Thursday, September 30, 2010

Commodity News Snapshot-Pakistan

KARACHI (September 30, 2010): Dollar buying pressure kept the rupee lower on the local currency market on Wednesday in process of trading, dealers said. The rupee lost six paisa against the dollar for buying at 86.20 and it also shed seven paisa at 86.25, they said. In the third Asian trade, the ailing dollar looked vulnerable to further losses against a swathe of currencies as falling Treasury yields and disappointing US data fuelled talk that US policy needed further easing.
KARACHI (September 30, 2010): Rates came down on the cotton market on Wednesday after the news that India would begin cotton export from November, dealers said. The Karachi Cotton Association (KCA) official spot rate was unchanged at Rs 7250, they said. In ready business, around 20,000 bales changed hands at Rs 4200-7400, they said.

ISLAMABAD (September 30, 2010): Timely availability of critical agriculture inputs will be essential to prevent drastic losses in yield, says the Food and Agriculture Organisation of the United Nations (FAO). According to the executive brief on Pakistan released by FAO, the organisation has received 20.5 million dollars against the requested amount of 107 million dollars under the revised PFERP to assist flood affected people by providing seed, livestock, fisheries and forestry interventions.

International New

LONDON (September 30, 2010): Gold hit its 10th record high in 12 trading days on Wednesday as investors worried that aggressive measures by the Federal Reserve to prop up the US economy could undermine the dollar and spark inflation. Spot gold hit a record $1,313.20 and was bid at $1,308.65 an ounce at 1443 GMT, against $1,307.40 late in New York on Tuesday. US gold futures for December delivery rose $1.70 an ounce to $1,310.10.

NEW YORK (September 30, 2010): US gold futures settled on Tuesday near its new all time high above $1,311 an ounce driven up as three reports argued for further quantitative easing by central banks that drove the euro up against the dollar and set off stop-loss buy orders in both markets, traders said. COMEX December gold futures closed up $9.70 at $1,308.30 an ounce on the COMEX division of the NYMEX. Range ran from $1,276.20 to $1,311.80, a record high.

LONDON: Oil hovered above $76 a barrel on Wednesday, paring losses after US government data showed crude and oil products stocks fell last week.

Pakistan Plans Wheat, Cotton, Sugar Futures to Aid Growers, Lure Investors

Pakistan plans to introduce futures contracts in cotton, wheat, sugar and corn as early as this year to support growers and attract foreign investment, the head of the National Commodity Exchange Ltd. said. 

“Sugar futures may begin in the next two months, while the rest of the three may take till June,” said Samir Ahmed, who is managing director of the commodity exchange. “The contracts will help bring consistency in local prices, benefiting growers. Initially, we will deal with as much as 5 percent of the crop, but later will include entire harvests.” 

Pakistan’s deadliest floods this year ruined crops worth 281.6 billion rupees ($3.27 billion), destroying rice, cotton and sugar, Farm Minister Nazar Muhammad Gondal said Sept. 28. By ripping out crops, stores and 4,000 kilometers of roads, the inundation boosted food prices and may push annual inflation to 20 percent, according to Prime Minister Yousuf Raza Gilani. The National Commodity Exchange Ltd. already trades rice, gold and crude oil futures. Trading jumped to more than 20 billion rupees ($231.9 million) this week, the highest since 2007. 

“Futures contracts will end the practice of market manipulation in which growers were always paid less than what their crop was worth by influential farmers,” said Zairuf Chhotani, a commodities analyst with IGI Finex Securities Ltd. “Futures will allow the small man to take positions even before the crop is sown, and sell it to the highest bidder.” 

Investor confidence in commodities is growing and the bourse also plans to start futures contracts in zinc, steel and copper, Ahmed said in an interview yesterday. With the floods receding, he hopes the waters will reinvigorate the earth. 

