Weekly Commodity Recap - Osage Coop Elevator...Weekly Commodity Recap December 12, 2011 400 600 800...

GRAINS & OILSEEDS Corn March corn gradually produced slightly higher trade into the end of the week last week, with higher highs on Wed-Fri following Tuesday’s nine-month lows; Friday’s close at 594 1/4 was up just one cent on the week. Corn was the quietest crop of the big three for once in Friday’s December USDA S&D, at least in the domestic S&D table; the only change was a five-million-bushel reduction in other industrial corn use, with both exports and corn use for etha-nol unchanged for 2011/12. Thus ending stocks rose by an equivalent 5 mbu, to 848 mbu. The world S&D table was slightly more eventful, with ’11/12 global corn output up by 8.5 million tonnes and carryout up by 5.6 MMT, mostly thanks to a 7.25 MMT gain in new-crop Chinese production (to 191.75 MMT). Passing on any other categories will leave the USDA with some questions for the final January S&D, with U.S. exports lagging and ethanol output surging, as well as lingering production issues for the ugly 2011 harvest. Preceding the USDA last week was the U.S. DOE reporting total fuel ethanol production for the week ending Dec. 2 at a record high 954,000 barrels per day, up from 930k bpd the previous week and exceed-ing the previous record of 939k bpd (set on the comparable week last season). For exports, Monday’s U.S. export inspections rose slightly to 38.5 million bushels, while Thursday’s export sales more than doubled to 27.4 mbu. Cumulative 2011/12 export sales stand just 28 mbu behind last year’s pace through a little over a quarter of the marketing year, with the USDA looking for a 235-mbu entire-year deficit in ’11/12 corn exports. Soybeans January soybeans held fairly steady ahead of the USDA report last week, sticking to the 1131 1/2 area (the 62% retracement on the charts) before bottoming out on Friday at just a quarter-cent above the $11 mark. The close at 1107 was almost 30 cents lower on the week altogeth-er. The trade was expecting an increase in new-crop U.S. soybean carryout, and they got slightly more than expected; ending stocks were increased by 35 mbu to 230 million bushels, now up from 215 in ‘10/11 and 151 mbu in ‘09/10. The USDA cut ’11/12 crush by 10 mbu and exports by 25 mbu, with exports now down more than 200 million bushels from last year’s peak (to 1300 mln bu) and domestic crush now at its lowest level since 2003/04 (at 1625 mln bu). World stocks rose by about a million tonnes, mostly on that U.S. usage cut, with South American production estimates unchanged this month. Weather conditions contin-ue to be consistent in Brazil and Argentina, with the main concerns still coming from south-ern BRZ and ARG, as the threat of La Nina looms; despite the excellent growing conditions for much of Brazil, Conab last week estimated the crop at just 71.3 MMT, down more than 5% from last season and well below the USDA’s 75.0 MMT figure. Earlier in the week, pri-vate analysts Celeres pegged new crop production at a record 75.6 MMT, up slightly from their November estimate. U.S. soybean inspections fell by more than 10 mbu last week to 31.6 mbu, while Thursday’s bean sales rose by slightly more than 10 mbu to 28.3 million bushels. Wheat March CBOT wheat also bottomed out following the USDA report on Friday, carving out a bottom at 584, slightly below the late Nov 586 low, and a new contract worst. Friday’s close at 596 was down almost 30 cents on the week as well. The trade was expected a steady car-ryout number in the U.S. wheat S&D table this month but they didn’t get it, with only one change but a big one—wheat exports were cut by 50 mbu to 925 mbu, now down 364 mbu from last year. ‘11/12 ending stocks rose an equivalent amount to 878 mbu, now a slight stocks increase from last season. The global S&D table also produced a bearish result, with ending ‘11/12 stocks up a sharp 6 MMT as the USDA integrated recent production increases from Canada and Australia. Argentine wheat production was also bumped up by 1.5 MMT, while Chinese output gained another million tonnes as well. Statistics Canada on Tuesday reported 2011 wheat production there at 25.26 million tonnes, well ahead of the trade’s expecta-tion for 24.5 MMT and up from 23.17 MMT last year; ABARE had estimated Australian wheat output at a record 28.3 MMT on Monday, up 8% from its September forecast, and ahead of 26.3 MMT last season. U.S. wheat export inspections fell to 14.5 million bushels on Monday, down 2 mbu on the week, with Thursday’s export sales also down slightly last week to 15.7 mbu. Ethanol No Report

