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SHOULD THE PHILIPPINES BE SELF-SUFFICIENT IN RICE?: Issue 32 April 29, 2013

By Rene Pastor

Politically, the answer is simple.

All Philippine governments have declared as policy that the country should be self-sufficient in rice, the staple of its nearly 100 million people.

The reality is that it may make better sense to just import the shortfall in rice and admit that as things stand, the Philippines can never achieve self-sufficiency in the grain.

The Philippines plants about 4.66 million hectares to rice. Just for perspective, Vietnam plants over 7 million and Thailand sows more than 10 million hectares to the staple.

To boost output, the Philippine government is spending anywhere from 40 percent to 60 percent of the Agriculture Department budget on irrigation and infrastructure in mainly rice-growing areas.

GMO rice is being tapped along with increased use of fertilizers.

After all that, it may still not be enough for the Philippines to become self-sufficient in rice.

Demand for milled rice is running about 2 million metric tons ahead of production. The population is also increasing too rapidly for the country’s farmers to keep pace.

There is another compelling reason why self-sufficiency in rice may not, in the end, be good policy.

Rice needs a lot of water and nitrogen-based fertilizers to raise production. The fertilizer-laden runoff from rice farms will contaminate ground water and fishing grounds, leading to runaway algae blooms which will kill fish. Red tide is already becoming a critical problem in many areas of the archipelagic country.

“Pollution from fertilizers occurs when these are applied more heavily than crops can absorb or when they are washed or blown off the soil surface before they can be incorporated,” a report by the U.N.’s Food and Agriculture Organization entitled “World Agriculture: Towards 2015-2030” said.

“Excess nitrogen and phosphates can leach into ground-water or run off into waterways. This nutrient overload causes eutrophication of lakes, reservoirs and ponds, leading to an explosion of algae which suppress other aquatic plants and animals,” the FAO report added.

In plain speak, the viability of farms and fisheries in the Philippines are in real danger from excessive use of fertilizers to boost rice production to meet a goal that only makes sense politically.

The Philippines can increase rice production in the short-term, but farms and fisheries may suffer irreparable damage from fertilizer abuse.

Switching crops or getting Filipino farmers to reduce their use of fertilizer would require a determined government thinking of long-term consequences for the country.

Regrettably, the government of President Benigno Aquino is making decisions on agriculture which will only cover a few months. A longer-term horizon is seemingly not uppermost in their minds at this time.

I can understand the impulses driving the Philippine government to go for self-sufficiency in rice. But there are now compelling environmental and economic considerations which should be considered as arguing against becoming self-sufficient in a crop when less costly alternatives are available. After all, all of the flour used to make the breakfast staple pan de sal consumed in the Philippines comes from imported wheat. Rice should be no different.

TWO-TIER RICE MARKET PERSISTS, WESTERN SUPPLIES TIGHT
By Jack Scoville, The Price Futures Group

The two-tier market will continue, with western prices trading much higher than those in Asia. The big spread between the different halves of the world could keep right on going next year.

Rice worked lower in the U.S. rice futures market but not in U.S. cash markets.

There is a tight situation in rice as supplies near the U.S. Gulf Coast are all but gone. Prices for new crops are discouraging to producers and planted area for the year will be average at best. World prices are a little weaker as well.

The Philippines announced that it had very strong production in the first quarter of the year and will keep its import ideas less than normal, maybe even zero if it can. It is even exporting a very small amount of specialty Japonica Rice to Dubai. Probably just to show it can really do it.

Demand from other Asian countries seems down except for China, which has contamination and food safety issues that have been noted in rice as well. There are some nasty things in the water used to grow rice in that country, and the rice has soaked some of the nastiness in. They will continue to supplement their own production with supplies from neighbors.

The other major buying in Asia is coming from South Korea and Japan to complete treaty obligations. African demand will be interesting for both South America and Asia. Both will compete for business, and both will have to work hard as African countries are trying to join the self-sufficiency program.

STEADY RAINS IN CENTRAL AND SOUTHERN PHILIPPINES
By Aaron Cook, Metservice and Metraweather

Metservice.com
Metraweather.com

We’re staring at another sleepy fortnight in terms of Philippine weather. Easterly winds will ensure solid rainfall along eastern coastlines. Parts of Mindanao and Western Visayas will be a touch drier than normal this week, but they will still see occasional afternoon showers, as evidenced by the 7-day rainfall chart below.

Keep your eyes on forecasts near the end of the week however. We should see the quasi-stationary front beefing up rainfall total over southern China and Taiwan (as warm air from the south collides with cooler northerlies). This front may creep further south and east into the South China Sea, but at this stage is forecast to stay away from the Philippines.