Fertile Land
“There is fertile land and it will bear us more fruit in the coming year,” he said.
The country lost 2.39 million metric tons of rice and 10.4 million tons of standing sugar cane because of the floods, Gondal said in an interview in Islamabad. The nation may also import 2.8 million bales of cotton, he said. 

Exports from Pakistan, the world’s third-biggest rice supplier, may plunge 35 percent to 3 million tons in the year started July 1 from 4.6 million tons the previous year, according to Malik Jahangir, chairman of the Rice Exporters Association of Pakistan, on Sept. 1. 

Wheat and rice are the two staples for Pakistan’s people, and the government and international relief agencies have found it hard to provide food for affected areas. The United Nations said damage to infrastructure may hurt farmers for years. 

The country, the third-largest cotton user, may import 50 percent more this year, said an industry official Sept. 21. Imports may reach 3 million bales, up from 2 million last year, according to Muhammad Arshad, a vice president at the Pakistan Central Cotton committee, a government-supported organization. 

The nation is also Asia’s third-biggest sugar user and may import 1 million tons next year after the floods damaged 15 percent of the cane crop, a farmers’ group said this month. 

Sugar mills may produce 3 million tons against a target of 3.5 million tons in 2011 because less cane will be available, said Ibrahim Mughal, chairman of the Agri Forum Pakistan. “That means we would need to import 1 million tons of raw or refined sugar to meet demand,” he said. 

To contact the reporters on this story: Khurrum Anis in Karachi at;
To contact the editor responsible for this story: James Poole at

Adani In Talks With Food Corp Of India To Build Storage

Indian trading house Adani Group is in talks with the Food Corp. Of India to expand grain storage facilities to bridge the current shortfall in warehousing.
India has world's largest network of state-run outlets to sell grains below market prices to the poor and the government buys more than 50 million metric tons of wheat and rice from growers annually to run the subsidized program.
The increase in government's grains procurement in the past few years has left a yawning gap between the growing stockpile and limited storage space. Millions of tons of grain is being stored in the open, under cover-and-plinth, despite the risk of damage due to natural causes such as rains and flooding.
The government annual procurement of rice has increased to more than 31 million in the past two years from 17 million tons in 1999-2000. Wheat procurement has risen to more than 22 million tons a year, from 14 million tons earlier.
"We are having a discussion with FCI to develop integrated storage networks at various locations in the country," said Sandeep Mehta, chief executive for Adani Group's container and logistics business.
He said Adani Group had earlier constructed 550,000 tons of bulk handling and storage capacity for FCI under a "built-to-suit" project.
There is a need to undertake more such projects because of the rising stockpile of wheat and rice in India, he said.
Under the "built-to-suit" project, the Adani Group linked surplus grains producing farmlands of Moga and Kaithal in Punjab and Haryana by rail to deficit regions of Mumbai, Kolkata, Coimbatore, Bangalore and Chennai.
"It is an integrated project under which we own the silos, railway sidings and wagons while the government guarantees the storage volume and pays the handling charges and lease rentals," said Mehta.
However, the volume of grain administered by the project is a small fraction of the total wheat and rice handled by the government.
"We aim to set up similar facilities at other places," Mehta noted.
The government had originally proposed such integrated circuits of silos linking surplus and deficit states in 2001-02 when grain stocks rose to a record 64.8 million tons. However, the scheme didn't take off as bulk of the excess stock was exported and there was a further drawdown in stocks following the drought in 2002.
India's grains stockpile has shot up again with the government holding 50 million tons of wheat and rice at the start of September. The government's buffer stock norms require only 21.2 million tons at the start of October.
In June, government invited private companies to invest in warehousing, guaranteeing subsidies, tax benefits and contracts from FCI for at least seven years. Last month, the government increased the guaranteed lease period to 10 years.

