04 March 2015 | Online since 2003



Investment funds reduce commodity holdings; Rain delays Brazil harvest


With inflation running at 20%, Argentinean farmers are reluctant to sell the only asset that is retaining its value – $-based soya beans! They are still clinging onto 3mt of old crop, have only sold 12% of new crop (total harvest estimated to be 50mt) when they normally would have sold half by now.

The government has imposed strict currency exchange rate controls (5 pesos/$1), which means that a black market has developed for cash (8 pesos/$1).

But soya can only be exported at official exchange rates which are 35% below black market rates, which when added to a 35% export tax, it is not surprising that export sales have dried up. The resultant lack of export tax means the Argentinean balance of payments is not improving; there are rumours that the government could force farmers to sell soya.

In Brazil there are rumours of a strike against the government decision to privatise the running of some 160 loading terminals, which threatens the workforce in terms of staffing and benefits. The Brazilian harvest is about 20% complete, as rain is said to have delayed harvest. Apparently the queue of 142 waiting ships is now 30-40 days long, with a combined total of 11mt of capacity waiting to be filled.

In the US, last years’ drought is not over, as the soil is still too dry in the run up to planting. Dedicated pessimists are already calculating the possible effects of a second-in-a-row US crop failure, and firing the first shots in the food or fuel debate. Optimists point to the widespread snow and rains expected over the next week.

China has allegedly bought as much as 1mt of wheat from the US, Canada and Australia in the past two weeks. Egypt bought 60,000t wheat from the US this week – nothing extraordinary except that no-one in the EU, Black Sea or Australia made any offers, which tends to confirm that exportable supplies are becoming exhausted, and that the US may be the last wheat exporter left standing with wheat that is €10/t cheaper than the EU (delivered EU!).

The USDA’s annual conference, Outlook Forum, is held this week; they forecast 30% lower average prices for maize and soya at $4.80/b and $10.50/b respectively for 2013-14, because of record harvests in both crops. UK May wheat futures are about £207, GM soya is about £400 ex port; currency is a major factor in supporting prices.

The FT recently reported that the average commodity hedge fund lost 3.7% in 2012. Last year three of the biggest commodity hedge funds closed, one of which (Fortress) lost 13% in the year to May 2012. The current two-largest funds, Clive Capital (London) and Blenheim (Australia), have lost money for two years running; Clive Capital managed a fund of £3bn in 2011, had lost almost £2bn by the end of 2012; Blenheim lost about $2 billion.

Calpers, the California pension fund, reduced its commodity holdings by half in October 2012, having lost about 8%/annum for five years. Barclays has also withdrawn from speculative bets in agricultural commodities. It seems that some of the larger players have permanently withdrawn from our markets (hooray!), and it is possible that prices may assume less stratospheric levels with less volatility (we can only hope). Of the more successful funds, the $600 million (£392m) Black River Commodity Trading fund run by Cargill, specialising in agriculture and energy, gained almost 9% last year.

Download



Comments


No comments posted yet. Be the first to post a comment

To post comment without approval login or register

Display name

Please enter your name

Email (optional)
Comment

Please enter your comment

Post Comment

Your comment submitted successfully.Please wait for admin approval.

Some error on your process.Please try one more time.



Jobs


21 February 2015
Customer Advisor and Chilled Products Forecaster
This company is part of a European food manufacturing group which specializes in dairy products producing large & small t...

1 March 2015
Engineering Team Manager
The UK’s largest supplier of pre-packed dairy produce, supplying every major UK food retailer as well as the wholesale, conve...

12 February 2015
Service Technicians/Engineers
If you do not have access to a computer, please post your full CV stating current salary to Karen Winfield, UK Group HR Manag...

2 March 2015
Account Support Manager - Animal Health - East of England
Company: MSD Animal Health (MSDAH) Position: Account Support Manager Therapy Areas: Pig Business Salary: Competitive, plus Be...

12 February 2015
Graduate Farm Business Management
Graduate Farm Business Management. Develop own expertise and profile in the ruminant sector with emphasis on farm business ma...




Top stories you may have missed
2 February 2015 | Arable
Is EU membership damaging UK farming?

Is EU membership damaging UK farming?

Membership of the EU is damaging the British farming industry, according to...


29 January 2015 | Machinery and Equipment
Drones 'rapidly changing' agriculture

Drones 'rapidly changing' agriculture

BASIS has launched an accreditation for pilots of Unmanned Aerial Systems (...


23 January 2015 | Arable
UK wheat yields have potential to double

UK wheat yields have potential to double

UK wheat yields have theoretical potential to more than double over the nex...


23 January 2015 | Machinery and Equipment
Crowds flock to LAMMA 2015

Crowds flock to LAMMA 2015

Britain’s farmers flocked to Peterborough for the first day of LAMMA’15 to ...


22 January 2015 | Cattle
Don't blame supermarkets for milk crisis...

Don't blame supermarkets for milk crisis...

The crisis in the dairy industry is not the fault of supermarkets, accordin...


16 January 2015 | CLA
Families affected by HS2 face 'major wor...

Families affected by HS2 face 'major wor...

Transport Minister Baroness Kramer visited three rural businesses in Cheshi...


16 January 2015 | Machinery and Equipment
John Deere unveil new 6R tractor range

John Deere unveil new 6R tractor range

Spearheading the John Deere range of mid-size tractors from Mannheim, the n...


14 January 2015 | Animal Health
Monthly TB checks more effective than ba...

Monthly TB checks more effective than ba...

Regular testing for bovine TB could significantly reduce the number of infe...


12 January 2015 | News
Government regulations hampering UK agri...

Government regulations hampering UK agri...

Single-issue policy-making threatens to hamper, not help, the progress of U...


8 January 2015 | Cattle
2015: The year ahead for the beef market

2015: The year ahead for the beef market

2014 has been a “rocky old year” for the beef industry but better prices ar...