VIETNAM RICE IMPORTER COMPLAINS OF CONTAMINATION; PHILIPPINES BUYS RICE: Issue 31 April 22, 2013

By Jack Scoville, The Price Futures Group

It was a wild week last week for futures and cash markets and for world events. The world watched Boston, Texas, and lots of other places as things seemed to unravel a little bit.

The importer of Vietnamese rice here in the U.S. has complained of too much iron in the rice. This is yet another contamination problem noted in Asian rice.

The Chinese contamination problems have been widely reported, but the Vietnamese problems are new.

Private importers in Philippines are also buying Vietnamese rice now, and will probably need to test for the iron contamination. (The Digest reported last week that Philippine private importers bought 187,000 metric tons of rice from Vietnam.)

The Philippines paid some pretty fancy prices for a product that is supposed to be dirt cheap in that part of the world and will have a right to insist on good, clean rice.

We will be watching to see how this is handled there. The cry for clean rice could push a little demand here or perhaps to India.

Thailand will be a last resort due to the super high prices there. What Thailand will do with all of this high-priced rice is not known, but it will either go bad or get dumped one way or another so one has to keep watching and waiting on them to make up their minds.

It could also mean that high quality and clean rice in Asia starts to increase in price as there won’t be so much of the good stuff around.

In the United States, Arkansas farmers have been able to start work. At least they have been able to get started in the northern part of the state, and many farmers were about done planting rice by the end of the week.

We understand that farmers in the southern part of the state were not able to work. Either way, this is good news. At least the crop is in, and conditions are called generally good in areas that are planted, even if northern Arkansas producers would like temperatures to be a bit warmer.

BENIGN WEATHER FOR PHILIPPINE RICE FARMERS
By Aaron Cook, Metservice and Metraweather
Metservice.com
Metraweather.com

The next two weeks will hold few surprises for Philippine rice growers, with persistent easterly winds and reliable afternoon and evening shower activity across most of the country.

Although the next two days will be fairly dry, we should see healthy rainfall for Central Luzon, Western Visayas and Mindanao during the second half of this week, as per the seven-day ECMWF rainfall chart below for Monday to Sunday. Temperatures will be slightly above average.

Casting our gaze further west, Thailand and Vietnam will be wet over the next two to three days, picking up widespread falls of 20mm to 40mm before a return to average rain later in the week. Closer to the equator, the ECMWF models favor average to above average rainfall for West Malaysia, Borneo, Sumatra and Java over the next 10 days (in the order of an extra 1mm to 5mm per day).

The global climate is thus far offering few clues to what the Philippines might expect in terms of growing conditions or typhoon activity during the second half of this year.

Climate models from major forecasting centers are all pointing towards neutral ENSO conditions over the next few months and there are not yet any credible hints that an El Nino or La Nina event is any more likely to form than normal from August onwards.

7_day (2)

BUYING AND SELLING PRICES OF RICE FROM THE PHILIPPINES’ NATIONAL FOOD AUTHORITY (In Philippine pesos per kg) As of April 19, 2013

SELLING

buying

PHILIPPINE MINING PROJECTS UNDER THE GUN FROM FALLING GOLD, COPPER PRICES
By Rene Pastor

The future of mining projects in the Philippines is under threat from something that neither the government of President Benigno Aquino nor anti-mining activists can control.

Last week, the price of gold dropped in one session by $140.40 or nearly 10 percent to register its biggest one-day fall in 30 years to trade at $1,360.90 per ounce.
Copper stocks were at their highest level in 10 years as inventories built up and prices slumped due to weaker consumption of the red metal in China, the world’s top consumer of the metal.

The falling price of both gold and copper could well make several fringe mining projects in the Philippines too expensive to develop. Why spend all that money and hassle in the Philippines when the prices of both metals are so weak and the return on your investment likely negligible?

The Tampakan project in the southern Philippines may well be the last project developed for a while, but only because Xstrata has already spent billions of dollars on the project.
The Philippine government has opted to actively support mining, but crashing metal prices may scupper attempts to entice investors grown weary of being treated as political footballs in the country.

