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USDA Forecasts Record 2009 Production For U.S. Soybeans
U.S. 2009 soybean production is expected reach a record high 3.32 billion bushels, as the U.S. Department of Agriculture on Tuesday raised its crop size and yield estimates.
In its monthly crop production report, the USDA said the 2009 crop estimate is 2% above its October forecast and 12% above 2008’s level. Yields are also seen up from last month and last year, at 43.3 bushels per acre, which, if realized, would be the largest ever. The USDA raised yields by 0.9 bushels from October’s estimate, which itself would’ve been a record, and 3.6 bushels from last year.
The soybean crop estimate is bigger than what the industry was expecting. Analysts surveyed by Dow Jones Newswires expected the soybean crop at 3.269 billion bushels, with a yield of 42.7 bushels. The rise over the previous month was expected, but the gain was greater than anticipated. Early harvest results have shown high yields, even as harvest was delayed last month because of wet weather. Harvest is 75% done as of Sunday, below the 92% done on average as of this date.
The USDA said yields are either unchanged or higher in all states except Georgia, Iowa, Mississippi, and Texas. Heavy rains in October in Mississippi will lead to “hindered yield expectations,” the USDA said. Some analysts expected to see USDA possibly cut harvested acres because of problems with excessive rains in the Delta, but the USDA left its forecast for harvested area unchanged at 76.6 million acres.
The greater production caused USDA to lift its estimate for the ending stocks by 40 million bushels, to 270 million for soybeans, compared to last month, the government said in its monthly supply and demand report. Ending stocks are what is left after accounting for supply and use.
Some of the extra production is going to more exports and more soybean processing. Soybean exports rose by 20 million bushels to 1.325 billion as import demand by China, EU countries and Russia are seen consuming more. The USDA also lifted the soybean crush by 5 million bushels to 1.695 billion bushels. Soybeans are crushed into two products—soymeal and soyoil.
The USDA also noted greater competition for U.S. soybeans from South America as that region is expected to grow more of the oilseed. USDA cited increases for Brazil, Argentina, Paraguay and Uruguay. Brazil, the second biggest soybean producer after the U.S., is expected to harvest 63 million metric tons, up 1 million from October because of an expected hike in harvested area. Argentina’s production is seen up 500,000 tons to 53 million as producers switch some land to soybeans from sunflower seed.
Source: CME News for Tomorrow
Tuesday, November 10, 2009
Monday, November 9, 2009
The Debts of the Lenders: Caijing Editor Resigns Under Pressure
For those who don't know, Caijing has been the leading independent news agency in China. Under the stewardship of their editor, Hu Shuli, Caijing reporters have repeatedly pushed the line about what are (un)acceptable topics to cover. Media in China is generally censored although the authorities have experimented in recent months w/a newfound sense of liberalism.
Most of these "ok" topics have been about criticism of the USA and Europe's poor handling of the economic crisis. Almost no coverage has been devoted to internal problems such as the restive Xinjiang province and Tibet.
Caijing reporters pushed the limits w/the release of generally negative stories on the economy, naming such issues as unemployment, bubble buildups, poor health care networks, and shady real estate practices. Such action have displeased the Party elders and provoked a backlash among the authorities. Apparently one of the latest casualties is that of Ms. Hu's resignation.
http://www.eeo.com.cn/ens/homepage/briefs/2009/11/09/155180.shtml
Most of these "ok" topics have been about criticism of the USA and Europe's poor handling of the economic crisis. Almost no coverage has been devoted to internal problems such as the restive Xinjiang province and Tibet.
Caijing reporters pushed the limits w/the release of generally negative stories on the economy, naming such issues as unemployment, bubble buildups, poor health care networks, and shady real estate practices. Such action have displeased the Party elders and provoked a backlash among the authorities. Apparently one of the latest casualties is that of Ms. Hu's resignation.
http://www.eeo.com.cn/ens/homepage/briefs/2009/11/09/155180.shtml
The Debts of the World: Supply Chain Cash Flow Slows
Is this a bearish macro signal? Higher supply chain spending indicates a belief among companies that is generally bullish. In contrast, lower supply chain spending indicates a general bearish belief.
“An abrupt slowing of payments and cash flow throughout the supply chain typically indicates a waning confidence in sales,” says Jim Swift, president and CEO, Cortera.
“But we’ve seen similar spikes occur in the past, as supply chain stakeholders make significant upfront investments in preparation for the holiday shopping season. What makes this one potentially puzzling is the timing."
http://www.supplychainbrain.com/content/nc/industry-verticals/retail/single-article-page/article/supply-chain-cash-flow-slows/
“An abrupt slowing of payments and cash flow throughout the supply chain typically indicates a waning confidence in sales,” says Jim Swift, president and CEO, Cortera.
