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Last December, I
published a major article ( *****2010 Food Crisis for Dummies***** )
explaining why the world was heading towards a major food crisis in 2010. Well,
the 2010 Food Crisis IS HERE!
Shortages have driven up prices and we are now entering the next stage of the
food crisis. Some of my long time readers will remember my March follow-up
entry ( *****2010 Food
Crisis Taking Shape***** ) in which I
laid out the three stage of the food crisis.
…
What is going to happen next is simple:
A) Prices will rise driven by growing shortages.
B) The fear of price collapse in soybeans will fade away and doubts about the
USDA will grow (ie: “if the USDA’s numbers are right, why are
prices still going up?”). As end-users try to get out of their
underbought and oversold positions, the price rises will accelerate.
C) Panic explodes as faith in USDA numbers collapse. Everyone
becomes a spot buyer.
Stage A of the
food crisis (shortage-driven price spike) has occurred. Now we are entering
stage B (confusion, growing doubts in government estimates, accelerating
price rises). This is confirmed by Kory Melby, who asks the question I
have been waiting for: Where Are the Soybeans?
Where
Are the Soybeans?
29 Jul 10
Cash soybean bids remain firm in the interior of Brazil.
Soybean crushers do not have enough soybeans to make it until November.
Soybean crushers are bidding a negative margin to secure cash soybeans.
Exciting Stuff
Happening In Grain Markets
Modbee reports that wheat prices surged in July by the
biggest amount in a half-century.
DROUGHT
SENDS WHEAT SKYROCKETING
last
updated: July 30, 2010 11:05:52 PM
Wheat prices surged in July by the biggest amount in a half-century
as severe drought in Russia and other former Soviet republics destroyed grain
crops.
• Wheat prices rose $1.97 a bushel, or 42 percent, this month
and are at their highest level since September 2008.
…
Agweb reports
about exciting stuff happening in grains.
Strong
Market Closes Mark Uptrend
7/31/2010
By Linda H. Smith
“We have exciting stuff happening in grains,”
says Jerry Gulke of the Gulke Group. “You almost have to see it on
paper to believe it. I don’t remember when I’ve seen all
commodities look this bullish at once.”
Gulke learned long ago that you can’t argue with the
technicals—the charts often tell you something is going on in the markets
that you can’t readily appreciate in the fundamentals. The charts
for wheat, corn, soybeans, bean oil and maybe bean meal all are now long on
both a weekly and monthly basis, he says. “This generally means
we will see an upward bias for the next 12 to 18 months.”
“It could be we are in about the same situation we were in
2008,” says Gulke. “Now, we need something
catastrophic to happen to not be in a bull market.”
…
AP reports that wheat prices end July with huge monthly
gain.
Wheat
prices end July with huge monthly gain
By
TALI ARBEL (AP) – July 30, 2010
NEW YORK — Wheat prices surged in July by the biggest amount
in more than a half century as severe drought conditions in Russia
and other former Soviet republics destroyed grain crops.
If the gains continue, U.S. shoppers could see a bump up in prices
of cereals, breads and pastas made with wheat. American wheat
farmers, meanwhile, are going to get a boost in income, said Scott Irwin,
professor of agriculture at the University of Illinois, Urbana-Champaign.
Wheat prices have risen $1.97 a bushel, or 42 percent, this month
and are at their highest level since September 2008. Its the
biggest gain for wheat contracts according to records dating back to
1959, according to the Chicago Board of Trade.
With no immediate end in sight for the drought in Russia, wheat prices
could continue to rally. That makes it more likely that the surging wheat
could wind up affecting prices for bread, said Ephraim Leibtag, an economist
with the USDA's Economic Research Service.
The lack of rain and extreme heat in Russia has already destroyed
about 20 percent of the country's grain crop in key growing regions,
according to Russian officials. Russia is a major exporter, but analysts say there
are rumors that the country may cut off its exports, boosting
demand for the remaining grain stocks in the U.S. and other major grains
producers.
Droughts are also afflicting Kazakhstan and parts of Ukraine,
while heavy rains have damaged the Canadian wheat crop. The
Canadian Wheat Board estimated that the 2010-11 yield would be the lowest
since 2002 because about 13 million acres were either left unseeded or
destroyed by heavy rains.
