ALL EYES ON THAILAND AS PRICES LOOK UPWARDS:

from last week - test post :

ALL EYES ON THAILAND AS PRICES LOOK UPWARDS:

We are increasingly feeling that prices are on their way up, not because of what is happening in the U.S., but also because of the possibilities now seen in Asia. This week’s hot news – really a combination of two weeks of developments reveals the following:

Iraq buys 100 TMT of rice, 70 TMT from Chaiyaporn at prices of $608 and $612 PMT CIF respectively, and another 30 TMT from Saif International, thought to be of Uruguay origin at $682 PMT. The reality is that many felt that Thai prices were exceptionally “cheap” with most of the trade offers seen at $620-30 PMT levels.

Thailand announces tender for release of 753 TMT of Thai stocks (of a variety of grades, brokens and fragrant rice. While the size of the release is not much compared to stocks, this news was accompanied by news in the Thai press of a 2 MMT deal to sell to China as well as a 1 MMT deal with Indonesia that most suggest to be MOUs at best. This is on top of an earlier agreement with Ivory Coast for 240 TMT. The problem is that almost none of these are showing up in the market place, with no freight market activities seen to back up some of these claims. Thai stocks are said to be at 17 MMT or nearly 11 MMT milled and while the government looks set to continue the scheme (and we expect more warehouses to be built), there is still pressure from these mounting stocks. Sources we contacted suggested that these stocks could take 3 years or more to dispose into the market, and if the current market conditions persist, the stocks will continue to rise and add even more pressure. While there is somewhat of a veil of secrecy behind what exporters may offer for these stocks (which incidentally can be used for domestic as well as export markets), higher prices in Vietnam and India would suggest that offer prices will be higher that during the last tender which was cancelled. We are however unsure as to how close this will come to government expectations, which are at a much higher level.

Vietnam prices were up over recent weeks but look stable now, to slightly lower as no Indonesian deal came, and as Philippines, shipments were also facing scrutiny now that the customs in the Philippines was on alert after the recent press news on smuggled rice, which seems to have half its problem solved.  About half the cargo was apparently purchases by a licensed importer, but the matter is still the subject of numerous views to whether the rice, currently in Subic (a transshipment zone) is actually smuggled. These higher prices are not back by much demand, though there are two trade buyers seemingly active in procurement and loading in the last week or so. The sales to Thailand seem to have created a vacuum in brokens, as we get indication prices of $390-410 PMT for Viet brokens, but with the exporters telling us that they really cannot supply it. This squeeze on broken rice is seen to be the core for the current price rises, and notably a squeeze in the premium between higher grades and low grades, with low grades looking firm due to the tightness in brokens – except in Thailand, which seems to benefit from cheaper materials coming from cross border sources.

Is old crop available from Thailand from privately negotiated sources? The answer seems to be a yes, but the details are fuzzy at best, and some traders we contacted suggested that there were a number of layers in price, from the formal indications we provide, to a variety of price options for old crop (some of it are old crop stocks held by exporters – not all are from these “secret deals” the press in on about). The market reality is that with higher offer prices from Vietnam and India, and with India looking relatively tight for supplies before the next season, there is a window of opportunity for Thai old crop, but the lock and keys to the stocks are with the government which continues to mull over these decisions, perhaps hoping for some form of news from India.

India stable, but with less availability and a higher price. India looks remarkably stable, prices are slightly firmer, shipping is relatively slow as competition between grain exports and some monsoon led loading delays (and slow loading) seem to have capped its ability to export more. The monsoon looks better, with rains now seen at 16% below norm, and with plantings almost at back to normal. There is a sense of optimism from India, perhaps from the 28.5 MMT of rice stocks and the 76 MMT total grain stocks held, but also from news of better pulses plantings, and some improved news on soy and other oilseed crops both from India and from the U.S., which has seen some improvement in weather of late. India will see higher prices partly due to a higher Minimum Support Price (MSP) which should combine with a smaller crop (we still feel that yields will be lower despite the news from plantings, but perhaps not a disaster, certainly not worse than in 2009). The only risk now from India is the possibility of an Minimum Export Price (MEP) being imposed, and we feel that the pressure on this will come from non-grain sources, like pulses, oilseed, corn and sugar and needless to say, any decision from India will likely have a strong dose of politics within. For now, sources suggest that there is no reason to curb grain exports, but most also admit that pressures elsewhere in the agronomy, and food inflation could swing decisions.

Nigeria demand is back! But softer than H1 2012. There is also some Nigerian interest that seems to be at the back of price increases seen in Thailand, India and South American origins, for parboiled rice, as talk of a 100% import tariff rate in the New Year has spurred some buying though it is also clear that the buying is not as strong as the wave we saw in the first half of 2012. There seems more questions about whether the government would go ahead with this plan, which was announced on 11 Dec 2011 during the Nigerian budget as presented by President Goodluck Jonathan. We will have to keep a keen eye on this development.

