Commodity Corner

Views on commodities and energy

Locked out of car, cut finger breaks monotony on crop tour

    It was a case of keys being accidentally locked in the car, a cut to the finger by a corn leaf and a chat about hail damage at a scouting stop on the Pro Farmer crop tour on Tuesday in Carlton, Nebraska.
    And thus, the monotony of scouting a seemingly-endless number of corn and soybean fields in the Midwest grain belt was broken, momentarily, by these incidents.
    At the stop in Carlton, a U.S. Agriculture Department official, in the car behind ours, accidentlly locked his keys in his rented Hyundai.
    Then, this reporter deeply sliced his finger on the leaf of a corn stalk.
    While the government man borrowed a phone from another scout to call the rental company and I dressed my wound with a wet napkin and a bandage, the farmer whose bean field we were scouting pulled up in his pickup.
    Then, Rich Mosier, a broker with brokerage and research company Allendale, Inc., passing through from his home in Davenport, Iowa, stopped for a chat.
    All of the sudden, it was a veritable meeting of the minds on the side of Highway 4.
    With a locksmith on his way, talk returned to farming.
    Scout Elwood Line, our driver and a farmer from northeast Illinois, asked if Carlton farmer John Lange was a ‘John Deere’ man, referring to the farm machinery maker Deere & Co.
    “Both — John Deere and International,” Lange said. “International combine and a John Deere head.”
    Mosier said the crops in this area, especially the dryland fields, were first hammered by hail and are now thirsty for rain.
    “The dryland has suffered the last three weeks. We haven’t had any big rains,” Mosier said.
    After about 45 minutes, the locksmith showed up to jimmy the door of the Sonata.
    Asked how he was doing, the locksmith replied, “Better than you, I guess.”
    Corn yield in the field we scouted  was projected at 193 bushels per acre, while the soybean count was 1,034 pods in a 3-by-3 foot area.

Crop Tour-How We Do It

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Calculating corn yieldsThere is no one magic formula for unlocking the secrets of a corn field’s yield potential. There are lots of them.

 

“There are about as many yield formulas as there are ways of doing anything,” said Roger Bernard,  the leader of the eastern leg of the Pro Farmer Midwest crop tour.

Stocking up for the Crop Tour

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Crop Tour SuppliesIf you’re planning on coming on next year’s Pro Farmer Midwest Crop Tour, better start stocking up on supplies now. It takes a lot of equipment to measure a few ears of corn and count soybean pods. Scouts on the annual tour must be ready for nearly anything when they head into fields to gather data for estimates of this year’s corn and soybean harvest.

Let’s start at the bottom – boots.  Solid footwear is essential for tromping through rows of corn, many of which are expected to be muddy due to surplus rainfall around the Corn Belt. More storms are in the forecast for this week, good for crops but bad for crop scouts. A raincoat and pair of waterproof pants can make the difference between merely a bad day and a miserable one if it storms during the tour.

U.S. Soybeans in focus, with weather

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soybean-field-illinoisThe bearish sentiment that took over Chicago Board of Trade grain markets last week may continue in coming days, especially if nearly ideal greenhouse conditions continue to help maturing crops in the Midwest.
    
Confirmation by the U.S. Department of Agriculture of bumper corn and soybean harvests coming this autumn sent grain prices lower last week. But new export interest by China for soybeans or slide in the dollar could still buoy prices. 
    
Soybeans will grab the spotlight when the markets open on Sunday night after a huge dive on Friday as the CBOT August soybean contract expired 87-1/4 cents lower — or 7.4 percent — at $11, a two-week low. 
    
Disappointing monthly domestic soybean crush numbers along with big, unexpected last-minute deliveries against the August soy contract — a signal that some companies had secured enough cash beans for now before harvest — triggered the selling. 
    
“Beans are the market to be tracking the next few days. They remain the most jittery and lively all the grains,” said Gavin Maguire, an analyst with brokerage EHedger. “But they also have reached a very critical technical point. If we open lower (this) week, essentially the charts will have etched out a very bearish pattern.
    
