The headline that emerged from nearly five hours of weekend talks by the producers’ club OPEC was that it that had decided to leave its output policy unchanged. But you shouldn’t believe everything you read in the press.
OPEC http://www.opec.org/home/cited the fragile state of the world economy and said it was doing its bit to try to nurse the economy back to health by avoiding any aggressive cuts in oil supply.
As far as the wider world could tell, the group, which supplies more than a third of the world’s oil, was united in its concern for its hard-pressed customers, especially the biggest one of all, the United States whose new leader is far more palatable as far as OPEC is concerned than his predecessor.
In reality, the closed-door debate inside OPEC’s scruffy Vienna secretariat on the banks of the Danube Canal, which feeds into the more romantic Danube River, was rather more heated than we were led to believe.
Languishing oil prices and ballooning oil stocks are more worrying for some members of OPEC than others and those most concerned about balancing their books were said to be holding out for radical action to try to drive up the oil market.
Delegates circulating in the lobbies of Vienna’s elegant hotels whispered that far from a straightforward consensus, some members had battled for a supply reduction of anything up to 1.5 million barrels per day.
Kuwait, whose government offered to resign en masse on Monday, and Iran, which faces expensive presidential elections in June, were among those keenest to prop up prices that have fallen by more than $100 from last year’s record high, the delegates said.
But intent on presenting a unified front, ministers chose not to tell the line of reporters waiting outside the meeting about any internal divisions.
The version for the media’s eyes and ears was that a new administration in the world’s biggest energy consumer made it so much easier to bury old enmities and agree with U.S. ally and leading oil exporter Saudi Arabia that for now the best output policy is one that doesn’t send oil prices soaring.

U.S. grain markets are unlikely to shake the influence of Wall Street in the coming week with equities remaining a bellwether gauge for commodity demand, as they have all winter.
    
The Dow Jones industrial average <.DJI> ended Friday on an up note at 7,223, up 9 percent for the week and the best weekly performance since November. Weary investors were enthused after beleaguered banks Citigroup <C.N> and Bank of America <BAC.N> seemed to show a pulse. 
     
“We are definitely going to be influenced by the big-picture market. It is hard to see corn and beans breaking away while there is such a concern about global demand,” said analyst Gavin Maguire with Chicago brokerage EHedger. 
   
“If we suddenly see some extended upturn in investor sentiment then that would lend support to food markets as well,” he added.
   
Chicago Board of Trade grains — last year among the darlings of the global commodity boom — have plummeted since the credit crisis last summer morphed into the global recession, with prices falling 40 percent or more. 
   
Large speculators now hold huge net short positions in CBOT grains and oilseeds, especially in corn and wheat. 
   
Profit-taking and capital preservation have been key as these “longs” covered losses elsewhere and ran from the bear market. 
But as Wall Street steadied this week, grain speculators followed suit. Commodity Futures Trading Commission data issued on Friday showed that large speculators’ net short position in corn, for example, shrank by 36,000 contracts. 
   
Grain traders are thinking like all investors: higher markets will bring confidence, both to consumers and financial markets. That can, in turn, revive credit and bring buyers of all goods and services, including grains, back to the table. 
   
So next week, grain traders will be watching for more news that the financial sector is coming out of its hole. 
   
Undoubtedly, the Federal Reserve’s announcements Wednesday afternoon 1415 EDT (1815 GMT) on interest rates following the two-day Federal Open Market Committee (FOMC) meeting will be key. 
   
But while financial markets remain a bellwether for grain and oilseeds in the week ahead, traders will also keep a sharp eye on more traditional fundamentals, namely plantings. 
   
In particular, grain traders eye the price spread between corn and soybeans, which together account for about 160 million planted acres each year in the U.S. Midwest. 
   
“Corn and bean plantings will be the conversation now until June,” Maguire said. 
   
