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Big Pat's Commodities Blog: Trends+Targets: Corn Soys+Meal Wheat Dollar

* "SETTLEMENTS WEDNESDAY DECEMBER 5/2012" *
* prices=the supply and demand of commercial trading *
* include short side in analysis *
Corn CH-premium to may 13
trend range: convergence flat lows-lower highs-low volatility
trading ranges: up-flat@top of trend range-consolidation=bearish
targets: (777 750)-725-685 653 (trading)

Soybeans SF-inverted
trend range: up-2nd day-new move-moderate volatility
trading ranges: up-suspect short covering-mixed buying-bullish
targets: 1566 (1511-1418)-1344 (trading)

Soybean Meal-SMF-inverted
trend range: up, narrow trading ranges=low volatility
trading ranges: flat@mid trend range, mixed buying=less bearish
targets: 490 468 (450-418) 393 (trading)

Wheat WH-premium to may 14
trend range: down, narrow trading ranges=volatile
trading ranges=flat@test of top of trend=less bearish
targets: (947-853) 815 782 728 684 (trading)

Cdlr CDZ-rolling dec to mar is evident
trend range: flat-consolidation, narrow ranges=low volatility
trading ranges: up@resistance, buying=less bearish
targets 10189 (10113-10046) 9934 9845 (trading)
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Informa hurts idea of drop in US soybean plantings

Informa Economics undermined ideas from US officials of a small fall in domestic soybean sowings next year, lifting its estimate for the increase in plantings, a rise it saw coming at the expense of corn and cotton area.

Informa lifted its forecast for soybean seedings next year in the US, the largest producer, by some 500,000 acres to a record 88.78m acres.

The estimate implies a substantial increase over area this year farmers planted 84.2m acres with the oilseed, according to the US Department of Agriculture.

And it is also substantially higher than a USDA forecast on Thursday of 84.0m acres of plantings next year, which had been greeted with some bullishness by investors, given a market consensus of a figure of some 88m acres.

The USDA data "seemed to rally the back end of the futures curve", Kim Rugel at broker Benson Quinn Commodities said, noting outperformance in the last session by November 2015 futures.

Falls in other crops

However, the USDA and Informa broadly concurred on forecasts for corn, cotton and wheat sowings for US harvests in 2015.

The analysis group cut its forecast for corn area next year by 300,000 acres to a six-year low of 88.01m acres, a reflection of the lower costs of growing soybeans, which are less fertilizer intensive than corn, fixing their own nitrogen from the atmosphere.

As for price incentives, the ratio of November 2015 soybean futures to December 2015 corn futures remains, at 2.33:1, historically elevated.

Informa pegged upland cotton acres at 9.38m acres, and total cotton area at 9.6m acres, down 13% year on year, and also a six-year low.

The group also ditched ideas of a small rise in wheat plantings, estimating sowings at 56.6m acres, down 218,000 acres from its previous forecast, and down from the 56.8m acres planted for the 2014 harvest.

'Makes no sense'

In fact, the USDA's relatively low estimate for soybean area, without higher ideas of plantings for other major crops, has attracted some scepticism over its forecasts.

At broker Country Futures, Darrell Holaday flagged that the USDA data showed total US crop area, as comprised by sowings and land put into the official conservation programme for the 2015 harvest, at 278.9m acres, a drop of 6m tonnes year on year.

"That simply makes no sense," Mr Holaday said.

"Where are these acres going?  Back into grass?  No  way. 

"I suppose this has been construed as positive [for prices], but I don't really think the market would believe it."

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U.S. Soybean Exports at Risk As Waterways Lag

U.S. Soybean Exports at Risk As Waterways Lag | Grain du Coteau : News ( corn maize ethanol DDG soybean soymeal wheat livestock beef pigs canadian dollar) | Scoop.it

Unless it makes major investments in the Mississippi River inland waterway, the U.S. is in danger as a soybean export leader. The country must upgrade or "get left behind in the world market,” according to a new study by the University of Southern Mississippi for the World Trade Center of New Orleans and the Big River Coalition.

Competitive crop producers are gaining momentum. Brazil has announced a $104 billion program, including heavy investment in transportation infrastructure. That country is expected to become the world’s No. 1 soybean exporter by the end of 2014. 

“With these advancements in logistical capabilities and infrastructure, Brazil has increased its ability to compete with U.S. soybean exports and agricultural exports in general through significant reduction to transportation cost,” the study says.

Brazil isn't alone. Argentina also is making major transportation investments. Such moves will reduce or eliminate delays that have hampered the movement of ag products from the countryside to the dock and eventually to portside bulk carriers. “With the reduction of wait time, transportation costs are reduced,” the study says. “When we consider the depth of some of their ports, we see the capacity to handle ever-larger ships, which have the very real advantage in the further reduction of grain transportation costs.”

Already, Brazilian soy export costs to China, by far the largest soybean importer, are the lowest, the U.S. second, with Argentina costs the highest of the top three exporters. “Should Argentina drop its export taxes on soybeans (which is under consideration), the U.S. is in danger of slipping to the No. 3 spot, which could potentially devastate the U.S. soybean industry,” the report says.

As the U.S. faces challenges to its dominance, global grain demand is expected to grow 47% by 2025, the report notes. “Particularly troubling is the lack of depth of the Lower Mississippi River.” The Panama Canal expansion, expected to be completed by early 2016, adds a "heightened sense of urgency," as ports in the Lower Mississippi are simply not deep enough to accommodate Post or New Panamax vessels, the report says.

Because of their weight and size, the vessels require a deeper draft of 50', but the current depth is only 45'. A Capesize vessel with a draft of 45' can carry an additional 13,475 metric tons (MT) of cargo over the present maximum draft of the Panama Canal. The same vessel at a draft of 50' can carry an additional 25,725 MT, an approximate 91% increase.

“In order for the U.S. to remain a leader in soybean exports, investments in the Mississippi River corridor are crucial,” the report says. “To protect its $270 billion in exports, the U.S. would need to invest $30.2 billion through 2020,” the report says. Yet current trends indicate expected funding will reach less than half of that amount at just $14.4 billion.

The Mississippi River system is made up of 41 ports, with an additional 59 ports dotting the river’s network of tributaries. “Areas of the Lower Mississippi River are deteriorating and in disrepair with many of the locks approaching 100 years of service. Aging locks that do not function properly cause delays. The more time that passes before repairs are accomplished, the higher the cost of repair.”

At current funding levels, replacement of the Inner Harbor Navigation Canal lock, a vital link that connects the Mississippi River to the Gulf Intracoastal Water System in New Orleans, might not occur until 2030.

The current lock, completed in 1921, is too small to accommodate modern-day vessels, and project costs have increased considerably.

By contrast, the report notes, Brazil plans to invest $26 billion real (Brazil's currency) to modernize ports within four years. Additionally, the Brazilian government plans to spend $15 billion real in port projects by 2015. During 2016 and 2017, Brazil will spend an additional amount, valued at $11.15 billion U.S. dollars, on seaport leasing projects.

The report notes major investments in improving the Port of Rio Grande do Sul, one of the most developed ports of Brazil, are particularly threatening to U.S. soybean exports. Other ports posing high risk to the U.S. are the Port of Santos and the Port of Paranagua.

Other countries also pose risks for U.S. soybean exports. Among them is Paraguay, which is making major investments in infrastructure, and Ukraine, the fourth-largest corn exporter. It might eventually emerge as a soybean exporter. Other countries increasing soybean exports are Canada, Colombia and Chile.

At present, though, the U.S. still has an advantage, but the gap is narrowing. According to the Soy Transportation Coalition, costs of shipping from Davenport Iowa to southern Louisiana via the Mississippi River, then to Shanghai, China via the Panama Canal are $78 MT. From Mato Grosso to the Port of Santos via truck, then to Shanghai, costs $174 MT, but $85 from Argentina to Shanghai—Londrina to the Port of Paranagua, then to China.

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Cuba Deal Costing Europe in $150-Million Wheat Export Market

The European Union stands to lose a $150-million wheat market in Cuba as the U.S. moves to normalize relations with the island nation after a 50-year embargo.

Wheat is Cuba’s second-biggest import, behind refined petroleum. The country bought 548,756 metric tons of the grain from the European Union in the year through June, with a value of 121 million euros ($149 million), including 356,639 tons from France, Eurostat data show.

The U.S. is the biggest shipper of the grain. Its share of Cuba’s wheat imports could reach as much as 90 percent from zero if the countries re-establish trade relations, U.S. Wheat Associates wrote in a statement yesterday. Under the current embargo, U.S. wheat exporters must use third-party banking institutions that make trade burdensome and often more expensive, according to the lobby group.

EU shipments “will be entirely conquered by the U.S. because they’re extremely close, extremely competitive,” said Paul Gaffet, a wheat analyst at Offre & Demande Agricole in Bourges, France. “There’ll be no more business.”

France losing a market of several hundred thousand tons is “threatening,” said Francois Luguenot, an analyst at InVivo, the largest exporter of French wheat. Any shift in supply may take one to two years, partly because lifting the embargo still requires approval by Congress, he said.

Wheat for March delivery rose as much as 4.4 percent to $6.77 a bushel on the Chicago Board of Trade today, the highest since May 20. Prices have climbed 9 percent this year.

Cuba’s Imports

Wheat accounts for 3.9 percent of Cuba’s imports, behind refined petroleum with 6.1 percent and ahead of corn, poultry and concentrated milk, according to the Observatory of Economic Complexity. Cuba gets almost all its wheat from the EU and Canada, and could import at least 500,000 tons from the U.S., U.S. Wheat Associates estimates.

Cuba, which last bought U.S. wheat in 2011, is the biggest wheat market in the Caribbean. With a tropical climate unsuitable for growing and located near export elevators on the U.S. Gulf, it’s a natural client for North American crops, U.S. Wheat Associates spokesman Steve Mercer said.