However, if new-crop soybeans can hold chart support that “leaves the upside for another run,” he added.
    
Now that August soy contract has expired, traders will watch new-crop November beans for buy/sell signals. Key support in that contract, always the main “harvest” delivery each year, is seen at $9.80, a level penetrated late Friday. November closed just above that point at $9.81-1/2, down 37-1/4 cents. 
    
Given the price break, new sales to China of U.S. soybeans would provide support. Driven by China’s huge appetite, U.S. soy export sales with more than three weeks left in the season was already 104 percent of USDA’s forecast.
    
HOT AS ALWAYS, BUT RAINS EXPECTED
The weather remains the wild card that can always rattle traders, but the most recent forecasts late Friday indicated plenty of rain and heat across the U.S. Midwest — ideal conditions to promote corn and soybean growth and yields.

“We have to make sure this rain event develops as forecast, especially in the central and eastern Corn Belt next week — filling in the dry spots,” said analyst Dan Cekander at brokerage Newedge USA. 
 
Dry pockets being watched include southern Minnesota, northern Iowa and northwestern Ohio. But most of the Midwest has had more than enough moisture to enhance crop development following the coolest, wettest July in years. Corn went through pollination last month under perfect conditions, the main reason the USDA boosted its corn yield estimate by six bushels per acre to 159.5, just under the record of 160.3 bpa. 
   
As CBOT traders say: big crops get bigger. So if August weather is as nice as July was, the U.S. corn crop — now forecast as the second-largest in history at 12.76 billion bushels — may get even larger. Importers are quite aware of that. For soybeans, U.S. output is already projected to be the largest on record at 3.199 billion bushels. Soy would benefit even more than corn from rains in August, since beans fill pods out this month and mature a little later than Midwest corn. 
          
The annual Pro Farmer Midwest Crop Tour begins on Monday, giving traders another read on the U.S. corn and soybean harvest. USDA data last week was based on Aug. 1 conditions. Crop scouts this week will inspect and sample fields from Ohio to South Dakota and estimate final yields on Friday.

from From Reuters.com:

Mining gold in Russia’s remote Chukotka region

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Chukotka, a region revived in the last eight years by the $2.5 billion investment of Chelsea soccer club owner Roman Abramovich, produced a fifth of Russia's gold in the first half of this year. Gold is the region's passport to growth after Abramovich quit as governor last July.

Only South Africa holds more gold than Russia, but Moscow's fragmented industry has struggled to access vast reserves in its inhospitable Far East. The region was first mined in the 1930s by prisoners of the Gulags set up by Soviet leader Josef Stalin.

Spotlight on USDA crop report, then weather

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illinois-soybeansThe U.S. government’s long-awaited crop report on Wednesday will give world grain traders their first indications from field surveys of expected final yields.
    
With the United States providing more than a third of the world’s soybean exports and more than half of its corn exports, the U.S. Agriculture Department’s August report always grabs headlines. Until now, historical yield averages have been used to project likely harvests based on planted acreage.
    
Still, this particular August report may be trickier to interpret than usual, because corn and soybeans remain immature for this time of year given rain-delayed spring plantings and the unseasonably cool growing season so far in the Midwest. States across the Corn Belt from Ohio to Nebraska have seen their chilliest July in more than 100 years. 
    
Ordinarily, that might mean big yields, especially for corn which pollinates in July. As of Aug. 2, only 14 percent of corn was “doughing” after pollination, versus the five-year average pace of 29 percent, according to USDA weekly reports. For soybeans, August weather is usually key to yields as the crop sets and fills pods this month. As of Aug. 2, only 36 percent of beans had set pods compared with the 54 percent average.
    
Another twist for grain analysts will be a special survey of corn and sorghum acres taken in July that USDA has promised to examine “variable weather conditions” in key growing areas. 
    
