GRAINS-Soy jumps to 1-week top, new-crop corn hits contract high

Mon Jul 30, 2012
* Soy, corn rise over 2 pct, build on Friday's gains

* Drought, heat to shrivel U.S. soybean, corn crops

* Soy in key phase, some corn damage beyond repair

* Market eyes crop deterioration in USDA report
By Naveen Thukral
SINGAPORE, July 30 (Reuters) - Chicago soybeans jumped to a one-week top on Monday, while new-crop corn rose to a contract high as the worst drought in five decades continued to threaten crop yields across the U.S. grain belt with little relief expected this week.

Wheat rose 1.7 percent to its highest since Tuesday, buoyed by the rally in corn and production concerns in South America and the Black Sea region.

"There is no weather relief this week as there are no rains in central and southeastern corn belt until the weekend and temperatures will remain above average," said Victor Thianpiriya, agricultural commodity strategist at ANZ.

"The market needs to ration demand."

Chicago Board of Trade new-crop December corn rose 2.6 percent to $8.14 a bushel by 0534 GMT, after touching a high of $8.14-1/2 a bushel, a contract high. Actively traded November soy gained 2.3 percent to $16.37-3/4 a bushel, the highest since July 23.

September wheat added 1.7 percent to $9.13 a bushel.

Soybeans, along with corn and wheat, posted their first weekly decline last week since the worst drought in 56 years started boosting prices about a month and a half ago, spurring corn and soybean futures to record highs.

The agricultural markets have resumed their rally since Friday as reports of crop damage poured in.

The U.S. drought has left corn plants withered and dying, and crop yields in the largest producing states will be much lower than experts have forecast, scouts said on Friday as they completed a U.S. Midwest crop tour.

Crop forecasters Lanworth, a unit of Thomson Reuters, and Informa slashed their yield estimates for both corn and soybeans on Friday, illustrating the effects of the drought.

More than half of the contiguous United States is experiencing drought, which is centred in the Midwest that produces 75 percent of the corn and soybeans in the world's largest grain exporting nation.

While soybeans are in their crucial yield-determining phase, the bulk of the corn crop is past the phase of pollination with rain at this stage of development unlikely to make much difference.

Price direction for CBOT grains could come from the weekly crop progress report from the U.S. Department of Agriculture later on Monday, which analysts are expecting will show a marginal downgrade in the corn and soybean crops.

There were expectations for the USDA report to show the soybean crop in good-to-excellent condition to fall 1 to 2 percentage points from the previous week's 31 percent. Ratings have dropped four straight weeks as the drought intensified.

The corn crop, along with soybeans, are rated to be in the worst condition at this time of the year in nearly 25 years due to the onslaught from the drought.

Traders will also be watching how much of the demand for corn has been dented by the surge in prices, particular from the ethanol sector where production has begun to decline.

The wheat market has been largely driven by the rally in corn futures but there are growing concerns over supplies from the Black Sea region and South America.

Dry weather in some wheat-growing areas in Argentina has begun to affect the 2012/13 crop, which farmers have yet to finish planting, the farm ministry said on Friday in its weekly crop progress report.

The country is the world's No. 6 wheat exporter and the top supplier to neighbouring Brazil. The government expects farmers to seed 3.8 million hectares with the grain this season, down from 4.6 million hectares last season.

  Prices at  0534 GMT
  Contract        Last    Change  Pct chg  Two-day chg MA 30   RSI
  CBOT wheat     913.00    15.00  +1.67%    +1.67%     845.36   65
  CBOT corn      814.00    20.75  +2.62%    +2.62%     727.14   67
  CBOT soy      1637.75    36.00  +2.25%    +2.25%    1543.98   62
  CBOT rice      $15.71    $0.11  +0.71%    +0.71%     $15.22   64
  WTI crude      $90.55    $0.42  +0.47%    +1.30%     $85.59   62
  Currencies                                               
  Euro/dlr       $1.229   $0.017  +1.39%    +1.12%
  USD/AUD         1.046    0.010  +0.99%    +0.88%
  Most active contracts
  Wheat, corn and soy US cents/bushel. Rice: USD per hundredweight
  RSI 14, exponential

(Editing by Himani Sarkar)

Grain prices bounce on lowball Lanworth yield data

27th Jul 2012, by Agrimoney
Grain and oilseed prices revived as Lanworth lowered the bar further on US corn yield forecast, putting it on course for a 17-year low, and hopes faded for crop-stabilising rains in the drought-hit Midwest.

Corn for August delivery jumped back above $8.00 a bushel at one point, with wheat retaking the $9-a-bushel mark and soybeans gaining nearly 3%, as already-poor expectations for the US corn crop took a further knock.

Lanworth - whose forecasts, which employ advanced analysis satellite imagery, are closely watched by traders – slashed its estimate for the US corn yield to 122.0 bushels per acre, from an estimate last month of 136.8-157.4 bushels per acre.
The forecast would represent the weakest result since 1995, and is lower than estimates from many other analysts, although a crop  tour by broker Doane pegged the yield in Iowa at 117 bushels per acre.

Doane said: "Plants have turned color and in some cases will be ready for harvest within a few weeks.

"The stress has reduced ear counts and ear size resulting in very poor yield potential."

Iowa is the top corn producing state in part because of elevated yields, which average 172.0 bushels per acre last year.

Influential crop-watcher

"Lanworth are not the kind of people to look at the glass half full. But people watch what they say," a commentator at a major broker told Agrimoney.com.

"It is not just eye in the sky stuff. They back up what they say from on-the-ground observation too."

Separately, Informa Economics, renowned as a conservative forecaster, reduced its corn yield estimate to 134 bushels per acre.

Jerry Gidel, at Rice Dairy, said: "That caused a bit of profit-taking, but the market recovered that ground."

Rice Dairy on Thursday, following a crop tour, estimated the yield in southern Illinois at 122 bushels per acre, and at 130 bushels per acre for the state as a whole, the second biggest producer after Iowa.

Earlier this week, University of Iowa agricultural professor Elwynn Taylor estimated that the market was trading a yield of about 136 bushels per acre, which tallied with his forecast, while a Reuters poll of analysts pegged the yield at 130.8 bushels per acre.

Soybean prospects

Lanworth also cut its forecast for the US soybean yield, to 35.7 bushels per acre, which would be the worst result since 2003.

Informa reduced its forecast to 38.5 bushels per acre, in line with the Reuters figure released earlier this week of 38.6 bushels per acre.

Informa estimated the US soybean harvest at 2.9bn bushels, with the corn harvest pegged at 11.5bn bushels.

Doane pegged the soybean yield in Iowa, which is also the US top producing state for the oilseed, at 39 bushels per acre, down from a harvest result of 50.5 bushels per acre last year.

'Extreme heat'

Futures got extra support from the removal of some rain from forecasts for the US Midwest forecast for the one-to-five day horizon, for which the GFS model had shown a band of rains, of 1-2 inches, running from Iowa on to Missouri, southern Illinois and western Kentucky.

"The European model does not have this feature, and the new GFS has taken this band of significant rain out of the forecast all together," weather service WxRisk.com said.

The need for moisture was highlighted by the latest US drought monitor data which showed larger areas of the US branded in "severe" or "extreme" drought as of July 24 than a week before.

"This is disheartening, considering that rainfall increased last week in some northern and eastern Midwest crop  growing areas," Gail Martell at Martell Crop Projections said.

"Extreme heat has been the enemy of corn," she said, noting that US this month's temperatures were "on track to set a new record" for July, having average 80.1 degrees Fahrenheit so far.

Rains hurt both quality and quantity of UK wheat

27th Jul 2012, by Agrimoney
UK wheat farmers face a double whammy of a crop with below average yields and threats to quality too thanks to poor weather, which is to drag rapeseed results below last year's as well.

Wet weather, which this month has seen rainfall hit more than double average rates, "has increased incidence" of infections on wheat ears by the fusarium fungus, and "resulted in continued development of [leaf] diseases", the Adas crop consultancy said.

Furthermore, in cutting sunshine levels to 50% of normal, the conditions "will have limited photosynthesis" for the crop, the European Union's third biggest.

"In the past, a lack of sunshine has not correlated with low yields, although this year may prove to be exceptional," Adas said.

With lodging, the bending over of crops, typically under hail and rain, also a setback "average yields could end up slightly below the UK five-year average" of 7.8 tonnes per hectare.

'High fungal toxin risk'

And while some weather conditions,  typically hot ones, can compensate for lower yields in raised crop specifications, "winter wheat  quality could be very variable this season", Adas said.

