Commodity Prices and Monsoon Panic
Over the last week, the commodity prices have increased rapidly. This increase can be attributed to two things.
1. Monsoon Panic
2. Low stocks in the market viz a viz higher demand
As regards monsoon panic, IMD has predicted few rains in North India. More rains are predicted in South and Western parts of the country, especially Maharathtra. Within the next one week, heavy rainfall is predicted in west coast (www.monsoondata.org), while most of North India will remain parched. The temperatures in the next one week are also predicted to reach over 30 degrees C in parts of Rajasthan, Haryana, Punjab and Delhi.
Based on the data available from IMD, monsoon has left fields parched in Western Rajasthan (-39%), Western UP (-28%), Haryana (-23%), Delhi & Punjab (-22%). Due to deficient rains in North India the crops that are likely to be effected are Sugarcane, Rice, Coarse cereals (maize, Jowar and bajra) and Oilseeds, in states of Uttar Pradesh, Punjab, Haryana, Rajasthan, Jharkhand and Bihar
Within the last one week, average prices of all coarse cereals have gone up. The major gainer being Barja +8.5%, Barley +9.96%, Jowar (Grain Sorghum) +14.5%. Corn is the only commodity prices of which has shown a very small increase of 2.8% as most of the end users are covered till the new crop arrives in the market.
CBOT closed a little lower than last week. Sept corn was $2.03 per bushel ($79.98 per MT) as against $2.0350 per bushel ($80.18 per MT) last week. Dec corn closed at $2.1675 ($85.39 per MT), lower than last week’s 2.1775 per bushel ($85.79 per MT)
The trade awaits the Sept 12, 2005 USDA report. As per the industry report, corn production estimates will again be lowered and the producted is estimated to be close to 10.288 billion bushels (261 MMT) (Average 10.027 – 10.595 billion bushels) (254 – 269 MMT) as against last months 10.35 billion bushels (262 MMT) report. The decrease in production is being attributed to high temperature in the corn belt.
Motorists want ethanol as oil prices soar (from various sources)
Motorists around the world are looking for cheaper fuels to run theor cars. Bio fuels have shown the way and more and more people in US, Brazil, Europe are filling their cars with more biofuels, such as ethanol made from sugar cane or corn, in the hunt for cheaper alternatives to high gasoline prices. Even before the recent surge in crude prices, countries in the Americas, Europe, Asia including India and Africa were integrating biofuels into national energy plans. France and China also plan to step up the adoption of renewable energies.
In the latest U.S. ethanol production data, output in the month of June set a record of 249,000 barrels a day and demand was growing even faster, hitting 277,000 barrels a day. Ethanol production as it is practiced in the United States -- the world's biggest fuel market -- and Europe using grain or sugarbeet, only began to become economically competitive with gasoline when world oil prices rose above $40 a barrel. On Tuesday, Sept 06, 2005 at the NYMEX futures exchange in New York, crude for October delivery was trading at nearly $66, down from last week's peak close to $71. Expects are of the opinion that the market could run to new highs should supply disruptions or an unexpected rise in demand emerge.
The explosion in demand has come from the development of flex-fuel car engines which can run on gasoline, ethanol or any blend, whichever is cheapest. Brazil, in recent years, has used about 45 percent of its cane crop for ethanol production, the rest for sugar production. In 2005, brazil is expected to use more than 51 percent of its cane crop for ethanol production because of demand from flex-fuel cars.
In India ethanol is made from molasses, after sugar has been extracted, which would possibly increase the cost of production. India is the largest consumer of sugar and if the current situation prevails, India is likely to import 1.5 MMT of raw sugar this season to bridge the demand and supply gap. The gap is likely to remain till 2006-07.
Ethanol fuel, also used as a gasoline additive to reduce pollution, a substitute for lead and sulfur and to extend gasoline stocks, is just emerging as a commodity on the global market. Ethanol futures contracts that debuted in March at the Chicago Board of Trade.
Effective use of By products
As the use of corn based Ethanol in increases, the use of Dried Distillers Grain with solubles is also gaining support. Countries like Korea, Vietnam and experimenting with DDGS in total mix rations (TMR) to be used for feeding heifers, calves and lactating cows.
It is rather difficult to gauze the market for DDG as the ethanol plants are spread across the country and the prices range from $75 in the northern plains, to $90 in Kansas and Missouri and $116 in California. (All prices are FOB basis).
USGC 2nd Poultry Meat Inspection Training Course in Coimbatore
After the success of the 1st Poultry Meat Inspection Training Course conducted by U S Grains Council in April 2005 in Bombay, the council is all geared to start its 2nd Poultry Meat Inspection Training Course in Coimbatore from Sept 18–23, 2005. About 15 participants from Ministry of Food processing Industries and private sector processing plants are expected to attend.
The attendees will receive information on US poultry inspection systems, HACCP based inspection model, Port mortem findings, chilling and freezing, packing and transport. Information on retail chain systems and food safety issues related to meat handling will be provided to the participants.
Currently no chicken being sold in the market is inspected by a government agency and certified as wholesome. Almost 95% of the chicken sold in India is traded as live and slaughtered in the streets on shops as per the requirement of the customers. This slaughter is under unhygienic conditions.
Though several municipalities have issued orders to stop street slaughter the same have not been implemented as there is no infrastructure for mechanical slaughter and the officers are not trained to inspect the poultry meat. The Ministry of Food Processing Industries, Government of India has finalized the guidelines for inclusion of chilled and frozen chicken in its mandate under Meat Food products Order of 1973. Currently MFPO covers value added products and does nor cover raw poultry meat.
Sale of inspected poultry meat is expected to boost sales and consumer confidence. As integration is set to make inroads in almost all poultry belts, the consumers can expect a better product at a good price. Integration will also aim to remove the middlemen from the system and provide a direct link between the farmer –processor and the consumer.
Amit Sachdev
Representative
U S Grains Council, India
bluecross303@gmail.com
Sept 10, 2005
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