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The above map shows South America’s LNG import terminals ahead of the coming Southern Hemisphere winter, including Chile’s Quintero terminal, which is expected online in June. (Click on individual terminals for details)

South America’s nascent import capacity will add a new dynamic to the Atlantic Basin market, drawing LNG counter-seasonally when demand in the Northern Hemisphere wanes during summer.

LNG imports to South America are not expected to be huge in 2009 due to falling industrial demand, but they could tighten the LNG market in the longer term. - Ed McAllister

By K.T. Arasu 
Investors will zero in this week on arguably the most important crop report of the year when the U.S. government forecasts how much corn and soybeans farmers will sow this spring across the country. 
   
The report is expected to project more plantings of soy and less of corn than in 2008, based on the U.S. Agriculture Department’s survey of about 86,000 farmers in March, a month before seedings begin in the Midwest grain belt. 
   
The Prospective Plantings report is eagerly awaited on grain markets and by investors in farm equipment companies, livestock producers, grain transporters or makers of products ranging from bread and pasta to ethanol. 
   
“I have been getting so many calls from the investing community because it affects so many other business that are associated with the farm sector,” said grains analyst Joe Victor of brokerage and research company Allendale Inc. 
   
The data will not be the only market driver this week. Investors will be also be checking the pulse of the economy for any signs of an uptick on Wall Street as global grain demand slips in the face of consumers recoiling from the recession. 
   
Farmers in Argentina, which competes with the United States in the world grain export market, will end a week-long boycott of selling grains on Friday and the market is anxious to know the next course of action in fighting higher export taxes. 
   
There have been mixed signals from Mother Nature. Floods in the upper reaches of the United States bordering Canada are threatening the seeding of spring wheat in about 500,000 acres, but southern Plains wheat areas are getting much-need rains. 
   
Investors have a full plate of factors to chew through this week, but the main focus will be on the USDA report. 
   
Analysts polled by Reuters expected farmers to plant 84.3 million acres of corn this year, down from 86 million last year. They were expecting 79.8 million acres to be seeded with soybeans, up from 75.7 million in 2008. [ID:nN26500623] 
   
USDA will update on June 30 after another survey in June when most of the planting is usually complete. 
   
BEARISH FOR SOYBEANS? 
Grains analyst Bill Nelson of Doane Advisory Services said the report could be bearish for soybeans. 
   
“If beans come in in the 79 (million) to 80 million range, with normal yields, it will be fundamentally bearish,” he said, adding that there was a cloud over demand as the United States was not expected to come out of the recession until perhaps 2010. 
   
“Chick placements are down 6-7-8 percent week after week because demand is lagging,” he said, referring to the number of chicks that are placed each week with flocks that grow into meat-producing chickens. 
   
Analyst Charlie Sernatinger of Fortis Clearing Americas said the USDA report could take the market by surprise if the department’s forecast for corn acres comes in at fewer than 84 million acres, and that for soy exceeds 80 million. 
   
The United States is the world’s largest exporter of corn and soybeans — both used to produce animal feed and the renewable biofuels ethanol and biodiesel. So USDA crop estimates for the United States are closely monitored around the world for price implications. 
   
The report comes at a time when overall trade volumes are expected to fall 9 percent this year, the largest contraction since World War Two, as demand collapses in the worst economic downturn in decades, the World Trade Organization said. 
   
“The real dilemma surrounding the pricing of the 2009 crop is associated with determining value in a rapidly changing economic environment,” MF Global analyst Rich Feltes wrote in a report to clients last week. 
   
“Is economic recovery and demand strength eminent? Is the economy headed for a period of rapid inflation and how would that influence soybean prices?” he asked. 
   
In a 20-year period, USDA’s prospective plantings estimates had been below the final estimate eight times and above 12 times for corn — from the smallest difference of 153,000 acres to the largest of 3.84 million, according to the USDA. 
   
For soybeans, USDA’s estimate was 12 times below the final estimate, and above eight times. The smallest difference was 25,000 acres, while the biggest was 3.5 million acres. 
   