Australia 2010-11 Wheat Crop Forecast Raised To 23.8M Tons

National Australia Bank Ltd. upgraded its wheat production forecast for this crop year to 23.8 million metric tons, but said it couldn't go as high as the mid-September forecast of 25.1 million tons by the government's Australian Bureau of Agricultural and Resource Economics.
The latest forecast by the bank, a major agricultural lender, represents an upward revision by 700,000 tons from last week and 1.4 million tons since August, and is up 2.1 million tons on actual output of 21.7 million tons in the last crop year ended March 31, 2010.
"While a crop of 25.1 million tons certainly is possible, at this stage we feel it is too early to call such a large crop," the bank said in a monthly rural commodities wrap, citing a smaller estimate of east coast acreage planted to wheat than Abare's.
Western Australia, which usually accounts for 40% of national wheat output, could also face further downward revisions depending on weather conditions, NAB reported.
Higher national wheat harvest estimates have improved export prospects, with the bank forecasting last week exports from the new crop could swell to 17 million tons, compared with 15 million tons from the previous crop, maintaining Australia's position as a major supplier to the global trade.
Last week, Abare projected exports from the 2010-11 crop at 18.4 million tons valued at A$5.22 billion.
Taking a global view, NAB reported there might be some further downside to production and quality estimates, with a major risk being the slow pace of the planting of the new Russian crop. The sowing window there is closing and while global wheat stocks are ample, much of this isn't readily available to the market, such as the stocks in China and India.
"With U.S. corn yields being lowered, the grain market is the tightest it has been for some time and the market can't afford a shortfall in a major producer like Russia," NAB reported.
An ideal combination of strong global prices and a solid production outlook has lifted the outlook for the sector, with NAB expecting the gross value of farm production to increase 13% in 2010-11 to A$46.6 billion. The outlook for farming incomes has also picked up, with NAB forecasting the net value of farm production to increase by more than 55% in 2010-11 to A$9.7 billion, it reported

Agriwatch 6th Global Pulses Summit 2010

Date December 4 – 5, 2010

Venue India Habitat Centre, Lodi Road, New Delhi – 110003

Having identified Pulses as an important and potentially worrying issue for India, Agriwatch launched its Global Pulses Summit Series in 2004.

After successfully holding regional conferences on Pulses in Indore and Hyderabad in 2010, Agriwatch announces the 6th Global Pulses Summit On 4th and 5th December, 2010

Theme : India needs Indians to consume more pulses

Over the years, Indian per capita consumption of pulses and indeed proteins has declined. This is contrary to our expectations of the world’s largest consumer of pulses with increasing disposable incomes.

Hence the 6th Agriwatch Global Pulses Summit will focus on how to increase the consumption to support the nutritional needs of the growing nation.

To reach the target of recommended 80g per day per capita protein consumption from the current 43gpd is not an easy task. It requires the entire industry to get together and create innovative solutions that benefit all. Clearly,

1. Production in India and globally needs to be increased to make available the demand

2. Capital investment must be increased in warehousing and milling and transportation.
3. Consumption of a variety of pulses encouraged by mandate and education
4. Prices need to be managed to make the pulses accessible for all
5. Working in the pulses arena must be made attractive to all stakeholders

The Summit plans to engage all stakeholders to bring out their perspectives and ideations on how to increase the consumption of pulses in India.

We will invite persons of eminence from amongst the following groups:

1. Central and State Governments of India

2. Growers Associations
3. Consumers Associations
4. Processing Industry
5. Supply Chain Industry –imports, warehousing, transportation, retail
6. Research Industry

The Agenda of the Summit aims to facilitate the discussions on the important factors that underlie this decline in per capita consumption.

For more information, please visit -

Japan to Slash Stockpiles of U.S. Corn as Rice Production Grows

Sept. 30 (Bloomberg) -- Japan will slash its stockpiles of corn and sorghum by 33 percent next fiscal year, cutting imports as the largest buyer of U.S. grain aims to boost feed rice output to reduce its reliance on overseas supplies.