Expectations for a global wheat crop smaller than last year's helped
propel prices for wheat up by 5.4 percent on Friday alone.
September wheat rose 34 cents to settle at $6.615 a bushel.
…
"Undoubtedly this will be good news in Nebraska, out there in the
West, on the Great Plains," Irwin said. If farmers switch acreage
from soybeans and corn to wheat, that could also drive an increase in the
price of those commodities as supply shrinks, ultimately leading
to higher meat prices for livestock producers and shoppers, he said.
…
Below is the
latest from Nogger. (Again, visit Nogger’s blog to
keep up to date about the 2010 food crisis. It has great coverage of
everything agriculture.)
Friday,
30 July 2010
German Production Estimates Cut
Hamburg-based Toepfer have reduced their German crop production estimates
quite sharply from last month saying that the cold winter delayed
crop maturity. In addition "dry conditions in the last six weeks and the
extremely high daytime temperatures have affected the yield potential of
crops in many places," they add.
…
Friday,
30 July 2010
Ukraine To Import Wheat In 2010/11?
Reports suggest that Ukraine will only manage to harvest "a
maximum" of 8 MMT of milling wheat this year, well below domestic
consumption of 11-12 MMT.
Having aggressively marketed and exported wheat of all grades throughout
2009/10 it will come as no surprise to hear that official records of
milling wheat ending stocks from last season appear to have got lost in the
post.
One report I am reading suggests that the cash-strapped Ukraine's
already have commitments to export 3 MMT of milling wheat this season.
The maths on this one certainly don't add up. Even is this
week's hastily introduced new regulations on exports effectively bars this 3
MMT from leaving Ukraine will clearly run out of milling wheat by
spring.
The country is estimated to produce 38-40 MMT of grains this year, down
13-17% from last season's 46 MMT. …
Friday,
30 July 2010
What Will This Afternoon Bring?
You'd have expected a profit-taking month-end sell off normally, but
things suddenly aren't "normal" any more. Early calls for
CBOT this afternoon are higher: corn up 2-4c, wheat up 8-10c, soybeans up
6-8c. …
Friday,
30 July 2010
What Will Tomorrow Bring?
Sharply higher global wheat plantings based on these prices that's for sure. Is
anyone reading this old enough to remember the dim and distant past of
2007/08? What a year that was, you'll never believe it right, what happened
was prices went through the roof just like now. …
Friday,
30 July 2010
IGC Issue Revised Export Figures
[Propaganda efforts are getting increadibly desperate and obvious.]
The senile old duffers at the IGC have revised yesterday's export numbers
before the ink has even had time to dry.
They've just heard that there's a drought going on in
Russia, which they seem to think might have a negative import on exports out
of the region this year.
They didn't hear about the drought until today as the
regular carrier pigeon they usually use is on holiday, and they've got a
student in to cover for him.
They've dropped their July 2010-June 2011 Russian grain export estimate from
yesterday's 15.8 MMT to 13.4 MMT today. To help balance that they've
upped US exports by 2.5 MMT to 82.9 MMT.
… Can you smell something funny?"
[USDA-lead propaganda is falling apart in the face of
reality…]
Saturday,
31 July 2010
Wheat Monthly/Weekly Stats
It's been a stunning month for wheat, with Friday's impressive
CBOT close apparently pushing wheat there to its largest monthly gain
since 1959, with London and Paris wheat not too far behind:
Commodity Month Fri Cls Weekly Gain Monthly Gain
--------------------------------------------------------------------
CBOT wheat Sep10 661.50 +65.25 (+10.9%) +181.25 (+37.7%)
Paris wheat Nov10 195.25 +15.50 (+ 8.6%) + 49.50 (+34.0%)
London wheat Nov10 142.50 + 8.55 (+ 6.4%) + 35.25 (+32.9%)
--------------------------------------------------------------------
Paris corn Nov10 178.50 +10.50 (+ 6.3%) + 29.25 (+19.6%)
Paris rapeseed Nov10 367.25 + 0.50 nominal + 37.50 (+11.4%)
Paris barley Nov10 201.00 +11.00 (+ 5.8%) + 38.50 (+23.7%)
--------------------------------------------------------------------
World buyers are
having flashbacks to 2007 and 2008
Agweb reports that world buyers are having flashbacks to
2007 and 2008.