We may also see a small depression moving through the East Philippine Sea come within about 1200 km of Mindanao on Thursday before drifting north and decaying. Its remnants are currently forecast to drift across the central Philippines around Monday and kick-start increased shower activity across most of the Archipelago.

Rainfall will be close to average in Thailand, Vietnam and Malaysia. Drier than average conditions across Java are about the only anomaly of note across the region.

ENSO conditions through the Pacific are still strongly favored to flat-line in neutral territory over the next few months. In a couple of weeks we should have updated climate model data from all of the major forecasting centers and will be able to complete a more thorough analysis of any early warning signs of El Nino or La Nina.

aaron pic

BUYING AND SELLING PRICEES OF RICE FROM THE PHILIPPINES’ NATIONAL FOOD AUTHORITY (in Philippine pesos per kg) As of April 26, 2013

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POOR U.S. WEATHER PROPS UP GRAINS COMPLEX, CHINA BUYS NEW CROP CORN AND SOYBEANS
By Jack Scoville, The Price Futures Group

Futures markets remain supported by bad weather in the United States.

In addition, farmers here remain tight holders of grain, and the actual cash price in the U.S. Midwest is generally much higher than futures.

However, prices for both corn and soybeans and products remain much less in South America. The region has captured more export business than it can handle right now and waiting times in ports remain pretty extreme and still close to two months.

But those waiting times are starting to come down now as volumes traded are dropping a bit and as the ports work overtime to get the product out.

The U.S. cash market is becoming more and more of a domestic market short term as any export sales have started to move to the new crop, and the harvest for the new crop is still months away. In fact, we are having trouble getting crops planted right now so it will be at least late September before much becomes available.

Corn and soybean futures markets continue to show the difference between the crop years in a dramatic way. The tight nearby cash market is shown as prices for May or July delivery remain significantly above the new crop deliveries.

Their big spread difference will remain in place until the weather shows more improvement here and the crops get planted. We expect the spreads to start to weaken over the next month. This is because the buy side of the market will have bought whatever old crop they need by then and the demand will start to drop.

Meanwhile, new crop demand will start to increase. In fact, the new crop demand for both corn and soybeans has already started to increase as China has stepped up to buy. They got big problems there and sky-high prices.

People will still eat, even with reports of Bird Flu. They might eat less poultry, but might eat more pork. This seems to be happening already. Both require soybean meal and corn in rations, so the overall demand for these products in world markets might not drop too much.

Weather remains an issue here in the U.S. as the cold and now wet weather has not allowed for much planting progress. Reports are that conditions are better in Europe and Russia, but China and Australia have had mixed trends. The weather seems to be good for the winter crops right now in South America.

Overall, the world supply situation for soybeans and feed grains seems to be easing, but there are still some short-term shortages to work though, mostly here in the U.S. and over in Europe.

We expect prices to relax over time, but any meaningful move lower could still be three or four weeks away. Users should be booked through the middle of the year, but can then move to a more hand-to-mouth buying program as long as the weather in the northern part of the world stays good for crops.

PALM OIL OUTLOOK: MALAYSIA EXPORT DEMAND SURGES
By Jack Scoville, The Price Futures Group

Palm oil values held last week as export demand made a big jump higher in Malaysia.

The demand for the first half of the month had been lower than the previous month, but the trend reversed once futures made new lows for the move.

Now the export pace is above last month and is expected to hold strong right into next month. The upside potential for prices might be limited as trees should be about ready for a seasonal increase in production.

However, palm oil prices remain cheap enough for now that the demand can hold itself together. Plus, Argentina has not really started exporting soybean oil yet and they are the number one exporter in the world. The political and economic situation there is a mess, so the export pace might not be as strong as normal, even with the good soybeans crop they had this year.

The Argentine government seems committed to grabbing as much money from the sales as it possibly can and this will lead to a slow export pace as mills and producers fight the trend.

Palm oil will benefit if the sales from Argentina remain slow. The price action showed little carry through from the move lower, another potentially bullish sign for prices in the near term.

USDA PACIFIC NORTHWEST WEEKLY GRAINS SUMMARY FOR THE WEEK ENDING APRIL 25, 2013

July wheat futures ended the reporting week on Thursday, April 25, mixed, as follows compared to last Thursday’s closes: Chicago three cents lower at 7.0375, Kansas City 12.50 cents higher at 7.6150 and Minneapolis wheat futures trended six cents higher at 8.0825.

