Agribusiness

Dole Food’s Upcoming IPO Signals Renewed Optimism In The Market

2009-10-17T00:50:00.000-07:00

Signalling the rising optimism in both stock and agriculture markets US fresh produce giant Dole Food, announced a US$565.7 million IPO last week, against the US$500 million mooted in August. It will offer 37.7 million shares and be quoted in New York. Chairman David Murdock, who took the group private six years ago, will retain a majority shareholding, at 59 per cent. Proceeds from the IPO will be used to pay off debts, personally guaranteed by Mr Murdock, amounting to some US$85 million, leaving borrowings of US$30 million outstanding.

Dole Food's reported net income during the quarter ended 20 June was US$20 million, down from US$181million during the same period of 2008. Dole achieved revenue of US$7.6 billion in last year as a whole, with net income of some US$123 million.

Meanwhile, shares in Phaunos Timber Fund jumped 8.8 per cent to US$0.71 in London last week, their highest since May, after the investment company said that it would answer shareholders' concerns about its low share price and undertake a strategic review. The fund, which has interests spread from South America to Eastern Europe, said it was seeking City advice on how to tackle the discount to its assets. As of June 30, Phaunos's investments were worth US$0.99 a share, yet the stock was trading at US$0.6425, a 35 per cent discount.

The statement from Phaunos comes three weeks after Ceres Agriculture Fund - which shares Phaunos's fund manager, FourWinds Capital Management - announced a strategic review on similar grounds. Ceres, whose directors in March tendered for 7.5 per cent of the funds' shares in an effort to close Ceres’s discount to net asset value, said fresh options included "a restructuring of the company".The share purchase helped close the discount on Ceres shares, which neared 40 per cent in January, to 11.4 per cent.

In what might portend better news to come, fertiliser stocks are declining, according to the data published last week by PotashCorp, the world’s largest producer. North American potash stocks fell by 54,000 tonnes to a little over three million tonnes last month. While this left inventories still 142 per cent above the five year average, it was at least some improvement. PotashCorp shares jumped C$2.62 higher at C$99.92 on the news. September's decline was the third consecutive monthly fall in stocks, the longest run since the summer of 2006. Prices held at roughly US$490 a tonne over the month, well below the US$880 or so they hit at last year's peak, but at least above the US$460 a tonne which India paid in July. Meanwhile, talks with China, the biggest potash consumer, over a fresh supply deal continue. Phosphorus prices were also stable, while ammonia jumped to about US$330 a tonne in Tampa, the highest price since late last year, the PotashCorp report added.

Grain markets remained firm over the past week, mainly supported by US markets influenced by harvest delays and potential crop losses due to early frosts. The US Department of Agriculture has confirmed there is more than enough wheat in the world. In the UK, according to merchants Gleadells, the recent rally has seen increased selling.

But leading EU grains research group, Strategie Grains sounded a note of caution over wheat prices, despite cutting its estimate for Europe's harvests by 1.2 million tonnes last week. This reflected lower forecasts for French, German and UK crops, and lower plantings than had been expected, with the forecast for Europe's average yield left at 5.7 tonnes per hectare.

That outlook, combined with weak Chicago prices impacted in European markets. Paris's November contract fell €1.00 to €127.00 a tonne. Strategie Grains' revisions follow large reductions this week to France's official wheat crop estimates.

Looking longer term, and much more bullish, was a Society Generale report that came out last week. This said hopes that China could become self-sufficient in grain looked unlikely to be fulfilled. Thus the case for a bull market, it said, was “compelling”.

Oilseed rape markets should remain relatively firm for the remainder of this year, but there is growing uncertainty about prospects for 2010. In Europe the Matif rapeseed market followed the US soy market higher, and was helped by the strong performance in crude oil.

Cocoa grindings are still slowing in North America and the EU. North American figures in the July-September period fell by 0.5 per cent to 118,400 tonnes, the National Confectioners Association announced. But this was still a significant improvement on the 6.8 per cent decline reported for the previous quarter, and the 13.0 per cent decline reported for the first three months of the year. The European Cocoa Association earlier this week reported a 1.5 per cent drop in EU cocoa grindings to 343,500 tonnes for the quarter. London cocoa for December lost early gains to stand 1.4 per cent lower at £2,097 a tonne, while the New York December contract was down 0.9 per cent at US$3,237 a tonne.

Delays in new sugar crop planting will leave supplies "tight" over the next year, according to research group FO Licht. This year’s price rally, which has pushed the price up by 80 per cent, has come too late to trigger plantings for the current crop year. "As sugarcane needs 12 to 18 months to mature, the cane that has been planted in response to this year's price surge will only be ready for harvesting for the 2010-11 crush”, Licht said, adding that lack of credit had also restricted plantings. Nor would Brazil and India, the world's two biggest sugar producers, whose harvest setbacks have been behind the surge in prices, be able to do much to increase demand.

London's December white sugar contract jumped more than five per cent on the news and on fund buying, rising a further US$3.10 to US$580.30 a tonne in late trade. New York raw sugar for March also rose five per cent.

Gourmet Corner:

Luxury basmati rice should be in plentiful supply this year despite the near crisis drought conditions in India. Increases in planted acreage lie behind the increase in supply, although it has to be said that the premium variety also needs less water. India produced three million tonnes of premium basmati rice last year, around two-thirds of which was exported. This year exports were banned.

Caraway seed prices are edging up despite disappointing crops in Finland, Holland, Poland and the Czech Republic. Prices are currently around US$2,770 per tonne for the 2009/10 season, but the market has been highly volatile, recent prices reaching levels of US$3,000 per tonne or more.

Breakfast is ready rise

2009-10-13T00:54:00.000-07:00

Breakfast is about to get more expensive! That staple of the day’s first meal around most of western Europe, orange juice, has been rising in price rapidly over the last few days. Quotes for Florida juice in the New York futures market last week were at the highest for a year. The market has been closing limit up, with the November contract’s last close at US 112.4 cents a pound. That is the highest since August 2008. The US Department of Agriculture has forecast that there will be 6 million boxes less collected, at 136 million and that the oranges will have a lower juice yield.

Just when farmers were celebrating the lack of hurricane damage a series of other problems have hit them. Severe frosts could cut orange output by as much as 16 per cent in the crop period beginning in December. This follows on from three years of drought, which had already cut estimated yields by 19 per cent. Florida’s crop has also been hurt by disease, including greening, a bacteria carried by insects.The USDA reports says that there are further problems in Florida which bode badly for the longer term, as in “poorly cared-for groves, trees were declining quickly due to citrus Tristeza virus, young tree decline and canker”.

Florida’s disaster follows on from a crisis in Brazil, the world’s largest supply of orange juice. Some of the problems there are similar, with the incidence of citrus greening rising by 49 per cent on last year’s levels in the growing areas in Sao Paolo and Minas Gerais. Earlier this year, however, a collapse in prices to their lowest level for eight years pushed many farmers into debt. They are now not in a position to cope with any rise in infections or sharp rises in temperatures.

Output has been forecast by the USDA to fall by six per cent. The report added that stocks of orange juice in Brazil were poised to fall to 58,000 tonnes in a year's time, 19.4 per cent lower year on year and 65 per cent below inventories at the end of June 2008. Growers are also facing difficult markets in that this summer only 40 per cent of the country's orange production had been contracted as processors. Increasing the independent farmers have found that their former major customers are now sourcing from their own groves. Then there has been a major fall-off in demand because of the world’s financial crisis. Exports were 29 per cent lower, by volume, in the latest crop year.

Prices on Brazil's open market remained below R$5 a kilogramme in Sao Paolo all summer, the lowest since 2001, and dropped to one quarter of the level they were achieving at the start of last year."Increased production costs and low prices... create more uncertainties about producers' profitability to remain in business," a report from the US Agricultural Trade Office in Brazil said. You cannot get much more pessimistic than that.

Fertilizer prices rise

2009-10-11T01:00:00.000-07:00

Signs are that fertiliser prices are off the bottom, with phosphate leading the recovery. "Among the three major crop nutrients, we believe phosphate has the highest probability for further pricing improvement over the next 12 months," said brokers RBC Capital Markets. The analysts there said prices seem to have bottomed in June and have since climbed 18 per cent -a trend that bodes well for Mosaic, which is the largest integrated phosphate producer.

The outlook this year for potash is more difficult to forecast, although a rise in demand is expected in 2010. "Recent price declines, lack of demand and high producer inventory levels have reinforced buyers' perceptions that they could be further rewarded by continuing to hold off on their potash purchases," RBC said, adding that the strength of potash's recovery will also largely demand on whether China resumes its potash imports in 2010.

Longer-term, demand for both nutrients remain strong, with a growing world production requiring higher farming yields. "According to the International Plant Nutrition Institute, fertilizer accounts for approximately 40 per cent of crop yields," RBC said. "In the major agricultural regions of China, India and Brazil, potash and phosphate application rates are below scientifically recommended levels and improved fertilization practices could lead to higher yields." However, on Friday fertiliser shares in the US were falling, with Mosaic down 42 US cents, at US$49.24, Potash down US$2.77 at US$90.23 and Agrium 86 US cents lower at US$51.91.

In the UK, agriculture merchants Gleadells said phosphate prices were at rock bottom, and they forecast that prices would shortly begin to follow world prices higher. For potash, they see world supply and demand being very much in balance. All nitrogen products, they point out, are likely to be affected by oil and gas prices, which are predicted to increase through the winter, so now might just be the right time to make that purchase.

In UK corporate news sausages and pork products supplier Cranswick said sales were strongly ahead at the interim stage, helped by a contribution from the recently acquired Bowes of Norfolk. Sales in the six months to 30 September rose by 19 percent from a year earlier, with seven per cent attributable to the contribution from Bowes. The shares closed up 8p on Friday at 708p.

Chocolate maker and retailer Thorntons reported that it had had a solid three months trading to end September, with sales up by 2.3 per cent to £46.8million. This was despite the fact that two big customers, Birthdays and Woolworths, had closed down. The shares closed the week up 6p at 126p, helped by the news that chairman John von Spreckelsen had put his hand in his and bought 40,000 shares at 124.4p each, taking his stake to 1.6 per cent of the company. The shares are now trading at their best in over a year.

In commodity markets, there was news that Colombian coffee growers may harvest as little as 9.3 million bags this year, down 19 per cent from the previous season, after above-average rainfall damaged plants. Coffee has surged 23 per cent this year in New York after heavy rainfall hampered harvests in Colombia and Brazil, the biggest coffee producer and exporter. Next year’s output will also be boosted by warmer weather that is helping plants flower, the Federation said. Colombian inventories of coffee, now at about 700,000 bags, probably will increase to one million bags within two years, still below historic average.

The difficulties of the UK grain harvest were confirmed by the first official estimates from DEFRA last week. The data, which is based on June Survey plantings and yield data from over 1700 farmers, put total UK grain production for 2009 at 21.8 million tonnes, a drop of 10 per cent. Within this total, the wheat crop is estimated at 14.2million tonnes, a decrease of 18 per cent. This was based on an average yield of 7.9t/ha and a 14 per cent decrease in the sown area - slightly above the figure put out by the NFU in September. Oats production was also down by 7 per cent to 731,000tonnes, as plantings and yields fell. But the barley crop is put 10 per cent higher at 6.7 million tonnes, due primarily to a significant rise in the spring-sown area, as farmers made up for lost plantings the previous autumn.

Rice prices are rising again, on forecasts that the Philippines, the world’s largest importer, will be forced back to the market after floods there destroyed stocks in the major cities and wiped out seven per cent of the fourth quarter rise crop. In futures markets the contract for November delivery gained all week, adding as much as 0.6 per cent on Friday to US$13.305 per 100 pounds. Drought in India may slash rice output there by about 18 per cent to 81 million tons in the marketing year that began last week, cutting global supplies available for importers, Concepcion Calpe, senior economist at the UN Food and Agriculture Organization (FAO), said last week. Global stockpiles are expected to drop by 3 per cent to 117.4 million tons at the end of the 2009-2010 season, according to the FAO.

Tea prices are threatening to go higher than the ten-year records currently being achieved. World shortages after adverse harvest have left shrinking stocks and are resulting in forecasts that the days of cheap tea have gone. Kenyan prices have soared above US$4 a kilo and have been reaching US$4.16 and more – the low for this year has been down at US$1.91 for some grades. Colombo prices for even the lowest grades have gone from LKR 120 to LKR380, and higher grades have reach LKR550. Droughts in Kenya, Sri Lanka and India have cut output severely and resulted in highly volatile markets. Sri Lanka is expected to produce as much as 50 per cent less this year. With blenders holding little in the way of stocks, all tea prices are vulnerable to upward pressures. Concern about supplies is now being exacerbated by strikes in Sri Lanka.

Gourmet Corner:

Indonesia nutmeg farmers have got a whiff of higher prices and are refusing to be negotiated down, preferring to wait until their fruits are fully ripe and Christmas orders start to arrive. Prices have firmed to around US$10,700 a tonne, up from US$9,200 a week ago and US$8,400 earlier this year. Traders are warning their customers that there is generally a shortage of nutmeg, and the Indonesian market is controlled by a few very wealthy suppliers who can afford to manipulate the market.

Cardamom prices are also rising on the back of demand for festivities, but this time in the east. Indian cardamom is up by over 10 per cent over the last few weeks, trading at around Rs899 a kilo compared to Rs595 a year ago. Suppliers said that demand was always strong at this time of the year for Asian festivals and the marriage season. Plus, the crop has been reduced by adverse crop weather and is expected to be as much as 35 per cent smaller this year.

Watchdog enters Timbercorp tussle

2009-07-07T13:11:00.000-07:00

The Australian Securities and Investments Commission told the almond and olive growers yesterday that a lawyer would be appointed to act on their behalf next Wednesday at a Victorian Supreme Court hearing to decide the fate of 14 separate almond and olive projects at Robinvale and Boort.

ASIC is also asking the growers to complete an online poll where their views about the future of individual schemes will be submitted to Justice Ross Robson who is to preside over the hearing.

Writing to growers yesterday, ASIC noted complaints it had received on perceived conflicts of interest involving Mr Korda's insolvency practice.

ASIC also acknowledged the difficulties growers have encountered in making their views known and said that a plan by the Timbercorp Growers Committee to appoint a temporary manager - otherwise known as a responsible entity - is feasible.

It says that if a temporary appointment was made, growers' fees would continue to accrue and funding arrangements would need to be put in place.

But in documents before the court, Mr Korda claims that to keep the projects alive through 2010 the growers need to stump up $195.9 million on top of their existing rent and project maintenance costs.

He says this is because harvest proceeds from next season's crops are expected to fall short of meeting costs the projects are likely to incur.

As liquidator of 41 Timbercorp companies, Mr Korda and his assistant Leanne Chesser are acting for both the growers and a syndicate of banks that advanced $200 million to Timbercorp to fund land purchases outside Robinvale and Boort in the state's north.

Mr Korda argues that his first responsibility is to seek the best possible solution for growers.

Last week Mr Korda told a growers' meeting that the almond and olive schemes were a cashflow nightmare because of the upfront charges projects incur before the crops can be harvested and generate earnings.

He told the meeting that even if outstanding rents and crop maintenance bills were paid the projects would remain in deficit.

Timbercorp subsidised growers' rent bills, by charging just 60 per cent up front and leaving 40 per cent outstanding as a debt on the company's books until after the crops were sold after each harvest.

Grain Trade Battle Continue

2009-06-01T23:25:00.001-07:00

Russia has seized a shipment of Egyptian oranges at Novorossiysk port, after discovering Mediterranean fruit-fly infestation. The orange move has been reported in the Russian media as tit-for-tat for Egyptian moves to seize three shipments of Russian wheat since May 13.

Rosselkhoznadzor (RSN), the government's food and farm product inspectorate, confirms that the imported oranges have been impounded, but insists this is not a retaliation for last week's arrest by the Egyptian prosecutor-general of Russian wheat. Alexei Alexeyenko, the RSN spokesman, said the arriving citrus was inspected, and after the pest was found, the shipment has been quarantined and fumigated. In time, it will be allowed to be delivered to the consignees.

Alexeyenko also told Agriprods.com that two weeks after the Egyptians claim to have found infestation in 137,000 tonnes of arriving Russian wheat, there is still no official report from the government in Cairo of any contamination; and no official Egyptian government complaint. He said RSN has run special laboratory checks on grain from the same source as the wheat exported to Egypt, but no trace of weevil infestation has been found.

Alexeyenko said that traditionally, Egypt buys medium quality (4th and 5th class) wheat. "It always corresponds to the GOST [state inspection standard] and to the quality indicated in the sale agreement." Alexeyenko reflects government thinking in Moscow that the Egyptian seizures are a ruse to cut the trading price of the Russian grain in the Egyptian market, and to favour competing exporters from other countries. The timing, he said, is related to the World Grain Forum 2009, when
world grain producers and buyers will assemble in St. Petersburg on June 6.

President Dmity Medvedev will also depart shortly for his first state visit to Egypt. To avoid the growing embarrassment, Egyptian Foreign Minister Ahmed Aboul Gheit claimed this week in Moscow that "the relevant Egyptian bodies must determine whether there is a high level of bugs in the shipment and whether the shipment corresponds fully to international standards."

Since RSN says that no report has been received from the Egyptians, Russia's Foreign Minister Sergei Lavrov responded, during a press conference with Aboul Gheit, with a hint that nothing abnormal has happened at all, and that the problem will be solved soon: "In Russia and Egypt there is a bilateral mechanism to check the conformity of such products to the established norms. This mechanism is used, and what happened - this is a normal working situation."

Warning Of Farmland Riots

2009-05-18T05:23:00.001-07:00

A warning that the quest for agriculture land by rich countries seeking to improve their food and fuel security could bring social unrest came last week from the US-based International Food Policy Research Institute (IFPRI). So it is drawing up a code of conduct for these acquisitions. Massive tracts of arable land in Africa, Russia and the Ukraine have been bought or leased. All told, the acreage secured through lease or purchase by Asian and European private and public investors is put by IFPRI at 15-20 million hectares, at a cost of €15-20 billion.

By comparison, annual net official development aid by OECD countries amounted to around €90 billion in 2008, €50 billion of which came from the EU. According to IRIN, the UN's humanitarian information news service, the lease of coastal wetlands in Kenya by Qatar threatens to displace thousands of locals who use the region for produce and livestock farming. Local councillors have said they will go to court to prevent the government from leasing the property.

In Madagascar meanwhile, the IFPRI researchers say, negotiations with South Korea's Daewoo Logistics Corporation to lease 1.3 million hectares for maize and oil palm played a role in the political conflicts that led to the overthrow of the government in 2009.

Stung by the criticism that using farmland for biofuel crops can actually boost carbon emissions and increase food prices, firms have been scouting about for cheap ‘wasteland'. "EU policies are certainly contributing to Western biofuels investment," Ruth Meinzen-Dick, one of the report's two authors, was quoted as saying in EUobserver, "When you hear the word ‘wasteland' or ‘unused', it usually does have some use, just not uses that are officially recognised," she added, "whether as a village common or as pastureland, gathering nuts, honey, or for rattan."

Food production is usually the focus of the land acquisition by emerging economies. The UAE has secured some 378,000 hectares to grow corn, alfalfa, wheat, potatoes and beans, while Saudi Arabia is in the process of gaining access to 500,000 hectares in Tanzania. Meanwhile in the east, Denmark's Trigon has secured 100,000 hectares from Russia. Sweden's Alpcot Agro has secured 128,000 hectares and Black Earth Farming 331,000 hectares in the country. Landkom, a UK firm, has leased 100,000 hectares in Ukraine. Ethiopia is home to 13,000 hectares secured under a contract farming agreement with Germany's Flora EcoPower for biofuel crop cultivation. Sweden's Skebab has secured 100,000 hectares in Mozambique for biofuels as well.

China has secured 2.8 million hectares in the Democratic Republic of Congo for oil palm and is hoping to access another 2 million hectares in Zambia for jatropha. Britain's CAMS Group has also purchased 45,000 hectares for jatropha biofuels in Tanzania. The researchers found that another 10,000 hectares have been secured in Nigeria by Trans4mation Agric-tech, also of the UK.

In markets, shipping rates continue to recover, as show by the key benchmark, the Baltic Dry Index. It surged at 2,432 points, up by 100, or 267 per cent higher than the low of 663 points of last December, led by the capesize sector. However, for the rally to be sustained, say brokers Fearnley and Braemar Seascope among others, the dry fleet will have to be reduced as fast as possible, otherwise the tonnage oversupply will prove disastrous.

In the major soft commodity markets, bullish sugar news, notably India’s production shortfall, has already been factoring into prices and the aggressive speculative buying has dried up allowing bearish traders to seize control. So world raw sugar futures closed down on profit-taking after racing to three-year highs earlier in the week on the back of heavy speculative buying. Alaron Trading said the next move higher may not occur until the third or fourth quarter. James Cassidy, senior vice president, Sugar Group at Newedge, looks for July sugar to decline to near US 14.50 cents a pound before finding support and levelling off. On Friday, ICE July sugar fell 52 points to settle at US 14.95 cents a pound.

Looking ahead, the International Sugar Organisation sees a possible 2009-10 world sugar deficit of 4.5-5.0 million tons. Tighter sugar stocks were also shown by the US Agriculture Department’s initial US figures for 2009-10. While production is higher, larger beginning stocks and decreased exports more than offset the increase. Ending stocks for the new crop year are pegged at a tight 289,000 tons, compared with 1.19 million in 2008-09. The 2009-10 projected stocks-to-use ratio for the U.S. came in at a bullish 2.7 per cent, down from a downwardly revised 11 per cent in 2008-09.

Coffee has strong underlying support as 2008-09 production is lower in Central and South America. The firmer US dollar and falling global equities pulled ICE Futures US Arabica coffee lower at the close of the week on Friday. The most actively traded contract, July settled down 20 points at US$1.2780 a pound and nearby May contract settled 40 points lower at US$1.2755. July Arabica is expected to continue to trade in the US$1.25-$1.30 range as speculators dominate the market, said Transworld Futures US. Futures have near-term resistance at the US$1.3075 level, Tuesday's high, and the strongest level since last October.

US cocoa futures rose on Friday in a minor technical bounce from recent lows during thin trade ahead of the weekend. Nearby July cocoa on ICE Futures US rose US$28 on Friday to settle at US$2,338 a ton. Liffe cocoa futures in London rose in tandem with the gains in New York. News this week from the International Cocoa Organization (ICCO) that 2008-09 grindings, a demand indicator, are expected to fall 6 per cent due to the economic recession which has been a bearish price influence. The ICCO said it expects global production for the current crop year to decline by nearly 7 per cent.

Gourmet corner:

Walnuts are the latest product for which tight stocks are being reported Last week there were sharp increases in spot UK prices of Chinese and Indian walnuts, according to the Public Ledger, as consumption rises around the world. Prices for Indian walnuts were being reported at US$6,700-6,800 a tonne cif European ports against US$5,200-5,300 two months ago. California walnuts are reported to be almost sold out, despite quotes of around US$2.75 a pound up from US$2 last year and after the largest US crop ever. Yet again strong Chinese buying is said to be the major cause of the shortages.

K+S Is Undercutting The Big Russian And American Players In The Key Chinese Potash Market

2009-05-01T02:15:00.000-07:00

In the global marketplace for potash there are none sharper at spotting a bargain than the Chinese. That’s because Chinese farmers, and the state fertilizer distributors, comprise the world’s largest consumers and importers of potash. And more than that, when the Chinese fix their annual contract price for potash imports, they set the marker for counterparts in India, South East Asia, and Brazil. During the last few years, China’s demand has been supplied from several sources. These include Canpotex of North America, representing Canadian and US mining companies such as Potash Corporation, the Belarusian Potash Corporation (BPC), representing potash mined in Belarus and Russia, and Israel Chemicals Ltd. (ICL). And during the past four years of booming commodity prices, the China market grew steadily, and so did potash prices.

But that’s history now. In the last half of 2008, the crash of all commodity prices and the shortage of farm credit have led most producers of potash to curtail their production dramatically, and prevent the accumulation of unsold stocks. In the first quarter of 2009, the Russian producer Uralkali, for example, cut its production of potash from 1.3 million tonnes to 459,000 tonnes, a reduction of 63 per cent. Potash Corporation, the world’s largest potash producer in Saskatchewan, has reported that in the same period it cut sales volumes to North American customers by 86 per cent, and to the rest of the world by 78 per cent.

But it’s spring in China, and after an unusually rainless winter, farmers preparing to plant need more potash than usual to improve their yields out of the dry ground. This is also the time that China’s big-volume buyers usually meet with the major producers and suppliers to fix the volume of deliveries of imported potash for another six to twelve months. But the China National Agricultural Means of Production Corporation (CNAMPGC), the China National Chemical Construction Company (CNCCC), and Sinopec - the three major Chinese buyers – all seem to be keeping their pens in their pockets, and their contract orders off the table. So what exactly is happening?

