CBOT Wheat Market Recap Report for 3/23/2009

Wheat opened higher along with corn and soybeans this morning with traders crediting the early strength to fears of stepped up inflation. This played out in outside markets with a lower dollar and higher crude oil, although the stock market was sharply higher. Funds were buyers of 2000 contracts through late morning, but prices sagged into early mid session and then made new lows on the day prior to the close. Wheat lost marginally to corn in light trade by spreaders. Heavy rain is expected tomorrow and into mid week in the western soft red wheat belt and scattered rains of up to 1 inch are forecasts in dry areas of the western and southern Plains at the end of the week. The 6-10 day forecast is for drier than average in drought-affected areas of the Plains. This week's export inspections were 22.4 million bushels in wheat, up sharply from last week's total of 12.7 million. Inspections need to average 14.6 million bushels each week to reach the USDA's projection.

Reuters Wall Street soars 7 percent on bank plan debut

NEW YORK (Reuters) - Stocks surged around 7 percent on Monday after the Obama administration detailed a plan to purge toxic assets from bank balance sheets, fueling optimism about a revival in bank lending and driving double-digit gains in financial shares.

The S&P 500 and the Dow industrials posted their biggest one-day percentage gains since late October after Wall Street finally got what it was asking for: relief for the battered banking sector and more data suggesting the housing market could be on the mend.

The success of Treasury's plan hinges on private investment, so markets were encouraged when several large investors, including Bill Gross of top bond fund Pimco, said they would participate in what has become a key part of the government's efforts to unlock credit markets and revitalize the recession-hit economy.

The KBW Bank index posted its best one-day gain since at least 1993, driven higher by a 26 percent gain in Bank of America Corp, a 25 percent advance in JPMorgan Chase & Co and a 20 percent gain in Citigroup Inc.

"Even for a bear market rally this is explosive, and frankly it's jaw-dropping. This was a massive move that had three legs," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.

Kenny cited three big factors driving the rally: the bank plan, its "benediction" by Pimco's Gross and traders reversing bets that stock prices would fall. more...

Malaysia's B5 scheme may use up 3pc of palm oil output

Malaysia is expected to consume 500,000 tonnes of palm oil, or 3 per cent, of national crude palm oil (CPO) production, when it fully implements blended biodiesel programme by early 2010, Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui said.

Also called the B5 programme, use of blended biodiesel has started with government agencies and will be extended to the industrial and mass transport sectors later.

In a recent interview with the World Refining Association, ahead of the Asian Biofuels Roundtable which will take place in Kuala Lumpur from today to Wednesday, Chin said the government is also working with Petronas to enable some retail stations to supply B5 to the agencies.

Malaysia started the B5 programme on February 1 2009 with Dewan Bandaraya Kuala Lumpur and the Armed Forces, in the central region.

"Discussions with the biodiesel producers and petroleum companies are ongoing on areas critical to the implementation, namely logistics and financing mechanism," Chin said.

He said challenges facing the biofuel industry this year include exports of subsidised US biodiesel to EU which distort prices and trade, the EU energy directive, and the global economic slowdown.

Last year, Malaysia exported 182,108 tonnes of palm methyl ester (PME), or palm diesel, valued at RM610.7 million. In January this year, it exported 12,731 tonnes of PME valued at RM30.19 million.

On the impact of the global economic crisis, Chin said the sharp drop in CPO prices, coupled with the global financial crisis, could slow the development of the biofuel industry in terms of stalling new investments.

"The Malaysian biodiesel industry has both the production capacity to a tune of 1.67 million tonnes and feedstock available to meet market demand both in the domestic and world market."

To reduce the current oversupply of palm oil and help support palm oil prices, Malaysia has also launched the RM200 million Oil Palm Replanting Incentive Scheme to reduce the nation's high palm oil stock to ensure the stability of palm oil prices.

The scheme is aimed at felling 200,000ha of oil palm trees aged 25 years and above, which will reduce palm oil supply by 700,000 tonnes annually in the short term. It has to date approved 63,000ha under the scheme, which closes at the end of June.

Chin said the quantum of CPO duty free exports has been increased to three million tonnes this year to cater to markets which prefer CPO while encouraging offtakes would also reduce stocks in the short term.