“Cuba would be foolish not to be a good customer given the close proximity to the U.S.,” said Steve Nicholson, vice president for food and agriculture research at Rabo Agrifinance in St. Louis.

Wheat accounted for 41 percent of the EU’s food and live animal exports to the Caribbean country in 2013-14, according to Eurostat. The EU might still sell the grain to Cuba at a sufficient discount, in a similar move to French feed wheat shipped to the U.S. this year, Luguenot said.

Grain shipping costs to Cuba from the U.S. Gulf are in the range of $6 to $7 a ton, while for France they’re more like $20 to $25 a ton, according to Gaffet.

“It’ll be a sizable client, close by,” he said. “The route is short. They’re going to jump on it.” 

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Russia’s Main Grain Exporters Halt Buying as Prices Rise at Home

Russia’s Main Grain Exporters Halt Buying as Prices Rise at Home | Grain du Coteau : News ( corn maize ethanol DDG soybean soymeal wheat livestock beef pigs canadian dollar) | Scoop.it

Russia’s biggest group of grain exporters stopped purchases for shipments abroad as the government fights domestic price increases.

The National Association of Exporters of Agriculture Products, which controls 50 percent to 70 percent of Russia’s grain shipments abroad, called for other grain exporters to back its decision for a halt until the domestic market stabilizes, it said in a statement today, citing the government’s concerns about inflation.

Russian inflation may surge 10.1 percent this year, spurred by food prices and the worst currency collapse since 1998, with the ruble weakening 45 percent this year. Russia, the world’s fourth-biggest exporter, is taking steps to stem its grain shipments, helping to send wheat prices in Chicago to the highest since May.

The nation is slowing down shipments by denying certificates that grain sellers and buyers need after sanitary inspections, a grain-export lobby said this weak. The country’s “main goal is to replenish the domestic market,” Deputy Prime Minister Arkady Dvorkovich’s spokeswoman, Aliya Samigullina, said by phone from Moscow yesterday.

Russia has also said it may scrutinize shipments through offshore companies, and the nation’s agriculture watchdog said last month it will block outbound cargoes deemed contaminated. The ruble this week weakened to an all-time low against the dollar before rebounding.

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Corn bulls shouldn’t get too excited about China’s GMO corn nod: Maguire

Corn bulls shouldn’t get too excited about China’s GMO corn nod: Maguire | Grain du Coteau : News ( corn maize ethanol DDG soybean soymeal wheat livestock beef pigs canadian dollar) | Scoop.it

(Reuters) - China’s alleged tune-change on accepting genetically modified U.S. corn shipments is unlikely to open the floodgates for U.S. exports to China anytime soon. China’s own flabby cash corn markets suggest the country already has plenty of inventories on hand.

Cash corn prices in Shandong Province – China’s top demand center – recently declined for the seventh consecutive week and are now some $72 per tonne (16.6 percent) off their 2014 highs and at their lowest levels since last spring.

Admittedly, those cash prices are still around $170 a tonne above the export price of corn at the U.S. Gulf, but nonetheless show little sign of urgency or supply tightness that would suggest an imminent surge in import demand.

 
 
 

Indeed, the subdued tone of domestic markets coupled with projections for China’s corn stocks to swell to 13-year highs open the door to a potential pick-up in corn exports from China. China corn exports are already projected to increase by over 350 percent from last year to four-year highs, but could climb further in 2015 if local traders determine that overseas buyers offer a better market for their supplies than domestic consumers.

And any such climb in outbound shipments of corn from China could eat into U.S. export market share elsewhere in Asia in major markets like Taiwan, South Korea and Japan.

So while U.S. exporters may at first look favorably on China’s softened stance towards U.S. corn imports, it is clear China has no obvious need for excess supplies over the near term, and may well be in a position to compete with the U.S. as an exporter next year should domestic prices remain soft and supplies remain abundant.


SENTIMENT RULES

For most of the past 20 years, China was a net exporter of corn due to strong government-level commitment to self-sufficiency in grain production and relatively robust annual production growth rates than generally exceeded the growth rates in domestic demand.

However, between 2008 and 2011 China’s corn demand pace accelerated at a faster pace than domestic production, leading to a draw on domestic inventories and increased tension among the grain origination and distribution community which was charged with ensuring an adequate and reliable flow of food and feed supplies to end users.

It was during this period when China initiated its most high-profile forays into the corn import arena, scooping up more than 5 million tonnes in 2011/12 and a further 2.7 million the following year.

On their own, those import tonnages were very modest, considering that total World corn imports for those years were 116 million and 95 million tonnes respectively.

But because of China’s status as a major producer and consumer of corn, the mere fact that the country felt it necessary to also import large tonnages of the grain were interpreted by market players as extremely bullish. The worst drought in decades during the U.S. corn growing season also exacerbated China’s import impact around that time.

Yet following a strong rebound in domestic production last year – along with a steep climb in domestic stocks – China backed away from the import market with great fanfare in 2013. A dispute over unapproved GMO-strains found in corn shipments from the U.S. was the official reason for the import back-pedal, although some market observers have suggested that China’s official aversion to genetically modified crops was merely a smokescreen to allow the country’s buyers to back out of U.S. import deals and repurchase supplies at lower prices.

Regardless of the real motivation behind the shut-off of U.S. purchases over the past year or so, the recent change in tone in corn import communiqués by China will be welcome news for U.S. exporters, and will give them hope for an uptick in demand from the country going forward.

Recent reports of mould found in corn stockpiles in top growing areas will also boost sentiment among corn sellers.

But for the most part, U.S. corn exporters will likely see little impact if U.S. corn gets put on the approved list for China’s crop importers again, as China’s main buyers remain awash in local supplies and so will have little or no need for overseas supplies for the foreseeable future.

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Will commodity prices follow oil price decline?

The precipitous decline in crude oil prices is worrisome on a number of fronts. 


Analysts are trying to decipher where oil will go from here as well as the ramifications, but there’s little agreement. 


The graph of oil prices over the last six months looks like a downhill ski slope. 


Oil has declined to $60 a barrel from more than $110 in July, which is reminiscent of what happened in 2008, when oil peaked at $145 in July and fell below $40 by the end of the year. Prices then gradually recovered through 2009 and 2010. 


Corn, wheat, soybeans and canola followed much the same path. In fact, over the last eight years, there has been an amazing correlation be-tween all of these commodities. Our best grain prices have been when oil is high.


On top of that, the value of the Canadian dollar has also fluctuated in sync with oil prices: high oil prices, high grain prices, high Canadian dollar. And the opposite has also been true.


However, corn prices have actually divorced themselves somewhat from declining crude oil values recently. Corn futures have gained about 70 cents after bottoming out at around $3.30 a bushel in October. 


It might seem logical to conclude that low oil prices would mean less demand and less profitability for corn-based ethanol, but the equation isn’t that simple. Low corn prices mean ethanol can be produced at less cost, and ethanol demand remains strong.


The growth in American ethanol production is over, but production is likely to remain relatively stable for the foreseeable future. 


As for currencies, the widening disparity between the loonie and the American greenback has more to do with the strength of the U.S. currency than weakness in Canada. The U.S. dollar index, which is a measurement against other key currencies, has increased dramatically in the last half of this year. 


Some analysts predict that the newfound strength in the American economy will spark a hike in interest rates south of the border.


The Canadian dollar has proportionately declined as the American dollar has strengthened. Our economy is no longer the shining star of developed nations. Interest rate increases are less likely here. 


Of course, continuing low crude oil prices will have a big impact on the provincial economies of Alberta and Saskatchewan as well as the entire nation. Much of the oil price decline is attributed to the Organization of Petroleum Exporting Countries refusing to cut production. There is also a new dynamic with the United States starting to gain self-sufficiency in oil, something that seemed impossible just a few years ago. 


The same thing happened with natural gas, which is now relatively cheap in North America. 


At one time, analysts pointed to a relationship between natural gas prices and the retail value of nitrogen fertilizer. In recent years, that relationship has broken down with nitrogen more closely following the price of corn. 


The relationship between high corn prices, high demand for nitrogen and high nitrogen prices certainly isn’t perfect, considering that nitrogen refuses to match the 2014 drop in corn prices. However, with corn recently turning somewhat higher, there is some evidence of strengthening nitrogen values.


The dramatic drop in oil prices is touching all facets of the economy: locally, nationally and internationally. History would say dropping oil doesn’t bode well for the grain industry, but cause and effect relationships can change over time.

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Uralkali Gains Most in 5 Years on Output Goal, Share-Deal Delay

Uralkali Gains Most in 5 Years on Output Goal, Share-Deal Delay | Grain du Coteau : News ( corn maize ethanol DDG soybean soymeal wheat livestock beef pigs canadian dollar) | Scoop.it

OAO Uralkali jumped the most more than five years in Moscow as the largest potash company raised its output goal even after one mine was halted by flooding and it delayed a share deal that would have left it less room to pay dividends. 

“With increased capacity utilization at other mines, we intend to produce 12 million tons of potash this year to meet strong demand from our customers,” Chief Executive Officer Dmitry Osipov said in a statement. In August, Uralkali estimated annual output of the fertilizer of 11.5 million metric tons. 

The potash producer advanced 14 percent, the biggest gain since May 2009, to 141.50 rubles by the close in Moscow trading, paring its loss for the year to 18 percent. 

Uralkali is monitoring the Solikamsk-2 mine in Russia’s Perm region after water poured into the site last month. A sinkhole that has widened to 54 meters (177 feet) by 83 meters opened near the mine, swallowing up summer homes. Uralkali sees a high risk the mine will be completely flooded, forcing it to abandon a site contributing almost 18 percent of its capacity. 

