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MONTHLY NEWS REPORT ON GRAINS

ISSUE 65 –SEPTEMBER 2010

MARKET NEWS:

Corn Set for Best Quarterly Advance Since 2006 on Declining U.S. Supplies

The Latest on Pakistan Flooding (FAO)

Subsidies won't keep bread on Mozambican tables

Russia to lift grain export ban when it becomes possible

Dollar helps US wheat to Egyptian tender victory

Afganistan - Pressure on Wheat Prices

Grain Market Report Summary (IGC)

EU targets commodity market speculation as prices soar

Five major risks for world grain markets - Rabobank

Futures Markets in August 2010 – CFTC

China may absorb South Africa’s grain surplus

THIS MONTH’S SELECTED REPORTS:

FAO/GIEWS: Crop Prospects and Food Situation – No.3, September 2010

COPA-COGECA EU-27 cereal estimates for 2010/11

FAO: Global hunger declining but still unacceptably high, September 2010

THIS MONTH’S EVENT:

FAO - Extraordinary Joint Intersessional Meeting of the Intergovernmental Group (IGG) on

Grains and the IGG on Rice – 24 September 2010

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MARKET NEWS:

============================================================================

30/09/10 - Bloomberg

CORN SET FOR BEST QUARTERLY ADVANCE SINCE 2006 ON DECLINING U.S. SUPPLIES

http://www.bloomberg.com/news/2010-09-30/corn-set-for-best-quarterly-advance-since-2006-on-

declining-u-s-supplies.html

Corn, little changed, is set for the best quarterly advance in almost four years on speculation stronger

demand for ethanol and feeds for livestock and poultry may drain supply in the U.S., the world’s largest

exporter.

December-delivery corn traded at $5.0525 a bushel in Chicago at 9:36 a.m. Singapore time, set for a 35

percent gain this quarter, the biggest advance since December 2006.

U.S. stockpiles probably declined to 1.407 billion bushels on Sept. 1, from 4.31 billion bushels three

months ago, and 1.67 billion bushels a year ago, according to an average estimate of 19 analysts surveyed

by Bloomberg News. The U.S. Department of Agriculture will release estimates on stockpiles of corn,

wheat and soybeans at 8:30 a.m. in Washington today.

“I think it’s a result of uncertainty over the U.S. crop,” Michael Pitts, commodity sales director at National

Australia Bank Ltd., said by phone from Sydney today, referring to the quarterly advance. The yield

decline in the U.S., the largest grower and exporter, added to concerns that supply is falling as demand

expands, he said.

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Increasing ethanol demand is pushing corn stockpiles lower, according to a Sept. 28 e-mail from Allendale

Inc., which estimated inventories may have fallen to 1.405 billion bushels.

Companies in the U.S. are forecast to produce 12.8 billion gallons of ethanol this year, according to an

estimate by the Renewable Fuels Association, the Washington-based lobbying group co-founded by Archer

Daniels, the world’s largest grain processor. Ethanol can be made from corn or sugarcane.

Government Mandate

The U.S. government mandates the tripling of use of corn- based ethanol and other biofuels to 36 billion

gallons in 2022, of which 15 billion gallons can be derived from the crop.

Wheat for December delivery was little changed at $6.8325 a bushel in Chicago, headed for a 35 percent

advance this quarter, the best quarterly performance in three years.

U.S. exporters sold 110,000 metric tons of soft, white wheat to Egypt for delivery in the year that started

June 1, the USDA said yesterday.

That’s in addition to the 722,600 tons of outstanding U.S. wheat sales to Egypt, and accumulated exports of

626,400 tons as of Sept. 16 in the year that began June 1.

Soybeans for November delivery were little changed at $10.995 a bushel in Chicago, taking the quarterly

advance to 22 percent, the most since June 2008.

U.S. exporters sold 165,000 tons of soybeans to China for delivery in the year that began Sept. 1, the

USDA said yesterday.

This adds to the 11.118 million tons in outstanding U.S. soybean sales to China for delivery this marketing

year, and accumulated exports to the Asian nation of 231,300 tons as of Sept. 16, according to the USDA.

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

============================================================================

28/09/10 - FAO

PAKISTAN FLOODING

HIGHLIGHTS

• FAO appealed for USD 107 million under the Revised Pakistan Floods Emergency Response Plan to

assist approximately 743 250 families through crop, livestock, fisheries and forestry interventions, andto

strengthen cluster coordination. To date, donor contributions amount to USD 20.5 million.