Chicago July corn futures trended 5.25 cents lower at 6.2450 while May soybean futures closed seven cents higher at 14.2350. Wheat futures were supported on Friday and Wednesday by strong export demand, and potentially crop damaging temperatures and weather conditions in the U.S. wheat growing areas.

On Monday and Tuesday, wheat futures were pressured by technical selling, new trade concerns over slowing demand and spillover pressure from the lower corn futures on Tuesday.

Corn futures were lower for the week with pressure on Monday and Tuesday from forecast crop-friendly weather and soil conditions. Buying support and expectations of flooding due to snow melt in the northern plains were supporting factors to the corn futures on Friday and Wednesday.

Soybean futures fell during the week due to ongoing concerns over the bird flu epidemic in Asia, profit taking, a lower-than-expected inspected-for-export figure of 4.8 million bushels (mb), a stronger U.S. dollar on Tuesday, and trade concerns that more acreage will switch from corn to soybeans.

CASH BIDS FOR WHEAT AND CORN AT PORTLAND AS OF APRIL 25, 2013: USDA

Cash wheat bids for April delivery ended the reporting week on Thursday, April 25, higher compared to week-ago bids for the same delivery period. Hard red winter wheat and dark northern spring wheat bids moved higher and soft white wheat bids were not available.

Bids for US 1 Soft White Wheat delivered to Portland in unit trains or barges during April were not available as most 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 14.75 to 17.75 cents per bushel compared to last Thursday’s noon bids for the same time period supported by the higher Kansas City July wheat futures, and a higher basis bid by some exporters.

Bids for US 2 Yellow Corn delivered to Portland in single rail cars were 267.75-273.00, 1.75 to 2.00 per ton lower than last Thursday’s bids of 269.50-275.00.

Bids for US 2 Yellow Corn truck delivered to the inland feeding areas of Yakima, Washington, and Hermiston, Oregon were 272.75-276.75, mixed, from 1.75 cents lower to 0.25 of a cent per ton higher than last Thursday’s bids of 274.50-276.50. Lower Chicago May and July corn futures pressured most corn bids lower.

All exporters have switched their nearby basis to over the July Kansas City wheat futures.

On Thursday, bids were as follows: April 8.9650-9.0650, mostly 9.0150; May 8.8650-9.0150; June 8.7650-8.9650; first half July 8.5150-8.8150, last half July 8.4150-8.6650 and August New Crop 8.3675-8.5175.

Bids for non-guaranteed 14.0 percent protein US 1 Dark Northern Spring Wheat for April Portland delivery trended one to 11 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 nearby basis to over the July Minneapolis wheat futures.

Protein scales for non-guaranteed 14.0 percent protein were plus zero cents each 1/4 of a percent of protein up to 16 percent protein and minus four to five cents each 1/4 of a percent of protein down to 13 percent protein.

On Thursday, bids for non-guaranteed 14 percent protein were as follows: April 9.3825; May 9.3325-9.3825; June 9.2325-9.3825; July 9.0825-9.2825 and August New Crop 8.9550-9.1550.

COLUMBIA, OREGON GRAIN VESSEL UPDATE AS OF APRIL 25, 2013: USDA

There were six grain vessels in Columbia River ports on Thursday, April 25, with two docked compared to six last Thursday with three docked.

New confirmed export sales this week were limited to Japan. Japan purchased the following wheat in metric tons: 22,359 of maximum 10.5 percent protein western white wheat for May 21 to June 20 shipment and 23,520 of minimum 11.7 percent protein hard red winter wheat and 19,942 of minimum 14 percent protein dark northern spring wheat for arrival by July 31.

Outstanding U.S. white wheat export sales as of April 18, 2013 for the marketing year beginning June 1, 2012 and ending May 31, 2013, totaled 409.0 thousand MT compared to 475.3 thousand MT on April 11, 2012, and 833.8 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 106.8
South Korea 61.4
Philippines 56.0
Yemen 45.0
Thailand 39.4
Taiwan 10.4
Nigeria 8.7
Canada 1.6
Malaysia 1.0
Burma 0.5
Hong Kong 0.3
Vietnam 0.3
Total unknown 77.6.

Accumulated white wheat export shipments as of April 18, 2013, in 1000 MT for the 2012-2013 marketing year, totaled 4161.9 compared to 4966.4 one year ago.

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

Coffee prices were sideways to weak last week and might hold these trends this week. The robusta market really took the brunt of the selling pressure as rains were reported in Vietnam. Arabica prices tried to rally, but the arabica bulls lost their nerve due to the weakness in robusta and on reports of increased selling from Brazil.

