Soevecon cautions over Russia grain export rebound

27th Feb 2013, by Agrimoney
Sovecon urged caution over prospects for a rebound in Russia's grain exports in 2013-14, despite questioning market ideas that the country may be in for a large rebuild of fast-depleting state inventories.

Earlier on Wednesday, Nikolai Fyodorov, the Russian agriculture minister, appeared to signal a willingness to rebuild state grain inventories, which are expected to be left nearly empty at the close of 2012-13 by sales into a domestic market clamouring for supplies after last year's drought hit harvest.

"My feeling is" that the start of intervention purchases "will be August or September", he told a meeting of the National Grain Producers' Union.

Last month, Ilya Shestakov, deputy farm minister, said that "if the harvest is good next year, we will consider replenishing these [intervention] stocks", which he saw ending the season at potentially 300,000 tonnes, after sales of some 4.5m tonnes.

Prospects for intervention buying are proving particularly sensitive given the thin levels of overall Russian supplies, and the outlook for this year's harvest which Andrey Sizov, the Sovecon managing director, termed "not that good" thanks to weather setbacks.

'Mechanism for market stabilisation'

In fact, Russia has a legal framework governing intervention buying which means that the level of purchases - if there are any at all – "is not at all clear yet", Mr Sizov said.

The purchases are based on a support price set at the end of March, and historically based on the previous year's price, plus an added percentage.

"If the market goes below the threshold price, the government will start intervention buying," Mr Sizov told Agrimoney.com.

"They do not say they want to buy a certain volume a year. Intervention - buying when prices fall too far, and selling when they rise - is a mechanism for market stabilisation."

Winterkill

Nonetheless, Mr Sizov was cautious on grain volumes which will be left to support exports in 2013-14, saying that while it was early in the season to be making forecasts, it appeared unlikely that they would approach last season's record of 28m tonnes.

They were likely to be closer to this season's exports, forecast at about 15m tonnes.

The country is set to end the current season with a thin level of overall carryover stocks, after a surge of early-season shipments exacerbated the impact of a disappointing harvest.

And the outlook for the 2013 harvest is not promising, after poor winter conditions left an estimated 12% of autumn-sown grains in poor condition, a higher-than-average rate of weather damage.

While some of this area will be resown in the spring, "much of it might go to non-grain crops", such as peas or sunflowers, Mr Sizov said.

"If you look historically, fluctuations in spring grain acreage are very low."

Price factor

Winter grain plantings had already proved disappointing, in part thanks to autumn dryness, and in part to fears – which have turned out to be unfounded – that the government would ban exports to protect domestic grain supplies, so sending prices tumbling.

In fact, prices have hit record highs, although weakening a little this month to some $385 a tonne, as measured by Central Russian food wheat.

"This price needs to drop by more than $100 a tonne for new crop to become competitive," Mr Sizov said.

While this was a possibility, "it will take some time", another reason to expect a slow-start to 2013-14 exports.

Evening markets: in-demand corn secures premium over wheat

27th Feb 2013, by Agrimoney
In the end, wheat futures did not pussyfoot around in surrendering their, usual, premium over fellow grain corn.

They held its own for most of the day, helped by ideas that prices near eight-month lows were attracting buyers.

"Bottom line is that wheat has simply got cheap enough for this time, given the strength in corn," Darrell Holaday at Country Futures said, towards the end of the trading day.

And that proved just about true for Chicago's best-traded May contract, which edged 1 cent higher to $7.12 a bushel.

Spreads game

But the March contract succumbed to a late-session capitulation which appeared based on technical factors.

After losing its premium over corn with some 20 minutes of trading to go, the lot dropped from about $7.08 a bushel, and a reasonable gain, to close at $7.04 ¼ a bushel, a decline of 0.2% on the day.

March corn, meanwhile, consolidated to close at $7.09 ½ a bushel, a gain of 0.6%.

Signally, the March corn contract also raised its premium over the May corn contract, which ended up just 0.5 cents at $6.95 ¼ a bushel.

Ethanol boost

There were a few forces at work in supporting corn, one being data  on weekly US ethanol production which bounced back 15,000 barrels a day last week, to 812,000 barrels a day, a seven-week high.

That is reapproaching levels which would meet US Department of Agriculture forecasts for corn use in making the biofuel in 2012-13, and with the summer driving season to come.

And it lends weight to ideas of capacity coming back on stream, after being mothballed last year as corn prices hit record highs.

In another sign of a tighter ethanol market, US stocks fell 121,000 barrels to 19.37m barrels.

'Cash is king'

Furthermore, there was talk from research group Yigu Information Consulting that China's imports of grain, notably corn, might be in for an uptick, on concerns of domestic supplies running low ahead of the autumn harvest.

Commodities guru Dennis Gartman said he would buy the grain, albeit at lower levels that today, at $6.77 a bushel, targeting $7.10-7.25 a bushel.

And, signally, there was the idea of US stocks being incredibly tight for now, a factor reflected in ideas of zero deliveries against the soon-to-expire March contract, meaning cash markets are a better place to sell, and leaving holders of short positions rushing to find coverage.

"With first notice day today, the shorts are now wondering where they are going to get the corn to deliver and they are scrambling to buy back their position," Mr Holaday said.

"The short squeeze that we have talked about throughout February is occurring. Cash ownership is king in the corn market."

'Weather leans negative'

That was enough to overcome a few negatives, such as better farming weather.

"Weather still leans negative [for prices] with beneficial rain/snow across the US Midwest and Plains, another storm across the southern Plains, eastern Midwest and Delta in the 11-to-15 day forecast, a wetter weekend outlook across Argentina, and timely rains headed for Chinese rapeseed areas," Richard Feltes at RJ O'Brien said.

US Commodities said: "Argentina's dry area has shrunk from 50% fewer weeks ago to 25% currently."

Brazil hiccups?

However, weather held some favours for bulls too, with Mr Feltes saying that it was "important to note that Brazilian port weather, after a dry patch this week, will shift wetter next week", meaning potential disruptions to loading cargoes.

(This is especially true of raw sugar, which recovered from a two-year low in New York to close up 0.3% at 17.84 cents a pound. The better-traded May contract added a more modest 0.2% to 18.08 cents a pound.)

And this when ships are already queuing up in Brazil to load up with soybeans from the early harvest.

Indeed, ideas of buyers still opting for higher-priced US supplies, which they can at least get hold of, gained renewed focus when the USDA unveiled the sale of 120,000 US soybeans to China for 2013-14, and a further 120,000 tonnes to "unknown" for 2012-13.

"We all assume it was China. There seems to be no end as they continue to buy some old crop," Country Futures' Mr Holaday said.

Soybeans for March ended up 0.7% at $14.57 ½ a bushel, with the better-traded May lot adding 0.5% to $14.39 ½ a bushel.

Mixed softs

Among soft commodities, sugar was not the only riser, with New York cotton adding 0.3% to 84.38 cents a pound for May delivery, and closing for December up 0.2% at 84.70 cents a pound, the contract's highest finish in nine months.

The fibre is being boosted by ideas of sustained Chinese demand, despite the huge stockpiles the country has run up.

But arabica coffee for May edged 0.05 cents lower to 145.45 cents a pound, providing little comfort for growers, notably in Colombia, concerned about the halving in prices from 2011 highs.