The answer is that a relatively big German company, with a relatively small share of the Chinese market for imported potash, is making a quiet play, and has put an offer on the table the Chinese cannot resist. That company is K+S Aktiengesellschaft of Kassel, Germany. K stands for kali (potash, potassium) and S stands for salz (salt). Five years old in the present corporate structure, K+S is Europe’s largest producer of salt. Its’ well-known package trademark is Morton’s little girl shielded by an umbrella, losing her salt, with the slogan: “When it rains, it pours”. This was a US-owned trademark for almost a century, until Dow Chemical sold it, along with its food and industrial salt products, to K + S for US$1.7 billion. Morton’s little girl became K+S’s on April 2nd of this year.

But a much bigger wind blowing the umbrella for K+S has been potash demand. During the commodity boom, salt lost proportional value in the group’s total revenues of €4.9 billion. The growth in potash prices drove the K+S group’s potash and magnesium division too. K+S says it lifted eight million tonnes of potash and magnesium last year from six German mines. It now counts itself the fourth largest potash producer in the world, with an export market share of one tonne traded in seven. .

The latest Chinese import statistics for potash in the quarter to March 31st reveal that China imported more than 170,000 tonnes of German-origin potash. That is more than a threefold increase, compared to the same period of 2008, and almost as much as was imported from Germany during the entire year of 2008. Asked by Agriprods to confirm what the data implies – that this German potash came from K+S - the company declined to say. The company is also unwilling to acknowledge that the price at which these shipments from Germany have been delivered to China is less than US$570 per tonne CFR (cost and freight delivered to Chinese port).

According to analyses issued this month by Scotia Capital in Toronto, and drawn from a variety of Chinese and foreign industry sources, K+S has been selling into China within a price range of US$540 and US$565 per tonne CFR. This is more than US$100 per tonne below the price at which supplies of potash are reported in the trade to have been landed in China late last year. Although K+S has in the past made relatively small sales of potash to Chinese importers, and the new number remains small, the significance of the K+S move is its timing and its price.

For at the end of 2008, all the major international potash suppliers to China, including Canpotex, BPC, and ICL, wound up their contracts, and halted fresh deliveries to China. The suppliers then proposed reopening contract negotiations for this year with the Chinese, but there was no response. Not until this month have the Chinese announced the formation of a “buying consortium”, which includes Sinochem, CNAMPGC and CNCCC. Contract talks have now commenced officially, but sources close to the table say the Chinese side is in no hurry to make a deal.

And that’s what makes K+S tactics significant, and its intentions worth investigating. In March Canpotex sold two cargoes of North American potash into Malaysia and Indonesia at a price of US$735 per tonne (CFR). This was the first price reduction from that exporter since last year. In April Canpotex followed with the sale of two additional cargoes to Brazil priced at US$750 per tonne. BPC had already announced in March that it was offering a 25 per cent discount off the spot price of Russian and Belarussian potash on the Brazilian market, down from US$1,000 per tonne to between US$750 and US$765 per tonne. But the downward trend of prices hasn’t aroused the hoped-for buying interest from the Chinese, either for the Russian or the North American product. Only K+S has signed new orders, at an even deeper discount.

Chinese buyers acknowledge that the K+S sales to date of 170,000 tonnes, even if they are repeated in the current quarter, are a drop in the bucket by China’s import standards. But they are having a much bigger psychological impact, Chinese trade sources claim. This is because K+S sales agents around China are convincing the domestic market that they will keep up supply volumes, and keep down price growth. If another 100,000 tonnes of K+S potash lands before May 25, when the International Fertilizer Association holds its annual conference in Shanghai, Sinochem and CNAMPGC may decide to keep talking past the deadline, and wait for a further drop in price. India, the next largest global importer, appears to be delaying renewing its annual contract until it sees what the Chinese do.

Chinese buyers are also reported by Scotia Capital in Toronto as saying that right now the spring planting requirement for potash has been met, and that three million tonnes of potash remain in inventory. The Chinese are claiming they have enough potash in stock to last for another three months. But they will have to conclude the new contract negotiations in time for deliveries to be made in time for the autumn planting season.

BPC and Uralkali refuse to comment on the China negotiations. But industry sources report BPC sales director, Oleg Petrov, as saying publicly on April 28th that India's potash inventories have dropped very low, while China has enough inventory for several months, making it likely that the Indians will try striking a deal before the Chinese feel the need to do the same.

Market analysts in Europe and North America say they have only recently seen the evidence of the K+S move in China. Roydel Stewart, the fertilizer specialist at Alfa Bank in Moscow, told Agriprods that the market had been taken by surprise by the K+S initiative in the China market. He said that when asked, K+S “vehemently deny that they sell to China at below-market prices. K+S never reports its potash production or sales. They group it with other products, so we don't know exactly how much potash they produce and sell. So it is possible, I suppose, that they are sending some volume to China...”

K+S spokesman Katja Seeger was asked what sales strategy K+S is keeping under the famous umbrella, and whether it is K+S's aim to undercut the supply and price controls of its international rivals, and improve its potash sales to China. She replied: “China is the biggest potash market in the world. K+S KALI GmbH traditionally supplies this market and will go on doing so. The quantities we ship are considerably smaller than those of some competitors. We ask for your understanding, that at this point we won´t discuss the strategic orientation of our business.”

The Price Is No Deterrent As Demand Continues To Rise - English Wines

2009-04-30T06:11:00.000-07:00

Interesting to learn from Guy Tresnan, sales and marketing director of PLUS listed English Wines Group, at the Master Investor Show in London last week, that the constraint on growth is volume rather then sales. In other words the company can sell all the wine it produces through a combination of retail sales, wholesale to supermarket groups and sales to restaurants. Needless to say it is retail sales that get the biggest mark-up as far as the company is concerned and the lowest mark-up comes from the supermarkets. Somewhere in the middle come well known restaurants such as Gary Rhodes, Ramsay, Konstam, Roast and other well known chains, but it is with them that maximum credit control has to be exerted in these difficult financial times.

Guy gives an example of Tom Aikens’s restaurants which went into administration in October 2008. All they owed English Wines was £600, but a lot of small farmers and suppliers were owed a lot more than that. In a matter of weeks Aikens was back in business through another company and all the outstanding bills were worthless. Guy is angry about this and, as an aside, suggests that he may put together a band of these creditors to have a good dinner at the new restaurant before telling whoever is front of house that the bill can be put against their old invoices.

The selling of wine is a funny old game as Rowan Gormley pointed out recently Rowan was the man who started Virgin Money and Virgin Wine for Richard Branson. After Virgin Wine was sold to Laithwaites he started another company called Naked Wine and this will cut through what he sees as the crap of marketing which costs small producers more than the wine costs to make. English Wines stands out from this comment as it is the only English wine maker of sufficient size to interest supermarkets and restaurant groups in its range of wines. Nevertheless it still has to spend significantly on marketing support for the supermarkets. .

The last two years have seen low harvests as a result of the weather and the words ‘climate change’ have disappeared from the lips of chief executive Frazer Thompson. When we wrote about the company this time last year he mentioned those two dread words on more than one occasion when explaining why he was buying land for grape growing on the chalk belt running up from Dover to the north Downs. It was because the average annual temperature was very similar to the area around Reims and Chablis where the French produce champagne and high class white wines from what are called the ‘noble grapes’.

Now the story is much simpler. The ground is suitable for growing pinot noir and chardonnay grapes, and the more the merrier. In the interim results announced last September Frazer reported that 116 acres of freehold land had been acquired at Kit’s Coty on Bluebell Hill near Aylesford and that the first 75 acres had been planted with vines which should start to bear fruit in 2010. Frazer Thompson is not very forthcoming with information but it looks a fair bet that the Kit’s Coty venture will cost around £10,000 per acre after taking into account all the expense of planting the vines and installing the wire, spiles and posts to support them.

Although a small harvest is expected in 2010, the wine from this will not be sold until 2011. The first full harvest should be in 2011 for wine to be sold in 2012 and most of this will be champagne type wine as the fizz inflates the profit margin. In a reasonable year one acre should produce 3 tonnes of grapes/acre which should amount to 3,000 bottles after the wine maker has done his work. By 2012, therefore, Kit’s Coty should be producing an additional 18,750 cases of fairly expensive wine and there will still be the grapes from the other 41 acres to come. It is a major investment, but as long as English Wines retains its premier position in its particular sector of the market, it should pay off

One thing can be said against PLUS listed English Wines Group, it is very parsimonious with news for a listed company. In fact the only announcements of note appear to be the interim results in September and the final results in April. Nothing about harvests or new sales contracts in the meantime which seems a pity as it fails to exploit its position as a listed company. A quarterly news bulletin would be one idea, as would special wine or meal offers for shareholders. After all the main vineyard at Chapel Down near Tenterden now has a restaurant run by celebrity chef Richard Phillips. There is a bit of romance in having shares in England’s biggest winemaker, but it would be a whole lot more romantic if some offers were thrown in. After all if expansion is what the company is about it may want to raise more money in the future and this will mean courting shareholders.

During 2008 pre-tax profits fell from £157,543 to £105,995. The low harvests in 2007 and 2008 were the culprits as the volume of wine sold last year fell by 17 per cent and the 8 per cent increase in selling prices (excluding duty) were not sufficient to offset this. The quality of the grapes mitigated this problem to an extent and costs have apparently been contained, but administration and market costs increased by 10 per cent. Looking ahead there is more acreage coming into production as the company attracts new growers to supply premium grapes from suitable land. Let us hope that the weather will be better this year so that it coincides with good quality to produce wines for which demand appears to be growing.

A rise in Asian palm oil demand

2009-04-30T02:11:00.000-07:00

A rise in Asian palm oil demand - the world’s cheapest and most consumed cooking oil - has cut stockpiles in Malaysia by 13 per cent in March to the lowest level since July 2007. Just last November they were at record highs, but the latest data suggests “the prospect for a sharp drop in palm oil prices has evaporated,” a HwangDBS Vickers Research report said. However, “current stocks of soybeans in China and of palm oil in India are at record levels, hence there is a possibility of declining purchases in the coming months,” warned Citigroup analyst Penny Yaw. Her latest report forecasts that the palm oil price will average RM2,200 a ton this year.

Malaysian crude palm oil futures edged up to a 34-week high on expectations that data due this week (starting 27 April) would show good palm oil exports so far this month. There is market speculation that exports could be as much as seven per cent higher. The benchmark July contract on the Bursa Malaysia Derivatives Exchange ended up RM5, or 0.2 per cent, at RM2,585, ( US$721.50). The benchmark contract hit an intraday low of RM2,535 and a high of RM2,648, a level not seen since August 25. Overall volume was more than double the usual level at 23,396 lots of 25 tonnes each.

China, the world’s largest vegetable oils consumer, has turned to stock piling other oilseeds, which analysts say may slow demand. It will extend by two months a plan to stockpile 6 million metric tons of soybeans and buy more rapeseed from growers to aid farmers sell crops and boost their incomes, the State Council said. Palm oil exports to China from Malaysia, the second-largest producer, have dropped 10 per cent to 1.03 million tons this year from 1.15 million tons in the same period last year, according to data from Societe Generale de Surveillance up to April 20.

Supporting palm oil prices are the threats to soya exports. Argentina, the largest soybean oil exporter, is having its worst drought in more than four decades and in addition there is on-going disruption to exports from the clash between government and farmers over taxes. The Buenos Aires Cereals Exchange lowered its 2009 soybean forecast by 6.1 percent to 37 million tons as the harvest may be the lowest in four years.

Another factor is that the US, the largest soybean grower, has indicated that farmers may plant less than had been expected. Soybean oil and palm oil are substitutes, accounting for about two-thirds of the world’s cooking oils. Plus, Russia is expected to step up imports before imposing higher tariffs on palm oil to help boost demand for domestic cooking oils, such as sunflower. Shares of the UK-quoted palm oil producers all rose on Friday, New Britain continuing its run, gaining12p to 395p, MP Evans up 4p at 270p, Anglo Eastern Plantations up 17p at 325p, REA up 28p at 345p.

Shares of Wilmar International Ltd, IOI Corp, KL Kepong Bhd and other plantation companies may rise more than forecast, according to brokers Hwang DBS Vickers Research. “Singapore listings offer best value,” the report said, advising investors to buy Wilmar, First Resources Ltd and Indofood Agri Resources. The report advised investors “take profit” on PT Astra Agro Lestari of Indonesia and Sime Darby Bhd of Malaysia.

In other markets, cocoa prices were mixed amid ongoing fears about leading producer Ivory Coast. “Ultimately the considerable shortfall in the main Ivory Coast harvest seen earlier this year - and resulting pressure on stock levels - will really hold any downside to prices in check”, said Barclays Capital analysts. By Friday on LIFFE, London's futures exchange, the price of cocoa for delivery in May had risen to £1,837 a tonne from £1,712 the previous week. On the New York Board of Trade (NYBOT), the July cocoa contract rallied to US$2,453 a tonne from US$2,354.

In coffee markets by Friday on LIFFE, Robusta for delivery in May dipped to US$1,491 a tonne from US$1,494 the previous week. On the NYBOT, Arabica for July rose to US 118.55 cents a pound from 114.25 cents.

On LIFFE, the price of a tonne of white sugar for delivery in August firmed to £413.10 from £396.2 the previous week. On NYBOT, the price of unrefined sugar for July increased to US 13.83 cents a pound from 13.48 cents.

Gourmet Corner:

Clove smuggling is on the increase. Farmers have become increasingly unhappy with the prices they are getting, while international prices are soaring after bad harvests last year and rising demand in Asia for cigarettes and food flavouring. High prices are also pushing importers to aid the smugglers.

In one major producer, Zanzibar, there is officially no free trade, selling being done by state organisation. Farmers say this has been giving them only half the selling price. So farmers have been taking their cloves over the border to Kenya. In another producer, Madagascar, it is the local Chinese merchants that have been causing discontent in their major market, China, and importers have been cutting them out.

One of the many problems with clove production is that it takes five years for a tree to become productive, so farmers are reluctant to cut down old ones or to invest money in new ones. So, in Zanzibar, for example, the number of trees have halved over the last thirty years, according to the Zanzibar Clove Producers Organisation, cutting the annual crop from 24,000 tonnes to 10,000 tonnes.

Zanzibar cloves are being quoted at around US$4,375 a tonne, up from US$4,150 fob EU earlier this year. Madagascar is quoting EUR2,996 a tonne, up from EUR2,470 cif European ports.

Food prices start to creep back up, retail figures show

2009-02-04T07:51:00.000-08:00

Since Autumn of last year the price of most food had started to fall from their record highs, as the cost of global commodities came down, especially wheat and milk.

However, the British Retail Consortium on Wednesday warned that the price of some food, especially frozen food and ready meals, was increasing once again.

According to the BRC, annual food inflation climbed from 6.2 per cent in December to 7.5 per cent in January.

This is because the majority of goods on shop shelves – from food, to electrical goods, toys and clothing – are imported.

Stephen Robertson, director general of the BRC, said: "The effects of the weak pound are starting to filter through to the costs of imports, slowing the rate of price falls for some non-food goods and contributing to pushing up the prices of some food products."

Overall, inflation rose from 0.5 per cent in December to 1.1 per cent last month.

And retail experts warned that shoppers will need to get used to a return to prices climbing up once again, especially in clothing and electrical goods, most of which are sourced from Far East countries, whose currencies are pegged to the value of the dollar.

Investors, fearing for the state of the British economy, have sold sterling on the international currency markets, forcing down the value of the pound from above $2 a year ago to $1.44 this week.

Jason Gordon, retail director at consultancy Ernst & Young, said: "We import tonnes of food from abroad – fruit and vegetables, much of our meat and most branded goods. It is all going to be costing retailers more."

Though some staples such as bread and milk have started to come down in price compared with their peaks of last year, other goods are more expensive than a month ago.

According to MySupermarket.co.uk, a kilo of bananas in Tesco increased from 85p to 95p between December and January; Asda increased the price of a cucumber portion from 34p to 49p and the price of Maris Piper potatoes at Sainsbury's has climbed from £1.50 for a 2.5kg bag to £1.99.

The full effect of the weak pound will only hit clothing, toy and electrical goods prices later in the year, after retailers' hedging agreements – contracts to shield themselves from currency volatility –run out.

"After more than a decade of falling prices for jeans, T-shirts, and other basic clothing, shoppers are potentially in for a rude awakening," said Mr Gordon.

Sugar Rises in N.Y. as U.S. Economy Shrinks Less Than Forecast

2009-01-30T17:40:00.000-08:00

Sugar prices rose, ending a three- day slide and capping the first monthly gain since September after the government said the U.S. economy shrank less than forecast and amid speculation that India’s imports will jump.

The U.S. gross domestic product contracted at an annual pace of 3.8 percent in the fourth quarter, the Commerce Department reported. That’s less than the 5.5 percent median estimate of 79 economists surveyed by Bloomberg News. The Reuters/Jefferies CRB Index of 19 raw materials jumped as much as 1.4 percent. Industry and government officials in India said import barriers fell.

“The GDP number wasn’t as bad as expected and that bumped commodities a little bit,” said Patrick Donnelly, a broker at Peak Trading Group in Chicago.

Raw-sugar futures for March delivery rose 0.08 cent, or 0.6 percent, to 12.67 cents a pound on ICE Futures U.S. in New York. The price fell 0.2 percent this week, after five straight gains.

The most-active contract advanced 7.3 percent this month partly on speculation that prices would rise if India, the world’s second-largest sugar producer, becomes a net importer this year for the first time since 2005.

“India may well need to import as much as 3 million metric tons of sugar this calendar year to satisfy local demand,” Fortis Bank and VM Group said today in a report.

Because of light volume, sugar’s gains today weren’t “a good sign of strength,” said Nicholas S. Hayman, a senior trader at LaSalle Futures Group in Chicago. “No one trusts this rally. Funds are yet to aggressively buy into this market.”

Biggest Gain in Week

Sugar rose as much as 2.8 percent earlier today, the biggest advance in a week, before paring gains. It lost 2.6 percent in the three sessions through yesterday on concern that Indian processors won’t increase imports as much as anticipated.

Prices may continue the downturn and fall to 12.5 cents by the middle of next week because “there’s simply no demand,” Hayman said.

India permitted duty free imports of the sweetener for sale domestically as output slumps, according to Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories Ltd. The trade ministry may announce the new rules in a day or two, Kumar said today in a telephone interview in Mumbai.

Indonesia Lowers Sugar Output Forecast as Prices Fall

2008-12-18T01:57:00.000-08:00

Indonesia, Southeast Asia’s largest sugar buyer, lowered its 2009 production forecast by 12 percent, expecting low prices to deter farmers from harvesting sugar cane.

Sugar processed from domestic crop may total 2.9 million metric tons, compared with 2.78 million tons this year, said Achmad Manggabarani, plantation director-general at the farm ministry. The government had forecast in April an output of 3.3 million tons.

Falling domestic prices this year prompted farmers to plant fewer acres to cane. The price of white, or refined, sugar was at 4,950 rupiah a kilogram (46 cents) in August, less than the 5,000 rupiah minimum price set by the government, Kompas newspaper reported in August.

The price “is not giving incentives to farmers to boost output,” Manggabarani told a breakfast meeting of officials from ministries of trade, industry, agriculture and state enterprises in Jakarta today. The output will top estimated domestic demand, eliminating the need for white sugar imports, he said.

Indonesia’s sugar production from farms is used for domestic household consumption, estimated at 2.73 million tons this year. Industrial users must import refined sugar or buy from domestic processors of raw sugar purchased overseas.

The country, estimated to import 1.93 million tons of raw and white sugar this year for household and industrial users, may purchase 20 percent less in 2009, said Bayu Krisnamurthi, deputy to the Coordinating Minister for Economic Affairs in charge of agricultural affairs.

Stockpiles

The nation may hold 1.1 million tons of refined sugar by the year-end, equal to five months of consumption, Manggabarani said.

Makers of food and drink in Indonesia may use 1.85 million tons of refined sugar next year, Industry Minister Fahmi Idris said at the meeting this morning, without giving comparative figures for this year.

In 2008, Indonesian refiners bought 1.38 million tons of raw sugar to be processed locally, while food companies bought from overseas 500,000 tons of refined variety, the minister said. He didn’t give the estimates for next year’s imports raw.

“Hopefully in five years we won’t have to import raw and refined sugar because of higher cane output,” Idris said.

The country is planning to convert some old mills to plants that produce raw sugar from sugar cane for refiners’ needs, he said, without giving details.

Indonesia will stop allowing new investments in sugar refineries as current capacity is higher than demand, Muhammad Lutfi, chairman of Indonesia’s investment coordinating board, told reporters after the meeting today.

The Southeast Asian country has seven licensed refiners, five of them active, Minister Idris said. The companies, which have a total capacity of 2.87 million tons, produced 1.2 million tons of refined sugar this year to November, he added.

Sweet Returns in a Commodity Crash

2008-12-02T02:36:00.001-08:00

This year has been anything but sweet for commodities investors. Since peaking in mid-July, the Reuters-CRB Index has crashed a cumulative 48% with every constituent of the index down sharply – except sugar.

To be sure, another formidable commodity is also holding up relatively well in the Panic of 2008 -- gold. Though down 2% this year that’s far better than just about every other asset class where losses exceed 30%.

Sugar prices have rallied 11% in 2008 on the heels of growing supply shortages.

Since peaking in March at $0.15 cents per pound, world sugar prices have indeed corrected to $0.12 cents now but remain higher since January 1st.

The International Sugar Organization is forecasting that global sugar production will decline 3.8% to 162.3 million tons in the year ending September 30, 2009 while consumption is projected to rise 2.4% to 165.9 million tons. This leaves sugar supplies in net deficit and the shortfall is likely to persist for several years, according to industry experts.

Sgg

The European Union and Brazil are primary factors causing the shortfall in sugar stocks.

European Union (EU) farmers recently renounced a significant amount of their quotas, resulting in lower output this year and into 2009.

In Brazil, where ethanol consumes a fairly sizable chunk of the country’s production, spare capacity is finding its way to ethanol, not edible consumption vis-à-vis exports.

Brazil is also confronting another crisis affecting global farmers – a credit crunch.

Sugar farmers in Brazil are now in the midst of serious financing problems as revolving bank credit it shut or interest rates have increased to levels that prohibit margin expansion for growers. It’s the same phenomenon occurring in the United States as farmers continue to feel the credit squeeze, canceling orders for farm equipment, delaying expansion plans and being decimated by the plunge in grain and most other agricultural prices since July.

Sugar isn’t the only commodity that’s in or approaching supply deficit. Coffee and cocoa also remain very tight, especially the latter amid unrest in the Ivory Coast – the world’s largest cocoa producer.

Once global markets finally calm down or, at least, stop gyrating violently, I expect the fundamentals to return to the commodity complex. Supplies are declining for several commodities, namely gold, silver, sugar, coffee, cocoa and rhodium. The grains, particularly wheat and corn, are also poised for another big move.

It’s definitely time to start looking at raw materials again following a 50% crash since July. I also think the sector will get help from a weaker dollar ahead of a 0% Federal Funds rate over the next 3-6 months as the United States desperately tries to conquer deflation in the economy.

My favorite commodities now include gold, silver, sugar and the grains. Supply imbalances continue to work in their favor.

Commodity Rebound in 2009 Will be Lead by Agriculture

2008-12-02T01:48:00.000-08:00

After the dust settles from the sell off across commodities triggered by the global financial crisis, agricultural commodities, which will benefit from a secure demand outlook and tight supplies are expected to outperform metals and oil in 2009.

Regardless of the gloomy macroeconomic outlook people still need to eat; therefore agricultural commodities will be more resilient during the economic downturn.

"Demand for agricultural commodities tends to be less elastic, less responsive to economic factors, more responsive to population," said Lawrence Eagles, a commodities analyst at J.P. Morgan.

However lower agriculture prices and scarce and expensive credit may cause farmers to struggle to finance production. The recent drop in commodity prices has been a disincentive for farmers to reinvest in production. The agricultural markets may yet fall further, before staging a recovery due to the demise of some of the world's largest banks, which has caused a lack of confidence in capital markets.

Eagles says there's great potential for agricultural commodities to lead the way in a commodity market rebound.

"Prices are not going to be dictated by funds and fund flows next year," Eagles says. "It's going to be about the availability of trade finance and demand and supply."

Sugar prices remain unchanged in restricted trade

2008-11-09T09:11:00.000-08:00

New Delhi,(Asia Pulse Data Source via COMTEX) -- Trading on the wholesale sugar market here remained unchanged in the national capital today, as prices continued to be asked at previous closing levels on little buying support against adequate ready stock position.

Marketmen said heavy sugar stocks position as against the demand mainly kept prices around last levels.

Following are today's quotations in Rs per quintal: Sugar ready M-30 1925-2000 and S-30 1900-1975.

Mill delivery M-30 1650-1885 and S-30 1640-1875.

Sugar mill gate prices (excluding duty): asmoli 1860, Amroha 1675, Bundki 1760, budhana 1840, baghpat 1680, chandpur 1660, chandanpur 1680, dhampur 1765, dorala 1800, deoband 1780, dhanora 1800, Gajrola 1660, jk 1720, kinoni 1875, kashipur 1730, Khatauli 1810, malak narain 1790, mawana 1800, Morna 1685, nanota 1675, nazibabad 1670, rani nangal 1760, ramala 1685, ramlaxaman 1680, simbholi 1870, sabitgarh 1800, samali 1765, sakoti 1690, thanabhawan 1840 and tikola 1800.