Brazil and Vietnam remain the big gorillas in the room and have been able to keep prices cheaper. Good news for buyers but not for the sellers in Philippines. We think prices are near some short-term lows as the drop in futures has been pretty extreme for both markets. However, it is hard to see much upside for prices with big crops expected in Brazil and in Vietnam.

The International Coffee Organization (ICO) data shows the potential for surplus production this year for the first time in a few years, so this will keep futures pinned near the lows.

Look for stronger differentials for pricing chances for sellers, and use futures to fix prices if you are buyers. Keep the sales moving and move any extra production out so there can be chances for stronger prices down the road.
Sugar remains a weak market, but might also be getting close to some lows. The big reason for the low prices remains the big crops coming out of Brazil.

But the noise is a little different now. Mills in Brazil are expected to produce ethanol now and then sugar if and when prices start to improve. They might have to wait for a long time as trends remain down in prices.

But, as in the case with coffee, the sugar price drop has been pretty extreme, and the news that Brazil will concentrate on ethanol first might at least keep the seller from pressing the market much more.

Like the grains and coffee, upside potential seems to be limited with the big production estimates for Brazil and other countries still around.

A turn to a sideways trading range seems possible with the moves by the mills in Brazil.

Cocoa prices took the week off last week, but the market is in a bull trend due to ideas and reports of smaller production in West Africa.

The price trend remains generally up, although futures are very close to initial targets for the rally now. It is possible that some down or sideways trade could develop for a week or two before any rally resumes.

Reports from Asia imply that production can be good to very good there, but the reports from West Africa show smaller beans that hurts quality and smaller mid-crop harvest yields as well. Ideas are that production for the coming year will be down, although the current rally in prices could cause farmers around the world to work a little harder to get the best potential production going.

Sellers should note that the market has moved a lot higher and should make any short term sales that need to be made. They should also watch deferred prices for chances to start the selling program for the next crop. Buyers might choose to wait to see if a correction develops, but should make sure they have good coverage levels on if and when it does as the overall trends remain up.

USDA RICE DATA HIGH, BUT TIGHT SUPPLIES PROP UP PRICES: Issue 28 Apr 1, 2013

By Jack Scoville, The Price Futures Group

The U.S. Agriculture Department (USDA) released its quarterly stocks estimates and also its prospective plantings reports on March 28th.

Hereunder is the USDA quarterly stocks data:

usda

The quarterly stocks reports offered a lot of surprises for the market, and none of them implied that higher prices are coming except for rice.

Rice data was on the high side of expectations, but still showed tight supplies overall. This is a market that has been moving sideways for a long time.

There is talk that the U.S. deep south and Texas are basically sold out on rice and that millers in Louisiana have started to source rice from northern Arkansas.

That does not happen unless the supplies are very tight as it is costly for millers to haul rough rice all that way for milling.

Overall, the stocks reports imply that futures have made highs and can generally work sideways or lower. It will take some signs of new demand or bad weather here in the U.S. to change trends back to up for any more than a short term move.

Rice is the lone exception as stocks there remain tight and the market is just starting to factor the tight U.S. market into the futures price.

Rice is one market with some significant upside price potential and it might not matter what happens to the other grains.

PHILIPPINES SETS RICE IMPORTS FROM THAILAND, CHINA, INDIA AND AUSTRALIA
By Rene Pastor

The Philippines said it is importing 163,000 metric tons of rice from four countries as part of import obligations under the World Trade Organization to buy a total of 183,000 tons in 2013.

The Philippines is one of the world’s top consumers of rice. The government of President Benigno Aquino said it is aiming to make the country self-sufficient in the staple food of its nearly 100 million people.

Some 98,000 tons of the rice will come from Thailand, one of the world’s top exporters of the grain, with 25,000 tons each coming from China and India, and the remaining 15,000 tons from Australia, the government’s National Food Authority said in a statement. The NFA is the government agency created to ensure a stable market in the politically sensitive grain.

The timing of the imports at the start of the second quarter of 2013 may be aimed at building up government buffer stocks which has declined by nearly 20 percent in a month.
The Philippine Agriculture Department forecast rice inventories as of Feb. 1 at 2.02 million tons, nearly 20 percent down from the previous month’s level.

Rice stocks in government and commercial warehouses stood at just over a month of daily consumption so analysts believe the imports are meant to shore up inventories. The Philippines consumes around 35,000 to 36,000 metric tons of rice a day.

The imports are also being done ahead of the third quarter of the year, when rice inventories in the Philippines seasonally drops to its lowest level for the year. Given shipping times and the filing of necessary documentation, the imported rice will likely arrive in mid-May or later, the analysts believe.