La Niña gives way to El Niño, is one which we feel could tilt the mood in markets more than many think. All eyes are now on what meteorologists all over the world describe as a shift from La Niña (typically associated with floods and excess rains) to El Niño (typically associated with dry weather and drought). This is expected to happen from Sep, and if we look around, we already hear of floods in China, monsoon weakness in India, dry weather apparently in Cambodia (though we feel its more about cross border rice movements that don’t make it to official figures), and the possibility of dry weather impacting markets for 2013.

Prices higher this week, but longer term remains cloudy, and split in views. We feel that market prices could see an upside after Sept, but prices are already higher, with Vietnam and Pakistan looking tight for brokens. Viet WR 5% is at $440-45 PMT levels, Indian WR 5% is at $430 PMT and Indian parboiled rice at $415 PMT for 5% grades while Thai PB 100S sits at $600 PMT thanks to the recent Nigerian interest we have pointed out – albeit the wave is not as strong as before. Myanmar prices were also seen at $370 PMT and higher for Emata 25%, but with the monsoon, loading is slow and the only stocks remaining seem to be in the hand of the MRIA while the rest of the market seems to be waiting for the next crop. There is a general sense of tightness that backs the current price increases and the fact that many markets are waiting for the next harvest also support these higher prices – but everyone also watches Thailand and India for signals from policy-makers.

There is still a lot of apprehension in the market, and the trade looks split on its view to just where the markets will go. We hear and equal measure of bearish talk, mostly on account of pressures from Thai stocks, to a more bullish outlook from many who feel that it may not be in the interest of Thailand to release and drop prices. Even a decision for India to continue exports do not tend to suggest bearishness, only Thailand seems to be able to evoke the “bear” in this market. The jury is out on a trend as there are many undercurrents pushing and pulling on price views. For now, markets look relatively firm until Thailand’s decision on stocks, release and price is understood.

Price Indications
21-Aug-12	Thai	Viet	Pak	India	U.S.	S. Amer.
100B	580
5%	565	440	450	430	580	585
10%	560	435	440		567	575
15%	555	425	430		550	545
25%	545	410	400	380	525	525
A1 Super or Brokens (sortexed)	505	390	350	345		360
Fragrant A1 Super	560
Parboiled 100S or 5% for Pak / Ind	600		460	415		630
Hom Mali 92% Purity or Jasmine Rice Equivalent (5%)	1030	640
Note:  Pakistan - holiday. MEP in Vietnam 4 Jul 12 as WR 35% 375 ; Glut 10% Viet $510-530 PMT - Viet brokens still very tight

New Career Path, Uncertain World

"Too big to fall" is sadly a word we heard too often last week as my short visit to the United States was marred by the spectacular collapse of Lehman Brothers, and the nearly collapse at AIG. While my visit to the redwoods delivered several fallen giants, I am sad, AIG is not only my insurer, but sponsors to my favourite football (soccer to Americans) clubs, and as a result, my parading around in the US in a Man U shirt caused quite a stir...not that united were well known there, but because the AIG emblazoned across my chest was well recognised by Americans who thought I was getting full use of the shirt before it became useless.
Anyway, the bad word here is equitisation of loans, the root cause for all the sub-prime led disasters facing the US Banking system, worse still, the many overseas who have joined the crowd as the increasingly sheep like financial derivatives and money markets trends reveal that not many are actually in the know for what to expect.
For every loser, there must be a winner (the evil short seller in this case) and we only wonder who they are, and if any more short selling will only end up ruining the investor who takes short term profits in exchange for institutions that hold the future and hard-earned savings of many millions.
Rescue packages sadly go to fat cats and institutions and not to the ground where the suffering is acute and hence one imagines that any rescue at this stage seems only to represent a "delay" rather than a solution. Then again, this is just my humble reading of the situation.
The good news, as financial markets and equity markets overall get him, I am ever more involved in supporting agricultural products and international trade, which i would say were the few that rose on the back of a loss of confidence in the banking and investment sector as money moved back to companies with hard products, products that sustain lifem the food and agricultural sector.
On my career front, I like the people, love the concept and vision and hope that the next few months and years will see us grow into a respected group that can be trusted and relied upon for our readings of the market place. On my personal performance, so far, so good...my reports seem ok, I am always learning new skills and am happy to be closer to the people I have known over the years to offer even more!
Hope I will have time to post more updates. "Sunrise or sunset"...well all I can say is a day is not complete without both!

Memories - Rice Congress of the Americas

These are a few of the pictures, rememberance to what was a well timed event, but one held as rice prices reached new heights to offer a glimpse of what the world could be dealing with if that price race continues.

