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Agriculture • U.S. Soy Supply at 48-Year Low as Brazil Ships Held: Commod
U.S. Soy Supply at 48-Year Low as Brazil Ships Held: Commodities
By Jeff Wilson – Feb 7, 2013 10:36 AM MT
Dry weather and shipping delays in South America are boosting demand for soybeans from the U.S., the world’s largest grower and exporter, and producing the tightest inventories in almost five decades.
Stockpiles will shrink to a nine-year low of 130 million bushels on Aug. 31, before the next U.S. harvest, according to the average of 31 analyst estimates in a Bloomberg survey. Reserves will total 4.2 percent of demand, the lowest since 1965, U.S. Department of Agriculture data show. The USDA will update its estimates tomorrow.
U.S. Soy Supply at 48-Year Low as Brazil Ships Held Paulo Fridman/Bloomberg
Harvests in March and April from Argentina and Brazil still are forecast to be the highest ever, with combined output jumping 28 percent from a year earlier.
Harvested soybeans are transferred into grain carts at a farm near Tangara da Serra, Brazil. Harvests in March and April from Argentina and Brazil still are forecast to be the highest ever, with combined output jumping 28 percent from a year earlier. Photographer: Paulo Fridman/Bloomberg
U.S. Soy Supply at 48-Year Low as Brazil Ships Held Ty Wright/Bloomberg
Prices have climbed 10 percent from a six-month low on Jan. 11 as drought dimmed prospects for the crop in Argentina and rain left delivery backlogs at Brazilian ports.
Harvested soybeans are ready for transport. Prices have climbed 10 percent from a six-month low on Jan. 11 as drought dimmed prospects for the crop in Argentina and rain left delivery backlogs at Brazilian ports. Photographer: Ty Wright/Bloomberg
.The drop in supplies will help send Chicago futures up 8.3 percent to an average $16.16 a bushel through August, Morgan Stanley said in a Feb. 4 report. Prices have climbed 10 percent from a six-month low on Jan. 11 as drought dimmed prospects for the crop in Argentina and rain left delivery backlogs at Brazilian ports. The countries are the largest shippers after the U.S., where export sales are up 27 percent from a year earlier, driven by demand from China, the biggest buyer.
“The U.S. does not have the supply to sell more soybeans overseas,” said Dan Cekander, the director of grain-market analysis at Newedge in Chicago, who predicted a rally to $16.50. “Price rationing will have to occur. It may take six months before world supplies are more balanced with demand.”
Soybeans are up 6 percent this year to $14.935 as of 11:18 a.m. on the Chicago Board of Trade, while the Standard & Poor’s GSCI gauge of 24 commodities gained 4.2 percent and the MSCI All-Country World Index of equities climbed 3.9 percent. A Bank of America Corp. index shows Treasuries lost 0.9 percent.
Argentina Cut
For a second straight month, the USDA probably will cut its forecast of production in Argentina to 52.9 million metric tons, compared with 54 million estimated in January, a Bloomberg survey of 23 analysts and traders showed. The country accounts for more than 44 percent of global exports of soybean meal fed to livestock and soy oil used for cooking and biofuel.
Most fields in Argentina got less than half of the normal moisture since Jan. 1, which makes conditions drier than a drought in 2012 that cut production to a three-year low of 40.1 million tons, according to T-Storm Weather LLC in Chicago.
In Brazil, excess rain in Mato Grosso, the biggest soy- growing state, disrupted inland crop deliveries and may extend the wait time to 50 days for ships to load exports, Hamburg- based researcher Oil World said Feb. 5. There were 135 ships loading or waiting to load soybeans, animal feed or corn on Feb. 5 at the five major Brazilian ports, according to SA Commodities in Santos, Brazil. A year earlier, 67 were waiting.
Record Crop
Harvests in March and April from Argentina and Brazil still are forecast to be the highest ever, with combined output jumping 28 percent from a year earlier, according to the USDA’s January estimate. Brazilian farmers probably will collect 82.7 million tons, the most ever, up from 66.5 million a year earlier, according to the average estimate in a Bloomberg survey of 23 analysts.