“But we’ve seen similar spikes occur in the past, as supply chain stakeholders make significant upfront investments in preparation for the holiday shopping season. What makes this one potentially puzzling is the timing."
http://www.supplychainbrain.com/content/nc/industry-verticals/retail/single-article-page/article/supply-chain-cash-flow-slows/
The Debts of the Lenders: Lula da Silva on the Promise of a Better Tomorrow
The Financial Times recently sat down to an interview w/Mr. Lula da Silva, President of Brazil, and one of the key leaders in the BRIC (Brazil, Russia, India, China) emerging market bloc. Mr. da Silva is cautiously optimistic about the future. Here are a few key comments:
“Not long ago I used to dream of accumulating $100bn in foreign reserves,” he says, still smiling broadly. “Soon we will have $300bn (€202bn, £180bn).”
“I am against the state being the manager of the economy. The state has to be strong – but as a catalyst of development. And we have run sound fiscal and monetary policies. That is why the banking sector did not break down during the crisis.”“I was reacting to comments by people who put the blame for the crisis on migrants,” he says.
“That’s how we will build a strong alliance among the Brics. At our first meeting I suggested we should begin trading in our own currencies. We don’t need the dollar. It’s just cultural and it can change.”
Perhaps there are a few lessons here that the more advanced economies in the West can learn from. Please note that Brazil has benefitted from a rush of hot money via the dollar carry trade, particularly in commodity price levels. Oil futures contracts have remained in contango for quite some time (where future exceeds spot). Now prices for longer dated contracts are pushing $100/barrel and renewing fears of inflation. In such an environment, demand for dollar denominated assets such as commodities will continue to rise or at least keep level.
But in the interest of fairness, here is another opposing perspective from noted economist Nouriel Roubini.
Source:
http://www.ft.com/cms/s/0/a1ed46c2-cc8d-11de-8e30-00144feabdc0.html
“Not long ago I used to dream of accumulating $100bn in foreign reserves,” he says, still smiling broadly. “Soon we will have $300bn (€202bn, £180bn).”
“I am against the state being the manager of the economy. The state has to be strong – but as a catalyst of development. And we have run sound fiscal and monetary policies. That is why the banking sector did not break down during the crisis.”“I was reacting to comments by people who put the blame for the crisis on migrants,” he says.
“That’s how we will build a strong alliance among the Brics. At our first meeting I suggested we should begin trading in our own currencies. We don’t need the dollar. It’s just cultural and it can change.”
Perhaps there are a few lessons here that the more advanced economies in the West can learn from. Please note that Brazil has benefitted from a rush of hot money via the dollar carry trade, particularly in commodity price levels. Oil futures contracts have remained in contango for quite some time (where future exceeds spot). Now prices for longer dated contracts are pushing $100/barrel and renewing fears of inflation. In such an environment, demand for dollar denominated assets such as commodities will continue to rise or at least keep level.
But in the interest of fairness, here is another opposing perspective from noted economist Nouriel Roubini.
Source:
http://www.ft.com/cms/s/0/a1ed46c2-cc8d-11de-8e30-00144feabdc0.html
Wednesday, November 4, 2009
The Debts of the Spenders: Is Warren Buffet a Corn Trader?
Is Warren Buffet betting on corn? The billionaire investor with a famously long term view caught the public eye this week by disclosing his holding company, Berkshire Hathaway, had recently acquired a large stake in American railway company, Burlington Northern Sante Fe (BNI). BNI runs a profitable freight line conveying containers full of stuff from coast to coast. One such route includes crossing the bread basket of America, the Great Plains, where acres of corn and wheat are grown and harvested every year.
Please note that Buffet is not betting on the price of corn. Instead, he is betting on the VOLUME of production increasing w/in the next few years. This does not necessarily mean prices will fall. Factors such as weather, pests, and spoilage will continue to add elements of uncertainty to the trade.
Some background: Harvest season is nearly over. Seasonally, most grains - including corn - are going to lie fallow until late winter's sowing. Speculative activity will begin to pick up in early December and again in late February as traders focus on March deliveries and the potential for new crop planting. Yearly highs are typically achieved in late May/early June.
Because of last year's commodity bubble, adding 2008-2009 's sharply higher prices will raise the average price range. Indeed, charting the past 10 years (1999-2009) will show a divergence from longer range charts like the 30 year.
To add further uncertainty into the mix, overplanting of soybeans within the past year has led to talk among some farmers of switching over to corn production while their soy fields lie fallow.
Through BNSF, Buffett Going With The Grain, Specifically Corn
Berkshire Hathaway’s $34 billion purchase of the Burlington Northern Santa Fe Corp. (BNI), billed as a wager on the economic future of the U.S., could also be a bet on the continued expansion of the corn industry, especially into the Great Plains.