• FAO is assisting 423 000 flood-affected families (3.4 million people) to plant in time for the Rabi wheat

planting season ending in November (280 000 HH), save livestock (133 000 HH) and rehabilitate/repair

small-scale irrigation (10 000 HH).

• Planting wheat will be possible in many areas of Khyber Pakhtunkhwa (KPK), Punjab, Balochistan, as

well as in parts of Sindh, where flood water has already receded.

• Standing water covers 60-70 percent of Sindh, leaving farmers unable to plant and thousands of livestock

stranded without feed.

Full Report:

http://www.pakresponse.info/LinkClick.aspx?fileticket=YqMoJckjieg%3d&tabid=72&mid=412

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29/09/10 - IRIN

SUBSIDIES WON’T KEEP BREAD ON MOZAMBICAN TABLES

http://www.irinnews.org/Report.aspx?ReportID=90618

Bread is back on the menu ...- In response to food price riots in early September, the Mozambican

government has laid on a range of price cuts and subsidies to make life easier for the poor, and has

promised to do some belt tightening of its own, but observers say the measures are unaffordable and will

not address the deeper issues.

"When you have riots you need to do some damage control," Fernando Lima, a prominent Mozambican

publisher and journalist, told IRIN. "This is a short-term solution as an emergency measure."

Mozambicans in the capital, Maputo, and the nearby town of Matola, took to the streets after the

government announced on 1 September that the price of bread and other basic goods would rise.

In defence of its decision, the government pointed to external factors like drought and wildfires in Russia -

one of the world's major wheat suppliers - to justify the higher prices and quell violent protests and looting

that left hundreds injured and at least 10 dead.

Antonio Fernando, Minister of Trade and Industry, noted on state-run television that global oil prices had

increased, while climate change and "other factors" had brought about a worldwide slump in wheat

production. "We have to understand that the financial crisis has still not passed and will take time ... we are

still suffering the impact [of it]."

A day later president Armando Guebuza told Mozambicans that his government understood the hardship of

the poor, "which is aggravated by external factors, such as the financial crisis and the rising price of food

and fuel". Security forces cracked down hard on what they called a group of raiding "bandits".

Lima suggested that while external factors might have added to the growing discontent in the capital, other

issues closer to home – like poverty and unemployment - were also to blame. "The very poor are very

angry, and they have the sympathy of most of the country," he said.

Cheap bread back on menu

The unrest subsided only when, on 7 September, the government announced a u-turn on measures it had

previously called "irreversible". Fernando told Mozambique's official news agency, AIM, that the bread

subsidy would require "a major financial effort from the government", but no exact figures were given.

On 21 September, two weeks after the first riots, AIM reported that registered bakers would receive a

subsidy of 200 meticais (US$5.6) for every 50 kg bag of wheat flour - costing 1,050 meticais (US$28) -

they purchased.

Other relief measures include halving water connection fees for low-consumption households, considerably

reducing the cost of piped water to the poor, and giving free electricity to households consuming 100 kwh

or less; prepaid electricity consumers will no longer pay for trash collection.

Generalized fuel price subsidies will be converted into a direct subsidy for urban public transport, which

will avoid giving subsidies to the rich who have their own vehicles.

The price of low-grade rice will be reduced by 7.5 percent, the surtax on imported sugar will be temporarily

removed, and customs duties will be lower on vegetables like potatoes, tomatoes and onions imported from

South Africa.

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The government would also do its bit: the wages and allowances of all senior officials, board members of

parastatals, and companies in which the state is the major shareholder would be frozen pending the

outcome of an assessment of the wages policy. Wages would also have to be paid in local rather than

foreign currency to bolster the national monetary unit.

State air travel would also be restricted; Guebuza promptly cancelled a scheduled trip to New York to

attend the recent gathering at the UN to discuss the Millennium Development Goals (MDGs).

Richard Cornwell, Director of Current Affairs at the Africa Public Policy and Research Institute in South

Africa, a think-tank, said the gestures were nice but not enough, and described them as "just a stopgap".

"The pro-poor attention embodied in every measure announced by the government is a significant change,"

Young Kim, the World Bank's acting representative in Mozambique, told IRIN.

Triggers

"The protests seem to have been a manifestation of underlying frustration ... depreciation of the metical

since the beginning of the year led to rapidly rising inflation and accentuated the frustration over

joblessness and poverty," Kim said.