CPO futures back firmly on bullish track

OBSERVATIONS: Weakness of the US dollar triggered sharp knee-jerk upside reactions in major world commodity markets, palm oil included.

Palm oil was weak in early trade last week, falling to as low as RM1,893 a tonne, basis the actively-traded June 2009 contract.

But thanks to the sudden and precipitous drop in the US greenback against other major world currencies last week, world commodity markets overall were, all of a sudden, looking up again.

Gold for April delivery on the New York Commodity Exchange soared to US$956.20 an ounce, up US$26.10 over the week; light sweet crude oil for May delivery on the New York Mercantile Exchange, for the first time this year, closed above the psychological US$50 a barrel level, settling last week at US$52.07 a barrel. And crude palm oil for June delivery on the Kuala Lumpur commodity exchange settled last Friday at RM1,985 a tonne, up RM55 or 2.85 per cent over the week.

The US greenback was trading at its high for the year of around RM3.73 at the beginning of this month. But it was worth a tad above RM3.64 last Friday, down 2.41 percent from its 2009 high.

Not even a poor export performance thus far this month could dampen bullish investor sentiment in the local market.

Swiss export monitor Societe Generale de Surveillance put Malaysia's March 1-20 palm oil exports at 741,397 metric tonnes, down 5.6 per cent from that for the similar period last month. And Intertek Agri Services' estimate was 723,770 tonnes, lower by some 71,000 tonnes or 8.88 per cent.

Conclusion: The technicals are all bullish, suggesting that the bulls will likely gore through the RM1,995 a tonne overhead resistance level this week, putting this market firmly back on the uptrack.

Reuters Nippon Steel, BMA agree 57 pct cut in coal price

Nippon Steel, BMA agree 57 pct cut in coal price
TOKYO, March 23 (Reuters) - Nippon Steel Corp (5401.T) has sealed a year-on-year discount of around 57 percent on coking coal contracts with BHP Billiton Mitsubishi Alliance (BMA) for fiscal year 2009/10, a Nippon Steel official said on Monday.

The deal -- the first between the Australian miner and the world's second-biggest steelmaker -- usually sets a benchmark for other firms' contract negotiations for the year starting on April 1, affecting steelmakers' production costs and miners' revenues for the year.

Nippon Steel struck an agreement with BMA, the world's top exporter of coking coal used in steelmaking, at prices between $128 to $129 per tonne on March 19, compared to last year's benchmark price of $300, the official, who asked not to be named, said.

An official at JFE Holdings Inc (5411.T), the world's third-biggest steelmaker, said the company had agreed to price cuts in the same range. BMA is an equally owned joint venture between BHP Billiton (BHP.AX)(BLT.L) and Japanese trading house Mitsubishi Corp (8058.T). The deal was well-flagged as Citigroup said in a research note late last week that BMA had agreed to accept a discount of around 60 percent.

Shares in Nippon Steel closed up 4.7 percent at 269 yen before the news,outperforming the iron and steel sub-index's .ISTEL.T 3.6 percent gain. Analysts said the agreed price was higher than expected and would deal a blow to earnings at Japanese steelmakers, already struggling with falling demand and facing prospects of squeezed margins on auto-sheet, their mainstay products.

"It was a must for them to keep the coal price below $90, or their earnings would suffer," said UBS analyst Agsushi Yamaguchi. Asian steelmakers were seeking a price cut to 2007/08 levels of around $97. Global steelmakers face a sharp reversal in demand as tight credit strangles demand for cars, construction machinery and other products that consume steel.

The headwinds are stronger at Japanese steelmakers as the high yen batters their exports, while demand remains weak at home compared with South Korea's POSCO (005490.KS) and China's Baosteel (600019.SS).

Steelmakers and miners' negotiations on the 2009/10 term contract price for iron ore, other key raw material for steel making, have been prolonged as the gap between the two parties' demands are still wide. Asian steelmakers are pushing for at least a 40 percent cut in iron ore prices to 2007/08 levels to end six years of consecutive rises, during which prices rose five-fold.

Miners, however, have resisted large price cuts, encouraged by a sign of a recovery in steel output in China, the world's biggest importer of iron ore, analysts said.

Source: Reuters (23 Mar 2009)