INTL FCStone, Inc. and its affiliates assume no liability for the use of this information contained and expresses no solicitation to buy or sell futures, options on futures contracts, or OTC products. Commodity trading involves risks and past financial results are not necessarily indicative of future performance. Any hypothetical examples given are exactly that and no representation is being made that any person will or is likely to achieve profits or losses based on those examples. Reference to and discussion of OTC products are made solely on behalf of INTL Hanley, LLC. Reproduction without authorization is forbidden. All rights reserved. —————————–—————————————————————————————————————————————————————————————————————————————————————————————————-

Grains: Matt Zeller Ethanol: Mike Blackford

2829 Westown Parkway, Suite 100 West Des Moines, IA 50266

[email protected] 515-273-4053


Weekly Commodity RecapDecember 12, 2011

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82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

United States Exports (million bushels)

Corn Beans Wheat

4.46

4.57

4.68

4.79

4.91

5.02

5.13

5.24

5.35

800

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2-Ju

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30-J

ul-1

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-Aug

-10

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ep-1

022

-Oct

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19-N

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1017

-Dec

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an-1

111

-Feb

-11

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ar-1

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r-11

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ay-1

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-11

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DOE Weekly Ethanol Production

ENERGY Energy Outlook: Energy futures came under some selling pressure Sunday night with a sharply higher dollar seen motivating the early losses. Sovereign debt concerns out of the EU continue to loom over the market after last week’s summit failed to yield any decisive measures. Even if the new plan had all parties agree to it, critics have concerns regarding how quickly the plan can be rolled out with the biggest focus being on shorter term liquidity issues. The S&P rating service has announced that they plan on reviewing all EU countries in during the first quarter. OPEC is meet-ing this Wednesday in Vienna to discuss an output target for 2012. While there is little expectations for any changes in production levels, trad-ers will be watching the interactions between Saudi Arabia and Iran which have tense since last spring. Look for a choppy session today with the market likely to trade both sides. Any rallies are likely to be used as an opportunity to sell with upside likely being limited due to the strong price action seen in the greenback. Basis Commentary: Gulf Coast ULSD cash markets were seen trading stronger on Friday as a round of short covering before the Colonial Pipeline scheduling deadline. Traders in the Gulf had stated they were expecting to see differentials drop on the scheduling day, but were forced to step in and buy up product when it did not. NYH distillate cash markets were seen trading about flat to Thursday’s market, but traders are thinking that this might not continue as the weather in the Northeast appears to be starting to cool off. LA CARBOB cash markets came off slightly on Friday after seeing a pretty good 6 cent jump on Thursday, due to short covering on a Kinder Morgan pipeline scheduling deadline. The weather along the USAC and especially in the Northeast will demand the most attention as we move deeper and deeper into the home heating oil sea-son without much weather to warrant large amounts of demand. Last week we saw large builds across crude oil and products according to the DOE report, if we continued to see gasoline and distillate demand wane we will be in store for another build and weaker futures/basis prices. Top Headlines: ---- Petrobras said the fire that occurred Saturday night at its 120,000 bpd Pasadena, TX refinery was limited to only the 12,500 bpd coker unit. This forced the unit to shut with timetable to restart. All employees were accounted for with on injuries reported. ---- Motiva was forced to shut its 110,000 bpd catcracker at its 250,000 bpd Norco, LA refinery on Saturday because of a pump problem. Re-pairs are seen lasting roughly 24 hours with planned rates expected later this morning. ---- ConocoPhillips said it suffered a coker drum fire at its 356,000 bpd Wood River, IL refinery early Saturday. No official comment was given by company officials though this unit is said to be associated with the new installed 55,000 bpd coker unit. Friday’s gains have been turned around in early morning equity trading as investors take negative comments from the weekend and rush into the U.S. dollar. Con-cerns about the commitment to the ECB from Germany have traders questioning whether or not the European Union’s outlook is as bright as it was on Friday. It is interesting to see such drastically different headlines move the mar-ket so violently in such a short period of time. Alas, that is where we are in today’s trading world as market headlines continue to drive markets sharply higher or lower at a moment’s notice.

