China Agriculture View

Last week a cold front brought heavy snowfalls across northern and central Chinese provinces.The heave snow affected the traffic and people’s lives.At the same time, it is benefit for crops.

Heavy snow in China’s wheat belt in the north is conducive for the winter crop, particularly to help ease dry weather earlier, but it has delayed corn transport out of the areas, worsening already tight supplies in the south.

As much as 55 cm of snow fell this week in China’s provinces of Henan, the country’s largest wheat area, as well as in Hebei and Shandong, the China Meteorological Administration said.

Experts said the snow was beneficial to the wheat crop in China, the world’s largest wheat producer and consumer.

“The snowfall is more conducive for wheat, it brings moisture to the soil. Earlier, some wheat areas have had dry weather,” Zhao Guangcai, a researcher with Chinese Academy of Agricultural Sciences, told Reuters.

But he said some young wheat leaves suffered minor freeze damage.

Another researcher with the Henan Academy of Agricultural Sciences said the snow helped kill insects and save water for farmers.

Feed mills in China’s consuming south, however, could face tigher corn supplies because the snow in the north has prevented farmers from selling their new harvest and delayed rail transport.

“Corn supplies are quite tight these days; there are some delays in transport,” said one official with the New Hope Group in the southwest province of Sichuan. The company was also looking for more imports from neighbouring countries [ID:nPEK205454].

The China National Grain and Oils Information Center said the bad weather also could reduce supplies for markets in Guangdong. Tight supplies have driven up China’s physical corn prices <0#ASCORN-CN> even at harvest time.

BEIJING, Nov 2 – Many Chinese wheat-growing provinces in the north seeded clouds over the weekend to help end a persistent drought and encourage the growth of winter wheat.

In Shandong, one of the country’s major wheat-growing areas, jets and rockets were used to bring rain and ease the drought that had hit 800,000 hectares of farmland by the end of October, the China Meteorological Administration said.

Cloud seeding brought Anhui province as much as 40 mm of rain over the weekend, easing dryness since September, the bureau said in a report on its website (www.cma.gov.cn).

Seeding coupled with a sharp fall in temperatures also brought the winter’s first snow to the capital on Sunday.

Beijing Weather Modification Office used 186 doses of silver iodide since late Saturday, which brought additional snowfall of more than 16 million tonnes equivalent, said the official Xinhua news agency.

“We won’t miss any opportunity of artificially inducing precipitation since Beijing is suffering from the lingering drought,” Xinhua cited weather official Zhang Qiang as saying.

Chinese farmers completed planting this year’s winter wheat at the end of last month. China has said it will try to persuade farmers to stabilise planting acreage. China harvested 2 percent more winter wheat or nearly 110 million tonnes this year.

While the moisture was good for winter wheat, sharp temperature falls can damage vegetable crops and kill young livestock, warned the Agriculture Ministry.

Source: Reuters

US wheat futures slipped on Tuesday, extending losses to near a one-week low as investors booked profits after last week’s strong rally on a steady US dollar.

Soybeans and corn edged higher after losses in the previous session on prospects of better harvest weather next week.

“We have seen the dollar claw back some ground and that is in conjunction with a negative turn in macroeconomic sentiment,” said Toby Hassall, an analyst with Commodity Warrants Australia.

“We had such a significant move in wheat last week, really there wasn’t a huge degree of fundamentals behind that rally in terms of global demand and supply.”

Wheat surged last week to a four-month high, propelled by fund buying and rains that delayed sowing of the US winter wheat crop. Corn and soybean also rallied as wet weather slowed the harvest of this year’s big crops.

But forecasts of favourable weather and a strengthening dollar knocked down the grain markets on Monday, with corn dropping 5 per cent, wheat losing 3.8 per cent and soybeans 1.9 per cent.

The US Agriculture Department said that soybean harvest was 44 per cent complete as of October 25, well below the five-year average for late October of 80 per cent. Corn harvest was 20 per cent complete compared with the five-year average of 58 per cent.

