Dec 28 Wheat Market report

[TOM4CWB]

Charlie,

It is amazing the legs this wheat market has!

Here is this week important points reported by US Wheat Associates:

"The week started out on a bearish note as both Egypt and India canceled tenders citing high prices over the weekend after Korea tendered and passed last week. Export sales were just below trade expectations at 299,000 MT but were nearly two and a half times greater than the 123,000 MT weekly average needed to meet the USDA export forecast. Recent tenders cover Japanese needs into April while traders expect increased near term interest from Southeast Asia among others.
With new sales originated from the Gulf slowing, basis prices are generally unchanged from last week. On the other hand, demand in the PNW has remained strong, causing basis prices to rise as futures fall, keeping cash prices steady. SW prices were unchanged on the week at $13.45/bu ($494/MT). Traders are not optimistic that prices will fall substantially for new crop SW.
The Prime Minister of Russia reportedly has signed a resolution raising its wheat export tariff from 10% to 40% of value, but no less than 105 euro/MT ($153). The tariff will be in force until April 30, 2008. The Ukrainian government announced that it may double its grain export quota for the current marketing year to 2.4 MMT (USDA forecasts exports at 1.5 MMT). The timing of the export opening remains uncertain.
Although the Argentine Agriculture Secretary left its production estimate unchanged at 15.4 MMT (USDA forecasts the Argentine harvest at 15.0 MMT), the government extended the closure of its wheat export registry to ensure domestic supplies.
New crop HRS prices rebounded on old crop. September '08 delivery HRS (MU08) is at a $2.23/bu discount to nearbys, up from 99 cents/bu in November. The MU08 premium over December '08 corn is at $3.93/bu, up from $1.54/bu early this summer. The November '08 soybean premium over MU08 contracts has fallen from $3.66/bu in July to $2.39/bu. The SW premium to SRW opened another $14/MT this week to $4.10/bu ($151/MT), up from $1.47/bu last month.
The dollar fell back after reaching a two month high against the euro last week. The Canadian dollar is again trading above the U.S. dollar."

The assasination of Benazir Bhutto:

"ISLAMABAD, Pakistan - Islamic militants said Saturday they had no link to Benazir Bhutto's assassination, dismissing government claims that a leader of pro-Taliban forces in Pakistan carried out the suicide attack on the opposition leader.

Bhutto's aides also said they doubted the militant commander Baitullah Mehsud was behind the attack and accused the government of a cover-up.

The dispute and conflicting reports about Bhutto's exact cause of death was expected to further enflame the violence wracking this nuclear-armed nation two days after the popular former prime minister was killed in a suicide attack."

http://www.msnbc.msn.com/id/22427154/

Black Oil, the CDN$ and grains and oil seeds are all directly affected by this destabilisation... volatility in markets is the most likely outcome!

[smcgrath76]

Devil's advocate here...
Local food is simply a way to prevent those in third world countries from becoming wealthy by restricting their access to wealthy markets with agricultural products (often the first products in the chain of development)...
I appreciate that this is not a balanced statement, but it is something to think about.

[rkaiser]

Good article pandiana. I guess this means you will be looking for a nice hairy grass fed two year old bull or two to throw out with those wonderful girls of yours. All part of the program ----- not?

[grassfarmer]

C'mon Sean you are kidding right?? "Local food is simply a way to prevent those in third world countries from becoming wealthy by restricting their access to wealthy markets with agricultural products...."
You extol the virtues of the "global market" that the masses have bought into yet are involved in an industry that has been on the receiving end of the consequences. Moving food around the world does not help the poor in third world countries,or the food producers there either indeed the policies of the global corporations that control politicians, agriculture and global trade create a lot of the poverty in poorer countries. The global marketplace was created to produce corporate wealth at the expense of food both producers and consumers.
Local food makes sense - of course it does, but is our society prepared to step up to their responsibilities as global citizins?
From the retail debauchery we have just witnessed in the name of Christmas I doubt it. We in the west have by and large turned into a nation of wasters - wasters of food, raw materials, manufactured goods,the environment. It makes me sick to see the crowds at a parasite outfit like Walmart (I maybe get dragged to one once a year)filling their trollies with crap because it's "cheap". Cheap if you ignore the sweat shop conditions that create much of their produce, cheap if you ignore the pollution Walmart causes moving it around the world, cheap if you ignore the slave like conditions of their retail workers, cheap if you don't count the cost our children will pay for this generations greed. Are we really so shallow as a civilisation?? apparently so.
I was reading recently of the global trade in recycled electronics and circuit boards in particular. There are outfits in north America that are set up to handle this work but by and large the work is exported to China and India - there was a picture of an Indian man melting lead out of circuit boards in the same pans his family eats out of. And people in the west are surprised when the toys they buy contain lead?? Well I guess we deserve it for going with "cheap" rather than "sustainable, ethical, sensible or moral"

[per]

I am all for local food. We try to follow the 100 mile rule and avoid Wallyworld when possible. It might be a good time to read Michael Pollen's NY Times article, Power Steer.

query.nytimes.com/gst/fullpage.html?res=9C06E5DB153BF932A05750C0A9649C8B 63

per

[charliep]

Agree with the optimism with three caveats.