The Philippine Commodities Digest believes total rice imports by Manila in 2013 will reach at least 850,000 tons. U.S. agricultural experts from the USDA feel the imports would hit 1.5 million tons of rice. The experts’ forecast is not official USDA data.

The Philippine government hopes high-yielding seeds and improvements in infrastructure, facilities such as irrigation, will help boost production of rice.

But limits in the acreage planted to rice, historically low yields, and a surge in rice demand brought on by an increasing population may well thwart government attempts to make the Philippines self-sufficient in its staple food.

BUYING AND SELLING PRICES OF RICE FROM THE PHILIPPINES’ NATIONAL FOOD AUTHORITY (in Philippine pesos per kg)
As of March 27, 2013

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CORN AND SOYBEANS WEIGHED DOWN BY USDA REPORT, WHEAT TRACKS CORN
By Jack Scoville, The Price Futures Group

The most price negative of the USDA reports was in corn. The report showed much higher stocks than the trade expected, and implied that high prices had done a job in rationing demand.

Stocks are still down from last year, and supplies might be tight by the end of the year, but the market can now afford to relax a bit.

Add to that news that Argentine corn is on its way to the southeast U.S., and you have a situation that has changed a lot over the last week or two.

It will now get much harder for bulls to move prices significantly higher. They will need to find additional demand before prices can do a whole lot.

On the other hand, the demand remains strong enough as it is to keep prices from breaking too much, especially with the whole growing season still in front of us.

It is very possible that prices will develop a new trading range until production prospects for the coming year are known.

The soybeans stocks report was also a big bearish surprise. It also implied that the situation is not quite as tight as thought, but ideas are that China will look to buy again if at all possible, so the bearish influence might not be so big for soybeans.

In addition, there has been talk of Brazil soybeans moving to U.S. crushers, but none of this has been confirmed like the Argentine corn has.

The wheat stocks were also higher than expected, but within the realm of error and wheat futures were mostly down hard due to the corn weakness, not due to the data.

The prospective plantings reports, a survey of farmers on planting intentions, was about as expected by the trade and not a reason to buy or sell for the most part.

Soybeans planted area was a little lower than expected, and implies that new crop soybeans prices should be stronger than corn or any old crop prices.

Traders will watch the weather now. It has been cold and wet in many parts of the middle of the U.S. where these crops will be grown. It could be that corn area drops a bit and soybeans increases a bit if the weather continues this way.

A lot of the gains in corn area came in the south and at the expense of cotton. Some of these areas might switch to soybeans if it gets too late to plant corn. This type of switching is still a few weeks away from happening.

PALM OIL OUTLOOK: PRICES MOVE SIDEWAYS, BUT DEMAND IMPROVES
By Jack Scoville, The Price Futures Group

Palm oil futures have also been in a trading range for quite a while.

Futures should develop a short-term down trend or at least test the lower end of the trading range. Moves lower this week could open up down side potential below 2250 (ringgit/ton) — basis the nearby futures contract — and maybe back to the lows below 2100.

There is no doubt that the palm oil is out there. Demand has been ok, but traders hope for more as the demand has fallen behind month-ago levels.

But soybean oil might work lower now and this might create some selling pressure on palm oil as well. The charts show that any move lower now would find new speculative selling that could push prices more than one might normally expect given the fundamentals.

USDA PACIFIC NORTHWEST WEEKLY GRAIN SUMMARY FOR THE WEEK ENDING MARCH 28th

Cash wheat bids for March delivery ended the reporting week on Thursday, March 28th, lower compared to week-ago bids for the same delivery period.

Hard red winter wheat and dark northern spring wheat bids trended moderately lower, while bids for soft white wheat were not available.

May wheat futures ended the reporting week on Thursday, March 28th, lower as follows compared to last Thursday’s closes:
Chicago 41 cents lower at 6.8775
Kansas City 33.75 cents lower at 7.2675 Minneapolis 22.50 cents lower at 7.8025

Chicago May corn futures trended 37.75 cents lower at 6.9525 while May soybean futures closed 44.25 cents lower at 14.0475.

All grains futures ended the reporting week lower with strong pressure today from the USDA Stocks and Planting Intentions reports.

Corn Stocks were estimated higher-than-expected at 5.4 billion bushels (bb), with the USDA March Planting Intentions estimated at 97.3 million acres. The soybean Planting Intention estimate was lower-than-expected at 77.1 million acres and Quarterly Stocks estimated at 1.0 bb. U.S. wheat Stocks were slightly higher-than-expected at 1.23 bb.

Wheat futures were supported on Friday by a lower U.S. dollar against foreign currencies and cold, dry weather conditions in the U.S. Southern Plains.

