below his. His visit to the US, for some reason scheduled so that he toils up and down the East Coast in the shadow of none other than the Pope, has only reinforced his shrunken stature.

Times Online

Forex focus

Euro/USD 1.60 Just a Matter of Time?

Dollar Hits Record Low, but That May be a Good Thing

Oil Prices Rise Above $115, Driving Canadian, Australian, and New Zealand Dollars Higher

Stronger UK Employment Numbers Fail to Help the British Pound

Strong Rally in Stocks Fail to Help all Carry Trades


Chicago closing comments - "analysts" or "anal-ists"?

There was absolutely nothing new or fresh to get inspired about tonight.

Beans: sharply lower just because they were.

Wheat: higher, because beans were lower, it was wheat's turn.

Corn: mixed, one was higher, one was lower, so one had to be mixed, right?

These markets are really getting terribly uninspiring. As I've been doing this Blog over the last few months, and reading every story that's going, it has become increasingly apparent that many of our "market analysts" are in fact "market anal-ists", they trot out the same market rhetoric with boring frequency. Indeed, many articles are so transparently dumb & repeat some crap that's been in the market for days I'm surprised some of that these boys (& girls) make a living.

Come on read this from a very popular wheat newswire (you know who you are):

Wheat rose in a correction from recent weakness amid setbacks in the neighboring (they can't even spell it right!) CBOT corn and soybean markets, a CBOT floor analyst said. Gains accelerated heading into the close of trading. Traders this week have been buying corn and soybeans and using wheat as a hedge against them, an analyst said. Corn and soybeans were lower, so it was not a surprise for wheat to find some strength, he said. Despite the day's gains, wheat is vulnerable for more losses as the new-crop winter wheat harvest approaches, said Larry Glenn, owner of Glenn Commodities. The condition of hard red winter wheat in the U.S. Plains is expected to improve thanks to precipitation, he said.

And wheat was what 28-40c up on the back of such inspiring news as that!

The thing that everyone seems to be forgetting here are the fundamentals. The futures markets are getting so devoid from the reality of the fundamentals that they are getting almost impossible to predict.

Sod the futures, lets look at the fundamentals, that's what I say. Wheat can be limit up for the next forty sessions in Chicago for all I care. Will that make one iota of difference to feed demand in the UK?

NO. Someone here may buy wheat or a wheat related product because they perceive that the price will increase because CBOT wheat has moved up, but I doubt that actual demand will increase one percent because of it.

We're in for a "summer of discontent", you mark my words.

NYMEX Oil Complex Soars as Records Fall Like Dominos

The NYMEX oil complex soared today as speculators continue their march to new record highs for crude oil, with the new record set today at $113.99. The big speculators such as Wall Street firms, hedge funds and the more recent group of currency and stock traders have joined forces as they continue to hype supply worries of one kind or another as the reason for higher prices. A partial list of reasons are tight supplies due to extraordinary growth in China, India and some Middle Eastern countries, a weak US dollar, geo-political concerns from oil producing countries Iran, Iraq, Nigeria, and Venezuela. While all of these geo-political concerns have been used on and off for nearly four years there has never been a major disruption. Not one. Therefore we can only conclude that what is driving prices higher is pure the fact that these firms realize they can do it uninterrupted, and laugh all the way to the bank. The U.S. economy continues to suffer and the sad part is it will just continue because this administration listens to its Treasury Secretary who is ex-Goldman Sachs, and he continues to tell everyone that it's "real supply problems."

We find it amazing that our leaders can intervene on behalf of some of the largest financial trading houses, some of whom are partly responsible for the sub-prime mortgage fiasco and the ensuring credit crunch, yet ignore doing something to stop this scam. All it would take would be an increase in interest rates when the Fed meets on April 29 and 30, or for Bush to open the Strategic Petroleum Reserve to refiners. None would want any crude from the SPR, but it might just convince the speculative community that there is plenty of oil around.

