Russia - Climate change would be nice if we get it Russia's summer heatwave has dimmed prospects that northern countries will “win” from climate change thanks to factors such as longer crop-growing seasons or fewer deaths from winter cold, experts say. Canada, Nordic countries and Russia have been portrayed as among a lucky few chilly nations where moderate climate change will mean net benefits such as lower winter heating bills, more forest and crop growth and perhaps more summer tourism. Russia’s two-month heatwave – blamed on global warming by president Dmitry Medvedev even though many experts say it is impossible to link individual weather events to climate change – is likely to shift the perceptions of risks. “There ought to be, coming out of this, a greater awareness that many hazards come with climate change,” said Kevin Trenberth, head of climate analysis at the US National Center for Atmospheric Research in Boulder, Colorado. “It’s not a matter of a benign shift to a longer growing season for northern nations,” he said. Russia’s heatwave doubled death rates in Moscow, wrecked a quarter of Russia’s grain crop and may cut $14 billion from gross domestic product. Many people in Nordic nations and Canada have grown aware of possible damaging side effects of less chill weather, including the risk to forests and crops of insect pests normally kept in check by winter frosts. But that belief is less widespread in Russia, where prime minister Vladimir Putin has in the past sometimes spoken about benefits of global warming. As president, in 2002 he joked that less icy weather would enable Russians to buy fewer fur coats. “By and large, Canadians understand that there may be benefits but climate change is going to be bad,” said Steven Guilbeault, of Canadian environmental group Equiterre. Extreme weather in 2010 “is going to help people understand the risks”. He said government policy did not match the urgency felt by the public. Canada’s greenhouse gas emissions were 24 per cent above 1990 levels in 2008, despite a promise under the UN’s Kyoto Protocol to cut them to 6 per cent below 1990 levels by 2008-12. Russia’s emissions were 33 per cent below 1990 levels in 2008, partly due to the collapse of high-polluting Soviet industries, and well within its Kyoto goal of keeping emissions below 1990 levels by 2012. Moscow plans to let emissions rise from current levels by 2020, despite pleas by many nations for a tougher goal. A study in Norway in June showed farming and forestry could benefit from moderate global warming, blamed mainly on emissions of greenhouse gases from burning fossil fuels. “The immediate effects are in general benefits” to economic growth, said Asbjoern Aaheim, lead author at the Center for International Climate and Environmental Research, Oslo. But there could be shocks, such as to fish stocks. And longer growing seasons were likely to have knock-on effects. – (Reuters) High crop prices to stay into 2012, says Goldman | ||||
The current food commodities rally is to prove more sustained that the last, as strong demand mops up a big chunk of rising crop production, Goldman Sachs has said, forecasting "still historically high" prices in 2012. While futures prices will be unable to maintain the current pace, they will remain well above levels before the latest rally kicked off in late June, the investment bank said. Supplies will remain under pressure from firm consumption from biofuels plants and livestock farms, both in the US and emerging markets, with American soybean inventories potentially on course to fall to 4.0%, as a proportion of use, the lowest since the 1960s. "Although we expect a supply response to the current tight balances in the 2011-12 crop year, the concurrent tightening across all major crop balances and the continued strong demand from feed and fuel will likely limit the recovery in inventories," Goldman said. "As a result, our outlook for the 2011-12 crop year points to sustained elevated crop prices, and we introduce 2012 crop price forecasts only slightly below our 2011 forecasts." Acreage battle Soybean prices appeared the best-placed for gains, requiring a move "sharply higher" to some $14 a bushel to "limit acreage loss" in the US, the oilseed's biggest producer, in the spring and lift sowings in South America to meet resilient demand.
Forecasts for continued strong Chinese economic growth in 2011 and 2012 imply "further remarkable strength of Chinese soybean consumption, supported by rising protein consumption and surging animal feed [needs]," Goldman said, adding that South American demand was expanding fast too. "In particular, biodiesel demand in Brazil is growing strongly, supported by the steady increase in required biodiesel mix into diesel." Chicago soybeans for November 2011 delivery offered an "appealing entry level", the bank said, rating the contract a "buy". 'Strong feed demand' Corn prices, which stood above $5 a bushel for less than nine months in the 2007-08 rally, were set to remain at some $5.85 a bushel into late 2011, and average $5 a bushel even in 2012.
"Our expectation for continued recovery in developing market and growth in emerging market protein consumption points to continued strong corn feed demand in 2011-12," Goldman said, noting that cattle placements on US feedlots had remained larger than expected, given firm feed prices. Even if a tax credit on blending corn-based ethanol into forecourt fuel is rescinded at the end of this year, gasoline price forecasts suggest that biofuel groups will remain in profit as long as the grain does not top $6 a bushel. Weakest link Wheat faced the worst prospects of the big-three traded crops, facing "some supply response" in 2011-12 on the "return of normal weather and some acreage gains".