International Monetary Fund (IMF) figures show that the metical depreciated by more than 30 percent in

nominal terms against the currencies of Mozambique's major trading partners - up to 50 percent against a

strengthening South African rand, and 30 percent against a recovering US dollar - and by August 2010

year-on-year inflation had reached 17 percent.

Victor Lledó, Resident Representative of the IMF in Mozambique, said the cost of living for most ordinary

Mozambicans had risen sharply since the beginning of 2010, and although "food prices played a very

important role in the riots", the increase in the price of bread, along with the announced increases in the

water and electricity tariffs, were only "the triggers".

"Because of the depreciation [of the metical], and because Mozambique imports quite a significant amount

of its consumption goods [mainly from South Africa], there was a marked increase in living costs," Lledó

told IRIN. "High and accelerated inflation has a significant impact, particularly on the poorest segments of

society ... High inflation is a high tax on the poor."

Economic growth without jobs

Kim said the country had come a long way, but at the heart of the recent problems there was a growing

feeling among Mozambicans that years of high growth in the gross domestic product had not significantly

benefited the poor or translated into desperately needed jobs.

Economic growth hit double digits after a brutal civil war came to an end in 1992, and since 1996 the

economy has grown by an average of 8 percent a year; government figures project growth in 2011 at 7.2

percent, but most experts agree that the type of growth Mozambique has experienced has not really been

"pro-poor".

Foreign aid inflows and capital-intensive "mega-projects" - like the state-owned HCB power-station on the

Cahora Bassa Dam, one of Africa's most powerful hydroelectric plants, and the Mozal aluminium smelter,

which contributes almost three-quarters of the country's exports - add significantly to GDP figures but do

not do much for jobs.

"Unemployment is a serious problem but it's not really measured," Kim said. Joblessness is officially

estimated at just over 25 percent but is generally believed to be higher.

"It's about cost of living, and food is a core component of that," said Joseph Hanlon, Senior lecturer at the

Development Policy and Practice department of Britain's Open University. "Half of Mozambique's

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population is poorer than it was 10 years ago, and all indications are that poverty in Maputo city is

increasing sharply."

Opportunity in agriculture

After almost three decades of peace Mozambique still depends heavily on aid and the domestic economy

has failed to develop or diversify. "It's classic Dutch disease," Kim noted, referring to an economic term

that describes how an increase in revenues from natural resources (or inflows of foreign aid) can lead to an

immediate currency appreciation, making domestically produced goods less competitive internationally.

"Mozambique has got to start taking seriously the business of agricultural development. Aluminium

smelters are all very well and good, but the linkages with the rest of the economy are too poor for it to be

sustainable as a national development strategy," Cornwell noted.

"The [mega-projects] are essential ... because they create a cash cow for governments, but they do little to

uplift the peasant in the countryside." Hanlon agreed, calling for urgent state intervention to help create the

necessary domestic markets to help boost small- and medium-scale farmers.

"An area that the government itself is very aware of is the need to increase agricultural production;

Mozambique has large areas of arable land that are not well used," the IMF's Lledó commented.

"If this dynamic could be changed, the food supply would be improved and Mozambique would need to

import less, and that would shield it from movements in the volatile international markets," he said.

"The crisis has provided the government with a very good opportunity to show the donors how committed

they are to improving the targeting of their expenditures, and making those expenditures more pro-poor,"

Lledó noted.

"With the World Bank, we [IMF] have been strongly advocating for the government to look at the

possibility of introducing new social safety-net systems, or to scale up existing ones. One strong candidate

would be conditional cash transfers."

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28/09/10 –Interfax-Ukraine

Ukrainian premier says grain export quotas could be imposed

Ukraine could impose grain export quotas, depending how much grain the country has available, and a

decision could be reached as early as next week, Prime Minister Mykola Azarov told a press conference in

Kyiv.

"The government is assessing how much grain is available, and a decision on how much it can export will

follow," Azarov said.

Azarov said he ought to know how much grain will be available by the end of this week, and a decision

whether to restrict exports or not might be reached next week.

Deputy Prime Minister Viktor Slauta said at the end of August that the government was not planning to

impose grain export quotas for now.

Grain traders operating in Ukraine had suggested introducing the quotas from September 15. "We'll wait

until September 15, and if nothing happens the market can work freely," Slauta said, adding the quotas

might yet be imposed in the event of sharp price rises in the international grain market or speculation in

Ukraine itself.

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The government had been discussing limiting grain exports to 2.5 million tonnes, including 1.5 million

tonnes of wheat, 1 million tonnes of barley and 0.01 million tonnes of rye.