“We expect the accident to have an insignificant impact on our 2014 full-year output target,” Osipov said today. 

Next year may be different. If the mine is lost, output will be 10 million tons, he told a conference call. Uralkali may also need to write down as much as $1 billion, mostly on lost reserves, Chief Financial Officer Anton Vishanenko said. 

Delay Cancellation 

Uralkali may respond to such a loss by accelerating startups of new mines and shipping some ore from its Solikamsk-3 site to be processed at the plant servicing the flooded mine, according to a company presentation. 

The company also delayed the planned cancellation of a 12.5 percent treasury stake following a merger with its Uralkali Technology unit, which holds the shares. 

Completion of the transaction would cut net assets by 82 billion rubles ($1.3 billion) and, following the slump in the Russian currency, affect the company’s net currency and net income under Russian accounting standards, Vishanenko said. That would affect Uralkali’s ability to pay dividends, he said. 

The company will decide on the cancellation after a closer assessment of the volatile economic environment, Uralkali said. 

The demand for potash in 2015 is seen falling to 57 million to 59 million tons from as high as 60 million tons this year, it said. Softer demand in markets like the U.S. may be countered by stronger purchasing from India and China, the company said. 

Uralkali expects to sign a new contract with China early in 2015, said Oleg Petrov, director of sales and marketing. 

A deal could have been struck in 2014 but for complications related to volumes supplied to China by Belarus, Uralkali’s former partner, in the second half of the year, he said. 

Uralkali expects Chinese demand for potash to expand next year even though the country may produce as much as 6.5 million tons of potash domestically, Petrov said. Belarus is now able to sell to the Americas because sanctions against the country were dropped, which also affects the potash markets, he said. 

To contact the reporter on this story: Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net

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DuPont's Spin-Off One Step Closer As Company Transforms Towards Possible Acquisitions

DuPont's Spin-Off One Step Closer As Company Transforms Towards Possible Acquisitions | Grain du Coteau : News ( corn maize ethanol DDG soybean soymeal wheat livestock beef pigs canadian dollar) | Scoop.it
Summary
  • The company’s spin-off of their titanium dioxide, fluoroproducts and chemical solutions business remains on track for a mid-2015 spin-off.
  • The company’s transformation will allow them to focus on agriculture, nutrition, industrial biosciences, and advanced materials and save $1 billion.
  • The company’s spin off of their performance chemicals division will further their gradual transformation to high-growth, less cyclical businesses.
  • The company’s transformation and cost savings will allow them to pursue strategic acquisitions, such as FMC Corporation.
  • We did anticipate the timing of the spin-off as the company had indicated such timing well in advance.

In December 2014, DuPont (NYSE:DDannounced that the new public company created following completion of the pending separation of their performance chemicals division would be named The Chemours Company. The Chemours Company will be a separate publicly-traded leader in titanium dioxide, fluoroproducts and chemical solutions. DD indicated further that, in connection with their transformation, the company will record a pre-tax charge to earnings of about $315 million in the fourth-quarter 2014 for employee-separation costs, asset-related charges and contract-termination costs. The separation of Chemours from DuPont remains on track to be completed by mid-2015. DD expects their transformation initiative contribute at least $1 billion in savings and the company will continue to identify additional areas of productivity across the organization. We believe that as DD approaches and moves past their impending spin-off, strategic acquisitions will become more of a priority for the company.

In our previous article, we noted that DD is spinning off such lower growth commodity business so that they can focus on higher growth businesses such as agriculture and nutritional products. We elaborated that the company's performance chemicals division tends to be volatile and is less likely to benefit from the kind of research DD is focusing on. We pointed out that FMC Corporation (NYSE:FMC) is a company also transforming to a company focusing on their fast-growing agricultural solutions and health and nutrition divisions while also retaining their lithium business as a separate operating division. We continued noting that many of FMC's businesses are exposed to larger favorable secular growth trends in agriculture, lithium in electronic vehicles, and an aging population that favors their health and nutrition products. Specifically, the company's agricultural division, which makes pesticides and crop-protection chemicals, is leveraged to long-term trends, such as the need to feed a growing population and increase protein consumption by an expanding middle class. The company's lithium division also benefits given that about a third of such business is lithium used for energy storage. We concluded that, given FMC's ongoing transformation, the company's slumping share price, the adverse market conditions the company currently faces and the complimentary business profile the company has when aligned with DD's business profile, FMC is an ideal acquisition target for DD as each company's near term transformational actions come to a close.

DD's expansion further into agricultural products, their divestment of lower-margin businesses, and with the majority of the company's revenues coming from overseas, DD is positioned to benefit from positive secular trends in demand for agricultural products and greater global economic growth. The company's free cash flows will likely enable funding internal growth, dividend increases, share buybacks and potential acquisitions such as FMC. DD's current price to earnings ratio is about 21.5 and the shares yield 2.6 percent. The company's forward price to earnings ratio is 15.80 based on 2015 earnings estimates of $4.51, as the company has seen recent downward earnings estimate revisions. We believe that potential investors should initiate a position in DD when the shares pull back 7.5 to 12.5 percent for a long-term hold (a forward price to earnings ratio in the range of 14 to 15). We believe that an acquisition of FMC will benefit DD shareholders over the long term, and, of course, FMC shareholders would benefit nearer term.

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CN overshoots 2013-14 grain handling revenue cap

CN overshoots 2013-14 grain handling revenue cap | Grain du Coteau : News ( corn maize ethanol DDG soybean soymeal wheat livestock beef pigs canadian dollar) | Scoop.it

The Western Grains Research Foundation will get a $4.98 million gift this season from Canadian National Railway, but not out of holiday spirit per se.

The Canadian Transportation Agency on Thursday ruled CN, during the 2013-14 crop year, exceeded its maximum allowable revenue from Prairie grain handling by $4,981,915, above its previously set “entitlement” of $667,128,937.

CN, the CTA said, now has 30 days in which to pay the overage to the WGRF, plus $249,096 as a five per cent penalty.

Montreal-based CN, in a separate statement Thursday, said it’s now “reviewing the agency’s calculations.”

Canadian Pacific Railway (CP), whose annual Prairie grain revenue is also capped under federal regulation, came in at $623,620,236 in 2013-14. That’s $1,653,714 below its “entitlement” of $625,273,950, the agency said.

In 2013-14, the agency said, Canada’s railways moved 38,461,953 tonnes of western grain, a total grain handle 18.8 per cent higher what they moved in the previous crop year.

The average length of haul in 2013-14 was 945 miles — one mile (0.1 per cent) farther than in 2012-13, the CTA said.

Federal transportation law requires the CTA to determine each railway’s maximum revenue entitlement each year and whether it’s exceeded that entitlement has been exceeded.

The caps on CN and CP apply to the movement of grain from Prairie elevators or from U.S. origins to terminals at Vancouver, Prince Rupert, B.C. and Thunder Bay, Ont. They also apply to CN’s and CP’s movements of grain bound for Eastern Canada or for export, up to either Thunder Bay or the CN station about 250 km north of the city at Armstrong, Ont.

Entitlements are calculated by way of a CTA formula taking in elements such as the volume‑related composite price index (VRCPI), which the CTA calculates before April 30 each year based on forecasted price changes for railways’ labour, fuel, material and capital purchases.

The index, along with the tonnage of grain hauled and the average length of haul during the crop year, is used to work out the railways’ yearly entitlements.

Government regulations name the WGRF, a checkoff-financed, farmer-directed Prairie grain research foundation, as the recipient of any overages.

CP was $177,961 over its cap at the end of 2012-13, while CN came in $6.35 million under its entitlement. — AGCanada.com Network, with files from Allan Dawson, Manitoba Co-operator

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December 18 Mid-Day Grains Commentary: Alexandra Lively - YouTube

December 18 Mid-Day Grains Commentary: Alexandra Lively
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PIG number 5422 saunters into the pen, circles its few square metres and mounts a plastic stand. The farmer cleans the animal’s underside, feels around and draws out what appears to be a thin pink tube around 30cm long. He begins to massage. Pigs elsewhere snort, grunt or squeal, but the alpha pig is unmoved. Soon he has filled a thermal cup with more than 60 billion sperm. Around 150 pigs will owe their short, brutish lives to this emission.

A malty smell hangs in the air at the Fuxin Breeding Farm in Jiangxi province in central China, 10 hectares of low concrete barns and fields beside a small reservoir, which is home to around 2,000 pigs. The business was started four years ago by 31-year-old Ouyang Kuanxue. Mr Ouyang’s friends say he was destined to be a pig farmer—he was born in the Chinese zodiacal year of the pig—but his own explanation is more prosaic: when he came back to Pingxiang, his hometown, in 2003 after studying management at university in Beijing, he could not think what else to do. His grandfather was a coalminer who kept a few pigs. His father already had 100. He decided to expand.

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Now the whole family is involved: together they have three farms with a total of around 5,000 swine. Mr Ouyang’s younger brother is in charge of production; his sister-in-law runs the office. The past year has been hard for them and other pig farmers, Mr Ouyang says, because pork prices have been low and feed expensive. But this lean year followed many fat ones. Mr Ouyang drives a Volkswagen SUV; his wife has a new Audi, wears a Cartier bracelet and runs two nail bars; they own an apartment in a new block in the local town. Mr Ouyang has a panoply of pig-related news feeds on his phone. Still, when he goes out for dinner with friends, he tends to avoid pork.

A brief history of Chinese pork

The family’s good fortune is emblematic of China’s flying pig market over the past 35 years. Since the late 1970s, when the government liberalised agriculture, pork consumption has increased nearly sevenfold in China. It now produces and consumes almost 500m swine a year, half of all the pigs in the world. The tale of Chinese pigs is thus a parable of the country’s breakneck economic rise. But it is more than symbolic: China’s lust for pork has serious consequences for the country’s economy and environment—and for the world.

