Another batch of entries from Nogger's Blog, in chronological order.
(emphasis mine) [my comment]
Thursday, 20 August 2009
Sugar Back On The Up
After a couple of days consolidating from all-time highs hit late last week, London white sugar futures are back on the upside today, with October currently up $12.80, or 2.3%, at $570/tonne.
A report on Reuters suggests that the Indian government is set to introduce new legislation that would prevent large companies such as Nestlé and Coca-Cola carrying more than 15 days worth of supply of domestic sugar.
Such companies will however be allowed to stock imported sugar beyond 15 days worth of consumption, which will potentially lead to a sharp increase in imports.
India's farm minister said that sugar production prospects this season were "not bright" in the world's largest consumer, after the poor rainy season.
The government are also said to be considering raising the compulsory amount that local sugar mills must sell at low state-set prices from 10% to 20%, as it attempts to stave off rising food prices without having to dip into it's own coffers.
A neat bit of buck-passing initiative being shown there.
[Here is Sugar open interest over the last twenty three years
Completely insane right?
Thursday, 20 August 2009
USDA Weekly Export Sales
For the week ended Aug 13, the USDA today reported the following weekly export sales:
Net sales of 1,435,500 MT consisted of 577,000 MT of old crop and 858,500 MT of new crop. Japan (319,400 MT) and Egypt (184,800 MT) took the bulk of the old crop, with new crop sales primarily going to unknown destinations (237,500 MT), South Korea (171,000 MT), Egypt (120,000 MT), and Japan (106,200 MT).
Net sales of 858,000 MT included 274,900 MT old crop and 583,100 MT new crop. China (222,000 MT) took the lion's share of old crop with the bulk of new crop going to China (393,000 MT), and the alternative spelling of China "unknown destinations" (108,000 MT).
Net sales were 393,900 MT, of mostly old crop (358,900 MT) with Indonesia (58,000 MT), Thailand (52,000 MT) and Japan (49,700 MT) the main protagonists. Peru (25,000 MT) and Colombia (10,000 MT) booked 35,000 MT of new crop.
For soybeans per-report estimates ranged from 300,000 to 700,000 MT, for corn 700,000 to 1,000,000 MT, and for wheat 350,000 to 550,000 MT.
Friday, 21 August 2009
With monsoon rains as much as 60% down in some parts of the country, summer rice acreage is expected to be 15% lower, according to the Indian farm minister.
It would seem that the government are dragging their heels somewhat on their promise to release 3 MMT of wheat and 2.5 MMT of rice onto the domestic market.
They have also today said that they will release 3 MMT of subsidized sugar "by October".
Now my question is why would they be so slow on releasing state owned stocks?
It wouldn't be that they know that their backs are up against the wall, and in reality they haven't got enough wheat to see them through to the next harvest would it?
They don't want to come out & admit it ahead of the impending state assembly elections, but neither do they want to release stock that they know they are really going to need in a few months time.
PS when are the state assembly elections pencilled in for? Take a wild guess. Go on, it begins with an "O". [October]
Friday, 21 August 2009
We Had An Indian Last Night
Very nice it was too, special mixed Kashmiri Rogan Josh if you're asking. Ordered an extra portion of pilau and a naan whilst they still had any left.
Our chums at Dow Jones are carrying an interesting story today, in which they quote the Indian finance minister as saying:
"We are starting the year with good buffer stocks. The normal buffer stock for wheat is 4 million (metric) tons and for rice it is 5.2 million tons.
Excluding the 9.2 million tons of buffer stocks, India has another 3 million tons of wheat and 2 million tons of rice in strategic reserves, the minister added."
That makes 7 MMT of wheat and 7.2 MMT of rice on hand. Hardly bumper stocks by my reckoning in a country that consumes 6.5 MMT of wheat and 7.7 MMT of rice a month.
Reuters yesterday said that Indian wheat and rice stocks were 33 MMT and 19.6 MMT respectively at the end of July.
Quite a disparity, we'd better hope it's the latter not the former that's true.
Monday, 24 August 2009
Twenty Dollar Beans?
Bloomberg are car rying an interesting story this morning in which an analyst with Standard Chartered says that soybeans could yet rise to an all-time high of $20/bushel.
