China looks to purchase overseas land to guarantee food supplies

CHINESE COMPANIES will be encouraged to buy farmland abroad, particularly in Africa and South America, to help guarantee food security, under a plan being considered by Beijing.

A proposal drafted by the Chinese ministry of agriculture would make supporting offshore land acquisition by domestic agricultural companies a central government policy.

Beijing already has similar policies to boost offshore investment by state-owned banks, manufacturers and oil companies, but offshore agricultural investment has so far been limited to a few small projects.

If approved, the plan could face intense opposition abroad given surging global food prices and deforestation fears.

However, an official close to the deliberations said it was likely to be adopted.

“There should be no problem for this policy to be approved. The problem might come from foreign governments who are unwilling to give up large areas of . . . land,” the official said.

The move comes as oil-rich but food-poor countries in the Middle East and north Africa explore similar options. Libya is in talks with Ukraine about growing wheat in the former Soviet republic, while Saudi Arabia has said it would invest in agricultural and livestock projects abroad to ensure food security and to control commodity prices.

China is losing its ability to be self-sufficient in food as its rising wealth triggers a shift away from diet staples such as rice towards meat, which requires large amounts of imported feed.

China has about 40 per cent of the world’s farmers but just 9 per cent of the world’s arable land.

Some Chinese scholars argue that domestic agricultural companies must expand overseas if China is to guarantee its food security and reduce its exposure to global market fluctuations.

“China must ‘go out’ because our land resources are limited,” said Jiang Wenlai, of the China Agricultural Science Institute.

“It will be a win-win solution that will benefit both parties by making the maximum use of the advantages of both sides.”

Oil hits $126 a barrel for first time

The price of New York crude oil struck a record high of $126 this afternoon, lifted by speculative demand amid concerns about tight global energy supplies, analysts said.

USDA S&D Highlights

Corn end stocks 08-09 0.763 billion bushels , 07-08 1.383 billion bushels.

Wheat end stocks 08-09 0.483 billion bushels, 07-08 0.239 billion bushels.

Soybeans end stocks 08-09 0.185 billion bushels, 07-08 0.145 billion bushels.

US wheat production:

All wheat 2.392b
Winter wheat 1.777b
HRW 1.011b
SRW 0.550b
White wheat 0.215b

Latest UK trades/markets

The rapeseed market has bounced the last few days with Paris futures up around EUR30 since the beginning of the month, effectively following Chicago & crude oil higher. Meal sellers have consequently put away their pencil sharpeners, just a couple of days after getting them out, effectively killing off all hopes of any forward business for the time being.

If there is going to be any trade on rapemeal then it will be on a strictly hand-to-mouth basis for the time being.

Wheatfeed pellets have finally found interest with £120 trading for May ex the standard Corby, Wellingborough, Tilbury range and down to £118 out of mills slightly further afield. June onwards however is still a cat and mouse game although September on its own, strangely, traded yesterday at £120.

Not much business has been done yet for the winter with sellers wanting a premium to summer levels & buyers wanting a discount based on wheat prices.

Spot wheatfeed meal ex Liverpool traded £120.

Spot soya hulls Liverpool traded yesterday £143.

Resale offers around on citrus nearby, looking for interest. Also looking for interest on nearby Liverpool 32% sunpellets.

Maize meal ex Worksop available for last half May £POA.

Also may have a possibility of getting hold of some limited quantities of spot IP hipro soya ex Humber £POA.

Early call on Chicago

"Corn futures opened 6 to 8 higher; soybeans 9 to 16 higher; wheat 15 to 20 higher. Solid gains were posted in overnight trade as weather and outside markets dominated trade. USDA reports Friday morning are not expected to alter that call, but they could. "

The USDA figures certainly could alter the markets perspective later on. Get back to the blog for details of what the figures have to say, and market reaction towards them as it happens soon after 13.30BT.