GRAINS-US soybeans rise on Chinese buying, corn up for 4th day

Thu Feb 28, 2013
* U.S. soy up for 2nd day, Chinese buying supports

* Corn up to over 2-week high on tight old-crop supply

* Wheat rises on hopes of rebound in U.S. exports

* Wheat set for biggest monthly drop since Sept, 2011
By Naveen Thukral
SINGAPORE, Feb 28 (Reuters) - U.S. soybean futures gained more ground on Thursday with Chinese buying supporting prices amid concerns over delays in shipping a record soybean crop from Brazil.

Corn rose for a fourth consecutive session to its highest in more than two weeks as the market was buoyed by tight old-crop supplies while wheat bounced back on hopes of higher demand for U.S. supplies.

"The market is realising that supply is very tight and it is going to be a big challenge to get soybeans and corn out of Brazil in time," said Victor Thianpiriya, agriculture strategist at ANZ in Singapore.

"Across wheat and corn markets, tight supply is going to support prices for the first half of the year until South America comes into the market."

Chicago Board of Trade March corn rose 0.6 percent to $7.13-1/4 a bushel by 0258 GMT, while March wheat added 0.9 percent to $7.10-1/4 a bushel. Soybeans gained 0.2 percent to $14.59-3/4 a bushel.

The soybean market is being underpinned by strong demand led by top importer China and expectations of shipping delays in Brazil, which is in the middle of harvesting a record crop.

The U.S. Department of Agriculture on Wednesday said private exporters had reported the sale of 240,000 tonnes of U.S soybeans, including 120,000 tonnes to China.

Traders said the market is closely watching Brazil's soybean crop progress for any signs of disruption or transport problems.

The country's soy industry says it is unable to speed this year's export flow, which is likely to be chaotic as record production is funnelled through ports that have failed to expand in tandem with grains output.

Soybeans received additional support on bargain hunting after prices fell for three days in a row and shed 2.7 percent of their value during the losing streak.

The wheat market is being buoyed by signs of rising interest from overseas buyers with prices on track for an almost 9 percent in February, the biggest monthly decline since September, 2011.

Saudi Arabia's state grains authority Grains Silos and Flour Mills Organisation has issued an international tender to purchase 110,000 tonnes of soft wheat and 440,000 tonnes of hard wheat.

Corn prices have been mixed, with the front-month contract firming due to short covering and tight supplies. Deferred corn contracts have faced headwinds amid expectations of large plantings in the United States in the spring, followed by a strong harvest in the fall.

For the month, corn is on track for an almost 4 percent drop, its sixth monthly loss in seven.

Commodity funds bought a net 3,000 CBOT soybean contracts on Wednesday, trade sources said. They were even in wheat and corn.
   
  Prices at  0252 GMT
  Contract        Last    Change  Pct chg  MA 30   RSI
  CBOT wheat     715.75     3.75  +0.53%   868.27   35
  CBOT corn      697.75     2.50  +0.36%   765.17   66
  CBOT soy      1442.00     2.50  +0.17%  1578.61   54
  CBOT rice      $15.79    $0.02  +0.13%   $15.49   38
  WTI crude      $93.10    $0.34  +0.37%   $89.09   35
  Currencies                                               
  Euro/dlr       $1.314   $0.085  +6.92%  
  USD/AUD         1.028   -0.028  -2.61%   
  Most active contracts
  Wheat, corn and soy US cents/bushel. Rice: USD per hundredweight
  RSI 14, exponential

(Editing by Himani Sarkar)

Chinese Feed Mills Said to Have Bought Six U.S. Corn Cargoes

By Bloomberg News - Feb 28, 2013
Chinese feed mills bought six cargoes of U.S. corn for delivery starting in September as users lock in future shipments that are cheaper than shorter-term purchases, said four executives in the grains industry with direct knowledge of the transactions.

The cargoes include at least 120,000 metric tons bought last week and total more than 300,000 tons, said the executives, who asked not to be identified because the deals are private. Feed mills and large livestock producers in southern China are among the buyers, they said. The executives requested that the sellers and purchasers not be named.

Suppliers of U.S. corn quoted about $297 (1,849 yuan) a ton, or 2,100 yuan including import taxes, for arrival in southern China from September, they said.

September corn on northern China’s Dalian Commodity Exchange traded at 2,439 yuan a ton at 11:30 a.m. local time. The most active contract in Chicago, for delivery in May, traded $6.9725 a bushel, while the September contract was $5.7825 a bushel.

China bought a record of 5.23 million tons of corn from overseas in the marketing year ended Sept. 30, and shipments this year are forecast to fall to 2.5 million tons, according to the U.S. Department of Agriculture.

U.S. Corn Sales to Korea May Fall 30% as Latin America Cheaper

By Sungwoo Park - Feb 28, 2013
Bloomberg
South Korea, Asia’s second-biggest corn buyer, may reduce imports from the U.S. for a third year as it increases cheaper purchases from South America, the largest local feed miller said.

Shipments including feed and food may fall below 2 million metric tons, from 2.84 million tons in 2012, Lee Tae Woong, a general manager at Nonghyup Feed Inc., said in an interview in Seoul on Feb. 26. Last year’s imports were the smallest amount since 2005, Korean customs data show.

Brazil, Argentina and Ukraine are taking market share from the U.S. in the three biggest importers -- Japan, Mexico and Korea -- after drought in the American grain belt pushed prices in Chicago to a record last year. The Latin American nations will increase output by 5.9 percent to a record this year, the U.S. Department of Agriculture said Feb. 8.

“South America is producing more, while the availability of U.S. supply is tight,” Lee said. “Unless the U.S. crop gets significantly cheaper, or even at the same price, it’s hard to choose it now.”

U.S. corn is about $30 per ton more expensive than the South American grain on a cost and freight basis, with the gap likely to remain until the next crop is brought to market later this year, he said.

Corn futures for May delivery were unchanged at $6.9525 a bushel on the Chicago Board of Trade at 8:15 a.m. in Seoul. The price remains little unchanged this year after climbing 8 percent in 2012, the fourth straight yearly advance.

Quality Boost

U.S. corn supply accounted for 35 percent of Korean imports in 2012, the lowest since 2005 and down from 78 percent in 2011 and 85 percent in 2010, customs data show.

“The quality of South American corn has also improved,” Lee said.

Nonghyup’s purchases will drop to less than 500,000 tons this year from about 1 million tons in 2012, with the company’s total corn imports to be largely unchanged around 2 million tons, he said.

Korean buyers will continue to switch to South American purchases of corn, Kim Chi Young, a director at the Korea Feed Association said in an interview on Feb. 1.

Nonghyup plans to increase purchases through private negotiations with some suppliers to half its grain needs starting this year in an effort to cut costs, Lee said. The company has traditionally bought most of its grain via public tenders.

In Japan, U.S. corn imports fell to 11.1 million tons in 2012, representing 74 percent of total purchases, data from Japan’s agriculture ministry show. Japan’s total corn imports dropped to 14.9 million tons last year, the lowest since 1986, according to the data.

Glencore buys stake in Brazil iron ore miner Ferrous

Wed Feb 27, 2013
Feb 27 (Reuters) - Commodities trader Glencore has bought an unspecified stake in unlisted Brazilian iron ore exporter Ferrous - its first equity stake in a producer of the steelmaking commodity.

