By Jack Scoville, The Price Futures Group

Rice remains a mystery trade.

Cash markets here in the U.S. are strong as most of the rice has been sold in the South and Delta. Arkansas farmers still have some of the crop, but Texas, Louisiana, and Mississippi producers are pretty much sold out.

There is rice in California, but farmers are holding there and waiting for a rally. They might get one as countries like South Korea still have some rice to buy here. Plus, Egyptian supplies do not seem to be moving to Mideast buyers in volumes that many had feared. The U.S. stands to pick up a little of this business as it often does.

Asian prices also seem stable to strong. India especially seems to have seen prices move higher. Vietnam will be harvesting and selling soon, and demand will be an issue for them. However, the market already knows that and prices are holding firm. Prices in the west will hold firm until the U.S. has a crop assured, but prices in Asia might soften if Vietnam becomes a big seller. That is still a month or two from now, and until then it looks like prices will hold stable or move a little higher.

Wheat prices will hold strong as demand for corn for feed here in the U.S. shifts to wheat. Wheat producers got some great weather in the last couple of weeks from two major winter storms.

One more might be coming this week. The snow seen from these storms and the snow that might come this week were great for wheat producers. The moisture is coming at a time when the crops need some precipitation. Crops are coming out of dormancy or will be soon, and moisture needs will be increasing. For now, there will be moisture available. One could not make that claim just a few weeks ago.

Prices have held due to the big demand shift. Feed users are looking more at wheat and less at corn due to availability and price. Overseas buyers are looking at U.S. wheat due to availability and price as well.

Demand should stay strong enough to hold prices strong even with good weather in the Great Plains. At least for the next few weeks or so anyway until the traders can see the good wheat in the fields.

Soybeans were the weakest market in Chicago last week. Even news of more Chinese buying could not support values very well. That is the clearest sign yet that attention is more on selling and shipping from South America than from the U.S.

The weather in South America is pretty good right now and all of our sources report that yields have been very good. It looks like Brazil will have big crops coming to market as soon as the logistical issues are resolved.
These will eventually be resolved, or at least improved upon, so we expect to hear of soybeans getting shipped and waiting times at Brazil ports to become less of an issue as March progresses.

Argentina knows the beans are coming soon too. It announced that it wanted to sell and ship 2.0 million tons of soybeans from last year’s crop during the month of March. It might not get that goal, but it has the port capacity and apparently the soybeans, so it might.

Overall, it looks like the soy complex can move lower as the competition increases. Soybeans might not work sharply lower until the market knows that the U.S. has a good crop too.

Plus, soybean meal will hold strong on less production of DDG (distillers dried grains) due to reduced ethanol production. But if new demand news can’t force the market higher then it will continue to weaken over the next few weeks and months.

Corn and wheat are the upside leaders in the grain room right now. Corn cash markets are very strong right now in the U.S. Prices in central Illinois are reported to be trading 40 cents a bushel or more above futures. There is not a lot of corn left in farmers’ hands, so there is not much chance that these extremely strong basis levels will back off too much in the near future.

We look for corn to hold stronger than soybeans over the next few weeks, although prices in futures might weaken a bit if the U.S. weather stays good.

South America has been exporting corn, but now is shifting to soybeans so there will not be the downside pressure in corn that might appear in soybeans over the next few weeks.

By Rene Pastor

The Philippines has become a major export market for U.S. agriculture and its food and beverage sector, but certain key areas are still off-limits because of tariff barriers imposed by Manila on some goods.

For the first time in decades, the Philippines pierced the top 10 as an export market for U.S. farmers as it was ranked the 9th largest market in the world with sales in 2012 at $2.3 billion, and this is projected to hit $2.5 billion in 2013.

Terry Barr, the senior director for industry research for CoBank, said at an outlook conference organized by the U.S. Agriculture Department that the Philippines is now the 5th biggest importer in the world of U.S. wheat and dairy products.

The reasons for the surge are simple.

A population of almost 100 million Filipinos, the second biggest in Southeast Asia, has created a market of consumers. Combine that with remittances from overseas Filipinos, estimated by the World Bank at $24 billion or 960 billion pesos, and about $10 billion or 400 billion pesos from the business outsourcing industry in the country, and you have consumers looking to shop and consume U.S. meat and beverages.

“Good sales opportunities still abound because of the robust Philippine economy, steady growth in the country’s retail, foodservice and food processing sectors, and consumer familiarity with American brands,” a recent report by the U.S. agriculture attaché in Manila said. The attaché report is compiled by U.S. agriculture experts although they are not official USDA material. They are viewed by the commodity and food industry business as authoritative.

The only hindrance to further expansion of U.S. agricultural exports to the Philippines would be Manila’s strict adherence to the minimum access volume (MAV) requirement for some politically sensitive goods under world trade rules.

“Since 2005, the Philippine government has maintained MAV levels at its WTO Uruguay Round commitments despite a continued rise in market demand for MAV products,” the attaché report said.

Those tariffs range from 30 percent to 50 percent and basically bar U.S. exports of MAV goods to the Philippines. The tariff rate for imported sugar is the highest at 50 percent, followed by rice, poultry and potatoes at 40 percent. Corn is at 35 percent, and pork and coffee at 30 percent.