Pigs have been at the centre of Chinese culture, cuisine and family life for thousands of years. Pork is the country’s essential meat. In Mandarin the word for “meat” and “pork” are the same. The character for “family” is a pig under a roof. The pig is one of the 12 signs of the Chinese zodiac: those born in that year are said to be diligent, sympathetic and generous. Pigs signify prosperity, fertility and virility. Poems, stories and songs celebrate them. Miniature clay pigs have been found in graves from the Han Dynasty (206BC-220AD). Historians think people in southern China were the first in the world to domesticate wild boars, 10,000 years ago.

For centuries sacrificial pigs—and the eating of pork—featured prominently in all forms of commemoration and festivity. At the autumnal Double Ninth Festival (on the ninth day of the ninth lunar month), male elders gathered at their ancestors’ tombs and slaughtered a pig as a symbol of that forebear’s ongoing provision for his descendants. When an estate was in financial trouble, pigs were the last expense to go, says James Watson, an anthropologist at Harvard University, because if the autumn rites were neglected, the ancestor would die a second, terrible death, a final expiration of his spirit.


Every household needs one

Almost every rural home once had a pig, not least because, well into the Communist era, the animals were part of the household recycling system. They consumed otherwise inedible waste and were valued for their manure (even Mao Zedong was a fan of the “fertiliser factory on four legs”). And their meat has always been central to Chinese cooking: it has “the perfect flavour for Chinese cuisine,” reckons Fuchsia Dunlop, a food writer and cook. Nothing is wasted. Pigs’ faces are served whole as a gourmet treat; their brains, says Ms Dunlop, are “soft as custard, and dangerously rich”. The appeal is medicinal as well as culinary: the innards are ascribed therapeutic benefits.

From trotter to tail, the Chinese eat the whole hog. Still, for much of China’s history, pigs were a luxury consumed only rarely, sometimes extremely rarely. That has changed dramatically.

Everything but the squeal

Lei Xiaoping, the manager of Mr Ouyang’s farm, eats pork for every lunch and dinner these days—swine from the farm that have died in a fight or are too small to sell. He is not squeamish about guzzling pigs he has reared himself. After all, as a child Mr Lei (now aged 51) ate pork only three times a year.

Even before the revolution of 1949, most people in China got only 3% of their annual calorific intake from meat. Pork soon became scarcer still. Tens of millions died in the famine that followed Mao’s Great Leap Forward in the late 1950s and early 1960s. For decades after that peasants would rub pork fat around their woks to give their vegetables a meaty hint, says Ms Dunlop, before putting the fat away to use on another occasion. As recently as the early 1990s many Chinese mostly subsisted on a diet of vegetables bought at street markets.

For Mr Lei, as for many of his countrymen, the years of deprivation are well within living memory. Not surprising, then, that eating meat has become a symbol of triumph over hardship, as much a part of China’s transformation as the towering skyscrapers and glistening cities. Grandparents who once went hungry stuff their grandchildren with the treats they lacked—and top of the list is pork. The average Chinese now eats 39kg of pork a year (roughly a third of a pig), more even than Americans (who typically prefer beef), and five times more per person than they ate in 1979.


Four legs good

The most obvious impact has been on the pigs themselves. Until the 1980s farms as large as Mr Ouyang’s were unknown: 95% of Chinese pigs came from smallholdings with fewer than five animals. Today just 20% come from these backyard farms, says Mindi Schneider of the International Institute of Social Studies in The Hague. Some industrial facilities, often owned by the state or by multinationals, produce as many as 100,000 swine a year. These are born and live for ever on slatted metal beds; most never see direct sunlight; very few ever get to breed. The pigs themselves have changed physically, too. Three foreign breeds now account for 95% of them; to preserve its own kinds, China has a national gene bank (basically a giant freezer of pig semen) and a network of indigenous-pig menageries. Nevertheless, scores of ancient variants may soon die out.

But China’s pigs are far from the only victims of their popularity. Demand for them worries the Communist Party, underpins what will soon be the world’s biggest economy and threatens Amazon rainforests.

This little piggy stayed home

The Chinese eat so much pork that when its price goes up, the cost of other things rises, too. For the Communist Party, therefore, keeping affordable meat on the table is vital, not least for the stability of the economy. In 2007, for example, an estimated 45m pigs died in China from “blue ear pig disease”. Pork prices rocketed; the annual rate of increase of the consumer price index (sometimes known as the “consumer pig index” because of the creature’s prominent role in it) hit a ten-year high. Panic buying ensued. There were reports of customers being injured in a crush on a supermarket escalator when rushing to buy cheap chilled pork in Guangzhou, and a general pork-buying frenzy across China. Imports doubled.

In response the party established the world’s first pork reserve, some of it in frozen form and some the live, snorting variety. This aims to keep pork affordable and reasonably priced: when pigs become too expensive, the government releases some of its stock onto the market; if they become too cheap, the reserve buys more porkers to keep farmers in profit. Other pro-pork policies include grants, tax incentives, cheap loans for farms and free animal immunisation—all intended to boost intensive pig farming and to keep plates loaded high with Chinese pork. According to Chatham House, a London-based think-tank, the Chinese government subsidised pork production by $22 billion in 2012. That is roughly $47 per pig.

Yet even the Communist Party can no longer control every aspect of this vast industry. That is partly because the appetite for pork is now so great—and growing so fast—that sating it depends on places far beyond China’s borders. Chinese pigs, in turn, are reshaping the environments of faraway countries.

The Communist Party prizes self-sufficiency in food. Most of the pigs China eats are indeed home-grown. But each kilogram of pork requires 6kg of feed, usually processed soy or corn. Given the scarcity of water and land in China, it cannot feed its pigs as well as its people. The upshot is that Chinese swine, which previously ate household scraps, increasingly rely on imported feed.

Ms Schneider reckons that more than half of the world’s feed crops will soon be eaten by Chinese pigs. Already in 2010 China’s soy imports accounted for more than 50% of the total global soy market. From a low base, grain imports are rising fast as well: the US Grains Council, a trade body, predicts that by 2022 China will need to import 19m-32m tonnes of corn. That equates to between a fifth and a third of the world’s entire trade in corn today.

As demand for pork rises, China’s porcine empire is sure to expand

As a result, land use is changing drastically on the other side of the world. In Brazil, more than 25m hectares of land—parts of which were once Amazon rainforest—are being used to cultivate soy (Chinese companies have not signed up to the “soy roundtable”, a voluntary association, the members of which agree not to buy soyabeans from newly deforested land). Entire species of plants and trees are being sacrificed to fatten China’s pigs. Argentina has chopped down thousands of hectares of forest and shifted its traditional cattle-breeding to remote areas to make way for soyabeans. Since 1990 the Argentine acreage given over to that crop has quadrupled: the country exports almost all of its whole soyabeans—around 8m tonnes—to China. In some areas farmers harvest two or three crops a year, using herbicides that have been linked to birth defects and increased cancer rates.

All these imports have made China ever-more exposed to global commodity prices. China has responded by buying land in other countries, some of which is used to grow feed crops or to raise pigs that are sold onto the domestic market at preferential prices. China itself is secretive about these purchases, but the International Institute for Sustainable Development, a Canadian think-tank, calculates that it has bought 5m hectares in developing countries; others think the total is higher. When Shuanghui, China’s largest pork producer, bought Smithfield Foods, an American firm, in 2013, it acquired huge stretches of Missouri and Texas. As demand for pork rises, China’s porcine empire is sure to expand.

Pigging out

Feeding the pigs is not farmers’ only concern. Their greatest fear is disease: growth slows when a pig gets sick, and, even more worryingly, swine on modern Chinese farms tend to be genetically similar (many are half-siblings), so when one gets ill, much of the herd may succumb. Farmers routinely add small doses of antibiotics to their feed, and this, too, has daunting knock-on effects. In America and Europe such practices are associated with the emergence of “superbugs”, bacteria in animals and humans that are resistant to most antibiotics. In 2009 pigs exported from China to Hong Kong were found to harbour one such bug. The mainland government acknowledged the problem, yet the use of antibiotics, hormones and growth-promoters is barely regulated.

These drugs pass into the wider food chain partly via sizzling plates of pork, and partly through the 5kg of manure that the average pig produces a day. This once-desirable substance is now a critical problem for China. Though large swathes of land have been set aside to contain it, they are poorly managed. The billions of tonnes of waste China’s livestock produce each year are one of the biggest sources of water and soil pollution in the country, according to the Ministry of Agriculture. The 16,000 dead pigs that were dumped in the tributaries of the Huangpu river, a source of Shanghai’s tap-water, after a virus outbreak in 2013, were a lurid indicator of a seeping national problem.

Porcine waste also contributes to emissions of methane and nitrous oxide, a greenhouse gas that is 300 times more potent than carbon dioxide. Intensive swine-farming is much more polluting than smallholding. So, as well as depriving Earth of the natural cooling function of the rainforests they displace, Chinese pigs contribute to global warming more directly. Greenhouse-gas emissions from Chinese agriculture increased by 35% between 1994 and 2005. The global expansion of livestock production is one of the primary causes of climate change, says Tony Weis of the University of Western Ontario, Canada, responsible for almost a fifth of emissions produced by human activity.

So although its proliferating pigs are a resonant symbol of China’s prosperity, they are also a menace. A few inChina—a very few—are beginning to question the benefits of eating more and more pork. Meat consumption is beginning to plateau among the very rich; health scares have boosted sales of organic food, though it still accounts for a tiny share of agricultural production. Vegetarianism is growing, but is generally thought eccentric. The ambition of most Chinese continues to be to devour as large a slice of the pork pie as possible. In much of the rich world meat consumption is stable or falling but in the Middle Kingdom it soars unrestrained. Forget the zodiac: in today’s China, every year is the year of the pig.