The Swiss-based trader and miner has also agreed to buy 20 million tonnes of iron ore from Ferrous over four years, in a deal that feeds Glencore's ambitions in a sector that has long remained the preserve of major mining groups Vale, Rio Tinto and BHP Billiton.

Ferrous, which has twice failed to raise capital through share offerings, has long been seeking a partner to bankroll its ambitious expansion plans, and the miner said on Wednesday the Glencore agreement strengthened its financial position.

"The agreement guarantees a substantial part of the company's production until 2016," chief executive Jayme Nicolato said.

Ferrous, which produced 3.2 million tonnes of iron ore in 2012, is targeting 5 million tonnes this year and wants to raise output to 17 million tonnes from 2016.

Glencore, like rival trader Vitol, has big ambitions for iron ore, which it hived into a separate business arm last year. It has since struck deals to buy output from emerging producers such as African Minerals and Bellzone.

Glencore and Vitol are competing for space in an iron ore market dominated by BHP, Rio and Vale with a combined share of around 60 percent, leaving even the world's largest commodity traders to battle over production in emerging iron ore basins such as west Africa.

Glencore has also been circling smaller Brazilian producers.

Sources with knowledge of the matter said last year it was one of the suitors for Anglo American's Amapa iron ore mine, eventually sold to Zamin in January.

Cyclone Spares Australian Iron Ore Port as It Heads to Mines

By Elisabeth Behrmann & Michelle Wiese Bockmann - Feb 28, 2013
Bloomberg
Australia’s Port Hedland, home to the world’s biggest bulk export terminal, escaped with minor damage from a weakening tropical Cyclone Rusty, which is now moving inland to the Pilbara iron ore mining region.

The cyclone, which started as a Category 4 storm, made landfall 110 kilometers (68 miles) north of the port town yesterday. It has weakened to Category 1 and is currently 100 kilometers east-northeast of the Marble Bar settlement, Australia’s Bureau of Meteorology said in a statement posted at 11:00 a.m. western standard time on its website.

Port Hedland, which exports product from mines owned by BHP Billiton Ltd. (BHP), Fortescue Metals Group Ltd. (FMG) and Atlas Iron Ltd. (AGO), reopened its anchorage this morning and expects to resume inbound shipping from 4 p.m local time, the port authority said in an e-mail. Rio Tinto expects to resume ship-loading at the nearby ports of Dampier and Cape Lambert later today, the company said in an e-mail. The operations closed on Feb. 25 ahead of the cyclone.

Both Rio and BHP are monitoring the weather for an expected spell of heavy rainfall in the eastern Pilbara, where some the companies’ mines are located, they said in separate e-mails.

“Heavy rainfall is likely to lead to major flooding in the De Grey catchment,” the bureau said. “Significant flooding is also possible in the Upper Fortescue catchment and in remaining east Pilbara coastal streams.”

Western Ports

Port Hedland, Dampier, Port Walcott and other ports in Western Australia handled iron-ore shipments totaling more than 500 million metric tons last year, or a 43 percent world share, according to Alphabulk. They accounted for 24 percent of demand for Capesizes, the biggest ore carriers.

Prolonged rainfall from Rusty expected over mines owned by BHP and Fortescue “could lead to more significant long-term loss of production,” the Paris-based bulk-shipping information provider said in an e-mailed statement. The companies are Australia’s second- and third-largest ore exporters, respectively. Atlas may also be affected, according to a bureau projection.

Cyclone season lasts from about November to April and high winds as well as flooding can disrupt iron ore operations in the world’s biggest exporter.

Bunker Prices : 28.02.2013

Source : Bunkerworld.com

	IFO380		IFO180		MDO		MGO
Singapore	633.00		640.00		945.00		955.00
Rotterdam	614.00		636.50		-		942.00
Houston	620.50		694.50		1,040.00		1,029.00
Fujairah	646.00		674.50		-		1,010.00
Los Angeles	637.50		675.50		1,045.00		1,082.00
Canary Islands	654.50		680.50		994.00		1,010.00
Busan	667.00		687.50		1,007.50		1,017.50
Genoa	638.00		669.50		-		1,006.50
Auckland	865.00		-		-		1,105.00
Montevideo	704.00		743.00		-		1,222.50
Valparaiso	693.00		788.00		-		1,025.00
Colombo	725.00		750.00		-		1,160.00
New York	641.00		674.00		1,045.00		1,034.00

Barley area to rise, as exporters' stocks tumble

25th Feb 2013, by Agrimoney
World barley area is to increase, reflecting a quest to rebuild inventories which are, among major exporting countries, on course for a 17-year low.

The International Grains Council, in a round of forecasts for crop plantings in 2013-14, pegged barley area at 53.1m hectares, a rise of 700,000 hectares year on year.

The estimate reflected in part the mixed impact of a better winter in the northern hemisphere, where "no major winterkill has been reported so far", the IGC said.

While in the European Union the lack of frost damage has limited the land up for reseeding with spring barley for reasons of winter cold, in the Ukraine, it has at least constrained losses in winter barley, which accounts for about one-third of plantings.

"After a shortfall of the previous season, the barley area in Ukraine is projected to rebound to about 4.0m hectares," the IGC said.

'Good returns'

In the European Union itself - the world's top barley producer, well ahead of the former Soviet Union, and Canada - sowings will be kept steady at about 12.4m hectares by the wet which prevented autumn crop plantings in much of the UK and parts of France and Scandinavia.

The IGC foresaw "a projected increase in spring barley plantings to replace lost flood-damaged wheat fields, mostly in the UK - compensating for a slightly lower area of winter varieties".

UK farmers are seen by many analysts as on course to sow their biggest spring barley area since at least the 1990s.

Meanwhile, in Canada, farmers, "encouraged by good returns, are also expected to increase barley plantings", by some 200,000 hectares to 3.2m hectares, "with the harvested area recovering to average levels of around 3.0m hectares", the IGC said.

The IGC estimate is in line with a forecast from Canada's farm ministry, AAFC, of sowings of 3.15m hectares, and harvested area of 2.85m hectares.

AAFC sees domestic barley prices averaging Can$220-250 a tonne in 2013-14, compared with Can$220-250 a tonne in the current season.

Inventories dwindle

Farmers' slightly more favourable view of barley comes amid prospects of a sharp decrease in prices of some other spring crops, notably corn, which the US Department of Agriculture sees averaging $4.80 a bushel in the domestic market in 2013-14, down 33% year on year.

World barley stocks will end 2012-13 at a five-year low of 23.6m tonnes, with the drop in inventories in major exporting countries particularly severe, of 14% to 12.5m tonnes, the lowest in 17 years.

"Much of the decline is in the EU, where a big export programme is set to more than offset higher production, leading to particularly tight stocks at 6.5m tonnes," the council said.

The level of inventories in exporting countries tends to have a disproportionate effect on prices, given that these are the supplies available to the international trade, so have a large impact on determining the degree of competition in the market.

Evening markets: wheat price slips back below $7 on US snow

25th Feb 2013, by Agrimoney
Not since June has wheat fallen below $7 a bushel in Chicago.

It did again on Monday, with the March lot dropping to $6.98 a bushel in late deals, before closing at  $6.99 ¼ a bushel, down 2.2% on the day.

The May contract, which is now the best traded, ended down 1.9% at $7.05 ¼ a bushel.