I can understand rice and sugar, but coffee? We produce a small amount so it’s not like there is a major farming sector to protect.

Manila has also cut rates for regional trade partners while keeping up barriers to American products. A good example is U.S. beef, which is subject to a 10 percent duty, while Australian beef comes into the Philippine market duty-free, the attaché report stated.

“The Philippines has also eliminated tariffs on approximately 99 percent of all goods for ASEAN trading partners,” it added.

At the very least, it seems a pretty good idea for the Philippines to negotiate the removal of those barriers.
In beef, it would level a field tilted heavily in favor of Australia and lower the cost for consumers in the Philippines.

There were 16 grain vessels in Columbia River ports on Thursday, February 28, with seven docked compared to 15 last Thursday with six docked. There were no new confirmed export sales of grain for Pacific Northwest loadout during the week.

Bids for US 1 Soft White Wheat delivered to Portland in unit trains or barges during March trended 3.25 to 5.75 cents per bushel higher than week-ago bids for March delivery. Some exporters were not issuing bids for nearby delivery.

Bids for 11.5 percent protein US 1 Hard Red Winter Wheat for March delivery declined by 4.50 to 11.50 cents per bushel compared to last Thursday’s noon bids for March delivery. Lower Kansas City March wheat futures pressured bids. On Thursday, bids were as follows:

March: 8.6775-8.8275, mostly 8.7475;
April and May: 8.7275-8.8275;
June: 8.6950-8.7950
August New Crop: 8.23-8.38.

Bids for non-guaranteed 14.0 percent protein US 1 Dark Northern Spring Wheat for March Portland delivery trended 10.25 to 25.25 cents per bushel higher compared with last week’s noon bids for March delivery. Higher Minneapolis May wheat futures and a higher basis bid by some exporters supported cash bids. Some exporters were not issuing bids for nearby delivery.

Outstanding U.S. white wheat export sales as of February 14, 2013 for the marketing year beginning June 1, 2012 and ending May 31, 2013, totaled 940.6 thousand MT compared to 972.3 thousand MT on February 7, 2012, and 1708.0 thousand MT one year ago.

Outstanding white wheat export sales for the 2012-2013 marketing year were to the following countries in 1000 MT:

Japan: 281.5
Philippines: 160.0
South Korea: 157.6
Thailand: 50.0
Taiwan: 23.1
Nigeria: 19.2
Burma: 3.0
Malaysia: 2.5
Canada: 1.5
Mexico: 0.9
Hong Kong: 0.8
China: 0.5
Vietnam: 0.5
Total unknown: 239.5

Accumulated white wheat export shipments as of February 14, 2013, in 1000 MT for the 2012-2013 marketing year, totaled 3312.7 compared to 3663.4 one year ago.

By Jack Scoville, The Price Futures Group

Palm oil moved lower last week and turned trends down again. So my idea that prices were bottoming proved wrong! Back to the drawing board.

There are still a lot of supplies in Malaysia and Indonesia to move, and that seems to be the big problem. Demand in February was down quite a bit from January, even with the Tet and the Lunar New Year festivals.

Plus soybean oil has been moving lower here in the U.S. as biofuels demand has been down a bit. Argentina is the largest exporter of soybean oil in the world, so vegetable oils prices might be under pressure for a while. We are advising buy-side traders to go hand-to-mouth for a while until the market shows a bottom again.

Demand from China might suffer if the economy there keeps slowing down. India seems to be pretty full at the moment too. So it could be a while before the market can make a new bottom and turn trends up.

The export data for February was disappointing to the bulls as they had hoped that month-to-month data would be more closely aligned.

However, it was a short month and a big holiday, so it will depend on the demand in March for the market to trade higher or lower.

Palm oil production should be in a seasonal decline, but the stocks are there so the demand must appear to stabilize the situation.

Wheat and corn imports by Malaysia are forecast to grow marginally through 2013/14 due to expansion in the baking and poultry sectors, while rice imports are seen staying relatively stable, a report by the U.S. agriculture attaché said.

Attaché reports are compiled by agricultural experts in the U.S. embassy although they are not official data of the U.S. Agriculture Department. They are considered by the commodity trade as authoritative.

The report said both the broiler and pork sectors are facing oversupply, and this limits any additional import demand for corn.

“Argentina remains the major corn supplier, with market share of more than 40 percent, with little exports recorded from U.S.,” the report said.

The baking sector remains vibrant, with new outlets being opened and products developing at a rapid pace. Following a dip in 2010/11, wheat from Australia returned to its dominant position in 2011/12 and should remain there through 2014.

While sales lagged in 2012, Malaysian bakers recognize the quality of U.S. wheat.

Rice imports are expected to remain relatively stable. Rice production is forecast to hover around 1.7 million tons. Historically, the U.S. has sold little rice to Malaysia but in 2012, the U.S. exported about 9,400 tons of rice to Malaysia. The Ministry of Agriculture in Malaysia is implementing a new law related to animal feed, which requires importers to register and list any feed ingredients they wish to distribute.

“While ostensibly required prior to distribution for feed or manufacturing, the Biosafety Committee has reviewed and approved only a small list of genetically modified corn events,” the report said.

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