Speculators are sensitive ahead of next month’s seeding. On Friday Informa Economics, a widely watched consultant, rocked CBOT markets with a surprisingly low corn plantings forecast that fed a rally in corn over soybeans. 
   
It pegged corn seedings at 81.4 million acres, down 5 percent from last spring, and soybeans at an all-time high of 81.5 million acres, nearly 8 percent higher than a year ago. 
   
But many traders and analysts doubted the corn figure. Others will start issuing their estimates next week ahead of the government’s official plantings estimate on March 31. 
   
Farmers and traders closely watch the spread between the two CBOT new-crop harvest months. They gauge projected costs of production — seed, fertilizer, land, fuel — with those forward prices that they can lock in for returns. 
   
Over the last month, the bias has moved to corn acres. 
On Friday, the CBOT November soybean <SX9>/December corn <CZ9> ratio fell below 2-to-1 — a key signal to farmers to plant more corn, analysts noted. 
   
As a rule of thumb, a ratio of 2.2-to-1 is an indifference point — plantings could go either way. A ratio below 2.2-to-1 favors corn acres, while above that level encourages soybeans. 
The ratio peaked at 2.36-to-1 in mid-January when soybeans rallied amid market worries about Argentine drought losses. But it closed at 1.97-to-1 on Friday afternoon. 
   
“Corn has broken out,” Linn Group analyst Roy Huckabay said of Friday’s close in May corn at $3.88-1/2.
   
But old-crop soybean supplies remain tight, with nearby deliveries on CBOT at a healthy premium to new-crop November. 
   
Informa’s numbers tightened that old-crop/new crop spread on Friday. But uncertainty about Argentina’s political woes will keep nearbys firm. Any new conflicts between farmers and government there could push more importers back to U.S. soy. 
   
On wheat, the biggest focus is weather for U.S. Plains hard red wheat, about half the total U.S. wheat crop. The Southwest belt — southwestern Texas all the way to southwestern Kansas — is suffering from drought. 
   
Soil temperatures have now warmed up to 40 degrees Fahrenheit all the way to northern Kansas, which means the crop is breaking winter dormancy and will need more moisture. 
   
“Monday morning we’re going to look at how much rain the northern Panhandle of Texas received. This is the last big chance of rain for the next 10 days. That will be an important bearing on what wheat does,” Huckabay said.

PHOTO: Illnois field taken in late February by Christine Stebbins

The number of rigs drilling in Western Canada in March has fallen to the lowest level for this time of year in more than seven years. Drilling could fall further if storage fills this summer and Canada’s high cost natural gas producers are unable to find a buyer for their gas and shut in production.

– Scott Haggett in Calgary

U.S. gasoline demand has showed signs of picking up over the past month, edging up 1.6 percent over the past for weeks according to government data. Analysts say lower pump prices have led some Americans to drive more. U.S. demand fell last year for the first time since 1991 as gasoline and crude prices raced to record highs, with further pressure coming later in the year due to the economic crisis.

The above graph shows five years of gasoline consumption in the world’s top consumer, compared with the average price for a gallon of U.S. gasoline.

This week we've brought you interviews with some of the world's best-known mining and steel companies. One thing that we've heard over and over again is: gold is king. Industry watchers say thinking of gold as an investment is not a bad idea. Check out Conway Gittens' story:

As the debate over "clean coal" rages on, General Electric is keen on offering up ideas to help coal transition from yesterday's polluter to a greener source of energy.
    
John Krenicki, the head of GE's energy infrastructure unit, says governments should invest in a dozen large-scale clean-coal demonstration plants in the United States, Europe, China and India. The plants would generate between 600-900 megawatts of power each and capture and sequester climate-changing greenhouse gases underground.
    
"We can change the game in coal for the next 100 years," he told Reuters in an interview.
    
Some environmental groups consider clean coal nothing more than a fairy tale. The technology to capture and store carbon in an environmentally safe way is commercially untested and not yet cost competitive, they say.
    
