Bullish Agricultural News

Businessweek reports that Record Brazil, Argentine Soy Crop Hurt by Disease.
(emphasis mine) [my comment]
Record Brazil, Argentine Soy Crop Hurt by Disease: Week Ahead
February 01, 2010, 09:30 AM EST
By Lucia Kassai and Rodrigo Orihuela

Feb. 1 (Bloomberg) --
Soybean fungi are spreading across Brazil and Argentina, the world's second- and third-largest producers, threatening record crops as demand gains.

Argentine farmers confront an "unprecedented" outbreak of Frogeye Leaf Spot, which can cut yields by 12 percent and has reached the heart of the Pampas farmlands, said agronomist Luciano Ascheri. In Brazil, more than 1,200 cases of Asian Rust have been reported, compared with 636 at this time last year, according to Embrapa, a government agricultural agency.

Downpours caused by El Nino encouraged the outbreak, which may reduce supplies as global consumption rises by about 6.4 percent this year, according to the U.S. Department of Agriculture. Brazil estimates its harvest will rise to 65.2 million metric tons from 57.2 million last year, while Argentina's crop will rise to 53 million tons from a drought-hit 32 million in 2009, according to the USDA.
"The disease has spread out really quickly because of the rains, and may affect yields," said Embrapa researcher Claudia Godoy. In 2003-2004, the country's worst-ever outbreak destroyed 8 percent of the crop.

Frogeye is relatively new to Argentina's soybean farms,
said Ascheri, an agronomist at the Buenos Aires-based Argentine Association of Regional Agricultural Experimentation Consortium.
Prospects of bumper South American crops caused soybean futures prices to fall to their lowest in more than three months, declining 17.75 cents, or 1.9 percent, to $9.14 a bushel on the Chicago Board of Trade on Jan. 29.
"When the Brazilian and Argentine crops start entering the market in February and March, they will put a bit more pressure on prices," Flavia Moura, 34, a grains and soy analyst at Newedge USA LLC, said in a Jan. 27 phone interview from New York.

U.S. Production
Together, the two South American countries will export 33.9 million tons of soybeans in 2010, compared with 37.4 million from the U.S., where farmers will produce 91.5 million tons, according to the Washington-based USDA. [The US has already exported 25.5 million tons in first four month of 2010, and there are another 10 million tons of export sales outstanding.  Point is that the USDA's numbers are completely bogus.]

Both Ascheri and Godoy declined to give estimates of how many tons of soybeans may be lost because of the fungi.

Rains that benefited plant development in Brazil also created conditions of high humidity that favor Asian Rust, Godoy, 39, said in a Jan. 27 phone interview from Londrina, Parana state.

Brazilian farmers spent $1.7 billion in fungicides last year to fight the disease and lost 571,800 tons to the fungus, according to Brasilia-based Embrapa's Web Site. Asian Rust was first found in Brazil in 2001 and peaked two years later when it wiped out 4.6 million tons of the oilseed, reducing the harvest to 49.8 million tons.

Unprecedented Outbreak

Frogeye, which creates brown spots on leaves, thrives in humid weather, Ascheri, 31, said.
Downpours brought by the El Nino weather system, which broke a two-year drought across Argentina, are driving up the incidence of the fungus, Ascheri said in a Jan. 27 telephone interview from Monte Maiz, in the central province of Cordoba.
Cases of Frogeye, which last year were confined to southern Cordoba, are now being found in Argentina's main agricultural areas, Ascheri said.
"In some farms, Frogeye is likely to reduce yields by about 500 kilos (1,100 pounds) per hectare, when we expected as much as 4,000," said Ascheri.

Rains in Argentina have forced farmers to increase aerial spraying of crops as large tracts of land are too humid to use land vehicles, Maximiliano Zavala, an agronomist at the Buenos Aires Cereals Exchange, said in a Jan. 25 interview.

Parts of southeastern Cordoba have seen as much as 400 millimeters (15.75 inches) of rain since mid-December, Ascheri said.
"Some farms are swamped," he said.
[production in Argentina and Brazil won't be a disaster, but it won't be quite has good as hoped]

Orange juice rally 'could have further 50% to go'
The rally in orange juice prices may have a further 50% to run as economic revival whets demand at a time when frost, disease and grove clearance have dented Florida's output, Fortis Bank Nederland has said.
Juice prices, which have already doubled over the last year, could be poised to rise to $2 a pound for the first time since March 2007, the bank said, noting the "radical" transformation in the market's outlook since the depths of the recession.