The Agrarian Policy Ministry now thinks Ukraine will harvest 38 million tonnes of grain this year after

drying. The ministry had previously lowered its forecast to 38.6 million tonnes from 40 million-41 million

tonnes. Ukraine harvested 46 million tonnes last year.

The markets have been waiting to see if Ukraine will join Russia in restricting grain exports. Russia,

formerly the world's third biggest grain exporter, sent wheat prices soaring when it introduced a temporary

ban on these exports on August 15. The embargo was introduced in order to ensure domestic supplies after

the drought caused by soaring summer temperatures ravaged this year's crop.

============================================================================

29/09/10 http://www.blackseagrain.net/

RUSSIA TO LIFT GRAIN EXPORT BAN WHEN IT BECOMES POSSIBLE

Russian Agriculture Minister Yelena Skrynnik told Itar-Tass on Monday that an export ban on Russian

grain was a temporary measure, which is going to be lifted as soon as it becomes possible in terms of food

security.

She had met representatives of the Kern Group of agrarian exporters as part of consultations on Russia's

accession to the WTO. The Kern Group comprises Australia, Argentina, Brazil, New Zealand, Paraguay,

Pakistan, Thailand, the Philippines, etc.

"As soon as we get information on the volumes of this year's harvest, we will certainly lift all the bans if it's

going to be possible in terms of food security," the Russian agriculture minister went on to say. She said

that 58.2 million tons of grain has already been collected in Russia. There are 26 million tons worth of

grain stocks plus the harvest, which is yet to be gathered. All in all, the overall grain reserve is estimated at

90 million tons while grain consumption is 77 million tons.

The minister refused to comment on whether growth in the agricultural sector might fall. She suggested

waiting for the balances on grain and harvest volumes. It will be possible to sum up the results only after

harvests have been gathered in the Siberia, the Urals and the Krasnodar territory. The Russian agriculture

minister believes that the harvest campaign may be over on October 1 or October 15 dependent on weather

conditions.

Russia's ban on grain exports was a subject for discussion at the Geneva consultations on Russia's accession

to the WTO. The ban was imposed in August after abnormal drought destroyed 30% of all grain crops.

Skrynnik said that those measures were in line with Russia's international obligations. "Staring from the

day we join the WTO, we will strictly follow the organization's recommendations. We are going to lift the

ban if the organization decides that it doesn't meet the WTO rules," the Russian agriculture minister

explained.

Commenting on the recent report of the Food and Agricultural Organization (FAO), Skrynnik denied

allegations that Russia's export ban on grain had largely provoked the growth of world grain prices. She

said that world grain prices had started going up long before Russia imposed a ban on grain exports.

In the meantime, the world's leading agricultural producers have supported Russia's plan to subsidise its

agriculture at a level of nine billion dollars a year.

"The Kern Group's ambassadors supported our position and assessed it positively," Skrynnik said. She

explained that there were three main items of the Russian stance: fixed commitments to maintain

agricultural subsidies at a level of nine billion dollars a year since the date of accession to the WTO; a fixed

schedule of reducing subsidies and non-application of export subsidies since the date of accession.

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Apart from that, Skrynnik held a meeting with representatives of the U.S. delegation who also supported

Russia's position and said they were ready to support Russia 's bid to join the WTO.

Negotiations to work out Russia's final obligations for granting state subsidies to agriculture after joining

the WTO will be held at a level of experts in Geneva late in October.

Experts believe that agriculture remains one of the main disputable issues on Russia's way to the WTO.

Other problem issues are export duties, the size of state subsidies to enterprises and the protection of

intellectual property.

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28/09/10 http://www.agrimoney.com/

DOLLAR HELPS US WHEAT TO EGYPTIAN TENDER VICTORY

Merchants have had to cut French wheat prices to secure part of Egypt's latest order for the grain, with the

weaker dollar boosting the appeal of rival US supplies.

Egypt, after its fourth ring round of merchants this month, split its latest 230,000-tonne soft wheat order

between US grain - of which state crop buyer the General Authority for Supply Commodities (Gasc), is to

take 110,000 tonnes - and French wheat, which will make up the balance.

However, while the winning US wheat was offered at an average of $273 a tonne, roughly the same price

as in the last soft wheat tender two weeks ago, Gasc paid $10 a tonne less for its French wheat, purchased

at $294.80 (E217.65) a tonne.

Egypt, the world's top wheat buyer, bought most of its wheat from the former Soviet Union last year, but

has been forced to turn to other suppliers by Russia's grain export ban.