It not over yet - the world need to work together to solve this one, but the meeting was a nice wake-up call to act now, or feel some dire consequences that would certainly shake the world and politics as we know it.

On a more light hearted note, this was my first visit to Brazil, and the people, the places and the friends I now have add to what was a good business meeting.

Hang-Gliding in Rio

Here is "Zero" and I. Zero is my instructure on this bold day in Rio in May when I did my first tandem hang-gliding flight.

It was a thrill...as you move from apprehensive, nervous to sheer wonder as you take flight and look at the wonders and natural beuty offered by Brazil.

A few bikinied babes on the beach did not do any harm to the sights...and of course I landed on all fours...and enjoyed by Chopp beer after!

Here's to a nice memory of Rio and an experience I can say was special, and one I will remember for the rest of my life. Cheers!

Sustainability and the Rice Industry: Can the world recognise farmers, farm assets and value them correctly?

So rice prices are falling and the whole word talkes a collective breath of releif in anticipation of affordable food prices, perhaps some pressure off governments that genuinely started wondering if they would face political crisis as the poor (and populous) voter starved.

There is a lesson here...we should not leave our guard down. I hope that the world has realised just how easy it is for the world to move from seemingly normal situation to CRISIS.

I hope sincerely that the world does not back down from this "wake up" call. In fact falling prices for now allows us to focus on the issues on hand and more on the long term than simple survival.

We must remember just how easy it was for panic to set in when India, Egypt and Brazil banned rice exports to create what happened between October and June of 2008.

Research on improving yields, reducing reliance on water and perhaps event come up with a better formula that the current systems in place.

Farmers deserve more
Farmers are undervalued
Farm land is undervalued
Farm products deserve more respect

Just take an example...most of us as employees expect a pay increment or better earnings from year to year just to make up for inflation, rising costs...if not any other more ambitious objectives.

If you take equity markets since the 1900s....any fund manager will show you that they have always performed well over the long term
Farm products have been declining in real terms for decades and even the 2008 "boom" in prices looks only a blip when compared to the real value of commercial and residential property, eqyity markets or one of many other economic/industrial indicators

Fact is, rice, wheat or corn is adjusted up 5% since the 1900s, would not only be more expensive, but probably not seen as a "food crisis". Prices rose in 2008 by some 300% in some cases, and this was seen as unacceptable...as compared to a program that allows farmer incomes to go us (just like us), the example of 5% a year since the 1900s would actually be less painful and allow a lot of our food assets to be valued correctly.

Imagine if all the global wheat or rice assets were owned by only 2-3 companies (just like in the case of iron ore, coal or some minerals where a few giants control markets)...we would have paid the price long ago.

The farm community has long been overlooked as a service community that has less desire - THIS IS WRONG, even if it was due to ignorance and negligence.

I'm trying to put the numbers together so we can see the visuals, but the facts remain the same - we just have a massive opportunity to do something instead of pretending that 2008 was just a once-time situation.

Sentiment...and oil rule commodities...but keep fundamentals close

Its been a while since my return from Brazil, and all I can say for now is that cmmodities traders and speculaters need only look at the oil price for direction as it seems all other fundamentals do not count. In the last month or so, we see freight rates at record highs, rice has gone past 1000$ and while its down now to 800 levels, once gets the feeling that prices could go anywhere...while most tell me prices are likely to trend down in the coming weeks/months, watch the weather, watch India, watch the crop numbers towards the end of the year to get a feel for where we are headed.

I'm personally more concerned about the longer term...water...land...productivity....as the short terms seems driven by sentiment and the flow of hot money that suddenly see commodities as a viable place to park money.

Its largely sentiment driven, with the sudden launch of commodity funds, zero coupon bond like investment vehicles and a plethora of unit trusts, funds etc seemingly only adding to the sentiment factor.

Watch this space, once again I promise more, as my work takes me back to coffee, rice, coal, iron ore and steel and the global shipping that oils the wheels of commerce.

PS Do not forget the fundamentals, as when the fund decide to exit, this is all we will have...and pay attention to the physical trades and not just the paper trades.....and don't forget inflation...seems we have been cursed b y "interesting times"!

The Global Rice Situation - A personal observation

The global rice "crisis" has so suddenly emerged as the current buzz words in the global media are "food security", inflation, rising commodities prices and how poorer nations will suffer. Taking a step back, one will realise that the media missed out one rather important fact...the issues have not changed for years, its only now, suddenly when prices shoot up that everyone is in a frenzy.
Government are busy, trying to avert inflation, starvation and well....losses in the polls. what has happened? In Rice, India effectively pulled the plug on some 3 million tonnes of rice from a world trade (10% of world rice trade), Vietnam decided to play it more cautiously and not rush out to sell their crop, as did the Thais. We must remember that the rice "trade" represents a paltry part of rice production...but we must also remember the poor importers who now struggle - The Philippines I felt actually did a good job, they did not get all they needed, but were organised and got a large part of their needs early, unlike the other net importers. Bangladesh and Africa I fear will feel the brunt. Both were key Indian supply markets, and both also represent the poorer segment of importers who will struggle to meet price and freight demand that is placed upon them. Indonesia will be interesting to watch as well, and maybe Cuba, to see if their relationships in Vietnam support their needs.