Since Jan. 28, the premium that exporters paid for U.S. soybeans delivered to New Orleans terminals is down 30 percent, a sign that overseas demand for U.S. supplies may be slowing, said Christopher Narayanan, the head of agricultural commodity research in New York at Societe Generale SA. Yesterday, the CBOT contract for March delivery was $1.515 more expensive than November futures, the highest premium since Dec. 17, which may slow demand for supplies left from last year’s crop, he said.
“Until we see an improvement in the export premiums, the market may move sideways,” Narayanan said. Chinese buyers waiting for North American harvests to arrive in September and October “raises the risks for subdued U.S. exports once South American crops begin hitting the market,” he said.
Rising Exports
U.S. exporters sold 34.22 million tons of soybeans as of Jan. 31, up from 26.86 million in the same period a year earlier, including a 13 percent jump in purchases by China to 20.86 million, government data show. Sales already are equal to 93 percent of the USDA’s forecast for the marketing year, with almost seven months left in the season that ends Aug. 31.
Sales of soybean meal reached 6.73 million tons in the first 18 weeks of the marketing year, up 43 percent from the same period in 2012, according to the USDA. The Philippines, the biggest buyer this year, increased purchases by 38 percent to 744,900 tons. Soybean-oil sales jumped to 759,000 tons from 222,000 a year earlier, with China buying 169,000, compared with none in the previous period.
China Pork
China has expanded imports of soybeans almost six-fold since 2000 as rising incomes and population boosted meat consumption, fueling more demand for crops to feed livestock. The country is the world’s largest pork consumer and will raise 690 million pigs this year, or 61 percent of the world total, according to USDA forecasts.
Demand has yet to slow for U.S. soybeans because of the supply risks in South America. Shipping and harvest delays in Brazil may force importers to buy more from the U.S., and an extension of Argentina’s drought may limit output to 47 million tons, or 13 percent less than the USDA’s forecast, Christina McGlone-Hahn, a Deutsche Bank AG analyst in New York, said in a Feb. 1 report.
“Either South America has to ship 12 percent more soybeans from March to August than they have ever done before, or prices have to rise to choke off Chinese demand for U.S. soybeans,” said Doug Jackson, a vice president at INTL FCStone Inc. in West Des Moines, Iowa, who has been a grain-industry analyst since 1974. “South America can have an infinite supply of soybeans, but if they can’t get them to the world market, it doesn’t matter.”
Pod Growth
February and March are the key months for Argentine crops as plants develop pods and fill them with beans, said Steve Nicholson, the chief economist for International Food Products Corp., a distributor and adviser on food ingredients in Fenton, Missouri. A crop of less than 50 million tons will increase demand for U.S. soybean meal and vegetable oil, he said.
Argentine farmers also have been slow to sell crops to processors or exporters as inflation accelerates and the peso loses value against the dollar, Nicholson said. Argentine supermarkets, including local units of Wal-Mart Stores Inc., Carrefour SA and Cencosud SA, agreed to freeze prices for 60 days amid an inflation rate that economists say jumped 26 percent last year, twice the official government estimate.
While the official rate for the peso fell 13 percent in the past 12 months to 4.986 per dollar yesterday, the currency in the blue chip-swap, an operation used to buy and swap assets traded in Argentine pesos and U.S. dollars, has weakened 39 percent to 7.6948 per dollar, according to data compiled by Bloomberg.
Hindering Sales
“The Argentina inflation and currency problems may be a bigger hindrance to exports than just the dry weather,” Nicholson said. “The only way to convince China and other buyers that the U.S. is out of soybeans is with higher prices.”
In Brazil, most crop deliveries travel as far as 2,000 kilometers (1,243 miles) by truck to reach ports, making them more prone to weather delays than those in the U.S., where barge and rail networks handle most bulk shipments to export hubs, said Michael Cordonnier, president of Soybean & Corn Advisor, a crop forecaster and researcher in Hinsdale, Illinois.
Shipping soybeans to China takes about 56 days from Mato Grosso, the biggest growing state, compared with 32 days from the U.S. Midwest via the Mississippi River, Cordonnier said. The transport cost to southern ports from Mato Grosso can reach $150 a ton, compared with $35 from Iowa to New Orleans, he said.
Processing Profit
Demand in the U.S. for soy-based meal and oil also is improving, compounding the erosion of inventories after the worst drought since the 1930s reduced domestic production for a third straight year. The Washington-based National Oilseed Processors Association said Jan. 14 that companies used 9.7 percent more soybeans in the four months ending Dec. 31, compared with a year earlier.