Dollar vs shipping

The decline in French prices reflected the need to compete with US exports made more competitive by the

weakening dollar, which lost some 3% over the fortnight and continued to lose ground on Tuesday,

undermined by fears for the US economy and thoughts that the central bank may print money to support it.

"US exporters have at least got the dollar on their side, which balances out the handicap from logistics," a

European grain trader told Agrimoney.com. Agreed shipping costs for the US wheat were, at $45.75 a

tonne, some $20 a tonne higher than transport from France, a country at the other end of the Mediterranean

from Egypt.

Extra options

Nonetheless, a London analyst expressed surprised to see French wheat "so competitively priced".

"They have had to come down to buy increased demand," the analyst said.

French wheat exports made a solid start to the 2010-11 crop year in July, when shipments rose 40% to

1.34m tonnes, and have recorded a series of high-profile orders since, notably from Egypt.

The tender also provided Egypt with an increased choice of supplies, with merchants making 23 bids

compared with 18 last time, and extra an origin, Germany, with Canadian grain also offered.

'Hard to see break'

However, even with futures prices lower too on Tuesday, these dynamics did not imply that market power

was returning back to buyers, the analyst said.

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"It's hard to see the physical market breaking when supplies are tight in Europe and exports strong, and

when corn is so strong too."

On futures markets, wheat for December stood 2.2% lower at $6.90 ½ a bushel in Chicago at 17:10 GMT.

Paris wheat for November slumped to finish 4.2% lower at E210.75 a tonne, a fresh one-month low, with

London wheat for the same month closing down 2.8% at £156.45 a tonne.

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23/09/10 - IRIN

AFGHANISTAN: PRESSURE ON WHEAT PRICES

Prices of Wheat have remained stable in Afghanistan to date

Abundant global wheat stocks and unusually good wheat harvests in Afghanistan in 2009 and 2010 have

kept prices in the country relatively stable so far. According the Ministry of Agriculture, Afghanistan will

only need to import 14 percent of its wheat needs this year (about 700,000 tons) - down from recent levels

of 25-33 percent.

However, there are indications prices could rise in the coming months, placing an additional burden on

poor people in a country considered one of the most food insecure in the world.

The floods in Pakistan, which traditionally accounted for more than half of all Afghan wheat imports, could

drive up wheat prices. Kazakhstan, another major exporter of wheat to Afghanistan, has seen prices rise

following news that the 2010 Kazakh cereal harvest is anticipated to be 22 percent below average. The

Russian export ban adds to the pressure on prices. On the other hand Uzbekistan may well be in a position

to fill the gap.

On the domestic front, the US Agency for International Development’s Famine Early Warning Systems

Network (FEWS NET) said in August that food security conditions were expected to deteriorate in

production-deficit provinces in southern, eastern, and central Afghanistan where poor harvests and recent

flooding had constrained supplies.

Additional pressure on wheat prices is usually triggered by demand for wheat during September, October,

and November as Afghans build stocks ahead of winter.

According to a 6 April report by the US Agency for International Development, the Afghan government

has 70,000 tons of wheat in a newly created Strategic Grain Reserve for use in food emergencies. The

government procured the excess wheat from areas with agricultural surpluses in order to support local

farmers and meet emergency food needs, but the reserve accounts for only 10 percent of this year’s wheat

shortfall.

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23/09/10 – International Grains Council

GRAIN MARKET REPORT SUMMARY

Global grain prices advanced again in September, those for wheat having returned to the peaks reached in

early August. While the initial trigger for the steep upturn in wheat and barley values in recent months was

the fastdeteriorating outlook for these crops in the Black Sea region, much of the more recent bullishness is

attributed to concerns about smaller than anticipated US maize (corn) yields, as well as substantial new

grain buying activity by importers. Another feature is the difficult harvest weather in some countries,

affecting milling wheat and malting barley quality. US soyabean prices partly mirrored the upturn in maize,

but were also supported by concerns about South American crop prospects and continued heavy buying by

China. Asian rice prices moved higher, largely because of the impact of the flood emergency in Pakistan.

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The recent surge in world grain prices, while not on the same scale as in 2007-08, again prompted concerns

about its impact on global food prices as well as the increased volatility in the major commodity exchanges.