Marginal rise in sugar prices on mild demand

2008-11-09T09:10:00.000-08:00

Mumbai,(Asia Pulse Data Source via COMTEX) -- Sugar prices rose further on the Vashi Wholesale Market here today on sustained demand from retailers amid poor supply from mills.

Medium sugar quality (M-30) moved up by 1/5 per quintal to Rs 1,844/1,920 from yesterday's closing level of Rs 1,843/1,915.

Small sugar quality (S-30) also rose by Rs 5 per quintal to Rs 1,815/1,845 from Rs 1,815/1,840 previously.

Following are today's closing rates per quintal with previous rates in brackets.

Small sugar(S-30) quality Rs 1815/1845 (Rs 1815/1840) and Medium sugar (M-30) quality Rs 1844/1920 (Rs 1843/1915).

Growers take out rally against sugar mills

2008-11-09T09:09:00.000-08:00

Jati,(Asia Pulse Data Source via COMTEX) -- Local sugarcane growers Thursday took out rally from Fazil Roundabout to the press club in protest against two sugar mills for not paying their dues despite passing 10 months.

Addressing the protesters, farmer leaders Ali Muhammad Memon, Haji Afzal, Hashim, Gul Muhammad and Muhammad Siddique accused two local sugar mills of purchasing sugarcane from the growers some 10 months back but not paying their dues.

They warned of staging protest demonstration outside of head offices of these sugar mills located along Shahrah-e-Faisal Karachi, if their dues were not be paid, immediately.

Sugar prices firm up further on renewed demand

2008-11-09T09:05:00.000-08:00

Mumbai,Sugar prices moved up further on the Vashi Wholesale Market here today due to increased demand from retailers amidst poor supply from mills.

Small sugar quality (S-30) rose by Rs 9 per quintal to Rs 1,804/1,830 from yesterday's closing level of Rs 1,795/1,830.

Medium sugar quality (M-30) also looked up by Rs 5 per quintal to Rs 1,825/1,910 as against Rs 1,825/1,905.

Following are today's closing rates per quintal with previous rates in brackets.

Small sugar(S-30) quality Rs 1804/1830 (Rs 1795/1830) and Medium sugar (M-30) quality Rs 1825/1910 (Rs 1825/1905).

Sugar futures up 1.5 pc on better demand; crushing delay

2008-11-09T09:04:00.000-08:00

New Delhi, Sugar futures today moved up by 1.5 per cent on pick up in demand in spot markets amid reports of a delay in crushing of new crop.

The most-active November delivery contract shot up by Rs 25, or 1.5 per cent, at Rs 1,806 per quintal on the National Commodity and Derivatives Exchange. The contract recorded a business turnover of 2,530 lots.

Similarly, December contract rose by Rs 19, or one per cent at Rs 1,842 per quintal in a turnover of 4,630 lots, while far-month January contract surged by Rs 20, or 1.1 per cent at Rs 1,912 per quintal, clocking turnover of 1,680 lots.

Market analysts said persistent rise in the sweetener prices at futures market was attributed to a likely delay in crushing of new crop in the main sugar producing state, Uttar Pradesh, after millers have challenged the state-fixed minimum price for cane in the Allahabad High Court.

In the spot market at Kolhapur, Maharashtra, sugar prices were ruling higher at Rs 1,782 per quintal.

The Uttar Pradesh government earlier had asked mills to pay farmers Rs 140 for per quintal of cane.

Tim Hortons to miss US sales targets, close stores

2008-11-09T09:03:00.000-08:00

Coffee and donut retailer Tim Hortons Inc said on Friday economic gloom in the United States will force it to close several restaurants in New England and put its U.S. sales targets out of reach.

The outlook from Canada's biggest restaurant chain -- seeking to overthrow Dunkin Donuts in some big U.S. markets -- comes in the midst of a raft of disappointing results from other retailers operating in the United States.

"We expect rationalization of underperforming restaurants will ultimately contribute to improved profitability, and improve sales performance at our remaining restaurants nearby," said Don Schroeder, president and CEO, in a release.

A company official was not immediately available to comment on how many U.S. restaurants would be shut.

The company posted a higher third-quarter profit as robust sales in its home market of Canada offset the lackluster performance in the United States, where a soured housing sector and credit crunch have slammed consumer confidence.

Same-store sales in Canada in the quarter grew by 3.8 percent, but they dropped 0.6 percent in the United States. Tim Hortons said it would likely miss its 2008 U.S. same-store sales target of 2 to 4 percent growth.

Third-quarter earnings per share rose to 43 Canadian cents from 36 Canadian cents a year earlier, beating analysts' average estimate of 41 Canadian cents.

Revenue came in at C$509 million, up from $490.5 in the same quarter last year, missing analysts' average estimate of C$537 million.

"Our earnings performance and positive same-store sales growth in Canada demonstrates our brand strength in the face of unprecedented economic and consumer challenges," said Schroeder in the release.

"While our brand in the United States is less developed and we faced sales and earnings challenges due in large part to the current economic conditions, we delivered strong consolidated performance in the third quarter," he said.

Bona Coffee Holdings Corp. Announces a Forward-Split

2008-11-09T09:02:00.000-08:00

Bona Coffee Holdings Corp. (PINKSHEETS: BCHC) announced that it has approved a 10-for-1 forward stock split of its 3,146,000 issued and outstanding shares of common stock. The record date for the stock split is shareholders of record as of the close of business on Wednesday, November 12, and the payment date is the same November 12th.

Bona Coffee Holdings Corp., incorporated in the Philippines, is a holding company whose businesses consist of coffee shops, furniture & jewelry stores, real estate, a casual wear clothing line, and a spa in Manila, Philippines.

The home office of Bona Coffee Holdings Corp. is Unit H, PSCOR Building, Elizalde Street, BF Commercial Plaza, Paranaque City, 1720 Philippines.

Caribou Coffee posts Q3 loss

2008-11-09T09:01:00.000-08:00

The Caribou Coffee Company has reported a net loss of $8.8 million or $0.45 per share in the third quarter of 2008, compared to a net loss of $8.5 million or $0.44 per share in the same period of 2007.

The company's consolidated net sales in the third quarter of 2008 were $60.9 million, a decrease of 1.7%, compared to $61.98 million in the same period of 2007. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $2 million in the third quarter 2008, compared to an EBITDA loss of $0.7 million in the third quarter of 2007.

For the first nine months of 2008, the company has reported a net loss of $17.6 million, compared to $15.6 million in the same period of 2007. Consolidated net sales were $185.85 million, compared to $186.68 million in the first nine months of 2007.

Michael Tattersfield, president and CEO of Caribou Coffee, said: "As we work to improve the overall profitability of Caribou Coffee we will focus on four key strategic initiates: improving the profitability of the coffeehouses, rationalizing the cost structure of the organization with the current revenue stream, aligning the current real estate portfolio and profitably growing the commercial and franchise business channels."

@datamonitor.com

Sara Lee: extending ethical coffee business offers recession resistance

2008-11-09T08:56:00.000-08:00

Sara Lee Corporation has announced a significant expansion in its ethically certified coffee business for 2009. This positive strategy contrasts the recent downward revision in its full year forecasts and expectations of harsh conditions ahead. Ethical products arguably possess a degree of recession resistance, offering Sara Lee a potential source of value-added sales in an otherwise tight market.

Sara Lee has announced that it intends to pursue a strategy in 2009 of increasing the sustainability of its coffee business by 30%. This equates to raising its purchased volume of certified coffee beans to 26,500 tons. In 2004 this figure stood at a mere 2,500 tons, illustrating the scale of growth in this area of Sara Lee's business.

This positive commitment to further investment in its sustainable strategy stands in stark contrast to the picture painted in Sara Lee's latest full-year profit forecasts, cut by up to 17%, with sales this year to date down 36% overall.

Sara Lee's plan reflects the argument that investment during a recession for CPG companies is an important long-term strategy for brand development as it can enable solid positioning in the post-recession marketplace.

Aside from ethical associations offering a positive "halo" effect for the company and its brands, ethical products also arguably offer a degree of recession resistance. This is because ethical consumers show greater commitment to their branded purchases than their more neutral peers. This suggests that during an economic downturn, ethical brands may fare better than non-ethical equivalents as their core consumer base has stronger ties.

Another important point is that consumers who already pay a premium for ethical products are less likely to be put off by recession ethical brands also crossover extensively with premium products and thus benefit in the same way in that dedicated consumers of premium brands tend to be less likely to trade down. Research by the Canadian Agricultural Economics Society supports this, showing that price-sensitivity is much lower among purchasers of Fairtrade products compared to that of non-Fairtrade consumers. Rising ethical prices would thus not automatically trigger a shift to cheaper non-ethical alternatives.

Clearly, there is still a risk that ethical brand growth may stall in a recessionary environment, as mainstream consumers will not be as likely to trade up. However, Sara Lee has a chance to court an intrinsically more stable consumer base and thus a more stable revenue stream, creating a solid basis for post-recession brand building.

@datamonitor.com

BRIEFING - ASIA AGRIBUSINESS - NOV 6, 2008

2008-11-09T08:55:00.000-08:00

An executive briefing on agribusiness for Nov 6, 2008, prepared by Asia Pulse (http://www.asiapulse.com), the real-time, Asia-based wire with exclusive news, commercial intelligence and business opportunities.

MEDCO OFFERED LAND TO GROW SUGARCANE IN PAPUA

JAKARTA - The Medco Group (JSX:MEDC) with core business in oil and gas sector has received an offer from the provincial administration of Papua to use 300,000 hectares of land to grow sugarcane.

Medco, however, said it would need at least 1 million hectares for sugarcane plantation to be commercially feasible.

OVERPRODUCTION RAISES INDONESIAN FARMER'S PURCHASING POWER

MAMUJU - Several agriculture and plantation products in Indonesia's West Sulawesi triggered the farmer's purchasing power hike based on the farmer's trade value (NTP).

"Nevertheless most of plantation commodities like coconut palm and cocoa fell, does not affect the farmer's purchasing power, because they are experiencing an over production in their plantation and agriculture harvests," said the Head of the West Sulawesi Statistics Center Agency (BPS) Nursam Salam, here Tuesday.

INDONESIA TRYING TO WIN MANGOSTEEN MARKET IN AUSTRALIA

JAKARTA - The Indonesian government through the Ministry of Agriculture is trying to win the mangosteen market in Australia, a senior official said.

Director General for Processing and Marketing of Agricultural Products, Zaenal Bachruddin said Indonesia's mangosteen exports in 2007 stood at 9,093 tons or 15 percent of national product worth us$4.95 million.

INDONESIA'S CACAO EXPORTS PREDICTED TO DROP 40 PCT IN Q4

JAKARTA - Indonesia's cacao exports in the fourth quarter this year are expected to drop to 40 per cent in value because the price of the commodity had plunged once below US$3,000 per ton.

"Before the crisis the price of our cacao ranged between US$1,700 and US$2,000 per ton and now it is still at that level although it once soared up to US$3,000 per ton. Our exports will be affected. In the last quarter of this year their value will drop 30 to 40 per cent compared to the previous quarter in line with the decreasing price of the commodity," the secretary general of the Indonesia Cacao Association, Zulhefy Sikumbang, said here on Tuesday.

Expert Says Cocoa Price Slump Unrelated to Global Financial Crisis

2008-11-09T08:54:00.000-08:00

The recent fall in the price of cocoa from Cameroon has some farmers and exporters alarmed. Officials say the drop is not linked to the global economic recession. But they warn that a prolonged downturn could lead to a drop in demand for exports from the continent. Voice of America English to Africa Service's Ntaryike Divine, Jr., in Douala, Cameroon, reports the Cameroon Cocoa and Coffee Board says recent drops in cocoa prices are not linked to the current global financial crisis.

The managing director of the board, Michael Ndoping, says the price slump is due to a glut of cocoa on the international market. He says the board won't know until early next year if the current price plunge means the worldwide recession is reducing demand for African cash crop exports. He adds that recent cocoa prices have been dropping compared to the week before.

"This is due to the fact that this is the peak period when all producing countries are all exporting " so there's surplus supply as opposed to demand. So it obviously amounts to a drop in prices. But prices normally pick up in January or February; so it's in January and February that we will know if the drop in prices is being caused by surplus supply on the market or is an effect of the world banking crisis .

But he notes that with the stocks and shares markets being highly speculative, anything could happen.

Ndoping spoke against a backdrop of fear gripping cocoa farmers and dealers in Cameroon. Many think the credit crunch is finally affecting the price of their exports. Cameroon's cocoa and coffee are traded on the London and New York stock exchanges.

Production has considerably increased over the past few years. But for several weeks, there has been concern over the possibility that the financial crisis will cut demand. He says, "If the banking crisis affects the commodities market, then somewhere we might witness a drop in prices. So we could unfortunately be affected, although right now we cannot say."

A long economic crisis beginning in the mid-80s wrecked several sectors of Cameroon's economy, especially agricultural exports like cocoa. Many farmers abandoned their plantations as demand for their crops sank. The government-run national produce marketing board, which provided financing for farmers, collapsed.

A new entity, the Cameroon Cocoa and Coffee Board was created in 1991 to stimulate production, regulate marketing and monitor the quality of cocoa and coffee produced for export. Ndoping says thanks to several government and donor-backed measures, the country has witnessed steady growth in cocoa exports, especially with increased investment and improved farming practices.

Over the past 30 years, Cameroonian production has risen from over 123 thousand tons a year to more than 187 thousand tons, and there are prospects of further expansion. The increased production has made Cameroon the world's fifth largest cocoa producer.

But he says he regrets that the coffee sector has not made similar progress. Farmers, especially those in the major coffee-producing northwest, stopped production during the economic crisis of the eighties and nineties. Many switched to food crops. Some say they could not compete in the world market against better-quality coffee from South America, and West Africa.

But current attractive world market prices are reviving interest in coffee growing and many farmers are going back to resurrect their farms. Ndoping sees a bright future for Cameroon, currently ranked 19th worldwide in coffee production. The government is helping farmers try to double production by 2010. Arabica coffee currently stands at 3,890 tons up from 3,100 tons in 2006. Production for robusta coffee has changed little, at about 40,000 tons.

Government support includes exemptions from import duties on imported inputs like improved seeds, and pesticides and their sprayers. It has also put in place a financing program to help farmers reclaim abandoned plantations. And, it's building storage facilities in growing zones to cut down on transportation costs by organizing workshops on improved farming practices, helping organize farmers' cooperatives, and facilitating farmers' access to markets.

Government officials say only better quality produce, and the elimination of middlemen who do not respect world market standards, will increase demand for Cameroonian coffee.

Cargill opens cocoa processing facility in Ghana

2008-11-09T08:52:00.000-08:00

Cargill has opened a new cocoa processing facility in Tema, Ghana, representing an investment of around $100 million.

According to the company, the plant has started production and has the capacity to transform 65,000 tons of cocoa beans per annum into cocoa liquor, butter and powders.

The Tema plant will extend Cargill's West Africa range of cocoa powders. The facility complements Cargill's existing cocoa processing facility in West Africa in Abidjan, Cote d'Ivoire, the company added.

Greg Page, chairman and CEO of Cargill, said: "This cocoa facility already has brought employment to almost 1,000 construction workers; creates new opportunities for Ghanaian cocoa farmers; provides full-time employment and training for about 200 employees in the plant, indirect employment for hundreds more, and supports Ghana's growing economy."

@datamonitor.com

Local projects to strengthen the cocoa industry

2008-11-09T08:50:00.000-08:00

Corporate news announcement processed and transmitted by Hugin AS. The issuer is solely responsible for the content of this announcement.

Barry Callebaut - making a difference for Africa

* Tree-planting project in Tanzania: 250,000 cocoa trees for 3,000 organic smallholders to boost yield and income * Tripling of cocoa-processing capacity in Ivory Coast: Investment of EUR 30 million (almost CHF 50 million) over the last two years to expand the cocoa factory in San Pedro, creating 75 permanent and several hundred seasonal jobs; processing capacity now 105,000 tonnes p.a. * Health center in Ivory Coast: Basic healthcare for 18,000 people in the cocoa-growing region of Goh near San Pedro

Zurich/Switzerland, October 29, 2008 - Barry Callebaut, the world's leading manufacturer of high-quality cocoa and chocolate products, has been committed to contributing to a more sustainable cocoa industry in Africa for many years. Africa supplies about 70% of the world's cocoa harvest.

* * *

Contacts for the media:

General: Germany: Gaby Tschofen Sascha Tischer Barry Callebaut AG :relations Gesellschaft fur Kommunikation mbH Phone: +41 43 204 04 60 Phone: +49 69 963 652 14 E-mail: E-Mail: s.tischer@relations.de gaby_tschofen@barry-callebaut.com

OVERPRODUCTION RAISES INDONESIAN FARMER'S PURCHASING POWER

2008-11-09T08:49:00.000-08:00

Several agriculture and plantation products in Indonesia's West Sulawesi triggered the farmer's purchasing power hike based on the farmer's trade value (NTP).

"Nevertheless most of plantation commodities like coconut palm and cocoa fell, does not affect the farmer's purchasing power, because they are experiencing an over production in their plantation and agriculture harvests," said the Head of the West Sulawesi Statistics Center Agency (BPS) Nursam Salam, here Tuesday.

He said that the harvest results in a 3.6 per cent rise in farmer's production index, also triggered the farmer's NTP and purchasing power. (ANTARA)

VIETNAM: GOOD RICE HARVEST IS NOT REAPING MONEY FOR FARMERS

2008-11-09T08:39:00.000-08:00

Rice farmers in the Mekong Delta are not being able to negotiate good prices for their produce.

They are finding it difficult to pick their way through a mix of fluctuations in government policy, lack of credit, falling global prices and a glut of stocks sitting in warehouses.

"We harvested almost 50 metric tons [about 55 U.S. tons] of summer-autumn rice two months ago, but still we are not able to sell it," lamented Nguyen Van Thanh, a farmer from Hau Giang province, one of the biggest rice-producing areas in the southern Mekong Delta. The area produces most of the rice responsible for making this country a top exporter of the staple.

The summer-autumn crop is the second harvest of the year. It usually begins in May and ends in November. The other crops are winter-spring (February to May) and autumn-winter (November-February).

Like many other farmers in the Mekong Delta, Thanh is "sitting on fire," as he puts it, because he cannot sell his crop even though rice prices have already tumbled. "If we sell our rice at the current price, 4,300 to 4,500 dong a kilo [26 to 27 cents a kilogram], we will have no profit at all," he said.

Encouraged by rising rice export prices, which nearly tripled this year due to tight global supply, farmers in the Mekong Delta expanded the number of acres they have planted for the third and last crop of the year, in hopes of a higher output.

The summer-autumn harvest has also been a good one. Farmers in the Mekong Delta are estimated to have harvested 5.5 to 8.8 million tons of rice from about 4 million acres of land under paddy cultivation.

But in March, the government of Vietnam imposed a ban on the signing of new export contracts to save rice for domestic consumption, part of a package of measures adopted to ensure food security.

Now that the Vietnamese government has allowed the export of rice to resume, demand for rice on the global market has fallen and export prices have declined.

Local rice exporters are therefore hesitant to buy and store rice using high-interest loans from the banks.

"There will be an additional million metric tons of commercial rice in the next two or three months," said Le Van Banh, president of the Mekong Rice Institute. "Finding warehouses for that enormous volume would be another problem, especially when the season of floods and storms is around the corner."

Because they need capital for the next harvest and have nowhere to process and store their newly harvested crops, farmers sometimes must sell their crops rapidly even if it is at a loss.

To help farmers sell out their harvested summer-autumn rice, in mid-August Vietnamese Premier Nguyen Tan Dung asked the State Bank of Vietnam to offer preferential loans to rice exporters so they can buy all the rice available for export.

The rice export target for 2008 has also been raised by around 2 percent (to about 5 million tons), to reflect the country's higher output and the government's effort to arrest falling domestic prices.

In a move that local media hailed as "an expression of socialist morality," Dung ordered several state-owned food companies to purchase all 4.4 million tons of summer-autumn rice still being held by farmers at a price Dung said "could assure Mekong farmers benefit." That price was estimated to be around 5,000 dong (31 cents) a kilogram.

Dung also ordered the Vietnam Food Association, the state body overseeing Vietnam's rice production and exports, to raise export prices.

Still, peasants like Thanh can hardly find traders willing to buy rice at the price recommended by the prime minister. "If I can sell my crops at 4,500 dong a kilo [27 cents] to pay my debts and fertilizer for the coming autumn-winter harvest, I would consider myself a lucky man," Thanh said.

For their part, rice exporters said they faced problems both in local and foreign markets.

"Finding markets is the main difficulty," remarked Banh of the Mekong Rice Institute. "Traders prefer to find buyers before purchasing [rice from farmers] so as to avoid the problems of long storage and high bank interest."

At the end of September, the governor of the SBV renewed his request to commercial banks to make preferential loans available to rice exporters to assist them in buying 440,925 tons of rice that remain in the hands of Mekong Delta farmers.

But export prices given by VFA are still too high compared to world market prices, a rice trader here points out.

VFA raised export prices for Vietnamese top export-grade rice from $600 to $650 a ton, bringing it close to Thailand's bestselling 5-percent broken grain.

"Trade is still not as easy as the premier desires," one observer said.

Even so, VFA reports that Vietnam exported 3.3 million tons of rice between January and August this year. Although that was a drop of 5.7 percent from the same period last year, it still resulted in an almost doubling of revenue to $1.79 billion.

In late August, the influential Vietnamese-language Saigon Economic Times said it is but fair that businesses that have so far made huge profit from rice share part of farmers' loss. "It's a matter of socialist morality," it argued.

But many businesses argue that they need to operate on the basis of market prices, which depend on the fluctuations in global supply and demand. They say any subjective attempts to interfere in the market, either to increase or decrease prices, would not succeed.

"If we have decided to follow the market economy, we should use mainly market tools and not administrative ones," said Nguyen Quang A, president of the Hanoi-based non-government Development Research Institute.

While economists discuss how to better manage the country's rice production and exports, poor farmers like Nguyen Van Thanh ponder what to do with their hefty stockpiles of rice.

(*This story was written for the Imaging Our Mekong Program coordinated by IPS Asia-Pacific.)

@IPS-Inter Press Service.

Basmati prices up on increased demand

2008-11-09T08:37:00.000-08:00

New Delhi, Basmati rice common variety rose by Rs 100 per quintal in the national capital today on increased marriage season demand.

Maize and bajra too firmed on the back of pick up in demand from poultries.

In the rice section, basmati common prices moved up by Rs 100 to Rs 6,550-6,750 per quintal on stockists buying.

Maize and bajra on the back of industrial demand gained Rs 20 and Rs 25 at Rs 760-825 and Rs 725-740 per quintal respectively.

Traders said the rise in basmati rice common variety was mostly attributed to increased demand on account of marriage season.

They said tight arrivals too gave a push to rising prices of select commodities.

Following are today's quotations per quintal in Rs: Wheat MP (deshi) 1,375-1,675 wheat dara (for mills) 1,125- 1,200, chakki atta (delivery) 1,125-1,140, Chakki atta Rajdhani (10 kg)145, shakti bhog (10 kg) 150, roller flour mill 1,140-1,155, maida 675-685 (50 kilos) and sooji 730-745 (50 kg).

Rice basmati (lal quila) 8,800, Shri Lal Mahal 8,800, Super basmati rice 8,900, Basmati common 6,550-6,750, rice Pusa-1121 4,000-4700, Permal raw 1,400-1,450, permal wand 1,500-1600, sela 1,900-2,050 and rice IR-8 1,250-1,400, Bajra 725-740, Jowar yellow 775-815, white 1255-1320, Maize 760-825, Barley (UP) 1,040-1,070 and Rajasthan 1110-1120.

@ APU Newswire.

Wok it out

2008-11-09T08:33:00.000-08:00

According to estimates, Chinese is the world's most popular restaurant cuisine. It's not just that the Chinese themselves -- in the mainland, in Taiwan, in Singapore, in Hong Kong and all over East Asia -- love eating out, it is also that non-Chinese have taken to their cuisine at all levels.

No matter where in the world you go, you are certain to find a Chinese restaurant. It may not be a fancy place. It could just be a takeaway doing junk Chinese but Chinese restaurants are ubiquitous, all the way from Europe to South America to Africa to Australia.

There are many theories for the popularity of Chinese cuisine. One says that the low cost nature of many of the dishes (little meat, lots of rice, lots of noodles and lots of vegetables) is the key. Another theory has it that Chinese is less a cuisine than a generic term for an umbrella of cuisine. By that, I don't mean just the obvious schools of Chinese food (Cantonese, Peking, Sichuan etc.) but also the many global variations. Eat Chinese food in middle America and it will all be roughly the same. But it will also be significantly different from Chinese food in say, France.

One of the strengths of global Chinese cuisine is that it adapts itself almost effortlessly to local tastes. We know now that Indian-Chinese food (Sino-Ludhianvi) only uses Chinese as a starting point. Most of the dishes are unknown in China and our style of eating Chinese would horrify most natives: fried rice and noodles with the main meal, everything deep-fried, all sauces to be wet enough to drench the rice etc.