Confusingly he says that he is "a little bit more bullish than bearish".
I think that if I thought beans could hit $20 I'd describe myself as more than "a little bit" bullish. He doesn't mention a specific time frame in which this event might happen either.
Once the harvest kicks-off in the US surely there's nothing more to be bullish about with South America set to plant wall to wall beans for spring 2010?
He does make an interesting point about corn demand though, with sugar at 28-year highs in the US and all-time dollar highs in London, demand for corn syrup sweetener (and hence corn) should be very robust.
Monday, 24 August 2009
Monday Morning Musings, Fish And Alistair Darling's Pubes
The overnight eCBOT is sharply higher on beans, and modestly so on wheat and corn.
There is some talk this morning of drought adversely affecting corn and soybean production in northern China, with around 21 million acres of arable land said to be under threat.
What's that drought in China and India? Simultaneously you say? Both countries are sure going to need their much-touted grain reserves if that one comes home to roost. Let's hope that they really do exist.
China imported 85,000 MT of wheat in July, according to customs data. That's a sharp increase on just 373 MT imported in July 2008, and in Aug/Nov 2008 they didn't import any wheat at all.
The Indian government continue to delay releasing the promised 3 MMT of wheat from it's buffer stocks onto the domestic market, despite millers appeals and Ramadan boosting demand.
Can you smell fish?
Extreme hot and dry conditions are also seen adversely affecting corn output in Ukraine and Russia.
Incidentally, China also imported 4.39 MMT of soybeans last month, a 25% increase on a year ago and 133,000 MT of sugar, a fivefold increase compared to 22,000 MT in July 2008.
The UK recession is over, the Times triumphantly informs us today! Apparently the Institute of Chartered Accountants in England and Wales (or TOSSERS for short) say that all our problems are behind us. Hurrah! Link [I share this sarcasm 100%]
I can just imagine the smug "I told you I knew what I was doing" look on Alistair Darling's face right now. Never trust a man who's hair and eyebrows don't match, that's what my Mum always told me. Have you ever wondered what colour his pubes are? I've got my money on ginger.
Monday, 24 August 2009
Australian Wheat Starting To Hurt
The promised El Nino event which seems to have already kicked up a fuss in India, where monsoon rains are down 26% so far this season, now also appears to be hurting wheat Down Under.
Extreme heat over the weekend saw many parts of Queensland, New South Wales, the Northern Territory and South Australia set record August temperatures on Saturday, only to break them a day later on Sunday.
Cunnamulla, in the Maranoa, recorded 37 degrees on Sunday. That is a huge 16 above average and their hottest August day in 102 years of records. Bedourie, in the Channel Country, saw another 38 degrees, their third consecutive day above 36 degrees.
Late August would be equivalent to late May in the Northern Hemisphere, when wheat enters key developmental stages that demand heavy rainfall for the top yields, says Gail Martell of Martell Crop Projections.
Australia Needs Rain Urgently to Meet Crop Forecast
Monday, 24 August 2009
Soybeans: Are The US The Only Shop In Town?
Now here's an interesting thought, reports are reaching Nogger Towers than Brazilian soybean supplies on the open market have all but ran out.
Certainly export pace out of Brazil has been phenomenal with exporters keen to cash in on a combination of high Chicago prices, strong Chinese demand, the large-scale crop failure in Argentina and the big inverses that we've been seeing between front-end and deferred month contracts.
The rate of exports has been pushing up domestic premiums to such an extent that Brazilian crushers may soon be looking to import US beans themselves, according to some reports I am hearing.
It's happened before, and would explain why China (who reportedly bought 896,000 MT of US beans last week) keep coming back for more, all the other shops are shut!
My reaction: The world is running out of food before our very eyes. People are declaring the financial crisis over, although it has yet to even start. Believe me, everything that has happened so far is nothing compared to what is to come.
Now that I have finished analyzing open interest on US futures markets, my next step is to finish the major article which lays out exactly what I see happening. Below is a quick preview/outline to hold you over until I am done.
Stage 1: Pressure builds until commodity shortages reach breaking point
Stage 2: Deflation in US commodity markets
This is where the financial crisis really starts.
