Friday, November 6, 2009

US interest rate rise in view

The weaker $US has been a key component of the rise in international grain values in recent months. But talk the US may have to raise interest rates - sooner, rather than later - helped support the dollar for a short time last week. In order to fund its ever growing debt, the US will need to lift rates to ensure US investments are competitive. The talk was spurred by another potential hike in Australian interest rates and speculation some European interest rates are set to ratchet higher.

As the $US attempted a recovery, US grain prices reacted with high volatility - nearly every uptick in the dollar was matched with a downtick in grain prices. And while we continue to talk about fundamentals - with ‘relatively’ comfortable grain stocks - it is movements in the ‘big’ dollar that is driving investment flows, grain and currency values.

In local industry news, CBH has auctioned off 70% of the core shipping space available for January to June 2010. Bidders had competed for the 4.895mmt of shipping capacity offered across Esperance, Albany, Kwinana and Geraldton. The auction took 42 rounds over three days. There were 15 participants who registered for the first auction, which covers the vast majority of the trade.

Viterra has confirmed it will rebrand the assets of ABB. All operations will be rebadged and other divisions will be renamed in line with existing Viterra structure. Signage will begin changing in coming months.
As it currently stands, container and dry bulk rates are at a very comparable level which should allow a good balance for grain exports which will spread the pressure over a greater number of service providers including container packers, bulk handlers, dry bulk operators, liner operators etc. There was interest in the container market for high protein wheat last week, but mainly out of east coast ports.

Owing to the slowest harvest on record, yield forecasts on US corn and soybean crops are being revised lower. Very light test weight might mean higher than expected usage. US ProFarmer reckons a notorious high-yield, low test-weight crop was 1992. The similarities to 2009 are very clear; late-planted, cool growing season, and high-moisture harvest.

In the first quarter of the 1992-93 marketing year, corn use (according to the Quarterly Grain Stocks Report) was steady with the previous year. In the second quarter of 1992-93, corn use surged 13% from year-earlier and use jumped 8% from year-earlier in the third quarter. Why? ‘Volume’ bushels are different to ‘weight’ bushels, which could lead to tighter-than-expected supplies of corn in the 2009-10 Quarterly Grain Stocks Reports.

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