INTL FCStone, Inc. and its affiliates assume no liability for the use of this information contained and expresses no solicitation to buy or sell futures, options on futures contracts, or OTC products. Commodity trading involves risks and past financial results are not necessarily indicative of future performance. Any hypothetical examples given are exactly that and no representation is being made that any person will or is likely to achieve profits or losses based on those examples. Reference to and discussion of OTC products are made solely on behalf of INTL Hanley, LLC. Reproduction without authorization is forbidden. All rights reserved. —————————–—————————————————————————————————————————————————————————————————————————————————————————————————

Energies: Jack Hunter, Greg Evans, Chris Jagoda

1251 NW Briarcliff Pkwy St 800 Kansas City, MO 64131



CATTLE/LIVESTOCK Trading lower in four of the five session this week, cattle futures will post their largest weekly losses of the year, down generally $3-5/cwt in both live and feeder cattle contracts. Fresh multi-month lows in the grains, confused EU debt plans, and disappointing boxed beef price action all contributing to the ongoing long liquidation which has been in place for several weeks now. Total open interest was down another 7,000 contracts this week and now stands at its lowest level in three months. Funds had kept their livestock positions while liquidating longs in the grains, softs, and other commodity markets earlier this fall and are now perhaps ready to surrender livestock positions with a strengthening US$, less threatening grain markets, and a general "risk off" market psyche. Friday's CFTC report confirmed speculative funds having sold almost 1,000 contracts of live cattle futures this past week, but still holding almost 57,000 contracts, still very large by historical standards and leaving futures vulnerable to continued selling pressure. Long-sided index funds, separate from the spec funds noted prior, are also now liqui-dating cattle positions with their total position now near 125,000 contracts vs the 150,000+ held this past spring. 125,000 contracts now their smallest position in almost two years yet remains more than 31% of total open interest. Our weekly cash cattle trade came late in the week with a few thousand head trading Weds/Thurs before the majority of the volume came on Friday. Prices came mostly $120 live in the South, down from a $124 market in the prior week, and $121-122 live / $195-198 dressed busi-ness in the North, down from a $126+ market last week. Trade volumes appear light with two major packers absent from the negotiated mar-ket on the Southern Plains. Basis remains firmer than historicals, but weaker than what we'd seen in previous weeks. The trade continues to talk of increased cattle supplies in coming weeks/months though many feel marketings have been aggressive enough to keep showlists current. Interesting to note that Feb cattle now trade at a $2-3 discount to spot cash values vs their traditional premium of $3-4 at this time of year. As mentioned above, the boxed beef markets moved sharply lower as well this week, down more than $3/cwt in the select index and almost $6 in the choice. This follows last week's aggressive 666,000 head slaughter total and a 650,000 head pace this week. More than 1,200 total loads traded which was a seven week high. Despite the weaker fed cattle prices, most estimates will show spot packer margins going from bad to worse this week. One analyst now has spot margins at a negative $100/head, some $40 worse than last Friday. The USDA declined to significantly change their beef supply/demand estimates in their December supply/demand stats issued Friday morn-ing. They did decrease 2011 beef production by 100 mil lbs, but made no changes to their 2012 numbers which now show year-over-year pro-duction estimated to be down a material 5% on reduced slaughter supplies. Interestingly, they now have 2012 exports down just slightly y-o-y despite early 2012 bookings now running 19% above the pace seen last year. Next Friday's monthly COF report will be expected to look something like this: December 1 on feed up 4% from last year, November placements up 1%, and November marketings down 2%. If con-firmed, this on feed total would be at, or above, the previous record high established in 2007. This placement number may also be viewed as somewhat negative for those who continue to talk of sharply reduced feeder cattle supplies, but have yet to show up in placement figures.