And this when, by contrast, Chicago corn kept its footing, closing up 0.5% at $6.93 ½ a bushel for March, and by 0.2% at $6.85 ½ a bushel for May.

This reduced the discount of corn and wheat to less than $0.06 a bushel for the spot contract, what appears to be the weakest since May last year.

'No more than pain relief'

OK, it was always going to be difficult for grains and oilseeds to show mega-gains on Monday, given the prospect of huge crops ahead in 2013 which are increasingly grabbing investors' attention.

"Bullish participants in the market retain the appearance of a terminally-ill patient in denial of the assured pending outcome fast approaching," Jaime Nolan-Miralles at broker FCStone said.

"Logistical delays in Brazil, expected Chinese buying in soybeans post its holiday season and possible adverse weather appear to be no more than pain relief for what is in effect a market on the cusp of a notable rebound in supply for 2013-14."

All this, of course, is reflected in the bearish position which speculators have taken this month, driving their net short positions in the likes of New York arabica coffee and raw sugar futures and options to record highs, and a massive drop in net long holdings in corn.

'Funds are liquidating'

In fact, speculators' net long in major US-traded commodities fell to its lowest level since March 2009 in the week to last Tuesday, according to Rabobank.

"This was the second consecutive week of managed money net long positions declining by over 100,000 contracts, and only the second time on record," the bank said.

US Commodities said: "The market now believes large production is highly possible," after forecasts for huge US crops were underlined by the US Department of Agriculture at its Outlook conference last week, and with South American weather improving.

"Funds are liquidating their long positions."

'Moisture deficit cut in half'

However, investors found extra cause to put wheat through the mangle, despite Friday's positive US weekly export sales data, of 766,000 tonnes.

The main one is the precipitation which is improving prospects for US winter wheat regions where drought has been setting back seedlings.

(More will be revealed on crop condition in monthly data due out on some US states later on Monday.)

"The morning radar shows very heavy precipitation in the southern Great Plains including previously dry wheat areas of the Texas panhandle," Gail Martell at Martell Crop Projections said.

"Drought is rapidly resolving from back-to-back snow storms. Very heavy precipitation last week cut the Kansas moisture deficit in half."

'Massive weather system'

In fact, more moisture is on its way to the southern Plains, and "seems to be tracking south of the previous storm and could offer rain and a foot or more of snow to portions of Oklahoma and north Texas", Benson Quinn Commodities said.

Weather service WxRisk.com said: "The next weather system is going to be a massive one that will strongly impact the central and lower Plains over the next 48 hours.

"Blizzard warnings are in effect for the entire Texas and Oklahoma, panhandles as well as eastern Colorado and south western Kansas."

Furthermore, "there may be another rain and snow event for the lower Plains, March 4-5", WxRisk.com added.

Demand setback

Then, as if easing supply pressures were not enough to cheer bears, the demand picture got a dent too, from the growing ideas that Egypt, the top wheat importer, may be sidelined from purchases for some time.

"Comments out of Egypt on the weekend indicated they had a 10-month inventory of wheat and would not be in the market for wheat for a while added to downward pressure," Darrell Holaday at Country Futures said.

"There is really a lot of question as to whether that is true, but it has certainly pressured the market."

That was true in Europe too, where Paris wheat for May dropped 1.7% to E233.50 a tonne, the contract's lowest close for seven months.

London wheat for May lost 0.5% to £205.15 a tonne, at least given some protection by the weakness of sterling, exacerbated by the UK's downgrade by Moody's.

'Physical prices remain firm'

Corn's better performance reflected some more positive news on the demand front, with the USDA unveiling US sales of 127,000 tonnes of corn to "unknown destinations" – some of it for 2012-13 delivery.

This just as importers were seen preferring by a distance alternative origins, including Brazil (strikes allowing) and Ukraine, where supplies are less constrained than in the US.

After all, in the US, "commercial traders are still finding it difficult to buy corn, and whilst the futures have fallen in the face of fund selling, physical prices in the US remain firm", a major European commodities house noted.

And this when speculators have sold down their net long position in corn futures and options so much – by more than 110,000 contracts, or 65%, in two weeks – that many believe hedge fund appetite for a further negative lurch is limited for now, despite ideas of a huge US crop coming in 2013-14.

"By now, most of the news of increasing supply should be priced in," Commerzbank said.

Speedy harvest

Would soybeans side with corn or wheat?

The oilseed had export demand on its side, with the USDA unveiling sales of 120,000 tonnes to China, of new crop.

But growing ideas of a resolution to the Brazil port strike, which has been shifting demand to the US, besides data from AgRural showing the South American country's soybean harvest 27% complete - ahead of the 20% a year ago, despite some heavy rains – suggested lower prices.

As did a weakened technical picture, after the oilseed's late pullback in the last session, which took the March contract back to its 200-day moving average.

US buying from Paraguay?

In fact, the contract fell through its 200-day, 20-day and 100-day moving averages on Monday, in dropping 0.7% to $14.51 ¼ a bushel.

The better-traded May lot ended down 0.6% at $14.35 ¼ a bushel.

Rumours that the US is turning too to South America for soybeans did little to help, with the talk going that east coast US livestock feeders have bought some Paraguayan soybeans for shipment into Norfolk, Virginia.

"It is true that about 1bn bushels of corn will need to be rationed and about one-third of the US soybean crush," US Commodities said.

"Brazil imports could bridge the gap."

'Positive production developments'

Moves among soft commodities were a little lower too, defying ideas that speculators huge net short positions in raw sugar and arabica coffee would at least see these contracts bounce, on ideas that appetite for further short positions would be limited.

That worked for a bit in helping raw sugar, which traded in positive ground for most of the day in New York, also gaining support from a Macquarie caution over the extent of negative consensus, before the pressure returned to send the May lot down 0.3% at 18.09 cents at the close.

Arabica coffee for May lost early gains to end down 0.5% at 143.10 cents a pound.

Macquarie said: "While the problems in Central America continue to be a serious threat for next season's production," a reference to disease pressures, "positive production developments elsewhere are countering this."

Evening markets: wheat price slips back below $7 on US snow

25th Feb 2013, by Agrimoney
Not since June has wheat fallen below $7 a bushel in Chicago.

It did again on Monday, with the March lot dropping to $6.98 a bushel in late deals, before closing at  $6.99 ¼ a bushel, down 2.2% on the day.

The May contract, which is now the best traded, ended down 1.9% at $7.05 ¼ a bushel.

And this when, by contrast, Chicago corn kept its footing, closing up 0.5% at $6.93 ½ a bushel for March, and by 0.2% at $6.85 ½ a bushel for May.

This reduced the discount of corn and wheat to less than $0.06 a bushel for the spot contract, what appears to be the weakest since May last year.

'No more than pain relief'

OK, it was always going to be difficult for grains and oilseeds to show mega-gains on Monday, given the prospect of huge crops ahead in 2013 which are increasingly grabbing investors' attention.

"Bullish participants in the market retain the appearance of a terminally-ill patient in denial of the assured pending outcome fast approaching," Jaime Nolan-Miralles at broker FCStone said.

"Logistical delays in Brazil, expected Chinese buying in soybeans post its holiday season and possible adverse weather appear to be no more than pain relief for what is in effect a market on the cusp of a notable rebound in supply for 2013-14."