The country’s corn and sorghum inventories will drop to 400,000 metric tons, from 600,000 tons in the year ending March 31, said Eri Utamaru, assistant director at the livestock production and feed division of the Ministry of Agriculture, Forestry and Fisheries. Corn represents about 90 percent of Japan’s feed grains stored for this year, she said in an interview in Tokyo yesterday.

Japan is aiming to boost feed-rice production by tenfold to 700,000 tons a year within the next decade on concern that growth in China, an expanding global population and improving diets will tighten supplies. The government also wants to promote the use of waste materials from Japanese food processors, aiming to replace 630,000 tons of corn in feed annually by the year ending March 2021.

“Japan is enhancing the role of its rice as an alternative to U.S. corn,” said Nobuyuki Chino, president of Unipac Grain Ltd. in Tokyo. “Competition between Japan and other corn buyers intensified” as China became a net importer this year and Russia’s ban on grain exports following its worst drought in 50 years prompted countries such as South Korea and Egypt to seek alternative supplies from the U.S., the largest exporter of corn and wheat, he said.

Japan imported 11 million tons of feed corn last year, 96 percent of it from the U.S. Corn futures in Chicago climbed to a two-year high of $5.2875 a bushel on Sept. 27 and traded at $5.05 at 10:31 a.m. Tokyo time.

Import Costs

The cost of importing U.S. corn into Japan has increased to about 25,000 yen ($298) per ton, including freight, Chino said. In December, import costs averaged about 20,000 yen, according to the Feed Supply Stabilization Organization, a Tokyo-based industry group.

The agriculture ministry plans to boost cash payments to domestic growers of rice, wheat and five other crops by 42 percent to 796 billion yen next fiscal year as it expands an income-support program to improve food self-sufficiency. Japan produces 40 percent of its food, the lowest level among industrialized nations, according to the ministry.

The ministry plans to cut its budget for stockpiling feed corn and sorghum by 34 percent to 2.75 billion yen next fiscal year, said Utamaru at the livestock division.

“Even if we reduce inventories, that won’t hurt stability in feed-grain supplies,” she said. “We expect more products to come from domestic growers.”

Feed Barley

Imports of feed barley and wheat through state tenders may expand this fiscal year, helping to stabilize supply, as the ministry boosted purchasing opportunities for feed mills and trading houses, Utamaru said.

The ministry, which previously held feed-grain import tenders twice a month, began holding the events every week from July, responding to industry requests.

Japan imported 1.35 million tons of feed grains through state tenders last fiscal year, of which 1.22 million tons was barley and the rest was wheat.

“Imports may increase by about 100,000 tons this fiscal year as we increased tenders,” Utamaru said.

Japan imports rice, wheat and barley under the state trading system to stabilize supplies. For corn, Japanese feed mills purchase the grain through trading companies in private deals with shippers such as Cargill Inc.

For feed-use grains, the ministry holds tenders under the so-called simultaneous buy-and-sell system, in which end-users and trading companies jointly bid for supplies of any origin and quality.

--Editors: Matthew Oakley, Jarrett Banks.

To contact the reporter on this story: Aya Takada in Tokyo Yasumasa Song in Tokyo at

ADM Has Upside Grains

AS WORLD POPULATIONS GROW, they will require more food and fuel. With its portfolio of food ingredients, livestock feed and biofuels,  Archer Daniels Midland may well be the company supplying them.

Shares of the grain-processing powerhouse have already gained ground this year as shortages caused by bad weather in Europe and Canada pushed up prices for corn and wheat. But analysts say ADM (ticker: ADM) still has plenty of growing to do before harvest time, which also reflects its modest current valuation.

The stock trades at only 10.6 times forward earnings, below the 11.4 times for competitor  Bunge  (BG). Analysts argue ADM should fetch a premium to Bunge, based on its stronger average return on assets over the past three years.