But about a century or so ago, they said that about American Chinese as well. The global popularity of Chinese food is largely a consequence of the emigration of large numbers of Chinese from the mainland to the West Coast of the US. They produced a bastardized version of their cuisine for American palates and popularised many of the dishes (chop suey, for instance) that form the backbone of international Chinese cuisine. Even today you'll be served something called American Fried Rice in much of Asia. Though the dish (with its use of tomato ketchup and the like) is only nominally Chinese, it is popular enough to turn up on menus at such Chinese cities as Singapore.

Since the late Sixties onwards, a new generation of Chinese restaurateurs have tried to popularise so-called 'authentic Chinese' food, making us conscious that the Cantonese cuisine which we once held to be the only 'real' Chinese food is just one aspect of the range of cuisine available in China. That battle has largely been won. Most of us now know that Cantonese is to China what say, Tamil food is to India's: a great cuisine but hardly the only one. And in India at least, it is the spiciness of Sichuan food that we prefer, even if we make our own Punjabified variations.

So what now? Where does Chinese food go from here? When the mainland opened up a decade or so ago, there was a rush to popularise the dishes that were served there (and not in Hong Kong, Taiwan etc.). But even that has now run its course. Most hotels will offer you a taste of mainland China. At the two Hyatt Chinese restaurants (China Kitchen and China House in Delhi and Bombay), the concept is one that was hatched as Made In China at the Hyatt in Beijing and relies on extensive use of chefs from the mainland. At Delhi's The Chinese, the food is so authentic that you could be eating in China. And most hotels now import chefs from the mainland and not from Hong Kong and Singapore.

Some restaurateurs argue that this phase is now coming to an end. To take a parallel, think of Indian food in England. Till the Seventies, Indian food was represented (or perverted) by cheap Bangladeshi curry houses who served what we could call junk Indian. An early breakthrough was the opening of Gaylord in 1966 and then, the Pakistani Shezan, a few years later. This led to some improvement in the quality and introduced Brits to the real thing but Indian food did not get genuinely trendy till the Taj opened The Bombay Brasserie in 1982 and attracted a new kind of client. Now, even the Bangladeshis are falling over each other to try and open upmarket, authentically Indian restaurants, and chefs from India find it easy to get jobs in England.

Both Chinese and Indian restaurants now need to move on to the next step. In some small way, it is already happening in London with such adventurous restaurants as Amaya and Rasoi's Vineet Bhatia winning a Michelin star each. Modern Chinese has been popularised by Hakkasan (with a menu that follows no regional direction) and other such restaurants.

But no cuisine can be said to have advanced to the next level unless restaurants serving new style dishes open in its country of birth. The revolution in French cuisine would have been meaningless if it had been restricted to London and New York. Its impact came from the fact that it occurred in France.

In the case of Indian food however, nothing very much has happened to the cuisine in India. But apparently, things are changing in China. And the agents of change are the overseas Chinese.

I met up last week with Andrew Tjioe, the founder of Singapore's famous Tung Lok group. Andrew's original claim to fame was a restaurant just off Singapore's Orchard Road where he served modern Chinese cuisine. He called it Club Chinois. Because he served unusual dishes -- a steamed Boston Lobster with preserved Japanese radishes, pickled Chinese chillis and Australian tomato sauce, for example -- he came to the attention of the world's foodies.

Then, he collaborated with Canada's most famous Chinese chef, Susur Lee who had a firm grasp of the techniques of French cuisines, to open My Humble House, also in Singapore. My Humble House and its current executive chef Sam Leong have been extensively written about because of the restaurant's many culinary inventions. For instance, wasabi mayonnaise, which is now almost a gastronomic cliche, was invented at My Humble House, as was the now ubiquitous dish of wasabi prawns.

Among My Humble House's many innovations was a refusal to use the oil that is such an important part of many Chinese dishes and to move away from simple stir-frying to include more of such techniques as baking and roasting, which are not only healthier but also significantly affect the taste and texture of the dish. Moreover, Humble House used non-Chinese ingredients. One of its early successes was a dish which combined a traditional Chinese roast duck salad with slices of crisp Peking Duck skin and a foie gras terrine made with five spice powder.

The Singapore Humble House was an instant success but Andrew knew that the real challenge lay in taking the concept to the mainland.

He says he was nervous when he opened his first Humble House in Beijing but gratified when it took off. He quickly opened a second one and now has four restaurants in China. Obviously the mainland Chinese are willing to have their tastebuds tingled by overseas Chinese chefs. (Made in China is also the brainchild of a Singapore chef Jack Aw Yong -- who later opened India's China House and China Kitchen).

I asked Andrew how customers in the Chinese mainland took to such dishes as Seven Spice Marinated Crisp Foie Gras on Caramelised Watermelon or Wagyu Beef with Green Apple Sesame Reduction. I know that we are a long way from tolerating such experimentation in Indian restaurants. So, were the mainland Chinese more receptive?

Oh yes, he said, they were. The most interesting aspect of China's current restaurant revolution is how the old style 500-seater emporia are dying out and punters are trading up to smaller restaurants that serve modern Chinese food. A new cuisine, based not on the old regional distinctions, but predicated on innovation is being widely accepted.

If Andrew is right and if the success of his restaurants in China is not an isolated example, then Chinese food may be changing faster than we realize.

To see more of the Hindustan Times or to subscribe to the newspaper, go to
http://www.hindustantimes.com.

Churches team up to help residents save on food bills

2008-11-09T08:32:00.000-08:00

In the midst of a difficult, sluggish economy, a national community food program is now being offered in the Austin area to help ensure that cupboards stay stocked and wallets stay full.

Living Bible Church and Austin Christian Fellowship recently announced a collaboration with Georgia-based Angel Food Ministries. Through the program, residents can order boxes of food at discounted prices. There are no eligibility requirements, applications or limits on order quantities. Food stamps are accepted.

Angel Food offers a medium sized box of food, worth about $60, for a discounted price of $30. The box contains top-quality, name-brand food staples including chicken or beef, milk, eggs, vegetables and other nutritional items. One box can feed a family of four for about one week. The menus, which consist of fresh and frozen items, vary each month and can be viewed online. Specialty boxes also are available for senior citizens.

The nonprofit, nondenominational Angel Foods Ministries provides hunger relief to communities across the country. The program was established in 1994 to provide food for struggling families in Georgia, but now serves more than 20 million Americans. In 2007, Angel Foods provided $95 million in direct food assistance to families.

Susan Sunde, member of Austin Christian Fellowship and coordinator of Angel Food Ministries for the Austin area, said the idea to bring the service to this region sprang from the heart.

"The big financial shakeup (of the economy) didn't come until after we applied for the license to do this," said Sunde. "Basically it was the heart to serve the people. We saw a real need in the community. We're very aware of the financial stress that many are under, and we saw it as a way to reach out and help others, as the Bible commands us to do."

According to Sunde, the service has been offered to the communities near Claremont for years. The purpose of the program is to help all families stretch their dollars and budgets further.

"They are going to save $30 initially," said Sunde. "That's going to allow them to put gasoline in their cars so they can get to work or buy jeans and shoes for their child. They don't have to sacrifice their needs for balanced meals."

BRIEF: County Connect buses take food donations

2008-11-09T08:30:00.000-08:00

All 131 County Connection buses in Central Contra Costa County and the San Ramon Valley will become rolling donation sites for the Contra Costa Food Bank beginning Monday through Nov. 22. Crates to take the food will be on board.

The food bank welcomes canned goods, peanut butter, beans, rice, pasta, iron-rich cereal, tomato products and 100 percent fruit juice. No glass containers are accepted because they can break easily.

Food donations also will be accepted at County Connection's main office in Concord at 2477 Arnold Industrial Way, Concord, and its transportation center at the Walnut Creek BART station, 220 Ygnacio Valley Road.

Requests for food are up this year because of the poor economy, said Renee Baptiste, spokeswoman for the food bank's Concord office.

To see more of the Contra Costa Times, or to subscribe to the newspaper, go to
http://www.contracostatimes.com/.

Evening Standard, London, business briefs column

2008-11-09T08:27:00.000-08:00

PAY RISE PUTS ASDA BOSS ON OVER GBP1M: The boss of Asda has seen his pay top GBP1 million. Andy Bond, chief executive of the UK arm of the giant Wal-Mart supermarkets empire, saw his pay package last year hiked up by 55 percent to GBP1.07 million. The pay rise came despite a GBP32 million reverse in 2007 profits to GBP560 million on the back of fines and legal costs relating to price-fixing investigations by the Office of Fair Trading into the sale of cigarettes and milk and other dairy products.

FINANCE CHIEF AT LAURA ASHLEY QUITS: Furnishings and womenswear group Laura Ashley's finance director David Cook is to leave in early December "to pursue other opportunities". He will not be replaced, and his job will be handled by chief financial officer Rebecca Navarednam, who is also company secretary. Cook has been with Laura Ashley for nine years. The company's profits fell 14 percent in the first half, and it is cautious about current trading.

PROPERTY HIT LEAVES LIBERTY IN THE RED: Covent Garden and shopping centres owner Liberty International today dived into the red after the value of its property fell 12.1 percent. The firm reported losses of GBP1.06 billion for the first nine months of 2008 against profits of GBP442 million a year earlier. It had to write down the value of its estate by GBP1.08 billion as the property-market crisis took its toll. Chairman Patrick Burgess said the "extreme turbulence in financial markets" has had "a marked impact on the UK commercial property sector".

PROFITS DISAPPOINT AT ARCELORMITTAL: Steel giant ArcelorMittal's third-quarter net profit disappointed analysts, coming in at $3.8 billion (GBP2.37 billion).

The company's chairman and chief executive Lakshmi Mittal said he would put expansion plans on hold for now, but added: "We remain optimistic about the industry's medium-term growth prospects." Sales rose 38 percent to $35.2 billion. Steel prices have come under pressure amid the current global financial crisis and ArcelorMittal is scaling back production by up to 15 percent.

NEW RBS CHIEF TO PICK UP GBP7.2M: Stephen Hester, the new chief executive brought in to sort out Royal Bank of Scotland, will be paid a basic salary of GBP1.2 million. He also gets just over GBP6 million of free shares to compensate him for a share scheme he left behind at British Land. Hester's basic salary is only just under that of his predecessor Sir Fred Goodwin. But Goodwin got GBP4.2 million last year after bonus and perks. Goodwin, who steps down as chief executive in two weeks but does not leave until January, gets no pay-off.

CARLSBERG TO SHUT TETLEY'S BREWERY: The Tetley's brewery in Leeds is to close after producing ale for almost 200 years. Its owner, Danish giant Carlsberg blamed the British Government for high duties on beer and increased regulation. It also said consumption was falling. The closure could cost 170 jobs. Carlsberg today admitted that it is struggling, and cut profit forecasts for the year by 10 percent. The company will now have just one brewery in the UK, in Northampton. Consumer group Camra said Tetley's would not be Tetley's brewed anywhere else.

SIGHTS LOWERED AT ALLIED IRISH BANKS: Allied Irish Banks today slashed its profits forecast, saying it now expects earnings per share to be about 120 euro cents against the 185-190 cents it forecast in the summer. It blamed higher funding costs, subscription to the Irish state guarantee scheme and rising bad-debt charges. The bank, which was among he first to be supported by the Irish government, said it wanted to raise its key capital ratios next year without issuing new shares. It admitted this may force it to cut its dividend.

To see more of the Evening Standard, or to subscribe to the newspaper, go to
http://www.thisislondon.co.uk.

Donation helps meet demand for food: Most of it will go to assorted-food packs

2008-11-09T08:25:00.000-08:00

The Community Food Bank of Eastern Oklahoma handed out its first batch of "Pantry Pacs" to local organizations Thursday after the Tulsa Community Foundation gave a hefty donation to feed the hungry.

The foundation recently gave $400,000 to help feed people in the Tulsa area in response to increasing requests at several social service organizations, said Phil Lakin, Tulsa Community Foundation executive director.

Most of the money, $275,000, went to The Community Food Bank of Eastern Oklahoma for packs filled with an assortment of food, which will be distributed to 18 agencies, said Cindy Cummins, food bank deputy director of business development.

The packs include nonperishable items such as peanut butter, baking mixes, canned tuna and canned vegetables. Each pack also will come with some perishable items such as a one-pound container of ground beef, Cummins said.

"It's not something

that we were expecting," she said. "If it weren't for this generous contribution, we would not be able to do this."

Cummins said most of the 18 local organizations have seen increases in requests -- up about 25 percent from last year -- because of the poor economy.

"We are so thrilled that we are able to make these additional food sources available," Cummins said.

First-time requests are spiking at local social service organizations as people seek aid, said Cindy Stevens, food bank director of community relations.

The rest of the $400,000 donation went to other organizations that provide specific food items that the food bank does not, such as baby formula, Lakin said.

For example, the nonprofit agency Emergency Infant Services would not benefit from the Pantry Pacs but is in need of infant formula and other baby-related items, he said.

Islamic Relief Fund in Malasia donates three tonnes food items for quake victims

2008-11-09T08:24:00.000-08:00

Islamic Relief Fund in Malaysia has donated three tonnes of food items for the earthquake victims of Balochistan. According to a statement issued by Pakistans High Commission in Kuala Lumpur, the High Commission received overwhelming response from Malaysian people and organizations who wished to donate in cash or kind for the quake victims.

The donation by Islamic Relief Fund comprise rice, wheat and condensed milk for earthquake victims.

The statement added that another organization Mercy Malaysia was sending its two-member Rapid Assessment Team to Pakistan, to assess the damages of earthquake and identify the requirements of affected people.

Malaysian people in their individual capacity are also donating warm clothing and other items.

Nothing Wrong With MP Evans’ Strategy: The Problems Lie With Markets

2008-11-08T05:00:00.000-08:00

So deeply demoralised have markets become that even the prospect of an OPEC-orchestrated rise in the price of oil is failing to help the alternatives, such as palm oil and its plantation owners. Malaysian crude palm oil futures have tumbled further on rumours of a 1.5million barrels a day cut in crude oil output. Optimism among palm traders was overwhelmed by slower palm exports as top buyers in China and India become serial defaulters. With palm prices down two-thirds from the very recent peak (June), that is hardly surprising.

Thus the AIM listed producer, MP Evans, faces comment of “excellent business model, just a shame about the market”. Latest progress report on its strategy of selling off its mature Malaysian plantations to re-invest in cheaper Indonesian new production and diversify into Australian beef cattle was excellent!

There was a rise in net income of 135 per cent to US$29.6 million in the interim period to end June. Earnings per share were up 27 per cent and there was net cash of US$24.9 million at the end of the period. Cash now stands at around $40 million net after successful land sales and an interim dividend of 2p has been paid. The latest forecasts from house broker Panmure, made last month, are for earnings per share to rise from last year’s US 18.85 cents to US 34.75 cents this year, and then 37.31 US cents in 2009. But, given the volatility of markets, those numbers will no doubt be reviewed. Palm rices are now down below the 20-year moving average.

Driving the interim performance were sharply higher revenues from a good palm crop, higher prices and profits on disposals. During this period gross profit more than doubled as a result of the rise in prices – the average price was up 70 per cent at US$1,166 a tonne. There was also a 19 per cent rise in fresh fruit bunches collected. Offsetting this was higher fuel and fertiliser costs and the sliding scale of Indonesian export taxes which ratchet in as the price climbs. Since then lower palm oil prices have toppled shares in the plantation companies, including MP Evans. Its share price is down from the 12-month high of 515.5p to 190pp, giving a market cap of around £100 million

MP Evans sold two major Malaysian estates, Perhentian Tinggi for US$23 million in March and Sungei Kruit for US$21 million in September. That leaves plantations worth around US$50 million still to be sold. MP Evans has raised a total of US$78 million so far from its divestment programme. In the new Indonesia projects MP Evans has secured 36,000 hectares, of which 5,800 hectares have been planted. This is expected to rise to 7,000 at the end of the year. MP Evans therefore has a land bank of many years under its belt still to plant, and can afford to be patient in acquiring the 15-20,000 hectares more that it wants to complete its plan.

News on the Australian front was not so good in the first half, as the trade was depressed by the absence of a wet season to bring good grazing for breeding cattle and the “growing out” stations there. But MP Evans invested US$6 million raising its stake in the business, North Australian Pastoral Company (NAPco), to 32.57 per cent. It now owns just under 5.5 million shares in NAPco, which it has acquired at an average cost of A$7.76 a share, compared to the net asset value of A$16.76 a share.

The pasture and arable areas have been improved to allow more cattle to be grazed there, and more crops grown either for fodder or for commercial sale. The cattle are grass-fed, light-weight cattle, for which prices rose sharply after some good rainfalls. Prices for heavier beef were also good, but those for cows and young “unfinished” cattle were down considerably as a result of the dry weather in the Northern Territory and Queensland. Lack of grazing meant cows and young cattle had to be sold off at a much younger age than would normally be the case, raising less money, and fodder had to be bought in. So, the cattle operations overall made a loss of US$308,000 which was a lot worse than 2007. The herd is now smaller than in normal circumstances, at between 150,000-160,000 compared to 198,000 at the end of 2007. “However, the core breeding herd is largely intact and, in the event that the season improves, the company will buy cattle to replenish the herd,” comments the board.
Summer weather post the interims was amongst the coldest on record in Queensland, but there has been some rain. This has both ensured a good wheat crops and improved cattle prices.

The remaining part of MP Evans’s empire is rubber, a business from which it is exiting. In the interim period, however, it made a profit of US$323,000 as stock was sold off at good prices. In current conditions the medium and long term have to be the focus – which companies will still be in business and making money the other side of the abyss! Long term, Panmure stresses, “MP Evans has a compelling strategy”. Demand for protein continues to rise in Asia – market target for the beef. Palm oil prospects long term are for rising demand in emerging markets for food and alternative energy, while the area for cultivation is limited.

Strong US Dollar Still Bears Heavily On Commodity Trading

2008-11-08T04:58:00.000-08:00

Food commodity prices collapsed as the dollar recovered, the Reuters/Jefferies CRB Index of 19 raw materials plunging 24 per cent in October,the steepest decline since at least 1956. The US Dollar Index, which measures the currency's performance against six counterparts, rose by 7.5 per cent, the best performance since October 1992 and making commodities more expensive for those with other currencies. "October is at last ending -- the worst month in commodity history," said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt. "Investors are expecting lower growth for the longer term and that is putting prices under pressure".

Worldwide rice panics in which shortages caused riots in several countries have swung right round over the summer into serious concern about the impact of a glut. Traders are saying that they are uncertain how far prices will fall. Since hitting a US$1,080 a tonne peak in April, prices have come down by over 40 per cent. Even in the US, where hurricanes flattened rice paddies in Arkansas and Texas,prices are plummeting. Rice markets are expected to fall further yet, with unwinding of speculative positions adding to pressure from the bumper harvests reported in many Asian countries, while orders are slowing. African buyers are said to be holding back on the hope of lower prices to come. Forecasts of the levels to which rice is likely to slump by December have been cut from around US$500-600 a tonne to nearer US$400.

Noting other factors, Harry Buvens at Antwerp international rice brokers Schepens, said that in his experience, "US$400 may even be optimistic." He said that Egypt was sitting on stocks that could soon be exported. Additionally, Burma had swung in months from being a distressed cyclone-hit importer to an exporter again. Not helping is the crisis situation in Pakistan, where the government is under pressure to secure export contracts at government-to-government level to the Gulf and Middle Eastern countries to earn foreign exchange badly needed by the country. The country is expected to have a bumper paddy crop this season and the Ministry of Food and Agriculture has assigned the Pakistan Agricultural Storage and Supplies Corporation to purchase paddy from growers.

Malaysian palm futures closed down nearly 3 per cent on Friday after crude oil fell on weak US third-quarter economic data renewing recession fears. This is currently the key factor, with lower oil prices also reducing consumer pressure for alternative fuels. News of stronger October palm oil exports estimated by two cargo surveyors failed to inspire the market, traders said. The benchmark January contract on the Bursa Malaysia Derivatives Exchange dropped 45 ringgit, or 2.88 per cent, to 1,515 ringgit (US$426) per ton. Earlier in the week the price rallied on a government announcement that palm oil output would fall next year. Indonesia, the world’s biggest palm oil producer, is also struggling with large stocks and trading was slow on Friday. In Jakarta, the state marketing centre, which sells palm oil from state plantations firms, said it failed to sell palm oil at an auction on Friday.

UK fertiliser prices are still rising despite slumping producer markets. Between October and November, most blended fertilisers increased by an average of £5/tonne. This is well over double the price seen in November 2007 when the average price stood at £187/tonne. Ammonium nitrate has also seen an average increase of 1.3 percent between October and November, increasing from an average of £376/tonne to £381/tonne, double the average price in October 2007 of £180/tonne.

Urea Prills saw a large fall in the average price between October and November, falling 16.0 per cent (£72/tonne) to average at £378/tonne for bags and prices were seen as low as £300/tonne. Market commentators state that the drop in the price of urea was due to the global downturn, demand falling with the end of the usage period and India tendering 1.5 million tonnes. However, they also expect that come the end of November when the India deal is concluded urea prices could increase again. Despite the fall in the average price of Urea Prills the average price is still 63.6 per cent above last October when the average price was £231/tonne.

Meat and bone meal jumped by over £30 a tonne to £135, the first price increase for seven years. Traders say this is due to a combination of the falling availability of the raw material plus rising prices combined with increasing demand. They expect higher prices to continue for some time as consumers trade down to cheaper meat cuts, and as pet food manufacturers switch to bone meal and away from expensive poultry meat.

Cattle prices rose all week in the US, posting the biggest weekly gain since 2004, on speculation that the supply of fattened animals to US slaughterhouses is shrinking. Meatpackers processed 638,000 head of cattle down 1.4 per cent from the previous week and down 3.5 per cent from the same week a year earlier, the Department of Agriculture (USDA). The country's feedlot herd on October 1 was the smallest for that date since 2003, the USDA said earlier this month. "Our numbers of fed cattle coming off the feedlots are going to be the tightest for the whole entire year here in the next 30 days," said Vetterkind Cattle Brokerage in Chicago. "It's just the lack of placements from the previous five or six months, because of higher corn prices. "Cattle futures for December delivery advanced US 1.25 cents, or 1.4 per cent, to US 92.7 cents a pound on the Chicago Mercantile Exchange. That gain for the week was 5.9 per cent, the largest jump since November 2004. Still, futures were down 7.6 per cent on the month, the biggest monthly loss since March 2006. Hog futures also fell to an 11-month low.

Sugar futures rose, jumping 12 per cent on the week, as lower output in Brazil,the biggest producer, contributes to a global deficit. But it could not recoup all the earlier falls - November white sugar posted its biggest monthly drop since March in London as investors cut their holdings in commodities on concern that a global economic slump will curb demand for raw materials. The London-based International Sugar Organization says sugar demand will exceed supply by 3.9 million metric tons this marketing year.

Mills in Brazil's Center South, which make up 90 per cent of the country's output, produced 1.63 million tons in the first half of October, down from 2.15 million a year earlier, according to the industry association, Unic. Raw-sugar futures for March delivery rose US 0.17 cents, or 1.4 per cent, to US 12.02 cents a pound on ICE Futures U.S. in New York on Friday. Most-active futures still are down 12 per cent this month as investors sell commodities to raise cash amid a credit crunch and on concern a recession will reduce demand for raw materials. Sugar has gained 11 percent this year, the best performance of the 19 commodities in the Reuters/Jefferies CRB Commodity Price Index.

China has yet another food scandal – this time melamine-tainted eggs. As a result Chinese manufacturers of animal feed will face tougher inspections. Food safety officials in Hong Kong reported last week that they had found melamine in eggs produced in the northeastern port city of Dalian and in the central Hubei province. The melamine level of 3.1 milligrams per kg was well above the permitted level of 2.5 milligrams per kg. Further checks revealed that melamine-tainted eggs were also being sold in the eastern Zhejiang province. It is believed that the melamine comes from animal feed.

Last year, melamine was found in wheat gluten and rice protein concentrate exported from China and used in the manufacture of pet food in the U.S. The tainted animal feed was responsible for deaths of hundreds cats and dogs in the U.S. Producers violating the rule will face severe punishment. They could have their business licenses stripped or face criminal charges. Since early September, when melamine was found in baby formula, the agriculture ministry has sent more than 369,000 inspectors to some 250,000 animal feed producers, and 238 companies were closed down over melamine-related violations. Some 3,682 tons of substandard feed were confiscated and destroyed.

The cotton price, heavily exposed to China, posted the steepest monthly decline in at least 22 years, on concern that China, the world's biggest user and the largest US customer, will curb purchases as global demand for textile products slumps. Overseas buyers, mostly Chinese, canceled US orders for 41,300 bales of cotton in the week ended October 23, or almost three-fourths of total sales, according to Peter Egli, of Plexus Cotton. Cotton futures for December delivery fell US 0.8 cents, or 1.8 per cent, to US 44.29 cents a pound on ICE Future in New York. The price earlier reached US 43.64 cents, the lowest for a most-active contract since February 2005, down 23 per cent in October, the biggest monthly drop since at least April 1986.

Fine wool prices in Australia continued to soften. While the medium to broader end performed a little better, the Eastern Index closed down 4.3 per cent. Reports of cancelled orders added to concern about the enormous drop in demand due to the global financial crisis. Even reputable customers are paying slower and this is adding to the tightening of funds available to purchase greasy wool. The New Zealand catalogue offered in Melbourne attracted limited competition but the majority of the catalogue was either passed in or withdrawn from sale.