- Current prices are high and likely to stay there for a year or two. Biofuel remains the driver (increased consumption).

- High prices = price volatility. Buyers don't want to pay too much and sellers don't want to sell too cheap.

- The things to follow over the next few years that will impact grain production, trade and prices are things unrelated to agriculture over which farmers have no control (the threat side of a SWOT analysis).

Not negative going ahead. However, would encourage a marketing plan which looks at risks/profitability in an uncertain world and encourages decision making.

[TOM4CWB]

Charlie,

Venezuela is taking "000" off their currency...

The Central Banks in the EU put in 500B last week... When all added up... the US had as much added by China et el...

SO,

Read this article and tell me why we won't be doing the same here?

Dec. 21, 2007, 11:54PM
Venezuela works on confidence as currency loses some zeroes
Circulation of the strong bolivar also aimed at collaring inflation


By JOHN OTIS
South America
CARACAS, VENEZUELA — It's getting easier to become a millionaire in Venezuela: A mere $200 will buy 1 million bolivars, the troubled national currency.

For an oil-producing nation that views itself as a potential economic juggernaut, the bolivar stands as a glaring symbol of weakness. But on Jan. 1, the Venezuelan government will start phasing out the bolivar and phasing in a new currency with a muscular name: the strong bolivar.

The freshly minted bank notes and coins are designed to boost consumer confidence and bring down the 20 percent annual inflation rate, the highest in Latin America. The move also could make bookkeeping easier because three zeroes will be lopped off the old denominations. A thousand bolivars will be worth one strong bolivar.

"This is the bolivar of the new Venezuela, which is set to become an economic power," President Hugo Chavez said in a speech earlier this year when he announced the currency switch.

The move comes amid growing stress to Venezuela's rapidly expanding economy. Inflation and shortages of chicken, beans, milk and other basic foods appear to be eroding some of the Chavez government's support.

Poor and working-class Venezuelans have long backed Chavez because his government has spent billions to build schools, clinics and subsidized food stores in their neighborhoods while poverty and unemployment have fallen. But these constituents have been hit hard by rising prices.

On Dec. 2, voters narrowly rejected a referendum on constitutional reforms that would have given Chavez more control over the economy and accelerated his drive to turn Venezuela into a socialist nation. It was Chavez's first defeat at the ballot box after nine years in office, and some analysts believe that many of his traditional supporters stayed home.

"With the food shortages and inflation out of control, these were not favorable conditions for the president," said Ronald Balza, an economics professor at Andrés Bello Catholic University in Caracas.


Once known for stability
The bolivar, named after South American independence hero Simón Bolívar, once was among the world's most stable currencies. For decades, it traded at 3.3 to the U.S. dollar, and it was one of the currencies used by the International Monetary Fund.

But starting in the 1970s, a cycle of oil booms and busts and economic mismanagement provoked inflation — the annual rate hit 100 percent in 1996 — and a long, steady decline in the value of the bolivar.

Under Chavez, record-high oil prices have fueled four straight years of economic growth, including an 8.5 percent expansion of gross domestic product in 2007. But massive government spending has pushed up the inflation rate. Meanwhile, Chavez's move to nationalize some utilities and parts of the oil industry has sparked capital flight, causing the bolivar to fall even further against the dollar.

The official exchange rate is now 2,150 bolivars per dollar. But to restrict capital flight, the government limits the number of dollars that businesses and individuals can buy, leading to a thriving black market. On Caracas' streets, the dollar trades for 5,000 to 6,000 bolivars.

That has led to price distortions, especially for goods imported with expensive dollars purchased on the black market. Jorge Acosta, manager of the Arbiter men's clothing store in Caracas, says an imported leather jacket in his shop now sells for 7.5 million bolivars (about $3,500 at the official rate of exchange) up from 3.2 million (about $1,500) just a year ago.

"Nothing justifies that a country that is so rich has a currency that is so devalued," Acosta said. "The problem is that our governments have mismanaged the wealth."


Shaping perceptions
Several other Latin American nations also have turned to new currencies as part of wider efforts to battle inflation and stabilize their economies.

Calling Mexico's devalued currency a national disgrace, then-President Carlos Salinas de Gortari sliced three zeroes off the peso in the early 1990s and called it the "new peso." Peru scrapped the inti for the new sol, while Brazil replaced the cruzeiro real with the real around the same time.

Part of the strategy is to shape people's perceptions. New bank notes with smaller denominations — allowing for single- and double-digit price tags rather than rates in the thousands and millions — can have a positive psychological impact, said Mark Weisbrot, co-director of the Center for Economic and Policy Research in Washington.

The switch to the strong bolivar "will close a cycle of instability that Venezuela has suffered for the past 25 years and generate positive expectations," Finance Minister Rodrigo Cabezas told the Caracas daily El Nacional.

But the currency makeover won't make much difference unless the policy is combined with other measures to cut inflation, such as a slowdown in government spending, said Domingo Maza Zavala, a former director of Venezuela's Central Bank.