Overnight developments - new highs for corn

Corn has hit fresh record highs overnight as wet weather continues to hamper planting progress in the US with eCBOT currently around 7c firmer. Forecasts for more rain this weekend & into next week are adding to farmers & traders anxiety.

Beans started off the overnight session lower but have been dragged higher by corn, surging crude oil & the Argy disruptions. It should be noted however that IF the weather continues to hamper corn plantings & WHEN the Argy dispute is sorted, both these factors are bearish soybeans in the medium term. Currently beans are 8-10c firmer.

Wheat is also higher (around 145-18c higher) on follow through from last night's close & ideas that the recent sharp downwards correction has done enough to tempt buyers back into the market.

The USDA are out at 13.30BST with their latest S&D estimates which could change the complexion markedy so tread carefully.

Tonights Chicago close

Septic Peg my mystic guide tells me that tonights CBOT close will see beans 10-15c down, corn 2-4c up and wheat 10c lower.

After correctly naming the 33/1 winner of yesterday's Chester Cup who could doubt her?

USDA Weekly Export Sales

For the week ending 1st May the USDA have reported the following export sales:

Wheat 07-08 Net 178,800 MT; 08-09 312,900 MT

Corn 2007-08 Net 337,200 MT;08-09 63,300 MT

Soybeans 2007-08 Net 41,000 MT;08-09 239,600 MT

Soymeal 07-08 Net 122,200 MT;08-09 12,100 MT

Soyoil 2007-08 Net 11,900 MT

Latest UK trades/markets

An un-named UK grain broker was quoted on Dow Jones earlier in the week saying that you could almost watch the wheat growing. Now it's got a bit of sun on it's back you can certainly see where he was coming from.

With the southern EU harvest only three or four weeks away from kicking off the chances of a late weather scare are diminishing by the day.

As reported earlier German farmers' association Deutscher Raiffeisenverband (which incidentally is worth 92 in Scrabble) forecast a 15.8% rise in 2008-09 German wheat output at 23.9 million tons.

This is broadly in line with the IGC's estimate of a 15% increase EU-wide.

No surprises then to see the wheatfeed market continue to slip. Nearby availablity problems at Icklingham (due to lack of demand for the head product) have supported the market a little this week with £124 trading most days ex Corby/Wellingborough type locations. Unconfirmed reports also suggest that £123 may also have traded yesterday.

For now buyers ideas for next week are lining up at £120 out of that kind of area.

Further forward straight Sept on its own has traded today at £120 basis Wellingborough/Corby/Dogsthorpe. With Jun/Sep also likely buyable at the price basis south east mills incl Tilbury.

Spot rapemeal ex Liverpool reported traded yesterday £169 and £170, strangely a discount to Erith fixings which traded £172. Beyond that sellers have pushed their ideas up and buyers have walked away.

Spot soya hulls in Liverpool reported done yesterday at £141 and £143.

Maize meal ex Worksop available for last half May £POA.

Full IP hipro soya very limited quantities available around £330.00 spot ex Humber.

Suns 32% Argy small quantity available ex Liv around the £187.00 mark.

Early call on Chicago

Corn futures are expected to open 1 to 3 higher; soybeans 1 to 10 lower; wheat 2 lower to 5 higher. A mixed call Thursday morning on corn planting delays but lower soybeans on a technical correction after strong grains Wednesday.

UK rates left on hold - for now

UK interest rates have been held at 5% by the Bank of England's Monetary Policy Committee (MPC).

The move was widely expected, although many analysts now predict that rates will be cut to 4.75% in June.

The MPC's decision came despite a flurry of downbeat data this week which has added to worries about the state of the UK economy amid a global slowdown.

However, rising fuel and food prices means that there are still worries over controlling inflation.

USDA Export Sales Expectations

The following are pre-report expectations ahead of today's USDA Export Sales Report for the week ended May 1st due 13.30BST.

Wheat 250-500,000MT vs 499,200MT prev week.