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Canada’s West Coast ports offer little relief from U.S. delays

Vancouver | Reuters — Gridlock at U.S. West Coast ports that has forced McDonald’s to ration French fries at its Japanese restaurants and interrupted supplies to retailers such as Lululemon is unlikely to be alleviated by routing cargoes through Canada, whose Pacific ports face their own problems.

Capacity is already limited at Canada’s largest port, Port Metro Vancouver, which is also staring at the possibility of another crippling strike by container truck drivers.

Tensions are mounting as talks to resolve longstanding complaints at the port drag on between government, management, and union and nonunion drivers, and there are rumblings of a possible work action, which would spur further shipping delays along North America’s West Coast, hampering trade flows to Asia.

“Things are definitely starting to heat up,” said Gavin McGarrigle of Unifor, which represents many unionized container truck drivers in Vancouver. “If these issues aren’t resolved there’s going to be a major problem.”

Adding to the labour concerns, British Columbia ports are operating near ideal capacity, leaving little room to take diverted shipments from U.S. ports.

While expansions are in the works at both B.C.’s Port Metro Vancouver and Prince Rupert, to meet a projected doubling of container traffic over the next 10-15 years, most of that new capacity is still years away, and even when complete would only add up to a fraction of West Coast U.S. capacity.

Vancouver and Prince Rupert together handle just 15 per cent of total West Coast container shipments, importing consumer goods and other products for both Canadian and U.S. markets, and exporting Canadian commodities like lumber, wood pulp and grains.

“We do roughly three million containers on the West Coast of Canada per year. On the West Coast of the U.S. they do about 20 million,” said Mark Gordienko, president of ILWU Canada, the union representing dockworkers in Western Canada.

Gordienko said Canadian dockworkers are also loath to undermine U.S. colleagues by handling diverted ships.

Cargo shipments to ports on the U.S. West Coast have been backed up for the last three months, with the congestion most pronounced at the twin ports of Los Angeles and Long Beach, the nation’s two busiest cargo hubs.

The congestion has already delayed shipments for such retailers as Lululemon Athletica and Ann Inc., along with the export of fruit and food products to Asian markets, such as potatoes for McDonald’s French fries in Japan.

The fast-food chain’s Japanese arm said Monday it would only offer small-sized fries at its 3,100 stores across the country.

Record traffic

Container traffic at Prince Rupert’s Fairview terminal is up 12 per cent so far this year, with volumes at Vancouver’s four container terminals up three per cent despite a month-long strike by container truck drivers in the first quarter.

With demand high, three Vancouver terminals added an extra shift at midyear. The terminal operators say some of that new capacity is still available, with volumes currently at roughly 65 to 75 per cent of maximum capacity.

But those numbers mask the severity of the issue, as operators generally aim to stay within 85 per cent of their maximum capacity to keep shipments moving smoothly.

“When they go above 85 per cent things start to slow down,” said John Parker-Jervis, spokesman for Port Metro Vancouver. “It slows down the supply chain quite a bit and you get congestion on the dock.”

The port wants to avoid a repeat of the backlog that formed earlier this year, when truck drivers walked off the job for a month in protest over long wait times and low rates.

The drivers returned to work after hammering out a joint action plan with government and the Port Authority. They say they are happy about progress made over the last nine months, but are frustrated over planned changes to truck-age standards and unresolved differences on pay rates.

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China Buys U.S. Grain Amid Signs Import Ban on GMO Corn to End

China bought as much as 900,000 metric tons of a corn-based grain from the U.S. after the government was said to have approved lifting a ban on a genetically-modified variety of the crop.

China signed contracts for as many as 15 cargoes of dried distillers grain for shipment between December and March, according to a report today by the China National Grain and Oils Information Center. China is the largest buyer of the by-product known as DDGS, which is produced when corn is stripped of starch for ethanol production.

Purchases fell to as low as 100,000 tons in September and October after some cargoes were found to contain the unapproved MIR 162 strain of corn, according to Sylvia Shi, an analyst at Shanghai JC Intelligence Co. Imports were as high as 600,000 tons in June, she said.

The government has told traders and officials that the Ministry of Agriculture has approved imports of the MIR 162, a genetically modified corn variety that’s commonly grown in the U.S., two people familiar with the matter said yesterday. They asked not to be identified because the information hasn’t been made public.

“We are all watching whether these newly-bought DDGS cargoes can discharge in Chinese ports smoothly,” said Xia Rui, an analyst at Shanghai Flow International Trade Co. “More deals will follow.”

China, the biggest market for U.S. food and agricultural products, is seen to be relaxing curbs on corn imports as the government pushes forward with a campaign to gain public acceptance of genetically modified organisms and seeks to expand food supplies. 

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Crop price weakness blamed for sliding farmland prices

The drop in land prices in Iowa, the top US corn and soybean growing state, identified by university research may be more widespread, another survey has revealed, showing drops in other major agricultural states too.

Creighton University said that a farmland price index it updates monthly had shown value falls for a 13th successive month, coming in with a figure of 38.6 for December.

While above November's 30.0 reading, it remained below the 50.0 level which indicates a flat market.

The reading reflected "much weaker crop prices", which "continue to take the air out of the bubble in agricultural land prices", said Ernie Goss, the Creighton economics professor in charge of the survey, which showed prices falling in a range of states, including Iowa, Kansas and Nebraska.

However, a few states, notably Missouri and North Dakota, had escaped the downward trend, and were showing accelerating price growth, the data showed.

'We have seen a peak'

The Creighton data followed hours after Iowa State University estimated average farm prices in the state falling by 8.9% to $7,943 an acre this year – the biggest decline since 1986.

Iowa State University also attributed the drop in state values, only the fourth annual decline since the 1982-86 US land price crash, to lower crop prices.

"Commodity prices and farm income are settling back to more expected levels," said Michael Duffy, who was in charge of the survey.

"I think we have seen a peak for the time being."

'Cash flow problem'

Lower crop prices will cause a "cash flow problem" for "all farmers for the next 18 months or so", Mr Duffy added, a factor which could prove serious for some.

"Pressure could come if farmers incurred debt in anticipation that commodity prices would continue," he said

"If farmers still have equity in their land they should be able to refinance. But farmers who got over-extended will be in trouble."

Nonetheless, he urged against over-pessimism over land prices saying that while "many people think [the Iowa data] indicates the beginning of another farm crisis, land values are still considerably higher than they were just a few years ago".

Machinery downturn

The Creighton survey also showed farm equipment in major US agricultural states continuing to decline, for a 17th successive month, with a sector index at 23.7, up from the reading of 18.6 in November, but below the 50.0 neutral level.

Nearly two-thirds of bankers polled for the survey forecast that farmers would delay machinery purchases "even more due to predicted revenue decline".

The data follow, another, profits warning last week from US-based Titan Machinery, a dealer in Case and New Holland equipment, and a series of reports from agricultural machinery makers showing declining profits.

Deere & Co, the owner of the John Deere marque, has forecast a 40% slump in earnings

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Wheat Halts Rally as Russia Export Drop Made Up by Europe Supply

Wheat declined from a seven-month high on speculation that U.S. shippers probably won’t benefit as exports slow from Russia, the world’s fourth-biggest supplier.

A weakening ruble is boosting food prices prices in Russia and prompting the nation to slow grain shipments. U.S. wheat is more expensive than competing supplies in France and the Black Sea region, according to the London-based International Grains Council. The Bloomberg Dollar Spot Index, a 10-currency gauge, rose 10 percent this year, cutting the appeal of American exports.

“European exporters have the supply and the shipping advantage to make up for shortfalls from the defacto Russian wheat embargo,” Richard Feltes, the vice president of research at Chicago-based R.J. O’Brien & Associates, said in a telephone interview. “Exporters from Argentina, Ukraine, Uzbekistan and Canada will also compete for wheat-market share.”

Wheat futures for March delivery fell 2.9 percent to $6.3625 a bushel at 10:56 a.m. on the Chicago Board of Trade, heading for first drop in seven sessions. Prices touched $6.77 yesterday, the highest for a most-active contract since May 20.

The grain has rebounded from a four-year low of $4.6625 reached in September.

Russia’s biggest group of grain exporters said it stopped purchases for shipments abroad and called for other shippers to back its decision for a halt until the domestic market stabilizes, according to a statement today. The ruble weakened to an all-time low against the dollar this week.

“With the recent price rally in wheat, other countries should be able to fill the world’s demand,” Paul Georgy, the president of Allendale Inc., wrote in an e-mailed note today.

Global production will reach an all-time high of 722.18 million metric tons this season, the U.S. Department of Agriculture estimates.

Corn futures for March delivery fell 0.7 percent to $4.0825 a bushel in Chicago. Soybean futures for March delivery slid 0.8 percent to $10.35 a bushel. 

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Striking port workers in Argentine grains hub halt shipping

Buenos Aires | Reuters — Port workers in part of the Argentine grain hub of Rosario went on strike on Thursday to demand a year-end bonus, paralyzing ship movements, said the head of the powerful CGT union’s local branch.

Wage increases are lagging behind Argentina’s soaring inflation rate, which some private economists estimate is around 40 per cent, far higher than official government estimates.

“We’ve started an indefinite strike,”said Edgardo Quiroga, secretary general of CGT’s San Lorenzo branch. “Dock workers are not tying up or releasing vessels. The ports of Timbues, San Martin and San Lorenzo are all at a standstill.”

The three ports lie on the northern limits of Rosario, a city in northeastern Argentina.

Argentina is a leading global exporter of soybeans and corn. Prolonged strikes in the grain sector can have global market implications and hurt public finances, which are bolstered by export taxes on soy and related products.