Chicago Board of Trade May soybeans <Sc1> closed 3.6 percent lower for the week at $9.17 a bushel. May corn <Cc1> fell 2.4 percent to $3.87 and May wheat <Wc1> slumped 7.8 percent to $5.07-1/4.

It seems if you got a problem in Washington today, you need a Czar to take care of it. And now some powerful U.S. senators believe the agriculture sector should get one to sharpen efforts to feed the world’s poor.
    
Former Agriculture Secretary Dan Glickman told lawmakers on Tuesday that too often agriculture takes a back seat to other “sexier” issues in policymaking, but it must be a priority if the country hopes to address global hunger and malnutrition.
 
“It is not a secondary factor,” Glickman said before the Senate Foreign Relations Committee.
 
Senator Dick Lugar, the Republican leader of the committee, supported appointing a White House food coordinator to take on raising agriculture and food aid’s prominence.
    
This “food czar” would be tasked with coordinating efforts between the U.S. Agency for International Development, the U.S. Department of Agriculture and other agencies involved in food aid and agriculture production.
    
The need for a food czar doesn’t seem as far stretched when considering recent events that have nudged agriculture over into the realm of a national security issue.
    
Soaring food prices last year sparked food riots and led to political instability in some parts of the world. The threat of violence and coups continues as the recession makes it increasingly difficult for even more people to buy food.
    
A food czar could possibly mitigate future riots by improving the United States’ role in making other nations self-sufficient in agricultural production, an area some say the country has failed in. 
   
In fact, U.S. efforts to address the long-term challenge of persistant malnutrition earn an ‘F,’ according to political science professor and author Robert Paarlberg.
 
He said U.S. agriculture assistance to Africa has plummeted 85 percent since the 1980s. “So as things have been getting steadily worse in Africa, the United States goverment has curiously been doing steadily less,” Paarlberg said.
 
A food czar, Lugar said, would have the difficult job of addressing this conundrum.

Photo Credit: Reuters/Luc Gnago (Farmers in Cote d’Ivoire work on a rice field); Reuters/Alberto Lowe (Riot police clash with Panamanians over food prices in Panama City); Reuters/Margaret Aguirre (A child in Ethiopia is severely malnourished due to widespread starvation brought on by drought and soaring food prices)

After the Federal Reserve said last week it would buy about $1 trillion of long-term U.S. debt, copper rallied to price levels seen in November.  Other base metals followed higher. 

Technical analysts at RBC Capital Markets referred to current metal action as “jobbers markets and not trends,” warning bulls “to beware of getting married to their positions in these choppy and uncertain times.” Others chartists said they were looking for confirmation of the price rally from demand indicators and would not recommend buying metals until the had clearly turned bullish.

The only analyst I spoke with willing to set specific upside targets was Barclays Capital technical strategist MacNeil Curry. He thinks London Metal Exchange copper can reach $4,300 to $4,500 a tonne, with possible scope above $5,000 a tonne. Specifically, Curry said he sees initial targets at $4,366 to $4,547 a tonne. He called short-term support at a trendline and recent low of $3,725 and $3,671. A move below that area would signal a bigger decline than previously forecast.

While LME aluminum has come off a two-month peak, it was trading in a new higher range above $1,400 a tonne. Curry said, “the path of least resistance is still clearly higher given the bullish divergences and weekly momentum indicators and given the strength in other commodity metals.”

A definitive break above that level would add to evidence that aluminum had completed an eight-month downtrend, the Barclays analyst said.

Curry sees zinc, currently trading at $1,280 a tonne, getting dragged higher. But it would need to break above January 7 high at $1,365 to really take off. A breakout puts in sight the 200-day moving average at $1,445 a tonne.

“I think it’s going higher with copper, but it may take awhile,” he said.

A slump in U.S. oil drilling activity due largely to weak prices could thwart the Obama administration’s goal of cutting crude imports by putting a dent in future production, analysts have said.  Below are graphs showing the decline in the number of rigs actively drilling for oil.