ADM's grain storage and export businesses should continue to benefit from elevated grain prices. Two pending decisions by regulators on approving higher ethanol blends for cars could be additional catalysts over the next few months.

ADM recently finished a spate of capital projects related to its ethanol and bioplastics businesses, leaving more cash available to buy back shares. The shares also carry a 1.8% dividend yield, rounding out the solid picture.

To be sure, higher corn prices are a negative for ADM's high-fructose-corn-syrup business, which has already been battered by the perception of the sweetener as unhealthy. The volatility of commodity prices and ADM's complex hedging also make projecting the company's quarterly earnings particularly difficult, leaving room for misses. But analysts contend corn syrup isn't going away, and fans of ADM say it is best evaluated on a longer time line.

"We think that this is a tremendous long-term holding," says D. Tysen Nutt Jr., a senior portfolio manager at Delaware Investments, which owns ADM shares. "It's a great company at a reasonable valuation that is going to be part of this movement toward greater demand for food as economies and populations grow."

Nutt and his team at Delaware are more bullish on commodities than they are on stocks and see ADM as a way to play that. They estimate the shares could have something on the order of 50% price appreciation over the next three to five years.

Weather, as it often does, has played havoc with commodity prices. A drought in Russia, a key European supplier, and wet weather in Canada pushed wheat prices up more than 45% since the end of June. Corn prices rose more than 35% over that period on speculation that hot, dry weather damaged crops. Prices for both grains have eased recently, but Credit Suisse analyst Robert Moskow says there could be more upside for ADM if the arbitrage opportunities for the grain shortage in Europe play out.

An expansion of its oilseeds (soybeans, cottonseeds, sunflower seeds, etc.) business, now underway, could prove even more significant for ADM's future earnings growth. During its fiscal-fourth-quarter (ended June 30) conference call, management said that it would increase oilseed capacity by 7% to 10% annually over the next five years in order to meet growing demand.

A new oilseed facility in Paraguay, slated to come online in fiscal 2012, will contribute one percentage point of that growth. The rest may come from acquisitions, Moskow says. "I think that any acquisitions they make would probably be accretive, and this is a business that they've shown that they're growing and doing very well in," he says.

News on the ethanol front could propel the stock in the next two quarters. The Environmental Protection Agency is expected to make a decision in mid-October about whether a higher-ethanol blend of gasoline, known as E15 (15% ethanol, 85% gasoline, versus the current standard of 10% ethanol, 90% gasoline) is safe for vehicles made since 2007. The EPA is expected to rule on cars made since 2001 in December. Analysts say the rulings are likely to favor ethanol producers.

"There's been precious little proof that E15 would be a problem for any car," says Paul Resnik, an analyst with Olympia Capital Markets. But, he adds, the auto industry sees the fuel-mix change as a no-win situation and has resisted it.

While ethanol isn't ADM's bread and butter, headlines on that front would likely affect the stock. And ethanol isn't all hype: ADM has invested $2.3 billion in capital projects related to ethanol and bioplastics, suggesting meaningful growth on the horizon.

Assuming a return of just 6% on the $2.3 billion investment, the company could have another 15 cents per share in earnings by fiscal 2012, says Moskow of Credit Suisse.

The one sticking point for ADM may be its corn-syrup business. Operating profit for the sugars and sweeteners category fell $30 million, to $119 million, in the fiscal fourth quarter, driven down by the increasingly pervasive idea that corn syrup is less healthy than other sweeteners. Many scientists say it's no worse than sugar, and it costs about 40% less.

Moskow and others say corn syrup isn't about to disappear, and indeed the industry may actually be able to raise prices by December.

The corn-syrup flap aside, ADM should help satisfy investors' hunger for steady returns as the company provides food and fuel to a growing world.

International Falls CBP agriculture specialists intercept destructive pests

U.S. Customs and Border Protection agriculture specialists recently discovered potentially destructive pests at the International Falls rail facility.