One measure of such volatility is the day-to-day change in futures values (such as for CME wheat – see

diagram) which, even allowing for the events of three years ago, is significantly greater than earlier in the

decade

Full summary of report is available at: http://www.igc.int/en/downloads/gmrsummary/gmrsumme.pdf

============================================================================

20/10/10 – Reuters UK edition http://uk.reuters.com/article/idUKTRE68J2PJ20100920

EU TARGETS COMMODITY MARKET SPECULATION AS PRICES SOAR

By Sybille de La Hamaide and Charlie Dunmore

BRUSSELS/PARIS (Reuters) - The European Commission is taking aim at growing speculation and

volatility in commodity markets, using its plan to reform wider financial markets, just as EU grain futures

hit contract highs on Monday.

Michel Barnier, the European Commissioner in charge of financial reform services, said at a conference

that he wanted to use a planned revision of the Market in Financial Instruments Directive (MiFID) to

reform commodity markets.

"The revision of MiFID is one of the key elements of an ambitious reform of the raw materials markets,"

the EU's financial markets chief said, stressing that commodity market regulation was high on his agenda.

"We are ready to go further. This is a key issue. We will not hesitate to consider further measures," Barnier

added.

European commodity markets are under pressure to tighten regulation as the United States pushes forward

with plans to tame speculative activity, blamed by some for boosting food and energy prices to record highs

in 2008.

The European Commission said last week it wanted to include commodities in its upcoming revision of

derivatives markets but had remained unclear on how it intended to tackle the issue of volatile commodities

markets.

France, the EU's largest grain producer and main centre for European grain futures markets, on August 31

urged common EU action to regulate commodity markets before it is due to head the Group of 20 economic

powers.

POSITION LIMITS

EU Agriculture Commissioner Dacian Ciolos, who also attended Monday's conference, said he wanted the

EU executive's plan to specifically include the issue of position limits on futures markets.

"We need to go further, especially today on the issue of position limits to counter excessive movements,"

he said.

"The role of the futures market is not to feed speculation and some actors' profits. The role of futures

markets is to offer tools to anticipate, manage volatility and contribute to the matching of supply and

demand," he said.

Volatility has been a persistent concern in recent months, with wheat gaining more than 60 percent in the

five weeks to August 5 on record volumes as drought-hit Russia, the world's third-largest grain exporter,

banned exports.

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European grain and oilseed futures powered up on Monday with wheat, maize and rapeseed prices hitting

their highest level since the summer of 2008.

============================================================================

17/09/10 – Rabobank

http://www.rabobank.com/content/news/news_archive/062-Fivemajorrisksforworldgrainmarkets.jsp

FIVE MAJOR RISKS FOR WORLD GRAIN MARKETS

Doubts on official forecasts US and China

Global grain markets are still precariously balanced following this season’s devastating crop losses in the

Black Sea Region, says Luke Chandler of Rabobank’s Agri Commodity Markets Research team. Given the

much lower feed grain exports from the Black Sea Region this season, global demand will have to be met

by the corn harvest in the U.S. and China, and wheat production from Argentina and Australia. According

to the Rabobank report, the official yield and harvest forecasts in all these regions may be overstated.

Weather in Southern Hemisphere

The major risk to Southern Hemisphere production is the strengthening La Niña weather pattern –

represented by cooling sea surface temperatures in the Pacific Ocean. According to the latest indicators, La

Niña has continued to strengthen in September and looks set to continue through the remainder of 2010.

Luke Chandler predicts that the subsequent threat to wheat and soybean yields in South America will be a

significant risk for both grains and oilseeds markets in 2010/11.

Setbacks in Black Sea region

The prolonged drought which devastated crops in Russia, Ukraine and Kazakhstan this summer could also

be a setback to new crop winter plantings. With no end in sight to the hot and dry conditions, many farmers

are missing the optimal planting window for winter wheat as they wait for rains to improve subsoil

moisture. And there are fears that even the areas that miss winter planting and pick up spring planting will

face lower yields.

Battle for acres

With prices for grains, oilseeds and cotton at such high levels, cropping farmers worldwide are set for a

bumper 12 months. Luke Chandler: “The risk here is that farmers will increase their plantings of high price

crops such as wheat, soybean and cotton at the expense of lower price crops such as corn.”

Corn is used not just for food and animal feed but also for fuel in the form of bio-ethanol. Luke Chandler:

“If we don’t expand corn acreage, there will be significant shortages in 2011/2012, particularly if drought

continues to hinder feed-grain exports from the Black Sea region.”