Traders had been expecting the USDA report to show that soybean harvest was 50 to 55 per cent complete and corn harvest was 20 to 25 per cent complete.

“If we do start to see a favourable outlook for harvest than that harvest delay risk premium is going to be wiped out,” said Hassall.

BEIJING, Oct 23 – Chinese buyers have cancelled at least two cargoes of Canadian canola for November and December shipment on worries that government authorities may hold cargoes over blackleg disease, one industry source said on Friday.

Canada is the world’s biggest exporter of canola, crushed for oil used in the vegetable oil and biofuel markets. China was Canada’s top canola seed importer last year, buying 2.8 million tonnes, though it is an inconsistent buyer year to year.

But Chinese authorities have told Canada they will not accept canola seed from Nov.15 without a certificate showing it is free of blackleg. The restriction covers canola seed used in oil and meal processing, but not seed meant for replanting.

“Some buyers learned the problem last week and have washed out two cargoes,” said the source, who declined to be identified.

ICE Canada November canola closed down 4 percent on Thursday with traders saying the news led to the drop.

Blackleg can reduce yield or kill plants. It is common in Canada canola seed, but is also present in much of the world, including China, so it should not be regulated, the chief of the Canola Council of Canada, JoAnne Buth, said in an interview.

“There should not be this kind of stringent requirements for something that’s going for processing,” Buth said. “It doesn’t seem legitimate.”

More cancellations could happen as the disease is common in Canadian canola crop. Chinese buyers have already booked more than 1 million tonnes of new canola crop from Canada, said one trader with an international trading house in China.

Traders said the move would stop imports completely. Chinese buyers said they did not dare to book more new cargoes.

Two Chinese buyers told Reuters they were not clear whether the date referred to was the loading date in Canada or the cargoes’ arrival date.

Chinese quarantine authorities have not informed buyers in China and could not be reached immediately for comment.

“Some cargoes cannot be washed out, who will take them? We would see how authorities tighten inspection,” said one Chinese buyer.

The move came as Chinese farmers plant rapeseed, a crop Beijing has been buying for state reserves from farmers over the past two years to try to shore up prices.

But cheap imports had pressured domestic prices of the cooking oil, popular in the country’s south.

The news has driven up domstic prices of rapeseed oil futures, with Zhengzhou prices rising 2 percent in morning trade.

China’s rapeseed imports jumped 265 percent in the first eight months of this year to 2.19 million tonnes, after a previous record year high.

At the same time, China’s record harvest prompted the government to build large rapeseed oil reserves to support domestic prices.

China and members of the Association of Southeast Asian Nations (ASEAN) pledged to enhance agricultural cooperation to help improve economic development and prevent food crisis.

China and ASEAN countries inked “Nanning Consensus” on stepping up agricultural exchange and cooperation at a summit forum held on Monday in Nanning, capital city of Guangxi Zhuang Autonomous Region.

“Agriculture is a major field for strategic cooperation among China and the ASEAN members, which is an important part of the construction of the China-ASEAN Free Trade Area (FTA)”, said Qin Ruixiang, deputy director of the Standing Committee of the People’s Congress of Guangxi.

The parties identified seven areas as the priorities for exchange and cooperation, including agro-industry and food security, new crop varieties and animal breeds, agricultural sciences and technology, biomass energy, agricultural processing and logistics, animal husbandry and fishery.

They also vowed to optimize the allocation of resources such as labors and funds, expand cooperation on technology and personnel training and intensify agricultural investment in ASEAN.

The summit forum was held ahead of the 6th China-ASEAN Expo in Nanning to be held from Oct. 20 to 24.

An agricultural exhibition of 600 booths would be held for the first time at the expo, which aimed at expanding opportunities for agricultural cooperation among China and the ASEAN countries, Qin said.

China and the ASEAN countries launched the early-harvest program in 2004, which set to scrap tariffs on about 600 agricultural imports in both sides by 2006. The program was part of the FTA framework agreement signed by China and the ASEAN countries in 2002.

Xu Ningning, Secretary General of China-ASEAN Board of Commerce (China) said the program had boosted agricultural production in the region and accelerated trade of agricultural products.