Monday, Tuesday and Wednesday, soybean futures had some support from new confirmed export sales of new crop soybeans, commercial buying, continued backlog of vessels in Brazil and continued tight supplies of old crop soybeans.

A better-than-expected inspected-for-export figure of 17.225 million bushels for the week ending March 21, commercial buying on Wednesday and a slight improvement in the ethanol production report for the week ending March 22 were some factors supporting the corn futures earlier in the week.

CASH BIDS FOR WHEAT AND CORN AT PORTLAND AS OF MARCH 28, 2013: USDA

Bids for U.S. 1 Soft White Wheat delivered to Portland in unit trains or barges during March were not available today as most exporters were not issuing bids for nearby delivery.

Forward month bids for soft white wheat were as follows:
April 8.0775-8.10
May 8.0775-8.15
June not available
August New Crop 7.25-7.3925

One year ago, forward month bids for soft white wheat were as follows:
April and May 7.00-7.05
June 6.90-7.02
July 6.70-6.90
August New Crop 6.60-6.70

Bids for 11.5 percent protein U.S. 1 Hard Red Winter Wheat for March delivery declined by 33.75 cents per bushel compared to last Thursday’s noon bids in lining up with the lower Kansas City May wheat futures.

On Thursday, bids were as follows:
March 8.6675-8.7175, mostly 8.6675
April 8.5675-8.7175
May 8.4675-8.7175
June 8.3725-8.6725
August New Crop 8.0875-8.1375

Bids for non-guaranteed 14.0 percent protein U.S. 1 Dark Northern Spring Wheat for March Portland delivery trended 27.50 to 32.50 cents per bushel lower compared with last week’s noon bids.

Lower Minneapolis May wheat futures and a lower basis bid by some exporters weighed on bids.

Protein scales for non-guaranteed 14.0 percent protein were plus zero cents each 1/4 of a percent of protein up to 16 percent protein and minus four to five cents each 1/4 of a percent of protein down to 13 percent protein.

On Thursday, bids for non-guaranteed 14 percent protein were as follows:
March 9.1525-9.3025, mostly 9.2325
April 9.1025-9.3025
May 9.0525-9.2525
June 8.9550-9.0050
August New Crop 8.7075-8.8075

Bids for U.S. 2 Yellow Corn delivered to Portland in single rail cars were 293.75-294.00, 14.50 per ton lower than last Thursday’s bids of 308.25-308.50.

Bids for U.S. 2 Yellow Corn truck delivered to the inland feeding areas of Yakima, Washington, and Hermiston, Oregon were 294.75-298.25, 13.50 to 14.00 per ton lower than last Thursday’s bids of 308.25-312.25.

COLUMBIA, OREGON GRAIN VESSEL UPDATE AS OF MARCH 28, 2013: USDA

There were 10 grain vessels in Columbia River ports on Thursday, March 28th, with four docked compared to nine last Thursday with four docked. There were no new confirmed export sales this week.

Outstanding U.S. white wheat export sales as of March 21, 2013 for the marketing year beginning June 1, 2012 and ending May 31, 2013, totaled 675.6 thousand MT compared to 753.8 thousand MT on March 14, 2012, and 1337.0 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 135.8
South Korea 108.8,
Philippines 103.0
Yemen 100.00
Thailand 54.5
Nigeria 19.2
Taiwan 10.0
Burma (Myanmar) 2.5
Canada 1.5
Malaysia 1.0
Vietnam 1.0
Sweden 0.5
Hong Kong 0.3
Total unknown 137.5.

Accumulated white wheat export shipments as of March 21, 2013, in 1000 MT for the 2012-2013 marketing year, totaled 3844.9 compared to 4348.2 one year ago.

RICE PRICES SUNK BY NEWS OF U.S. RICE IMPORTS FROM VIETNAM: Issue 26 Mar 17, 2013

By Jack Scoville, The Price Futures Group

Futures showed diverging trends in the market action last week. Price weakness was shown in the soy complex and rice, while corn and wheat showed strength.

The speculators, led by the funds, were the biggest players on the week and forced the moves, but they had the fundamentals behind them to support the directions that the prices took.

The downside leader on the week was rice. Rice broke a trend line on weekly charts that had held for about three years, and it was for this reason that futures went down hard on Wednesday and Thursday.

There was news that created the initial selling. ARI, an international rice trader with headquarters located in the U.S., announced that it was importing about 13,000 metric tons of Vietnamese rice into Texas.

The news highlights just how high prices are in the west when compared to those in Asia. It also shows just how tight the situation is in Texas, where a big Latin and Asian population is located. The amount imported is not particularly large. But just the idea that imports are coming and the situation here could ease caused the speculator selling.