Archer-Daniels-Midland Co., the largest grain processor, said on Feb. 5 that operating profit in its oilseed unit more than doubled to $411 million in the fiscal second quarter that ended Dec. 31, as plants ran at record capacity. The company, based in Decatur, Illinois, will continue to benefit from improved soy margins, Kenneth Zaslow, an analyst at BMO Capital Markets in New York, said in a Feb. 6 report. He has an outperform rating on ADM.
The estimated profit to process soybeans in Illinois is $1.47 a bushel, up 77 percent from a year earlier, USDA data show. Based on futures prices, crush margins will double from year-earlier levels in the second quarter and triple in the third quarter, Zaslow said.
‘Behind Curve’
“Inventory levels are really tight right now,” and there remains a risk that U.S. harvests in September and October may not be sufficient to revive supplies, said Kelly Wiesbrock, a portfolio manager helping to manage $1.3 billion of assets for Harvest Capital Strategies, a San Francisco-based hedge fund.
As of Jan. 29, the U.S. Drought Monitor classified 51 percent of nine Midwest states with soil-moisture levels below 20 percent of normal, including some at zero, with water shortages and crop damage likely. The region produces most of the nation’s soybeans. A year earlier, 20 percent was in drought.
“We’re still behind the curve on moisture levels and a lot of guys are saying we’re setting up for another drought,” said Wiesbrock, who grew up on a farm in Illinois, where his brothers, father and grandfather still grow corn and soybeans on 3,000 acres. “We may get off to a good start and have trend- line yields and they’d be less tight, but you don’t rebuild inventories in one year and we don’t harvest until the end of the year.”
http://www.bloomberg.com/news/2013-02-0 … ities.html
Statistics: Posted by yoda — Thu Feb 07, 2013 2:07 pm
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Gold and Silver • Richard Russell – World’s Supply Of Silver Dangerously Low
Richard Russell – World’s Supply Of Silver Dangerously Low
http://kingworldnews.com/kingworldnews/ … y_Low.html
Today the Godfather of newsletter writers, Richard Russell, warned his subscribers “… the world’s supply of silver has grown dangerously low.” Russell also had some fascinating comments regarding gold, and stocks, including some great charts. Here is what Russell had to say: “If a problem has no solution, it may not be a problem, but a fact — not to be solved, but to be coped with over time.” (Shimon Peres) As I read the quote, I relate it to the FACT of the US’s debt. This is a situation that can never be solved honestly — it’s a fact. A fact that our children or our grandchildren will have to cope with. How they cope with it will set the course of the world of tomorrow.”
“The month of January was a winner, and according to Yale Hirsch (he edits the Stock Trader’s Almanac) if January is an up month the odds are that the rest of the year will also be up. Newspaper or magazine headlines seldom get it right, but courageous Barron’s keeps trying. The cover of this week’s Barron’s shouts in large red letters — STOCK ALERT! GET READY FOR A RECORD ON THE DOW.
I’ve posted five years of the Dow on the chart below. At the bottom of the chart we see the 89-day rate-of-change. It seems so easy — all the Dow has to do is climb another 174 points, and eureka, it’s at a new record high, and at the same time it has confirmed the new record highs in the Transportation Average. Wait, note that RSI is at its severe overbought zone for the first time in almost two years. In the last five years, RSI has signaled overbought five times. At the bottom of the chart we see the 89-day rate-of-change (this is momentum).
I keep thinking about that giant surge among the silver miners. Was that surge telling us that silver is preparing to take off to the upside? I’m not sure, but it has certainly worked to keep my eyes on silver. I know that the world’s supply of silver has grown dangerously low. Whereas ten years ago there were three billion ounces of silver above ground and there for the taking, today there are less than one billion ounces of silver available. And unlike gold, silver is actually consumed.
I find the chart below of silver to be interesting. For the first time in many months, silver has closed above its 50-day MA (moving average). MACD could be in the process of turning up. Silver has now closed above its declining trendline.