The specific weight of the crop – its mass per fixed volume – is threatened by fungal infections, "known to cause shrivelled grain", unsuitable for producing flour.

"Given the wet weather at flowering and the increasing levels of fusarium in many crops this could be a major factor influencing quality this harvest," Adas said in a report for the HGCA crop bureau.

Meanwhile, there was a "high risk" of the development of myotoxins – toxic fungal residues which in large enough concentrations can render crop unfit even for feed.

And protein levels may be depressed too, given that "wet years and early nitrogen uptake tend to correspond with lower protein contents", the briefing said – although on this score, infections could hold some benefit.

"Overall, grain protein levels are expected to be below average, except where late disease leads to poorly filled grains, lower yields and higher protein contents."

Even the recent dry spell could hold setbacks, in causing temperature stress which can cause the release of enzymes which break down starch, a factor measured by the Hagberg falling number, with affecting bread-making qualities.

Lower rapeseed prospects

The "baking heat" of the last few days presented a risk to rapeseed too, in causing a rapid drydown which has increased the risk of cracking, and seed loss, on harvesting, the consultancy warned.

However, a bigger risk was from lodging, which "can reduce yields by 15-50% in affected areas due to poor sunlight interception, and can make harvesting slower and more difficult".

One-half of the UK rapeseed crop has bent over to some degree, a reflection of strong early growth which left the crop vulnerable to wet and windy spring weather.

"Yields overall are not expected to be as high as recent years," despite coming in at 3.3-3.7 tonnes per hectare from early cuts, above the average 3.4 tonnes per hectare.

Better for barley

Barley farmers appear to have come out better from the conditions, facing "reasonable" yield prospects for the winter crop, a forecast "supported by early yields ranging from 6.1-7.2 tonnes per hectare".

"The indicators for malting quality seem good" too, with "wet years often associated with low grain nitrogen concentrations" preferred by brewers.

For spring barley, "malting quality prospects are good for most of the early drilled crops where nitrogen was applied early", Adas said.

Romania dents further Black Sea wheat export hopes

27th Jul 2012, by Agrimoney
The Black Sea region's grip on world wheat exports took another knock with a warning of a drop in Romanian shipments, where hot weather has cut the harvest by 30%, besides damaging corn and sunflower crops.

Romania faces a slump to 4.95m tonnes, from 7.2m tonnes, in its wheat harvest this year thanks to a long spell of hot weather, interrupted only by a wet May, US Department of Agriculture staff in Bucharest said.

"The impact of the dry period remained visible in wheat height and density," they said in a report. Their estimate was lower than the 5.3m tonnes forecast by the International Grains Council on Thursday.

The decline, and farmer hoarding spurred by rising prices, have cut the supplies available to export from a country which achieved prominence last season in securing shipments to Egypt, after winning approval as a wheat provider to the world's top importer of the grain.

"Given the market attitudes of producers, less wheat volume is expected to flow into export channels," the USDA staff said.

Regional setbacks

The comments continue a drop in expectations for wheat shipments from a Black Sea region, especially Russia and Ukraine, which has come to represent a source of ready and competitively-priced supplies of the grain.

In Ukraine, where wheat production hopes have been slashed thanks to winterkill and extended dry weather, Ukrainian Agribusiness Club sees exports falling to 2.5m tonnes this season, from 5.3m tonnes in the newly-finished 2011-12.

Ukraine, which chalked up wheat exports of 13.3m tonnes four seasons ago, achieved wheat shipments of 4.3m tonnes in the notorious drought season of 2010-11.

Crop downgrades

Russia - where a food security committee chaired by Deputy Prime Minister Arkady Dvorkovich will on August 8 hold a meeting on grains - continues to be surrounded by talk of an export ban, despite efforts by the like of the Russia Grain Union industry group to downplay the threat.

At US broker Market 1, Mike Mawdsley said: "Will Russia tax or ban exports? Looks like they aren't yet.

"But stay tuned, this could be a very bullish development for wheat if Russia decides to restrict to tax their sales,"

Russia's state forecaster on Friday cut to 77m-80m tonnes, from 83m-86m tonnes, its forecast for Russia's grains harvest, citing drought, if remaining above an International Grains Council estmate of 76.9m tonnes.

Kazakhstan on Monday cut its forecast for its grains harvest to 12.8m tonnes, approaching a post-Soviet low.

'Stressed plants noticeably'

The USDA staff also warned that dry weather had "stressed corn plants noticeably", noting that some farmers have warned of yields losses of up to 50% if rain does not arrive this month.

Romania's corn crop, the European Union's second biggest, and ranking in the global top 10, was pegged at 8.8m tonnes, a decline of 16.2% year on year, if above some other estimates.

Attempts to rebuild an oilseeds harvest by sowing sunflowers - after winterkill left only 85,000 hectares of rapeseed surviving in the spring from 360,000 hectares sown in the autumn – had also snagged on the hot weather.

While sunflower sowings had risen by 12% above 1.1m hectares, boosted by plantings on ploughed-in rapeseed fields, "the additional acreage is unlikely to be translated into much additional output", the bureau said.

"The average yield is expected to drop to 1.5 tonne per hectare compared to 1.8 tonne per hectare last year. Similar to corn, if no precipitation is received soon, the crop situation will decline further."

Soybean Import ‘Cartel’ Under Fire as Policy Debate Rages

Arientha Primanita, Ezra Sihite, Ronna Nirmala & Faisal Maliki Baskoro | July 28, 2012
The Jakarta Globe
Indonesia is hurting from skyrocketing soybean prices, but few people are in agreement over what to do about it.

Politicians and industry figures voiced their opposition on Friday to the government’s plan to suspend the 5 percent import tax on soybeans for four months starting on Wednesday.

They also criticized the lack of a clear food policy or blamed commodity importers for the recent, sharp rise in prices. A drought in the United States, a major soybean exporter, has lowered yields there and sent prices soaring.

Indonesia, the world’s fourth-most populous country, has been hit particularly hard. Prices have climbed more than 33 percent in the past three weeks, with soybeans now selling for Rp 8,000 (85 cents) per kilogram.

Agriculture ministers past and present, industry representatives and President Susilo Bambang Yudhoyono all spoke out on Friday, a day after Trade Minister Gita Wirjawan voiced his opposition to the import duty plan. Hatta Rajasa, the chief economic minister, announced the plan on Wednesday.

Agriculture Minister Suswono criticized local soybean importers for setting their profit margins too high during a time of scarcity. He claimed they were partly responsible for making prices go up.

“They should have a feeling of empathy toward consumers,” Suswono told reporters before a cabinet meeting in Jakarta on Friday.

Siswono Yudohusodo, a former Agriculture Minister and now a lawmaker and member on House of Representatives Commission IV overseeing agriculture and forestry affairs, also said suspending the import duty was not a solution.

“The government should come up with a decent plan to boost soybean production in the domestic market,” Siswono said. “That way, it will help reduce our dependence on imports.”

Suyanto, the chairman of the Indonesian Tempeh and Tofu Cooperative (Kopti), pointed to what he called a monopoly in soybean importation.

“There are four big companies and they set the price,” Suyanto claimed, adding that he thought the companies manipulated prices unfairly, though he admitted it would be difficult to prove. He declined to name the companies, but he collectively termed them a “cartel.”

Cargill Indonesia, one of the main soybean importers in Indonesia, dismissed Suyanto’s accusations.

“Cargill does not go into price discussions nor agreements with other importers and traders,” Jean-Louis Guillou, Cargill’s country representative for Indonesia, told the Jakarta Globe in an e-mail.

“We fully abide by Indonesian law and this includes not artificially influencing import prices,” he added. “Cargill shares the concerns about increasing commodity prices impacting local Indonesian consumers.”

Suyanto, too, criticized the import duty plan. The government tried the same thing in 2008 — a 10 percent tariff was suspended — and it didn’t work then. “So history repeats itself,” he said.

Instead of purchasing soybeans from the United States, Suyanto said, Indonesia should buy from Thailand and Vietnam, claiming the quality was just as good.

Ratna Ningsih, the head of cooperatives at the Jakarta agency for small and medium enterprises, said that all tempeh and tofu producers in Jakarta had agreed to resume production following a three-day strike.

Clashes between makers and sellers of the soybean products broke out in several markets earlier this week as producers sought to enforce the strike. Yudhoyono also spoke out against the “sweeps.”

“I appreciate the confederation of tempeh and tofu, but there is no need to do this sweeping,” he said. “This is not a solution because the tempeh and tofu sellers are not the ones to be blamed.”