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Crash in Oil Prices Cuts Corn Price Estimates for 2015/16

Crash in Oil Prices Cuts Corn Price Estimates for 2015/16 | Grain du Coteau : News ( corn maize ethanol DDG soybean soymeal wheat livestock beef pigs canadian dollar) | Scoop.it

Projected U.S. farm corn prices in 2015/16 are $3.79 per bushel, a dip of 10 cents compared to last month, according to December forecasts released this week by the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri.

Looking forward, prices are expected to remain below the cost of production, with FAPRI forecasting a price of $3.98 per bushel by 2018/19. 

While those numbers aren't optimal, those prices are higher than the $3.50 per bushel forecast for 2014/15. The projected decline in corn production is contributing to an increase in prices, but that price growth is also being moderated by the decline in oil prices, according to Pat Westhoff, FAPRI director.        

The good news? Lower oil prices should lower fuel costs to farmers as well as reduce corn prices. Still, the oil price crash overall will probably improve net farm income more than it will lower crop prices.

Ethanol's Impact

“The biofuel side of the story is much more complicated and uncertain but potentially more important,” Westhoff says. With lower gasoline prices, people will probably drive more, which should push up the use of gasoline and ethanol in 10% blends.

But there is a good chance this will be outweighed by two opposing factors, according to Westhoff.

1. Lower oil prices will make ethanol more expensive relative to gasoline, and that probably reduces the already small amount of ethanol used in E-15 and E-85 fuel.

2. With ethanol more expensive relative to gasoline, the corn-based fuel probably makes it less attractive to other countries, so U.S. ethanol exports that are now the largest in years may well decline. Ethanol exports would be less than they would have been with higher oil prices, he explains.

“These negative effects on ethanol demand are likely to outweigh the positive, so the net effect is less demand for ethanol, which translates into lower corn prices,” Westhoff says.

Trends in Soybean, Wheat

Looking at other crops, FAPRI projects 2014/15 soybean prices of $10 per bushel, unchanged from last month, but that drops to $8.78 for the 2015/16 marketing year. Prices are likely to remain below $10 per bushel through 2018/19, FAPRI says. “Continued high U.S. soybean acreage in 2015 and large global supplies weigh on projected soybean prices,” Westhoff says.

Wheat prices have been higher than anticipated so far in the current marketing year, with FAPRI’s 2014/15 projection calling for prices of $6.01 per bushel, up 11 cents from the November estimate. But for 2015/16, Westhoff says large global grain supplies reduce wheat prices almost $1 per bushel at $5.05. Prices rise in subsequent years, but remain below $5.50 through 2017/18.

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The Debate About GMO Safety Is Over, Thanks To A New Trillion-Meal Study

Visit almost any anti-GMO website and you will find alarming headlines about the alleged dangers of GMO foods. They kill pigs, cows and sheep on farms and in lab studies! Humans are next!

MonsantoMON +1.01%’s GMO Feed Creates Horrific Physical Ailments in Animals,” screams a typical article, in AlterNet, a popular anti-GMO site. It touts “new research” but as is typical of such articles and such sites, it neither quotes a study nor links to any independent research.

Although there have been more than 2,000 studiesdocumenting that biotechnology does not pose an unusual threat to human health and genetically modified foods are as safe or safer than conventional or organic foods, questions remain in the minds of many consumers.

What does the research say?

Animal feeding studies are the basis for evaluating the safety of GMO crops. One-off studies of lab animals have occasionally shown some problems. Gilles-Eric Séralini, in his retracted GM corn study (later republished in a non-peer-reviewed anti-GMO journal), claimed rats fed genetically engineered corn developed grotesque cancerous tumors—the kind no farmer would miss among his animals if this cause-effect was genuinely in place.

Anti-GMO crusader Jeffrey Smith, on his personal website, the Institute for Responsible Technology, lists more than a dozen cases in which he claims animals fed GMOs exhibited abnormal conditions, including cancer and early death. He also references his own self-published book, and anecdotal evidence that pigs fed GM feed turned sterile or had false pregnancies and sheep that grazed on BT cotton plants often died.

“Nearly every independent animal feeding safety study on GM foods shows adverse or unexplained effects,” he writes. “But we were not supposed to know about these problems…the biotech industry works overtime to try to hide them.”

The American Academy of Environmental Medicine—an alternative medicine group that rejects GMOs and believes that vaccines are dangerous—claims, “Several animal studies indicate serious health risks associated with GM food,” including infertility, immune problems, accelerated aging, faulty insulin regulation, and changes in major organs and the gastrointestinal system.

Is there any basis to these allegations? After all, globally, food-producing animals consume 70% to 90% of genetically engineered crop biomass, mostly corn and soybean. In the United States alone, animal agriculture produces over 9 billion food-producing animals annually, and more than 95% of these animals consume feed containing GE ingredients. The numbers are similar in large GMO producing countries with a large agricultural sector, such as Brazil and Argentina.

Estimates of the numbers of meals consumed by feed animals since the introduction of GM crops 18 years ago would number well into the trillions. By common sense alone, if GE feed were causing unusual problems among livestock, farmers would have noticed. Dead and sick animals would literally litter farms around the world. Yet there are no anecdotal reports of such mass health problems.

But we don’t need to depend on anecdotes to address these concerns. Writing in the Journal of Animal Science, in the most comprehensive study of GMOs and food ever conducted, University of California-Davis Department of Animal Science geneticist Alison Van Eenennaam and research assistant Amy E. Young reviewed 29 years of livestock productivity and health data from both before and after the introduction of genetically engineered animal feed. [NOTE: article is behind a paywall until October 1.]

The field data represented more than 100 billion animals covering a period before 1996 when animal feed was 100% non-GMO, and after its introduction when it jumped to 90% and more. The documentation included the records of animals examined pre and post mortem, as ill cattle cannot be approved for meat.

What did they find? That GM feed is safe and nutritionally equivalent to non-GMO feed. There was no indication of any unusual trends in the health of animals since 1996 when GMO crops were first harvested. Considering the size of the dataset, it can reasonably be said that the debate over the impact of GE feed on animal health is closed: there is zero extraordinary impact.

The Van Eenennaam study corresponds to other reviews of animal feeding data, some multi-generational and as long two years. 

Several recent comprehensive reviews from various authors summarize the results of food-producing animal feeding studies with the current generation of GE crops (Deb et al., 2013; Flachowsky, 2013; Flachowsky et al., 2012; Tufarelli and Laudadio, 2013; Van Eenennaam, 2013). Studies have been conducted with a variety of food-producing animals including sheep, goats, pigs, chickens, quail, cattle, water buffalo, rabbits and fish fed different GE crop varieties. The results have consistently revealed that the performance and health of GE-fed animals were comparable with those fed near isogenic non-GE lines and commercial varieties.

Here is a comprehensive list of animal feeding studies. Many of these studies are independent. The list included systematic reviews, all of which conclude that GMO feed is safe.

As Dr. Steven Novella notes on his blog Neurologica:

[T]his data is observational, meaning the authors are looking at data collected out there in the world and not part of any controlled prospective experiment. Observational data is always subject to unanticipated confounding factors. However, robust observational data is still highly useful, and has the potential to detect any clear signals.

The findings also comport with long-term GMO feeding laboratory studies. The GENERA database, found at Biology Fortified online, lists more than three-dozen examples of multi-year studies. A recent review of 24 of these studies by Snell et. al found: “Results…do not suggest any health hazards and, in general, there were no statistically significant differences within parameters observed.” There have been a few outlier studies, such as the retracted GMO corn research. But if Séralini’s data were real and 80% of food was poison, animals and people would be dropping like flies.

The authors also found no evidence to suggest any health affect on humans who eat those animals. No study has revealed any differences in the nutritional profile of animal products derived from GE-fed animals. Because DNA and protein are normal components of the diet that are digested, there are no detectable or reliably quantifiable traces of GE components in milk, meat, and eggs following consumption of GE feed.


In other words, the debate over the risks associated with GMO food is effectively over. As Novella writes:

We now have a large set of data, both experimental and observational, showing that genetically modified feed is safe and nutritionally equivalent to non-GMO feed. There does not appear to be any health risk to the animals, and it is even less likely that there could be any health effect on humans who eat those animals.

In order to maintain the position that GMOs are not adequately tested, or that they are harmful or risky, you have to either highly selectively cherry pick a few outliers of low scientific quality, or you have to simply deny the science.

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Potash output hopes send Uralkali shares soaring

Potash output hopes send Uralkali shares soaring | Grain du Coteau : News ( corn maize ethanol DDG soybean soymeal wheat livestock beef pigs canadian dollar) | Scoop.it

Shares in Uralkali soared despite the group noting a potential $1bn hit from a mine accident, as the world's potash producer lifted its forecast for world potash volumes, and sounded a, relatively, upbeat note on its own output.

Shares in the Russia-based group soared 14.5% in Moscow to 141.50 roubles, their best performance since May 2009, and enough, even at the current devalued rouble rates, to add the equivalent of $850m to its stockmarket value.

The jump was helped in part by a recovery in Moscow shares, which gained more than 4% on average, after a three-hour conference by President Vladimir Putin was seen as offering investors some reassurance on the state of Russia's economy.

However, Uralkali's rally, which supported more modest rises in shares in Western rivals such as Canada's Agrium and Chile's SQM too, gained extra momentum from upbeat talk on its own performance, and that of the world market.

'Spectacular performances'

The group lifted its estimate for world potash shipments this year to a record 59m-60m tonnes, from a previous forecast of 56m-58m tonnes, citing "spectacular" performances by markets including Brazil, South East Asia and the US.

While volumes may retreat to 57m-59m tonnes next year, that would still stand to be the second largest on record.

Uralkali estimated its own output, and sales, this year at 12m tonnes, at the top end of previous output guidance of 11.5m-12m tonnes.