Argentine farmers’ decision to resume their anti-government protests dominated Sunday’s newspaper editorials, with some commentators saying the seemingly never-ending conflict over soy taxes risked spilling into political turmoil and even violence (Joaquin Morales Sola in right-leaning La Nacion).

Most agreed the conflict’s resurgence was down to last week’s surprise announcement by President Cristina Fernandez to share the soy tax revenue with the provinces, which critics see as an election ploy ahead of a mid-term vote due in June. Farmers took as proof she is unwilling to lower the levy.

Some columnists criticized the government for erratic policies that have stoked the conflict at a delicate time for the country (Eduardo van der Kooy, in top-selling daily Clarin), saying Fernandez needed to change tack to reflect the changed economic reality (Miguel Bonasso in Critica).

Argentine media are increasingly critical of the government and few defended the president’s handling of the standoff. Leftist daily Pagina 12, which generally supports Fernandez, echoed her own defense of the soy taxes as a vital tool to encourage more diversity in crops and redistribute wealth among the poor.

Here are some key extracts from the leading newspapers’ best-known columnists: 

Joaquin Morales Sola, right-leaning, pro-countryside La Nacion:

“Sometimes, violence is built slowly with words and gestures. Argentina is on its way there. The countryside has exploded, as was predictable, after the government’s latest assault on the farmers, who rightly realized the government hated them. Hate is always a precursor to violence, as are measures taken without consultation … There is a palpable and disturbing climate of hate emanating from those who govern and from the farm sector as well.

“If the government was willing to give up 30 percent of the soy export taxes, no one has explained why it wasn’t willing to give that money to the farmers. A reduction of that size in the export taxes would have instantly calmed down the farmers.

“Provincial leaders in the soy regions didn’t have time to celebrate the government announcement (to share soy tax revenue with the provinces) before they got wind of the rebellion on their doorsteps … violence isn’t far off.” 

Miguel Bonasso, a lawmaker who used to back the Kirchners but has since distanced himself from them, in Critica, an independent, center-left oriented daily:

“The last thing the government or society needs is to go back to the events of last March that caused the gaucho war.

“The state should impose taxes on exports, like it does on imports. The public sector should get a share of farming profits, as it should from mining or oil … but the burden should be fair and reasonable, according to different circumstances. The situation of small- and medium-sized farmers is not the same as the big sowing pools (alliances of investors who farm soybeans).

“Neither are the circumstances the same as they were last March. In the intervening period we have seen one of the worst droughts in history and a collapse in international commodities prices, including soy.”

Alfredo Zaiat, in leftist, pro-government Pagina 12:

“The privileged farming lobby of the Pampas, represented by four, landed groups that have lost their historical differences to redefine themselves as the Argentine Rural Soy Federation, wants to do away with export taxes, especially those on soy.

“The loss of fiscal income that would come from such a measure could not be immediately compensated elsewhere, so the resulting loss in revenue would have to come from debt.

“What the local branch of the multinational soy corporation want, with the blessing of the opposition, is to eliminate the soy export taxes and get a steep devaluation (of the peso). In this national championship, where no questions are asked, the leaders of the landholders and soy farmers never explain what this double whammy of devaluation and zero export taxes would mean for prices and people’s purchasing power.”

Eduardo van der Kooy, in top-selling daily Clarin, which has taken an anti-government line of late:

“Contradictions and confusion appear to be the only signals from the government in these grave times. Such behavior is leading the country to unbearable levels of social tension.

“They even mounted a fragile negotiating table with the farmers. But this week the dialogue went out the window (and) Cristina came out with a botched formula to share the soy export taxes with the provinces.

“With no room left for maneuver, the farm leaders had to launch (a new strike) … Cristina told the farm leaders the soy export taxes couldn’t be touched for fiscal reasons. She also said she wanted to avoid a “soy takeover” in the countryside. Two weeks later she announced she would give 30 percent of the soy tax revenue to the provinces, so the fiscal reasons weren’t so solid and the “soy takeover” even less so. From now on, will the provincial governors and mayors getting the profits from soy do anything to encourage farmers to grow corn and wheat?”