Corn 400-750,000MT (vs 596,000MT)

Soybeans 150-350,000MT (vs 375,600MT)

Soymeal 50-150,000MT (vs 114,800MT)

Soyoil 5-15,000MT (vs 8,900MT)

Things that really annoy me Part 2

The French.

News is just in of a short-sighted Frenchman surrendering to a statue of Toulouse Lautrec in Montmatre.

Did you know that we were once at war with the French for 116 years? They called it the Hundred Years' War for some reason, it must have been a typo. Anyway, the only reason it lasted so long was that we were enjoying beating them so much we decided to pan it out a bit.

Never ask the French for help. They wouldn't even help us get the Germans out of Paris.

Overnight developments - pound sharply lower

There's not much change in the overnight grains markets today, with soybeans a little easier in a minor correction from last night's gains, currently trading around 10c lower on front-month May.

The strong dollar weighs on the market, the Argy strike & record crude oil support.

Corn is mostly around 4c firmer this morning on follow-through trade from last night and continued planting delays in the US. Oil supports, although the growing anti-ethanol backlash is keeping "investors" cautious of adding to their already significant longs. "In return for investing in something the US government encouraged, their (US farmers') finances will be crucified if policy makers have all the say," bleats one pundit horrified at the prospects of the goal-posts being moved halfway through the heavily subsidised game.

Wheat is mixed, mostly around 2-3c firmer, in a modest correction from last night's losses. Wheat is going to find it hard to rally from here faced with huge northern hemisphere crops now just weeks away. Our sauerkraut-munching chums (don't get me started on the Germans, we've put all that behind us now haven't we?) are predicting a 15.8% increase in wheat output this season (see last night's post below), in line with the IGC's estimate of a 15% increase EU-wide.

Book squaring & profit-taking may feature later in tonight's session ahead of tomorrow's USDA S&D report which is released pre-opening at 13.30 pm BST Friday.

The pound is lower at $1.9536 at 8.40 am BST near a 2-1/2 month low against a broadly firmer U.S. currency as the market remains nervous ahead of the BOE's decision on rates due at noon. Whilst rates are expected to be left unchanged at 5%, given the fact that the vote for the April rate cut included six in favor of the 25bp reduction, two votes for no change, and one vote for a 50bp cut, it’s clear that there is major disagreement amongst the Committee on what their next move should be.

Things that really annoy me Part 1 in an occasional series

I went into the chemists to buy some antihistamines yesterday, all red-eyed & sneezing, and the assistant said in that condescending voice that they do "have you had them before, are they for you?"

I said "no, they're a f***ing present for my Mother, it's her birthday on Saturday, can you gift-wrap them?"


Latest UK trades/markets

The weather has certainly improved over the weekend & with the outlook set fair for much of the country for the rest of the week summer finally seems to have arrived.

Its arrival also hearalds turnout & with it of course a slowdown in feed demand. Many compounders seem to have set their stall out to take things hand-to-mouth across the summer, and it in no surprise to see that what little demand has been around in this holiday-shortened week has been for spot material.

The rape market is still pretty flat, with maybe some modest premiums to be had for nearby material. Erith fixings asking around the £170 mark, with Jun/Jul quoted £169, Aug/Oct £150 and Nov/Apr £158. Forward asking prices are a little above last week's lows as continental levels have picked up slightly. This isn't however making much difference in the UK where crushers are keen sellers. Liverpool prices, traditionally a significant premium to Erith, are now pretty much level money with £169 trading for spot yesterday.

The wheatfeed market is also pretty flat. Fixing problems at Icklingham this week having a knock-on effect at nearby mills and spot fixings out of the likes of Corby, Wellingborough, Dogsthorpe changing hands at around £124. Beyond this week though nobody wants to know. The forward market is quiet with the last reported trade at £122 for May/Sep ex similar locations.

Soya hulls ex Liverpool last reported done at £143, still potentially buyable at the same money, although one report suggests that £147 was doen for Avon material yesterday.

Nearby citrus pulp in the north west looking for interest around the low £140's.