PHILIPPINE SUPREME COURT HEARING ON MINING LAW UNCALLED FOR
By Rene Pastor

The decision by the Supreme Court in the Philippines to even entertain petitions against the mining law illustrates what is wrong with the country.

The Supreme Court decided back in 2006 the law is constitutional. That should be the end of it. The Court could easily have said, as they do in other jurisdictions, that this issue has been settled and dismissed the case outright. That is the normal thing to do.

But the Philippines does not do normal. Instead, we relitigate and refile a case to infinity and beyond.

This case is like throwing manure on the ceiling and hoping something sticks, or the court is persuaded to change its mind.

At some point, institutions in the Philippines like the Supreme Court should say unequivocally that we have gone over this law before and it is constitutional. This is one reason investors look at the Philippines and slam its legal system as a breeding ground for systematic corruption. Nothing is ever settled until the price is right, or populist politics steps in.

This is a silly decision by the Supreme Court and they know it. This is a waste of time.

WEATHER DELAYS SPRING PLANTINGS IN U.S.; LARGE CROPS IN BRAZIL, ARGENTINA
By Jack Scoville, The Price Futures Group

It seems calmer to start the week in world events, and perhaps even for world grains markets.

The weather looks to be mostly good for harvesting and shipping in South America. Indications are now that the crops in Brazil might be a little overestimated, with most now talking about soybeans production near 81 million tons instead of 84 million.

Either way, though, the production looks big. Corn production there is now estimated at about 75 million tons due to good winter crop growing conditions. Argentine crop production estimates are holding steady near 50 million tons for soybeans and 25 million tons for corn.

It also looks to be a calmer week for weather, even with one more system likely to move through the U.S. Great Plains and Midwest in the first half of the week.

The new system will move from west to east starting today. No one is forecasting the massive rains that were reported in much of the Midwest last week, but there could be some fairly significant rains that will keep flooding around and farmers out of the fields.

Chicago got a month-and-a-half of rain in one 36-hour period last week, and flooding is still reported in parts of the city and suburbs.

Most parts of the Midwest remain too wet and too cold for any work to get done, even in areas close to the Ohio River. Some work has been done in the Delta south of the Ohio River, and grains and oilseeds planting progress should be seen in the reports that will be released by USDA Monday afternoon.

Even in this area the progress is spotty, and it really depends on where you are for any progress to be noted at all. Some farmers in northern Arkansas, for example, are about done with planting, while some farther to the south in the state have barely gotten underway.

Midwest and Great Plains weather should see one more system pass the region in the first half of the week, but then forecasts call for warmer and drier conditions to develop.

Those along the Red River on the border between Minnesota and the Dakotas are very worried, and should be. The snow in the area will rapidly melt and the flooding could be catastrophic.

Other areas, though, will welcome the warmer and drier weather as it will allow fields to dry and soil temperatures to warm. This includes the Canadian Prairies, where it has been extremely cold as well.

It is possible the new crop futures could shift trends more to down if and when the weather clears. We have seen a lot of buying in new crop corn due to the weather and what cold and wet weather might mean to planted area and yields.

Generally speaking, the later it gets the bigger the chance that corn will pollinate during the hottest part of the summer and this could hurt yields.

Farmers might be forced to switch to varieties with shorter maturing terms and these varieties generally feature somewhat smaller yields. Some farmers might choose to plant more soybeans and less corn.

So weather is getting more important and improved forecasts will be watched this week to see if they change or if in fact the weather does improve.

If so new-crop corn and soybean prices could see increased selling pressure and bull spreads could once again be a feature in both markets. Supplies remain tight in spot markets although supplies down the road look to be much bigger.

PALM OIL OUTLOOK: PRICES SLIP AS DEMAND WEAKENS
By Jack Scoville, The Price Futures Group

Palm oil is trying to work lower amid less demand.