Cattle/Livestock Ben Parks

1251 NW Briarcliff Pkwy St 800 Kansas City, MO 64131




SOFTS ICE Coffee Futures Finish Lower Arabica coffee futures finished lower on consolidation. The most active contract for March delivery settled 90 points lower at 227.75 cents a pound. Activity increased slightly today with traded volume reaching 12,661 lots, with the action driven mainly by short term specs. Uncer-tainty over Europe debt crisis kept markets volatile. Traders continued to focus on any news from origin that can give a better idea of the size of the next crop in Brazil. CONAB is expected to release the estimate for the 2012-2013 crop on December 15, and the USDA will pub-lish a revision on December 16, of the 2011-12 world output and the first estimate for the 2012-2013 crop. In June, the USDA estimated the 2011-2012 world output at 135.0 million with Brazil at 49.2 million bags and Colombia at 10.5 million bags. During the week, Arabica cof-fee futures edge down 1.80 cents characterized by low volumes. External factors and the performance of the US Dollar induced the action while the Euro-zone debt problem remained to concern participants. In London, the Robusta market closed higher. The January position closed $15 higher at $1,926 and the March position closed $16 lower at $1,962 per ton. The market action continued slowly. Physical business in Vietnam is quiet, with some European buying to cover immediate demand. After a history of defaults during the last seasons, dealers are not inclined to close forward sales. During the week, Robusta prices declined $29 per ton. The Robusta market was under pressure on growing concerns about the European crisis. The leaders of European countries appeared to come together to tie their economies much closer in a new treaty. In Vietnam, the annual ICO conference ended amid different reports with respect to the size of the crop. The NY-London arbitrage narrowed slightly to finish at 137.30 (basis the March posi-tion). ICE Coffee Warehouse Stocks rose 8,243 bags, and are currently at 1,490,079 bags. Pending Grading: 82,463 bags.

Coffee: INTL Hencorp Hernando de la Roche

777 Brickell Avenue, Suite 1010 Miami, FL 33131




COTTON From a bearish world WASDE report to indications of persistent weakness across the textile supply chain to rumors of bigger crops from key producers, much of the news last week kept prices well contained and pressured to the downside. Weekly nearby prices settled at 90.43 cents per pound, tumbling through recent support to the lowest weekly close in more than a year. Futures are now down three of the last four weeks, with a range of technical indicators leaning to the bearish camp again following a period of range-bound consolidation over the last few months. Aside from a technical standpoint, the December WASDE confirmed much of the widespread sentiment for looser global fundamen-tals. While the changes in anticipated U.S. production and demand played out much as we expected, the real fireworks were reserved for the global balance sheet, especially on the consumption side, with big drops in India, China and Turkey. In addition to these large cuts, there were modest slices in usage across many markets. In the end, world ending stocks are projected to jump 2.7 million bales from last month to 57.67 million bales, the highest in three years. In fact, many traders believe there will be more bearish revisions to several of these markets in coming months, especially China and India. This bearish view follows recent reports of fading textile output in key cotton consumers. In particular, China announced industrial output in November grew at its slowest rate in two years, suggesting weaker growth may lie ahead for the fiber sector. Weaker overall industrial output combined with sagging production across China’s textile complex is weighing on prospects for both cotton consumption and synthetic fiber production in the world’s largest textile producer. Also, Turkey’s textile sector contracted again in October, following the country’s steepest contraction in apparel exports in more than two years. This decline is directly tied to plunging retail apparel demand across Europe, by far the largest market for Turkish textile manufacturers.

The persistent pessimism across the global textile and apparel supply chain is not the only force weighing on prices, as the supply side contin-ues to expand. While the anticipated global harvest size eased a bit in December owing to the smaller U.S. crop, worldwide production is still likely to top a record 123.4 million bales, driven by prospects for even bigger crops in the Southern Hemisphere. In particular, showers over Mato Grosso cotton in Brazil intensified over the last week and a half, replenishing the young crop and helping narrow the deficit with normal season-to-date precipitation levels. And Australia’s ABARES remains more optimistic than the USDA on local harvest prospects, suggesting an unprecedented crop size Down Under may grow even bigger this season. While the news comes in dribs and drabs with few smoking guns pointing to a looming, dramatic de-cline in price, the weaker trend remains in play over most of the last nine months. A growing body of anecdotal evidence is hinting at lower Northern Hemisphere plantings this spring, owing to relatively more attractive crop prices elsewhere. While this issue could stifle any near-term tumble to long-run average prices, we look for the market will drift low-er in the weeks ahead, now than long-term support has been broken.