All this, of course, is reflected in the bearish position which speculators have taken this month, driving their net short positions in the likes of New York arabica coffee and raw sugar futures and options to record highs, and a massive drop in net long holdings in corn.

'Funds are liquidating'

In fact, speculators' net long in major US-traded commodities fell to its lowest level since March 2009 in the week to last Tuesday, according to Rabobank.

"This was the second consecutive week of managed money net long positions declining by over 100,000 contracts, and only the second time on record," the bank said.

US Commodities said: "The market now believes large production is highly possible," after forecasts for huge US crops were underlined by the US Department of Agriculture at its Outlook conference last week, and with South American weather improving.

"Funds are liquidating their long positions."

'Moisture deficit cut in half'

However, investors found extra cause to put wheat through the mangle, despite Friday's positive US weekly export sales data, of 766,000 tonnes.

The main one is the precipitation which is improving prospects for US winter wheat regions where drought has been setting back seedlings.

(More will be revealed on crop condition in monthly data due out on some US states later on Monday.)

"The morning radar shows very heavy precipitation in the southern Great Plains including previously dry wheat areas of the Texas panhandle," Gail Martell at Martell Crop Projections said.

"Drought is rapidly resolving from back-to-back snow storms. Very heavy precipitation last week cut the Kansas moisture deficit in half."

'Massive weather system'

In fact, more moisture is on its way to the southern Plains, and "seems to be tracking south of the previous storm and could offer rain and a foot or more of snow to portions of Oklahoma and north Texas", Benson Quinn Commodities said.

Weather service WxRisk.com said: "The next weather system is going to be a massive one that will strongly impact the central and lower Plains over the next 48 hours.

"Blizzard warnings are in effect for the entire Texas and Oklahoma, panhandles as well as eastern Colorado and south western Kansas."

Furthermore, "there may be another rain and snow event for the lower Plains, March 4-5", WxRisk.com added.

Demand setback

Then, as if easing supply pressures were not enough to cheer bears, the demand picture got a dent too, from the growing ideas that Egypt, the top wheat importer, may be sidelined from purchases for some time.

"Comments out of Egypt on the weekend indicated they had a 10-month inventory of wheat and would not be in the market for wheat for a while added to downward pressure," Darrell Holaday at Country Futures said.

"There is really a lot of question as to whether that is true, but it has certainly pressured the market."

That was true in Europe too, where Paris wheat for May dropped 1.7% to E233.50 a tonne, the contract's lowest close for seven months.

London wheat for May lost 0.5% to £205.15 a tonne, at least given some protection by the weakness of sterling, exacerbated by the UK's downgrade by Moody's.

'Physical prices remain firm'

Corn's better performance reflected some more positive news on the demand front, with the USDA unveiling US sales of 127,000 tonnes of corn to "unknown destinations" – some of it for 2012-13 delivery.

This just as importers were seen preferring by a distance alternative origins, including Brazil (strikes allowing) and Ukraine, where supplies are less constrained than in the US.

After all, in the US, "commercial traders are still finding it difficult to buy corn, and whilst the futures have fallen in the face of fund selling, physical prices in the US remain firm", a major European commodities house noted.

And this when speculators have sold down their net long position in corn futures and options so much – by more than 110,000 contracts, or 65%, in two weeks – that many believe hedge fund appetite for a further negative lurch is limited for now, despite ideas of a huge US crop coming in 2013-14.

"By now, most of the news of increasing supply should be priced in," Commerzbank said.

Speedy harvest

Would soybeans side with corn or wheat?

The oilseed had export demand on its side, with the USDA unveiling sales of 120,000 tonnes to China, of new crop.

But growing ideas of a resolution to the Brazil port strike, which has been shifting demand to the US, besides data from AgRural showing the South American country's soybean harvest 27% complete - ahead of the 20% a year ago, despite some heavy rains – suggested lower prices.

As did a weakened technical picture, after the oilseed's late pullback in the last session, which took the March contract back to its 200-day moving average.

US buying from Paraguay?

In fact, the contract fell through its 200-day, 20-day and 100-day moving averages on Monday, in dropping 0.7% to $14.51 ¼ a bushel.

The better-traded May lot ended down 0.6% at $14.35 ¼ a bushel.

Rumours that the US is turning too to South America for soybeans did little to help, with the talk going that east coast US livestock feeders have bought some Paraguayan soybeans for shipment into Norfolk, Virginia.

"It is true that about 1bn bushels of corn will need to be rationed and about one-third of the US soybean crush," US Commodities said.

"Brazil imports could bridge the gap."

'Positive production developments'

Moves among soft commodities were a little lower too, defying ideas that speculators huge net short positions in raw sugar and arabica coffee would at least see these contracts bounce, on ideas that appetite for further short positions would be limited.

That worked for a bit in helping raw sugar, which traded in positive ground for most of the day in New York, also gaining support from a Macquarie caution over the extent of negative consensus, before the pressure returned to send the May lot down 0.3% at 18.09 cents at the close.

Arabica coffee for May lost early gains to end down 0.5% at 143.10 cents a pound.

Macquarie said: "While the problems in Central America continue to be a serious threat for next season's production," a reference to disease pressures, "positive production developments elsewhere are countering this."

Evening markets: wheat price slips back below $7 on US snow

25th Feb 2013, by Agrimoney
Not since June has wheat fallen below $7 a bushel in Chicago.

It did again on Monday, with the March lot dropping to $6.98 a bushel in late deals, before closing at  $6.99 ¼ a bushel, down 2.2% on the day.

The May contract, which is now the best traded, ended down 1.9% at $7.05 ¼ a bushel.

And this when, by contrast, Chicago corn kept its footing, closing up 0.5% at $6.93 ½ a bushel for March, and by 0.2% at $6.85 ½ a bushel for May.

This reduced the discount of corn and wheat to less than $0.06 a bushel for the spot contract, what appears to be the weakest since May last year.

'No more than pain relief'

OK, it was always going to be difficult for grains and oilseeds to show mega-gains on Monday, given the prospect of huge crops ahead in 2013 which are increasingly grabbing investors' attention.

"Bullish participants in the market retain the appearance of a terminally-ill patient in denial of the assured pending outcome fast approaching," Jaime Nolan-Miralles at broker FCStone said.

"Logistical delays in Brazil, expected Chinese buying in soybeans post its holiday season and possible adverse weather appear to be no more than pain relief for what is in effect a market on the cusp of a notable rebound in supply for 2013-14."

All this, of course, is reflected in the bearish position which speculators have taken this month, driving their net short positions in the likes of New York arabica coffee and raw sugar futures and options to record highs, and a massive drop in net long holdings in corn.

'Funds are liquidating'

In fact, speculators' net long in major US-traded commodities fell to its lowest level since March 2009 in the week to last Tuesday, according to Rabobank.

"This was the second consecutive week of managed money net long positions declining by over 100,000 contracts, and only the second time on record," the bank said.

US Commodities said: "The market now believes large production is highly possible," after forecasts for huge US crops were underlined by the US Department of Agriculture at its Outlook conference last week, and with South American weather improving.

"Funds are liquidating their long positions."

'Moisture deficit cut in half'

However, investors found extra cause to put wheat through the mangle, despite Friday's positive US weekly export sales data, of 766,000 tonnes.

The main one is the precipitation which is improving prospects for US winter wheat regions where drought has been setting back seedlings.