But the U.S. stimulus package provided $3.4 billion for fossil energy research and development. Some of these funds could resurrect the FutureGen pilot clean coal project that was abandoned last year.
    
President Barack Obama, White House Chief of Staff Rahm Emanuel and Transportation Secretary Ray LaHood -- all former Illinois legislators who fought hard for Illinois-based FutureGen -- are now in positions to push clean coal forward.
    
The United States must show leadership in this area if it expects the rest of the world to do its part to combat climate change, according to Krenicki.
    
"We're pursuing (projects) in the European Union and we're pursuing them in China, but the answer from most countries is, 'We'd like to see the U.S. lead,'" Krenicki said.
    
A 600 MW clean coal plant would cost more than $2 billion to build, but it would also create thousands of jobs in states hit hard by the economic downturn, he said.
    
Krenicki said the United States seems "paralyzed" by trying to jump to strictly green and renewable electricity generation from its dependence on fossil fuels. Clean coal, he says, is a needed evolutionary step to get the country out of the current stalemate to a green future.
    
Krenicki noted that with technologies like a smart grid and wind turbines the results are quick and easy for voters to see. "You can put points on the board so I think it's politically acceptable," he said of such projects.
    
"Some of these other technologies, like cleaner coal, you're doing it for the next administration, even if you're two-term," he said.

For more green business news, click here.

Photo credit: Reuters/Brendan McDermid (GE's John Krenicki); Reuters (A miner working at a coal mine in China)

Costs for ingredients like rice, wheat and oil are falling, so why are prices for breakfast cereals like Rice Krispies and Special K still rising?

If you want an answer to this question, you aren't the only one.

Food companies like Kellogg Co, which makes the products mentioned above, say the higher prices are justified because while commodity price inflation has eased amid a global economic downturn, commodity prices remain well above historical averages.

But CEOs of grocery chains like Safeway and Kroger say those higher prices are increasingly out of whack with their own lower-priced private label products.

"We have seen some price declines," Kroger Chief Executive David Dillon said on a conference call, but he said prices for national brands were not in step with a broader fall in commodity costs.

Dillon said sales of national brands were ho-hum, while sales of Kroger's store brands are rising enough to hit historic highs.

"That's going to continue as long as that kind of price differential exists," said Dillon, who expects national brand sellers to discount via promotions before they cut prices.

Dillon said there is no tug-of-war between grocers and food makers over pricing, but then again, he thinks his company will benefit either way. If national brands keep prices high, consumers buy more store-brand products, which produce higher profits. If national brands lower their prices, the grocer's overall sales could rise because it would be selling more expensive products.

"We are quite happy in either scenario," Dillon said.

While store brands result in lower total sales, grocers love them because they generate more profit. At the same time, they are favored by shoppers because they help them lower food costs during a severe recession.

Indeed, private label has become so popular that Safeway is rolling out its own line of seafood and prepared entrees called Waterfront Bistro.

(Picture: Reuters)

Call it the Congressional version of the lightning round.

Ron Kirk, the Obama administration’s choice for U.S. Trade Representative, had a rapid-fire confirmation hearing before the Senate Finance Committee on Monday that lasted no longer than 45 minutes.

“Exhilarating,” was how Kirk, a former Dallas mayor, described the quick experience, fittingly, in one word.

Senators had to compress the session to attend a vote on amendments to the omnibus spending bill.

Kirk started off by telling senators “It’s been a long and strange journey getting to this point,” but didn’t even make it through a shortened version of prepared remarks before he was urged by Finance Committee Chairman Max Baucus to wrap it up.

“I’m going to ask about four questions, and if you don’t mind, I’d like about 45-second answers,” Baucus told Kirk. He proceeded to ask how Kirk would promote bipartisanship on trade issues, enforce the U.S.-Canada softwood lumber deal, eliminate sanitary and phytosanitary barrier for farm goods, and whether a bilateral trade agreement with Panama was closer to passage than pending deals with Colombia and South Korea.

