(emphasis mine) [my comment]

18:15 UK, 29^th July 2010, by Agrimoney.com
Bunge warns on profits, after bad call on soybeans

Bunge maintained its knack for profits warnings, cutting its 2010 guidance for a second time, as the oilseed crusher admitted had been caught out by the "tight" soybean market.

Shares in the US agribusiness giant slumped by 13% to $46.88 in New York, wiping more than $1bn of its stock market value.
…

Wrong call

…
Gross profit at the group's Agribusiness crushing, marketing and distribution division, which is responsible for 80% of group revenues, slumped by 45% to $270m as slow farmer selling of soybeans, coupled with strong imports by China, kept prices firm, reducing Bunge's margins.

The group, admitted it had been caught off guard by the "tight supply situation", saying that its risk management strategy in oilseeds "had anticipated more balanced supply and demand in the quarter, considering the record soybean crops in South America".

Jacqualyn Fouse, Bunge's chief financial officer, added: "The global crushing environment is more challenging than expected."
…

Kory Melby reports that soybean premiums are leading the rally higher in Chicago.

Soybeans Today - Outlook For 2011
12 Jul 10

SOYBEANS TODAY

Soybeans keep rallying towards 11 dollars per bushel. Given the massive crops in Brazil, Argentina and soon to be ready USA, I am impressed by the ability of soybean market to hold these higher levels. Personally I would have thought we would be nearer 8 dollars by now.

Chinese demand and reluctant farmer selling are keeping port bids in Brazil firm. Soybeans are being offered for + 25 cents over May 2011 futures.
…

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Cash Soybean Shipments Via Paranaguá port
16 Jul 10

… Thursday's rally shook loose some soybeans. Impressive to see the soybean premium stay firm combined with rally in Chicago.

+1 dollar per bushel over Chicago September soybeans. + 40 cents per bushel over March 2011 Chicago soybeans.

This will shake loose the rest of the Brazil soybeans. ...
+95 cents per bushel over Chicago for spot soybeans at Paranaguá port
13 Jul 10

The premiums have lead the rally higher in Chicago.
…
Brokers in Amsterdam are expecting 11 dollar soybeans.
…

Soybean Basis Map for the Midwest

The Center for Agricultural and Rural Development (CARD) has been posting Daily Corn and Soybean Basis Maps for Iowa and the Midwest. The maps show both old crop basis and new crop basis. Old crop basis equals the current local cash price minus the nearby futures price on the Chicago Board of Trade. Local price data are obtained from DTN, and a spatial smoothing algorithm is employed to develop the maps.

Below is the latest graph from July 23. The orange and brown represent areas where soybean prices are above future prices.



It is easy to see that export demand (mostly China) is responsible for these premiums. Soybeans are transported down the Mississippi river for export, which is why soybean prices are higher the downstream you go. Buying by exporters at the mouth of the Mississippi is driving prices higher.

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Below is a batch of entries from Nogger. (visit Nogger’s blog to keep up to date about the 2010 food crisis. It’s a great source of info for everything agriculture.)

Friday, 9 July 2010
China Imports Record Volume Of Soybeans In June

China imported a record 6.45 MMT of soybeans in June, according to the Chinese National Grains and Oils Information Centre (CNGOIC).

That is a phenomenal amount of soybeans which ever way you look at it.

Imports month are expected to fall back a bit for the next few months as their own soybean harvest approaches. Even so at 5 MMT in July, 4.5 MMT in August and 4 MMT in September they're still at historically high levels.

Also of note is that the US seems to be getting a larger slice of the cake this year. Normally US sales to China would have dwindled to next to nothing in the summer months as they switch their attention to cheaper South American beans.

Friday, 16 July 2010
Is It 2007/08 All Over Again?
…
Many are now likening this to "2007/08 all over again", suggesting that this is only the first 26%, there's a further 74% still to come yet. Are they right? …

Friday, 16 July 2010
What Else Is Going On?

Russian crop estimates continue to decline with SovEcon now forecasting a grain crop of less than 75 MMT.
…
The insatiable Chinese Ministry say that, port congestion or not, they will import 5.8 MMT of soybeans this month. That would be the second highest on record, with last month being the highest. They love it don't they? Simply LOVE IT. Meanwhile, This year's wheat crop WILL be more than 115 MMT they confidently predict. Predict isn't the right word really, they are telling us because they've already written it in the book. This is despite floods, drought and frosts. They've also written another "bumper" corn harvest in the book as well, they say, gleefully informing us that they have already "minimised" the impact of the abnormal weather. I don't know how they keep a straight face, I really don't. What next, they're only buying soybeans, corn, wheat and barley in vast quantities to support the global economy?