(More will be revealed on crop condition in monthly data due out on some US states later on Monday.)

"The morning radar shows very heavy precipitation in the southern Great Plains including previously dry wheat areas of the Texas panhandle," Gail Martell at Martell Crop Projections said.

"Drought is rapidly resolving from back-to-back snow storms. Very heavy precipitation last week cut the Kansas moisture deficit in half."

'Massive weather system'

In fact, more moisture is on its way to the southern Plains, and "seems to be tracking south of the previous storm and could offer rain and a foot or more of snow to portions of Oklahoma and north Texas", Benson Quinn Commodities said.

Weather service WxRisk.com said: "The next weather system is going to be a massive one that will strongly impact the central and lower Plains over the next 48 hours.

"Blizzard warnings are in effect for the entire Texas and Oklahoma, panhandles as well as eastern Colorado and south western Kansas."

Furthermore, "there may be another rain and snow event for the lower Plains, March 4-5", WxRisk.com added.

Demand setback

Then, as if easing supply pressures were not enough to cheer bears, the demand picture got a dent too, from the growing ideas that Egypt, the top wheat importer, may be sidelined from purchases for some time.

"Comments out of Egypt on the weekend indicated they had a 10-month inventory of wheat and would not be in the market for wheat for a while added to downward pressure," Darrell Holaday at Country Futures said.

"There is really a lot of question as to whether that is true, but it has certainly pressured the market."

That was true in Europe too, where Paris wheat for May dropped 1.7% to E233.50 a tonne, the contract's lowest close for seven months.

London wheat for May lost 0.5% to £205.15 a tonne, at least given some protection by the weakness of sterling, exacerbated by the UK's downgrade by Moody's.

'Physical prices remain firm'

Corn's better performance reflected some more positive news on the demand front, with the USDA unveiling US sales of 127,000 tonnes of corn to "unknown destinations" – some of it for 2012-13 delivery.

This just as importers were seen preferring by a distance alternative origins, including Brazil (strikes allowing) and Ukraine, where supplies are less constrained than in the US.

After all, in the US, "commercial traders are still finding it difficult to buy corn, and whilst the futures have fallen in the face of fund selling, physical prices in the US remain firm", a major European commodities house noted.

And this when speculators have sold down their net long position in corn futures and options so much – by more than 110,000 contracts, or 65%, in two weeks – that many believe hedge fund appetite for a further negative lurch is limited for now, despite ideas of a huge US crop coming in 2013-14.

"By now, most of the news of increasing supply should be priced in," Commerzbank said.

Speedy harvest

Would soybeans side with corn or wheat?

The oilseed had export demand on its side, with the USDA unveiling sales of 120,000 tonnes to China, of new crop.

But growing ideas of a resolution to the Brazil port strike, which has been shifting demand to the US, besides data from AgRural showing the South American country's soybean harvest 27% complete - ahead of the 20% a year ago, despite some heavy rains – suggested lower prices.

As did a weakened technical picture, after the oilseed's late pullback in the last session, which took the March contract back to its 200-day moving average.

US buying from Paraguay?

In fact, the contract fell through its 200-day, 20-day and 100-day moving averages on Monday, in dropping 0.7% to $14.51 ¼ a bushel.

The better-traded May lot ended down 0.6% at $14.35 ¼ a bushel.

Rumours that the US is turning too to South America for soybeans did little to help, with the talk going that east coast US livestock feeders have bought some Paraguayan soybeans for shipment into Norfolk, Virginia.

"It is true that about 1bn bushels of corn will need to be rationed and about one-third of the US soybean crush," US Commodities said.

"Brazil imports could bridge the gap."

'Positive production developments'

Moves among soft commodities were a little lower too, defying ideas that speculators huge net short positions in raw sugar and arabica coffee would at least see these contracts bounce, on ideas that appetite for further short positions would be limited.

That worked for a bit in helping raw sugar, which traded in positive ground for most of the day in New York, also gaining support from a Macquarie caution over the extent of negative consensus, before the pressure returned to send the May lot down 0.3% at 18.09 cents at the close.

Arabica coffee for May lost early gains to end down 0.5% at 143.10 cents a pound.

Macquarie said: "While the problems in Central America continue to be a serious threat for next season's production," a reference to disease pressures, "positive production developments elsewhere are countering this."

GRAINS-Wheat near 8-month low, soy up on Argentine crop f'cast

Tue Feb 26, 2013
* Wheat little changed, near lowest since June

* Snowfall across U.S. Plains boosts winter wheat crop

* Argentina soy harvest seen smaller at 48 mln tonnes
By Naveen Thukral
SINGAPORE, Feb 26 (Reuters) - U.S. wheat was little changed on Tuesday, languishing near its lowest since June due to improved crop weather across the U.S. grain belt, while corn edged higher for a second straight session.

Soybeans ticked up, recouping ground from two sessions of losses, on a forecast of a smaller crop in Argentina, although the rapidly advancing harvest of Brazil's record soy crop capped gains.

Recent storms helped improve wheat conditions across the U.S. Plains, but more moisture was needed to ensure healthy development when the crop breaks dormancy this spring.

In Kansas, the largest producer of hard red winter wheat, the crop was rated 23 percent good to excellent as of Feb. 24, up from 20 percent a month ago, according to a report issued on Monday by the state field office of the U.S. Agriculture Department's National Agricultural Statistics Service (NASS).

A potent winter storm bore down on the U.S. southern Plains on Monday, dumping more than a foot of snow and creating blizzard conditions in Oklahoma, Texas and parts of Kansas still digging out from a winter storm last week.

"We have seen significant snowfalls across the U.S. and it is allaying any moisture concerns as the crop comes out of dormancy," said Brett Cooper, a senior markets manager at INTL FCStone Australia.

Chicago Board of Trade March wheat had gained a quarter of a cent to $7.05-1/2 a bushel by 0212 GMT, after touching an 8-month low of $6.98 a bushel on Monday.

The soybean market was underpinned as Argentina's Rosario grains exchange lowered its forecast for the nation's soybean crop to 48 million tonnes, down almost 10 percent from a month ago as a long dry spell eroded yields.

Scant rainfall from early January until the middle of last week pushed global grains prices higher on supply concerns and spurred analysts to trim their production estimates. Many crops are passing through yield-defining growth stages.

But Rains in the last few days in Argentina's main crop belt arrived just in time to avert serious damage to soy and corn crops in the world's No. 3 exporter.

"Argentina's grains exchange lowered its bean crop to 48 million tonnes which is making some people think that the USDA might revise down its numbers for South American soybean output," said Cooper.

BRAZIL HARVEST

CBOT March soybeans rose 0.4 percent to $14.56-1/2 a bushel and March corn also added 0.4 percent to $6.96-1/4 a bushel.

Brazil's 2013/14 soybean harvest accelerated over the past week as weather over the grain belt turned drier and allowed producers to make progress in collecting what is expected to be a record crop.

As of Feb. 22, producers had harvested 28 percent of Brazil's planted soybean area, up from 19 percent a week earlier but slightly down from the 29 percent harvested by this time last year when drought reduced the crop size, local grain crop analysts Celeres said on Monday.

Commodity funds sold a net 5,000 CBOT soybean contracts on Monday, trade sources said. They sold 3,000 wheat and bought 3,000 corn contracts.