Baucus alloted Kirk “23 seconds” to explain how he would build support for trade among America’s middle class, which views deals as bad for the country, and later, “15 seconds” to talk about how he would enforce deals.

The Doha round of World Trade Organization talks, now dragging into its eighth year? No questions.

Baucus, along with Republican senators Chuck Grassley and John Cornyn, mentioned errors in Kirk’s tax return, but none of the senators used their precious seconds of time to question Kirk about his omissions.

Cornyn, who defeated Kirk in a 2002 race for the Senate, praised  Kirk’s record in Dallas and called him “the right man” to be U.S. trade representative despite the tax issue.

–By Roberta Rampton and Doug Palmer

Photo: Reuters/Hyungwon Kang (Kirk testifies at his confirmation hearing)

Northern Illinois saw the warmest days of the year last week after a long, cold winter. High temperatures climbed into the 60s Fahrenheit by Friday. Heavy rains into Sunday also helped melt remaining snow in the fields, add to summer soil moisture reserves and help remind the grain markets that corn planting in the heart of the Midwest will begin in less than a month.
    
The U.S. Agriculture Department is already surveying farmers on their planting intentions. Results will be issued in the government’s prospective plantings report on March 31, the annual benchmark for the markets to gauge supply. Traders generally use the March numbers against an average 5-year annual yield to pencil in expected U.S. grain output until the USDA’s August crop report, the next farmer surveys, gives more insight into actual yields and acreage after corn pollination has taken place in the Midwest.
    
So grain trade speculation in March, and CBOT prices, will gyrate with changing views among traders as to what plantings will be for the 160 or so million acres of U.S. land usually planted to corn and soybeans. Illinois and Iowa together count for about one-third of each crop.
    
At the moment, traders and analysts say that high-priced fertilizer combined with national crop insurance rates recently set at $8.80 a bushel for soybeans and $4.04 for corn will likely mean fewer corn acres and more soybeans than a year ago. The insurance targets are used as the base price to determine crop loss payouts, if necessary. As a reference point, CBOT November soybeans closed at $8.15 on Friday and December corn at $3.90-3/4.
    
“The producer has a safety net but it favors beans versus corn, bottom line,” said Don Roose, analyst and president of brokerage U.S. Commodities in West Des Moines, Iowa. 
    
Roose expects soybean acres to be up from the 75.7 million seeded last spring and less corn acreage than the 86 million planted in 2008, especially if the price of fertilizer — key to producing big corn yields  — does not come down soon.
    
“That’s the huge debate out here in the country right now,” he said, referring to the cost of fertilizers like DAP.  “The retail price is still around $850 to $900 a ton even though the wholesale price is $350 to $400.”
    
Retailers got stuck with exorbitantly high priced fertilizer last year, buying it last summer at its highs on supply fears. But farmers are not willing to pay $850 for corn fertilizer today. 
    
Movements in CBOT corn and soybean markets over the coming weeks will also help farmers finalize their planting decisions. The price ratio between new-crop November soybeans to December corn widened by mid-January to 2.36:1 — a level that made soybeans very attractive to plant –  as traders saw soy prices surge on worries that Argentina’s soy crop output would be cut due to drought.
    
The ratio has come back since then with Argentine rains and was down to 2.09:1 as of Friday’s close, a level which tends to favor corn over soybeans. The general rule of thumb is  that a ratio of 2.2 to 1 is the “indifference” point where plantings could go either way, says senior oilseed analyst Anne Frick with Prudential Bache Commodities in New York.
    
Regardless of the current CBOT price ratio, she too expects more soybean acres this year than 2008.
    
Private analysts will begin releasing their 2009 U.S. corn and soybean acreage forecasts this week.

Photo: Northern Illinois field taken by Christine Stebbins.