Exports so far this month have been disappointing. They are down 5 percent to 7 percent from last month and show no signs of improving in the short term.

However, super strong canola futures and stronger soybean oil futures have helped support palm oil futures. All in all, though, the short-term trends have been weak.

Palm futures have not put together much of a rally attempt even though seasonal indications show that higher prices can be expected at this time of year due to less production.

The lower production cycle is starting to pass now and that is not good news for bullish traders. Neither is the lower demand that has been seen lately.

Traders will probably shift to a sell rallies type of mindset for now. They will probably get help from Chicago futures as time passes and summer makes its inevitable appearance in the U.S.

Buyers will most likely shift to a hand-to-mouth supply scenario for the next few months, and such moves are probably best for now. We have no real down-side target for now, but a move through 2250 ringgit/ton basis the nearby futures could indicate a test of the lows just below 2100 ringgit again.

MALAYSIAN PALM OIL COUNCIL’S MONTHLY OIL PRODUCTION AND EXPORT FIGURES

1 malaysia

2 exports

3 production

COFFEE, SUGAR AND COCOA OUTLOOK
By Jack Scoville, The Price Futures Group

Coffee appears to be a market trying to form a bottom. This is true in robusta and arabica markets. The robusta remains the stronger demand market, but seems to have prospects of increasing supply.

Vietnam keeps saying it has a small harvest, but keeps exporting strong numbers. We look for this strong export pace to tail off as the country runs out of the previous crop and farmers look to hold the new crop.

Demand has been active, differentials have been strong, and prospects for overall strong prices remain. Robusta remains the weaker demand market, and this is reflected mostly in differentials paid for inferior qualities used by the big commercial roasters.

Differentials for better qualities have been strong, but demand has been minimal and the overall market in Central America and northern South America has been rather quiet. Robusta shows the best signs of moving higher for now, but Arabica is now very cheap on spreads and can move higher as well, especially if stronger roaster demand appears. The demand seems to be out there, but waiting. The buy side might wait too long and need to pay up.

Sugar is caught between big supplies in Brazil and demand for competing products, such as ethanol. It could be that sugar prices are near a bottom as well. Sugar mills are telling observers that they plan to concentrate on ethanol production first as prices are better over in that sector, then return to sugar if and when prices get stronger.

Prices remain depressed due to big supply ideas. For example, the International Sugar Organization (ISO) expects production to outstrip demand by about 6 million tons this year. Increased demand from the ethanol side can reduce this surplus, but the fact remains that there seems to be a lot of sugar around, and that means that upside potential for prices should be very limited.

Cocoa appears to have entered into a long term rally. There have been bad demand and large production ideas around for the last several months.

But the mid crop in western Africa has been not as strong as expected, and ideas are that the coming production year harvested this winter will also be less. Meanwhile, Asian production should be good as weather has been generally favorable for production this year.

But the market concentrates on the Africans, and there are some problems there. The grind data was not quite as bad as expected for Europe and much better than expected in North America, so demand is better than forecast by the trade overall. Charts show that the market is in a bullish trend. Buying interest should be strong on any short-term price weakness.

USDA PACIFIC NORTHWEST WEEKLY GRAINS SUMMARY FOR THE WEEK ENDING April 18, 2013

May wheat futures ended the reporting week on Thursday, April 18, higher, as follows compared to last Thursday’s closes: Chicago five cents higher at 7.0275 and Kansas City five cents higher at 7.4375.

Minneapolis July wheat futures trended 17.75 cents higher at 8.0225. Chicago July corn futures trended 3.75 cents lower at 6.2975 while May soybean futures closed 28.50 cents higher at 14.3050.

Soybean futures moved higher with support from good export demand of tight old crop supplies and forecast of wet, cooler weather over the weekend in parts of the Midwest.

Good export demand for U.S. soft red winter wheat and cold weather in the northern and western U.S. Plains that may cause planting delays and crop damage were supportive factors to the wheat futures during the week.