Wednesday, 21 July 2010
Russia To Sell Off Intervention Stocks Domestically

Twenty three Russian districts have now declared state of emergencies due to what media reports are calling the "worst drought in 130 years".

Agriculture Minister Yelena Skrynnik has said that the government will sell "at least" 3 MMT of the state-owned intervention grain stockpile to "struggling meat and dairy producers in the drought-affected areas."

…
Meanwhile, some "enterprising" Moscow taxi drivers are now apparently charging their fares extra for using the air conditioning, according to some reports. More than 1,200 Russians are said to have died so far this month, mostly by drowning whist attempting to take refuge as temperatures reached near-historic record levels of 36.5C.

Wednesday, 21 July 2010
How Much Is That Piggie In The Pokey?

Those slippery snakes the Indian government have so much wheat that they are looking relax a ban on exports and get shot of some, according to media reports.

Yet at the same time Indian flour millers are importing wheat from Kazakhstan and Australia.

So what's going on here then?

[ANSWER: a good part of (if not all of) India’s wheat stockpile is inedible. (see *****THE TRUTH ABOUT INDIA'S WHEAT RESERVES*****)]

Thursday, 22 July 2010
Chinese Imports

Chinese customs data shows that the nation imported a record 6.2 MMT of soybeans in June, bringing the half year to date cumulative total to 25.8 MMT, a 17% increase on last year.

Imports from the US for the year to date are currently running at 13.8 MMT, 15% up on twelve months ago.

Only one cargo of US corn arrived in China in June, bringing net imports for the year to date to 88,000 MT, much more is in the pipeline for this month and beyond.

For wheat Jan/June imports are more than double year ago levels at 885,000 MT.

Monday, 26 July 2010
Haven't Seen The Word 'Awash' Just Lately
…
The USDA currently say that 2010/11 will finish with wheat ending stocks of 187 MMT, in round figures that's still 50% more than in 2007/08.

It's maybe more than slightly disconcerting however to note that almost half (48%) of this 187 MMT is in China, India, Egypt and Syria (2007/08: 42%). None of these countries are noted for their export prowess, and at least two of them are bent as a nine-bob note. Additionally the quality of these stocks is questionable certainly in the first two. China alone currently accounts for 35% of all the wheat ending stocks in the world (2007/08: 31%).

Based on those numbers it certainly seems that the world's wheat reserves are getting more concentrated into fewer hands, and seemingly those of traditionally non-exporting nations are holding an increasingly larger slice of the cake.

In the case of China we have a country with a proven track record of exaggerating production numbers. In the case of India we have a country with a long history of stock mismanagement. And Egypt hardly have an unblemished record in any category you wish to chose from. It seems fair to assume that a fair chunk of the world's wheat either isn't really there, or at the very least is well past it's sell-by date.
…

Tuesday, 27 July 2010
EU Grain Close

…
Futures opened lower, but soon rebounded once Russian analysis group SovEcon lowered their grain output estimate for the nation to 70-75 MMT, and warned that things could drop below 70 MMT.

Russian production estimates are dropping by as much as 5 MMT every week at the moment it seems. SovEcon didn't issue an estimate on wheat output, but the Russian Grain Union did, pegging production at only 45 MMT this season.

As the harvest progresses in Russia it seems that output predictions are dropping like a stone. One can only assume that something similar will happen in Kazakhstan too?

Things aren't as bad in Ukraine, but production there is also undoubtedly lower this year. That leaves the three main "let's just take whatever we can get" culprits looking at significantly reduced exports this season. Some are even suggesting that Russia will ban exports entirely.
…

Wednesday, 28 July 2010
It's All Kicking Off Again I See

London wheat is up sharply, with front month November setting a fresh 13 month high of GBP139/tonne, and November Paris wheat hitting a new two year high of EUR187.75/tonne.

Speculation that Russia's harvest is going to be so bad that exports will be at best slashed, and at worst banned entirely, seems to have got the funds all excited again this morning.

Up to now the government are playing things down, insisting that they will not need to introduce and export ban, and that national reserves are adequate to meet consumption this year.

The average Muscovite, their heads addled with vodka and partially fried by the hottest July temperatures on record, are worried about food price inflation.