Below, I keep a sharp eye on the US dollar, and you can be sure the bond market is also watching the dollar closely. Actually, all commodities should be watching the dollar, because if the dollar breaks down, it’s going to require MORE dollars to buy commodities, which is inflationary. Also, if the dollar breaks down our foreign creditors will demand more yield (higher interest rates) for buying and holding dollars.
The daily chart below shows gold’s latest action in a down-slanting flag. This flag should break to the upside, putting gold above 1700. The higher horizontal line denotes tough resistance at 1800. We should see some significant action in gold and silver this week. At the bottom of the chart we see the Dollar Index, which is declining. The declining Dollar Index should be a plus for gold.
Statistics: Posted by DIGGER DAN — Wed Feb 06, 2013 6:57 pm
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Firearms • Walmart limiting ammo sales due to supply issues
Walmart limiting ammo sales due to supply issues
The world’s largest retailer is limiting U.S. ammunition sales to three boxes of shells per day, per customer.
BENTONVILLE, Ark. — The world’s largest retailer is limiting U.S. ammunition sales to three boxes of shells per day, per customer.
Walmart said Thursday the restriction is in place because the supply of ammunition has become tight.
Ashley Hardie, a spokeswoman for the Bentonville-based company, says Walmart is monitoring its ability to meet demand and will lift the restrictions when it is able to.
The company doesn’t break out sales of individual items and Hardie wouldn’t say how much sales have increased. She says the limits apply to all types of ammunition and are in place to ensure as many customers as possible can be served.
Gun shops have reported increased sales since the massacre of 20 first-graders in Newtown, Conn., revived the nation’s gun control debate.
https://www.dailyherald.com/article/201 … 702019918/
Statistics: Posted by yoda — Sat Feb 02, 2013 3:30 am
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Agriculture • Corn, wheat prices jump after US cuts supply hopes
Corn, wheat prices jump after US cuts supply hopes
Wheat futures set course for their strongest performance since November, with corn values higher too, after a slew of long-waited US data cut hopes for domestic supplies of both crops.
Wheat futures initially soared nearly 4% in Chicago after the US Department of Agriculture cut its estimate for domestic inventories at the close of 2012-13 by 38m bushels, to 716m bushels, a bigger drop than investors had expected.
And the data cast doubt on ideas of a bumper crop in 2013 too, in dashing forecasts of a jump in US winter wheat seedings.
The USDA pegged winter wheat seedings at 41.8m acres, 867,000 acres fewer than investors had expected.
Corn revisions
For corn, the USDA revealed that domestic inventories at the start of last month were, at 8.03bn bushels, down 17% year on year and some 180m bushels fewer than investors had banked on.
The figure followed growing speculation this week that US livestock feeding with the grain had been stronger than previously appreciated in the latter months of last year, and indeed the USDA raised by 300m bushels its estimate for feed use over 2012-13.
The revision was not reflected fully in the much-watched USDA estimates for US corn inventories at the close of 2012-13, in September, with export hopes slashed following a weak start to the season.
"Corn exports are projected 200m bushels lower, reflecting the slow pace of sales and shipments to date, and increased pressure from larger supplies and exports from South America," the USDA said.
Nonetheless, the estimate for stocks at the close of the season was cut by 45m bushels to 602m bushels – contrasting with market expectations of an increase in the inventory estimate.
‘Strong and volatile prices’
Corn prices also gained more than 3%, with the USDA supporting ideas that the supply squeeze meant no imminent end to the period of elevated prices.
"While stiff competition has limited US corn exports, higher domestic disappearance leaves the balance sheet historically tight and is expected to support continued strong and volatile prices well into summer, particularly in the domestic cash markets," the USDA said.
"Higher expected feed and residual use [of corn] more than offsets reduced prospects for exports."
Chicago corn for March stood 3.2% higher at $7.21 ¼ a bushel, potentially on course for its biggest one-day rise since October.
http://www.agrimoney.com/news/corn-whea … -5396.html
Statistics: Posted by yoda — Fri Jan 11, 2013 1:54 pm
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Agriculture • Significant Tightening of Global Grain Supply
Significant Tightening of Global Grain Supply – Demand Balance Forecast
13 September 2012
GLOBAL – Continued deterioration of cereal crop prospects over the past two months, due to unfavourable weather conditions in a number of major producing regions, has led to a sharp cut in FAO’s world production forecast since the previous report in July.