"We expect that still large inventories combined with the supply response to current high wheat prices will generate a small increase in stocks-to-use levels both at the global and US level," Goldman said. "This outlook points to lower new crop wheat prices." The bank forecast wheat falling from $7 a bushel next year to $6.25 a bushel in 2012. However, Goldman added that a range of factors could potentially upset its forecasts, notably the impact of the ongoing La Nina weather pattern on South American crops, the course of US biofuels policy and the lifting, or implementation, of export bans. | ||||
30th November 2010, by Agrimoney.com | |
Crop prices to stay firm into 2012, says SocGen | |
Societe Generale analysts have lifted their forecasts for grain prices into 2012, warning that the severity of this year's production shortfalls may take more than a season to fix. The bank forecast the grains rally peaking in the first quarter next year as depleted supplies, which on its calculations will reduce US corn stocks to a 40-year low of 3.2m tonnes at the close of 2010-11, force buyers to pay up. However, the peak will be far higher than it had expected in its last commodities outlook report, in September. Societe Generale lifted by 13% to $7.70 a bushel its forecast for the average price of Chicago wheat in the first three months of 2011, by 27% to $6.60 a bushel its forecast for the average corn price and by 30% to $13.60 a bushel its estimate for soybean prices. 'Uncertainty and nervousness' Furthermore, it forecast that futures would not collapse from their peak, as after the 2008 price spike, but enter a "moderate" decline which would see Chicago wheat, for instance, remain near $7 a bushel for the rest of the year. While high prices were likely to foster a rebound in production, "it may not be enough to restore an adequate level of supply". "Steady growth" in global demand for grains alone would require an extra 30m-40m tonnes of crop production to meet, even before the replenishment of "uncomfortably low" inventories after the weather setbacks to European, North American and Black Sea crops. "In total, world grain production will need to increase by up to 100m tonnes to a record of 1.80bn tonnes," a figure which while possible, given that the US alone could raise output by 40m tonnes, required better-than-average weather conditions. "Against this background, we think that uncertainty and nervousness will consistently hang over any projected forecasts for a surplus in 2011-12," the bank's report said. Next season "will represent a crossroads, and that another year of global deficit cannot be completely ruled out at this stage". 'Warning signal' Societe Generale's bullish price forecasts reflected in part expectations of further cuts to estimates for 2010-11 crops, with the La Nina weather pattern, associated with dry weather in parts of South America, to knock 4m-5m tonnes from expectations for the continent's soybean harvest. "We tend to consider that the lack of rain which severely delayed soybean plantings in Mato Grosso, or wheat plantings in Argentina, was a warning signal," the note said. For corn, it warned that China's crop could come in short of official forecasts, noting that private analysts and the US Grains Council had come up with estimates well below the US Department of Agriculture's figure of 168m tonnes. A rise in Chinese corn prices since January last year, and the rally's resilience to recent measures by Beijing to clamp down on food inflation, appeared evidence of constrained supplies. Chicago vs Paris World wheat inventories were set to end 2010-11 at a "comfortable" 26% of demand, looser than soybean stocks, which would finish at a "satisfactory" level of 22%, and corn stocks, on course to fall to a "meagre" 16% of consumption. However, wheat's global overview masked the potential for Europe's strong pace of exports to deplete its stocks of the grain to 8.6%, tighter than in 2008, when Paris prices hit E300 a tonne. "In other words, we think that European wheat exports are going to have to slow down in the second half of the marketing season," Societe Generale said, a process which would require Europe's prices extending their premium of about $40 a tonne over US wheat to "at least" $60 a tonne. At current prices, "competition is even and European exports show no sign of slowing down. This is why we think that this spread may need to rise further". | |
Black Sea woes may give wheat price further kicker
The Black Sea grain giants, whose drought-ravaged harvest this year sent grain prices soaring, may lend a second kicker to wheat prices, thanks to growing expectations that export potential will remain muted next year.
The Canadian Wheat Board, the world's biggest seller of the grain, flagged an "increased potential" for wheat "to assume a more influential market role", given the increased risks facing many winter crops.
"In Ukraine and Russia, higher-than-normal temperatures are promoting plant growth and delaying dormancy," the board said.
"This increases winterkill potential. It also increases the likelihood that Russia will limit exports beyond the end of the marketing year, perhaps to the end of calendar 2011, at least until crop-production results become clearer."
The board, forecasting wheat prices would be underpinned by "supportive" prospects for fellow grain corn, added that it was expecting to step up sales of its own supplies over the next two months, leaving 60% of 2010-11 deliveries priced by the end of January, compared with a current figure of 39%.