Berkshire Chief Executive Warren Buffett called Monday’s purchase an “allin wager” on the economic future of the country, raising hopes among the grain industry for better railway conditions.
“It’s recognition of the large amount of capital investment that has gone into this [railroad] industry over the past 10 years—both in terms of upgrading track—and computerization,” said Bill Nelson of Doane Agricultural Services. “The story behind the purchase is that investment is
in position to start returning a lot of dollars to investors ... certainly grain export is one of the major elements involved there.”
Grain transported to export terminals in the Pacific Northwest, Gulf of Mexico, Mexico and the Great Lakes comprises approximately half of all the agricultural commodities that BNSF hauls annually. BNSF is the nation’s leading rail corridor for corn, the country’s largest single crop.
“This is a great year for Berkshire Hathaway to be investing into railroad transportation,” said Joe Victor of Allendale Inc. “With a record corn/soybean crop coming in, it should be a great year to move grain, very much like late 2006/early 2007,” before the U.S. economy began to falter.
BNSF is already the nation’s largest rail carrier of agricultural products, transporting more than one million carloads of farm commodities in 2007, nearly half of which were corn and wheat.
With some 20 billion bushels of all types produced annually, grain is engrained into the U.S. economy, and accordingly, so is grain transportation. The U.S. Department of Agriculture estimates that railroads originate approximately 35% of all domestic grain shipments each year.
“As for grains in particular, if we don’t fix the locks/dams of the major river arteries of the U.S., then railroads are going to be more important to shipping grain,” said Mike Zuzolo of Global Commodity Analytics & Consulting LLC. With almost all of BNSF’s 32,000 route-miles of track lying west of the Mississippi River, observers say Buffett’s big buy—the largest ever made by his
Omaha investment firm—is also a vote of confidence for continued expansion of corn into the Great Plains, a landscape that for generations had been dominated by unending miles of spring and winter wheat.
Buffett is “betting on future of cash grain industry in Great Plains, because a large percentage of grain grown here moves to the coast by rail,” said Nelson, of Doane Agricultural Services. “Yields are improving, so grain volumes are. Look at where these crops have migrated and where the investment money has gone: into the Plains and into corn.”
A USDA map now classifies counties as far west as the Nebraska-Wyoming border as “major production areas” for corn, a crop once primarily grown east of the Missouri River. Victor attributes the westward march of corn to improved genetics resulting from the development of new biotech hybrids—a technology that has not yet been adopted in the wheat industry.
“Wheat is 10 years behind on biotech,” he said. “The big picture is more corn acres, and fewer wheat acres, in the U.S.” The USDA concurs, publishing baseline forecasts in February that predicted “a gradual shift to corn, and away from other crops,” through 2018, partially due to
“gains in exports that keep corn demand and producer returns strong.”
Corn yields almost four times as many bushels of grain per acre as wheat, naturally resulting in far greater demand for transportation.
Source CME News For Tomorrow
Please note that Buffet is not betting on the price of corn. Instead, he is betting on the VOLUME of production increasing w/in the next few years. This does not necessarily mean prices will fall. Factors such as weather, pests, and spoilage will continue to add elements of uncertainty to the trade.
Some background: Harvest season is nearly over. Seasonally, most grains - including corn - are going to lie fallow until late winter's sowing. Speculative activity will begin to pick up in early December and again in late February as traders focus on March deliveries and the potential for new crop planting. Yearly highs are typically achieved in late May/early June.
Because of last year's commodity bubble, adding 2008-2009 's sharply higher prices will raise the average price range. Indeed, charting the past 10 years (1999-2009) will show a divergence from longer range charts like the 30 year.
To add further uncertainty into the mix, overplanting of soybeans within the past year has led to talk among some farmers of switching over to corn production while their soy fields lie fallow.
Through BNSF, Buffett Going With The Grain, Specifically Corn
Berkshire Hathaway’s $34 billion purchase of the Burlington Northern Santa Fe Corp. (BNI), billed as a wager on the economic future of the U.S., could also be a bet on the continued expansion of the corn industry, especially into the Great Plains.
Berkshire Chief Executive Warren Buffett called Monday’s purchase an “allin wager” on the economic future of the country, raising hopes among the grain industry for better railway conditions.
“It’s recognition of the large amount of capital investment that has gone into this [railroad] industry over the past 10 years—both in terms of upgrading track—and computerization,” said Bill Nelson of Doane Agricultural Services. “The story behind the purchase is that investment is
in position to start returning a lot of dollars to investors ... certainly grain export is one of the major elements involved there.”
Grain transported to export terminals in the Pacific Northwest, Gulf of Mexico, Mexico and the Great Lakes comprises approximately half of all the agricultural commodities that BNSF hauls annually. BNSF is the nation’s leading rail corridor for corn, the country’s largest single crop.