Based on the latest indications, global cereal production would not be sufficient to cover fully the expected utilization in the 2012/13 marketing season, pointing to a larger drawdown of global cereal stocks than earlier anticipated. Among the major cereals, maize and wheat were the most affected by the worsening of weather conditions.
FAO’s latest forecast for world cereal production in 2012 stands at 2,295 million tonnes, down 52 million tonnes, or 2.2 per cent, from the record in 2011. This forecast is significantly (about four per cent) below the estimate reported in FAO’s previous report in July, largely reflecting the worsening of maize production prospects in the United States because of the widespread and severe drought.
World production of coarse grains (i.e. maize, barley, sorghum, millet, rye and oats) is projected at 1,148 million tonnes, down 17 million tonnes (or 1.5 per cent) from 2011. The anticipated fall mainly reflects a smaller maize crop, which is expected to decline to 864 million tonnes in 2012, 20 million tonnes less than in 2011. According to the latest report from the United States Department of Agriculture, published on 10 August, this year’s maize crop in the United States could fall to 274 million tonnes, down 56 million tonnes (17 per cent) from the July forecast and 40 million tonnes (13 per cent) below the previous year.
The FAO’s forecast for world wheat production has also been downgraded since July. Global wheat production is anticipated to reach 663 million tonnes in 2012, down 15 million tonnes (two per cent) from the previous forecast, which would be 36 million tonnes (five per cent ) below 2011.
Most of the decline from last year (as well as from the previous report) reflects the negative effects of drought on CIS yields and production.
Wheat output in the Russian Federation is forecast to decline by 29 per cent to 40 million tonnes compared to 2011 and below the 41.5 million tonnes registered in 2010. Production also looks set to fall sharply in Kazakhstan and Ukraine, by 47 per cent and 37 per cent respectively. By contrast, a number of other key producers may harvest larger crops. In the United States, wheat production is to increase by 13.5 per cent to an above-average level of 61.7 million tonnes. In Canada, wheat output is expected to be above-average and six per cent higher than in 2011.
This year’s harvest in India is pointing to a record of almost 94 million tonnes (up eight per cent from the previous year’s record).
Likewise, in China, wheat output may reach a new high of 118 million tonnes. In the EU, the latest projections point to only a small reduction from 2011.
http://www.thecropsite.com/news/11927/s … e-forecast
Statistics: Posted by yoda — Sat Sep 15, 2012 1:32 am
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Gold and Silver • Re: Leeb – Supply Crunch To Send Silver Into The Stratospher
Got yer silver?
Time is running out to get it at bargain prices.
Statistics: Posted by Deo Vindice — Tue Aug 21, 2012 8:10 pm
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Gold and Silver • Leeb – Supply Crunch To Send Silver Into The Stratosphere
Leeb – Supply Crunch To Send Silver Into The Stratosphere
http://kingworldnews.com/kingworldnews/ … phere.html
Today acclaimed money manager Stephen Leeb told King World News, “… it will be very difficult going forward to acquire large amounts of silver.” Leeb, who is Chairman of Leeb Capital Management, also said that because of this, “… the price of silver is literally going into the stratosphere.”
Here is what Leeb had to say: “This is going to be very important for the silver market going forward, Eric. As an example, photovoltaics is a tremendous way to generate electricity from the sun, but it uses a large amount of silver. The major difference between photovoltaics and other ways of generating energy from the sun, is that the other methods require a great deal of water.”
“One of the methods being used to garner energy from the sun requires six to seven times more water than nuclear, and nuclear already requires tremendous amounts of water. The point I am trying to make is that photovoltaics requires a bare minimum of water and in some cases no water.
Water, which is becoming much more of a concern in today’s world, is going to be critical going forward in terms of supplies….
“Also, if you look at fracking, you are not going to be doing fracking unless you have a lot of water. And you are not going to be running a lot of nuclear power unless you have a lot of water. So water becomes a key constraint.
So the fact that photovoltaics doesn’t use any water is utterly critical. If we are going to build out infrastructure, and use the sun as a major producer of electricity, you have to put photovoltaics at the top of that list. In fact, the growth rate of photovoltaics has been exponential over the past few years.