Tea’s price fall shows that few markets are immune to the financial crisis, with Colombo’s auctions seeing prices halve at end-October actions. Brokers said that a major factor was weakening of the currencies of key importing countries such as Russia and the Middle East. Jayantha Keragala, chairman of the Sri Lankan Tea Exporters’ Association said that fears of global recession and thus western demand were other factors, and so was poor quality tea. Prices of some varieties fell by Rs30 to Rs40 a kilo.

Gourmet Corner:

Olive oil output continues to soar as more and more countries cultivate olive groves. Demand, however, is still expected to outstrip supply in the 2008/9 season, according to the International Olive Council. It forecasts output at 2.7 million tonnes,up from this year’s crop of 2.6 million, and consumption at 2.9 million, up from this year’s 2.8 million. Stocks are put at 645,000 tonnes at the end of September. Prices for EU oil quoted for bulk UK are around £2,156 for extra virgin, down from the year’s peak of £2,398 but off the low of £2,156 a tonne, and around £10 a tonne cheaper for ordinary.

Vanilla, one of the most expensive spices to produce, is facing shortfalls as Madagascar’s crop is forecast to be lower than expected. It is unlikely to reach 1,000 tonnes as producers have been discouraged by the market’s unwillingness to allow price increases to balance rising costs. Demand has, however, been rising, with US imports at 1,500 tonnes so far this year. Madagascan prices are up from US$25 a kilo at the low to US$32 for extract grade delivered US.

Clove prices are in a state of disarray due to currency swings, the financial crisis and lower production. Prices are expected to rise. The short crop in Indonesia has pushed up the prices to US$6,500-7,000 a tonne. The price of Comoros and Zanzibar cloves is US$4,200 a tonne and that of Madagascar is US$3,700 a tonne. “In fact, we have not seen such a situation where prices of Indonesia and other origins differ by a 50 per cent margin. A big Chinese company based in Singapore is buying 2,000 tonnes of cloves very quietly for Indonesian cigar companies and this is pushing the markets up,” according to a report from Dhirish International of India. Indonesia, which uses a substantial quantity of its cloves in the tobacco industry, is unlikely to have anything for exports.

Weather Could Limit Indian Cane Crop And Affect Sugar Prices

2008-11-08T04:57:00.000-08:00

Weather Trends International is the world leader in developing and applying highly accurate year-ahead business weather forecasts for 129 countries across the globe. The long range forecasts have a proven track record of reliability with the worlds most successful and admired companies like Wal-Mart, ASDA, Target, Johnson & Johnson, Anheuser-Busch, Sherwin Williams, Agway, Bloomberg, Citigroup and 100 others. Weather Trends International offers a complete suite of products and services including short range and year-ahead global forecasts and analytical assessments for grains, sugar, energy and other weather driven commodity markets across the globe.

With world sugar (ICE) futures trading below 11 cents, the market is vulnerable to sharp moves in either direction. While the current trend is for the technical indicators to place more downside pressure on futures, we continue to watch the dollar and other fundamentals for signs of a reversal as March 09 is the next contract, providing a significant time frame for speculation to start to creep into the market.

We have seen an inverse relationship between the dollar and sugar futures this past week as the dollar has strengthened, sugar has steadily fallen, getting as low as US10.55 cents. There is a relationship with crude (and the broader weakening across the commodity spectrum), but different factors will start to come into play at we approach the end of 2008. Demand destruction in the oil space is well documented, and it is conceivable that oil will continue to slide further. At the current trading levels, however, world sugar prices do not have much more downside potential.

There are several fundamental reasons to support this. First, even with lower crude prices allowing Brazilian production to swing back in favor of increased sugar (over ethanol), global demand for the sweetener remains strong, and any additional sugar available to the physical market will not have to search for a home, so the global S-D will not be significantly affected by higher stocks. Also, a slight increase from the Centre-South will not offset the reduction to the Indian crop for both the current and next crop year, which is a supply factor that we have been highlighting for months.

In addition, despite the fact that US$ is the strongest we have seen in 2 years against the global benchmark currencies (US$ has risen 8% in the last month), this should be viewed as a short term opportunity, and possibly a favorable entry point for March/May 09. As mentioned above, the nearby contract is Mar 09, and current futures levels are hovering around the cost to produce for the major origins. When production margins are squeezed (and we are approaching this point), high volume producers can and will withhold physicals from the market until the prices move in their favor; if this situation plays out, this will not be the first time the market has seen such a move in recent years.

With our view of fair value for Mar 09 sugar around the US12.0 to 12.5 cent range, the time may be good to begin strengthening long positions, as the outlook between now and early 2009 is constructive for the market. Further, we feel that the factors on the supply side of the equation will start to figure into March/May09 more prominently. We have discussed in recent weeks that Brazil will still have a healthy crop and the outlook through December is favorable for crushing, but dryness will shave some off of the final yields.

Further, we have been talking all summer about weather related limitations to the Indian cane crop, and these reduced numbers for both the current and more importantly next year’s crop will start to be figured into analysts estimates.

This recent pullback below US11 cents may be the only time we see prices at these levels for the near future, even if the broader commodity market continues to slide. The next WTI monthly commodity review will be held the first week in November, and will address the outlook for carry over stocks and crop potential in more detail.

Great Southern Plantations Struggles With Markets And The Tax Man

2008-11-08T04:37:00.002-08:00

Buying back the farm is not easy in a financial firestorm, as Australia’s biggest forestry management company is discovering. Two months ago Great Southern Plantations (GSP) unveiled a major restructuring plan. The essence of the proposal, which requires approval from investors in eight separate tax-effective schemes, was to convert GSP into a much simpler and more transparent company which would not be subject to the whims, and damaging legal rulings, of tax authorities. Great idea. Lousy timing.

Since the grand plan was unveiled on August 26 the share price of GSP has sagged alarmingly, triggering one re-pricing, and perhaps setting the scene for another downward re-pricing, or a return to the drawing board to try and devise a fresh plan. On the morning of the original announcement, GSP opened trading at A$86 cents, and rose to A95 cents. The initial upward move was largely because management said the complex re-structure would see new GSP shares issued to investors in the eight schemes at a price of $1.10.

Three weeks ago management was forced to unveil Plan B, which incorporated a “volume weighted average price” over five trading days, plus a floor price of A50 cents a share, and a ceiling of A$1. Oops. Over the past 10 trading days GSP has been stuck below the A50 cent floor, and has dipped as low as A35 cents – a slide which means it might be time to roll out Plan C.

For anyone unfamiliar with GSP it is largely a creation of Australian tax laws which are supposed to reward investors in agriculture. This remains the case, but the fine detail has changed so often, and the Australian Tax Office (ATO) has altered its rulings so often that only the holder of a masters degree in tax law could tell you the current position. GSP’s appeal was that it took the worry out of the situation by creating purpose-designed “managed investment schemes” which pooled investor money and made sure it was applied to the letter of the law, planting hardwood trees (and other crops), caring for them, and harvesting them. In effect, GSP was more of a fund manager than a farmer.

Over time the company did well, but erratically. Unexpected changes to the law, plus movements in competing investment markets, or movements in interest rates, could freeze one year’s forecast inflow of funds, or lead to flood which had to quickly find a legal home. In “the good old days” between early 2003 and early 2005 GSP shares rocketed up from around A65 cents to A$4.88. But, since then as the resources boom siphoned off spare investor dollars and interest rates rose (and fell), the stock plunged. Down to A$1.98 by early 2008, and then down much further. If all this isn’t bad enough the real disaster has been the latest change of mind by the ATO which ruled that investors could not claim as tax deductible investments in “non-forestry” managed schemes.

This was this straw which broke the camel’s back triggering a major re-think inside GSP and producing a decision to “simplify” the business by creating “a more sustainable, transparent and valuable business”. Forestry would remain the core of the company, but major changes would be made to the way it operated with the key move being to offer conventional GSP shares to investors in the managed schemes. The argument was that this would enable them to swap a relatively illiquid investment for a liquid investment.

GSP chief executive, Cameron Rhodes, said at the time that the transaction would bring together the company’s key asset, high value agricultural land, with the tree and cattle assets of investors in selected forestry and cattle managed investment schemes. “The company will become an integrated forestry business and have additional revenue and cash flows from both forestry and cattle to complement our existing tax effective managed investment scheme business,” he said. The new look GSP would own 180,000 hectares of forestry land and a herd of 217,000 head of cattle on stations (ranches for Americans) across northern Australia.

In normal times the deal should have appealed to everyone. The original proposed “investment-for-shares” swap price of A$1.10 sat comfortably alongside a reported net tangible asset backing per GSP share of A$2.13. Investors in the scheme would end up being issued with 398.3 million new GSP shares and speak for an estimated 55 per cent of the enlarged capital base. But, all the rational logic in the world could not escape the fact financial markets worldwide have crapped themselves, and that the largest single shareholder in GSP is the troubled American hedge fund, Ospraie Group, which says it isn’t currently a seller (oh yeah!), but admits it is “selling down investments over a three year period”. On top of this there is the issue of an estimated
A$770 million in debt which, according to a Macquarie Bank report dated August 27, has given GSP a debt-to-equity ratio of 88.2 per cent.

Macquarie, in that report issued the day after the original proposal was unveiled, loved the deal and headed its comments with the comment “buying back the farm”. The bank said it was “a step in the right direction” and would place GSP on a “more stable long term footing”. The forestry business alone would have its 180,000 hectares of forestry land worth A$1.1 billion and be entitled to the harvest proceeds of a vast amount of woodchips over the next five years, worth at today’s prices around A$800 million. In terms of future financial performance, Macquarie was tipping that GSP would post a profit of A$11.9 million in 2009, rising to A$24.6 million in 2010.

The problem now is that GSP appears to be caught in the grip of falling asset values, uncertainty over how to convince investors in eight tax-effective management schemes to swap their assets for shares in GSP, a fistful of debt, and a potential big seller of stock in Ospraie. That’s why GSP is trading at A35 cents, valuing the business at a lowly A$115 million. It was all meant to be so much easier. Curse the tax man (amen). Curse the crash (amen).

Commodity Prices Continue To Tumble As Demand Slows Down

2008-11-08T04:37:00.001-08:00

It was a week when all one could do was watch awe-struck, as share prices fell internationally into a apparently bottomless pit on fears that economic slowdown would turn into a global slump, taking other markets with them. The Baltic Dry Index, a benchmark for commodity-shipping rates, fell to the lowest in more than six years. In fact it has fallen by nearly 70 per cent in the three months to September 30, the largest quarterly drop since the exchange began compiling the data. It is down 62 per cent so far this month at 1,221 points, after rising to a record high of 11,793 points on May 20.

"Demand for commodities is definitely slowing down,'' Yu Mengguo, a senior analyst at Jinpeng International Futures was reported as saying from Beijing. "That's being reflected in tumbling prices, for which we can't see a bottom right now." The Reuters/Jefferies CRB Index, which tracks commodity futures prices for 19 raw materials, plunged to the lowest in four years in the widespread de-leveraging by funds of all sorts. Prices for all agriculture commodities fell in the carnage. Trade continues to be frozen because of lack of finance and anyway many buyers are holding back in the expectation of still lower prices.

Manufacturers are being caught as consumers respond to the current fears of recession, while raw material price rises are still coming down the pipeline. UK food consumption is falling as prices go up in the shops -the latest price rise currently being sought is by bread manufacturers, who are still trying to pass on past rises in grain costs. Sales of food have dropped for the first time in over two decades as consumers start cutting back on purchases, says the Office of National Statistics (ONS). The figures show that in the last three months, the volume of food sales dropped 0.1 per cent – the biggest fall since records began.The figure is in stark contrast to recent trends which have seen the UK experience an average growth of 2.7 per cent a year in food consumption for the last 20 years, indicating a major shift in consumer attitude

Milk prices saw a dramatic drop at the United Dairy Farmers October auction which will set alarm bells ringing throughout the industry. The average achieved on Thursday for the 48 million litres sold was 18.03ppl – a 7ppl drop on last month’s average and 14ppl below the same auction last year. Quota broker Ian Potter was reported by the Farmers’ Guardian as saying he was shocked by the fall. Having fully expected some reduction, but not of this magnitude, he viewed the result as ‘grim’. He added: "It’s a good job it was not a month ago or you can bet we would not have seen the increases we have. From where we are at this point, prospects for 2009 are starting to look shaky. And remember we are somewhat in a bubble in the UK as the only country in Europe where milk price has defied gravity until now."

Scottish agriculture land prices, however, are soaring, up 42 per cent over the last year according to the annual Bank of Scotland Agriculture Land Price Index. They have risen by 134 per cent in five years and now average £4,262 per acre. The average value of a farm in Scotland now exceeds £1 million, at £1,154,615. This is actually 40 per cent higher than the average for Great Britain although farmland north of the border is the second least expensive in Great Britain and 27 per cent below the average across Great Britain of £5,871. Arable land is the most expensive land type in Scotland at £5,588 per acre but it is mixed farming land that has seen the biggest rise since 2003 with the average price increasing by 156 per cent.

All fertiliser prices were weakening dramatically, with the exception of DAP Tampa which was steady. Sulphur fob Vancouver was down to a third of the previous week’s levels at US$60-150 fob a tonne, ammonia prices nearly halved, at US$4950500 fob Yuzhny and US$575 Tampa, and granular urea was down around $60 at US$298-325 USG.

In international markets, cocoa prices fell sharply in New York but held firm in London amid a farmers' strike in key exporter Ivory Coast. "Apart from macroeconomic forces, which continue to heavily sway cocoa values, news from Ivory Coast continued to suggest a slowing of arrivals to ports as farmers continue to strike," said Sucden analyst Stephanie Garner. By Friday on LIFFE in London the price of cocoa for December stood at £1,283 per tonne, up from £1,275 a week earlier – at last December’s peak they were around £1,500. In New York, the December cocoa contract slumped to US$1,867 per tonne from US$2,142.

Coffee prices dropped around six per cent on Friday as traders feared cuts in spending on such non-essential foods. Over the week on LIFFE, Robusta for January delivery fell to US$1,641 per tonne from US$1,779. On the New York Board of Trade (NYBOT), Arabica for December delivery dipped to 107.80 US cents per pound from 114.05 cents.

Sugar prices fell in the wake of lower oil prices, in response to its use in Brazilian ethanol production. By Friday on LIFFE, the price per tonne of white sugar for December delivery slipped to £295.50 from £323.20 pounds the previous week. On NYBOT, the price of unrefined sugar for March delivery slid to 10.57 US cents per pound from 11.32 cents.

Malaysian crude palm oil futures slumped by its daily 10 per cent trading limit on Friday as crude oil posted heavy losses and Asian sentiment became increasingly bearish amid fears. Chinese and Indian traders are reneging on contracts made at higher prices and there is a build-up in stocks after lower exports, traders said. The benchmark January 2009 contract on the Bursa Malaysia Derivatives Exchange fell 155 ringgit to 1,395 ringgit ($389.9) per ton, a three-year low.

Cotton markets in Asia remained under pressure amidst the turmoil in global markets. In Pakistan the price fell by Rs175 per maund during the week and analysts said the financial chaos may continue to take its toll in the coming sessions. The cotton market seemed, traders said, to be slipping from the hands of growers as markets generally plummeted, but supply and demand factors would determine the price outlook on the local market, they said. However, most traders have no storage capacity and are dumping newly-picked phutti into ginneries at low rates. The New York cotton futures on Friday were quoted lower by 1.34 and 0.19 US cents at 49.08 and 53.32 US cents per lb for both the ruling December and the forward March contracts respectively.

Physical rubber prices finished unchanged on Friday, but the Malaysian Rubber Board's benchmark SMR20 was 164.85 cents per kilo down from 169.45 cents per kilo a week earlier. In futures, the October contract in Tokyo which closed at ¥180.5 on Monday finished at ¥180.6 a kg on Friday at TOCOM. Meanwhile the Bangkok spot rate improved by Rs 10.23 to Rs 93.43 a kg during the week.

Wood markets are looking resilient, but warnings from the international industry association, Global Wood, this is just because trade is moribund. While China and India were buying at reasonable levels, log trade elsewhere was very slow and demand was low. Some business in non-premium species was being conducted with Vietnam. Prices for these species were likely to have been keenly negotiated and qualities would have been lower than usual. Japan has also been in the market. But tropical wood prices have continued to rise according to data until mid-October.

Across Europe the crisis in financial markets has yet to hit wood industry demand severely, although the Spanish joinery industry is suffering badly from lack of export markets. Among European majors the third quarter proved challenging for both Stora Enso and Metsäliitto Group, as weak demand continued to hit profits. US companies have suffered from the collapse in US housing markets. Wolseley announced that it was taking drastic action in its US building materials supply business to stem big losses. Chinese wood demand had been soaring, with door production for the domestic markets rising at the rate of 30 per cent a year and worth US$0.7 billion in 2007. The furniture market, according to Global Wood, is also growing rapid with imports of US$1.07 billion last year, which were only a mere five per cent of total domestic Chinese sales.

The Australian wool market finished 8.5 per cent lower, on average, at sales in Sydney, Melbourne and Fremantle. Soft demand in the current financial crisis and weak competition continued with falls across all micron ranges and wool types. It was not helped by a larger than expected offering a weak Australian dollar. Buyers for China were dominant with support from buyers for India. In South African sales the Cape Wools Indicator was down by 4.2 per cent since the last week against a 19.2 per cent depreciation of the Rand against the US Dollar and a 12.6 per cent depreciation against the Euro.

Water disputes are rising. Talks between Pakistan and India on the reduction of Chenab water flow remained inconclusive on Friday. After the two-day meeting, Indus Water Commissioner Jamaat Ali Shah told journalists that Pakistan had presented its point of view on water reduction at Head Marala and loss of 0.2 million acre feet of water but differences remained. Both sides exchanged information. India will collect more data on the reduction of water flow due to filling of Baglihar dam.

ETFs: A surprise top performer among ETFS last week was iShares S&P Timber & Forestry, according to UK Broker Killik’s latest weekly (starting 13th October) ETF Bulletin. It soared by 56.3 per cent, but on the year it has lost 0.4 per cent. Fifth worst performer over the last month was PowerShares Global Agriculture NASDAQ OMX, which fell by 35.3 percent.

Gourmet Corner:
Pistachio nut prices have risen because of poor harvest in Iran, jumping by US$500 a tonne in recent days, with reports of prices up around US$8,800-$10,000 a tonne, depending on quality. Buyers have been switching to US supplies as the price is cheaper, although this market has also benefited from the shortage, quotes being around US$3.45 a pound for October delivery against a low this year of US$2.25.

Weak Kneed Defra Almost Stymies UK Harvest

2008-11-08T04:36:00.000-08:00

The good news is that the latest figures from the National Farmers Union confirm that this year’s harvest in the UK will prove to be big despite farmers enduring some of the most difficult conditions for decades. The bad news is that it was very nearly not so, and the blame would have to go to Defra rather than the weather. Only at the last possible moment did Secretary of State Hilary Wedgwood Benn wake up and give a further suspension of GAEC3 rules governing the work while land is wet. This is yet another of the rules handed down by the desk jockeys of Brussels who have no idea of the problems faced annually by farmers. Effectively it governs the amount of work that can be carried out when the land is wet.

What they do not seem to appreciate is that no farmer wants to bring home crops while the soil is wet. It clogs up the ground, means more money has to be spent on drying, and makes it that much more difficult to produce a seedbed for the next crop. But needs must when the devil drives and the worst thing, at a time of food security, is to threaten them with fines at a time of appalling weather conditions.

As Guy Gagen, chief arable adviser to the NFU pointed out, "Farmers and growers have a natural instinct to look after the soils that support their livelihoods and the NFU encourages its members to record the effects of harvesting in difficult conditions, and what steps were taken later to rectify affected fields. Our members do not want to leave remaining crops out any longer than is absolutely necessary at this time of year when days are shortening, temperatures are falling and soils are becoming wetter. They will be taking on considerable extra costs through having to dry wet crops."

Defra simply lived up to its reputation as one of the most inefficient government departments – second only to the MOD.. The UK is hardly the biggest of countries and Defra should have been on top of the problem at an early stage with suggestions of its own, not wait until asked by the NFU to hand down a derogation of the rules. Still that is what you get with a government that has basically ignored the farminig industry for a number of years and put in charge a Secretary of State who is a townie and had to buy his first pair of boots when he got the job.

The NFU had been warning Defra since August of the problem, but little was done by way of suspending the rules until the end of September. Heavy rainfall hit farmers across England at that time, and they had been indicating there was a high risk or certainty that they could breach GAEC3 rules on harvesting cereal, protein and oilseed crops in waterlogged conditions when the rain subsided and remaining crops become dry enough to harvest.

Anyway, back to the good news. Grain producers in the UK are among the most productive in Europe, with output increasing faster than changes in plantings once again. According to the NFU estimates for 2008, the UK wheat yield is expected to be up by 17.1 per cent with production at 17.558 million tonnes, up 32.6 per cent on last year. It has to be admitted, however, that yield results for England and Wales in 2007 were about 10 per cent lower than expected after an extended drought in the spring and severe summer flooding.

The improvement this year is due to both increased yields and greater plantings, with yield estimates showing an increase in all regions in England and Wales. Defra area estimates show farmers responded to demand for food by increasing wheat plantings in the UK by 13 per cent on last year to 2.073 million hectares. Why Defra pussy foots around the plain fact that farmers expected prices would be higher this year, but could not anticipate increased prices for fertiliser and fuel, can only be answered by those who claim to understand the thinking of bureaucrats.

The yield increase was largely due to excellent planting conditions last autumn and exceptional growing conditions during the season. UK spring barley production is estimated to be up by 27 per cent to 3.481 million tonnes, partly as a result of a 7.4 per cent increase in yields on 2007 but mainly due to an 18.3 per cent increase in planting. Average winter barley yield for the UK was up by an estimated 10.5 per cent. Total UK production was up by 21.5 per cent to 2.841 million tonnes.

Estimated UK total oilseed rape production in 2008 is 11.1 per cent down from last year at 1.875 million tonnes. Estimated yields were similar at 3.2 tonnes/hectare but a difficult crop establishment period in the autumn led to a lower harvested area than 2007. According to Ian Backhouse, the chairman of the NFU, “milling quality appears to be better than last year and, while results are mixed, on average quality is very good, showing that crops harvested before the worst of the rain will have broadly met bread flour milling specification.”

The next question facing the UK farming industry is how much acreage to plant for next year. A lot of this planting has already been done, but the final decision will rest on farmers’ views of the trends in price of fertilisers and fuel. At the moment both seem to be falling, but don’t tell the EC or they will bring in some rules to interfere with this last bit of good news. And Defra certainly won’t put up a fight.

Mr Gloom Forecasts Misery For The Palm Oil Market

2008-11-08T04:34:00.002-08:00

Dorab Mistry is sounding very gloomy. That is really bad news for palm oil prices. To put non-specialists into the picture, he is the established guru of the palm oil markets, sitting in his base at Indian group Godrej International’s trading office in London. While confident that the use of palm oil will continue to widen, he is in no doubt that in the short term supply is going to overwhelm demand.

Other palm oil specialists see the same picture. James Fry, head of London-based LMC International, told a conference in Kuala Lumpur this week that a slowdown in Malaysian crude palm oil output was unlikely to be fast enough to lift prices, which could fall by another 30 per cent, While the Malaysian government was supposed to be debating this contentious issue, a number of ministers found their diaries were full!!

Mistry had a good go at speculators still trying to push prices back up. “Each time prices fall, we have noticed the proverbial Five O’Clock Phantom come in and ramp them up,” he told last week’s gathering at the China International Conference of Seed Crushers and Malaysia-China Palm Oil Trade Fair in Nanjing. “This may be good for the short term benefit of speculators and day-traders but it will simply prolong the agony of high stocks and poor demand.” Even their help has not stopped the palm oil price from plummeting. It has come down by 60 per cent from its June peak and is now trading at around US$436/tonne. And of course, the market has taken plantation-owners’ profit forecasts and share prices down with them, including the little London-quoted group that includes New Britain, REA, Anglo-Eastern and MP Evans.

Mistry’s gloom helped the slide on its way again this week. Not that he was completely pessimistic. He saw great competitive strength against other vegetable oils in palm’s “sheer size”. It has very high productivity per hectare and is thus a low-cost crop. Given the current rise in the price of fertiliser, he said, the current marginal cost for the average medium sized plantation of producing palm oil is around 1,000 ringits, and the all-in-cost around 1,200 (US$350) a tonne. That compares with the cost of producing US soybeans of around US$294 – but, turning the beans into oil produces the figure of US$735 a tonne.

This advantage, according to Mistry, should drive palm oil into new uses for industrial application. Currently there are few fetters on palm oil use in energy due to its lack of certified “green” credentials. Once that has been addressed, he said, “a vast new market will open up.” Productivity is also being boosted by the introduction of new palm varieties, bringing growth “in excess of that seen in other annual or tree crops”. As a result, he told his audience, in five years’ time palm had the prospect of a production additional tonnage of 20-22 million. It was highly likely that more would thus be available for energy production without reducing food supplies as, inevitably, production of other versatile food/energy crops would soar, too.