Our analysis for overnight trading is two pronged. We believe there is a better than a 70% chance we will see a new all time high for crude oil, since we closed very close to the record set today, it's rather convenient for the perennial price hawks to breach the $114.00 level that could set in motion a run to $115.00. However, a failure to do so would likely send prices down at least $1.00 to $2.00 as some of the more recent longs would probably book profits. This scenario has popped up on our radar as we believe the failure to breach $114.00 late in the session could be suggesting that even the perennial bulls are ready to take some profits.

Almost half of organic produce on sale in British supermarkets is imported

The UK has one of the largest organic markets in the world accounting for more than 10 per cent of the overall global market. Yet almost half of all organic produce sold in British supermarkets is imported, according to the NFU’s Farming Outlook.

Hmmmm - I smell a rat here. How do we actually know that the stuff our foreign suppliers are sending us actually IS organic? Or are we blindly paying inflated prices for products that are likely inferior to intensively farmed stuff at home, simply because our foreign suppliers have a more "relaxed" approach to their organic criteria? Si - is organic I promise, the er how you say, paperwork, si the paperwork is in the post, I make special price for you my friend.

Maybe the asylum-seekers & illegal immigrants write the paperwork out & label the stuff up on their way over here?

Time to get the "I'm stupid, kick me" t-shirts out again.

UK trades/markets latest

Spot Erith rapemeal fixings for this week traded £191.

May08/Apr09 soya hulls Liverpool done basis £144.

Early call on Chicago

Corn futures are expected to open 4 to 6 higher; soybeans 10 to 13 higher; wheat 8 to 15 higher. Grains and oilseeds traded solidly higher in overnight trade on continued weather concerns in the U.S. Corn Belt. Wheat gathered strength from lower than expected crop ratings.

Hitler found alive & well

And working for Derby City Council:

British local authorities wrote off £130 million in unpaid council tax last year. Derby City Council alone wrote off more than a million pounds, but still managed to find time to get a 71-year-old woman jailed for failing to pay her tax in protest at the drug-taking and prostitution outside her house.

A council spokesman said "It's difficult to track down non-payers who don't speak English, or who move around a lot, but a 71-year-old woman is a sitting target". Actually, he didn't say that at all - but he might as well have.

UK may have to buy milk in before long

THE dairy industry is warning that the traditional daily pinta is at risk as UK milk output sinks to its lowest level in 39 years.

Domestic milk supplies are fast approaching the 1971 levels when national output was 12.9bn litres.

In that time the dairy industry made huge efficiency gains but the number of milk producers has plunged amid falling economic returns.

Milk experts Kite Consulting has predicted the UK could be facing a shortage of milk by November 2011. The country would then become reliant on milk imports and exposed to the vagaries of global markets.

NFU Cymru president Dai Davies said: “Everyone involved in buying, processing and retailing milk need to wake up to the fact that security of supply is no longer guaranteed.

“Unless action is taken to increase production, the UK could be seeing shortages of British-made milk, cheese and other dairy products.

“We could be facing a situation whereby shoppers may not find the full range of British dairy products on the shelves. Shortage is a real threat.”

Figures from the Rural Payments Agency show that between April 2007 and March 2008, milk production fell to 13.2bn litres – down from the previous annual figure of 14.1bn litres.

Annual milk demand in Britain is around 12.6bn litres, with consumption rising 3% in the last 12 months.

Milk prices rose last autumn but profit gains were mostly wiped out by rising prices of inputs such as feed and fuel. Farmers say they need at least 30p a litre to remain viable.

UK latest trades/markets

Spot Liverpool 48% soya resale indicated £305. Please enquire as product is very limited, and prices volatile.

Erith rapemeal fixings also remain volatile, with most of the cheaper sellers now taken out of the market as northern mills/ports stay tight. Fixings traded yesterday at £187 & £188 depending on dates, buyers over at the price. These prices are changing by the minute, so please enquire for an up-to-the-minute quote. Aug/Oct offered £159 (last trade £158). Nov08/Apr09 market £165 bid, £166.50 offered.

Wheatfeed pellets showing signs of seasonal weakness. May traded ex South East mills last week at £134, yesterday offered at £133 against bids at £130. Jun/Sep quoted £130 and Oct08/Apr09 £135.

Spot Liverpool citrus pellets quoted at £149.50.

Spot Liverpool wheat distillers grain available on resale £POA.