============================================================================

08/09/10

FUTURES MARKETS IN AUGUST 2010

OCE, Commodity Futures Trading Commission

Agriculture

CBOT Corn futures open interest increased 9.9 percent in August. Commercial participants, who accounted

for 50.0 percent of open interest, held net short positions; they decreased their long positions by 10.4

percent and increased their short positions by 29.1 percent. Non-commercial participants, who accounted

for 35.5 percent of open interest, held net long positions. They increased their long positions by 29.8

percent and decreased their short positions by 17.5 percent. Non-reportable participants, who accounted for

14.5 percent of total open interest, held net short positions; they increased their long positions by 25.0

percent and decreased their short positions by 1.6 percent.

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CBOT Wheat futures open interest fell 5.6 percent in August. Commercial participants, who accounted for

57.0 percent of open interest, held net short positions; they decreased their long positions by 10.1 percent

and decreased their short positions by 1.5 percent. Non-commercial participants, who accounted for 32.6

percent of open interest, held net long positions. They increased their long positions by 0.1 percent and

decreased their short positions by 11.7 percent. Non-reportable participants, who accounted for 10.4

percent of total open interest, held net short positions; they increased their long positions by 5.7 percent and

decreased their short positions by 7.7 percent.

CBOT Soybeans futures open interest increased 8.3 percent in August. Commercial participants, who

accounted for 55.0 percent of open interest, held net short positions; they increased their long positions by

0.9 percent and increased their short positions by 20.7 percent. Non-commercial participants, who

accounted for 32.6 percent of open interest, held net long positions. They increased their long positions by

17.4 percent and decreased their short positions by 12.8 percent. Non-reportable participants, who

accounted for 12.5 percent of total open interest, held net short positions; they increased their long

positions by 4.2 percent and decreased their short positions by 4.8 percent.

CBOT Soybean Oil futures open interest fell 7.2 percent in August. Commercial participants, who

accounted for 57.7 percent of open interest, held net short positions; they decreased their long positions by

15.0 percent and increased their short positions by 5.6 percent. Non-commercial participants, who

accounted for 32.9 percent of open interest, held net long positions. They increased their long positions by

0.1 percent and decreased their short positions by 24.1 percent. Non-reportable participants, who accounted

for 9.4 percent of total open interest, held net long positions; they increased their long positions by 8.2

percent and decreased their short positions by 27.7 percent.

Full Report: http://www.cftc.gov/OCE/WEB/index.htm

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07/09/10 – Business Day

http://www.businessday.co.za/articles/Content.aspx?id=120225

CHINA MAY OBSORB SA’S GRAIN SURPLUS - Agriculture Ministry

Agriculture, Forestry and Fisheries Minister Tina Joemat-Pettersson jets off in search of deal on maize

The government yesterday brought hope to grain farmers who are struggling to find alternative markets to

dispose of surplus maize following a bumper crop that drove prices down.Agriculture, Forestry and

Fisheries Minister Tina Joemat- Pettersson said SA is talking to China about a much-needed alternative

market.The government is also hoping to attract new investment in agro- processing plants, she said. SA,

the continent’s largest producer of maize, produced a surplus of about 4-million tons for the 2009-10

season, but strict competition rules mean farmers are not allowed to pool the surplus in order to sell it

internationally to the highest bidder. “We’ve had our first round of negotiations with the minister of

agriculture as well as the minister of imports in China,” Ms Joemat- Pettersson said yesterday, ahead of her

departure to China. She said that although China does not import maize as a necessity, “they import value-

added products which would be cattle feed and poultry feed, so the discussions we are having would be to

use some of the maize for value-addition, which would then mean that we set up systems for agro-

processing for the surplus maize that we do have”.

Argentina, Brazil and China between them account for more than 60% of total maize output in the

developing world, with China alone accounting for 45%. The Agricultural Business Chamber welcomed

the department’s efforts last night, saying that if the deal goes through it will “help stabilise the price” to

acceptable levels.

John Purchase, CEO of the chamber, said it will be ideal for the farmers and for agricultural businesses if

the minister succeeds in negotiating a long-term agreement with China. That will encourage farmers to

plant more of the grain to supply a big market such as China’s, he said. Grain SA, the body that represents

most of SA’s maize, wheat and soya producers, last week estimated that up to 10800 small farmers face

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bankruptcy due to a record maize harvest of 13-million tons, which has driven prices down. It warned that

almost 30% of commercial farmers could be out of business by next season.