“USDA’s crop report on the 12th will be a direction finder, anticipating what USDA has up its sleeve not only on acreage change for corn and sorghum,” said Joe Victor, analyst at  Allendale Inc. “You can not rule out the possibility that USDA might have some minor changes for soybean acres.” 
    
On average, grain analysts expect the government to cut its current planted corn area of 87 million acres by roughly a million acres. But given July Midwest weather they also expect USDA to boost corn production by 4 bushels per acre from its current yield estimate of 153.4 bpa. USDA already is forecasting the U.S. production at 12.29 billions bushels, the second largest on record after 2007′s 13.04 billion, and a record 3.26 billion bushel soy crop.
     
The August report is always key for grain production estimates. But demand, especially for soybeans, will also continue to draw huge interest. Analysts will watch for USDA’s soybean demand forecast, any fresh soybean purchases by China and changes in the bottom line: end-season stockpiles.
    
“U.S. soybeans and U.S. products are priced by far and away the most competitive on the world market, priced significantly better than Argentina and Brazil,” said grain market analyst Terry Roggensack of The Hightower Report.
    
Weakness in the dollar is part of the attraction for foreign buyers. But Brazil and Argentina, the second and third largest soy exporters, also now have limited supplies left. 
   
WEATHER WATCHERS 
Weather — not just in the U.S. but India — will be key for the markets before and after the USDA Wednesday data. Traders are getting edgy about scattered dry pockets in the northern Midwest, wondering if pod-filling soybeans will be hurt. But the grain belt is also supposed to finally heat up — just what corn needs now to boost maturation.
    
In India, crops are suffering from low monsoon rains.
    
“The initial impact of the bad monsoons has been mostly on sugar and rice,” Roggensack said. “The market’s focus now is … ‘What if the Indian soybean and groundnut crops are significantly damaged?’” 
   
“India is the biggest edible oil importer in the world,” he said. “If its yields are 15 percent, you’re talking about a huge impact on the world’s oilseed and vegetable oil market.”

PHOTO: Illinois soybean field taken by Chris Stebbins on Aug. 2.

from Environment Forum:

Calling Dr. Strangelove!

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Perhaps you've heard about the Russian submarines patrolling international waters off the U.S. East Coast (if you haven't, take a look at a Reuters story about it) in what feels like an echo of the old Cold War. The Pentagon's not worried about this particular venture, but there are concerns from the U.S. energy industry about another Russian foray -- this one in concert with Cuba. In rhetoric that may ring a bell with anyone who saw the 1964 satirical nuclear-fear movie "Dr. Strangelove,"
the Washington-based Institute for Energy Research is sounding the alarm about a Russian-Cuban deal to drill for offshore oil near Florida.

"Russia, Communist Cuba Advance Offshore Energy Production Miles Off Florida's Coast," is the title on the institute's news release. Below that is the prescription for action: "Efforts Should Send Strong Message to Interior Dept. to Open OCS in Five-Year Plan." OCS stands for outer continental shelf, an area that was closed to oil drilling until the Bush administration opened it last year in a largely symbolic move aimed at driving down the sky-high gasoline prices of the Summer of 2008.

Saudi takes away a source of monthly dread

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Every month the world’s leading oil exporter Saudi Arabia sets official selling prices for its crude. It is an event of major importance for physical oil traders — and, until very recently, of major dread for energy reporters.
For years, the Saudi prices were among the most difficult pieces of information to track down and relay in a timely and accurate fashion.
As if sensing that pain, Saudi state oil company Aramco in June started to issue the prices by email.
The relief for traders must also be considerable. They are no longer bombarded with the question “are the Saudi prices out yet?” and no longer saddled with the task of rattling out a long, complicated list of numbers, all too easy for a reporter to misreport.
Release by email should be more accurate, help to improve transparency in the oil market – and be smoother for all concerned.
Well, in theory. In July, Aramco emailed the August prices to Reuters correspondents in London, who were out of the office for the weekend, and not to those in Dubai, who were hard at work. The official release also omits a couple of the many prices — but perhaps Aramco takes the view reporters should be left with something to do.