The growth of this industry strongly suggests that silver is going to play a critical role, and a much larger role than previously assumed in the whole energy equation. I’m talking about silver as an industrial metal. The problem going forward is how to connect the dots between how much silver we produce and how much we are going to need for energy and electricity production, particularly in China.
So silver has two drivers going forward. One is the monetary aspect because silver is money. But the other is the industrial component, and the demand for silver to cultivate energy is going to skyrocket. Later on, people will not believe you could buy silver in the $20s. It’s a gift right now at $29.
I think it will be very difficult going forward to acquire large amounts of physical silver. Countries will have a very hard time picking up the necessary silver they will need for all of the demands. When you couple in the investment boom, that is still in front of us, that means the price of silver is literally going into the stratosphere.
The Chinese know this and that is why they are buying so much physical silver, as well as gold. I have said to many times that we are going to have a mania in the junior mining shares, but we are also going to have a mania in the price of physical silver.”
Statistics: Posted by DIGGER DAN — Tue Aug 21, 2012 7:36 pm
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Slumping Money Supply (Not Austerity) Plunges Hungary Into Recession
By Steve H. Hanke
Hungary is in a recession, again. According to the chattering classes, as well as many analysts and financial reporters, fiscal austerity is the cause of Hungary’s slump.
Nonsense. Hungary’s recession results from its slumping money supply.
When monetary and fiscal policies move in opposite directions, the economy will follow the direction taken by monetary (not fiscal) policy – money dominates. For doubters, just consider Japan and the United States in the 1990s. The Japanese government engaged in a massive fiscal stimulus program, while the Bank of Japan embraced a super-tight monetary policy. In consequence, Japan suffered under deflationary pressures and experienced a lost decade of economic growth.
In the U.S., the 1990s were marked by a strong boom. The Fed was accommodative and President Clinton was super-austere – the most tight-fisted president in the post-World War II era. President Clinton chopped 3.9 percentage points off federal government expenditures as a percent of GDP. No other modern U.S. President has even come close to Clinton’s record.
The money supply picture for Hungary seemed to be looking up until late 2011 (see the accompanying chart). Indeed, Hungary’s money supply had nearly returned to its trend-rate level, when it peaked in November 2011. Then, in the course of just over a month, things took a turn for the worse.
First, Moody’s downgraded Hungary’s debt to junk status, and soon thereafter, S&P and Fitch followed suit. Then, the EU and IMF walked out on debt restructuring talks, citing concerns over proposed constitutional changes, which threatened the Hungarian central bank’s independence. Just days later, their fears were confirmed, as the Hungarian Parliament passed the controversial law, merging the central bank with the Financial Supervisory Authority. And, to top it off, Hungary unexpectedly cancelled part of its December debt auction.
When the dust settled, confidence in Hungary’s financial system had been shattered. Despite a 15.9% increase in the supply of state money, the total money supply had plummeted by 4.2% (from November 2011 to January 2012). As the accompanying table shows, this decline in the total money supply was driven by a 9% drop in the all-important bank-money component of the total.
Hungary’s money supply has yet to recover from this perfect monetary storm. And, as if that wasn’t enough, Hungary recently adopted a damaging financial transactions levy.
Money and monetary policy trump fiscal policy. Until Hungary gets its money and banking houses in order, its economy will continue to wallow in recession.
Slumping Money Supply (Not Austerity) Plunges Hungary Into Recession is a post from Cato @ Liberty – Cato Institute Blog
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Agriculture • Alarms sound over world food supply as drought wilts US Corn
Alarms sound over world food supply as drought wilts US Corn Belt
The US government on Friday slashed estimates for global food supply as a deepening drought withers corn and soybean crops in America’s heartland. ‘Scary situation,’ one analyst says.
By Patrik Jonsson, Staff writer / August 10, 2012
ATLANTA
A historic Midwest drought prompted the US government on Friday to slash supply estimates for nearly everything in the US cornucopia, including corn, soybeans, and sorghum – a move that caused commodity prices to jump and concerns about the state of the global food cupboard to rise.
US corn and soybeans are crucial to global food supply because they are used for food, feed, cooking oil, and even motor fuel. Reduced supply and higher prices mean that poorer, import-reliant nations may not be able to replenish their food stocks.