Spot Liverpool PKs traded last week £135 & £136, now asking £137.

Prairie meal available deld UK in bulk loads direct from the Continent, POA depending upon location, eg deld Yorks £565. Bags also available ex Humber area £590.

Cargill Reports Third-quarter Fiscal 07/08 Earnings up 86%

Try bringing that up next time you are negotiating on price!

Minneapolis – Cargill today reported net earnings of $1.03 billion in the 2007/08 third quarter ended Feb. 29, up 86 percent from $553 million in the same period a year ago. Earnings in the first nine months totaled $2.9 billion, a 69 percent increase from $1.71 billion a year ago.

USDA crop progress report

The USDA's crop progress report released after the close Monday showed that winter wheat conditions have improved slightly in the last week, with a two percentage point increase in the good/excellent category to 47%.

Corn planting remains slow with just 2% of the crop in the ground compared to 4% last year and the 6-year average of 7%.

Tesco in trouble over biofuel

From The Times:

Tesco has made false claims about the source of the green fuel sold at its service stations, according to an investigation that found that the chain sold one of the most environmentally damaging types of biodiesel.

An investigation by Greenpeace found that 30 per cent of the biofuel in Tesco diesel came from palm oil. A litre of Tesco diesel typically contains 5 per cent biofuel.

Researchers from the group bought biodiesel from a Tesco filling station in Edmonton, North London, on April 3 and sent it to Germany for analysis by ASG, an independent laboratory.

A Tesco spokesman said initially: “The feedstock we use is rapeseed and soy. There is no palm oil whatsoever.” When pressed, he admitted that small amounts of palm oil might be used in some parts of the country. He said that the only recent example was in the North West in January when Tesco biodiesel contained 10 per cent palm oil. When told of Greenpeace’s findings, Tesco issued a new statement: “We try to minimise the use of palm oil but levels do go up and down. We wouldn’t give a set limit.”

Tesco said that the concentration of palm oil in its biodiesel was the responsibility of Greenergy, its supplier. Tesco owns 25 per cent of Greenergy. A spokeswoman for Greenergy also initially denied using palm oil but later said: “It’s a very, very small proportion of our feedstock mix.”

Greenergy is a member of the Roundtable on Sustainable Palm Oil, which claims to be trying to prevent rainforests from being destroyed to grow palms. Only a tiny proportion of palm oil has so far been certified as coming from sustainable sources.

The Liberal Democrats have uncovered a loophole that allows suppliers, when declaring the previous use of the land on which biofuel was grown, to put “unknown”. A DfT spokesman said: “We allowed this flexibility, following extensive consultation, in recognition of fact that it may be difficult to supply information when the supply chain is new. We have been clear that suppliers will only be allowed to do this for a limited time.”

Early call on Chicago

Corn futures are expected to open 2 to 7 higher; soybeans 13 to 20 higher; wheat 12 higher to 2 3/4 lower. Lingering weather concerns in the Corn Belt are causing firmness in grain and oilseed markets again Monday morning. Asian demand is firming as well.

No food grain use for bio-fuel production: India PM

(IANS)--India may be talking to Brazil over bio-fuel production for fuel sustainability, but Prime Minister Manmohan Singh is clear that his country, facing a food shortage, will not copy the South American nation to make ethanol from edible plants. According to Vilasrao Muttemwar, the minister for non-conventional energy accompanying President Pratibha Patil on her visit to Brazil, Mexico and Chile, Manmohan Singh has said that food grains should not be used to make bio-fuel in India.

The prime minister’s directive follows rising food prices and a shortage of food grains after decades of self-sufficiency.

“The prime minister is very particular that we should not use food grains for producing ethanol or any bio-fuel even if we are facing an energy crunch. We cannot afford that,” Muttemwar told IANS.

“The prime minister has also made it clear that we will grow (bio-fuel producing) plants (like Jatropa) in wastelands and we should ensure that there is no diversification from traditional cultivation,” the minister said.

Muttemwar added that India had around 35 million hectares of wasteland that can be used to cultivate such plants.

The government has proposed to constitute a bio-fuel board to formulate and implement a comprehensive plan for the production of alternative energy sources.