Kopti called on the government to intervene and put a stop to the escalating soy prices.

“The government has to step in,” Suyanto said.

Kopti members, he continued, wanted Bulog, the state procurement agency, to take over soybean importing from the private sector.

“That way there won’t be any price distortion,” Suyanto said. “The government can stabilize it.”

Rice production may fall below 100 mt in 2012-13

USHA TUTEJA, Financial Express
Posted: Saturday, Jul 28, 2012
The deficit monsoon rains, which are crucial for kharif output in India, caused great worry to farmers, media and policy makers. The rainfall has been below normal in all regions except east and north east India, during June and July. The key grain producing states of India, including Punjab, Haryana, Rajasthan, Uttar Pradesh, Madhya Pradesh, Himachal Pradesh and Uttrakhand are worst hit: The progress of the monsoon so far has not been satisfactory. In a recent forecast, the Met department predicted the rains would be 92% of the long-term average, lower than its April forecast of 99%. Rainfall is considered normal if it is between 96% and 104% of 89 mm of the long term 50 years average. The country as a whole has experienced monsoon deficit of 22% till July 20.
The rains are critical as more than 50% of Indians depend on farm income and 60% of cultivated area does not have assured irrigation. Also, the monsoon replenishes 81 water reservoirs vital for drinking water, power and irrigation.

Adequate rains, which act as a strong check on inflation by boosting farm output, are critical for fast recovery as growth of the India’s Gross Domestic Product (GDP) has slowed down sharply to 5.3% in the quarter ending March, 2012.

Deficient monsoon will impact agriculture sector as a whole and kharif output in particular. Risk to the rainfed crops is greater because their sowing season extends from June to August, when country receives two third of its monsoon rainfall.

The monsoon rains determine water availability for 58% of the country’s net sown area that produces major crops like rice, pulses, oilseeds and cotton. A set back to the monsoon could reduce agricultural growth and will have impact on overall economic growth of the country when other important sectors are not performing well.

Since more than 50% of workers households primarily depend on agriculture for their livelihoods, low rainfall could hit the household budget of the poor by pushing food prices further due to low production and shrinking supply of the food articles. This could reduce demand in rural areas for other items due to income contraction.

According to the information provided by the ministry of agriculture, government of India, there was a significant progress in sowing of most crops compared with June, however, the acreage under paddy is down by 6% against the year 2011. The area under total pulses has also plummeted from normal area of 5.2 lakh hectares to 4 lakh hectares by showing a decline of around 1.2 lakh hectares (22.3%). In addition, there was relatively lower acreage of oilseeds by 0.68% and cotton by 3.50% till last week. However, area under sugarcane has jumped by 12.50%.

The late sowing of these crops will lead to shorter crop cycle and will reduce yield significantly. Overall impact of monsoon rainfall on kharif output will depend on its quantum, regional and temporal distribution. If monsoon fails to pick up, the country’s rice production may fall below 100 million tonne during the year 2012-13.

Government can take some comfort from high procurement of wheat and rice. Overall stock of grain with the central government is around 80 million tonne. But, deficit in production of rice and other important crops like pulses and oilseeds could scupper the Food Security Act, the UPA government plans to introduce in the next session of Parliament.

Under the act, government proposes to promise a hunger free India by giving subsidised grain to majority of the population. According to the estimate of the Prime Minister’s Economic Advisory Council (PMEAC), around 74 million tonne of cereals are annually required for the distribution under the Food Security Act.

Fulfillment of this promise needs uninterrupted supply of grain through the public distribution system (PDS). The present buffer stock will help to cope with the problem to some extent but maintenance of minimum buffer stock would require replenishment of the stocks by increased domestic production.

The country could face further shortage of commonly consumed pulses like arhar, moong and urad, which are regularly imported by the country to bridge the demand supply gap. Similarly, oilseeds could be in short supply and country has to resort more imports. These conditions will exert pressure on prices of these essential commodities and hurt the consumption of poor.

The deficient rainfall in June and July has affected the supply of vegetables badly which is leading to rise in their prices. According to Delhi Agriculture Marketing Board, a decrease of 20% has been registered in the supply of vegetables this month in comparison to the last year. The prices of vegetables might elevate, if situation does not improve.

The retail prices of vegetables have seen a remarkable increase in the last one-month. The prices of vegetables such as cauliflower, tomato and potato have increased by 50%. The poor weather condition has also affected the quality of vegetables. Most of the vegetables are perishable and get spoiled due to increased temperature.

In such circumstances, the effective price regulation by the government is of vital importance. It is possible for the regulator to reduce gap between the prices paid by the consumer and prices received by the farmer. In order to achieve this objective, there is an urgent need to consider mechanisms to make price regulation more effective. The available technology enables the regulator to collect information, analyse, monitor and to take a decision in fast manner without incurring a financial burden.

At the end, the rains which act as strong check on inflation, are vital for not only the agricultural sector but also for the overall economy. A low monsoon could adversely affect food production and hit farm income which supports two-thirds of Indians.

The Central Government has announced some measures to deal with this situation. These steps include setting aside 900 MW of power for ramping up sowing operations in the grain basket states of Punjab, Haryana and Uttar Pradesh and enhancing diesel supply since producers will depend on pump sets to draw ground water for their fields. Further, a subsidy is likely to be announced on massar to curb the rise in prices. It is felt that these measures will help marginally. There is a lot at stake this year due to slow down in economy. The UPAs focus on the aam aadmi needs to deliver food security to poor and vulnerable sections of the society and this is possible when domestic production is sufficient and food is accessible and affordable for the common man.

The author is acting director, Agricultural Economics Research Centre, University of Delhi

Govt releases stored wheat to control price rise

Anindita Dey / Mumbai Jul 28, 2012,
Business Standard
The government has started releasing wheat from its own warehouses to quell the price rise in the domestic market.

Following price rises in the international market, Indian wheat is preferred. This has triggered more export from India in the past month. According to official sources, the Food Corporation of India has bought surplus wheat for exports from the major wheat producing states of Rajasthan, Punjab, Haryana and Uttar Pradesh. This is because Indian wheat is available in the global market at a competitive price, even after fetching a premium over the floor price of $228 per tonne, said sources.

In the international market, Australian wheat is available at $350 per tonne, while the Black sea or the Ukranian variety is fetching $300 per tonne. In contrast, the Indian government decided to export wheat at a minimum price (floor price ) of $230 per tonne, which is currently fetching $280-290 a tonne. The rupee depreciation has also helped the suppliers prefer exports over supply to the domestic market.

In the past month, wheat prices rose to Rs 1,350-1,500 a quintal, as against $1,170-1,250 a quintal in the domestic market. Official sources added export is not a worry since the government is laden with stocks in warehouses. “Moreover it is a rabi crop and won’t be much affected by the monsoon”, they said.

In June, an Empowered Group of Ministers had approved the open market sale of 8 million tonne (mt) of wheat, both for bulk sale and the public distribution system. The need to explore the opportunity to export wheat arose after grain stocks in state-run granaries bulged to 71 mt against the available storage space for 66 mt. The stocks are 150 per cent more than the required quantity, officials said.

In July, the Cabinet Committee on Economic Affairs approved export of 2 mt wheat from the government stock at a floor price of $228 (about Rs 12,400) a tonne. The last time the government had exported wheat from the Food Corporation of India’s reserves was in 2004-05.

While it has been decided to immediately allow export of 90,000 tonnes of wheat through bids received by a public trading firm in its recent tender, a committee headed by the commerce secretary has been set up for exporting the remaining quantity.

Oilseed sowing up on soybean surge

Coarse cereals, pulses continue to falter

Sanjeeb Mukherjee / New Delhi Jul 30, 2012,
Business Standard
A surge in the sowing of soybeans in parts of Madhya Pradesh and Maharashtra has lifted overall oilseed acreage to above the normal area (average of the past five to 10 years, depending on crop) for the first time during the current kharif season, providing a much-needed cheer amid overall gloom.

According to the latest data from the agriculture ministry, oilseed sowing during the week ended Friday rose to 13.83 million hectares (m ha), three per cent more than normal at this time of the year. The push has also helped sowing reach close to last year’s level.

“The rise in the past week will help compensate the loss of acreage in groundnut because of low rain in Gujarat,” Agriculture Secretary Ashish Bahuguna had told reporters on Friday, after reviewing the overall crop sowing scenario.
In Madhya Pradesh and Maharashtra, soybean was sown on 1.4-1.5 m ha during the week because of good rains. Soybean and groundnuts are the biggest oilseed crop during the kharif.

