Unstructured Finance

Countdown for U.S. corn; How many will be switched to soy?

It’s crunch time for corn.

Grain traders are anxiously waiting USDA’s weekly crop progress report late Monday as it will tell the story of how U.S. corn was planted this season.

As of May 24, American farmers still had 15 million corn acres of a projected 85 million yet to plant as heavy spring rains in the eastern Corn Belt delayed planting by at least 10 days to two weeks in many areas. Midwest acres seeded after mid-May usually lose more than a bushel a day on yield.

“Analysts are wondering how many of the remaining 15 million acres will be planted to soybeans rather than corn,” Mike Woolverton, Kansas State University grain economist, said in his weekly newsletter. 

“The consensus guess is one million acres if it immediately stops raining in the eastern Corn Belt and Mid-south; up to two million acres if it stays wet,” he said. 

Midwest farmers are also bumping up against planting deadlines in their crop insurance plans. In Illinois — the No. 2 corn producer following Iowa and among the eastern Corn Belt states struggling the most — farmers have until June 5 to decide whether or not they are going to plant corn or cash-in on their insurance. 

Sensex extends rise above 14,500

INDIAThe Sensex ended the month with a flourish, closing 2.3 percent higher on Friday which helped it post the biggest monthly rise in 17 years as positive economic data lifted investor sentiments.

Helping the rally was better-than-expected GDP figure for the March quarter.

The top Sensex gainers included ACC, DLF and JP Associates, all gaining over 8 percent each.

Oil firms were in focus today, with the government indicating that it was likely to allow market pricing of fuels. HPCL shares surged 8.3 percent, IOC gained nearly 7 percent and BPCL ended 3.75 percent up.

How the financial crisis affected your cardiologist

CUBA-HEALTH/SICKOThe New Yorker’s Atul Gawande has an excellent piece this week about why healthcare costs vary from one city to another. Gawande focuses on the cultural reasons behind geographical differences in healthcare costs. In some cities, influential doctors or institutions have emphasized that medicine is a business so physicians should try to maximize their profits. In others, doctors and institutions have emphasized that medicine is a healing profession, so physicians should try to maximize the quality of the care they provide, even if that translates to lower income.
But there may also be a more economic element to the answer. Gawande notes that there is a correlation between doctors’ expenses and their healthcare decisions:

Brenda Sirovich, another Dartmouth researcher, published a study last year that provided an important clue. She and her team surveyed some eight hundred primary-care physicians from high-cost cities (such as Las Vegas and New York), low-cost cities (such as Sacramento and Boise), and others in between. The researchers asked the physicians specifically how they would handle a variety of patient cases. It turned out that differences in decision-making emerged in only some kinds of cases. In situations in which the right thing to do was well established – for example, whether to recommend a mammogram for a fifty-year-old woman (the answer is yes) – physicians in high- and low-cost cities made the same decisions. But, in cases in which the science was unclear, some physicians pursued the maximum possible amount of testing and procedures; some pursued the minimum. And which kind of doctor they were depended on where they came from….
(P)hysicians from the most expensive cities did the most expensive things.

It’s possible that higher costs force doctors to think more like businesspeople and make them at the margin more likely to try to maximize profits, while doctors facing lower costs can worry less about their income.
If that’s so, then consider the case of New York City. Cheap borrowing costs and lax regulations in this decade allowed the financial sector to become inordinately profitable. That, in turn, lifted wages for support personnel, real estate costs for doctors’ businesses and homes, and so forth, which in turn incentivized doctors to order questionable tests and procedures for their patients.
In other words, distortions in the financial sector may have contributed to inefficient resource allocation in the seemingly unrelated sector of medicine.
It’s the sort of contagion from the housing bubble that few would have predicted.

Opel, Magna in tentative deal

opel2Germany’s Opel might have a Canadian owner soon.

With its current owner, General Motors, facing a very-likely bankruptcy, Germany desperately wanted a new owner for Opel to save it from insolvency, save thousands of workers from unemployment and save the politicians from failing in re-elections.

After hours of talks with Italian automaker Fiat and Canadian auto parts supplier Magna International, GM has reached an agreement, in principle, to rescue the German unit.

The two sides have been trying to agree on a memorandum of understanding that would serve as the basis for bridge financing of 1.5 billion euros ($2.1 billion) as well as a trustee solution that would protect Opel from creditors in case GM files for Chapter 11.

The Office: More tragedy than comedy for UK banks

Pedestrians walk in the financial district of Canary Wharf in London March 24 2009. With property markets stabilising and hopes that the worst of the financial crisis is behind us, Europe’s banks are now looking to resolve their next biggest problem: 225 billion pounds of loans backed by UK commercial property.

As Sinead Cruise and I wrote earlier today, banks are now organising to sort through this massive debt pile, picking the good from the bad, foreclosing on properties and selling off what they can.

“Lenders have long turned a blind eye to breaches of covenants as long as they met interest demands by collecting rents. But they are now abandoning this softly-softly approach as the British economy worsens, planning foreclosures on a scale not yet seen in this cycle.”

Check Out Line: Diamonds no longer a girl’s best friend?

tiffany1Check out the quarterly results at jeweler Tiffany & Co. It’s enough to make one question  Marilyn Monroe’s choice in songs.

The company posted a slightly weaker-than-expected first-quarter profit and said sales dropped 22 percent as shoppers avoided jewelry. Companies like Tiffany and even more-affordable peers such as Zale Corp have seen demand hurt in the past year as consumers focus on buying necessities in the recession.

In a sign that maybe things are at least stabilizing, Tiffany maintained its full-year profit outlook. Even better, the U.S. economy contracted slightly less than initially estimated in the first quarter.

Liveblogging Chrysler in bankruptcy court

Reuters’ Emily Chasan will be sending live updates from the Chrysler sale hearing in U.S. Bankruptcy Court on Friday starting at 9 a.m. Read her updates on DealZone or follow the DealZone Twitter account.

Investment bank in hiring shock

Barclays Capital is thinking big. As Reuters banking correspondent Steve Slater wrote earlier:

“Barclays Capital, the investment bank arm of Britain’s Barclays Plc (BARC.L), will hire more than 750 staff this year as part of its plan to win leading positions in equities and M&A advisory, a top executive said.

“The bank, which bought the U.S. business of Lehman Brothers in September, is now expanding in Europe and Asia. It is also targeting a top three spot in prime services to take advantage of a retreat by rivals servicing hedge funds, he said.

Barc-ing up the right tree?

As the credit crisis has unfolded, many banks have trimmed their prime brokerage units’ lists of hedge funds clients in an effort to reduce lending and risk as fast as possible.

rtr23h6lHowever, as often happens, caution by some becomes a business opportunity for others — many smaller hedge funds, for instance, complain about the difficulty in getting a prime broker these days.

Barclays Capital president Jerry del Missier told Reuters this week the investment bank wants to take advantage of the shake-up in the industry.

Quality control

After last year’s record poor performance, investors may view a warning that the quality of hedge funds could get worse with a certain degree of irony.

rtxa3mqHowever, according to the Hedge Fund Standards Board’s chairman Antonio Borges, this is one of the negative effects on the industry that proposed EU laws could have.

What he calls the ‘protectionist element’ of the draft — whereby the EU market could be shut to fund managers from outside unless their host countries adopt similar rules — could mean large hedge funds in London gain a comfortable market position without having to face up to competition from the huge U.S. hedge fund industry.