Grain markets will keep an eye on spring planting intentions in the United States, the world’s largest exporter, in the coming week but the dollar and politics have also jumped back into the markets as a surprise.
    
Grains were led higher by soybeans this week, rebounding after corn gained the previous week on seeding expectations. But U.S. government moves to shore up debt markets and also Argentine politics came back into the mix, adding a lot of juice to bullish grain buyers. Chicago Board of Trade May soybeans ended 8.6 percent higher for the week at $9.52 a bushel, while May corn gained 2 percent ending at $3.96-1/2. CBOT May wheat closed at $5.50-1/4, up 6 percent on the week.
 
The weaker dollar was a big trigger, as a falling greenback makes all U.S. commodities cheaper to overseas buyers. The dollar notched its biggest weekly plunge against a basket of currencies since 1985 after the U.S. Federal Reserve announced on Wednesday it will spend more than $1 trillion to buy mortgage and U.S. Treasury securities to boost the economy. U.S. Treasury yields dove on the news and investors, also wary of inflation, dumped the dollar. 
 
One key to the 2008 commodities rally, which saw record grain prices into the summer, was the sliding dollar. As the currency began turning around in July 2008, as grains hit multi-year highs, commodities began a long descent.  
    
“This week has showed us the extent to which we are tied to the financial markets,” said Rich Feltes, director of MF Global Research in Chicago. “It’s not just the grain fundamentals. It is the political landscape — what’s going on in terms of Congressional and Fed actions, Argentine government policy — all of these things are impacting our markets right now.
    
“Whether or not the dollar adjustment has essentially run its course will be an important factor,” Feltes said.
    
Another outside factor last week was Argentina, the number 3 soybean exporter and number one shipper of soybean meal.
    
A squabble between Argentine farmers and their government over a soy export tax threatened to disrupt shipments there as farmers decided to halt sales of grains and livestock for seven days beginning Saturday, further dimming hopes for any quick resolution to the conflict.
    
“Seven days will not cause too much excitement but the uncertainty that it could become longer would be supportive for spreads,” said Mario Balletto, Citigroup analyst in Chicago.
    
China, the biggest soy buyer, has noticed. The U.S. Department of Agriculture on Friday said U.S. exporters sold a fresh 165,000 metric tons of soybeans to China on Thursday, of which 55,000 was for 2008/09 shipment.
    
MEANWHILE, U.S. SPRING PLANTING NEARS
If the dollar and politics in the U.S. and Argentina have been a powerful distraction, grain traders also remain tightly fixed on the basic supply fundamentals: spring planting.
    
A tussle between corn and soybeans continues for more than 160 million acres in the United States that will be seeded in the next two months — and end up supplying half of world corn exports and one-third of soybean export shipments.
    
The markets await the March 31 USDA annual planting intentions report, the first official word on what farmers intend to plant this spring based on actual farmer surveys.
    
As of Friday many grain analysts still thought U.S. farmers will seed a couple million fewer corn acres than the 86 million planted last spring, while soybean acres could be up as much as 5 million from the 75.7 million planted in 2008.
    
A wild card remains cost of fertilizer, which is much more essential to good corn yields than beans, a legume. Nitrogen fertilizer in the Midwest is running about $600 to $750 a ton, down sharply from $1,000 last fall. But phosphorus and potassium-type fertilizers, such as DAP, are still very pricey at $950 to $1,000 a ton, crop specialists say.
    
Bob Nielsen, extension agronomist at Purdue University, still thinks soybeans offer a better return, considering current prices and planting costs. But if USDA forecasts smaller-than-expected corn seeding intentions on March 31 report, he said, the corn market could rally and swing back more farmers to plant corn. Farmer hopes that corn demand to produce ethanol will rise this year are another wild card. 
    
“These guys have to make a decision pretty soon. The end of the month is their last opportunity to see a change in prices that would sway them one way or the other,” Nielsen said.
    
Wheat trading was a sideshow most of the week considering the fireworks in corn and beans. But traders continue to nervously eye the weather. Drought is pressuring the hard wheat crop in the southern Plains — about half U.S. wheat crop — while flooding may threaten the prime spring wheat area in the United States, the Red River region of North Dakota.