However, the dismal situation in coarse cereals and pulses has worsened, as the gap between normal area and actual sowing has widened. In the former, the gap widened by 1.2 m ha during the week. In pulses, the difference was 0.55 m ha. “This is a worrying sign, as it shows that farmers are in fact not planting coarse cereals and grains in monsoon-deficient areas,” a senior agricultural economist said.

The southwest monsoon showed some signs of revival during the week, but this was far less than required. “I feel that overall monsoon deficiency would continue to remain at 22-20 per cent till the end of July and the monthly shortfall would be around 16 per cent,” Bahuguna said.

“I’am not unduly worried about the fall in coarse cereals, as it can be supplemented by grains, but pulses definitely is the main area of concern,” said Ashok Gulati, chairman of the Commission for Agricultural Costs and Prices (CACP).

Rating agency CRISIL warned that a continuation of thi situation in the remaining weeks of this monsoon season would lead to a drought, maybe severe, in 2012. It termed the situation akin to 2009, when India faced the worst drought in 30 years.

Among other crops, the area under paddy was estimated at 19.1 m ha, with 700,000 hectares unsown in West Bengal. Cotton had been sown on 9.72 m ha till Friday, around 320,000 ha more than the normal area. Jute plating was on 7,000 hectares more than the normal area.

Sugar traders most bearish since April with Brazil harvest on track

30 JUL, 2012, BLOOMBERG
LONDON: Sugar traders are the most bearish in three months on speculation that drier weather will accelerate harvesting in Brazil, the world's largest producer.

Ten of 16 analysts surveyed by Bloomberg said they expect raw sugar to drop next week and three were bullish. A further three were neutral, making the proportion of bears the highest since April 13.

Sugar output in Brazil's centre south, the biggest producing region, rose 2% in the first half of this month, industry group Unica said on July 25. Cane-growing areas will be mostly dry through the start of August, according Somar Meteorologia, a weather forecaster.

Prices rebounded from a 21-month low last month and entered a bull market on July 9 after rain in May and June delayed Brazil's harvesting and exports.

Sugar is now poised for its worst weekly performance since March as the drier weather eased concern about the crop and refocused attention on the prospects for a glut. Czarnikow Group, which traded the commodity in 90 countries last year, is forecasting a second consecutive surplus in the season that starts on October 1.

"The harvest in Brazil is catching up and that is a good bearish signal for the market," said Jonathan Bouchet, a trader at Boman Capital, a Geneva-based hedge fund. "The weather in South America at the moment is adequate to harvest and ship, which will increase supplies and keep pressure on prices."

While raw sugar rose as much as 27% since June 4 on the ICE Futures US exchange, futures are still 3.4% lower for the year at 22.5 cents a pound.

The Standard & Poor's GSCI gauge of 24 commodities fell 1.2% and the MSCI All-Country World Index of equities gained 3.7%. Treasuries returned 3.1%, a Bank of America Corp index shows.

Sugar also jumped in the past several weeks as India's monsoon, which brings 70% of the country's rain, was 22% less than average in the June 1-July 23 period, according to the national weather office.

Sugar production estimate of Maharashtra declines to 70 lakh tonnes

28 JUL, 2012, JAYASHREE BHOSALE, ET BUREAU
PUNE: The sugarcane availability estimate in Maharashtra has been further revised downward from 650 lakh tonne by June-end to 605 lakh tonne as of today, a decline of 45 lakh tonnes. Sugar production may drop to 70 lakh quintals from 90 lakh quintals last year.

The state sugar commissionerate held a meeting of all the sugar co-operatives in the state on Wednesday to assess the cane availability. Maharashtra sugar commissioner Vijay Singhal said, ""We now expect that the cane availability will be about 605 lakh tonnes. The reduction has come mainly because of absence of rainfall and diversion of cane for fodder."" If the rainfall does not improve in next 15 days then the cane availability is likely to worsen further.

Maharashtra co-operation secretary Rajgopal Devara said, ""Cane availability will be less this year as thousands of tonnes of sugar cane is being diverted for use as fodder. We will send our official first estimate of cane availability to the centre by the end of the current month."" The co-operation department controls the sugar industry as most of the mills in the state are in co-operative sector.

Maharashtra had crushed 771 lakh tonne sugarcane and produced about 90 lakh quintal sugar in 2010-11. This year, the area under cane has reduced from 10.05 lakh ha last year to 9.45 lakh ha as of today. Maharashtra has been facing drought-like conditions from the beginning of the current year. Cane is being diverted on large scale for consumption as fodder. The industry has kept its fingers crossed and is expecting that a situation like 2003 does not come when the cattle camps had to be run through out the year.

As the dam water levels are critical and not sufficient even for drinking water purpose, dam water supply to agriculture has been stopped from over a month. As a result, the per hectare yield of the standing crop is expected to decline by 20% to 25%.

More decline in cane availability is in rain shadow districts like Solapur, Ahmednagar, Pune and Satara. KN Nibe, managing director, Shri Pandurang Sahakari Sakhar Karkhana from Solapur district said, ""We expect the cane availability to decline by about 25% in Solapur district. There is negative water level in some of the major dams supplying water to our district."" Cane availability in Solapur is expected to decline from 145 lakh tonnes last year to 100 lakh tonne as of today. Kolhapur, the main sugar producing district is likely to suffer less as the reservoirs have good water levels.

The sugar industry is expecting two possibilities about beginning of the crushing season. If the rainfall does not improve, then the mills have to start operations early from September because mills require water for running their boilers. If the rainfall improves, then the crushing season will begin by November-end, after Diwali gets over. Early crushing reduces sugar recovery while late crushing is good to extract maximum sugar from the cane.

FCI hikes open market wheat price by 10% for bulk consumers

29 JUL, 2012, PTI
New Delhi: The Food Corporation of India (FCI), the nodal agency for procurement and distribution of foodgrains, has increased the prices of wheat being sold to bulk consumers by 10 per cent to Rs 1,285 a quintal, a top official said.

Last month, the Empowered Group of Ministers (EGoM) had approved the sale of 3 million tonnes of wheat to bulk users (such as flour millers and biscuit makers) under the Open Market Sale Scheme (OMSS).

Subsequently, FCI issued tenders for 13 lakh tonne wheat to be sold during July-September at a base price of Rs 1,170 a quintal.

"As prices in the open market are ruling higher than Rs 1,170 per quintal, we decided to hike the grain price under the scheme to Rs 1,285 per quintal," FCI Chairman and Managing Director Amar Singh told PTI.

The order has been issued, he added. "In last meeting, the EGoM had directed that wheat should be sold at Rs 1,170 per quintal during July-September period and at Rs 1,285 per quintal from October onwards. But the Food Ministry took a decision to implement the price of Rs 1,285 per quintal from now itself," he added.

When asked about reports that tenders for wheat sale under OMSS has been discontinued, Singh said: "The sale of wheat under the OMSS has not been suspended. Of 13 lakh tonne, nearly 7 lakh tonne wheat has been sold through two tenders so far and the rest will continue."

He explained that fresh tenders have not been floated as FCI has sought clarity from Food Ministry on allocation of quantity to those states, which have already exhausted their quota in the first two tenders.

The entire allocated quantity has already been exhausted in Punjab (0.1 million tonne), Andhra Pradesh (18,978 tonne), West Bengal (11,563 tonne), Chattisgarh (10,823 tonne), Assam (10,186 tonne), Rajasthan (5,234 tonne) and Jharkhand (400 tonne), the FCI data showed.

The sale of wheat under OMSS have been slow in Karnataka, Delhi and Jammu and Kashmir (J&K), which have been allocated with maximum quantity of wheat.

Wheat sale to bulk users under the OMSS has been allowed to clear surplus foodgrains stocks in the government godowns, which is overflowing with record 82 million tonne foodgrains, as against the storage capacity of 64 million tonne.

The government's stocks have risen sharply due to record production and procurement in the last few years.

Miners Should Cut Back Spending As Prices Fall, AFI Says

By Elisabeth Behrmann - Jul 29, 2012
Bloomberg
Australian Foundation Investment Co. (AFI), a fund owning shares in BHP Billiton Ltd. (BHP) and Rio Tinto Group, said it would encourage companies to cut back on investments in new operations as commodity prices fall.