And while it forecast its production dropping next year to 10.2m tonnes, thanks to the accident which has closed the Solikamsk-2 mine in Russia's Perm region, that is above the expectations of some analysts given estimates of up to 2.3m tonnes for output from the lost facility.

Mine accident costs

Nonetheless, Anton Vishanenko, the Urakali finance director, acknowledged the dent to the group's finances from the closure of Solikamsk-2, which the group is as yet unsure will be lost temporarily or permanently.

"If we talk about pessimistic scenario, total writedown might each up to $1bn," Mr Vishanenko said.

 He also flagged the headwind from Russia's ongoing financial turmoil, even though Uralkali produces, in potash, an export product which is denominated in dollars, providing some hedge from a tumbling rouble.

"The key question, what will happen to inflation," he said, noting that the group had budgeted for a rate of 5% next year, in line with the official forecast, but a figure which many observers say now looks too low.

"Now state-owned banks do not give money less than 20%, 25% per annum in Russian roubles to first-tier borrowers," he said.

"That's why we already see a lot of pressure from our suppliers which are pushing price upwards."

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Cheap Oil Jamming Rails Means Higher U.S. Power Bills

Cheap Oil Jamming Rails Means Higher U.S. Power Bills | Grain du Coteau : News ( corn maize ethanol DDG soybean soymeal wheat livestock beef pigs canadian dollar) | Scoop.it

U.S. electricity costs are poised to reach the highest level since 1999 because railroads are too clogged to deliver enough coal to power plants. 

While the U.S. has the world’s biggest coal reserves, utilities are forecast by the government to end the year with the lowest stockpiles since 2005. With carriers including BNSF Railway jammed with record shipments of oil and grains, Xcel Energy Inc. (XEL)and other power producers say they can’t get the coal they need. 

The rail delays mean utilities haven’t rebuilt inventories that fell to a seven-year low last winter. Power producers filed 10 notices this year warning regulators that stocks were low enough to threaten generation, compared with two filings in 2013. Utilities have been obliged to rely more on natural gas, increasing costs for consumers. 

“There’s plenty of coal,”Jim Thompson, a director of coal for IHS, an Englewood, Colorado-based energy and industrial analytics company, said by phone Dec. 2. “The problem is the coal transportation system.” 

Utilities got as much as 25 million short tons (22.7 million metric tons) less coal than they needed from mines in Wyoming’s Powder River Basin this year, Peabody Energy Corp. (BTU), the biggest U.S. producer of the fuel, said in October. Utilities will burn 868.5 million tons in 2014, generating 39 percent of U.S. electricity. 





Low Inventories 

Power companies are on pace to end the year with 129.2 million tons of inventories, 32 percent less than the record 189.5 million tons reached in 2009, U.S. Energy Information Administration data show. 

Utilities have used natural gas to preserve coal stocks, even though it’s 22 percent more profitable for a power plant in the Midwest to burn coal, data compiled by Bloomberg show. 

Average U.S. power costs will rise 1.8 percent to $12.69 per megawatt hour in 2015, the most expensive in records going back to 1999, the EIA said in a report Dec. 9. 

The shale oil boom has also sent wages for welders and pipefitters in Louisiana above $100 per hour, causing cost overruns for chemical projects. 

The strengthening economy, record shipments from the shale-oil boom and expanding grain crops have overwhelmed the rail network, said Lee Klaskow, an analyst at Bloomberg Intelligence in Princeton, New Jersey

West Texas Intermediate oil has slumped 45 percent this year as U.S. production has risen to the highest in more than three decades. The U.S. benchmark slid $2.36 today to settle at $54.11 a barrel on the New York Mercantile Exchange

Unplugging Bottlenecks 

Average rail speeds plunged 6.4 percent in the past year while dwell times, a measure of how long cars sit in a rail yard, increased 8.7 percent, data compiled by Bloomberg show. 

BNSF, owned by Berkshire Hathaway Inc. (BRK/A), had the biggest increase in commodity carload traffic this year, with a gain of more than 22 percent, Bloomberg Intelligence data show. The company has boosted personnel, added tracks and locomotives and sought to unplug bottlenecks, George Duggan, group vice president for coal business, said at a conference Dec. 9. 

U.S. coal imports increased 37 percent to 12.2 million tons this year, led by purchases from Colombia, EIA data show. 

“The transportation constraints gave utilities a need to diversify supply,” Ted O’Brien, chief executive officer of Doyle Trading Consultants, a Grand Junction, Colorado-based coal analysis company, said by phone Dec. 11. That’s made foreign coal more competitive than U.S.-mined fuel, he said. 

The Tennessee Valley Authority has cut generation this year to preserve coal stocks, Ben Jones, the company’s manager of coal origination, said at a conference in New York this month. 

Winter Stockpiles 

“Our main concern has been -- can we get the coal we’ve bought into our system,” he said. “We started trucking coal to the plants.” 

Xcel Energy’s stockpiles are “significantly low,” Craig Romer, the Minneapolis-based company’s director of fuel supply operations, said by phone Oct. 28. 

“Normally in the fall we try to build up those inventories in anticipation of weather events,” he said. “Right now, we’re just not getting the service to build those winter stockpiles.’ 

Utilities may be forced to navigate low inventories through next year and this ‘‘could create challenges in the summer of 2015,” Alan Haymes, an economist at the Federal Energy Regulatory Commission, said at the agency’s monthly meeting in Washington today. 

Powder River 

Powder River Basin coal prices increased 5 percent to $12.65 a ton in the past year. They would be even higher if utilities had confidence it could be delivered, according to IHS’s Thompson. 

“Some railroads are now saying it will probably be 2016 before we get a full resolution to the problem,” Emily Medine, a principal at Energy Ventures Analysis, an Arlington, Virginia-based energy consultant, said Dec. 9 in New York. “There is pent-up demand. A price spike in PRB could happen depending on the performance of the railroads.”

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Mitas Tires turns to dandelion as rubber source

Mitas Tires turns to dandelion as rubber source | Grain du Coteau : News ( corn maize ethanol DDG soybean soymeal wheat livestock beef pigs canadian dollar) | Scoop.it

I'll admit as a city dweller I'm a 'green grass' kind of guy. Just like no farmer wants to see a weed popping above the canopy of a soybean field, I abhor the bright yellow flowers appearing in my lawn. And I'm pretty tough on them using properly applied herbicide technologies (usually be a custom applicator - okay, a lawn service) to take care of the weed.

I may have to rethink my feelings about dandelions. The folks at Mitas, the Czech-based tire company, which also makes tires in Charles City, Iowa - announced it is planning to test a tire next year that uses rubber extracted from a dandelion. To be specific it is Taraxacum koksaghyz - a Kazakh dandelion. While the name is the same as that troublesome weed that plagues my Minnesota yard, it's definitely only a distant cousin. Yet it may bring some new respect for dandelions too.


The plant was discovered in Kazakhstan back in 1932 according to Wikipedia and is native to that region. It's known for its ability to produce rubber. In fact the term koksaghyz is derived from native Kazakh to be kok - which means plant, and saghyz which means rubber, or gum. Again, I'm relying on Wikipedia here, so there may be some fine-tuning of that information.


However, the plant is a raw-product producer of a form of rubber that may have more uses. Mitas announced it will test a tire that will use material from the flower along with rubber tree latex in a compound for agricultural tires. According to the press release, the goal is to have the first prototype of the dandelion tire during 2015.

Why dandelion? According to a media release announcing the prototype, Andrew Mabin, Mitas' sales and marketing director says: "We are examining different ways to use natural and renewable materials to produce our tires. Our research and development department is actively seeking new ways to improve our manufacturing process which includes researching new raw materials or substitutes."

The company is one of several tire manufacturers exploring the use of Kazakh dandelion for its rubber, he adds.

Mitas is involved with Drive4EU which aims to cultivate the dandelion to "enable the EU to become less dependent on the import of natural rubber…" according to a website dedicated to the program. As a participant, Mitas is currently involved in researching use of the dandelion.

Of course, this time of year talk of turning crops into new uses always brings up a memory that scene in "It's a Wonderful Life" where George Bailey's friend discusses building a plant to turn soybeans into plastic - so-so video link here to spark your memory.

Now it took some time, but U.S. manufacturers are using soy-based oil as part of the process to make plastic and rubber products. Whether you're talking materials in Ford vehicles or rubber in farm tires (Bridgestone is working with soy-based materials for tires)

The ag industry is always looking for ways to enhance markets for products we raise. Ethanol has been a boon for corn (and no, it doesn't raise food prices). Biodiesel will be good for soy oil use (remember the price of soybeans right now is based on meal, and the oil was often an afterthought - that could change). If the tire industry can cultivate a dandelion and manage natural rubber use, that's interesting too.

As we look toward 2015, it appears we'll see a lot of technology put to use in new ways. We're the site to keep up with that, so subscribe to our e-newsletter and check out the site often for the latest in farm technology. And you can join a conversation about technology by visiting our forum at FarmIndustryNews.com/forum.

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Iowa's Farmers Mutual Hail Insurance to Acquire John Deere Crop Insurance

Iowa's Farmers Mutual Hail Insurance to Acquire John Deere Crop Insurance | Grain du Coteau : News ( corn maize ethanol DDG soybean soymeal wheat livestock beef pigs canadian dollar) | Scoop.it

Farmers Mutual Hail Insurance Co. of Iowa (FMH) announced it is acquiring Moline, Ill.-based John Deere Insurance Co. and John Deere Risk Protection Inc.

The action is a result of Deere’s previously announced review of strategic options for the crop insurance business.