Futures were able to recover a bit on Friday and might recover more this week, but some damage has been done to the charts and to the psyche of the market now. Longer term, farmers will be inclined to plant less rice this year, so prices in the U.S. are likely to stay higher for a longer period of time after the futures move this week. Even so, it seems that rice buyers got a gift last week and should not turn down the chance to get some cheaper rice booked.

The soy complex was the other market to see selling pressure last week and the selling pressure in these markets could continue longer than it should for rice.

China only bought new crop soybeans last week, and it waited until late in the week to close the sale. No current crop sales were announced, and it seems that there might not be any new sales soon.

We hear that China is now trying to unload some purchases it made earlier in the year in Brazil back into the world market but is finding takers as the wait times in parts down there is still at least 50 days.

We are advising buyers to stay with a hand-to-mouth posture for a little while longer. The soybeans will eventually flow from the south, and this will not be good for U.S. prices.

In fact, it now looks like Brazil could export right through the U.S. harvest season and that could create even lower prices than many analysts are willing to admit.

The soy complex should be interesting to watch, and buying only to cover immediate needs still seems like the best strategy.

Wheat was the upside leader of the markets last week. A strong export sales report issued on Thursday surely helped, as did continuing ideas that U.S. soft red winter wheat is about the cheapest in the world.

We are not so competitive for hard red winter or spring, but we are getting some business there too, because we can ship and the wheat is available.

There has also been a sharp increase in domestic demand. Burlington Northern reduced shipping rates from the Midwest to the southern Great Plains in an effort to capture more shipping of SRW to feed lots in Texas.

It is no surprise that the leader of the futures was Chicago because of this news. Kansas City and Minneapolis futures lagged a bit as demand has not been so strong there and the weather is slowly but surely improving in the Great Plains as winter crops start to break dormancy.

Corn was stronger during the week, but not quite as strong as wheat. Corn is almost completely a domestic market these days, even with some improvement in export sales last week.

The rally in corn futures created some new farm selling which did nothing to weaken cash market basis levels but did keep futures somewhat weaker than wheat futures. Feed demand is still there, and ethanol demand seems to be increasing as processors start to come on line again.

Any feed demand lost to wheat will probably shift to the ethanol side now. There should not be a lot left for farmers to sell, but there is some out there to be moved. Futures should hold strong overall and cash should too until the farmer has sold the last of his crop.

PHILIPPINES JOINS ELITE CLUB OF RARE EARTH METAL PRODUCERS
By Rene Pastor

The Philippines is going to become a producer of a rare earth metal early next year, joining a small group of countries producing metals that are critical to the running of gadgets like cell phones and night vision goggles.

China is the dominant producer of rare earth minerals. But ever since Beijing limited the export of rare earth minerals, annoyed developed countries led by the United States have ratcheted up the search for other sources of the minerals.

Japan’s Sumitomo Metal Mining said it is going to build a pilot plant at its majority-owned nickel mine on Palawan island to produce the rare earth metal scandium, a silvery metal that could be used to strengthen aluminum alloys for industrial uses such as metal halide lamps or alkaline batteries.

The Philippines is one of the most highly mineralized countries in the whole of Asia. Finding rare earth minerals in the country would make the country even more attractive for mining firms given the premium commanded by such minerals in industrial applications.

Around 14 rare earth minerals are used by a variety of industries. They are difficult to find in commercial quantities.

But the minerals are vital because they are used in things like night vision goggles, the colors that light up the screen on a cell phone, or in cars where they are used to run power windows and seats among others uses.

Sumitomo said the scandium recovery pilot plant will be built at its subsidiary, Coral Bay Nickel Corporation, on Palawan.

Scandium is produced in only three mines in the world – the uranium and iron mines in Zhovti Vody in the Ukraine; the rare earth mines in Bayan Obo, China; and in the apatite mines on the Kola Peninsula, Russia.

The plant will be constructed “by the end of 2013 and for trial production to get underway at a level of 10 kg per month in 2014.”

“The company will aim for construction of a scandium oxide production line of commercial scale and the launch of related business in 2015,” the Sumitomo statement added.

World production of scandium is estimated at 10 tons per year. The use of the metal is expected to increase as more deposits of the metal are developed.

PHILIPPINE RICE STOCKS DIVE ALMOST 20 PCT, STOCKS AT 4-MONTH LOW
By Rene Pastor

Rice stocks in the Philippines dove nearly 20 percent to hit its lowest level in four months, and there are only enough stocks for just over a month’s consumption in government and commercial warehouses, government figures showed.