It already looked like
output in Florida, which produces three quarter of America's oranges, would be "historically low", even before potential damage from summer storms is factored in....
11: 49 UK, 3rd February 2010, by Agrimoney.com
Squeeze on beef supplies to drive sector revival
Beef cattle farmers look placed for a better year, even if economic recovery proves weak, as US consumers compete with exporters for falling supplies of the meat, a leading academic has said.
Live cattle prices look set to recover the $9-per-hundredweight loss suffered last year, when weak consumer demand amid the recession had a "devastating impact" on the market, Purdue University economist Chris Hurt said.
The severity of the market's reaction to the downturn implied that "it may be possible for
even modest economic recovery, in the range of 3%, to have a surprising strong impact on rebounding cattle prices", Mr Hurt said.
And
in 2010, domestic suppliers would be competing harder with exporters, which are set to raise shipments from the US by 10%, according to US Department of Agriculture estimates.
'Healing' year

"This year is expected to be one of healing for a battered beef industry, as smaller supplies and recovering [consumer] incomes swing cattle prices upward," he said.

"Most cattle producers will approach this year with optimism."
Prices for finished steers would, in Nebraska, rise from an average of $83 per hundredweight last year to the low $90s by the spring.
Prices of steer calves had already begun recovering, reaching $109 per hundredweight in Oklahoma last autumn, a rise of $4 year on year, and on course to reach $115-120 a hundredweight in the second half of the year.

Herd shrinks

Beef supplies per capita in the US are set to fall by about 3% this year, Mr Hurt said, factoring in both the rise in exports and a continuing fall in production.
Even after a fall of 2.1m animals, or 7%, in the US beef cattle herd over the last decade, farmers still look intent on further shrinkage, to judge by the falling number of heifers being retained for raising into breeding cows.
"With smaller cow numbers,
the 2010 calf crop is estimated to be down 102% and will be the foundation for smaller production," Mr Hurt said.
21:13 UK, 25th January 2010, by Agrimoney.com
Sugar rally to last until 'at least the autumn'

Sugar prices are set to rally until at least the third quarter of this year, as buyers in a "relatively desperate position" compete for dwindling supplies of the sweetener, Barclays Capital has said, as prices hit 30 cents a pound for the first time since 1981.
New York raw sugar, which touched 30.10 cents a pound on Monday, will average 30 cents a pound in the second and third quarters of the year, the investment bank said.

And
the price looks poised to remain at least in the mid-to- low 20 cents-a-pound level entering 2011, evening assuming a jump of more than 40%, to 23m tonnes, in output from India, the second-ranked producer.

Prices below these levels "are difficult to perceive on the 12-month horizon because global stocks have been run down so sharply", BarCap said, noting world inventories at sufficient to meet 8.3 weeks' consumption compared with 20 weeks three years ago.
"The bull story for sugar is still firmly in pace for the next six months at least.... [and] it is difficult to perceive prices declining in the next harvesting year with any considerable momentum".
Output hits

The bank estimated sugar production matching demand of 167.0m tonnes in the 2010-11 marketing year, which starts in September- some recovery, but insufficient to rebuild stocks.
Global sugar market dynamics 2010-11 (year-on-year change)
Production: 167.0m tonnes (+6.4%)
Of which Brazil: 38.0m tonnes (+7.0%)
Consumption: 167.0m tonnes (+1.2%)
Year-end stocks: 26.5m tonnes (unch)
Source: Barclays Capital

Inventories are being depleted by a second successive year, in 2009-10, of consumption exceeding output, which has been dented by weaker-than-expected harvests in India, thanks to its weak monsoon, and in rain-soaked Brazil.
"The Brazilian harvest continues to disappoint, with above-average rainfall continuing into the New Year," BarCap said.

Although some Brazilian sugar mills had remained open in what is normally a close period,
"this is more in desperation to meet exist ing contract requirements than to provide additional supplies beyond current expectations".

'Relatively desperate position'

Demand, meanwhile, remained robust despite prices which remain near record highs in London and 29-year highs in New York.
Global sugar market dynamics 2009-10 (year-on-year change)
Production: 157.0m tonnes (+5.2%)
Of which Brazil: 35.5m tonnes (+11.3%)
Consumption: 165.1m tonnes (+2.2%)
Year-end stocks: 26.5m tonnes (-24%)
Source: Barclays Capital

"Many countries, not the least India, have been forced into a relatively desperate position in terms of import needs, because many of these countries' governments postponed [imports] during 2008-09 due to a perception that 2009-10 would see supply levels recover, and thus lower prices.
"However, the reality has been a worsening in the market balance. Import tenders are emerging on a regular basis to compete for an ever-decreasing supply of sugar."

'Expect nervousness'

Sugar traders have had the psychologically important 30 cents-a-pound mark in mind for months, since the extent of the market squeeze began to become evident.

The odds of it hitting that level shortened two weeks ago when selling by commodity index funds as part of an annual reweighting exercise failed to make much dent in the rally from prices as low as 20 cents a pound as recently as December 9. 