…
Wheat, once again posted the largest percentage gains overall in our
table. Continued weather problems in the FSU and Europe are still fueling the
rally in wheat. Now that the spec funds have painfully bought back all of
their short positions in wheat, some have “got religion”
and are aggressively buying the market in an attempt to make back the
money they lost. World buyers are also having flashbacks to 2007 and
2008, when hoarding behaviors by net exporter countries made food
staples like wheat and rice very expensive and hard to buy. On paper
the world stocks of wheat are still much above 2007 levels, but once burned
is twice shy as they used to say. …
Weather Woes
Around the World
Agrimoney reports
about signs of crop damage and lower yields in
German.
German
yield fears help wheat prices to new highs
By
Agrimoney.com - Published 22/07/2010
Wheat prices hit their highest for nigh on two years in Europe, and rose
above \$6 a bushel in Chicago, after farmers reported fears of yield
losses of up to 20% in Germany because of dry weather.
Farming association Deutschen Bauernverbandes, or DBV, said that wheat yields
in the European Union's second-ranked producer of the grain would be
"10-20% down on the year".
Initial harvest results had shown signs of crop damage and lower
yields, notably in areas with lighter soils, where the impact of this
year's prolonged dry weather had been particularly severe.
While the DBV did not make a production estimate, the decline
implied by the data is greater than many of the forecasts so far being
factored in. FO Licht analysts earlier this month estimated the
German wheat crop at 24.86m tonnes, only 300,000 tonnes lower than last
year's.
…
Agrimoney reports
that Argentine wheat joins list plagued by dry
weather.
Argentine
wheat joins list plagued by dry weather
By Agrimoney.com - Published 26/07/2010
Argentina has emerged as the latest country to face potential setbacks
over wheat, with adverse weather threatening its recovery from a
century-low in plantings.
"A new concern is bubbling up in Argentina. It is dry,"
US broker US Commodities said, noting that 79% of the South American
country's intended wheat acreage had been planted as of last week. Typically,
farmers have all but finished sowings by now.
The concerns were echoed by Rabobank analysts, who warned of a "great
deal of uncertainty" regarding Argentina's wheat crop, South America's
biggest, and one typically drawn on by regional importers such as Brazil.
"Dry conditions in some areas of the country, especially in the south
and west of the wheat region, might prevent planting intentions from being
fully realised," the bank said.
Dry weather has already cut hopes for crops in the European Union,
Western Australia and, in particular, Kazakhstan and Russia, sending
wheat prices jumping on international markets.
…
More hot weather
… Russia and Kazakhstan, and potentially eastern Ukraine, are
set for further hot and dry weather, with some areas forecast to
receive temperatures of up to 108 degrees Fahrenheit (42 degrees Celsius).
"The forecast for the week does not remain optimistic... with a
further rise of expected temperatures," Agritel, the Paris-based
consultancy, said, adding that temperatures in Russia had hit record highs on
Saturday.
…
Benzinga reports
that problems in grain producing regions.
…
Corn/Wheat/ Soybeans are all trading significantly higher as the drought
conditions in southern Russia continue and with little if any prospects
of relief in the very near future. Summer crops require rain however,
in Russia’s case, and in the case of Kazakhstan and the Ukraine the
lack of grain during July has put the summer grain crops there in very real
danger.
China and Canada have a very different problem which is the exact opposite
of drought, these two countries have suffered heavy rains in the grain
producing regions, which has limited farmer activity or has
devastated what was planted. The strange weather patterns have
succeeded in tightening world grain supplies. The grain market bears
argue that there is a vast supply enough in fact to meet global demand and
they are correct, for now. As long as there are no other problems regarding
logistics, the industrialised world and I include the 2nd tier nations in
this, will be able to feed themselves. There will not be a famine [Talk
of famine means that stage C of the 2010 food crisis (Panic) is growing
nearer].
However the important point I wish to make is that these reserves will
be drawn down, taking the world into 2011 with limited grain reserves and
high and rising prices. …
Abnormal US
Weather Continues in 2010
In 2009, Farmers experienced the worst weather “Ever Seen” (see *****Worst Harvest Season Ever Seen***** ).