Mistry went on to say that food demand in the crop year October 2008 to September 2009 was forecast to rise by 4.0 million tonnes and bio fuel demand to rise by 2.5 million, compared with the potential available palm oil increase, ,. However, he had his doubts that demand would be this strong. A pessimist about the impact of the melt-down in the world’s financial system, he pointed to the subsequent difficulties of forecasting. The problem was assessing not supply growth, but demand growth. Palm prices had come down, but the affect of that in bio fuel demand was limited by the fall in crude oil prices. A major problem was the palm oil market’s “death wish.”As he explained: “A biodiesel producer will not re-commission his plant unless he can tie up at least one year’s supply at a low, workable price and also lock in his selling price. On the other hand, traders will not be able or willing to sell one year forward at current low price.

“So, our biodiesel producer has to go to the plantation companies and deal with their Byzantine procedures and approach.” Slamming the plantation groups he accused them of “hardly ever” showing any inclination to create demand or win new markets. “Thus, in many cases we have seen a stalemate and no demand is captured,” he criticised.

Governments also came in for a pounding from Mistry. “The concerned governments almost killed the goose that laid the golden egg by imposing high export taxes. Now, I am afraid, the pendulum has swung the other way and importing countries will soon have the upper hand.” Malaysian and Indonesia producers had lost the help of US export subsidies (they can no longer round-trip via US ports and collect them on re-exporting), and Germany had reduced the mandatory level of biodiesel to be blended in car fuel.

Other bearish short-term factors for palm producers were booming rape production in Canada and Argentina and improvement in competitive position of Brazilian fuel-stock producers with the decline in the real. At the same time, Asia had enjoyed good palm production weather, so he expected a continued rise in stocks. In India, the one place where palm importers have enjoyed a good market, the government was expected to push up taxes to protect local oil producers. In the short-term one of the few bullish points for palm, wearing its alternative energy hat that is on the horizon is a hope of higher crude oil prices out of OPEC.

A Wake-Up Call With Chinese Orange-Juice

2008-11-08T04:34:00.001-08:00

Excellent results from Asian Citrus actually stirred London’s AIM market to raise the share price – an encouraging sign for both of them. It has bounced off the 75p low for the year and has been trading 100 percent higher at around 150p. Still, there quite a way to go to get back to the year’s 342p peak!

Sales last year boomed, despite the exceptionally cold winter, with consumers attracted by the fact that Asian Citrus oranges are organic. Achieving official organic accreditation gives Asian Citrus marketing and brand-building strong backing. In a country that has suffered so many food and pollution scares, organic produce sells at a premium – of between 8-12 per cent in the case of Asian Citrus.

It would be helpful in getting a better grasp of what is currently the world’s most important economy if the increasing number of oranges that Asian Citrus is selling could be read as wealth index. Unfortunately, sales are up because Asian Citrus is taking market share as much as expanding into new territory. And it, too, is warning that the country’s economic growth is not quite as hectic as it was. Though in China’s case this means a slide from double to single figures!

All the same, Asian Citrus beat forecasts for the year to end June resoundingly. Revenue was up 11.3 per cent on 2007, at £39 million translated into sterling. Underlying earnings rose by 2.6 per cent at £30.2 million, net profit gained 25.3 per cent at £29.1 million, earnings per share were 39.3p a rise of 10.2 per cent and the dividend was up 17.6 per cent at 5.8p. The market had been expecting earnings of 33.5p and a 5.6p dividend. Forecast for next year is currently for a large jump to earnings of 57.7p with a dividend of 9.6p.

The opportunity in China spotted by the Asian Citrus founding Tong family was that the demand for American varieties of oranges outstrips supply by a considerable margin, but import costs are high. Low Chinese wages give local producers further cost advantages.Revenue improvement last year was mainly from increased productivity, with only 2.1 per cent of the gain coming from price rises. The increase in supermarket sales will continue as a factor in raising profits, as will the organic certification. More supermarket contracts also bring the benefit of taking Asian Citrus products into more parts of China.

Asian Citrus is doing an increasing amount of business straight into supermarkets rather than via wholesalers – 27 per cent against last year’s 23 per cent – and several supermarket new groups have signed up for long term contracts. A greater part of sales are going to high-margin supermarkets, anyway, the proportion now reaching 36 per cent of total revenue and accounting for 27 per cent of production. Progress, too, was reported in moving into higher added-value products. A new contract was signed in booming Guangdong, with Bosun Health Good R&D Center, for manufacture and distribution of Asian Citrus own-brand freshly squeezed juice products. The trial launch is expected shortly.

Both Hepu and Xingfeng plantations are being replanted, to increase production, with winter orange trees of various species. At Hepu, where the plan is to have 1.2 million trees, productivity has already improved from the work done so far. In Xingfeng production increased by 177 per cent from the first 400,000 winter oranges planted. A second batch of 400,000 will begin trial cropping this winter, and a further 800,000 will reach their fruit-bearing age in the next two years. Asian Citrus is investing RMB 86 million to build new infrastructure and put in an irrigation system there. A third plantation, Hunan Plantation, is being prepared, with a leasing agreement for 35 sq. km secured, and infrastructure work already started. The plan is to plant 2.4 million trees there within the next three years.

Meanwhile, the agriculture wholesale market and processing centre is proving successful, with Phase One completed and 235 of the 238 units sold. That brought in RMB 91 million. The year was not without its problems, however, despite the soaring profits. As chairman and chief executive Tony Tong explained, last winter’s snowstorms did not only affect the harvest. Temporary market shortages brought traders flooding the market with stored crops. That undermined the price, though only “briefly”. But, while Asian Citrus signed up several new supermarket chain customers, Tony Tong said it “did make it difficult for the group to increase its proportion of sales to supermarkets”.

Costs rose sharply, too, especially for fertiliser which was up by 10-15 per cent. But the improving economies of scale and tight controls kept unit cost rises to six per cent.

Looking into 2009, the strategy continues to be to raise the productivity as well as size of its plantations. Asian Citrus has a steady flow of hundreds of thousands of new orange saplings from its nurseries, and is trying out different species to find the best. The nursery business is being expanded to keep up with demand.

Cautiously, because of the “volatility of the real estate sector in China”, says Tony Tong, Asian Citrus is going slow on the next phase of its wholesale market. This will now not start until the second half of next year, and development will not be finalised unless conditions are right. Something else that has been put on hold is the planned Hong Kong listing. The reduction in share price and trading volume in London have been less than pleasing to Tony Tong, whose history and substantial interests in Hong Kong make him a businessman of some consequence there. Even so he has abandoned the idea of a Hong Kong listing for the time being, given the state of markets. London’s gain!

Lack Of Credit For International Trade Hits Bulk Freight Rates

2008-11-08T04:32:00.000-08:00

The credit crisis is threatening 90 per cent of world trade fund done on letters of credit, warns shipping broker Braemar Seascope in its latest weekly chartering report. The inability of commodity buyers to open letters of credit is strangling international trade and has brought down bulk freight rates to levels not seen since 2001. The situation is deteriorating, and will not ease until banks are able and willing to issue trade credit.

Among the dry cargo shipping markets, that for containers is virtually at a standstill, and others are in an “absolute freefall” with some owners leaving their shops at anchor or drifting, said Braemar Seascope. A World Trade Organisation meeting has been arranged for November 12 to assess the crisis. Despite the billions of dollars poured into the banking system, banks are unwilling to enable transactions even with good party risks that have been customers for years, says the broker.

For many markets, including shipping last week was one of the most turbulent in living memory. While fears of deep global recession remained after governments worldwide moved to rescue the banking system, short covering brought a recovery across the board in soft commodity prices on Friday, taking the DJ Dow Jones-AIG Commodity Index to 138.051 up 1.91 per cent.

Fertiliser markets were dismal, however, with all product markets remaining bearish although prices for ammonia, sulphur and DSP Tampa were unchanged on the week. The worst were urea markets, which were described as “plunging and plummeting”, the price of Prilled Urea Middle East down US$200 a ton at around $340.

Rice was an exception to the gloom. The US Rice Producers Association said last week's government projection for U.S. crop production was severely overstated, and suggested late planting and September hurricanes could render the crop almost 17 per cent smaller than the official estimate. Chicago’s November rice contract finished up 6 1/2 cents at US$15.41 1/2 per hundredweight Thursday, off the day's low of US$14.95.

India hiked the minimum support price for all varieties by INR500 per metric ton, Kapil Sibal, the federal minister for science and technology, announced. The minimum support price, or the rate at which government agencies procure the grain to ensure a steady return for farmers, of common grade rice will now be INR9,000/ton, while the price of grade A rice will be INR9,300/ton.

Cocoa was weakened by traders’ suggestions that chocolate buying would be reduced in recession. By Friday on LIFFE in London the price of cocoa for December slumped to £1,275 per tonne from £1,368 a week earlier. In New York the December cocoa contract retreated to US$2,142 per tonne from US$2,249.

Coffee markets were mixed. By Friday on LIFFE, Robusta for January delivery rose to US$1,779 per tonne from US$1,748 a week earlier. In New York Arabica for December delivery fell to US 114.05 cents per pound from 114.10 cents.

Sugar prices lost ground as oil prices plunged. "Lower energy prices have weakened prospects for biofuel-related price support," said analysts at Goldman Sachs. By Friday on LIFFE the price per tonne of white sugar for December delivery slipped to £323.20 from £324.90 the previous week. In New York the price of unrefined sugar for March delivery lowered to 11.32 US cents per pound from 11.40 cents.

Malaysian palm oil futures gave up gains of more than 3 per cent to finish unsettled by fears that a global recession will cut demand. An earlier rally had been on a rebound in the crude oil price. The benchmark January contract on the Bursa Malaysia Derivatives Exchange closed down RM16, or 0.97 per cent, to RM1,635 (US$463) a tonne. The contract, which hit a high of RM1,705 earlier and a low of RM1,620, touched a 2-year low of RM1,593 a tonne on Thursday.

Also depressing sentiment was the likelihood that the largest producer, Indonesia, would lift the current 7.5 per cent export tax. In response to recent price falls the Indonesian government says it will scrap its tax on palm oil exports when prices hit a monthly average of US$650-US$750 a tonne, to help weather the financial crisis. Under current regulations, the government will not impose a tax on crude palm oil exports in the following month if prices in Rotterdam, the European vegetable oils market, average below US$550 a tonne a month.

The Australian wool market finished 3.5 percent lower, on average, at sales in Newcastle, Melbourne and Fremantle. The AWEX EMI fell by A29 cents (-3.3 per cent), ending the week at A83 cents/kg. This reflected falls of A24cents (-2.6per cent) in the North and A 34 cents (-4.1per cent) in the South, with their corresponding Regional Indicators finishing the week at A885 cents and A800cents clean, respectively. The Western Indicator fell by A30 cents (-3.7per cent), finishing the week at A790 cents.Prices came back for all Merino types and micron ranges as demand continues fall and there was less of a downward movement in exchange rates to buffer the drop in prices in A$. Buyers for Italy led the way in Newcastle, with buyers for China dominant on a national basis and some support from buyers for India.In South African sales, where 6,171 bales were on offer, the Cape Wools Indicator was down by 5.1 per cent since last week against a 0.1 per cent depreciation of the Rand against the US Dollar and a 0.1 per cent depreciation against the Euro.

The speed at which US food companies passed on commodity prices rises and are still holding them despite the fact the market falls is causing concern, particularly in the US. Retail grocery-store prices leapt 7.6 percent last month from a year earlier, driven in part by a 14.2 percent rise in cereal and bakery prices, said the Bureau of Labor Statistics. In March, the price of a 20-ounce loaf of Sara Lee Soft & Smooth Classic White bread was $1.97 at a Wal-Mart, now it's $2.24.

Nestle the world's biggest food company by revenue, increased global prices an average 5.4 percent in the first half. "Prices might come down a little, but I don't think it will be anything spectacular," Nestle Chairman Peter Brabeck-Letmat said in an interview. Hershey Chief Executive David West told investors last week that consumers can expect to see higher prices on its chocolates, including for products for which supermarkets run promotions.

Food companies have outperformed the broader stock market in the last three months, with their shares down 18 per cent versus a 29 per cent decline for the Dow Jones U.S. Total Market Index.

Gourmet corner:
Desiccated coconut prices are falling back having reached record highs of around US$2,300 a tonne a few weeks ago, and are now aroundUS$2,000. Bad weather in Asian countries and rising demand squeezed the market this summer. Prices are expected to fall back after Christmas.

Uniq Sandwiched Between A Rock And A Hard Place!

2008-11-08T04:31:00.000-08:00

How “cheap” must cheap food get in this crisis? You have to ask when even sandwich companies are having a bad time! Seems the customers want to trade down even further, while rising farm costs mean raw material prices are still going up. Food manufacturers are certainly caught between a rock and a hard place! Sandwich maker Uniq, once dairy produce group United Dairies, has just put out a profit warning, dashing recovery hopes and for now (at least) and encouraging the market to savage the share price even further. It has fallen to around 39p against a high for the last twelve months of 227p. The market cap is now only around £44 million. Unfortunately, Uniq has not made a happy choice of product for a recession in that many have a luxury label, simple though they may be.

While a few analysts had been hoping for profits of around £3 million pre-tax for the year to end December 2008, giving earnings per share of just under 2p, most had been hoping for break even at best. Now the view is that there will be a loss of anything from £3-6million, depending on the analyst you choose. The rot started for Uniq’s share price in July, when M&S, its largest customer for sandwiches and ready meals, indicated that tough times in the High Street were reaching even its food sales. M&S accounts for a quarter of Uniq sales, although it also supplies supermarket groups across Europe. Uniq is already in the midst of major restructuring, closing down plant and laying off people. Now more cost-cutting must be done, and analysts are expecting it to be heavy.

“Following our last update in July, we have seen further deterioration in economic conditions, particularly in the UK and France. The consumer response to these conditions is affecting the mix of sales towards lower added-value products and channels, and towards price-discounted products,” says the Uniq statement to the Stock Exchange. UK sales over all were up 1.7 per cent in the first quarter, but sandwich sales, which rose by 13.1 per cent in the first half, were only showing growth of 2.1 percent in the third quarter. Sales of desserts are not falling, but only because prices have been cut.

Across the UK as a whole the positive impact of prices increases made in the third quarter were offset by the need for price discounting on others. But Uniq said that in the UK, at least, it still hoped to make a trading profit in the second half “albeit at a much lower level than last year, and still dependent on Christmas.”France was the worst market, with sales were down by 6.8 per cent in the third quarter. Uniq suffered from having a heavy weighting of higher-margin own-brand products as against supplying cheaper own-label lines.

In Northern Europe as a whole, sales were up by 4.2 per cent, a better performance than the 3 per cent of the first half. Within that, German sales fell two per cent, because of a weak market for fish products. In Holland salads sales were flat, after a fall of 9.7 per cent in the first half. Poland, a relatively new market, did well, however, showing a rise of 24 per cent.

Overall, Uniq hopes for a sales improvement by the year end. Last year it announced a pre-tax loss of £44.1 million after write-downs and scrapped dividend payments. The first half of this year, to end June, it just scraped in to the black, with profits of £0.8 million pre-tax and basic earnings per share of 1.2p. There was again no dividend. The pension deficit rose from £76 million to £146 million because of the stock market fall. One of the few bright points was the £7.4 million net cash.

All this is extremely frustrating for Uniq’s management which has been reshaping the group for some years now. It was only two years back that the board made the strategic decision to sell two of the most profitable businesses to raise £268 million to cut loans, put money into the pension fund and have capital for recovery.

Bad news, too, for all their dairy product, bread and horticulture suppliers! Results like this will keep a price squeeze on raw materials such as milk, cream, grains and salads. Though, at least (some) energy costs have come down!

PureCircle Leads A New Era Of Natural Sweeteners Up To 200 Times As Sweet As Sugar And With No Calories

2008-11-08T04:30:00.000-08:00

‘Out of the strong came forth sweetness’ says the Book of Judges and so it is with AIM listed PureCircle except the words are in the wrong order. Sweetness and strength are key to this company which has developed a method of naturally extracting Reb-A from the stevia (stevia rebaudiana) plant which is native to Paraguay. The leaves from the stevia plant have been used for hundreds of years in Paraguay and Brazil to sweeten local teas, and as a “sweet treat”. There are several related substances that can be derived from the stevia plant, but the best tasting, purest and sweetest of all of them is Rebaudioside-A which produces a substance tasting very similar to sugar, but 200 times sweeter, and has a beneficial dietary effect and – best of all - no calories.

You cannot do much better than that in this day and age when obesity seems to be a problem affecting every age and class and new diets, rather than exercise, are the holy grail. Well, PureCircle reckons it has harnessed the full potential of stevia by producing sweeteners from the other naturally occurring substances in the plant and these sweeteners also have zero calories. They can therefore be used as a sugar substitute in all manner of products which currently contain sugar, high fructose corn syrup or artificial sweeteners. Beneficial to diabetics and those wishing to reduce sugar intake for health reasons, their primary use is as a sweetener to enhance the flavour of food and drinks. Unlike artificial sweeteners, they are heat stable to 200°C, acid stable, do not ferment, and have none of the cloying taste associated with saccharin.

The list of applications for which PureCircle’s sweeteners are applicable is as long as your arm. From soft drinks and coffee to ice cream, pickles, pastries and confectionery. Diabetic diets are a given, but they are also an antioxidant and help to enhance flavours. In these days of cost pressures on manufacturers they can also bring cost savings as sugar substitutes or replacers as well as offering choice. Reb A comes in two strengths – high purity or 75 per cent Reb A. Then there is Sweta (which must surely be pronounced sweeter), a co-product produced when making Reb A, but treated further to produce an even sweeter taste. Steviol glycosides are a mixture of all the glycosides and steviosides found in the leaves of the stevia plant and Greenlite is a range of consumer products which sweeten naturally without the calories. In other words they are aimed directly at the fatties, obese, diet conscious – call them what you will – which comprise a huge market.

Small wonder that some hefty investors have recently become involved. At the beginning of July a joint venture company called Olam Wilmar Investment Holdings owned jointly by Wilmar International and Olam International took a 20 per cent stake in PureCircle and appointed a director to the board. Never heard of those two companies? You should have as when the deal was done they were worth a combined US$25 billion on the Singapore Stock Exchange. Wilmar is Asia’s leading agribusiness group with operations in more than 20 countries across four continents. Olam is a leading, global integrated supply chain manager of agricultural products and food ingredients with its operations also stretching far and wide.

The plan was for the JV company to strengthen PureCircle’s supply chain and accelerate sales. At the same time it would expand production by developing new stevia plantations and process plants throughout the world. Paul Selway-Swift, the chairman of PureCircle was obviously delighted with the deal as he could see it as accelerating the growth of the company in the emerging natural sweeteners market. He also welcomed as a non-executive director Mr Kuok Khoon Hong the chief executive of Wilmar.

The two of them did not have to wait long for the pay off as by the end of that same month Magomet Malsagov, the managing director, announced that substantial, long-term contracts had been signed with PepsiCo and Whole Earth Sweetener Company for the supply of high purity Reb-A for use in beverages and tabletop sweeteners worldwide under the PureVia™ brand. In addition, PepsiCo and Whole Earth will grant PureCircle an exclusive license to market Reb-A under the PureVia™ brand in certain categories where it will be entitled to all profits. Crucial to this whole deal was the ability of Pure Circle to deliver high quality, consistently-pure Reb-A in the amounts required by such customers worldwide.

The credit for this must go to Magomet who co-founded the company in 2002 when still in his 20s. It was he who established the group’s entire supply chain from the plantations and extraction facilities to the multi-functional plant in Malaysia and anticipated the need to sell on a worldwide basis. As a result PureCircle is now poised to lead the new era in natural sweetening which has such huge potential. Hopefully he will be able to come and speak at our next Agriprods Forum in London.

Water Everywhere… But Not Enough (Clean) Stuff To Drink

2008-11-08T04:19:00.001-08:00

Even the official global water stats are terrible – l.1billion lacking safe drinking water, half all hospital beds filled by people suffering from water-related disease. Given the rising incidence of water-created chaos in floods across the UK, Europe and the US due to our increasingly volatile weather, unofficial water pollution and its impact is undoubtedly much higher and more dangerous.

The regulators are on to this. Tough water regulations have been coming into force in the EU and US. All of which is excellent news for a small UK company, Hydro International. The AIM-quoted £20 million cap company has a range of technologies to control water run off, treat storm water, combined sewage overflows and municipal wastewater. Relatively tiny though it is, Hydro is a world-leader in designs to bring cost-effective solutions for controlling quantity and improving quality of water.

Too small to attract much attention, it has nonetheless been growing steadily. Interim figures to end-June show sales up 35 per cent from £11million to £14.9 million, bringing pre-tax profits up 27 percent from £0.8 million to £1 million and giving earnings per share of 4.93p. This has come from both organic growth and acquisition, and there will be more of the latter given Hydro’s prudent nurturing of its cash flow – outsourcing manufacturing. It closed the period with £3.7 million cash and equivalents. Forecasts are to sales this year to reach £32.2 million, giving earnings per share of 13.6p, up from 11.9p, and a dividend of 2.1p. For 2009 the forecast is for earnings of 16.3p and a 3.4p dividend, and these numbers for 2010 are 18p and a dividend of 3.7p.

Given that UK house builders had been the biggest single source of Hydro’s business (15 per cent of sales) and the US economy was slowing rapidly, past progress and future expectations show the widening interest in its products. Sales are now also being made into Asia, with a new distribution agreement signed in Malaysia as well as another EU one in Belgium.

While chief executive Stephen Hides calls the current business environment (with some understatement) “challenging”, he expects further progress to be made on growing Hydro. The marketing effort and acquisition targeting are designed to spread the net wider yet. Hydro is in the market for complementary technology to add to its circa 20 products, as well as for good customer lists.

A few months ago Hydro bought major US competitor, Oregon-based Eutek, in a £7 million deal. On the same day it was able to announce a £1.6 million contract for its Hydro-Brake flow control devices as part of a flood-prevention scheme in Glasgow. Eutek is important as it has patented equipment to remove fine grit, sugar sands, abrasives and solids from wastewater. Since this is the stuff that clogs up membrane filters, pumps and pipes, Eutek technology is invaluable. This adds a new dimension to the Hydro product list, built up since it was founded in 1980. Originally this was based around vortex technology, although in recent years it has added water storage, filtration and drainage devises.

Manufacturing is done by third-party engineering and fabrication companies based in Europe and North America, and sold through a wide network of independent distributors.

On its side is the urgent need of both UK and US governments to alleviate flood damage. The EU has its Water Framework Directive, with strict targets to be met by 2015. House broker KBC Peel Hunt anticipates that “this should boost Hydro’s sales of storm water treatment products from 2009”. Added impetus will be coming from the US Clean Water Act and other directives which force companies there to remove contaminants from storm water, and take steps to prevent sewers overflowing in storms. The US target dates are 2011 and 2012 and it is only just beginning to insist on measures that are standard in Europe, such as separation of sewage from storm water systems. As a result the aftermath of US flooding is particularly unpleasant, and positively dangerous. Hydro has products that tackle all of these issues, plus products for use in flood prevention programmes.

KBC Peel Hunt says “...these drivers should continue to benefit Hydro for many years to come.” Thus, while the state of the UK and US housing markets, and a lag between the current and next EU directive, are likely to hold back Hydro’s growth in the coming year, the medium term prospect looks very attractive. Profit breakdown is currently 61/39 per cent storm water/waste water management. Big buyers of the products are infrastructure builders, so Hydro will be gaining from the construction of new roads, rail and hospitals. For the UK, says KBC Peel Hunt, the likely drop in housing-related orders should be more than offset by work by water companies, on infrastructure and on “accelerated investment in flood control in the wake of 2007’s disastrous floods.” Much of the UK’s water system dates back into Victorian times, and would need upgrading even without the escalating demands of weather and regulation!

US sales growth will be driven by tighter pollution control and the 10 per cent per annum rise in the grit removal market. Hydro is also encouraging US pipe and pre-cast concrete manufacturers to incorporate Hydro’s devices within their products. The US is spending US$5 billion a year on improving its antique water systems. Outside these core markets Hydro is licensing products to companies in Australia, South Korea and New Zealand. And to help it in the more distant Asia-Pacific markets it is seeking local manufacturers.

The shares are quite a long way down from their peak – hardly surprising given its size and the state of the market. Even in the last year it has been up to 180p and the peak was around 240p, while it currently trades at around 130p. Since it has few competitors the chances of profile-raising orders to help both sales and shares look good.

China Has To Face Up To Problems Within Its Peasant Farming Population

2008-11-04T04:40:00.000-08:00

Amidst the gloom and mayhem in financial markets, Chinese leaders held a vitally important meeting for world food. In addition to the global economic crisis, last week’s annual policy-setting meeting tackled issues facing the nation’s 730 million farmers. They are the source of so much of world food exports and trade in agriculture commodities, such as fertilisers, and a major factor in the world’s water crisis. China’s leaders consider solutions to the economic state of the farmers as a vital part of avoiding civil unrest at a time when the coastal regions remain so much more prosperous that the country’s interior. Discontent among the farmers and social imbalances are leading to rises in migration to the massively overcrowded and polluted cities.