Weather setbacks
Rabobank analysts noted a "high risk" that Black Sea wheat exports will "not fully recover" in 2011-12, with the "critical status" of Russia's supplies overshadowing any rebound in next summer's harvest.
And this threat had not yet been factored into wheat markets, which were making rosy assumptions about the ability of other exporters to keep on filling the gap left by Russia, the world's third-ranked wheat exporter in 2009-10, Kazakhstan and Ukraine.
Europe's winter wheat sowings had, after all, been held back by dryness in the centre of the region and wet weather in western and southern areas, making an expected increase in plantings look "less certain".
Meanwhile, a lack of moisture leaving much US winter wheat in poor condition, and the surge in soybean exports was restricting the amount of crop already in silos which could be taken to ports.
Too optimistic?
"The market is overestimating the ability of traditional wheat exporters to fill the void left by a lack of exports from the Black Sea region over the next 12 months," Rabobank said, edging its forecast for wheat prices in the third quarter of next year $0.10 higher to $6.75 a bushel.
"We believe this warrants a risk premium not yet factored into the market."
Chicago wheat for December delivery closed 0.1% higher at $6.48 ј, with Paris wheat closing unchanged at E218.25 a tonne.
London wheat for January was flat at the Ј174.65 a tonne at which it finished the last session, a two-year closing high.
Russian bottlenecks
Separately, Black Earth Farming, the Russian farm operator, said that the country was struggling to cope with its relegation from major exporter - with shipments banned since August - to a state reliant on spreading its remaining thin supplies across a huge area.
"As a result of this year's vast production drop, normal intra-country trade flows of grain have been forced to change direction," the group said.
"Instead of shipments from central regions out to ports for export, grains are now moving the other way which is putting strains on the transportation infrastructure."
Indeed, "infrastructure bottlenecks" were, in regions short of supplies, exacerbating price increases caused by the drought. Average domestic prices had reached about $214 a tonne, compared with $115 a tonne seen early in the year, the group added.
The Canadian Wheat Board, the world's biggest seller of the grain, flagged an "increased potential" for wheat "to assume a more influential market role", given the increased risks facing many winter crops.
"In Ukraine and Russia, higher-than-normal temperatures are promoting plant growth and delaying dormancy," the board said.
"This increases winterkill potential. It also increases the likelihood that Russia will limit exports beyond the end of the marketing year, perhaps to the end of calendar 2011, at least until crop-production results become clearer."
The board, forecasting wheat prices would be underpinned by "supportive" prospects for fellow grain corn, added that it was expecting to step up sales of its own supplies over the next two months, leaving 60% of 2010-11 deliveries priced by the end of January, compared with a current figure of 39%.
Weather setbacks
Rabobank analysts noted a "high risk" that Black Sea wheat exports will "not fully recover" in 2011-12, with the "critical status" of Russia's supplies overshadowing any rebound in next summer's harvest.
And this threat had not yet been factored into wheat markets, which were making rosy assumptions about the ability of other exporters to keep on filling the gap left by Russia, the world's third-ranked wheat exporter in 2009-10, Kazakhstan and Ukraine.
Europe's winter wheat sowings had, after all, been held back by dryness in the centre of the region and wet weather in western and southern areas, making an expected increase in plantings look "less certain".
Meanwhile, a lack of moisture leaving much US winter wheat in poor condition, and the surge in soybean exports was restricting the amount of crop already in silos which could be taken to ports.
Too optimistic?
"The market is overestimating the ability of traditional wheat exporters to fill the void left by a lack of exports from the Black Sea region over the next 12 months," Rabobank said, edging its forecast for wheat prices in the third quarter of next year $0.10 higher to $6.75 a bushel.
"We believe this warrants a risk premium not yet factored into the market."
Chicago wheat for December delivery closed 0.1% higher at $6.48 ј, with Paris wheat closing unchanged at E218.25 a tonne.
London wheat for January was flat at the Ј174.65 a tonne at which it finished the last session, a two-year closing high.
Russian bottlenecks
Separately, Black Earth Farming, the Russian farm operator, said that the country was struggling to cope with its relegation from major exporter - with shipments banned since August - to a state reliant on spreading its remaining thin supplies across a huge area.
"As a result of this year's vast production drop, normal intra-country trade flows of grain have been forced to change direction," the group said.
"Instead of shipments from central regions out to ports for export, grains are now moving the other way which is putting strains on the transportation infrastructure."
Indeed, "infrastructure bottlenecks" were, in regions short of supplies, exacerbating price increases caused by the drought. Average domestic prices had reached about $214 a tonne, compared with $115 a tonne seen early in the year, the group added.
by AgriMoney