A container arriving from Bangladesh via Canada was targeted by CBP on Sept. 8 for an intensive agriculture examination for potential foreign pests. The shipment, destined for Chicago, was offloaded and the containers swept out.

During the inspection of the pallets, a total of 14 live insects were intercepted and sent to United States Department of Agriculture for identification.

USDA specialists identified two of the insects as a scaly cricket (Mogoplistrida sp.), and a gall midge (Xylodiplosis sp.), both actionable pests.

These insects are detrimental to plant growth and development and may not occur in the United States. Gall midges are tiny mosquito-like insects that attack plant tissue and form galls in which their larvae develop. Scaly crickets are small crickets that can’t fly, but eat the leaves of a wide variety of plant species.

The shipment will be fumigated to remove the pest threat before final distribution of the commodity into the United States.

U.S. Customs and Border Protection is the unified border agency within the Department of Homeland Security charged with the management, control and protection of our nation’s borders at and between official ports of entry. CBP is charged with keeping terrorists and terrorist weapons out of the country while enforcing hundreds of U.S. laws.

Agriculture Program Helps Students Pour into the WEG

The Kentucky Horse Park - Come any morning to the Alltech FEI World Equestrian Games and you'll see them: school children by the thousands storming the Horse Park with the elation of being on a field trip and attending an event some have heard about for most of their lives.

Billy Frey, who usually serves in his role as Alltech's head of public relations for North America, spends his mornings at the Games as a ringmaster of a circus that Wednesday saw more than 5,000 students and 57 school buses from Fayette County alone unload at the sprawling park.

Dealing with the flood of children – 52,000 K-12 throughout the course of the Games – maybe seem enough to handle. But Frey said the idea to have children attend with their classes didn't come about until two weeks ago, so planning has been fast paced.

"The idea came from (Alltech Founder and CEO Dr. Pearse) Lyons on a Wednesday about 10 days before the Games. By Friday we had a meeting set up (for) the next Monday with Stu Silberman," Frey said.
At that Monday morning meeting, Schools Supt. Silberman had with the help of Lexington Catholic President Steve Angelucci brought together a total of nine superintendents to get the program running.

"In a project like this you have to go to people that can really help you spread the word," Frey said. "I had to give them a deadline of Tuesday at 5 and then they got me the (number of) tickets (needed)."

According to Frey, Lyons approached partners in the agriculture industry to purchase event tickets for students ages 12 and older while those younger than 12 already are admitted to the park with a free grounds pass.

"There is so much to see here for a kid 12 or younger," Frey said. Many middle schoolers and high school students have been given tickets to events going on throughout the day. "There's only limited funds to go around so we wanted to make sure that we could let in as many as possible."

To get the students into the event, "Dr. Lyons went out to a lot of our partners and said there is a real gap today between the farm and the people's dinner table, and as an industry we've done a terrible job at bridging that gap. We've got a great story to tell and everybody's going to listen, but the reality is you have to be some salesmen and have some marketing there," said Frey who believes the World Equestrian Games is a perfect setting for relating the story.

One method of impressing upon students the affect agriculture has on their lives involves a standard ploy for getting kids' attention: ice cream. Not just any ice cream but Dippin' Dots, the creation of an Alltech scientist using a process similar to one used by the company.

Fayette and Madison County Schools make up the bulk of tickets claimed with Fayette sending 17,000 students and Madison utilizing 14,500. But that's only 60 percent of the overall tickets claimed as students from all of the counties surrounding Fayette, as well as Jackson, Bell, McCreary and Pendleton Counties also are attending.

"In a project like this when you throw it together so quickly, there's a lot of room for things to go wrong. Our No. 1 priority is the student's safety. We want to make sure they get in here and make sure they are safe when they are in here, but No. 2 we want them to learn something. Whether it is about a horse, about a shark, about an alligator, about agriculture, whatever," Frey said.