Headquartered in West Des Moines, Iowa, FMH has served America’s farmers since 1893. Specializing in the crop insurance industry, the company has been run by the same family for over 120 years. FMH provides comprehensive insurance and risk management products and services for America’s heartland, including private and federal crop insurance, reinsurance products and services, as well as farm and ranch insurance that includes auto, property, and liability coverage.

Deere has been involved in the crop insurance business for nine years, during which John Deere Insurance Co. has become a top-10 provider of crop insurance with national distribution and a product portfolio of both government-backed multi-peril crop insurance (MPCI) coverages, as well as private crop insurance products such as crop hail protection.

The transaction is subject to regulatory review and approval. Closing is expected in the first quarter of the 2015 calendar year.

FMH was advised in this transaction by Conning as strategic advisor and NCP Inc. as financial advisor. Faegre Baker Daniels LLP acted as legal counsel to FMH.

Citi served as exclusive financial advisor to Deere & Co.

Source: Farmers Mutual Hail (FMH), Deere & Co.

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Quality of record-large U.S. corn harvest ‘good’

CHICAGO (Reuters) — The quality of the record-large U.S. corn harvest was “good,” with high average test weights beneficial for export prospects for the world’s top shipper, the U.S. Grains Council said in an annual report on Tuesday.

Average weight of a bushel of corn was 57.6 lbs, below the three-year average of 58.8 lbs but a high enough average to qualify as No. 1 corn grade, the report said.

The council tested 629 samples of corn in 12 of the top-producing states including Iowa, Illinois, Indiana, Minnesota and Nebraska. The U.S. Department of Agriculture has estimated the corn crop at 14.4 billion bushels, up from the previous record of 13.9 billion bushels in 2013.

“This year’s report shows for the second year in a row that the United States has an abundant supply of high-quality corn available to export,” said Kurt Shultz, USGC director of global strategies. “The average values from the report indicate that the United States will have a crop that will store and handle well as it moves through the market channels to export.”

The crop had slightly lower moisture and protein content and comparable starch concentration than the 2013 crop, the report said. Overall higher yields reduced protein while good kernel filling resulted in comparable starch content.

One-hundred percent of the samples tested below the U.S. Food and Drug Administration level of 20 parts per billion of the plant toxin aflatoxin that can sicken animals or humans if ingested.

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U.S. Farmers May Cut Back on Phosphorus

SAVANNAH, Ga. (DTN) -- While the world demand for phosphorus fertilizers continues to climb with a growing world population, U.S. farmers may decide to curtail phosphorus applications in the 2015 growing season because of profitability concerns.

With lower corn prices, the current ratio on the DAP/corn price ratio chart shows DAP is 37% higher than its historical average. (Chart courtesy of Wayne Welter, J.R. Simplot Company.)

If U.S. farmers do decide to apply the nutrient next spring, there is some question if the logistical system can handle that much demand in one application season.

Wayne Welter, market analyst for J.R. Simplot, said in a phosphorus outlook presentation at the 2014 Fertilizer Outlook and Technology Conference held last month in Savannah that a couple different factors will be in play in 2015 for phosphorus. End-user demand and Chinese exports are going to be important areas to watch in the upcoming year.

LESS P APPLIED?

U.S. farmers have seen grain prices drop to the lowest levels in four years. Growers are watching grain prices and retail fertilizer prices closely and are contemplating fertilizer affordability, he said.

"Will growers cut application rates in response to lower grain prices?" Welter asked. "This is the conversation going on right now with growers."

Welter explained the ratio of DAP NOLA (wholesale price of Diammonium Phosphate at the Port of New Orleans) to the future December corn price gives a feel of how affordable the DAP fertilizer would be. The average ratio since 2009 is 37% higher than the historical average. This suggests affordability issues, he said.

The U.S. phosphate demand should stay flat to down in the short-term, generally where it has been in recent years, Welter said. American farmers used 4.2 million tons in 2010, 4.3 mt in 2011 and 4.4 mt in 2012. The forecast for 2013 is expected to be 4.2 mt; 2014, 4.4 mt; and 2015, 4.2 mt.

With a late harvest in some locations and many farmers deciding to limit phosphorus application this fall because of perceived high retail prices, Welter questioned whether logistical constraints will act as a barrier to prevent all demand from being met if farmers do decide to apply phosphorus in spring. It is not realistic to think all phosphorus applications can be made in one spring season, he said.

"This is going to be a huge issue to watch," he said. "This is a lot of pressure on an already fragile logistic system."

U.S. farmers are not the only producers in the world to consider cutting back on applications of phosphorus.

BRAZIL ALSO CONSIDERS CUTS

Brazilian farmers will also generate lower revenue per acre, which will affect nutrient demand there, Welter said.

With little fertilizer production in Brazil, most of its nutrients are imported. In recent years, the tons of fertilizer Brazilian farmers are using were increasing, but this may change in 2015.

In 2011, Brazil imported 3.7 million metric tons (mmt) of phosphorus fertilizers while for 2012 it was 4 mmt, and in 2013 the number jumped to 4.7 mmt. Brazil is forecast to import 5.4 mmt in 2014, but pull back imports to 5.2 mmt in 2015, he said.

Welter said phosphate inventories in the Brazilian countryside are growing as a result of profitability concerns. For the same reason about profit concerns, growers in Mato Grosso may forego planting their second-season crop.

China's importance in the world phosphorus outlook is growing. The country looks to its phosphorus exports in the coming years. China is forecast to export 5.9 mmt in 2014 and 6.3 mmt in 2015. This comes after exporting 4.9 mmt in 2011 and 4.5 mmt in both 2012 and 2013. The nation is also expected to export roughly 1.5 mmt of phosphorus fertilizer to the Western Hemisphere in 2014, Welter said.

With lower corn prices, the current ratio on the DAP/corn price ratio chart shows DAP is 37% higher than its historical average. (Chart courtesy of Wayne Welter, J.R. Simplot Company.)

However, Rongjian Sun, a fertilizer distributor in Beijing, told DTN's China Correspondent Lin Tan recently that China is expected to export 3 mmt of phosphate fertilizers in 2015.

China liberalizing its agricultural sector is the main reason phosphorus exports are expected to increase. Revisions to the 2015 export tax regime will enable China to export year-around, and this has a cumulative impact on their exports, Sun said.

INDIA DEMAND INCREASING

India is another country important in the phosphorus outlook. Indian demand for phosphorus is set to increase in the coming years. The new Indian government has stated it will make the necessary revisions to increase phosphorus application, he said.

India is forecast to consume 7.5 mmt of DAP in 2014, which was up from the 7.2 mmt used in 2013. In 2015, the country is expected to use 8.2 mmt of the nutrient, he said.

In the medium term with world demand increasing for phosphorus nutrients, there is room for capacity expansion in the global phosphorus market, Welter said. With various new projects in the works across the world, he estimated an additional 5 mmt of new product could come online in the next few years.

"The industry can justify capacity expansion because of the increasing world population," Welter said.

AFRICA OFFERS OPPORTUNITY

The continent expected to see the most disproportionate population growth is Africa. The continent already has 15% of the world population today and this could jump to 25% by 2050.

This growing population creates a huge opportunity in Africa, where many regions use little fertilizer. Using more fertilizer will help ensure food security, he explained.

There is a clear relationship between the population rates and nutrient use, Welter said.

Global agricultural phosphorus demand in the medium term will trend higher with the increasing world population, and developing nations will account for much of this growth, Welter said. The world demand is forecast to grow at a rate of 2.0% in the coming years, from a forecast of 42.0 mmt in 2015 to 44.6 mmt in 2018 and 47.3 mmt in 2021.

CHINESE EXPORTS INCREASE

While U.S. and Brazilian farmers may cut back their phosphorus applications in the upcoming growing season, other countries are going to ramp up their usage or production of the nutrient.

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Russia Planning to Boost Wheat Stockpiles as Food Costs Soar

Russia said it will increase the price it pays for wheat in a move to boost domestic stockpiles as the currency’s plunge drives up the cost of bread.

The country plans to increase grain reserves to at least 5 million metric tons to ensure supplies for flour millers and animal feed producers, Agriculture Minister Nikolai Fedorov told reporters today in Moscow. Prices are rising in Russia, the world’s fourth-largest wheat exporter, after foreign buyers took advantage of the weakening currency to increase grain purchases.

“The government needs to offer a price to be able compete with exporters,” Daryna Kovalska, an analyst at Macquarie Group Ltd. in London, said by phone. “They want to fight food inflation.”

Russia’s food inflation accelerated to 12.6 percent in November with the economy teetering on the brink of a recession. The ruble tumbled to a record low today versus the dollar as panic swept across the country’s financial markets after a surprise interest-rate increase failed to stem the run on the currency.

Wheat rose as much as 3.2 percent to $6.39 a bushel in Chicago, the highest since May. In Paris, futures added 2 percent to 195.50 euros a ton.

Russian Grain

Russia isn’t likely to put an embargo on grain exports anytime soon, Federov said. State reserves held 1.4 million tons of grain as of Nov. 25, according to the Agriculture Ministry.

Farmers in Russia have refrained from selling grain on the domestic market as the ruble declines, market researcher SovEcon said Nov. 17. The government has been unable to purchase any milling wheat at its weekly buying sessions at the National Merchandise Exchange since Oct. 28, according to data from the exchange.

In the country’s Western region, a main supplier of wheat for exports, the government’s price will increase to 9,300 rubles ($128.42) a ton for fourth-grade milling wheat, Fedorov said. He didn’t specify when the measure will take effect.

That variety of wheat rose 4.9 percent in the past week to 10,625 rubles a ton, according to data from SovEcon as of Dec. 12.

“If ruble continues to devalue and the domestic price continue to go up, farmers aren’t going to sell,” Matt Ammermann, a commodity risk manager at INTL FCStone, said by phone today. “They will need cash for financing in the spring, so we may start to see a little more selling in the February-March timeframe.” 

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