The worst weather "Ever Seen” means exactly what it sounds like:
the worst in living memory or recorded history. Reading about the 2009/10
harvest was a long series of horror stories. Farmers saw the worst drought
ever seen, the most rain ever seen, the worst hail ever seen, the worst
flooding ever seen, the earliest snow ever seen, etc…
Well, 2009’s abnormal weather continues in 2010.
Bloomberg reports about the weather threat to U.S. crops.
Soybeans
Rally to 12-Week High, Corn Gains as Dry Spell Hurts World Crops
By
Jeff Wilson - Jul 30, 2010
…
Weather Threat
Prices also rose as heat and excessive rain threaten U.S. crops,
Schultz said.
From Texas to Pennsylvania, temperatures will be as much as 6
degrees Fahrenheit higher than normal over the next two weeks,
increasing stress on plants, said Gail Martell, the
president of MartellCropProjections.com in Whitefish Bay, Wisconsin.
In the Midwest, the main U.S. growing region, the total rainfall
during the past two months was probably the highest since 1960, after
as much as 6 inches (15 centimeters) of rain moved east from South Dakota to
Illinois in the past 24 hours, said Mike Tannura, the
president of T-Storm Weather in Chicago.
The data point to the warmest and wettest June-July period since
1960, Tannura said today in a report to clients. With forecasts for a
hot August, there is increasing potential for large swings in yields, he
said.
“Too much rain and warm evening temperatures have caused widely
variable crop conditions across the Midwest and in individual fields,”
Northstar Commodity’s Schultz said. “It’s still going to be
a good crop, but not as big as farmers were hoping for just three weeks
ago.”
…
Agweb reports
about the record breaking Midwest heat.
Strong
Market Closes Mark Uptrend
7/31/2010
By Linda H. Smith
…
Behind the rally may be the hot summer nights, he adds. “Illinois
has had the most consecutive 80-degree or more days in history, and
it’s not cooling off at night. We are hearing from Drew Lerner
(Global Weather) and Elwynn Taylor (Iowa State University) that it is hot
nights that corn really doesn’t like. And there’s a chance of
hot, dry weather in August. Trim 5% yield potential and that is a
650-million-bushel loss…
Beatrice Daily
Sun reports that lush fields of corn and soybeans were
reduced to dying stalks and shoots in a matter of minutes.
From
the ground up
By Chris Dunker/Daily Sun staff writer Posted: Saturday, July 31, 2010 6:00
am
Nearly six weeks ago, lush fields of corn and soybeans
across four Nebraska counties were reduced to dying stalks and shoots
in a matter of minutes.
According to the U.S. Department of Agriculture’s Farm Service
Agency, 125,000 acres of crops were destroyed during the June 20 hail
storm across areas of Gage, Lancaster, Johnson and Pawnee Counties.
…
Harms watched his maturing corn crop be destroyed by golf ball and tennis
ball-sized hail from his home on June 20.
He, like most other farmers, remarked that he had never seen
anything like it as entire fields were destroyed, some with little evidence
of a crop left behind.
…
Hasenkamp said the Gage County area has had yearly experience with severe
hail damage to crops over the past four to five years.
“I’d say we’re more educated on what to expect because
of our experience with it,” Hasenkamp said. “But this is by
far the worst I’ve ever seen in my lifetime.”
…
Rapid City
Journal reports about the worst grasshopper infestation ever
seen.
Heavy
outbreak of grasshoppers at work on West River fields
Jomay Steen, Journal staff
Tuesday, July 20, 2010 6:00 am
Every morning Doug Hlavka surveys the damage that a newly hatched plague
of grasshoppers has set upon his cornfield and pastures.
“This is the worst infestation that I’ve ever seen,”
Hlavka said.
…
Hlavka, 56, noticed the first hatchings about two weeks ago. The hoppers
quickly moved into his pastures and fields to begin their ravenous work, he
said.
“I lost 40 acres of alfalfa that I didn’t cut. I had 80
acres of corn that they’re eating up real fast. I’ve
sprayed around its edges, but I’m waiting for an airplane to spray
it,” he said.