It all looks very familiar. Argentina’s rebellious farmers are threatening to go back to their highway protests, the government is refusing to cut export taxes on soybeans and another showdown in Congress is on the horizon.

If ruling party lawmakers’ continue to refuse to take their seats and allow a vote on an opposition-led bill to cut the taxes, farmers will have a good excuse to resume road protests and a freeze on grains sales to starve the state of revenue.

President Cristina Fernandez will be loath to see another showdown on soy taxes after last year’s crushing defeat when her own vice president cast the deciding vote against her in the Senate, forcing the government to roll back the sliding-scale system that set off months of political turmoil.

Rather than risk another spectacular defeat, especially as she tries to move up mid-term elections to June, Fernandez could try to take the steam out of the opposition drive by lowering the taxes herself — and local media speculated this week that she was mulling such a move.

But government officials have ruled out that possibility.

Even if Fernandez were to offer a concession on the soy tax, it would likely be a small one because she would not want to lose too much face or too much income in an election year.

But a small reduction is unlikely to satisfy the farmers, making any resolution seem more distant than ever.

A year of bitter fighting, mutual insults and political tension has blunted the tool of negotiations and the conflict looks poised to drag on for at least as long as Fernandez and her supporters remain in power.

Alaska is known as a big oil producing state, but don’t forget about it when it comes to renewable energy. That was the message of the state’s senior senator, Lisa Murkowski, to U.S. Interior Secretary Ken Salazar. 
    
At a Senate Energy and Natural Resources Committee hearing this week, Salazar showed several large U.S. maps of potential wind, solar and geothermal energy resources. One problem, the country’s biggest state, Alaska, was nowhere to be found.
    
“There are few things that irritate me more than maps of the United States of America that do not include that great northern state,” Murkowski told Salazar, as the standing-room-only hearing room burst into laughter.
    
“Our renewable energy resources are wonderful and vast and we look forward to the time that you will come up to visit them,” she said. 
    
Murkowski even defended Hawaii, which was also left off Salazar’s maps.
    
“We do encourage the Department of the Interior to make sure that all 50 states are represented on your maps,” she said, raising more giggles from committee members and those sitting in audience, including the press table.
    
Salazar was just as amused.
    
“That’s a point well taken,” he said. “Alaska is so important that it merits a map all to itself.”
    
“You’re right,” Murkowski responded.
    
If Salazar follows through on his promise, the solar energy map for Alaska would be rather dark — at least during the winter, when the sun doesn’t shine in some parts of the state for several months and is out for only a few hours a day elsewhere.

–Tom Doggett

For more news on renewable energy, click here.

Photo credit: DOI (Interior Secretary Salazar testifies before Senate committee)

One reason oil prices are as high – or not lower than they are – depending on your perspective, is OPEC’s unusually high level of discipline. Output targets for the disparate group, whose members range from leading exporter Saudi Arabia to oil minnow Ecuador, have often born a tenuous relationship to reality. This time, they have been met by an estimated 80 percent — and rising. Algerian Energy and Mines Minister Chakib Khelil said OPEC’s discipline could reach 95 percent, but, for “technical reasons”, that would be as good as it would get. Asked about Algeria’s own production, Khelil said it would average 1.229 million barrels per day in March. — “‘So above Algeria’s OPEC target of 1.2?” Asked one of the posse of journalists in attendance. “Yes. It’s 95 percent,” said Khelil and laughed. Well he might. OPEC ministers are generally more relaxed than when they met in December when the oil price was heading towards $30. It has since risen to nearer $50. What might make them even more relaxed would be more output restraint from beyond OPEC. Leading non-OPEC producer Russia keeps turning up at OPEC meetings, but any cooperation with OPEC reductions has been limited to Russia’s involuntary decrease in output that has resulted from underinvestment and natural decline. “Of course we are disappointed,” Khelil said of Russia. “Wouldn’t you be disappointed if you cleaned in front of your house and your neighbours started pouring stuff in front of theirs?”