(emphasis mine) [my comment]

Friday, 6 March 2009
UK Wheat Closes Sharply Higher

EU wheat futures closed up Friday, with UK futures sharply higher on the outlook for a significantly lower crop in 2009.

Paris May milling wheat closed up EUR1.75 at EUR137.50/tonne, whilst London May feed wheat ended up GBP4.25 at GBP112.00/tonne.

Traders are starting to focus on a large reduction in the size of the UK crop in the coming season. [Really? A +20% drop in UK wheat food production might affect prices? Who would have thought]

With farmers reporting backward winter wheat is emerging from dormancy in relatively poor condition. A combination of late planting and cold and wet soil looks set to slash UK production to around 14mmt, maybe less.

Defra say that as a whole 14% less wheat has gone into the ground in England, with plantings in the west and the north most reduced. Overall 1.635m ha of wheat has gone into the ground in England. "Up north" things are even worse, 22% less has been planted in Scotland, they say.

With Cerestar's plant in Manchester having switched from maize to wheat in April last year, and the Ensus plant in Teeside set to be fully operational by harvest this year, there is 2 million tonnes more domestic wheat demand that didn't exist twelve months ago from those two plants alone.

And here we are, now facing a crop some 3.5mmt lower, and that is only IF we manage a decent yield of 8mt/ha. Just suppose yields are below average, as I expect they will be?

The last time we planted a crop of 1.635m ha was in 2001, that year production was just 11.58mmt. Let's hope we do end up carrying old crop into new, it looks like we're gonna need it.

Friday, 6 March 2009
Ukraine: Strangling The Golden Goose

What a difference twelve months can make. A year ago Ukraine was looking forward to a bumper grain and oilseeds harvest and cashing in on soaring world commodity prices.

Ukraine reaped a record grain harvest in excess of 53 million tonnes last year, 25.9 million tonnes of it wheat, propelling it to overtake Argentina (who in contrast had a disastrous wheat harvest) into fifth place in the list of the world's largest wheat exporters.

But twelve months down the line things look much different.

The wheat harvest in Ukraine will decline by 29.7% to 18.2mmt in 2009, according to the International Grains Council.

Ukrainian oilseed rape and wheat producing giant Landkom International PLC said today that it had been forced to raise £4.8 million from investors just to see it past this year's harvest.

The company increased it's plantings threefold for the 2008 harvest, increasing it's land bank to 115,000 hectares. This year things are much different, the company is said to be scaling back it's operations, cutting initial plans to sow 54,000 hectares this year down to just 34,000 hectares. Landkom says it has also postponed investments and expansion plans.

So why has it all gone horribly wrong for the Ukraine? Well, of course falling grain and oilseed prices have got something to do with it, but there is much more to it than initially meets the eye.

Businesses, and residents, in the Ukraine have made many painful adjustments in the wake of the global economic downturn. But as 2009 progresses, they are having to endure at least one more headache: aggressive tax collecting from a revenue-starved government.

Ukraine law says that businesses like Landkom can reclaim value added tax paid on grain that was exported and not consumed in the country.

There's just one small problem.

“When a tax officer came to do an inspection, they said to my accountancy team and auditors that they are laughing at us for claiming the refund, because the state simply does not have any money to pay us,” a Landkom representative is quoted as saying.

Tax experts say that the experience of Landkom is becoming increasingly common.

The tax authorities are said to be deliberately targeting medium to larger-sized businesses looking for supposed tax violations in an attempt to try to bridge a gaping budget deficit.

A recent report done by PricewaterhouseCoopers, the International Monetary Fund and the World Bank entitled “Paying Taxes 2009. The global picture,” ranked Ukraine 180th out of 181 countries in terms of the ease of paying taxes. Rampant red tape, corruption and the overall complexity of the tax system are the main problems in Ukraine’s tax system, according to the study.

Saturday, 7 March 2009
Ag Canada Cuts Wheat Planting Estimate

Ag Canada say that falling world prices and dryness will see Canadian farmers cut wheat plantings to 23.227m acres from 25.009 acres last year.

Western Saskatchewan and eastern Alberta have received less than half of normal precipitation since September 1st and need generous spring rainfall to aid planting and promote wheat growth.

All wheat area was pegged at 23.895m acres by Ag Canada in January.

Canadian all wheat output in 2009 is now predicted at 23.95mmt down 16% from 28.61mmt last year, and more than 1mmt below it's January estimate, said Ag Canada.

With exports of 16.90mmt in 2009/10 and domestic usage of 8.47mmt, ending stocks are seen tightening from 6.80mmt to 5.40mmt, they say.

The production estimate is very similar to the 23.90mmt predicted by the Canadian Wheat Board last week, and reflects a similar drop in production being seen in the US.