Bulls made "several attempts" to push sugar to 30 cents a pound
after the index fund reweighting finished, David Sadler at Sucden Financial Sugar said.
10:50 UK, 27th January 2010, by Agrimoney.com
Argentine wheat sowings 'may plunge further'

Argentina's wheat plantings, which fell to a century low last year, may plunge potentially by a further one-half thanks to government curbs which have accelerated a switch to other crops, Rosario Grain Exchange has said.
Such a shift would be likely to wipe Argentina - historically a bigger shipper of the grain than Russia and Ukraine put together - off the map of wheat exporters. [one of Russia's biggest competitor for wheat exports has been "wiped of the map"]

Farmers "aren't going to take a risk" on a crop which the government so tightly controls, with exports only permitted once domestic supplies have been assured, the exchange said in a weekly briefing.

The curbs, coupled with firm prices, only improve the attractions of soybeans, for which there is a 35% export tax but no restriction on volumes.
"The worst that could happen — and we're on that path — is that next [crop] year wheat plantings falls against and production is not enough to meet domestic demand," the report said.

Agrimoney reports that demand to lift crop prices.
08:54 UK, 30th January 2010, by Agrimoney.com
Demand to lift crop prices, with soy 'to jump 26%'
Growth in consumption will revive prices of corn and soybeans in Chicago, and drive wheat higher on both sides of the Atlantic, Commerzbank has said, at the end of a gloomy month for crop markets.
The German bank, forecasting that
a rebound on the global economy will whet demand for a range of food commodities, said that soybean prices would continue to be supported by strong Chinese orders.

"Given China's disappointing domestic soybean output and a continued rising demand, China's import needs will remain high," the bank said.

Despite strong production, Commerzbank said it was "cautiously optimistic" on prices, which would hit $11.50 a bushel during the last three months of the year — implying a 26% jump for Chicago's November contract.
[soybeans will go much higher than $11.50 during the last three months of the year.]

Ethanol demand
Corn prices would benefit from a more global recovering in its consumption, which is on course to rise by 4% this year on Washington estimates after almost stagnating in 2008-09.
Commerzbank's crop price forecasts fo r the fourth quarter
Corn: $4.50 a bushel
Soybeans: $11.50 a bushel
Wheat: $5.70 a bushel in Chicago, and E145 a tonne in Paris

"Moreover, nearly one-third of domestic corn output in the US is being used for ethanol production, and this volume is set to expand even further going forward," the bank said.

"This could push up prices," which were set to rise to $4.50 a bushel by the fourth quarter, 15% higher than Chicago's December lot closed at on Friday.

Wheat hopes
...
"One can safely assume that the attractiveness of wheat growing has suffered at currently low prices and that in major wheat growing countries the acreage for wheat will decline," Commerzbank said.
"Global wheat consumption, which hardly grew in 2009-10 due to the economic crisis, should benefit from lower prices and pick up again in the course of the coming months, supporting prices."
My reaction:  The supplies of agricultural commodities are going to experience squeeze across the board in 2010.
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6 Responses to Bullish Agricultural News

  1. dashxdr says:

    Jim Willie CB mentioned you again, Eric.

    http://www.marketoracle.co.uk/Article16987.html

    Some analysts have dished out criticism of an article written by the Jackass last May 2009 about hitmen coming to bust the COMEX. Eric deCarbonnel of Market Skeptics seemed to require the signed contracts with dates and ordered hits, even weapons used, methods detailed, blood spray patterns documented, in a very foolish rebuttal. Curiously, Eric deC has provided corroborating evidence to fortify my arguments, with details on irregularities in well written articles to cover events from London. Otherwise, he does excellent analysis.

  2. Sebastian says:

    What caused the big drop in gold price today?

  3. dashxdr says:

    The supplies of agricultural commodities are going to experience squeeze across the board in 2010.

    Will they, Eric? Will they really?

    I'm starting to question the effectiveness of keeping up on these things. Of maintaining a cat-like state of readiness waiting for The Big One.

    Every prediction of massive collapse has been wrong, by everyone.

    It's getting boring.

  4. Trader says:

    Desperate Jim Willie just refuses to admit He's wrong.

    Gold & silver is being defeated right now by the worthless FRN. :)

    Eric, you might be right, but just not in 1H of 2010.... of perhaps 1H of 2011.

  5. Mark says:

    I never quite understood why Jim Rogers thinks that there is a farmer/farm-credit crisis.

    Now I know:

    http://www.youtube.com/watch?v=v-zsIxqvTIo

    (simplified: high food prices in 2008 led to huge fertilizer applucation -- of which we now see the results -- gigantic yields -- and because of now rather low food prices that yield will IMHO come down from now on)

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