Last month, Grain SA chairman Neels Ferreira called for the interventions of the departments of trade and

industry as well as agriculture, forestry and fisheries, saying the farmers want an urgent solution, given the

danger of their produce being wasted because they cannot dispose of all of it in the local market. He said

the government also needs to reopen the debate on the ban on using maize for biofuel, imposed in 2008

when world maize stocks were dwindling and there was fear of compromising food security. Allowing

maize to be sold for biofuel use would contribute to SA’s production of oil and also help the country reach

its objectives for renewable energy, he said.

Grain SA estimated that the renewable energy, or biofuel, option would add 9% to the volume of oil

produced in SA, create an extra 39% of protein feed for animal use, and add to the production of

commercial carbon dioxide. It also estimates that 105000 jobs could be created by the biofuel process

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THIS MONTH’S SELECTED REPORTS:

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24/09/10 – FAO/GIEWS

CROP PROSPECTS AND FOOD SITUATION – NO.3, SEPTEMBER 2010

At the current forecast level, the 2010 cereal production, coupled with large carry-over stocks, should be

adequate to cover the projected world cereal utilization in 2010/11. The world cereal stocks-to-use ratio at

the end of marketing year 2010/11 will decline only marginally to 23 percent, still well above the 19.6

percent low level registered in the 2007/08 food crisis period.

In developing countries, the outlook for the 2010 cereal crops is generally favourable. Good harvests are

anticipated in Eastern and Western Africa, despite serious floods in parts. In Southern Africa, an above-

average cereal crop was gathered earlier in the year. However, severe drought sharply reduced production

in North Africa, particularly in Tunisia and Morocco.

Full Text: http://www.fao.org/giews/english/cpfs/index.htm

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24/09/10- COPA-COGECA

COPA-COGECA EU-27 CEREAL ESTIMATES FOR 2010/11 SHOW PRODUCTION DROP,

CONFIRMING NEEED FOR STRONG CAP TO ENSURE FOOD SECURITY

New Copa-Cogeca EU-27 cereal harvest estimates for 2010/11 released today show production is down by

over 14 mt this year, confirming the need for a strong Common Agricultural Policy (CAP) in the future to

ensure food security for 500 million consumers.

More details and statistical details: http://www.copa-cogeca.eu/img/user/file/ALL_CER_2010.pdf.

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FAO, September 2010

GLOBAL HUNGER DECLIINING BUT STILL UNACCEPTABLY HIGH

Global hunger declining but still unacceptably high

At close to one billion, the number of undernourished people in the world remains unacceptably high in

2010 despite an expected decline – the first in 15 years. This decline is largely attributable to a more

favourable economic environment in 2010 – particularly in developing countries – and the fall in both

13

international and domestic food prices since 2008. The recent increase in food prices, if it persists, will

create additional obstacles in the fight to further reduce hunger

Full text: http://www.fao.org/docrep/012/al390e/al390e00.pdf

Website: http://www.fao.org/hunger/en/

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THIS MONTH’S EVENT

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24/09/10 - FAO

THE EXTRAORDINARY JOINT INTERSESSIONAL MEETING OF THE INTERGOVERNMENTAL

GROUP (IGG) ON GRAINS AND THE IGG ON RICE

Global cereal supply and demand still appears sufficiently in balance. While acknowledging the sudden

increase in prices and deterioration of prospects for cereal markets in recent months, for wheat in particular,

the Groups did not conclude that this situation was indicative of an impending food crisis. Unexpected crop

failure in some major exporting countries followed by national responses and speculative behaviour rather

than global market fundamentals, have been amongst the main factors behind the recent escalation of world

prices and the prevailing high price volatility. The Low Income Food Deficit Countries (LIFDCs) are most

adversely affected by these high prices. The Groups expressed sympathy towards countries which were

affected by natural disasters.

Full Report and more information about the meeting: http://www.fao.org/economic/est/commodity-

markets-monitoring-and-outlook/grains/grains-meetings/extraordinary-intersessional-meeting-of-the-

intergovernmental-group-igg-on-grains-and-the-igg-on-rice/en/

OUR WEB SITES:

FAO World Food Situation Portal

http://www.fao.org/worldfoodsituation/

FAO Grains Website

http://www.fao.org/economic/est/commodity-markets-monitoring-and-outlook/grains/en/

To request previous issues of the MNR:

http://www.fao.org/economic/est/publications/grains-publications/monthly-news-report-on-grains-mnr/en/

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http://www.fao.org/economic/est/publications/grains-publications/monthly-news-report-on-grains-mnr/en/

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http://www.fao.org/economic/est/publications/grains-publications/monthly-news-report-on-grains-mnr/en/

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