Full IP hipro soya very limited quantities available around £330.00 spot ex Humber.

Suns 32% Argy small quantity available ex Liv around the £187.00 mark.

Early call on Chicago

Corn futures are expected to open 4 to 5 higher; soybeans 4 to 10 higher; wheat 3 to 5 higher. Futures finished a bit firmer in overnight trade and are called that way Wednesday morning, even though the U.S. dollar value is stronger. Planting concerns are still a major factor.

USDA Wheat Production Expectations

Following are pre-report trade expectations ahead of Friday's May Crop Production Report released 13.30 BST 8th May 2008.

Wheat Production Avg Range USDA 2007

All wheat 2.298 2.171-2.400 2.067
All winter wheat 1.701 2.171-2.400 1.516
HRW 0.964 0.896-1.000 0.962
SRW 0.519 0.370-0.552 0.358
White wheat 0.222 0.202-0.250 0.197

All figs in billion bushels.

Trade Readies for S&D Report

The following are the pre-report trade expectations ahead of tomorrows USDA's S&D Report. USDA will release the report on Friday, May 9, at 13:30 p.m., BST.

2007-08 Carryout
Avg Range Apr USDA 2006-07
Corn 1.320 1.240-1.434 1.283 1.304
Soybeans 0.152 0.130-0.160 0.160 0.574
Wheat 0.243 0.232-0.257 0.242 0.456

2008-09 Carryout
Avg Range 2007-08
Corn 0.707 0.481-1.114 1.283
Soybeans 0.273 0.481-1.114 0.160
Wheat 0.424 0.280-0.501 0.242

Estimates in billion bushels.

Boris Johnson is ace

If we really can't have Jeremy Clarkson for Prime Minister, then Boris Johnson for Mayor of London must be next best thing.

Sian Berry, the Green Party candidate says "There are a hundred reasons why Boris Johnson should not be Mayor of London. But his dinosaur views on the environment alone are enough to show what a disaster he would be for our city. The man who backed Bush against the Kyoto treaty and who doesn't believe there's a risk from passive smoking cannot be trusted with our future - or even, really, with his own. He's a 19th century man in a 21st century city."

What has Boris himself got to say about all this: "If you want to be green - kill a cow."

Words of wisdom indeed.

Hmmmm, Boris Johnson & Rupert Stafford, you never see them in the same room at the same time do you?

Soapy bubble or opportunity of a lifetime?

Steven Pearlstein at the Daily Stox Report writes:

"The global financial system these days is beginning to look like a giant Whack-a-Mole game: When we think we've knocked down one speculative bubble, another one just like it pops up. The latest is the commodities bubble is everything from oil and natural gas to gold, copper, wheat and rice. But what turned a bull market into a bubble was the sudden arrival of large numbers of new investors and an array of new investment vehicles, many of them involving derivative instruments traded outside the confines of regulated markets.

"Speculators have always played a prominent role in commodities markets, but in the past year, they have literally overwhelmed them, causing a dramatic increase in trading volume, volatility and prices and disrupting many of the normal relationships between producers and end-users.

"Many of these were the same hedge funds and hot-money investors who had gorged on sovereign debt of developing countries, tech and telecom stocks, subprime mortgages and commercial real estate and now needed a new thing to focus on. Others -- including, it is said, some sovereign wealth funds -- looked to commodities as a hedge against the falling dollar. But perhaps the biggest push came from pension funds, foundations and university endowments whose managers had all gone to the same conferences and read the same academic papers, suggesting that a basket of commodity futures would provide a good hedge against stock and bond market declines.

"To meet the needs of these investors, Wall Street and Chicago's commodities houses came up with all sorts of new vehicles, including exchange traded funds, index funds and structured investment vehicles -- the commodities equivalent of mortgage pools and asset-backed securities.