Data from the China’s Ministry of Agriculture showed China’s agricultural exports to ASEAN hit 4.58 billion U.S. dollars in 2008, up 16 percent from a year ago, and agricultural imports from the ASEAN rose 30.2 percent year on year to 9.24 billion U.S. dollars.

Rasphone Sitaheng, minister of Agriculture and Forestry of Laos, introduces the development of Laos’ agriculture during the China-ASEAN Agricultural Cooperation Summit Forum in Nanning, southwest China’s Guangxi Zhuang Autonomous Region, on Oct. 19, 2009. More than 200 experts and representatives from Asean countries, Russia, the United States and Isreal attend the forum which kicked off here on last Monday.

LONDON/NEW YORK, Oct 16 – Agricultural commodities could be poised for stardom in 2010 as weather concerns and alternative fuel needs throw up strong fundamentals, after lagging other commodity sectors this year.

Softs, in particular sugar, will be volatile into 2010 — but offer good returns for those with a strong stomach — due to persistent rains in top producer Brazil, and India, the world’s largest consumer, shifting from a major exporter to an importer.

“Sugar has very strong fundamentals that are here to stay for more than a few months,” said Emmanuel Jayet, a commodities analyst with Societe Generale.

Peter Lucas, investment strategist with RBC Wealth Management, said softs offered good value, but also singled out corn and wheat for next year.

Corn consumption has risen to record levels, boosted by the expansion of the U.S. ethanol programme, leading to a drawdown in global stocks.

The International Grains Council last month forecast corn stocks at the end of the 2009/10 season (July/June) would fall to 134 million tonnes, down from 147 million a year earlier.

“In my opinion corn is the market which gives the trend of the grain market in general and we will have decreasing stocks. I think corn prices will increase next year,” Societe Generale’s Jayet said.

“Ethanol consumption in the U.S. is breaking new records every month,” he added.

BEHIND THE CURVE

Lucas said agriculturals had lagged a cyclical-driven rally in which base metals out performed due to expectations of growing demand as the global economy recovered.

Copper has surged 117 percent since the end of 2008 and crude oil is up 98 percent.

Among agriculturals and softs CBOT wheat is down 15 percent, corn is off 8.6 percent, cocoa is up 23.5 percent and arabica coffee is up 27.6 percent.

For a graphic showing commodity performance in 2009, click: http://graphics.thomsonreuters.com/109/CMD_IPESFT1009.gif

Lucas also said “the overall environment is competitive for a commodities rally, because of the weak dollar”.

A weaker dollar makes investment cheaper for holders of other currencies. The dollar has fallen 6.5 percent so far this year against a basket of currencies and is widely expected to extend that drop.

But investing effectively in softs will be a question of getting the right balance between fundamentals and technical charts. Softs’ performance has varied greatly due to their separate fundamentals.

Raw sugar, for example, has soared 111.7 percent since the end of 2008, largely because of India’s poor harvest, and on expectations of another disappointing crop next year following a weak monsoon.

Cocoa set the highest levels in nearly 25 years in London a week ago, powered by expectations of improving demand and worries over tight supplies from top producer Ivory Coast and other key West African growing regions vulnerable to disease and pests.

Commodity fund manager John Di Tomasso, president of Di Tomasso Group Inc. in Victoria, Canada, advocated a “middle approach” to investing in soft commodities, particularly after new milestones set in recent weeks by sugar, cocoa and coffee.

“We think some time in the next few years, the softs in general will do well, but some specific softs are overpriced at the moment,” Di Tomasso said.

Improving prospects for grindings (a measure of demand) as the global economy shows signs of recovery has also supported cocoa.

“It is very clear that grindings are starting to recover, the onus is definitely on the supply side to be able to deliver and it just doesn’t look likely,” said Kona Haque, commodity strategist with Macquarie Bank.

Arabica coffee has risen by a quarter this year, driven by increased fund activity, the weak dollar, robust demand, and recent concerns over falling Colombian coffee supplies due to poor weather and a programme to replant ageing trees.