Land reform is increasingly an issue as farmers need to be able to gear up to raise yields. At the moment farmers are allowed to have only 30-year leases on their tiny plots, averaging 1.5 acres, (compared to 15 acres in Eastern Europe and 432 in the US) with the government owning all the land. Farm yields, although up 50 per cent on 25 years ago, are plateauing.

“China has too little land and too many farmers, “said Tang Min, deputy secretary-general of the China Development Research Foundation. Rural incomes are extremely low. Thus the government is considering making trade in leases easier, in the hope that larger and richer farms will be formed. There is urgent need for more wells, land reclamation and pollution clean-up, and for new farming methods to achieve the government targets of greater self-sufficiency and increased exports.

In the UK, however, land prices gains are sliding, with a fall of just under 1 per cent in the third quarter of 2008 according to the Knight Frank Farmland Index. In quarters one and two they grew by 11.9 per cent and 10.4 per cent respectively. The credit crunch is having an effect on life-style buyers and wet weather has given farmers a bad year.

Meanwhile, the crisis in world commodity markets was in focus as shipping indices continued to show a dire picture for international trade, falling sharply yet again and returning to the levels of four years ago. Last week the Baltic Dry Index had its largest drop ever, and has collapsed by 53 per cent over the last three weeks. It is now down 74 per cent on May’s levels.

Rice prices were dropping in India and Pakistan following the bumper crop, and farmers are cutting plans for new plantings. Basmati rice prices are suffering in particular. Prices were down by 5 per cent or more.

Coffee prices tumbled as traders took the view that purchases would fall in recession, even as inventories in ICE Futures US warehouses are rising and Brazilian exports are soaring. For coffee the Robusta price fell over the week from US$1,934 to US$1,748 a tonne by Friday on LIFFE, London's futures exchange, On the New York Board of Trade (NYBOT), Arabica for December delivery sank to 114.10 US cents per pound from 123.55 cents.

Traders decided that even chocolate sales would plummet, and so cocoa saw a further round of fund selling in line with soft (commodities) in the light of ongoing gloomy global economic conditions. By Friday on LIFFE, the price of cocoa for December slid to £1,368 per tonne from £1,426 a week earlier. On the NYBOT, the December cocoa contract retreated to US$2,249 per tonne from US$2,461.

Sugar prices also beat a retreat, with India out of the export market as prices fell. Plus, the government has ended an export subsidy scheme. By Friday on LIFFE, the price per tonne of white sugar for December delivery dropped to £324.90 from £358 the previous week. On NYBOT, the price of unrefined sugar for March delivery fell to 11.40 US cents per pound from 12.67 cents.

Cotton in the US was yet another victim of recession fears, with the US Department of Agriculture (USDA) slashing forecasts by 10 per cent and leading analysts to expect it to continue to move the numbers steadily downwards. World consumption will reach 122.3 million bales, down from the month-ago estimate of 123.7 million, the USDA said. China, the world's largest cotton user, will import 11 million bales this year, down 8 percent, or 1 million bales, from the September estimate, the USDA said. Unsure of the extent to which major international buyers, China, India and Turkey, will see economic contraction, markets then gave cotton in New York its biggest weekly tumble since 1995. However, in Karachi on Saturday prices remained stable around the overnight levels despite reports of fresh limit-fall in the New York cotton futures, analysts said. The local market is thriving on the supply and demand factors as both buyers and sellers are not yet inclined to be influenced by the current run on the foreign financial and capital markets.

Cotton prices are down 27 per cent this year. Cotton futures for December delivery fell the exchange limit of 3 US cents on Friday, or 5.7 percent, to 49.44 US cents a pound on ICE Futures U.S. in New York. That is a fall of 14 per cent on the week, the biggest such drop for a most-active contract since June 23, 1995.

Palm oil was the source of widespread defaults, and lower Chinese orders, according to reports across Asia. Prices continued to slide, having reached a level down 60 per cent from the peak March level of US$1,289. Yet this dramatic price could soon be drawing to an end as growers consider shifting their focus from expansion to renewing older crops, curbing supplies in the medium term. A level of 1,500 ringgit a ton, or 15 per cent below current levels, is a break-even point for plantations. They are facing a strong squeeze on profits as prices have halved since July while fertiliser – which accounts for 50 per cent of plantation costs - and other farm costs have fallen by lesser amounts.

If palm oil prices stayed below 1,500 ringgit for a prolonged period, Moody’s Investors Service has said, it may consider a rating change for a string of palm oil companies in Southeast Asia. Prices of palm oil have been savaged by forecasts of bumper harvests in Malaysia and Indonesia, increasing availability, and good oilseed crops in importers India and China, reducing their need for imports.The prospect of a global recession means that the risks to our already low forecasts are probably still on the downside, said London-based Capital Economics in a note, adding that farm commodities could drop by as much as a third. Replanting existing estate has become a priority in Malaysia, with a government target of replanting 200,000 hectares of oil palm trees aged 25 years and above. There have been problems with this target as plantation owners have preferred to spend money on greenfield land in Malaysia or Indonesia, or buy smaller companies.

Rubber traders faced crises across Asia as prices collapsed, although they closed steady. Tokyo’s prices moving down to new life-time contract lows. In India RSS 4 which was quoted at Rs 106 a kilo on the previous weekend shed almost Rs 23 a kg during the week breaking through the Rs 100-mark on Tuesday.

No market escaped the widespread volatile trading conditions, not even Australian wool. The wool market there, however, finished the week 0.9 per cent higher, on average, at sales in Sydney, Melbourne and Fremantle due to weakness in the US dollar amidst the financial uncertainty. The AWEX EMI rose by A10cents (+1.2 percent), ending the week at A 868 cents/kg. This reflected rises of A 6 cents (+0.7per cent) in the North and A 14 cents (+1.7per cent) in the South, with their corresponding Regional Indicators finishing the week at A 909 cents and A 834 cents clean, respectively. The Western Indicator rose by A 2 cents (+0.2per cent), finishing the week at A 820 cents. As usual, Chinese buyers dominated.

Dairy product prices are falling internationally on improved supply. Global prices for skimmed milk and whole milk powder are forecast to decline by 16 per cent this year, according to Abare, Australia’s independent government economic research agency.Global cheese prices are forecast to fall by 8 per cent and butter by 9 per cent. Yet milk production in the European Union is forecast to rise by 1 percent.

Cattle prices also went south last week as traders took the view that financial recession would take meat off the household budget and cut eating-out in restaurants in the US at least. Prices were down by 0.5-2.0 per cent across the board in US markets for beef, pork and hog markets in the US.

Gourmet corner:
Peppermint oil prices in India are causing some perplexity. Willing exporters are hard to find and higher prices are being sought at an unusually uniform level across regions. Prices have risen by around 50 per cent over the last five months, which should be tempting out the sellers, and levels of around US$15 a kilo are being reported. At the same time, competing US prices have risen, although producers say that this is only covering rising fertiliser and transport costs. Importers are reluctantly concluding that farmers now have the option of other, easier, crops and are letting their customers know it!

Eucalyptus oil is apparently seen as a dangerous cargo within China, and the caution with which it is being treated is blocking supplies as peak demand for winter colds approaches. Farmers are reported to be giving it up as a crop. The result is that supplies are falling and higher prices are also giving essential oil importers headaches. Again, levels are up around 50 per cent over the summer, to around US$9.25 a kilo.

Farmers Breathe Easier With End In Sight To Rising Fertiliser Prices

2008-11-04T04:31:00.000-08:00

Shares of fertiliser companies are wilting. Prices falls of 30 per cent and more have been seen since Merrill Lynch and other US brokers slashed forecasts last week. This was put down to US sector major, potash producer Mosaic, coming out with less brilliant figures than expected. Mosaic merely tripled net earnings on doubled sales, while the analysts were going for US$2.94 a share and not the US$2.65 they were given. Even before then, however, fertiliser markets have been losing their fizz.

Tumbling down have come the shares of Agrium, CF Industries, Potash as well as Mosaic – it fell by over 40 per cent - in the US, and the London quoted GDR’s of Russia’s Uralkali. Potash Corp was left down 60 per cent from its peak. The stocks have fallen from favour, or from the funds of distressed sellers, despite the fact that all are reporting record profits. The analysts got very rough – Goldman axed its six month price target on Mosaic by US$35 to US$115 and pulled it from its “Americas Buy List”. That seems at bit harsh as the share price was US$47 at the time and general expectation is that there is no reason for fertiliser demand to disappear given the concerns about global grain, sugar and vegetable oil supplies! Its 52 week trading range has been US$48.72 to US$163.25.

All the same, Mosaic put out a prudent warning with its figures that demand has slowed seasonally. Plus, to better balance its inventory levels and supply chain demands it was reducing its planned phosphate production from 1 million to 500,000 tonnes over the next few months. Sales volume guidance was for a reduction for phosphate, but potash sales guidance was left unchanged. Mosaic also pointed to the record low inventories for North American potash producers in August, although those for phosphates were up slightly from the low levels of a year ago. It gave reassurance that the fundamentals all round remained positive, with demand expected to rebound balance with supply had been resumed.

To no avail! Brokers have fallen out of love with commodities and are now worried. So many distressed banks and funds were heavy players. The US Agriculture Secretary Ed Schafer said the credit crunch would impact production next year, with farm expenses rising by 16 per cent and loans hard to get. Yet the fertiliser stocks collapse was not just part of the general sell-off. There has been specific bearish industry news that gives rise to either caution (if you are an investor) or celebration (for farmers)! Over the last few days buyers have been deserting the trade markets, for now at least, and stocks in countries such as Russia are higher than this time last year. The latest news from the market is that spot fob prices in every category of fertiliser are either dropping, or lower, or softer or weaker – with one exception. That is DAP Tampa, where the price is stable.

The problem for watchers of fertiliser prices is that they are not traded on the world’s futures markets, but deals are done mainly bilaterally between the buyers and sellers. In April this year the prices started to go stratospheric when China agreed to a Potash company quote of almost US $600 a tonne for potash, and a few weeks later the price saw US$1,000. In recent days reaction has set in to the summer’s high prices – farmers are looking at what profits they are making from the harvests. Lower crop prices, particularly for wheat, mean that farmers can see little or no profit in planting at present. Fertiliser prices are in the process, says the fertiliser journal The Market, of falling to a level at which farmers can again see a potential profit.

Stocks of urea are mounting at production points in the main exporting countries as, despite lower order levels, prices are too attractive for many producers to give in and cut output. So forecasts are that October’s business will see lower and lower prices until buyers can no longer wait to book what they need for November and December, or else buyers become convince that there is a floor. Also, fall-out from the financial market has begun to reach the trade. Credit limits have been tightened and loan rates raised. Client risks are being re-assessed by suppliers.

Urea prices have plummeted. The market reports that the only active buyer, India, has been playing a very successful tactic of buying limited quantities and then backing off to maintain downward pressure on prices. Some Indian buyers are trying to escape from contracts made at peak prices, while at the end of September they were down by over US$150 a tonne at around US$620. In the DAP market, prices are said to be under severe pressure, and this situation is expected to continue for some weeks at least. Phosphoric acid prices are thought likely to dip from the US$1,920 level. There is little visibility on trading, and some producers have cut output and are building inventories in the hope that prices will rebound. There is talk of US barge prices of around US$915-20 a ton, but this is likely to be too high for buyers.

Ammonia prices are reported to have fallen back by US$50 or so to around US$850-860 a tonne fob. For ammonia there is potentially strong demand which, if it materialises, will underpin prices. For UK farmers these easier prices have yet to work their way down the pipeline. Farmers trade organisations were still saying a few weeks ago that prices were due to rise by £10 a tonne for blended products to an average of £578 a tonne (up £368 on a year ago), and potash was expected to rise reflecting an increase by producers of as much as £30 a tonne. The average price AN bags was expected to be up £5 a tonne to £376 a tonne (up £215 on a year ago.)

Amiad Would Make A Tasty Morsel For One Of The Big Water Companies

2008-11-04T04:30:00.000-08:00

Some trouble Amiad is used to – after all, it was born on an Israeli kibbutz forty years ago. But the newly listed AIM water filtration company ran into a whole lot of unfamiliar flack this spring – exit of a major shareholder, stock market upsets at its unfamiliarly lumpy order flow as drought hit irrigation sales, and the mega mark-down on small emerging market stocks all around the world as investors worried about rising interest rates. More than enough to bring the shares down 44 per cent!

Fortunately for Amiad, the new green funds saw this as a buying opportunity in a very tightly held stock. It has also attracted the attention of Iceland’s Atorka investment group. Water sector stocks are relatively scarce in the UK markets, apart from the major utilities. Anyway, Amiad was probably due a bit of a shake-out having soared from its 129p November 2005 float price to 297p. It is now up from 155p and at 166p could have further to go. A number of factors should boost Amiad’s figures in 2006. However, it will probably not be until 2007 that it will begin show its mettle – coming to the stock market is always a disruptive process, and the company is undergoing a lot of re-organisation.

The seller was Gaon Agro, the Israeli venture capitalists who backed Amiad very early on, and wanted to move on to the next one. As their holding had been 13.05 per cent of Amiad’s equity, the market was a bit concerned. Majority shareholder, Kibbutz Amiad, also sold a little to help house-broker Panmure Gordon bring in more institutional investors, but is now sticking with its 51.01 per cent holding. Amiad’s CEO Yossi Katz, has given investors the reassurance that quotation levels in both the industrial and municipal sectors are up 30 per cent. May and June were “strong” months.

Amiad is just about global, its simple, self-cleaning, low maintenance water filtration systems selling in 60 countries with only around 10 per cent going into the local market. The products are used to recycle water in industry – cotton fields, ship ballasts (to stop them spreading pollution when cleaning and discharging), the energy, motor, food and paper businesses – and to clean up drinking water. Geographically clients spread from China, to Asia, through the east and western countries of Europe and to North and South America. In the UK a major client is the Eden project in Cornwall, where Amiad products filter rainwater to irrigate the exotic plants.

With such a spread, why bother to come to AIM? It is making good profits - last year Amiad announced 57 per cent more pre-tax profits, at US$4.1million, on sales up 15 per cent at US$42.4 million. The answers include raising funds to boost its sales force to take full advantage of its established brand and network, and maybe become a treatment contractor. Net proceeds of the float were US$9.3million, and there was US$7.7million cash left at the December year end. Money is needed, too, to build on market strengths in suction techniques and high-efficient thread filters, maybe expand to contracting, and to certainly diversify production. Lastly, it wanted to raise its profile and credibility with a London float as competition is increasing with the market size.

The United Nations puts a figure on the proportion of the global population that is short of water of 40 per cent, and Global Industry Analysis of the US says the global market for water treatment systems is currently US50billion, and growing at 8 per cent plus a year. By 2025, however, according to Global Water Intelligence, driven by rising regulation Europe alone is likely to have a water investment market worth €356billion, (or €437 per capita against €379 for the US). Everyone is trying to get involved, particularly when Amiad is earning gross margins of over 50 per cent.

In 2007, apart from all the new business areas which will be delivering increase from a low base, there will be the agriculture orders that will miss 2006. It is only just beginning to focus on two water-hungry areas – India and Central America – and its joint venture in China’s vast market is very new. In Europe it has signed up a mega-customer for its filters in France’s Veolia, probably the world’s largest water company. Veolia’s business will help reduce the seasonality of its figures, which comes with reliance on farming patterns and the irrigation sector -this is a success for its effort to increase exposure to the municipal and industrial markets. Then, one of the benefits of the float restructuring is that it will no longer be paying fees to its venture capitalist backers.

The niche markets which it is developing with the floatation money are the new ones for it of pre-filtration, ballast water tank – not just Asian kelp and zebra mussels can be spread, but harmful aquatic organisms include cholera - and borehole water from off-shore oil and gas rigs. Expectations for its growth rate in 2007 and 2008 are over 20 per cent. With a market capitalisation of only £32million, that makes it a tasty morsel for some of the big predators in this sector.

Sunkar Resources Has The Right Deposit In The Right Place For Shrewd Bottom Fishers

2008-11-04T04:29:00.000-08:00

The sheer brutality of a bear market is writ large in the performance of Sunkar Resources which raised £36 million in June prior to listing on AIM. The price paid then was 120p per share: now the shares cost 24p. And nothing has changed. The company still has a phosphorous rock deposit in Kazakhstan totalling 800 million tonnes capable of producing fertilisers for the next 56 years. The deposit lies in a flat lying position on the Kazakh steppes close to surface so will be cheap to mine and the world still needs fertilisers. Even so investors have decided in a matter of weeks that the company is not worth £191.8 million, but £40 million which is only a fraction more than the money actually raised. That is the measure of this bear market at the moment, but Donald Sinclair, the Scottish finance director, is determined to maintain the company’s presence in the market until the turn comes and sensible valuations return.

In this case it was the first interim results that were being discussed, but there was not a lot of real news over such a short time. The terms of the Sub Soil Use clause have been amended so that the Kazakh subsidiary is in full compliance, but you would have to have read the original terms to understand the changes. Apart from that, most of the mining equipment has been moved onto the site and stripping and ore extraction operations have started.operations. There is more machinery still to come and the tantalising thing is that the company could be very close to cash flow.

The bottom line is that this rock can be concentrated very cheaply to17% phosphorous which could be trucked as crushed rock direct to users in the vicinity to boost alkali in the soil, or to a suitable plant in Russia or Uzbekistan for upgrade. There are two problems with this. The first is transport costs and the second the low price of around US$20/tonne that will be received. Nonetheless there could be a profit in direct transportation – perhaps as much as US$10/tonne – depending on the distance the rock has to be transported. With such a huge deposit it makes sense to generate an initial cash flow from this operation while still moving ahead with the core plan which is to install a phosphoric acid plant.

The first essential step of this processs involves treating the rock with acid to produce phosphoric acid. Fortunately for Sunkar there is plenty of sulphur available from the Tengiz oil field in western Kazakhstan where Chevron is involved in a joint venture with Tengizneftegas so sulphuric acid will be no problem. Each barrel of oil being produced contains about 16% hydrogen sulphide, which the company says is equivalent to just over 19 kgs of recovered sulphur.In addition the gas fields nearby have excess ammonia from the cleaning of sour gas so Sunkar will be one of the few integrated producers of phorphorous based fertiliser in the world as all three main components are within reach. As part of the ongoing process ammonia is added to the phophoric acid to produce either mono-ammonium phosphate or di-ammonium phosphate which are the actual fertilisers.

A large-scale, low cost phosphate fertiliser manufacturing operation producing up to 1.76 million tonnes of d-ammonium phosphate per year is expected to cost around US$740 million. But when one considers that the current price of DAP, the world’s most widely used ammo phos fertiliser, easily adapted to all ranges of dry fertiliser application methods, is worth nearly US$1,000/tonne, the return should be swift. Add to this the advantages of having such a huge deposit near surface and close to transport and it can be seen that Sunkar Resources has a huge asset with immense potential which is simply not being valued sensibly in these difficult times. Even if the shambles of the US banking system is infecting the rest of the world crops will have to be grown and crops need fertilisers. This is the sort of stock Buffett and Bolton buy at times like this.

The central part of the deposit alone covers an area of 836 sq kms which is about one-tenth the size of County Durham. The overburden is only about 3 metres in thickness so can be stripped by scrapes and bulldozers. The processing plant would be at the epicentre of a highly agricultural region west of the town of Kandagash which is a freight hub on the North-South road, the Moscow-Tashkent rail link and the Orsk-Atytrau rail link. Transport is no problem so Sunkar can start generating modest cash flow quite quickly while it develops a strategic mining and business plan and carries out a bankable feasibility study on the processing plant. It just makes so much sense even if investors have shut off their brains for the moment.

Soft Commodity Prices Get Hammered Despite US Bail-Out

2008-11-04T04:25:00.000-08:00

“Pork barrel” politics got the US$700 billion bail-out package voted through on Capital Hill on Friday night on a three-to-one margin. A guesstimate of US$100 billion was put on tax breaks offered, with the agriculture lobbies getting their share to help the bill through the House of Representatives. These ranged from wool producers, Alaskan fishermen, Virgin Island and Puerto Rican rum and Oregon wooden arrow-head makers.

Global agriculture futures markets have been plummeting, with the S&P GSCI Agriculture index down 15.75 per cent in September on fears for the global economy. In the year to date agriculture has reported the largest falls among the Standard & Poor’s indices, with a drop of 16.6 per cent. Vital news came on exchange traded funds, a major market for agricultural investors. Insurer AIG has confirmed that all obligations will be honoured for over 100 exchange traded commodities offered by ETF Securities, despite suspending trading on 16 September.

ETF Securities said it was in discussion with market makers and members of the London Stock Exchange, Deutsche Borse, Borse Italiana and Euronext to have trading reinstated as soon as possible. All of ETF Securities' London listed commodities remain listed with the Financial Services Authority. AIG has been handed an $85 billion rescue package from the US government. Last month’s top performing ETFs continued to be short contracts – wheat was up 14.8 percent and soya up 13.1 per cent among the agriculture commodities. But on a one-year view the long corn contract is up 17.6 per cent.

Shipping markets showed the extent to which international trade is declining. The Baltic Dry Index, a benchmark measure of shipping costs for commodities, fell 1.2 per cent to 2,990 in the week according to the Baltic Exchange in London. This is the first time that the index has fallen below 3,000 in over two years.

Asian rice prices continue to slip as more arrives onto markets, although US prices closed the week firming. The benchmark Thai price fell by 1.4 per cent in the week to US$710 a tonne, well below April’s record of US$1,080 in April. India is indicating that it will have another bumper crop in 2008/9.

In Chicago the November rice contract climbed the daily limited, closing at US$18.34 per hundredweight, up 50 cents. US rice production is forecast by Informa Economics to come in down six million hundredweight, at around 201 million, because of damage from Hurricane Gustav.

While UK farmers are still seeking, and winning, higher prices for milk and dairy products, New Zealand’s Fronterra Cooperative Group, the world’s largest dairy exporter, announced price cuts for cheese, butter and yoghurt citing rising global production. US milk production in August was up 1.1 per cent on a year earlier and Australia’s output was 6.5 per cent higher. Fronterra owns 43 per cent of China’s Sanlu, whose involvement in the melamine-contaminated milk scandal has forced it to write off US$93 million from its investment.

The latest New Zealand’s retail price index reading shows that milk, cheese and eggs rose by 24 per cent in the second quarter compared to a year earlier, but world prices have fallen, partially reflecting dollar improvements. According to ANZ National Bank in New Zealand, world prices for dairy products have slumped by 25 percent from the record levels of last November.

Palm oil prices fell to a 19 month low, with December delivery palm down 6.5 per cent at 1,954 ringgits (US$562) a metric ton on the Malaysia Derivatives. Pressure on palm oil prices is expected to persist on a 19 per cent fall in September exports compared to the previous month and recent revision of the EU biofuels policy, reducing targets to avoid food market inflation. Heavy falls have been seen in the prices of local plantation companies and refiners, including Wilmar International Indofood Agri Resources and Golden Agri Resources.

Coffee prices hit 10-month lows. "Arabica and Robusta coffee values slumped to the lowest level since December 2007 on Thursday as a strong dollar drove down prices of soft commodities," said the Public Ledger. By Friday on LIFFE, London's futures exchange, Robusta for November delivery fell to US$1,924 per tonne from US$2,128 a week earlier.On the New York Board of Trade (NYBOT), Arabica for December delivery slid to US 123.55 cents per pound from US135.80 cents.

Cocoa prices declined but supply worries could soon see them rebounding. Ivory Coast's 2008/09 cocoa season failed to open on time on October 1 as shipping firms were still waiting for documentation to arrive. Also, heavy, persistent rains in the country's main growing zones continue to raise concerns about the spread of black pod disease.

By Friday on LIFFE, the price of cocoa for December had slipped to £1,426 per tonne from £1,536 a week earlier. On the NYBOT, the December cocoa contract retreated to US$2,461 per tonne from US$2,756.

Sugar prices fell but were expected to rally going forward. "The market is entering a transitional period before being driven by a stronger sentiment, linked to a deficit of production expected in 2009," said Sucden analyst Karim Salamon. By Friday on LIFFE, the price per tonne of white sugar for December delivery dropped to £358 from £404 the previous week. On NYBOT, the price of unrefined sugar for March delivery fell to US 12.67 cents per pound from US 14.59 cents.

Rubber prices dropped to their lowest in thirteen months on the slump in global car sales. In Tokyo the most actively traded contract fell 3.1 percent to 238.8 yen a kilo (US$2,272 a tonne), bringing the retreat from June’s 28-year high to 33 per cent. On Friday the Malaysian Rubber Board's benchmark SMR20 fell to US 254.30 cents per kilo from US 279.00 cents per kilo a week earlier.

Cotton prices rose on reports that heavy rain in Mississippi could hurt the US crop, with 4-8 inches of rain predicted. This helped the December contract claw back some ground on ICE Futures in New York, and it closed on Friday up 0.3 per cent at US 58.6 cents a pound, still down 2.9 per cent on the week.

The Australian wool market finished 0.2 per cent lower, on average, at sales in Sydney, Melbourne and Fremantle. In last week’s highly uncertain climate demand was muted, but as usual Chinese buyers dominated, and there was support, to a lesser extent, from Indian buyers. The Australian dollar was up 5.5 per cent against the dollar. In South African sales, the Cape Wools Indicator was up by 1.5 per cent since last week against a 3.2 per cent depreciation of the Rand against the US Dollar and a 1.1 per cent appreciation against the Euro.