The Agriculture Department’s Bureau of Agricultural Statistics said that as of Feb. 1, rice inventories in commercial warehouses were only enough for 16 days of consumption while stocks in government warehouses would last for 17 days.

Household stocks stand at 26 days, but they are out of reach of the market. Daily consumption in the Philippines of rice, the daily staple of its nearly 100 million people, stands at around 36,000 metric tons.

As a matter of policy, rice inventories should be equal to two months’ worth of consumption. This would increase in the Philippines to three months’ worth during the seasonally lean third quarter of the year.

The total rice inventory on Feb. 1 stood at 2.02 million tons, down 19.8 percent from the January 1 figure of 2.52 million tons. It is the lowest stock level since Sept. 1, 2012, the BAS figures showed.

The government of President Benigno Aquino has launched a drive to make the Philippines, one of the world’s top importers of rice, self-sufficient in the grain in 2013.

But most analysts believe the Philippines will not hit the target because surging demand will not be matched by the harvest in the Southeast Asian nation, given low yields when compared to its Asian neighbors and limited acreage that can be planted to rice.

The Philippine Commodities Digest estimated total rice imports in 2013 will reach at least 750,000 tons, with the possibility they would reach 1.0 million tons.

Agricultural experts at the U.S. embassy in Manila forecast imports of 1.5 million tons in 2013, unchanged from the level hit in 2012.

Consumption of rice in the Philippines is also being boosted by the free-wheeling spending normally seen during elections in the country. Midterm national polls are scheduled for May.

WEEKLY GRAIN MARKET NEWS FROM THE USDA IN THE PACIFIC NORTHWEST — March 14

There were 13 grain vessels in Columbia River ports on Thursday, March 14, with five docked compared to 12 last Thursday with five docked. Two weeks ago, the number was 16 with seven docked.

Confirmed new export sales were to Japan and the Commodity Credit Corporation.

Japan purchased the following wheat in metric tons (mt): 21,009 of maximum 10.5 percent protein western white wheat for April 21 to May 20 shipment as well as 23,064 of 11.7 percent protein hard red winter wheat and 20,940 of minimum 14 percent protein dark northern spring wheat for arrival by June 30.

The Commodity Credit Corporation of the USDA purchased 52,080 mt of minimum 9.5 percent protein soft white wheat for export distribution to Bangladesh under the PL 480 Title II program, shipment is for April 1 to 15.

Outstanding U.S. white wheat export sales as of March 7, 2013 for the marketing year beginning June 1, 2012 and ending May 31, 2013, totaled 782.0 thousand MT compared to 726.3 thousand MT on February 28, 2012, and 1392.4 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 135.3
Philippines 121.0
South Korea 107.8
Egypt 55.0
Yemen 45.0
Thailand 38.0
Taiwan 23.5
Nigeria 19.2
Burma 3.0
Malaysia 2.0
Canada 1.7
Vietnam 1.0
Total unknown 229.5.

Accumulated white wheat export shipments as of March 7, 2013, in 1000 MT for the 2012-2013 marketing year, totaled 3672.5 compared to 4172.6 one year ago.

PALM OIL OUTLOOK: MARKET DIRECTIONLESS BUT AMPLE SUPPLIES COULD WEIGH ON VALUES
By Jack Scoville, The Price Futures Group

Palm oil traded higher and lower over the course of the week, and ultimately did not settle on a direction. The market wants to be fundamentally weak as traders still anticipate good supplies against uncertain demand.

Palm oil traders look west and see big exports that will flow sooner or later from South America and wonder how palm oil at current prices can compete. They also worry about demand from India and China. India seems to have a lot of vegetable oils already in the country, and there are worries about the Chinese economy and demand potential.

Palm oil seems content to follow soybean oil for now as it seeks to hold competitive pricing.

Supplies in Malaysia and Indonesia are dropping a bit these days, but there is still plenty of it around so any big rally probably depends as much on what happens in the soy complex as anything. And right now, the soy complex does not act particularly strong.

RICE CASH MARKET STRONG, VIETNAM HARVEST EYED: Issue 24 Mar 3, 2013

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.

MANILA BECOMES KEY U.S. EXPORT MARKET, BUT BARRIERS REMAIN
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.

WEEKLY GRAIN MARKET NEWS FROM THE USDA IN THE PACIFIC NORTHWEST — Feb. 28
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.

PALM OIL OUTLOOK: TRADE EYES IMPROVED DEMAND FROM CHINA, SOUTH ASIA
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.

MALAYSIA’S WHEAT AND CORN IMPORTS SEEN SLIGHTLY UP, RICE IMPORTS FLAT: REPORT
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.