  Prices at  0212 GMT
  Contract        Last    Change  Pct chg  MA 30   RSI
  CBOT wheat     705.50     0.25  +0.04%   867.93   21
  CBOT corn      696.25     2.75  +0.40%   765.12   40
  CBOT soy      1456.50     5.25  +0.36%  1579.09   50
  CBOT rice      $15.44    $0.02  +0.10%   $15.48   35
  WTI crude      $92.59   -$0.52  -0.56%   $89.07   29
  Currencies                                               
  Euro/dlr       $1.309   $0.080  +6.48%    +6.49%
  USD/AUD         1.028   -0.027  -2.55%    -2.71%
  Most active contracts
  Wheat, corn and soy US cents/bushel. Rice: USD per hundredweight
  RSI 14, exponential

(Reporting by Naveen Thukral; Editing by Joseph Radford)

Augment wheat exports to Bangladesh

TEJINDER NARANG, THE HINDU BUSINESS LINE
25, February 2013
Bangladesh last year imported about 3 million tonnes (mt) of wheat from Russia, Ukraine (1.0mt), Canada/Australia (0.9 mt), while India’s contribution--- which is flush with huge stocks -- has been minimal (0.5 mt).

Though there is regular cross-border export of wheat to Bangladesh by the medium-sized traders, import on Government and private account via Chittagong and Mongla port of approximately 2.5 mt per annum takes place from all origins. This includes a tendered annual import of Director General, Department of Food (DG Bangladesh) of approximately 800,000 tonnes. India should actively exploit this market for better “fob” value realisation, as logistics costs would be the least; there are no quarantine concerns like Iran/Egypt and payment arrangements are fairly smooth.

INDIA MISSES OUT

In 2010, the Bangladesh government made an official request for import of 300,000 tonnes of rice and 200,000 tonnes of wheat from Food Corporation of India (FCI). However, the terms of trade offered by FCI were “as it where is” basis from warehouses at port towns. It took no liability on account of quality, quantity shortage and transit loss after the material was de-stocked. The Bangladesh government had desired supplies on delivered basis — (C&F Liner out shipments); 90 per cent payment against shipping documents and 10 per cent payment after quality and quantity are contractually complied with, or pro rata deduction thereof. The Indian and Bangladesh governments, respectively, represented by three PSUs (STC, PEC, MMTC) and DG Bangladesh could not arrive at a compromise. Repeated requests made by the Bangladesh government for supply of grains could not be appropriately responded to by the Indian side. Bangladesh feels let down by this episode.

During 2010-12, the aggressive bidders/shippers in “DG Bangladesh” tenders were international traders based in Dubai, Singapore, Bangkok, who sourced wheat from diverse origins. (Most MNCs have stayed away from Bangladesh Government wheat tenders.) However, upon execution of the contracts, they discovered that there was an extra cost of $10-12/ tonne, which remained unforeseen (at the time of bidding) for deemed contractual non-compliance. The option was either to perform at a loss, or abandon implementation by allowing the Bangladesh Government to encash their performance bank guarantee.

After losing money, these traders have withdrawn from their aggressive posturing in tenders, while new kids on the block-- South Korean trading firms and some other companies --- are bidding for Indian/third country wheat at $12-15 below performing price. They might also face a similar situation like their predecessors, unless they see major bearishness in coming months. The chances are that Bangladesh may not be able to import the contracted quantity, but may be content with monetary compensation by invoking bank guarantees. The objective of any Governmental institution should be to secure its food supplies, rather than to be in the business of making money out of defaults. Therefore, there is an immediate need on the Bangladesh side to correct these procedural wrangles.

DIFFERENT MODEL

The “South Korean” model necessitates the involvement of two intermediaries and two additional banks in a string of seven parties, while the normal trade flow comprises three entities. A local trader in Bangladesh assigns the contract to his foreign principal. Extended intermediation is meant to mitigate risk exposure due to quality or quantity claims, after wheat is discharged at ports in Bangladesh and for expediting 10 per cent payment/ release of bank guarantees. This risk premium induced by extreme contractual cautiousness reduces FOB realisation of the supplier. It also adds additional cost burden to the Bangladesh government and extra banking cost. The prospects of supply of poor quality grains also increase. The net effect is that the Bangladesh Government acquires feed quality /low grade wheat, though payments appear to be made for good milling wheat.

For private wheat imports by Bangladesh, Singapore/Australian traders have an edge because they can offer 180 days secured or unsecured credit at better terms. That may not be possible for Indian players.

However, for efficient trade flow for official imports the Indian side has to be flexible as well. The way out is simple: (a) GOI/private trade should be willing to supply wheat to Bangladesh on C&F Liner Out delivered basis and (b) Bangladesh government should accept quality/quantity final at load port (c) a performance guarantee of 5-10 per cent may be held as security for contractual performance, instead of the existing provision of making 90 per cent payment against the shipping document, and holding 10 per cent payment till quality issues and performance bank guarantee are finalised.

Such a procedure would be cost effective and pave the way for much greater bilateral co-operation.

(The author is a freelance grains trade analyst)

Grain mountain grows despite push for exports

By Naveen Thukral and Mayank Bhardwaj
25 FEB, 2013, REUTERS
SINGAPORE/NEW DELHI: India will be unable to consume or export enough wheat and rice to rein in a record stockpile after another bumper harvest, a failure that means crops risk rotting in fields instead of being sold on world markets to cash in on higher prices.

In March, farmers in India will begin to harvest the sixth consecutive wheat crop expected to exceed demand, and when threshing is over in June the government's combined wheat and rice stocks are set to hit 100 million tonnes. That is about a fifth higher than the volume in storage a year ago.

The grain mountain is worth about $30 billion and the nation of 1.2 billion will soon have enough wheat piled up to feed its poor for a year. But in a stark example of country's corruption-plagued and inefficient food distribution and storage system, much will simply end up rotting in a country with 500 million poor, and despite a need for income from exports to reduce a record current account deficit.

The food ministry is pressing the government to increase exports, but country's creaking transport system means that a large portion of grains will simply not be able to get to ports even with global prices jumping a fifth last year.

The country's grain export facilities are working flat out, but the government will struggle to ship more than 6 million tonnes of wheat in 2013 from its stocks, while sales by private exporters will be capped at around 2 million tonnes.

If exports reach 8 million tonnes in 2013, it would make India one of the world's top 10 exporters. The volume would amount to about a quarter of the 30 million tonnes shipped by top exporter the United States.

Wheat also has to compete with booming rice exports for limited capacity on the railroads and in the ports. Like wheat, the rice crop has been abundant and the nation emerged as the world's biggest rice exporter in 2012.

"Despite our best efforts, we (India) cannot export to an extent where stocks come down to somewhat manageable levels," said Tejinder Narang, adviser at New Delhi-based trading company Emmsons International.

"The government will have to struggle with mammoth stocks. There's no way out."

That means India is unable to capitalise fully on the opportunity to export to international markets, where there is room for more Indian supply to compensate for poor harvests from major producers.

Benchmark Chicago wheat prices jumped 19.2 per cent last year as adverse weather conditions reduced harvests from Australia and Russia, the world's second and third largest exporters. Wheat was the best-performing commodity on the Thomson Reuters-Jefferies CRB index in 2012.

Storage space of 47 million tonnes can accommodate less than half of the expected stockpiles, and the rest will sit under tarpaulins in the open.