Monday, 9 March 2009
Monday Morning Grains

The grains markets are firmer Monday morning, adding to friday night's gains, with beans, wheat and corn all mostly 4-5 cents firmer.

US farmer selling remains light on soybeans forcing the cash basis higher. The USDA are out Wednesday with their latest S&D estimates, and some analysts are forecasting a cut in soybean ending stocks by around 25 million bushels.

The ongoing dispute between Argy farmers and the government is also keeping the nearby cash market tight as farmers their also sit on their hands, and their beans!

I wonder if we are starting to see a bit of a trend developing here?

Argy farm leaders meet with the government there again tomorrow when the thorny subject of the soybean export tax will no doubt be on the menu. As the government have already clearly stated that they will not be moving on the issue (because they desperately need the tax to pay the bills), it will be interesting to judge the farmers' mood after this one.

US wheat remains under threat from drought in the Southern Plains.

Monday, 9 March 2009
US Wheat Latest

Kansas, which accounts for almost a quarter of all US winter wheat production, is on the radar screens this morning as the winter-wheat crop emerges from dormancy and increases tillering. Drought in Texas is spreading north through Oklahoma and into the state.

[Not a pretty picture, is it?]



Abnormally dry conditions now cover 64% of the state, according to Allen Motew of QT Weather.

The past week saw highly variable weather conditions with some sub-freezing weather, record warmth, strong winds, rain, tornadoes and hail [Wow, that is quite some weather], he says.

The week ahead will be just as interesting with a brief warm-up before cold settles in with the chance of snow later in the week as temperatures will be far below normal by late this week, he adds.

Monday, 9 March 2009
Texas Asks For Drought Disaster Aid

Texas Governor Rick Perry asked for disaster relief assistance from the federal government on Friday for drought-stricken farmers across the state.

Parts of south and central Texas including the ranch lands around San Antonio and the state capitol Austin are suffering from their most severe drought on record, exacerbating the woes of the state’s cattle industry already been laid low by the country’s deepening recession.

Extreme drought conditions also exist across many other areas of the parched state, according to the U.S. Drought Monitor.

"Govvernor Rick Perry today requested that the U.S. Department of Agriculture provide disaster relief assistance for Texas farms and ranches that have suffered economic and physical losses as a result of severe drought conditions," Perry’s office said in a statement.

"If Perry’s statewide request is approved, qualified farm operators in all Texas counties will be eligible for low-interest emergency loans from the USDA. The agency also offers additional programs, such as technical assistance, to eligible farmers," the statement said.

Drought is also gripping much of the rest of the U.S. southwest, threatening farmers and water supplies in fast-growing cities.

In California, Governor Arnold Schwarzenegger last Friday declared a statewide drought emergency, urging the state’s cities to impose mandatory conservation measures to cut urban consumption by 20 percent.

Finally, here is last Thursday’s drought map from the US Drought monitor.

My reaction: 2009’s food output picture remains ugly:

1) UK wheat output set for a drop of at least 20% (14mmt from 17.5mmt), which will leave the UK with no wheat to export.

2) Because of two new wheat processing plants (the Ensus plant in Teeside and the Cerestar plant in Manchester), UK domestic wheat demand will increase by at least 2 million tonnes, which means England might become a wheat importer in the near future.

3) The wheat harvest in Ukraine will decline by 29.7% to 18.2mmt in 2009.

4) Aggressive tax collecting from a revenue-starved government are aggrevating Ukraine's falling wheat output. (Ukraine ranked 180th out of 181 countries in terms of the ease of paying taxes)

5) Canadian all wheat output in 2009 is now predicted at 23.95mmt (down 16% from 28.61mmt last year). With exports of 16.90mmt in 2009/10 and domestic usage of 8.47mmt, Canadian ending stocks are seen tightening from 6.80mmt to 5.40mmt.

6) The ongoing dispute between Argentinean farmers and the government is keeping the nearby soybean cash market tight. Farmers have been hurt terribly by the worst drought in decades and want the soybean export tax repealed. Meanwhile, Argentina's government desperately needs the export tax to pay its bills. It will be interesting to see what happens.

7) The drought in Texas is spreading north through Oklahoma and Kansas.

8) Kansas accounts for almost a quarter of all US winter wheat production and abnormally dry conditions now cover 64% of the state

9) Texas Governor Rick Perry asked for disaster relief assistance from the federal government on Friday for drought-stricken farmers across the state.

Parts of south and central Texas including the ranch lands around San Antonio and the state capitol Austin are suffering from their most severe drought on record

10) Drought is also gripping much of the rest of the U.S. southwest (just look at ugly charts above).

11) Finally, Governor Arnold Schwarzenegger last Friday declared a statewide drought emergency In California


Conclusion: The world seems destine for a food crisis this year.