Unstructured Finance

CBOT Grains Bide Time with Eye on Argentina, Exports

January 31, 2009

illinois-winter-corn-field1Corn, wheat and soybeans on the Chicago Board of Trade will likely keep within recent ranges in the week starting Feb. 2.
A deepening global recession which is easing demand for commodities, plus fewer investors in commodity markets, will continue to limit price volatility and, thus, trading.
The slide in the Dow industrials on Friday (down 148 points at psychological support at 8000.86) came after government data showed U.S. GDP for the fourth quarter fell at its fastest pace in nearly 27 years. That just underscored the economic crisis, since the U.S. economy is still the key engine for the world.
The mood on the CBOT trading floor has taken an 180-degree turn in the past year. As 2008 began, traders could not believe how volatile grains had become. They watched prices soar day after day on huge world demand for food and feed and biofuels, and hot Wall Street money flooded into commodities.
Today, the mood is subdued. Veteran traders are back to worrying about seasonal fundamentals, notably South American weather. Hot, dry weather in Argentina, the world’s third largest soy exporter and No. 2 in corn, roasted crops this month with yields likely down significantly from a year ago.
Traders now say Argentine soybean output could fall as much as 25 percent from last season and corn production could fall as much as 40 percent. The wheat harvest was already estimated to be the smallest in 20 years. 
But the jury is still out, hence the CBOT trading ranges.
Argentina also turned a little wetter this week with some expectations that crop conditions have stabilized. Soybeans have the greatest chance to benefit if the weather is milder in February, when the plants fill bean pods. So CBOT soybeans closed below $10 a bushel this week.
“We will be watching the weekend weather and the forecast for direction. But beans are also at the bottom end of the range, so a bounce is not out of the question,” one floor broker for soybean merchants said on Friday afternoon.
Up to 60 percent of the main corn and soybean region in central Argentina is expected to see light to moderate rains on Monday and into Tuesday. Then, it looks dry again, according to the late weather forecasts on Friday. So the on-again, off-again forecasts for Argentine rains will keep trade in soybeans a little more jumpy next week.
In contrast, “corn and wheat will continue to focus on demand, in particular into the export sector,” said grains analyst Shawn McCambridge.
U.S. wheat and corn prices are getting a more competitive in the world market — a switch from the recent trend. The U.S. Agriculture Department reported strong weekly corn export sales the last two weeks, with this past week a marketing-year high over 1.1 million tonnes. 
“Corn will also be looking at what takes place with the soybeans on acreage consideration for this spring,” McCambridge added. “While corn might not have the same fundamental support that soybeans would have on the South American concerns, we still can’t let soybeans get to far away from corn as we still need to secure enough acreage.”
Grain analysts have been tracking the price ratio between new-crop November soybeans and December corn in recent weeks. The rule of thumb is a ratio below 2.2-to-1 favors corn acres.
Another market factor that will get a little more play as spring approaches is the condition of the U.S. hard red winter wheat crop. The southern plains where the crop is grown is suffering from another dry winter. Last week the Texas state crop report rated 62 percent of the HRW wheat in poor to very poor condition. Texas will issue its next crop update on Monday afternoon and other key states, including top producer Kansas, will release monthly reports.

Princely Sums

January 31, 2009

(fixes typo in third paragraph)

MARKETS-STOCKS/Talk about the end of the salad days. The White House is pledging action against “irresponsible” bonuses for executives at bailed-out Wall Street companies and Senator Claire McCaskill has proposed a law to cap their compensation to $400,000 a year.OBAMA/

IPOs on horizon in February, but scant new filings in January

January 30, 2009

Bankers desperate for signs of life in the U.S. IPO market are likely to be buoyed that three are on the calendar in a single week in February, including a $562.5 million offering by Bristol-Myers Squibb offshoot Mead Johnson Nutrition. Hardly a deluge, but not bad after only one IPO in the past six months.

Terra Industries’ Maryland defense

January 30, 2009

maryland-defenseEven though fertilizer maker Terra Industries rejected a more than $2 billion takeover offer from rival CF Industries earlier this week, CF has said it is still committed to doing a deal.

Sensex ends 2 pct up after choppy start

January 30, 2009

The BSE Sensex saw a choppy start today but buying by domestic funds lifted it into positive territory.

New Star a timely boost for Henderson

January 30, 2009

Henderson bulks up

Henderson’s purchase of struggling New Star looks a good way of quickly beefing up its falling hedge fund assets — at a time when the industry is seeing investors pull out their cash left, right and centre.

Check Out Line: Clearing out the pantry

January 30, 2009

BRITAIN-WOOLWORTHS/CLOSINGCheck out people buying only what they use.
Remember when every time you went to the store you bought toilet paper, paper towels and other basics just so that you wouldn’t run out?
Well, those days appear to be gone.
As companies like Colgate-Palmolive and Procter & Gamble report earnings, one thing becoming clear is that consumers are now using up everything they have in their cupboards before buying replacements.
Call it “destocking,” “pantry deloading,” or “inventory drawdowns,” but whatever it’s called, it cuts into sales — for retailers and manufacturers. As consumers are using up the shampoo or soup they have on their shelves before buying more, retailers are also getting rid of excess inventory before buying more from manufacturers.
With the economy in recession, consumers have every reason to be frugal. On top of that, manufacturers have raised prices over the past two years in order to cope with soaring commodity costs.
But with fewer items being purchased, the next question is whether those manufacturers will have to lower prices to maintain market share.
Also in the basket:
GDP sees biggest drop in 27 years
Unilever faces slowdown just as new CEO takes over
 (Photo: Reuters)

Credit crisis advantage?

January 30, 2009

RocheThe credit crisis may just be the leverage Roche needs in its bid for Genentech.

The Swiss drug maker went hostile with its bid to buy the 44 percent of Genentech it doesn’t already own. But in a rather unusual move, it has gone to shareholders with an offer that is actually lower than the $44 billion bid it initially made for the U.S. biotech group.

Bringing it all back home

January 30, 2009

Two of the world’s biggest fund managers have decided that it may just not be worth their while being associated with running external fund of hedge fund businesses.