“This is a great year for Berkshire Hathaway to be investing into railroad transportation,” said Joe Victor of Allendale Inc. “With a record corn/soybean crop coming in, it should be a great year to move grain, very much like late 2006/early 2007,” before the U.S. economy began to falter.
BNSF is already the nation’s largest rail carrier of agricultural products, transporting more than one million carloads of farm commodities in 2007, nearly half of which were corn and wheat.
With some 20 billion bushels of all types produced annually, grain is engrained into the U.S. economy, and accordingly, so is grain transportation. The U.S. Department of Agriculture estimates that railroads originate approximately 35% of all domestic grain shipments each year.
“As for grains in particular, if we don’t fix the locks/dams of the major river arteries of the U.S., then railroads are going to be more important to shipping grain,” said Mike Zuzolo of Global Commodity Analytics & Consulting LLC. With almost all of BNSF’s 32,000 route-miles of track lying west of the Mississippi River, observers say Buffett’s big buy—the largest ever made by his
Omaha investment firm—is also a vote of confidence for continued expansion of corn into the Great Plains, a landscape that for generations had been dominated by unending miles of spring and winter wheat.
Buffett is “betting on future of cash grain industry in Great Plains, because a large percentage of grain grown here moves to the coast by rail,” said Nelson, of Doane Agricultural Services. “Yields are improving, so grain volumes are. Look at where these crops have migrated and where the investment money has gone: into the Plains and into corn.”
A USDA map now classifies counties as far west as the Nebraska-Wyoming border as “major production areas” for corn, a crop once primarily grown east of the Missouri River. Victor attributes the westward march of corn to improved genetics resulting from the development of new biotech hybrids—a technology that has not yet been adopted in the wheat industry.
“Wheat is 10 years behind on biotech,” he said. “The big picture is more corn acres, and fewer wheat acres, in the U.S.” The USDA concurs, publishing baseline forecasts in February that predicted “a gradual shift to corn, and away from other crops,” through 2018, partially due to
“gains in exports that keep corn demand and producer returns strong.”
Corn yields almost four times as many bushels of grain per acre as wheat, naturally resulting in far greater demand for transportation.
Source CME News For Tomorrow
The Debts of the Lenders: India Buys 200 Tons of Gold, Minister Says North America and Europe Have Collapsed
Yesterday, the New Delhi Reserve Bank revealed that it had bought 200 tons of gold in exchange for dollars. The sale came from the IMF's reserves.
But that's not all. In unusually provocative language, Pranab Mukerjee, India's finance minister said that, "Europe collapsed and North America collapsed." Other statements included "We have money to buy gold. We have enough foreign reserves."
Unlike the other BRIC economies, India is not reliant on export driven sales of raw material commodities and/or cheap manufactured goods. So, there has been no traditional dollar peg that has driven its trade relationship w/the outside world. Under the current and past administrations, India has been slowly but steadily shedding its Nehru era Socialist ties when the country was still politically and economically tied to Soviet Russia.
Since the end of the Cold War, subsequent administrations have embarked on an economic liberalization program and met stunning success - most notably in the business processing outsourcing (BPO) sectors which includes IT work. But much of the country remains predominantly agrarian in nature. Other stumbling blocs include the powerful presence of trade unions in the southern provinces and long running Communist insurgenices in the north-east. Then there are the recurrent security problems with Kashmir and Pakistan to the north-west.
The price of spot and forward gold rose in the markets to hit a yearly high of $1087/troy ounce.
http://timesofindia.indiatimes.com/biz/international-business/IMF-sells-200-tonnes-of-gold-to-India-worth-67-billion/articleshow/5191262.cms
http://www.ft.com/cms/s/0/0eaa4a80-c856-11de-a69e-00144feabdc0.html
Monday, November 2, 2009
The Debts of the Spenders: US Restaurant Executives Grow More Optimistic About Business Outlook
So, why am I posting about restaurant owners/managers, a subject that has never been covered on this blog before? The reason is simple. Dining establishments are representative of American business. And most of these businesses lie on the smaller end of the scale.
The 2008 US Census reports that most establishments employ less than 20 workers. Examining small business sentiment can lead to valuable clues in larger macro trends such as hiring, capital improvements, and loan applications. (Employment is a lagging indicator. Loan applications for capital improvements are leading indicators).
Source:
The following survey was completed by restaurant chain executives. But keep in mind that most restaurant chains operate on a franchise model.
http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=20091028006037&newsLang=en
The 2008 US Census reports that most establishments employ less than 20 workers. Examining small business sentiment can lead to valuable clues in larger macro trends such as hiring, capital improvements, and loan applications. (Employment is a lagging indicator. Loan applications for capital improvements are leading indicators).
Source:
The following survey was completed by restaurant chain executives. But keep in mind that most restaurant chains operate on a franchise model.
http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=20091028006037&newsLang=en
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