Cotton: Gary Raines Fibers & Textiles

209 10th Avenue South Nashville, TN 37203




DAIRY Cheese CME spot cheese prices dropped sharply this week with barrels showing the larger decline with heavy trading volumes. The blockbarrel spread, which was at a prolonged inverse last month, has now widened considerably above the long-term 2.5 cent average. Given the current position of the CME futures nearby contract, I would expect that it is more likely that the spread will be narrowed by barrels coming up to blocks rather than vice versa. USDA Dairy Market News (DMN) notes that the recent decline in price has spurred on some featuring and promotional campaigns by retail-ers. Demand for mozzarella and provolone is good with extra interest also noted in pepper jack and Colby / jack. Many cheese plants are be-ing contacted to handle surplus milk loads during the upcoming holiday period as Class I interest will be lower with the schools out on break. The international markets were mostly a mixed bag this week. The USDA-AMS reported its bi-weekly Oceania Cheddar cheese price down 3.4 cents from the previous period. The December 6th gDT auction had cheddar cheese prices up 2.1% across all contracts compared to the previous auction price. The CME cash-settled cheese futures prices were lower across most of the forward months for the week. Butter / Cream Despite the lower weekly average price, CME AA spot butter prices seem to have found some support as the market rebounded a total of one penny on Monday and Tuesday and held firm for the remainder of the week with decent trading volume. Class II operations have again ramped up their draw on the cream supply; however, DMN notes that most producers and handlers expect this to be temporary. Most expect churning will be fairly heavy by the end of the year and continue into the new year. Demand has been active as buyers place fill-in orders for the upcoming holiday and many retailers are indicating strong feature activity for the next two weeks. On the international front, the AMS bi-weekly prices for butter were unchanged for Oceania and slightly lower for the EU. DMN notes that the EU market has a weaker tone with sales mostly centered around the internal market as EU butter is still at a price disadvantage to meet demand. On the gDT auction market, anhydrous milkfat was up 12% across all contracts. CME butter futures were a mixed bag this week, higher on the nearby months and lower on the deferreds. Milk Powder NDFM prices continue to slide lower on the AMS spot markets amidst what is termed as a “sluggish” market by DMN. Most buyers are satis-fied with current stocks on hand and prefer to work through inventories before going back to the market. The current strong inverse in the forward curve has certainly been encouraging more “hand-to-mouth” purchases over the recent months. Despite the cash market weakness, the CME futures forward curve did move slightly higher on the week, perhaps reacting to the stronger tone in the gDT auction market this week, where skim milk powder was 2.6% higher across all contracts. Dry buttermilk markets were a mixed bag, with the Central / East price down slightly and the Western price up a 1 1/4 cents. DMN reports that a recent export order has put Eastern inventories in a better position and production has been heavy recently but is expected to move low-er with the increase in Class II cream demand. On the gDT, dry buttermilk powder was up 14.4% across all contracts while whole milk pow-der was up 2.0%. Whey Complex Dry whey prices continue their show march higher as the market remains very tight. Some buyers have found themselves back bidding in the spot market as some producers are cutting contract sales as they struggle to keep current with contract commitments. Production is expected to remain firm with cheese production. Keeping a reign on price increases is the continuing threat of some demand destruction through reformu-lation by manufacturers as they examine all of their alternatives for substitutes to dry whey. Prices still have a ways to go before they reach the peak levels seen in 2007. WPC remains steady as DMN characterizes current demand as strong. Supplies are tighter as some manufacturers cease producing WPC 34 in lieu of other products. Some manufacturers indicate that they are mostly committed already for most of their planned 2012 production. Lactose prices also remain steady as there are reports that there still remains some 2012 contractual demand to be satisfied. Manufacturers report still receiving inquiries from buyers. Also of interest is the announcement that lactose will start trading on the gDT auction starting in April 2012.