Mining companies will start to question the economics of projects as prices fall and costs rise, Ross Barker, chief executive officer of the listed Melbourne-based fund with a market value of A$4.5 billion ($4.7 billion), told the Australian Broadcasting Corp.’s Inside Business program. “That is obviously something we would encourage because we don’t want to spend large amounts of money and not get good returns.”

Companies are reassessing spending plans as commodity prices drop, amid concern over growth in Europe and China, the biggest metals consumer. BHP will delay approval of a $33 billion mine expansion in Australia for two years until 2014 because of falling commodity prices, the Australian newspaper reported yesterday, citing a document prepared by an unidentified consultancy.

“There is much more economic growth to feed through China and other emerging economies but on the other hand the period of huge cash flows from very high commodity prices will be coming to an end,” Barker said. “There are still an enormously large number of mining projects in train. The big question for immediate to long-term investors is how many of those will actually get up.”

China’s Economy

China’s economy expanded at its slowest pace for six quarters in the three months to the end of June. BHP, the world’s largest mining company, needs to be flexible in the face of change, CEO Marius Kloppers said last month.

BHP’s net income may have declined to $17.4 billion in the 12 months to June 30, according to the mean of 18 analyst estimates compiled by Bloomberg, from a record $23.6 billion a year earlier. Rio de Janeiro-based Vale SA, the second-biggest mining company, last week posted its lowest quarterly profit in more than two years because of falling prices. Net income fell 59 percent in the second quarter to $2.6 billion, Vale said July 26.

The board of Melbourne-based BHP Billiton has been due to decide on proceeding with the Olympic Dam copper-uranium-gold mine expansion by the end of this year. Kloppers warned in May that rising costs and easing commodity prices may change the economics of certain projects.

Iron-Ore Port

Aside from Olympic Dam, BHP’s board is also due to decide on two other major projects -- an iron-ore port expansion in Western Australia and a potash project in Canada -- by the end of the year. The three projects may cost a combined $68 billion to build, according to a May 23 estimate from Deutsche Bank AG. The bank estimated Olympic Dam alone will cost $33 billion.

BlackRock Inc. (BLK), the largest holder of BHP’s Australian stock, according to data compiled by Bloomberg, said in March it trimmed holdings due to concerns that spending on Olympic Dam and shale gas assets may curb returns.

Rio Tinto in April withdrew from talks to take part in a A$9 billion ($9.4 billion) port expansion in Queensland where some of its coal mines are located, citing economic volatility and higher costs. Rio this month said it will shed jobs at the Clermont thermal coal mine in Queensland state because of rising costs and falling prices. Thermal coal prices have declined 20 percent since the start of the year.

Rio CEO Tom Albanese said project costs in Australia had as much as doubled.

“Increasing costs are an industry wide problem, particularly in hotspots like here in Queensland,” Albanese said May 10 during the company’s annual meeting in Brisbane. “We probably cannot develop as many projects as we could have done a couple of years ago spending the same level of money. That means we have to be more selective.”

BHP will fall short of a five-year spending target of $80 billion for building mines and expanding assets as it sees commodity prices declining, Chairman Jac Nasser said in May.

Drummond Coal cannot load all ships berthing -sources

Fri Jul 27, 2012
By Jack Kimball and Jacqueline Cowhig
BOGOTA/LONDON, July 27 (Reuters) - Colombia's Drummond Coal, one of the country's two biggest exporters of thermal coal, will be able to load only three out of five ships berthing in the next few days because the Fenoco rail strike has shrunk port stockpiles, Colombian logistics sources said.

Drummond may have to declare force majeure within a week unless customers agree to defer shipments, they said.

Most of Drummond's customers are utilities and traders in Europe.

Colombia is the world's fourth-largest coal exporter and Fenoco transports coal to ports for its shareholders Glencore International Plc's Prodeco unit, Drummond International and Goldman Sachs Group Inc's Colombian unit.

Drummond was unavailable for comment.

Drummond as of Friday had about 100,000 tonnes of coal in stockpiles at the ports and five ships due to arrive to start loading before the end of July, they said.

"Drummond has been loading at a slower rate than usual but there was not enough coal at the port on Thursday to load all the vessels there," one source said.

"There will definitely not be enough coal to load at least one ship due to arrive on July 29, they do not have big stockpiles at the ports," another source said.

If the Fenoco strike does not end within days, Drummond could be compelled to declare force majeure, they said.

Workers at Fenoco, Colombia's main coal railway, went on strike on Monday over pay and working conditions, threatening to paralyse more than half the country's shipments.

Fenoco is trying to get the strike declared illegal, a Fenoco official said.

"Every time the company says that the strike is illegal, it's a form of distraction," said Ricardo Machado of the Sintraminergetica union.

The rail operator has filed a suit with the Colombian courts to invalidate the strike but it could take up to six months for a decision to be reached, Fenoco said.

The 2009 rail strike which lasted 27 days was declared illegal months after it ended.

Fenoco says it believes there were irregularities with the voting process this year. The union denies the allegation and contends it was all fully legal.

But Fenoco refuses to negotiate with the unions until they agree to move 10 coal trains carrying around 60,000 tonnes of coal - less than one Panamax cargo - because of safety concerns.

Colombian coal contains a high percentage of oily volatile materials which make it prone to spontaneous combustion when stored for long periods.

"If we reach an agreement on moving the trains that are stuck  we will be prepared to start negotiating. That doesn't mean we're going to agree on everything, but we will start negotiating," Fenoco President Peter Burrowes told Reuters.

Drummond's European customers were unfazed by the prospect of shipment delays or cancellations because they can easily be accommodated in the current oversupplied market.

"Drummond in the past has been quick to declare force majeure but this time I expect they'll just delay, even by months won't be a problem," one customer said.

Drummond would be reluctant to cancel sales made at higher fixed prices than current levels, traders said.

European delivered coal prices have dropped by 30 percent from over $120 a tonne in Q4 to $85-90 this month because supply growth has outpaced demand, shrinking producers' margins and triggering output cuts in high-cost countries.

Labour cost inflation has been one of the major factors behind narrowing margins in most major coal exporting countries.

Bumi Resources Digs Up 8.6% More Coal Than in H1 of 2011

Francezka Nangoy | July 28, 2012
The Jakarta Globe
Bumi Resources, the country’s biggest thermal coal producer, said that its coal production rose almost 9 percent in the first half of this year from the same period last year.

Dileep Srivastava, a director at Bumi Resources, said that the company’s coal production was 32.5 million metric tons in the first half of this year, an 8.6 percent increase from 29.9 million tons during the same period last year.

“Our expansion projects are proceeding as scheduled and we expect to step up output in the second half of 2012,” Srivastava said in an e-mail on Friday. “We had a lot of rain this year.”

Despite the increase, Bumi Resources’ first-half production was less than half of what it projected for the full year. The company set its coal production target at 75 million tons this year.

Typically, heavy rainfall will affect production at coal and oil and gas mining sites. Indonesian coal miners, including Bumi Resources and rivals like Adaro Energy and Harum Energy, have their mining sites in Kalimantan, an island rich in natural resources such as coal and oil.

In Kalimantan, coal and oil miners have open-pit coal mines — as compared to an underground operation. Because of that design, greater-than-expected rainfall negatively affects mining.

Dileep said Bumi would boost production in the second half of this year, so that it could meet its full-year target.

He said that coal sales at Bumi rose 10.2 percent to 32.2 million tons in the first half of this year from 29.3 million in the same period last year.

The average selling price of Bumi coal fell to $88.4 per ton this year, from $91.3 per ton in the same period a year earlier.

Thamrin Sihite, director general of minerals and coal at the Energy Ministry, said on Wednesday that the country’s coal production was set at 332 million tons this year.

Indonesian coal firms produced 150 million metric tons in the first half of 2012.

Tired of delays, Tata Power looks abroad

Press Trust Of India / Jul 30, 2012,
As project awards and execution have been down to a trickle for want of regulatory approvals and challenges on fuel supply are mounting, Tata Power has decided to focus on foreign opportunities to meet its 2020 vision. The country’s largest private sector power utility, has a 26,000 Mw generation target by 2020.

“Considering the present situation (coal availability and delay in decision making), I don’t believe this target can be achieved from the domestic market, even though the country needs those kinds of capacities,” MD Anil Sardana said.

Therefore, the company is devoting a good part of its time and energy in identifying opportunities in foreign lands to meet its ambitious target of 26,000 Mw by 2020, he said.

Accordingly, the company has shortlisted some places abroad to scout for suitable projects and partners. “We are certainly looking at the shortlisted geographies which include Africa, Southeast Asia, West Asia, the Far East starting from Indonesia, Vietnam, etc,” Sardana said.