A report on Bloomberg suggests that grain prices "may double this year because of the drought, according to the Grain Producers’ Union."

They quote on expert as saying inflation may hit 8.1% by the end of the year, against a government forecast of 6%.

Having had a vested interest in deliberately understating the size of their domestic crops for the past couple of years, it seems that the government have had good reason to overstate production numbers this time round.

It wasn't that long ago that they were confidently forecasting a grain crop in excess of 100 MMT. SovEcon yesterday suggested that in reality it could fall below 70 MMT. That's the entire exportable surplus wiped out, leaving "just" last season's carryover stocks of, allegedly, 24 MMT in reserve.

My spies tell me that 4 MMT of that probably doesn't really exist, and these are good reliable spies. So that leaves us 20 MMT, of which roughly half is in intervention, 3 MMT of which has already been pledged to be sold off cheap to the drought-hit areas.
…

Wednesday, 28 July 2010
Just Call Me Mystic Nog

I'm indebted to my chum Rudy at Bloomberg for being the first person to email me this breaking news.

Faced with the prospect of their chums at the five rouble store closing down prematurely, slimy no mates Egypt have suddenly decided that they will now allow French wheat shipments from more than one port after all.

With Russian wheat production estimates falling daily they appear to be suddenly looking to rekindle some old relationships, and realised that it's not always a buyers market.

I genuinely feel sorry for poor old Nomani Nomani, he must be sweating like a gerbil in a gay bar right now.

Thursday, 29 July 2010
Epic Wheat Devastation As Russian Crop Obliterated Shocker

The headline writers are enjoying an enthusiastic "hand shandy" at the moment it seems. This morning I particularly like:

"The global wheat crop is encountering problems of Biblical proportions, driving wheat prices to 13-month highs on Thursday morning."

Not just Russia but also Ukraine and Kazakhstan are "currently experiencing the worst drought in 130 years," they tell us.

Throw in a touch of "severe drought" mixed with a smattering of "bullish calamities" and we are staring to have shades of 2007/08 all over again here.

Meanwhile "even the Australians haven't been able to meet production estimates, as their crop is being threatened by locusts and a dry winter," we are helpfully informed.

Elsewhere "Bread may get more expensive in Ukraine" and "Heatwave drives Russians to the verge of panic purchases" blimey, we better get down the shops sharpish. Even if they only have a couple of cheese and onion with sun dried tomatoes and kalamata olive ciabatta's left, I'm having 'em.
…

Thursday, 29 July 2010
Are You Getting Deja Vu?
…

Thursday, 29 July 2010
Ukraine Blocks Wheat Exports

A report on Reuters this morning says that new export criteria introduced by the Ukraine Customs Service "effectively means a ban on wheat exports".

The new quality measures have apparently been brought into immediate effect.

Very interesting, Mr Bond.

What happens to existing sales? Nobody seems to know at this stage, presumably force majuere if the government introduce new rules preventing you from fulfilling existing obligations? Sellers will be happy to run with that line of thinking I'm sure. [anyone who was counting on wheat from Ukraine now suddenly needs to find wheat from somewhere else. Expect panic buying to grow as other countries begin restricting exports.]

Thursday, 29 July 2010
Show Me The Money

The Russian Institute for Agricultural Market Studies (IKAR) say that Russia won't export wheat from it's state-owned stockpiles (of around 9.5 MMT) "as domestic flour millers and livestock farmers are facing a shortage." That would leave a similar quantity of carryover stocks from last season still in private hands available to export, but they said that they "don't exclude" the possibility of a restrictive grain export duty from 2011."
…

Thursday, 29 July 2010
Russia To Start Importing Wheat From Egypt

Only kidding! So far.

Thursday, 29 July 2010
The IGC Smell Of Wee And Mint Imperials

Returning refreshed from an enforced month away on medication, the IGC have today cut their estimate of global wheat production by 13 MMT to 651 MMT.

It was only last month that they inexplicably raised it 4 MMT from their previous estimate saying that increased production in the US, China, Australia and Iran would more than compensate for losses elsewhere around the globe. They didn't call that one too well did they?
…
You wouldn't exactly trust them to rewire your house would you? …

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My reaction: As the I have been writing for months now, the world is heading towards an unprecedented food crisis in 2010. Once food inflation picks up in the US and around the world and the media begins to turn their attention to the problem, everyone will be horrified to learn that no one has any grain reserves. Then you will see TRUE panic. Panic which can’t be sweeped away by money-printing.