His wife, Val, lost her flower and vegetable gardens to the insects. He
estimates that in certain areas on his ranch, there are 30 grasshoppers
resting on each square foot of land. They have covered the sides of his home,
outbuildings and fence posts.
“My mother’s 84, and she says they’re the worst
she’s ever seen,” Hlavka said.
…
The balance of
power is shifting to exporters
Agrimoney reports
that the balance of power is shifting to
exporters.
Opinion:
Egypt's tiny wheat reversal is a big deal
23:37 GMT, Wednesday, 28th July 2010, by Agrimoney.com
The wheat market just crossed a rubicon.
Ever since the grain's last rally petered out two years ago, weakened by a
bumper crop and global recession, importers have held all the cards. It is
less than two months Chicago wheat slipped below $4.30 a bushel, nearly its
lowest for three years, as buyers sat on their hands.
Egypt's relaxtion of import rules only introduced last year shows that the
balance of power has shifted a long way back to exporters.
Allowing France to ship in 30,000-tonne volumes rather than the
60,000-tonne panamax standard is a more significant reversal than it first
appears.
Why the concession?
…
What Cairo's move does show is that it wants to make life easier for
France's merchants.
And that's quite a shift for a buyer which focused, as
importers' power grew, very much on getting value for money.
…
…it doesn't look like Egypt is taking any chances with its supplies.
And if the world's biggest wheat buyer is hedging its bets, the rest of
the market should take note.
Soybean Rally
Surprises World
Commodity Online
reports that soybean overcomes bearish trend.
Soybean
overcomes bearish trend
Published
on July 30, 2010 16:10:00 IST
After witnessing a long bearish phase, finally soybean prices
recovered during July month. NCDEX futures market prices increased
nearly 8.1 % during this period.
In fact, till last month, it was the general opinion
that world oilseeds market would witness further fall in prices due to
comfortable supply as Brazil, Argentina and US which are the major soybean
producers harvested a bumper crop this year.
…
Cash Premiums
Driving Soybean Market Higher
Premiums in the cash market are forcing soybean futures higher. Despite
prices jumping to a six-month high, the premium for soybeans delivered in
August is still 74 cents to 75 cents a bushel above August futures on the
Chicago Board of Trade. Basically, while August Soybean futures have rallied
to $10.53 per bushel, the real, cash price of soybeans is 74 cents
higher at $11.27 per bushel.
USDA reports the Gulf Export basis for grain.
BG_GR110
Baton Rouge, LA Fri Jul 30, 2010 USDA-LA Dept of Ag Market News
Gulf Export bids and basis for grain delivered to gulf export elevators,
barge to Louisiana Gulf (Mississippi River), prompt or 30 day shipments,
dollar per bushel, except sorghum per cwt.
…
Midday bids and basis for US 1 Yellow Soybeans
Cash Bids Change Basis Change
Aug= 11.2650 - 11.2750 up 24.75 +74 Q to +75 Q dn 1
Sep= 10.8300 - 10.9000 up 17 +78 X to +85 X unch
Oct= 10.7900 - 10.8000 up 17 +74 X to +75 X unch
Nov= 10.8000 - 10.8300 up 17 +75 X to +78 X unch
Dec= 10.7900 - 10.8000 no comp +74 X to +75 X no comp
This intense
backwardation (where cash prices are higher than futures) is evidence of
shortages and is the driving force behind the grain rally.
What Happens Next
Things are getting really interesting in agricultural markets. As for what
happens next, I will point to my first entry on Soybean Overconsumption:
What
this means
The soybean prices are going way up. How high they go
depends on how long the current overconsumption lasts. In other words,
right now it would take a 50 to 80 percent rise in prices to ration demand
until next harvest. However, with two or three months more of the
current overconsumption [TOO LATE], soybeans prices will
have to double or triple to ration demand.
Watch for the USDA’s Madoff Moment
As his ponzi scheme collapsed due to withdrawal requests, Madoff had to
face reality and shocked the world by admitting the truth. Investors
who believed they owned billions found they had a little over 100 million to
divide among themselves. The USDA, in the next [month] three
to four months, will also have to face the reality and admit that
the world is missing ten to twenty million metric tons of soybeans. The
news should be as well received as Madoff’s announcement.
Eric de Carbonnel
Market Skeptics
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