The reason why there has been tame inflation so far is that banks have been creating commoditiy (and stock) IOUs at the same rate they created dollar IOUs. As long as investors are willing to accept paper promises (like gold futures) instead of the real thing, inflation will not go out of control. However, when an event inevidably shakes faith in the US banking system, the world will see hyperinflation unlike any seen before.
ALL episodes of hyperinflations have been caused by rampant money printing. However, there has never before been a country which has leveraged every single assets class to the extent that Wall Street has done. The hyperinflation that is about to hit the US will be caused (at least initially) by deflation of commodity markets (gold, grains, etc...). The dollar's collapse will therefore be more rapid than any previous period of hyperinflation.
Manipulation of Commodity Prices
Believing commercial banks have been suppressing the price of commodities down is only thing that make sense. Consider the following:
1) Commercial banks have the ability to sell commodity IOUs in unlimited quantities, with no margin requirements or supervision. (This is fact)
2) Banks have been irresponsible in every aspect of their business that we know about (subprime CDOs squared, for example) and have no risk control. They are operating without reserve requirements thanks to an accounting gimmick (deposit reclassification). They also built up trillions in OTC derivatives and created overleveraged off-balance sheet financial vehicles (ie: SIVs, VIEs, etc...),
Logically, these banks are virtually guaranteed to have abused their ability sell paper commodities and have boxed themselves into a massive short position as a result. To support this claim, there is a mountain of evidence of manipulation.
Warped perception of risk in the market place
Right now, the entire commodity derivative market is built on the idea of no default risk. This is to say, investor are now taking default risks very seriously in the credit markets (after experiencing horrible loses due to financial crisis), but these concerns over counterparty solvency are completely absent in commodity derivatives.
We now have a twisted situation where insolvent financial institutions can't even sell bonds (promises to deliver dollars at a later date) without an FDIC guarantee, but those same financial institutions have no problem selling investors OTC commodity derivatives (promises to deliver commodities at a later date). While there is no transparency to the OTC commodity derivative market, simple logic dictates that financial institutions are taking advantage of the complete absence of risks premiums and cheaply selling enormous amounts of commodity denominated debt to meet funding needs. As long as counterparty fears remain absent from commodity derivative markets, the number of financial institutions turning to those markets for funding will continue to grow, causing the commodity credit bubble to grow ever larger.
Widespread deflation fears have undoubtedly made the commodity credit bubble worse. After all, if the price of commodities is expected to fall, why sell debt denominated in dollars? Selling commodity derivatives instead would make far more sense.
Unfortunately, as the credit crisis has demonstrated so far, reality eventually catches up with those selling debt they have no hope or means of repaying. Default will begin occurring on commodity derivatives, most probably COMEX gold futures [or soybean futures, or sugar futures]. Unlike the credit bubble, the fed will be powerless to stop deflation of the commodity credit bubble, as it can't print commodities.
The physical shortages in the face of growing demand will lead to the collapse of commodity paper substitutes. US futures markets, ETFs, unallocated gold account, etc will default in the face of soaring prices and the scarcity of their underlying commodity.
When the world loses confidence in US futures markets, commodity hoarding, especially in precious metal and food staples, will quickly result. This hoarding will provide further fuel for already rallying commodities.
1) Governments will build up their reserves, especially reserves of gold and grains.
2) Companies will build up inventories instead of holding cash
3) Investors will swap their dollars for gold
4) People will start stockpiling food.
What happens when everyone around the world tries to buy one month supply of food?
Stage 3: The collapse of US credit markets
Some U.S. embassies worldwide are being advised to purchase massive amounts of local currencies; enough to last them a year. Some embassies are being sent enormous amounts of U.S. cash to purchase currencies from those governments, quietly. But not pound sterling. Inside the State Dept., there is a sense of sadness and foreboding that 'something' is about to happen ... within 180 days, but could be 120-150 days."
Stage 4: *****The collapse of US derivative markets*****
Stage 5: The collapse of Wall Street
Wall Street's Financial Wizardry And Fraud
*****Bailout Insanity And Bank Arrogance*****
Stage 6: Dollar hyperinflation
Stage 7: US economic disintegration
Potential for Famine in the US
Potential for Famine in the US
One in nine Americans on food stamps
US Import Bubble
US economic disintegration