Dollar, exports and weather to dominate CBOT grains, oilseeds

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corn-field-roadGrain traders will be gearing up this week for the biggest crop report of the summer on Aug. 12, leaving the door open for plenty of volatility in Chicago Board of Trade grain and oilseed markets. 
  
That will be the first time the U.S. Department of Agriculture forecasts the size of the 2009 U.S. corn and soybean crops based on actual field surveys, rather than historical yields.
    
“The markets take on a life of their own in advance of these crop reports,” said Rich Feltes, senior vice president of MF Global Research. “I think we would be able to hold the value of soybeans fairly well going into the crop report. 
    
“But I would think the corn market … is going to struggle unless the weather looks adverse. Wheat is going to be tailing around with corn.” 
    
Soybeans continue to be buoyed by USDA’s outlook for U.S. soy stocks to slip to a 32-year low of 110 million bushels by the end of August, when the 2008/09 marketing season closes, given brisk export demand. Some analysts say soy stocks could get even tighter given China’s voracious demand. USDA last week said China booked another 1.9 million tonnes of U.S. soybeans, including 120,000 tonnes from rapidly dwindling 2008 harvest supplies.
    
For corn, the story remains perfect growing conditions in July, when most of the crop was pollinating. That spells big yields. Wheat still looks pressured by poor export demand and prospects for USDA to raise its 2009 U.S. output estimate. 
    
Given last spring’s delayed corn planting, many analysts expect USDA to trim its corn harvested acreage figure on Aug. 12. But given the excellent recent growing weather, that cut is not likely to translate into an overall smaller corn crop. 
    
“An increase in yield could more than offset a decline in acreage,” said Brian Basting with Advance Trading, a Bloomington, Illinois, brokerage and farm adviser.
    
In July, USDA said it expects U.S. farmers will harvest the second-largest corn crop on record at 12.29 billion bushels, at an average yield of 153.4 bushels per acre. Soybean output is forecast at a record-large 3.260 billion bushels. 
   
DOLLAR FALLS, GRAINS RISE 
Positioning before the crop report “along with the outside markets, the U.S. dollar in particular, will continue to drive our views,” said Dan Basse, president of AgResource, a  consultant in Chicago.
     
The dollar slid to its lowest levels of 2009 on Friday as an unexpectedly small contraction in the U.S. economy fed some economic optimism and curbed safe-haven demand for the dollar. Not surprisingly, the Reuters-Jefferies CRB index <.CRB> of 19 commodities rose to a six-week high during the week. 
    
If the dollar sinks further in the coming week it will remain a buy signal for commodities. A weak dollar makes U.S. exports such as grains cheaper for overseas buyers. 
    
A yellow flag for speculators, however, will remain the rising chances for government regulation in the free-wheeling commodity markets. The Commodity Futures Trading Commission will resume hearings on Wednesday, keeping markets on edge.
    
Another factor: commodity index funds, sizable “long-only” traders from their mandated index holdings, will on Friday begin rolling forward their September futures positions.
    
Last week, CBOT August soybeans rose 11 percent to close at $11.34 a bushel, powered by export demand. Corn and wheat were lifted by the strength in soy and by the falling dollar. September corn closed up 7 percent for the week at $3.39-1/2 while September wheat finished 2 percent higher at $5.28-1/4.

PHOTO:Northern Illinois corn field taken August 2 by Christine Stebbins

from India Insight:

Ambani rivalry spills over at shareholder meeting

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Anil Ambani on Tuesday used an annual shareholders' meeting to lay into his older brother and the government for good measure, over the issue of gas pricing which is at the heart of the most recent spat between the fighting Ambani brothers.

Anil charged Reliance Industries, India's top private-sector conglomerate run by estranged brother Mukesh, had used every trick in the book, and some outside the book, to feed its "greed", and was firing from the shoulder of the oil ministry that he claimed was being "partisan".