NTPC production hit due to inadequate coal supply

Three of seven power generating units of the plant were closed following deterioration in supply of coal

Press Trust of India / Bhagalpur Jul 29, 2012,
Production at three of the seven power generating units of NTPC at Kahalgaon in Bhagalpur district was stopped following inadequate supply of coal to the plant, a senior NTPC official said.

Three out of seven power generating units of the plant were closed following alarming deterioration in supply of coal and the rest of the four units was on low load, General Manager of 2,340 MW Kahalgaon Super Thermal Power Poject Subhashish Ghosh said.

The shutdown units were 210 MW third unit of first phase of the plant, 500 MW 5th and 6th units constructed under the second phase.

Ghosh said Eastern Coalfields' Lalmatia coal mine was sending only five rakes of coal against 12 rakes and it would be difficult to run all the units in near future on full load as we require 45,000 tonne coal to run these units on full load.

"The NTPC management is in touch with the ECL management for improving coal supply," he added.

Coal India’s new compensation deal saves SECL’s Gevra project

PRATIM RANJAN BOSE, THE HINDU BUSINESS LINE

Project stuck on land acquisition hurdles

RECENTLY IN BILASPUR:
A late yet, exemplary move to remove hurdles before acquiring land for the Gevra project in Chhattisgarh seems to have helped Coal India avert the biggest downside risk to its production plan, in this fiscal.

At 35 million tonne of annual production, Gevra is not merely an opencast mine but the single largest source of power grade coal in the country, if not Asia.

A showpiece project of the Bilaspur-headquartered wholly owned subsidiary, South Eastern Coalfields Ltd (SECL); the project contributed a little over eight per cent of CIL’s annual production of 435 mt and approximately 15 per cent of the company’s pre-tax profit of Rs 8,606 crore, in 2011-12.

NO LAND

On the flip side, in 2011-12, Gevra had scooped out the last grain of coal from the 3,000 hectares of land that was made available to the mine in the mid 1980s.

The mine’s intended shift to the South – along the 8-km wide coal seam – was restricted by seven villages, resisting the planned acquisition of nearly 1,100 hectares that would keep the mine running at the current pace for nearly 23 years.

While production was so far maintained by extracting coal from a small patch in the East, the available resources were not enough to survive the full year.

The bottomline was clear. Unless the company made a breakthrough in acquisition; the promised 7.5 per cent production growth in 2012-13 would be hit.

FRAGMENTED OWNERSHIP

According to company sources, the root cause of the problem lies with an early notification for acquisition in the 1980s.

While CIL delayed acquisition, the prospect of job (at CIL) made the land valuable, leading to a highly fragmented ownership.

A 12-acre plot at Pondi village, for example, is now held by 147 persons. Similarly a 3.6-acre piece of land in the same village is fragmented into 42 pieces.

LUCRATIVE COMPENSATION

Waking up to the reality late in 2011, the SECL management convinced the CIL leadership to improve the company’s RnR policy to win over the opposition against land acquisition.

According to the new policy, adopted in March, SECL offered Rs 6-10 lakh an acre for land depending on quality, coupled with job offer or compensation (Rs 5 lakh an acre) for loss of livelihood. Farmers can also opt for annuity income against loss of livelihood. Flexibility is also adopted in offering jobs to locals.

BREAKTHROUGH ACHIEVED

Armed with an improved offer, the SECL top brass literally camped at the villages to ensure speedy acquisition. The perseverance finally paid off as landowners from two villages – Amgaon and Pondi – finally started accepting compensation beginning this month.

“It was a critical situation. Thankfully we could start acquiring land in time. Production will soon resume in the resourceful southern front,” says SECL Chairman A.K. Sinha.

Coal buyers see defaults as prices slip: Traders

27 JUL, 2012, REUTERS
LONDON/NEW DELHI: Indian coal markets are seeing scattered defaults among end-user and trade buyers in part because of a 20 percent slide in prices this year, although the vast majority are honouring their contracts, Indian trader said.

International coal prices have slumped to about $85 a tonne for South African cargoes from comfortably over $100 in December because of oversupply and tepid Asian demand.

The weakness of the rupee against the U.S. dollar, along with ever-tightening credit availability, is squeezing the trade middlemen who are holding high-priced imported coal inventories, traders have said.

"There are some defaults by smaller traders and also two cement makers," said a source at one of India's biggest coal importers, who declined to be identified.

South African producers, who supply India's traders and cement and sponge iron makers, said they had not experienced any direct Indian defaults but were wary of any indirect impact.

A default by any player on a cargo re-sold several times in a chain would have a ripple effect, producer sources said.

"We've not had any direct problems. They really have performed well as far as we're concerned but I have heard that a minority of the smaller players have had issues," one producer said.

"Some buyers (end-users) are actually defaulting now on fixed price contracts because they are being offered so much coal, of various origins, which were defaulted on by China," said an Indian trader who sells to both the Indian and Chinese markets.

"These distressed cargoes are being offered at huge discounts so the buyers just take them instead," he added.

"I have a cargo for China due to load in the next week which I've already agreed to drop the price on. I'm just hoping that it will be loaded and paid for," he added.

The discounts offered vary on a case-by-case basis, depending on how desperate the seller is to shift the cargoes, said an Indian coal market player who confirmed hefty discounts were on offer.

"On a standard $90 per tonne FOB deal, traders may offer $6-7 per tonne discount," he said.

India has 6 million to 7 million tonnes of thermal coal in inventories at its main ports, most of it imported at prices substantially higher than those at present.

Following a slew of defaults by Indian players in 2005, the industry has made strides to gain a reputation for meeting contracts, even when the market has plunged.

Suppliers flocked to the Indian market after widespread defaulting and price re-negotiation in China earlier this year.

Problems in the Chinese coal market have undermined Indian traders in their efforts to rebuild their reputation for meeting

contract terms, Indian traders have said. Some have experienced direct defaults from Chinese buyers, while Chinese defaults have led to some Indian counterparties trying to escape from contracts, they said.

End-users who had enquired for prompt cargoes are now sidelined, buried under cheap offers and saying they will not return to the spot market until August or September, they said.

"We have stockpiles of South African coal (in India) which were earmarked for customers but are just going to have to sit there. We'll be bleeding until Q4," the first Indian trader said.

Vietnam seeks $100 million from India for Tata Steel project

29 JUL, 2012, PTI
HANOI: In a bid to break a four-year deadlock involving Tata Steel's $ five billion project, Vietnam has soughtfinancial assistance of $ 100 million from India towards payment of land compensation cost.

"Government of Vietnam has requested Indian government to assist by giving $ 100 million for site clearance for the project," Vice Minister of Industry and Trade of Vietnam Le Xuan Quang said.

The project has been stalled after the provincial government estimated the acquisition cost at $ 200 million for around 4,000 acres of land, an amount Tata-Steel was not happy with and refused to pay.

This resulted in Indian business giant not receiving the investment license for its 4.5 million-tonne steel plant at Vung Ang Economic Zone in Ha Tinh province.

The issue has also been taken up by at the highest level by Prime Minister Manmohan Singh, External Affairs Minister S M Krishna and Former Finance Minister Pranab Mukherjee.

Sources close to the project said the land cost asked from Tata is very high as compared to what has been taken from Taiwan-based Formosa group to set up a steel plant in the same province.

When pointed out that Vietnamese government was paying part of the land compensation for the land given to Formosa group, Quang said the country has been affected by the global economic slowdown and it does not have money for site clearance for the Tata-Steel project.

"Vietnam has also been affected by global economic crisis and we do not have money for site clearance (for the Tata project). We have requested Tata to pay the money," he said.

"Our government is very active in addressing the pending issues between Tata and local authorities," Quang said but warned that further delay in finalising the land compensation may result in increase in land acquisition cost.

China Iron ore fines import prices witness major crash

27 July, 2012
BEIJING (Commodity Online): Imported iron ore fines market crashed this week on weak demand from steel industry, according to The Steel Index. China steel industry is expected to remain weak with stimulus measures unlikely to take effect on demand in the economy.

Iron ore fines 62% Fe at CFR Tianjin Port fell 7% to $116.2 per dry ton while 58% Fe fell 8.9% to $106.8 per dry ton.

At CFR Qingdao port, 62 % Fe, 2 Al % fell 6.1% to $118.1; 63.5%/63% Fe fell 6.3% $119.1 per dry ton, TSI report said.