Wheat consumption and exports from government warehouses will likely account for around 82 million tonnes of India's 92.3 million tonnes of output in 2013. Additional 2 million tonnes of exports by private traders will leave a surplus of around 8 million tonnes.

India produced a record 105.31 million tonnes of rice last year, while domestic consumption stood at around 90 million tonnes.

The government has so far given permission for 4.5 million tonnes of wheat exports from state storage in 2012/2013. It will likely raise that to 6 million tonnes but beyond that the permits may be no more than a paper solution as there is no real capacity to ship more out unless the bureaucrats push for wheat to have priority over rice exports.

A food ministry official, who declined to be identified, said his ministry was pressing the cabinet to allow India to export as much as possible while prices are firm.

RISK FROM PESTS

India's grain stockpile has grown rapidly over recent years, thanks to near-perfect weather and the government's commitment to buy the entire quantity of wheat and rice brought to market in a bid to support farmers.

Wheat stocks alone will be about 64 million tonnes in June, 16 times the state target for the time of year, said two government sources responsible for grain purchases and storage who declined to be identified as they are not authorised to speak to the media.

As India gears up to buy a record 44 million tonnes of wheat from the latest harvest, the Food Corporation of India has been building platforms of wood and cement for storage. These are no match for purpose built grains warehouses and silos and leave supplies exposed to rodents and the weather.

In previous years, images of rotting grains in faded bags has stoked stinging criticism of the government which is now under pressure to trim stockpiles.

PORT CONGESTION

"Port congestion is an issue as cargoes have to wait, adding to exporters' costs and delaying deliveries," said Sanjeev Garg, chief executive at agricultural products trading company CommCorp International in New Delhi.

Even though Indian wheat exports account for a small fraction of the global trade of 140 million tonnes, shipments from the South Asian nation have already helped ease tight supply of lower quality grains.

The latest tender for Indian government wheat was awarded at $312 per tonne. Australian supplies, which are higher quality varieties, typically cost $20-40 per tonne more, traders said.

India has little competition right now for its wheat, which is bought by Thailand, South Korea and Taiwan as animal feed while some southeast Asia countries blend it with milling wheat to bring the cost down.

(Additional reporting by Ratnajyoti Dutta in NEW DELHI; Editing by Ed Davies and Simon Webb)

UBS Sees Iron Ore Plunging 54% to Lowest Since ’09 on Supplies

By Phoebe Sedgman - Feb 26, 2013
Bloomberg
Iron ore, trading near 16-month highs, may slump 54 percent to the lowest level since 2009 as China boosts production and global supply climbs, said UBS AG. (UBSN)

Rates may tumble to $70 a ton in the three months ending September after trading between $130 and $160 through June, Sydney-based commodity analyst Tom Price said in a phone interview today. China is the world’s biggest importer.

Iron ore has surged 75 percent from a near three-year low in September as China’s growth rebounded from a seven-quarter slowdown. That may prompt an increase in Chinese output and idled mines with capacity of 100 million tons a year are set to return to the market from March, according to Macquarie Group Ltd. on Feb. 22. Global seaborne supplies will climb 9.1 percent this year, Morgan Stanley estimates.

“We expect a big correction in the third quarter,” said Price. “We see a big lift in supply.” Ore with 62 percent content delivered to the port of Tianjin in China cost $151.90 a dry ton yesterday, according to The Steel Index Ltd. Rates rose to $158.90 on Feb. 20, the highest since October 2011.

While Price joins analysts from Westpac Banking Corp. (WBC) to Deutsche Bank AG in predicting cheaper prices in the second half, his estimate is lower than most. Westpac senior economist Justin Smirk and Bank of America Corp. expect $110 by yearend.

Rates may jump above $160 in the short term amid lower supplies from India and as the cyclone season in Australia threatens shipments, said Price. March ore swaps rose 1.8 percent to $150.06 yesterday, snapping seven daily losses, data from SGX AsiaClear show, as a severe tropical cyclone neared Port Hedland, the world’s largest bulk export facility.

Cyclone Rusty

Rusty, a category 3 storm, is 170 kilometers (106 miles) northeast of Port Hedland, said the Bureau of Meteorology. The port, which ships ore from BHP Billiton Ltd. (BHP) and Fortescue Metals Group Ltd. (FMG), has closed and Rio Tinto Group’s Dampier and Cape Lambert iron ore shipping facilities are shut.

Australia is set to deliver about 80 percent of total new seaborne supply this year, most of it in the second half, UBS analysts including Price said in a Jan. 31 report. That will coincide at a time when China has “sufficient” ore and as steel production declines in the second half, they said.

“The trade will remain pretty tight generally all the way through to June or July and then it starts to fall over going into August or September,” said Price. Iron ore slumped 22 percent in the third quarter of 2012. Global seaborne supply will outpace demand by 20 million tons in 2013 from a 37 million ton deficit last year, says Goldman Sachs Group Inc.

Iron ore is measured in dry tons, or metric tons less moisture. At Tianjin port moisture can account for 8 percent to 10 percent of the ore’s weight

Australian Port Evacuates as Cyclone Threatens Iron Ore Mines

By Elisabeth Behrmann - Feb 26, 2013
Bloomberg
The approach of Severe Tropical Cyclone Rusty toward the north-west Australian coast triggered orders for the evacuation of parts of Port Hedland, site of the world’s biggest bulk export terminal.

People in low-lying areas should move to emergency shelters as the upgraded Category 3 storm, with winds of as strong as 195 kilometers (121 miles) an hour likely to cause “rapid and powerful flooding,” Western Australia’s Department of Fire and Emergency Services said today in an e-mailed statement.

Port Hedland, a town of about 20,200 people, exports iron ore from mines owned by BHP Billiton Ltd., the world’s biggest mining company, Fortescue Metals Group Ltd. (FMG) and Atlas Iron Ltd. Rusty is located about 170 kilometers north-east of Port Hedland, the Bureau of Meteorology said in an update at 8 a.m. western standard time on its website.

Cyclone season lasts from about November to April and high winds as well as flooding can disrupt iron ore operations in the world’s biggest exporter.

BIMCO opens Shanghai Center office

2013-02-26(Xinhua)
SHANGHAI - The world's largest international shipping association opened its Shanghai Center office on Monday, making it the city's first international shipping organization.

The Copenhagen-based Baltic and International Maritime Council (BIMCO) has more than 2,500 members around the world, and they control more than 15,000 ships and over 65 percent of the world's tonnage.

Nearly 75 percent of international shipping industry trade and other relative industries in the world go by BIMCO's contracts and clauses.

Torben Skaanild, secretary general of BIMCO, said the establishment of the center in Shanghai is a milestone for the council.

BIMCO will help China to amplify the "voice" of the Chinese shipping industry on the world shipping stage, especially in making international shipping standards and trade rules, Torben said.

Statistics show that the container throughput of the Shanghai Port reached 32 million TEUs in 2012, which has made it the largest container port in the world for three consecutive years.

However, the city had no representative or acknowledged shipping organizations prior to BIMCO.

Shanghai will improve its infrastructure construction to build itself into an international shipping center, as well as develop its shipping service industries that rely on BIMCO, which include shipping trade, shipping finance, consultation and marine technology, said Zhang Lin, deputy director of Shanghai Municipal Transport and Port Authority.