"This is shocking,” Dan Basse, president of Ag Resources, said during a conference call on Thursday, ahead of the World Agricultural Supply and Demand Estimates report from the US Department of Agriculture. “This is getting people at the United Nations very concerned. The poor in the world are going to see tremendous pressure on their budgetary expenditure for calories. This has become a very scary situation, particularly for those in the world who are impoverished."
IN PICTURES: Drought in the USA
With the release of the global supply and demand report Friday morning, prices on the commodities exchange in Chicago rose to all-time highs for corn and soybeans, the hardest-hit crops so far. The estimate for the US corn crop is at the lowest level since 1995-96, when many fewer acres were planted.
The report piggy-backed on the release Thursday of the United Nations Food and Agriculture Organization’s Food Price Index, which showed global food prices rising by 6 percent, largely because of the US drought. Untimely rains in sugar-producing Brazil and dry conditions in Russia’s wheat belt, too, have taken a toll.
The hottest July on record in the Lower 48 and scant rainfall have created the widest US drought since 1956, wiping out much of the corn and soybean crops, which are used globally and domestically for food, feed, and ethanol production. In the US, which is the world’s top exporter of corn, more than half the crop is now considered in “poor” condition. The Agriculture Department on Friday slashed yield estimates by 12 percent, from 146 bushels per acre to 123 bushels per acre.
American farmers had planted the largest corn crop ever this year, in response to high commodity prices and high global demand. The US was supposed to be “swimming” in corn this fall. Instead, the harvest will be a “train wreck,” Kelly Wiesbrock, a fund manager for Harvest Capital Strategies, tells the Reuters news service.
Higher commodity prices mean poorer countries will import much less, putting millions of people on the lower rungs of the global food chain in jeopardy, and potentially creating a situation similar to the world food crisis of 2007-08. In all, estimates for this year’s global grain supply are down by 180 million metric tons – enough to fill about 360 supertankers to the brim.
"This is not some gentle monthly wake-up call,” Oxfam spokesman Colin Roche told the press after the latest figures were released. “It’s the same global alarm that’s been screaming at us since 2008. These new figures prove that the world’s food system cannot cope on crumbling foundations. The combination of rising prices and expected low reserves means the world is facing a double danger."
A May report from the National Intelligence Council, an adviser to the federal government, suggested that countries that depend on food imports – Pakistan, Bangladesh, Sudan, South Sudan, and Egypt, to name a few – are vulnerable to social unrest should food prices rise too high.
In the previous world food shortage, some 60 food riots erupted across the globe, the US State Department has reported.
The drought is serving to highlight the importance, and vulnerability, of the US Corn Belt as it relates to global food supply. More specifically, the situation has focused new criticism on US ethanol production mandates, which require that 40 percent of an already-poor crop go toward refining the coarse grain into car fuel. The mandates were put in place over the past decade to help cut greenhouse-gas emissions and to make the US more energy-independent. So far, President Obama has said he’s not considering waiving the mandate.
“An immediate, temporary suspension of that [ethanol] mandate would give some respite to the market and allow more of the crop to be channeled toward food and feed uses,” José Graziano da Silva, director general of the UN’s Food and Agriculture Organization (FAO), wrote recently in the London Financial Times.
Government economists expect corn prices to rise to a record $9 a bushel, up from a $6 bushel estimate in early July. But private ag economists suggest that the drought is worse than advertised and that prices could go even higher.
Extrapolating from price peaks set in 1973, a year when corn and soybean supply was about as tight as it is today, and adding current demands, Terry Roggensack of the Hightower Report concluded that corn prices could go as high as $17 a bushel and soybean prices could top $50 a bushel.
Such prices could make some farmers and commodity traders wealthy, but they could be devastating for poorer, food-importing nations. “The U.S. leads the world in exporting corn, soybeans and wheat, and the surging prices are expected to be felt across the international marketplace, hurting poor food-importing countries,” said a study by British charity Oxfam issued ahead of this week’s UN report.
However, the FAO did note that its overall food price index for July remains well below the peak reached in February 2011, suggesting that countervailing forces – including lower beef prices – may yet stave off a repeat of the 2007-08 global food shortage.
http://www.csmonitor.com/USA/2012/0810/ … -Corn-Belt
Statistics: Posted by yoda — Fri Aug 10, 2012 1:24 pm
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