"The government keeps on spending," Maza Zavala said. "The inflationary factors are increasing."

During a transition period of about six months, both the bolivar and the strong bolivar will circulate, and Venezuelan shopkeepers must list prices in both currencies. A kilogram of powdered milk costing 28,000 bolivars will also carry a price tag of 28 strong bolivars.

Some Venezuelans believe that the new system could make their lives easier.

"The numbers won't be so big anymore," said Orangel Suarez, a Caracas social worker.

Others see the move as another sweeping — though mostly symbolic — gesture by Chavez, who already has changed Venezuela's flag, national seal and time zone.

Oscar Trejo, co-owner of a Caracas construction company, called the strong bolivar "a way of cheating the people into thinking that inflation is down and the value of their money is up."

Special correspondent Jose Orozco in Caracas contributed to this story.

john.otis@chron.com"

http://www.chron.com/disp/story.mpl/business/5398755.html


We could easily do the same thing with the US/CDN dollar... and go back to Millions/Billions instead of using Trillions!

GRIN

Everyone would think wheat was a great deal at $1.00/bu! (instead of $10.00)

The CWB could feel right at home... wouldn't have to change it's thinking!

[TOM4CWB]

Here is the DTN Dec 28 Report

"Wheat...Turmoil in Pakistan gave white wheat markets a mild jolt this
week as PNW exporters gauged the impact on existing sales and additional
demand potential. Weekly export sales show 3.6 mb yet to be shipped for
Pakistan, committed for January and early February shipment. New crop
values took the brunt of decline in futures this week, with white wheat
closing at $7.85 for August 2008, red spring 14% at $9.29 and red winter
11.5% settling at $8.62.
Weekly Sales...Hard red spring was the top selling class of wheat last
week, registering 6.2 mb to put the year-to-date total at 263 mb and 46%
ahead of a year ago. White wheat also recorded a respectable 3.3 mb for
a current year total of 144 mb that is 8% over year-ago levels.
Barley...Old crop export bids found some life this week as exporters
worked through nearby port congestion and looked for odd-lot coverage on
upcoming shipments."
http://www.webercommodities.com/index.cfm?show=801&id=0700B939&sort=6&cat=4

This market sure looks like it has great looking legs Charlie!

Happy New Year to every one!

[charliep]

Actually find the comment on barley interesting. Most barley done optional origin anyway (Saudi tenders for quantity/specifications but origin at international grain companies discretion). Having an open market for feed barley would mean packaging of feed barley sales off the west coast with alternatives of Prince Rupert, Vancouver or Portland. Heavan forbid I would suggest this but something innovative like having US barley flow north to fill a vessel or Canadian barley south might happen to fill a 65,000 panamax (http://en.wikipedia.org/wiki/Panamax).

Rules that prevent this both sides of the boarder to prevent this but for a bulk commodity like barley, why not? Objective is to have a more visible market that allows price arbitrage.

[TOM4CWB]

Charlie,

Can you imagine,

Barley from northern Alberta being swapped with ND MT barley... optional origin... southern AB cattle get the closest barley... Prince Rupert gets the closest supply...

We must get over the historical east west trade bias... and trade synergy and smart... as we are NOT the low cost producers!

It looks like the CDN rail cap is a major impediment to access premium global markets... shipping on a timely basis... when produce is needed... is essential to extracting a premium!

As long as the "designated area" grower can not see the premium... how could there be a problem? (ie. $60/t discount on PNW basis levels)

How can the CWB justify the massive RS Protien premiums being paid to "designated area" growers... that simply do not exist in the global market place? (PNW NS/DNS 13.5-15px all $12.00/bu!)

PNW Basis NS/DNS $1.70 over MGE, Gulf $1.95 over!

http://www.uswheat.org/USWPublicDocs.nsf/2a788abb563a2d3285256f35006322c1/439f4547a72c0f8f852573bf006c865b/$FILE/PR%20071228.pdf

[smcgrath76]

Not neccesarily my viewpoint, that I posted, just food for thought.
Does a banana produced by hand labour and shipped to Canada have a larger or smaller carbon footprint than a loaf of bread baked with flour produced with fossil fueled wheat?
I think the local food thing is a good one, but I can see the argument from the other side of the fence as well. I am not sure we can support local food on one hand and then target say the European market with our product on the other all the while leaving third world countries out of the game.

[cakadu]

Another angle to it Sean is the fact that in supporting locally grown food, people in any country, not just third world countries, have the ability to increase the local economy. Issues such as food safety are often more easily undertaken and people know where their food comes from.

Local food enables production of foods that grow best in an area, not forcing land to do what it isn't supposed to do i.e. try to grow grain on land that is pretty much dry year round.

By growing locally, you often preserve local customs, traditions and breeds of plants and animals that would/will be lost if we keep going down this train wreck of a path we are on.

I'll play devil's advocate from another angle of your argument. People quite often "pooh-pooh" the notion of sustainability, saying that 40% of producers will be lost if we grew agricultural products sustainably. Is that a realistic number or would it be better to loose 75% of producers if we continue doing what we have been doing?