Trevor Williams at sees it differently: "Our view is that there is little or no evidence to support the view that it is investment flows that have primarily driven up commodity prices or that there is a bubble developing. It is true that more funds have been set up to invest in commodities, creating more liquid markets in goods that are now in much greater demand, but no signs of the trillions of dollars that drove the credit cycle or the boom in the 1990s. Further, there is little to suggest that these markets are in bubble territory anyway, i.e. a situation in which prices are so far above fundamentals or their own long run performance as to be unsustainable."

Then there's a poll over at asking readers their long-term view on commodities. With 97 respondents, 16 percent responded that this is just the latest in a series of bubbles and 84 percent said "in 5 years we are going to wish we could buy at these prices."

A million well-dressed monkeys can't be wrong.

Overnight market developments - oil supports

Oil at or near a record $123/barrel is supporting all the grains complex this morning. Corn is up around 7c, soybeans 4-8c firmer and wheat up around 4c.

The Argy problem is ongoing & although some progress has been made is far from resolved as yet. This is also supportive for beans.

The USDA are out Friday with a revised crop production estimate which will keep traders cautious.

Early call on Chicago

Corn futures are expected to open 1 to 3 higher; soybeans 11 to 14 higher; wheat mixed. Overnight soybean prices rallied on technical strength and corn prices recovered some of Monday's loses due to low planting progress. Wheat is mixed in very light trade.

Overnight developments

Corn futures are up 4-5c overnight after the USDA planting progress report showed 27% of the new corn crop was in the ground as of Sunday, well under the 45% planted a year ago.

"It's still of a concern," Simon Roberts, head of agricultural commodities at Australia and New Zealand Banking Group Ltd., said by phone from Sydney today. "But there is the general perception that like last year, if there are any breaks in the weather you'll see a rapid planting progress."

Dale Durchholz, an analyst at AgriVisor in Bloomington, Ill., cautioned against reading much into the numbers because plantings were unusually early between 2004 and 2006. The percentage planted nationwide in those three years was 84%, 79% and 70%, respectively, he said.

"You've got to step back and see that made some kind of a distortion," he said.

Soybean futures are around 11c firmer this morning. Soybean planting was 5% complete as of Sunday, below the average of 14%,according to the USDA. Analysts' expectations were for 7% to 9% complete.

Market participants are closely watching a meeting in Argentina, the world's second-largest corn exporter and the third-biggest in soybeans, today to resolve a dispute between farmers and the government over taxes that disrupted crop exports.

The U.S. has a large amount of unshipped soybean export sales on the books that would be susceptible to cancellation if the dispute is resolved soon.

Wheat is little changed overnight after the USDA report threw up little in the way of a surprise.

The USDA said 47% of the winter wheat crop was rated good to excellent, up from 46% last week and 57% a year ago. Traders had expected the good-to-excellent rating to improve by 1 to 2 percentage points from a week ago.

Durchholz said that as with the other crops' progress reports, there was little in the winter wheat progress that was likely to move the market.

USDA Plantings/progress highlights

Corn 27% planted is within the range of expectations and well up on last week's meagre 10% done, although still behind last years 45% and the five year avg of 59% done.

Bean plantings are 5% done vs last years pace of 8% and the 5 year avg of 14%.

Winter wheat condition good/excellent improved 1% point to 47%.

Overnight developments

Corn fell overnight on speculation a rally in the dollar may make the grain more expensive to overseas importers and reduce the appeal of commodities as an alternative investment. Having reached 8c down, corn had clawed back most of those gains by 9am, supported by soy & wheat, and stood 1c easier.

Wheat is around 7c higher on speculation demand will rise after the price fell to $7.765 on May 1, the lowest since Nov. 20.

Soybeans are 2-3c steadier after Argentina failed to lift a ban on beef exports as promised earlier last week, eroding optimism that farmers would resolve a dispute with the government over taxes that disrupted crop exports.

The Argentine government isn't prepared to modify the export tax when officials and farmers meet tomorrow, newspaper La Nacion reported yesterday, citing people close to the government who weren't identified.