(emphasis mine) [my comment]

Fed admits dollars disappearing
Star-News - Google News Archive - Feb 11, 1986

WASHINGTON — A lot of U.S. greenbacks can’t be accounted for.

A study has concluded that $136 billion in U.S. currency — 88 percent of the total circulation—is missing.

In a comprehensive look at personal money-handling habits, Federal Reserve Board economists concluded that individuals over age 18 are holding $18 billion in U.S. coins and cash. That is about $100 per person.

That is, however, only 12 percent of the $153.9 billion of cash supposedly in circuiatAon. Where is the rest?

“I wish we knew where it was.” said Paul A. Spindt, a Fed economist and one of the authors of the study.

Fed economists know that part of it is in the cash drawers of legitimate businesses and some Is held by people under age 18. Neither group was included in the Fed survey.

Spindt said he doubted, however, whether the amount held by youngsters and businesses would total more than 15 percent. That leaves nearly three-fourths of U.S. currency missing in action.

One explanation is that part of the missing money is being u8ed in the “underground” economy, populated by those intent on evading income taxes by dealing on a cash- only basis.

This explanation, however, would account for only part of the funds, because even ill-gotten gains flow back into general circulation at some point.

Other studies have speculated that as much as one-third to two-thirds of U.S. currency winds up in foreign hands. The Fed economists made no estimate of how much has gone overseas, but speculated that a big part of the money is, indeed, being used by foreigners who would rather deal in the stable U.S. currency than In their own currencies.

“We do know that there are some very large shipments of U.S. currency going offshore to various destinations around the world,” Spindt said.

This money often ends up in areas with high inflation rates. In some Latin American nations, for instance, the citizens exchange local currency on the black market for dollars as a hedge against their own currency’s being devalued.

The study, published in this month’s Federal Reserve Bulletin, has important implications for the central bank in its efforts to control growth of the nation’s money supply.

The basic measure of money known as M1, is defined as currency in circulation and checking accounts. The $153.9 billion estimate for the amount of currency in circulation accounts for about one-fourth of the M-1 total.

If it turns out that a great deal of this money is no longer in the United States, the growth targets the Fed sets for M-1 would have to be adjusted.

The study concluded that the amount of currency in circulation, the $18 billion held by Individuals, is changing hands more rapidly than had been estimated. The study estimated this money was spent and replenished at a rate of about $420 per adult a month.

This turnover of money is known as velocity. In recent years it has failed to perform as policymakers had expected, blunting the effect of Fed efforts to manage money growth.

The study said 14 percent of American families operate on a cash-only basis but most family finances are handled through checking accounts which covered 57 per cent of all family spending.

The study said 42 percent of families have cards for automated bank teller machines but only 30 percent of families used the cards in the month before the survey.

The survey on financial patterns among U.S. families was conducted for the Fed from May to August 1984 by the Survey Research Center of the University of Michigan. which Interviewed 1,946 families.

“We need to take a more careful look at how money is being used in the economy,” Spindt said. He said the authors of the report are recommending that the survey of cash be repeated on a regular basis to get a more accurate reading of peoples use of money.

Confidence in the dollar was collapsing going into the 1980s (see some of my other entries), so why was the share of dollars held abroad increasing?



Answer: Iran-Contra

…
In the 1980's this meant cocaine producers routed their product through the privileged CIA-protected La Corporacion-Cali-Noriega-Contra coke pipeline, with a commensurate increase in volume and drop in prices (mentioned above). This was a monetary pipeline as well, with the producer economies receiving infusions of hard American currency. In that sense one commodity, cocaine, flowed north while another kind of commodity flowed south: hard currency. …

…
With that statement in mind, consider these quotes from ex-DEA agents like Michael Levine and Cellerino Castillo:

"For decades, the CIA, the Pentagon, and secret organizations like Oliver North's Enterprise have been supporting and protecting the world's biggest drug dealers.... The Contras and some of their Central American allies ... have been documented by DEA as supplying ... at least 50 percent of our national cocaine consumption. They were the main conduit to the United States for Colombian cocaine during the 1980's. The rest of the drug supply ... came from other CIA-supported groups, such as DFS (the Mexican CIA) ... [and] other groups and/or individuals like Manual Noriega." (Ex-DEA agent Michael Levine: The Big White Lie: The CIA and the Cocaine/Crack Epidemic)