Steep fall in iron ore prices have prompted stakeholders in the industry to opt for iron ore swaps to mitigate risks, according to Freight Investor Services. Hence, July trade volumes of iron ore swaps are set to zoom, FIS said.

Iron ore producers BHP, Rio Tinto and Vale have launched capacity ambitious capacity expansion plans as they expect the slowdown in China economy to ease and rebound soon.China steel futures have risen after tumbling to record low on Monday. The most active rebar contract on Shanghai Futures Exchange rose to a week-high of 3768 Yuan ($590) a ton before falling to 3,762 yuan.

JSW Steel plans to keep furnaces running

Mahesh Kulkarni / Bangalore Jul 28, 2012,
Business Standard
JSW Steel Ltd, facing severe shortage of iron ore, is trying to work out a contingency plan to ensure steady supply of ore at its Vijayanagar plant in Bellary. The company is currently operating its 11-million tonne (mt) per annum steel plant with inventory of iron ore sufficient for two months. The plan includes importing ore from neighbouring states.

“We have a raw material stock sufficient to run our Toranagallu plant till end of September at 80 per cent capacity utilisation. Though the stockpile reserved for auctions is getting exhausted, we are banking on ore coming from NMDC, which is allowed to mine up to 1 mt per month. It is currently producing about 700,000 tonnes and if they increase production to 1 mt, it would help us,” Vinod Nowal, director and CEO said.

The company has been facing shortage of ore since July- August 2011, when the Supreme Court banned mining in Karnataka and ordered sale of ore only through e-auctions from a stockpile of 25 mt. So far, JSW has purchased 14 mt at the e-auctions and received about 11 mt. It requires 60,000 tonnes of iron ore a day to run its 11-mt plant.

The company is planning to import ore from Chhattisgarh and Odisha to keep its blast furnaces active in the event of further delay in resumption of mining, he said. However, he did not give details of how much the company would import from these states. In case ore stock is exhausted earlier, capacity utilisation will have to be cut.

Nowal, however, is confident that mining will resume in August and supplies would improve. The Supreme Court has permitted opening of category ‘A’ mines already and it is expected to decide on the opening of category ‘B’ mines on August 3.

“We expect at least seven mines to start operations by August. The Central Empowered Committee has approved the reclamation and rehabilitation plans of 11 mines. The Indian Bureau of Mines has inspected four of them and they are now waiting for the Karnataka government to give them the pollution control board’s clearance,” Nowal told Business Standard.

He said these mines can together bring about 3-4 mt of iron ore a year to the market. “It is time for the state government and court to speed up the process of giving clearances, so that they can resume mining immediately,” he said.

Adding: “We will request the apex court to give permission for opening A category mines within 10 days,” Nowal said. While ruling out the possibility of importing ore from abroad for the Bellary plant, as it is located far from a seaport, Nowal said JSW would procure ore from Chhattisgarh and Odisha to keep the plant running. “We cannot close the chimney,” he said.

Meanwhile, the company is also facing the problem of rising prices of iron ore in the domestic market, even as the prices have dropped in the international market. “The landed cost of iron ore purchased at the auctions works out to be at least Rs 800-1,000 more than the international prices, which are ruling at $130 per tonne (Rs 7,280),” he added.

Sesa Goa to produce 10 MT iron ore from Liberia in phase-I

29 JUL, 2012, PTI
New Delhi: Vedanta group firm Sesa Goa is targetting to produce 10 million tonnes of iron ore in the first phase of production from Liberia's Western Clusters project on the back of higher-than-estimated reserves.

"Drilling is going on full swing, every where we are getting positive signs. By the end of 2013-14 financial year, we will make the first shipments. We have divided the project into two phases and in the first phase, production target is of 10 million tonnes (MT)," Sesa Goa Managing Director P K Mukherjee told PTI.

The Goa-based iron ore miner had acquired 51 per cent stake in project in Liberia (in West Africa) last year for about USD 90 million (Rs 411 crore). This was the first overseas acquisition of the company.

Mukherjee added that the reserves at the Liberian project are likely to be three times higher than original estimates of one billion tonnes and the company would ramp up production from the project by up to 30 MT in the second phase.

"The reserves are higher, may be three times more than original estimates... During the second phase, it (production) would get ramped up to 30 MT. The second phase production will begin 2-3 years after 2013-14, so by 2015-16 or 2016-17 it should happen," he said.

The iron ore miner, which had begun exploration of the asset during April-May this year, is planning to invest Rs 400-450 crore on the project this year.

The Sesa Goa MD, however, said that capital expenditure plan for the project is still underway and this year's money will largely be spent on payment to the local government, exploration, equipments and other related studies for the project.

"This financial year, we are expecting total cash flow of Rs 400-450 crore (on the project) but that does not mean it is the total capex. The total capex will be much higher," he said, adding that a decision on capex will be taken by December.

Talking about Sesa Goa's plans to set up a steel mill in Jharkhand, Mukherjee said that the company is looking to sign a memorandum of understanding (MoU) for the project with the state government in a month's time.

The company, which is planning to set up a steel plant of 1.5 MT per year capacity in the mineral-rich state, has started acquiring land for the project on its own, he said, though he did not reveal the investment plans for the project.

Sesa Goa already has a prospecting licence of an iron ore mine in West Singhbhum district of the state for carrying out mining operations.

Iron Ore-Traders eye pause in declining spot prices

Mon Jul 30, 2012
* Steel mills may return to market for restocking

* Buying expected to be limited to small volumes
By Ruby Lian and Fayen Wong
SHANGHAI, July 30 (Reuters) - Chinese traders expect iron ore prices to pause from a recent decline and stabilise after hitting a 2-1/2 year low last week, as the country's steelmakers take advantage of low prices to restock the key steelmaking ingredient.

Still, industry participants said any bargain buying would be limited, and prices were unlikely to stage a significant rebound amid uncertainties about the health of the global economy.

"Steel mills may need to replenish some stocks after they saw prices have slid too much over past few weeks, and they are also running very low stocks," said an iron ore trader in Shanghai.

The Steel Index's price for 62 percent-grade iron ore grade .IO62-CNI=SI for delivery to China hit $116.20 per tonne on Friday, its thirteenth consecutive decline and its lowest level since Dec. 29, 2009. The price fell 7 percent in a week.

The most active rebar contract for January on the Shanghai Futures Exchange was traded almost flat on Monday after edging up to an over one-week high of 3,776 yuan ($590) per tonne.

Sharply falling prices and swelling inventories have forced some small traders to sell their stocks at a loss, abandoning hopes for a strong rebound in demand for iron ore and steel in the latter half of this year given the bearish outlook in the global economy.

"Spot prices are currently cheaper than the stocks that steel mills have on hand. If the decline persists, it would encourage steel mills to restock more," said a trader in Beijing.

However, traders said fears about the global economy and fragile growth in China meant iron ore prices would likely stay rangebound in the near term.

With tepid demand worldwide and strong production from Australia and Brazil, some industry experts warn that the downtrend for iron ore prices remains intact and prices could touch $110 a tonne if demand doesn't pick up fast enough.

"Prices will probably not fall as sharply as they did in the past month, but they may continue to decline since the overall macro environment remains unstable," said the Shanghai-based trader.

  Shanghai rebar futures and iron ore indexes at 0416 GMT

  Contract                          Last    Change  Pct Change                            
  SHANGHAI REBAR*                   3764      2.00        0.05
  PLATTS 62 PCT INDEX                118     -1.00       -0.84
  THE STEEL INDEX 62 PCT INDEX     116.2     -1.10       -0.94
  METAL BULLETIN INDEX            117.43     -1.21       -1.02

  *In yuan/tonne                                                                          
  #Index in dollars/tonne, show close for the previous trading day
 ($1 = 6.3807 Chinese yuan)

(Editing by Richard Pullin)

Prominvest tops Birla's Northern Iron bid

AGENCIES, Financial Express
Posted: Monday, Jul 30, 2012
Melbourne/Sydney: Australian junior miner Northern Iron Ltd said on Monday it has received a A$525 million ($550 million) takeover offer from a Swiss trading company, Prominvest AG, just topping an earlier bid from Indian conglomerate the Kumarmangalam Birla-led Aditya Birla Group.

The two bidders are eying Northern Iron's high quality iron ore mine in Norway, at a time when benchmark iron ore prices are falling, hitting their lowest level in more than two-and-a-half years on Friday.

Northern Iron said the new offer from Prominvest, pegged at a cash price of A$1.42 a share, was both indicative and highly conditional.