There are also worries over weather in top coffee producers Brazil and Vietnam.

The U.S. dollar’s slide this week to its lowest level in 14 months will not be a major shot in the arm for U.S. grain exports because of a steady rise in prices fueled, ironically, by the weaker greenback.

This week’s broad-based commodities market rally on the back of the tumbling dollar, which lifted prices for corn, soybeans and wheat to multiweek highs, has largely offset the weak dollar’s benefits, traders and analysts said.

“The prices have gone up precipitously here in a short amount of time and that has actually cut our exports back,” said Don Roose, analyst with U.S. Commodities.

“The weaker dollar has not compensated for the run-up that we’ve had,” he said.

U.S. corn futures on the Chicago Board of Trade rose to a 3-1/2 month high this week, soybeans hit a six-week high and U.S. wheat reached a 10-week peak as the U.S. dollar fell to a 14-month low against a basket of major currencies.

A weak dollar is traditionally viewed as a catalyst for exports of dollar-denominated commodities like corn, soybeans and wheat because it increases the buying power of those holding other currencies.

Wheat is a particularly currency-sensitive commodity because the grain is exported by far more countries than corn and soybeans.

But U.S. wheat export sales projections have declined in tandem with the sinking dollar due to ample global supplies of cheaper wheat and comparatively higher U.S. shipping costs to key markets.

Egypt, one of the world’s top wheat importers, bought 180,000 tonnes of French wheat this week, passing on U.S. offers which were $18 to $20 a tonne more expensive.

The U.S. Department of Agriculture cut its projection for 2009/10 marketing year U.S. wheat exports this month to 900 million bushels, down 50 million bushels from its previous month estimate. Some traders said the export outlook could slip further despite the dollar’s weakness.

“The futures market is trading the dollar prematurely rather than waiting to see if we actually get demand from a weaker dollar. The market has kind of made up for the currency move almost one-for-one,” said a U.S. wheat trader.

Source: Reuters

China will increase spending on agricultural production by 20% this year amid warnings that climate change could spark a future food crisis .

Prime minister Wen Jiabao’s announcement of an extra 121 billion yuan (£13bn) to boost farm yields and raise rural incomes was a central part of his annual budget speech at the Great Hall of the People.

The government’s spending pledge also included extra money for renewable energy and improved power efficiency, but these environmental benefits were outweighed by moves to boost overall domestic consumption and a likely emphasis on intensive agriculture.

The short-term aim is to ease the impact of the economic crisis on rural dwellers, who account for more than half of the 1.3bn population. This group is considered a potential source of social instability because the average rural income is just a third that of the city. Wen said grain prices would be increased as an incentive for farmers to produce more.

Many Chinese people can remember the famines of the early 1960s which killed tens of millions of people. More recently, improved farming policies and technologies have given China a high level of self-sufficiency and growth. But the country’s top economic planning body warned that this would be hard to maintain.

Northern China, which accounts for 58% of the country’s food production, suffered its worst drought in half a century earlier this year, according to local media. Rising temperatures and over-use of water resources has continued to cause desertification, cutting the cropland available.

In the face of this, and continued industrial and urban development, it will be a major task for the coming year to be keep the area of arable land above 120 million hectares, Wen told the 3,000 delegates of the National People’s Congress, China’s parliament. This is the minimum that the government has long set for food security.

While China remains committed to high economic growth, and the consequent greenhouse gas emissions, it will continue to boost environmental programmes as well. Wen said spending would increase on wind, solar and nuclear power, as well as research on “clean coal” technology. China’s energy efficiency has improved 10% over the last three years. The output of carbon and sulphur emissions grew 5% slower than the economy in 2008.

The National Development and Reform Commission said China would introduce a regional climate change programme, shut small coal mines and power plants and continue to experiment with cap and trade emissions programmes.

China was praised for the large green component of the $586bn fiscal stimulus package it announced last November. According to the HSBC Climate Change Centre of Excellence, investment in energy efficiency measures, renewable technology and other efforts to ameliorate the impact of climate change accounted for more than 30% of the package.