My only concern, we are talking about people, and poor people at that who will pay the price of what I see as a loss of interest from the global economies on agriculture. We were too busy building factories, removing agricultural land to make way for golf courses (and factories no less), we did not heed the warnings on water, on the need for another green revolution, and simply took for granted low food and commodity prices that have been the feature of the 90s and well...for most of the 2000s.

Another concern is the sudden rush of fund money into commodity markets. These funds are needed elsewhere, and if at all only contribute to more inflation as they create smaller bubbles within relatively small markets...be it coffee, sugar, cocoa, wheat, soy or oil palm...we now see even pension funds and other longer term vehicles take a closer look at commodities markets, where investment opportunities via equity is somewhat limited due to the nature of business (you still can't take a punt on the farmer whose importance is rising fast, only a handful of agri-business and trade companies listed in a number of stock exchanges). This money only seems to create more volatility, render some contracts useless as tools for hedging and add more risk. I'm not against funds and their motives, but fear for the worst.

So where are we now? I feel this is an excellent opportunity for life sciences, crop science and biotechnology, yes, GM foods could come to the rescue, if not at least be out to an extreme test, a test that will measure their true potential. But are the masses open to this? My humble take on this: The rich citizens of the EU will continue to exercise caution as they still can't trust their governments who have so often hidden the truth, the Americas and Asia, and Africa will have no choice (ie political failure, riots, starvation, the poor will pay the price, but also hold the political card), but to take a good look at the offerings. But don't forget, Food-Crop Science is a business, so there is a price to pay.

So where are we? Water shortage is still there, the farmer is still poor (well maybe not as poor as before), the farming community continues to get smaller, and there is still no long term solutions on hand as most still focus on the short term.

There is an urgent need to look at the long term, groups like IRRI abd CGIAR and just about that, and yet the rich sovereign funds, fund managers who are tasked to grow our retirement and investment monies are only concerned about market gains (and understandably, they get paid to show a return). The return on an investment in good research that yields us solutions for the future will come in the form of affordable food, political stability and the opportunity for economies to focus on a balanced, sustainable model for growth and development.

There is no question that the world is at crossroads, and needs to invest in our garden to for more fruits, fruits that will avert starvation!

Nitin's 8th Birthday

why was I missing for most of Jan...was doing family time!!!

Coffee Outlook 2007 - Vietnam, movers, shakers and concerns of the buyers

Yes, Coffee Outlook 2007 looks good. We have people from all over the world there to talk prices, understand what Vietnam brings to the coffee industry table and to get a feel for the issues on hand.

I sense that roasters are getting worried, its becoming a supplier's world where those with physical supply will rule the roost.

On one hand - since 2002 lows, we are very happy for the farmers, but on the other hand you can't help but feel for the roasters whose margins are slowly being eroded. I wonder how brand value measures up in this scenario.

There is some pressure for sustainable development (so as to avoid the "crisis in a cup" scenario as painted by Oxfam in the early 2000s), but lots of pressure for producers to produce more!

Fact is - labour, fertilizers, land and more are rising costs...expect the bottom line levels to rise. This suggests prices will not see 2002 levels ever again.

But...are there deals in the background to pre-finance new crops and also develop a dedicated supply as conditions to such arangements...should buyers start behaving the same way as steel, iron ore and other industrial commodities where there is a lot of emphasis on maintaining a strategic interest and hence supply and availability?

We have heard all this before...and given the US Dollar's depreciation in the last year or so.
Is coffee also a victim of the energy age?
- fertiliser costs up
- coffee is not the best crop to plant - there are others
- the property boom in ASia means higher land costs and possibly higher labour costs

Should we look at Africa again? Does Africa want coffee?

Lets see what they say at Coffee Outlook 2007...and also pay attention to some of the banter duing breaks, during the parties and during the less formal meetings we have during the week.

SeaTrans - we're proud of it!!

Just back from Shanghai and am very pleased with the way everything went! We felt that everyone enjoyed it...was nice to see rooms full at the end of the conference and during the afternoons...all in all we are happy and now look forward to crafting the next event for 2008, perhaps even take the idea and build other similar platforms for exchange in commodities and in shipping.

My thoughts now move to coffee...must get ready for Vietnam.