The offer was just above a sweetened A$1.40 per share bid last week by Aditya Birla worth A$518 million.. Northern Iron's shares closed at A$1.04 on Friday, rising 30 percent for the week.

Northern Iron (NFE) said it planned to allow Aditya Birla to examine its books, and would make the same offer to Prominvest if it withdrew a request for exclusive access.

Subject to one or both of Aditya Birla Group and Prominvest participating in the due diligence process, NFE will engage with each relevant party to determine whether a binding proposal can be agreed, the Australian firm said in a statement.

Northern Iron owns the Sydvaranger iron ore mine in northern Norway. It produced 501,000 tonnes of iron ore in the first quarter of 2012 and in late May said second-quarter output would be similar. Sales of its ore are spread across a range of steel mill customers worldwide, according to the company.

Analysts said the mine's resource stands at 450 million tonnes and has an operating life of around 19 years. Northern Iron has offtake agreements with India's Tata Steel and China's Sinosteel.

RBC Capital markets in a report in May said based on the average resource multiple of past deals involving magnetite projects Northern Iron would fetch at least $1.30 a share though a deal could come in higher as the mine is under production.

Aditya Birla Group is a $40 billion conglomerate with a focus on metals, cement, textiles and fertilisers, according to its website. No other details about Prominvest were immediately available.

Government creating artificial iron ore shortage: FIMI

30 JUL, 2012, MEERA MOHANTY, ET BUREAU
NEW DELHI: The federation representing merchant miners in the country claims stocks at mine heads reveal that there is no real shortage of iron ore, a key steelmaking ingredient.

In a letter to the finance ministry, the Federation of Indian Mineral Industries, or FIMI, has accused the government, both at the state and centre, of creating an artificial barrier through high export duty and freight charges.

Exports are down 42 % in the last two years and has cost the country an opportunity loss of $8.3 billion in forex, claimed FIMI. It believes the 30% export duty was premature and counter productive, and holds it particularly responsibly for this "state-induced" supply crunch in iron ore.

In the two years since the last quarter of 2009-10 there has been a cumulative increase in railway freight of 126%, which translates into 40% of realisation on iron ore.

As on March 31, 2012, mine-head stocks added up to 123.5mt and production to another 169.66mt says FIMI quoting Indian Bureau of Mines, or IBM data, which functions under the ministry of mines and minerals. Supplies to steelmakers (other than SAIL and Tata Steel who have their own captive mines) totaled 64.63MT.

After accounting 57MT of exports in 2011-12, it still leaves the country with a 138.77mt of iron ore. "Where's the shortage?" asks FIMI, arguing for rollback on export duty on iron ore.

Its petition comes days after similar pleas from industry chambers Ficci and Assocham on behalf of the steel industry. A source in the industry said the mines ministry is ready to ask for easing the 30% export duty in the wake of falling exports.

FIMI instead wants a 30 % duty on the import of iron or pellets to protect the interest of merchant miners. Import of pellets are steadily on the rise from 122,331 tonne in April to 174,319 tonne in May (dipping to 73,278 tonne in April) this year.

This recent trend is forced by the shortage of available, usable iron ore in the country in lieu of regulatory moves by the states and courts to reform iron ore mining practices.

"This (imports) is even more serious in the current context of the depreciating rupee. In the last two years, the country has lost worth $ 8.3 billion in foreign exchange due to lower export of surplus iron ore fines,' claimed FIMI's chairman in his July 23 letter to finance secretary RS Gujral.

India's steel-making capacity is largely dependent on iron ore lumps. It doesn't have enough installed processing (beneficiation and pelletisation) capacity to use fines, and low-grade ore, also produced during mining. Much of this, like Goa's largely low-grade output, was being exported to China.

Roughly at 30-70, the lumps to fine ratio fall as mines grow older. Domestic requirement of fines (again excluding SAIL and Tata Steel) currently does not exceed 30 mt. Merchant miners argue restricting exports of fines only results in a pile up at mine heads, hindering production.

China Cosco Declines To Nine-Month Low After Loss Widens

By Bloomberg News - Jul 30, 2012
China Cosco Holdings Company Ltd. (1919), the country’s largest listed shipping company, fell to a nine- month low in Hong Kong after saying preliminary first-half loss widened more than 50 percent as a ship glut weakened rates.

The fleet operator dropped by as much as 4.3 percent to HK$3.15 before trading at HK$3.17 as of the noon trading break, the lowest since Oct. 10. The benchmark Hang Seng Index rose 1.5 percent.

Slowing global economic growth, including in China, and fuel costs that have remained high contributed to the record expansion of losses, China Cosco said in a statement to the Hong Kong Stock Exchange on Friday after the market closed. Losses will widen by half from the 2.8 billion yuan ($439 million) deficit for the six months ended June 30, 2011, according to the preliminary earnings report.

“A weak dry bulk market has been a major drag to China Cosco since 2008,” Bonnie Chan and Janet Lewis, analysts at Macquarie Capital Securities Ltd., wrote in a July 27 note. “It will take at least another two years for the dry bulk market to state a meaningful recovery from the current slump.”

The cost to ship Australian iron ore to China, the world’s biggest route for dry-bulk commodities, on a Capesize vessel reached a 17-month low on July 27 amid a shortage of cargoes of the steelmaking raw material. Rates fell 2.2 percent to $6.44 a metric ton, figures from the London-based Baltic Exchange showed. That was the lowest level since Feb. 8, 2011, according to data compiled by Bloomberg.

China Cosco, which made 48 percent of revenue from container shipping last year, booked a full year loss of 10.5 billion yuan in 2011. Net loss will probably be 2.67 billion yuan this year, according to the average of 10 analysts’ estimates compiled by Bloomberg.

Baltic index slides on slow freight business

Fri Jul 27, 2012
July 27 (Reuters) - The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, fell on Friday as the market continued to struggle with slower cargo trade and mounting fleet growth.

The overall index fell 2.61 percent or 25 points to 933 points. The index fell for the fourteenth straight day and has declined over 10 percent this week.

The Baltic's panamax index fell 2.55 percent to 1,031 points due to muted demand in both the Atlantic and Pacific basins.

"The tone in the Pacific remains soft and rates continue to slip little by little," the exchange said in a note clients.

Average daily earnings for panamaxes, which usually transport 60,000-70,000 tonne cargoes of coal or grains, reached $8,225, lows not seen since early July.

"Atlantic rates have come under very heavy pressure over the past seven days, with little expectation that the market will stabilize any time soon," broker firm Braemar Seascope said in a note.

"An increasing number of charterers are pushing for ideas on APS basis prior to discussions and owners who have been holding out are starting to consider front-haul business as well in search of better rates," Braemar said.

The Baltic's capesize index fell 1.23 percent with average daily earnings falling to $4,740. Capesizes typically haul 150,000 tonne cargoes such as iron ore and coal.

"Capesize rates have dropped significantly this week, with little light at the end of the tunnel for the immediate future," Braemar said.

Analysts said the falling price of iron ore in recent days seems to be the only hope for improvement in capesize rates in the fourth quarter of the year.

Iron ore prices hit their lowest level in more than two and a half years on Friday as China's slowing economy reduced global demand growth.

Shipments of iron ore account for about a third of seaborne volumes on the larger capesizes, and brokers said price developments remained a key factor for dry freight.

Rates for supramax vessels were down $314 at $11,177 and those for handysizes were down $208 to $8,735.

Growing ship supply, which is outpacing commodity demand, is set to cap dry bulk freight rate gains in the coming months, with economic uncertainty and a slowdown in China adding to headwinds.

The overall index, which gauges the cost of shipping commodities such as iron ore, cement, grain, coal and fertiliser, has fallen more than 46 percent this year.

(Reporting by Soma Das in Bangalore; editing by Keiron Henderson)

Bunker Prices : 30.07.2012

Source : Bunkerworld.com

	IFO380		IFO180		MDO		MGO
Singapore	630.00		642.00		905.00		915.00
Rotterdam	607.50		629.50		-		896.00
Houston	622.50		657.00		955.00		962.50
Fujairah	636.50		657.00		-		1,006.50
Los Angeles	610.00		647.50		-		956.00
Canary Islands	631.50		655.50		942.50		956.00
Busan	645.50		667.50		930.50		940.50
Genoa	628.50		655.50		-		958.50
Auckland	740.00		-		-		1,020.00
Montevideo	644.50		699.50		1,045.00		1,099.50
Valparaiso	696.50		778.00		-		1,205.00
Colombo	701.50		778.50		-		1,036.50
New York	638.50		668.00		-		922.00