Corn futures ended the week lower with pressure on Thursday (April 18th) from commercial selling and disappointing corn export sales and shipments.

Earlier during the week, corn futures were supported by commercial buying and rain in the U.S. crop-producing areas. On Monday, grain futures were pressured by the disappointing first quarter GDP growth report for China of 7.7 percent annually, which also pressured gold, crude oil and copper markets.

CASH BIDS FOR WHEAT AND CORN AT PORTLAND AS OF APRIL 18, 2013: USDA

Cash wheat bids for April delivery ended the reporting week on Thursday, April 18, mixed compared to week- ago bids for the same delivery period. Hard red winter wheat bids and dark northern spring wheat bid trended higher, while soft white wheat bids trended lower.

Bids for US 1 Soft White Wheat delivered to Portland in unit trains or barges during April trended 7.25 to 7.75 cents per bushel lower than last Thursday’s noon bids for April delivery. Some exporters were not issuing bids for nearby delivery.

Bids for 11.5 percent protein US 1 Hard Red Winter Wheat for April delivery advanced by five to eight cents per bushel compared to last Thursday’s noon bids for the same time period supported by the higher Kansas City May wheat futures, and a higher basis bid by some exporters.

On Thursday, bids were as follows: April 8.8175-8.8875, mostly 8.8475; May 8.6875-8.8875; June 8.64-8.84; first half July 8.39-8.69, last half July 8.29-8.54 and August New Crop 8.2575-8.3575.

Bids for non-guaranteed 14.0 percent protein US 1 Dark Northern Spring Wheat for April Portland delivery trended 12.75 cents per bushel higher compared with last week’s noon bids for April delivery.

Higher Minneapolis July wheat futures were supportive to the cash bids. All exporters have switched their basis to over the July Minneapolis wheat futures.

Protein scales for non-guaranteed 14.0 percent protein were plus zero cents each one-fourth of a percent of protein up to 16 percent protein and minus four to five cents each one-fourth of a percent of protein down to 13 percent protein.

On Thursday, bids for non-guaranteed 14 percent protein were as follows: April 9.2725-9.3725, mostly 9.3225; May 9.2725-9.3725; June 9.1725-9.3225; July 9.0225-9.1725 and August New Crop 8.8575-9.0575.

Bids for US 2 Yellow Corn truck delivered to the inland feeding areas of Yakima, Washington, and Hermiston, Oregon were 274.50-276.50, 4.50 to 5.75 per ton lower than last Thursday’s bids of 279.00-282.25.

Lower Chicago May corn futures pressured the cash corn bids. Bids for US 2 Heavy White Oats for April delivery held steady with last Thursday’s noon bids at 270.00.

COLUMBIA, OREGON GRAIN VESSEL UPDATE AS OF APRIL 18, 2013: USDA

There were six grain vessels in Columbia River ports on Thursday, April 18, with three docked compared to 10 last Thursday with five docked.

New confirmed export sales this week were limited to Japan.

Japan purchased 24,330 metric tons (mt) of minimum 14 percent protein dark northern spring wheat for May 21 to June 20 shipment. Japan also purchased 5,330 mt of maximum 10.5 percent protein western white wheat and 18,275 of minimum 11.7 percent protein hard red winter wheat for delivery by July 31.

Outstanding U.S. white wheat export sales as of April 11, 2013 for the marketing year beginning June 1, 2012 and ending May 31, 2013, totaled 475.3 thousand MT compared to 572.3 thousand MT on April 4, 2012, and 1073.8 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 109.8
Philippines 73.0
South Korea 71.2
Yemen 45.00
Thailand 39.4
Taiwan 20.5
Guatemala 13.1
Nigeria 8.7
Canada 1.6
Malaysia 1.0
Burma 0.7
Sweden 0.5
Hong Kong 0.3
Total unknown 90.5

Accumulated white wheat export shipments as of April 11, 2013, in 1000 mt for the 2012-2013 marketing year, totaled 4124.7 compared to 4764.1 a year ago.

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