Lumber prices in the US reached a 17-year low on fears of the impact on construction of the world housing slump. Futures for November deliver on the Chicago Mercantile Exchange dropped by 4.6 per cent on Friday to US$190 per 1,000 board feet, down 19 per cent on levels of a year ago.

Hog prices weakened last week in the US as demand fell. Futures for December were down nearly three per cent, at around US 61.3 cents a pound. Wholesale pork prices fell to the lowest since April, at US 72.85 cents a pound. US cattle and beef prices were also lower. Feeder cattle futures were down 2.9 per cent for November, at US$1.006.

Tuna prices have been edging up on global markets on shortage of supplies. According to The Tuna Report the current import price in Bangkok is around US$2,000 a tonne for frozen skipjack tuna, “the highest in history.” Catches from the Indian Ocean have been declining, with exports from India, Thailand, Sri Lanka, the Maldives and Japan all reported to be down. Rising fuel prices have caused boat operators in Japan, China, Korea and Taiwan to suspend operations. In the Pacific nine nations have imposed a ban to conserve tuna resources.

Gourmet Corner:
Pepper is seeing as volatile a price run as major internationally traded commodities. Indian traders said that the market had fallen into the hands of “manipulators”. No one was ready to risk hedging on “apprehension” of the price swings, according to Kishnor Shamji, president of the Indian spice association. The October contract was down Rs217 last week, at Rs13,820, with turnover falling sharply. Brazil and Vietnam were reported to be holding back, awaiting higher prices. Vietnam’s target was said to be around US$2,750 a tonne, but Indonesia was reported to be selling its new crop to US buyers at around US$3,500 a tonne. The rise in the dollar has kept export prices relatively stable.

Cardamom prices have crossed the Rs1,000 per kilo barrier for the first time in 21 years, with Indian stocks said to be exhausted and demand still rising. Markets were relatively quiet last week, with dealers requirements in Saudi Arabia and other Gulf countries already covered for Ramadan.

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2008-11-03T03:56:00.000-08:00

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Wiseman Celebrates Fractional Relief For Dairy Farmers!

2008-11-03T02:22:00.000-08:00

Farmers got a piece of good news this week – a badly needed one after a terrible summer. Tesco, which takes almost a billion litres of milk a year, is giving farmers a 0.5p a litre increase! That news also reflects improving trading conditions for Robert Wiseman Dairies, although the industry is calling for rises in pennies not in fractions! Farmers input costs have gone up by 34 per cent over the last year, and the appalling months of rain have taken a further toll adding to soaring feed, fertiliser, energy and machinery prices in pushing up costs.

Prices for milk have been stepping up. But the fact that a four-pint polybottle of milk, which cost 135p a year ago, is now 144p, that a pack of butter has gone from 88p to 106p and mild cheddar is now 708p a kilo against 524p, has not done that much to help farmers. The fight to get the major retailers to concede price rises has been a tough one and it is not yet over. The National Farmers’ Union in Scotland estimates that cost to farmers producing milk will need to rise by a further 3p a litre over the winter.

Dominated by the big retailers, milk has been a difficult market over recent months. Even for major processor Robert Wiseman, with its well-invested dairies and strong balance sheet, which has 27 per cent of the UK milk market. It brought its shares tumbling down in May when it warned that “unparalleled pressure on costs”, delayed milk price increases and lower returns from bulk cream sales would hit profits by over £8 million in the year to March 2009. Apart from energy and milk costs, Robert Wiseman had to contend with a 23 per cent rise in the price of resin for plastic bottles.

With that guidance analysts cut 2009 forecasts to around £31 million pre-tax, giving consensus earnings per share of around 29p with a dividend of 15.2p. For the year to March 2010 the forecast is for around £37 million with an earnings consensus of 35p and a dividend of 16.5p, with debt halved at around £20 million. The earnings forecasts compare to earnings reported for March 2008 of 34.7p on pre-tax profits up 10 per cent at £38.4 million.

While the May warning sent the share price plummeting, dropping by 44p to 542p on the day, and then down another 100p in the following weeks, it has been relatively steady since. The shares have been trading around 325-340p, the market reassured by statements of plans for higher milk prices. Plus, Robert Wiseman has been able to announce expanding sales volumes as it increased contracts with 131 Netto and the Martin McColl Group and started servicing Co-op stores in the South of England.

Investment has also gone ahead with, with Robert Wiseman committing to a new £4.5 million nine-acre site for a distribution centre for the south-east of England. It has just brought on stream a new cost saving state-of-the-art £80 million dairy in Somerset, and preparatory work is being carried out to almost double capacity from the current four million litres a week. The board says that capacity could be taken up to 500 million litres a year for an additional £20 million.Analysts have remained relatively cautious despite all this on top of July’s announcement that first quarter volumes were up by 2 per cent, year on year. However, since much of the caution was based on rising energy-related costs, the fall in the oil price might help turn sentiment.

Processors will have to fight harder to get British milk – cost pressures are forcing farmers to give up trying to earn a livelihood from dairy and rising land prices have provided encouragement for selling up. Last May Robert Wiseman gave figures with the results showing that UK milk production had fallen from 14.1 billion litres in 2003/4 to 13.2 billion in 2007/8, and the current year is expected to be lower still. The weak pound has made it expensive to import milk and other dairy products. At the same time, farmers have been forming their own selling co-operatives to find the most lucrative markets, be it for liquid milk or for milk powder for export.

However, the processors are taking heart that after years of declining cow numbers there are indications that more are being bred. They should not celebrate too soon! It will take some time to turn heifers into mature milk-yielding herds, and a sustained period of improving prices is going to be needed for farmers to make this investment.

Milk Does Not Come From Cows!

2008-11-03T02:21:00.000-08:00

Milk does not come from cows – it comes from multi-nationals! That message has come over very clearly in the last few weeks. Milk ads may feature bucolic cows grazing in pastoral idylls, but don’t be taken in, this is big business.

From China there is a horrific scandal unfolding showing what can go wrong in the industrial process. New Zealand dairy giant Frontera raised the alarm on melamine, an industrial chemical normally used in plastics, being added across China to diluted milk to make it appear higher in protein after problems with sick infants were reported by its local affiliate. Yet Ireland has just highlighted an altogether different international story, and very positive one – the growing financial success of one of the three biggest processors, Glanbia.

Glanbia is by far the largest of Ireland’s three major diary processors. It processes over a third of Ireland’s annual 1.1 billion gallons of milk, but has been venturing further and further into the US. This is booming business, too. Prices in the international dairy market have soared since 2005, with butter having risen from around US$2,000 a tonne to US$4,400 and milk powder up from around US$2,200 to US$4,000 for skim and US$4,700 for whole milk power.

Of the Irish trio, Glanbia, Dairygold and Kerry, it is Glanbia that has been doing best. Profits at the pre-tax level rose from around EUR68 million in 2005 to EUR99million last year. It has just reported strong profit growth continuing this year, with first half pre-tax profits at EUR53 million, a rise of 38 per cent, and a 22 per cent earnings per share rise to 14 cents. Two thirds of Glanbia sales and profits are generated outside of Ireland.
Glanbia predicted in the interim statement that full year earnings would rise around 15 per cent year-on-year. Dublin brokers Goodbody were forecasting full earning earnings per share of over 35 cents, a rise of 16 per cent. Including the latest US acquisition the brokers have upped that to 40 cents. While the shares, at around 364 cents are right at the bottom of the twelve-month price range of 360-545 cents, Glanbia has outperformed the market.

Just ahead of the financial statement came the news that Glanbia was spending EUR213 million to buy US whey-based protein product and supplements manufacturer Optimum Nutrition. It already has a 50 per cent stake in New Mexico cheese and whey maker Clovis, and California-based nutritional busines Seltzer. Optimum sales last year were US$185 million and operating profit was US$35 million.

The extraordinary thing about the internationalisation of Glanbia is that CEO John Moloney has orchestrated it over the last five years or so without massively diluting the original farmer shareholders. The co-operative business from which it sprang still holds a controlling 54 per cent. In his interim statement John Moloney referred to the volatility of Irish dairy markets. This had “created a time lag in balancing input costs and market returns,” he said. Hence his interest in acquiring international businesses and high-added-value products, like those at Optimum – it’s a leading US sports nutrition brand. It also makes diet bars and vitamin supplements. The global fitness market is worth US$44 billion and is expanding at around eight per cent a year.

It is easier to build returns in this US market than in the crowded home dairy market, where consolidation is slow to come, despite the frequent rumours of a tie-up between Glanbia and No. 2 processor Dairygold. Glanbia’s range of Irish businesses extends from fresh dairy products to soups and spreads, but it also retains interests in feed milling and grain processing and retailing. Glanbia’s basic US dairy operations are now much larger than those in Ireland – it processes 600,000 gallons of milk, twice that of its operations in Ireland, produces 300,000 tons of cheese a year against 200,000 in Ireland. It is the largest US cheddar cheese producer.

Moloney’s eyes, however, are on the international business models set by Switzerland’s Nestle, France’s Danone and Scandinavia’s Arla Foods. Glanbia is already in the UK and Africa. But there won’t, he says, be another major acquisition for a couple of years.

Cranswick’s Range Of Products From Bacon To Budgie Seed Gives It Strong Defensive Qualities in Difficult Times

2008-11-03T01:54:00.000-08:00

AIM listed Cranswick does not operate on anything like the scale of Agfeed , which we wrote about a couple of weeks ago, as China accounts for more than 50 per cent of the world's annual pig production as well as being the world's largest and most profitable pork consumer market. More than 1.2 billion Chinese consume pork as their primary source of meat and it is estimated that 65 per cent of all meat consumed in China is pork. The figures from Cranswick are minute in comparison, but it is interesting that both companies are involved in pig feed as well as pigs as that was the foundation of the business when Cranswick was formed by Yorkshire farmers in the 1970s.

In 1988 Cranswick embarked on a strategy to broaden its base into related areas offering greater scope to add value to its processes. Activities have since been extended from this agricultural base and it now operates in three core, yet related markets. The first move in this direction was the purchase of a small pork butchery which enabled the company to extend its operations from pig rearing and pig feed production into the processing of pork cuts for the United Kingdom's wholesale and retail markets. The agribusiness was grouped around its historical pig marketing and pig feed operations, under the Cranswick Mill subsidiary. The company manufactures pig feed at its original Driffield site in East Yorkshire and at its Wellingore plant in Lincolnshire which was acquired in March 2000. This acquisition helped boost the company's production of pig feed to 250,000 tons per year, while extending its range into the important pig rearing region of Lincolnshire.

The acquisition of Wellingore also enabled the company to extend its feed production to poultry feed. Cranswick Mill oversees Cranswick's pig marketing operations, buying pigs from farmers many of whom are customers for the company's feed products, which is exactly what Agfeed does on a much bigger scale in China. These farmers are not confined to the home regions of the company and the pork is then sold on to pork product producers as well as to Cranswick itself. In fact it manufactures pork products, including sausages, hams, and other meats, under its Cranswick Country Foods subsidiary. The food products are manufactured in five production plants and include a 15 per cent share of the U.K. market for premium quality sausages, under the Cranswick, Cranswick Gourmet and George Lazenby labels. The last of these is the exclusive licensee for the brand Duchy Original Sausages, produced from the Prince of Wales’ pig herd.

Over the years the food division has overtaken its pig feed division in turnover, accounting for two-thirds of the company's sales. Cranswick's third area of operations is pet foods which includes the Tropical Marine Centre, Europe's largest importer, breeder, and distributor of tropical fish and invertebrates, as well as a leading manufacturer of fish foods. This division's other subsidiaries are George Buckton and Magnet which produce bird seed. George Buckton, a very old company founded in the 19th century, originally operated as a dry saltery but after the first World War it changed direction to become one of the United Kingdom's leading producers of bird seed, particularly well known for its corn-based feed created especially for the pigeon racing circuit. As such it was a natural extension of the feed production business and led the company further into the pet and pet food markets.

In the late 1990s, Cranswick turned to boosting its pork products activities. The company found new markets for a number of pork products that were less popular in its core U.K. markets. As such, in 1998, the company began seeing growing sales to the Chinese market for pigs' feet, as well as sales of pork bellies to South Korea and pig tails to the West Indies. In its home market, meanwhile, it continued to build its successful range of gourmet sausages which proved so popular in Germany that it established its first foreign subsidiary there as specialty food products were becoming its fastest growing operation.

Over the last 20 years Cranswick has transformed itself into a diversified, yet unified feed-food-pet group which has helped it ride out the Europe-wide slump in pork prices that caused a number of its closest competitors to go out of business at the end of the decade. The food division accounts for in excess of 90 per cent of overall sales having evolved into a business focused predominantly on the supply of fresh and processed food to the UK food retail, food manufacturing and food service sectors. The latest results for the year to end March confirm its resilience with pre-tax profits up 8 per cent to £35.3 million and earnings rising 11 per cent to 55.9 p per share. The food and pet businesses contributed most of sales growth with sales of bacon up 44 per cent, cooked meats up 32 per cent and sausages up 19 per cent.

Chairman Martin Davey admits that Cranswick is having to absorb ever rising costs, but sales are continuing to grow and most of the costs can be absorbed into increased selling prices. How long this can continue with supermarkets striving to keep prices down is anyone’s guess, but with its current range of products Cranswick can certainly point to defensive qualities even though these have not protected the share price of late.

Traders In Agricultural Commodities Transfixed By US Financial Crisis

2008-11-03T01:49:00.000-08:00

Traders in agriculture commodities were transfixed, along with all market traders worldwide, by the fight to agree a bail-out for the US financial crisis. Fundamental factors were sidelined in hugely volatile trading on progress or lack of it, in Congress. Concern about how a collapse of financial systems, worsening recession, would affect consumer spending dominated sentiment, so even frozen orange juice futures saw price falls in the uncertainty.

As Friday closed with the bail-out talks in stalemate, the DJ Dow Jones-AIG Commodity Index closed down 1.4 per cent and the Reuters/Jefferies CRB Index fell by 1.6 per cent. Markets need the reassurance that investors will continue to dump futures contracts.

The Philippines, the world's largest rice buyer, may cut imports by as much as 35 per cent next year as domestic stockpiles surge and local production gains, Finance Under Secretary Jeremias Paul said in Manila. President Gloria Arroyo abandoned a plan to balance the budget this year to boost spending on rice purchases, farmers' subsidies and repairs to irrigation systems after the price of rice more than doubled to a record. The surge in the price prompted concerns that there could be a global food shortage.

The National Food Authority “has a lot of stocks, so I don't think we'd need to buy so much next year,'' Paul said. Imports totalled 2.31 million tons this year. Rough rice futures rose to a record US$25.07 per 100 pounds in Chicago in April, after India and Vietnam curbed exports to safeguard domestic supplies and the Philippines increased imports. On Friday the contract for November delivery gained 0.7 per cent to US$20.18 per 100 pounds in Singapore. The benchmark export price of white rice from Thailand, set weekly, fell 2 percent to US$749 a ton today from a week earlier, according to the Thai Rice Exporters' Association.

Cocoa prices climbed, boosted by supply disruption in major exporter Ivory Coast. Exports from the main ports in Ivory Coast remained blocked as a strike by workers from the Cocoa and Coffee Bourse continuing into a third week. By Friday on LIFFE, the price of cocoa for December gained to £1,536 per tonne from £1,522 a week earlier. In New York the December cocoa contract rallied to US$2,756 per tonne from US$2,690 dollars. Further upward price pressure is coming from cocoa farmers in Nigeria, who are paying more for goods and services because of a general rise in prices, seeking higher prices.

Coffee prices jumped amid a lack of deals. By Friday on LIFFE, London's futures exchange, Robusta for November delivery rose to US$2,128 per tonne from US$2,092 a week earlier. On the New York Board of Trade (NYBOT), Arabica for December delivery climbed to US 135.80 cents per pound from 133.05 cents.

Sugar prices rose strongly on both sides of the Atlantic. "A strong outlook for sugar market fundamentals continues to provide support to prices," said analysts at Barclays Capital. By Friday on LIFFE, the price per tonne of white sugar for December delivery rallied to £404 from £377.70 the previous week. In New York the price of unrefined sugar for March delivery increased to US 14.59 cents per pound from 13.60 cents.

Cotton prices continue to weaken, the cotton ETFS down 37 per cent on the last year and 29 per cent over the last month, according to London-based brokers Killik.

Orange-juice futures for November delivery fell US 1 cent, or 1.1 per cent, to US 90.3 cents a pound on ICE Futures in New York, but closed up 0.4 per cent on the week. Earlier, the price dropped to US 89.5 cents. “Bulls appear to be having some success in defending the 90-cent level,'' Dan Vaught, an analyst for Wachovia Securities, was reported as saying. However, the market could drop to "fresh lows'' in the absence of hurricane damage to citrus groves in Florida, the world's second-biggest grower.Retail sales of orange juice in the U.S. have dropped every month for more than three years, according to Florida government data. Brazil is the world's largest orange producer.

Eastern European food exporters are being hit by currency problems. The Polish zloty's record strength – it is up by over 13 per cent on a year ago - once a source of patriotic pride, is turning into a national curse as prices of Kielbasa sausages, steaks and hams depress sales in the US and western Europe. The Czech krone is up by 13 per cent, too. The 10 eastern European members of the EU exported 8.6 billion euros (US$12.6 billion) of food and livestock to the euro zone in 2007, representing 12 per cent of total food imports according to Eurostat, the EU's statistical office.

A survey of 426 companies by the American and Czech Chambers of Commerce in Prague showed that more than a fourth of Czech businesses are considering moving to a cheaper currency base. Unfortunately, that is not possible for the makers of speciality Eastern European foods!

Australian and lamb and sheep prices are forecast to increase during 2008-09, driven by tighter domestic supplies, according to ABARE. Average sale yard lamb prices are forecast to increase 16per cent in 2008-09 to average A $3.90/kg (carcase weight) – the highest annual price in real terms since 2004-05. According to ABARE, an expected fall in the number of lambs marked will lead to a 4 per cent decline in lamb slaughter during 2008/09 to 20 million head. This is expected to result in a 6 per cent fall in lamb production in 2008/09 to 404,000t. Reflecting the lower lamb slaughter and production levels forecast for 2008-09, Australian lamb exports are expected to slip 2 per cent, to 160,000tonnes (shipped weight).

In a week in which the Australian exchange rate rose sharply against the US dollar, the Australian wool market finished 3.7 per cent lower, on average, at sales in Sydney, Melbourne and Fremantle this week.

While shipping markets have begun to improve from the summer doldrums, the dry cargo section last week was not able to maintain the momentum. The Braemar Seascope Chartering Report showed a fall of 7.4 per cent on a month ago.

Fertiliser prices generally are still weakening on lack of sales, and Indian buyers were reported to trying to back out of deals prices agreed in July and August at above US$800 a ton now that there are reports of deals being down below US$600.

Gourmet corner:

Lavender oil prices have been lifted by a poor French crop, with prices rising by as much as 20 per cent to around EUR40 a kilo. The crop is estimated to be down around 30 per cent from its original target, with the shortfall put down to disease and bad weather. Export values have been fairly steady, at around US$20,500-21,000 a tonne. China’s crop has also been poor because of adverse weather, with frost early in the year causing widespread damage.

Coriander seed oil prices are expected to rise again following late completion of Russia’s harvest and a smaller crop than forecast. Local farmers are thought to have switched to more profitable crops, and local traders are in no hurry to sell on to the export markets. Current prices range from US$85-90 a kilo.

Honey exports from Brazil, the world’s 11th largest producer, have been booming on the resumption of exports to the EU. It is now the world’s fifth largest exporter. As global supplies have been contracting, with hives increasingly suffering from disease, Chinese, Australian and Argentine honeys have been holding their highs for the year, with prices at up to US$2,500, US$3,250 and US$3,375 a ton respectively cif European ports.

Chilli prices in the UK and elsewhere in Europe are forecast to remain firm, as changing weather patterns have encouraged farmers in Africa to switch to more profitable crops and adversely affected Chinese and Bangladeshi growers. Strong export demand is supporting high prices for Indian chillies, but traders say the domestic market is currently off by two or three per cent as markets await the new chilli crop. Export prices were being quoted at around US$2,050 a tonne, the high for the year, against US$1,700 for the low.

More Funds Launched To Exploit The Food Prices Boom

2008-11-03T01:47:00.000-08:00

Gyrations in commodity futures over the last few weeks – wild swings first in one direction then another – could very well have sent investors scuttling away from those new favourites, agricultural exchange traded funds! So, what about a quieter life and a look at some of the new equity funds – the farmland one at land agents Bidwell, for example, or the global agriculture investment trust from Schroders.

Star of Agriprods first Forum this month was Coast Sullinger, who runs the agriculture fund at Gaia Capital Advisors. The number of questions showed just how much interest there is in these kinds of funds.

The Schroders one aims to be a bit different, a London stock exchanged traded Guernsey registered fund. Aimed at launching as a £250 million fund, the Schroder Agriculture Land Fund will invest in farmland across Europe, South America and Australia for starters. About three-quarters of the Schroder fund will be invested in other funds specialized in farmland where land values and investment returns can be improved by large-scale farming or by changing land use. The balance of the fund will invest in agricultural commodities or stocks with a direct farmland theme. That, says fund manager Mark Bridgeman, may include companies like Black Earth Farming, NZ Farming Systems Uruguay and Australian Agriculture.

Farmland is enjoying its biggest revival in 30 years as investors including George Soros and the largest US pension fund manager, TIAA-Cref, believe that crop prices, chiefly grains, will be supported by shortfalls in production. In parts of the US Midwest land prices have risen as much as threefold, while broker Knight Frank LLP estimates UK values rose 38 per cent on average in the first half of 2008. .

Some of the opportunities internationally are outstanding,'' Bridgeman said. Currently he favours farms in Australia, Brazil, Canada and Romania, where he expects higher returns than in the UK or US. Bridgeman said he is conducting `detailed due diligence'' in a dozen investment opportunities, mostly regional agricultural farmland funds.

He has signed a memorandum of understanding to invest in a new Romanian land fund. An earlier vehicle run by the same managers acquired small parcels of prime arable land at prices 90 per cent less than elsewhere in the European Union, then joined them into larger units suitable for more productive, modern farming. About three-quarters of the Schroder fund will invest in other funds specializing in farmland where land values and investment returns can be improved by large-scale farming or by changing land use.

More affluent populations, particularly in Asia, as well as biofuel production, are likely to increase demand for crops and ensure land values keep rising, said Bridgeman. He has helped manage a family farm in northeast England for the past 20 years and is moving over from his role as head of research at Schroders to run the new fund.

Bidwells has set up its fund, claimed to be the largest of its kind to date, as a joint venture with Mayfair property group Palmer Capital Partners (PCP). This is a new product for PCP’s new European division in Germany, which will be working with Bidwells’ agriculture team – it has 40 consultants based principally in Cambridge. Already, getting on for EUR50 million has been raised pre-launch, and the target is to pull in around EUR300 million in total.

The Palmer European Farmland Fund (PEFF), set to go live in November has its eye on the very much cheaper farm land prices in Eastern Europe which, its managers believe, will inevitably converge with Western farmland prices. The fund is being positioned as the only direct investing, EU-based farmland fund for institutional investors. Average net income return projected is of 5.5 per cent per annum over the 10-year fund life. Combined with an envisaged capital growth in land prices over this period, the hope is that net returns will be in the region of 10 – 15 per cent per annum.

PCP will be bringing to the party is experience working in other property sectors in central Europe, and Bidwells the agriculture skills.Guy Barker, managing director PCP, says: "The fund will offer an exposure to the strong, long-term fundamentals of the soft commodity sector without the volatility associated with direct commodity investment. Essentially it is a real estate investment which is non-correlated to other mainstream property sectors. As assets will all be in the EU, it also avoids the political and economic risks of some of the more temperamental foreign land fund products.”

Richard Warburton, head of Bidwells Agribusiness, plans to go for good quality arable, dairy or even vegetable land. In addition, approximately 20 per cent will go into supporting infrastructure and commercial forestry. In his view, investors have become wary of short-term profits and are ready for the quieter life with “long-term investments in farmland, and companies in the food value-chain, such as processors”.

Bidwells’ skills in agriculture are in as short supply as those of engineers and geologists in the other resource sectors. While institutions have their eye on increased investment in farming – the massive sovereign wealth funds have begun to dip in their toes – the problem is a shortage of experienced farm managers. So they’ve had to become major investors in commodity futures to get their targeted exposure.

Figures just out from the US Commodity Futures Trading Commission, the US regulator, put sovereign wealth fund participation in US markets at around nine per cent of the US$200 billion commodity index universe. The grain complex has been a top favourite with the these funds.

For those who are still feeling adventurous, there are a couple of Africa-invested funds. Cru has launched an Africa Invest fund, aiming at putting up to £30 million into a portfolio of land and farms in Malawi. Very much bigger is the new Emergent Africa Agriculture land fund, which hopes to invest up to EUR1 billion in six to eight areas of sub-Saharan Africa on the basis that technologies new to the region, such as irrigation, could boost yields by up to 50 per cent.