Dairy: David Bullock INTL FCStone Foods Division

300 Highway 169 South, Suite 350 St. Louis Park, MN 55426




STEEL Raw Materials: Wisconsin looks to push through Mining Regulation Bill and Fast-track Iron Ore Project- The GOP wing of the Wisconsin House of Representatives has released a draft bill to overhaul the state’s mining regulations and limit the ability of environmentalists to challenge per-mit decisions. The bill has long been awaited as Gogebic Taconite had announced plans to move on iron ore mining in Penokee Hills, south of Lake Superior. It is a classic debate over whether or not the jobs and overall economic impact outweigh potential environmental risks- with local unemployment around 10% the jobs issue may be a winning one for Republican’s but the battle appears to be just starting. One sticking point will be language that precludes citizens from bringing any lawsuit related to the mining once a permit is granted- partisanship has been evident and growing in Wisconsin this year and we can expect this process to be a long and bitter one with no clear outcome yet in sight. US/Global: Worker Strikes at ArcelorMittal Europe Sites– Wednesday of this week we saw the stirrings of some major labor action at European plants controlled by ArcelorMittal, with thousands of workers staging strikes and demonstrations over job security concerns. We didn’t see much impact coming from some of the strikes which were only 2 hour shift protests but we have also heard some news of 24 hour walkouts- plants in Belgium, France, Luxembourg and Italy were all effected and further disruption could now be expected in Spain and possibly some sites in Germany, Poland & the Czech Republic. The effect right now is also limited as the 24-hr walkouts were mostly at plants already idled- but the unrest now seems to risk spilling over into areas where production could be impacted. Projections suggest a 25,000 person walkout would hit output by at least 10-20% across Europe. We will update this story as more information about the protesters and unions plans become clear. Severstal Quarterly Results Driven by Russian Market- The Russian steel and mining company saw net income of $429 million in its quarter ended Sep. 30th, up 16.6% from the year prior- most of the growth was seen coming from the domestic Russian construction market and not from the US unit- but Q4 is often seasonally weak in Q4. German Output at 10-Month Lows in October- German crude steel, pig iron and ferroalloys all showed some softening in October, drop-ping 1% month on month to the lowest level of 2011 after a fourth consecutive monthly decrease. Steel processing is still running a little bet-ter but overall demand had forced the idling of a number of different elements in the supply chain even as overall production continues to run at 1.3% better year on year. The bulk of the decline came in the auto sector, dropping 12.9% from the usual seasonal peak in October, which offset light increases in other sectors (notably construction and machinery). Asia: Asian HRC Prices Sideways Post Japanese Price Hikes- We reported last week’s announcement that Japanese producer JFE would be hik-ing base prices for HRC by $50/tonne but since then the fallout has been minimal and we have not seen the remaining producers follow through. Chinese export prices moved up slightly and are now seen at or near $600/tonne FOB Shanghai, about $10/tonne higher than last week but Chinese sellers are now pushing for $605/tonne. With freight right now at about $50-55/tonne for a 5,000 tonne shipment for Chi-nese material, the exports should not catch significant buying interest with domestic prices still depressed in Europe and Japanese and South Korean producers looking to be aggressive with offers to compete with the Chinese. Flat-Rolled Inventory Optimization: Little to update here- flat-rolled futures markets remain quiet today though US producers continue to follow behind price hikes as we hear news that RG Steel has an-nounced that it will increase prices on hot-rolled to follow this week’s announcements by Nucor and AK Steel. Price in-creases for RG Steel will also be effective immediately on new orders and will be for a mini-mum of $40/ton. That rounds out the vast majority of domestic US producers, all of which have now followed Severstal’s lead with further price hikes.

Steel: Spencer Johnson, Dr. Mo Ahmadzedah

2829 Westown Parkway, Suite 100 West Des Moines, IA 50266




EUROPEAN WHEAT/GRAINS AMSTERDAM, Dec 9 (Reuters) - European milling wheat futures edged lower on Friday after a U.S. Department of Agriculture (USDA) report showed higher-than-expected grain stocks . * By 1550 GMT the most traded contract on Euronext milling wheat futures, March, was 0.9 percent lower at 173.75 euros a tonne for around 7,000 lots. Front month January was 0.4 percent lower at 179.00 euros a tonne. * A bigger-than-expected stocks forecast from the U.S. Agriculture Department pressured Chicago Board of Trade corn, soy and wheat futures early on Friday, traders said. * The world is harvesting its largest-ever wheat, corn and rice crops this year, easing tight supplies that drove world food prices to record levels earlier this year, the U.S. government forecast on Friday. * Europe secured an historic agreement to draft a new treaty for deeper economic integration in the euro zone on Friday, but Britain, the region's third-largest economy, refused to join the other 26 countries in a fiscal union and was isolated. * European Union grain trade lobby Coceral raised its forecast for the bloc's soft wheat harvest in 2011 to 129.64 million tonnes on Friday, up from 128.39 million tonnes estimated in October. * The benchmark contract on Euronext for new crop fell 1.1 percent, following the general bearish trend but also due to beneficial rainfall in western Europe. GERMANY * In Germany, prices followed Paris and U.S. markets down after the bearish U.S. Department of Agriculture report. The return of the Rhine and Danube to normal levels meant dealers were seeking to fulfill deliveries delayed because of the low water which had prevented vessels from sailing full. * Standard new crop bread-quality wheat for January delivery in Hamburg was offered for sale down two euros at 189 euros a tonne with buyers at around 188 euros. * Hamburg selling prices remained 11 to 12 euros above Paris futures due to farmers retaining produce in the belief 2012 supplies will be tight after Germany's disappointing 2011 wheat harvest. * The return of water levels on the Rhine and Danube rivers were making transport easier and traders were scrambling to organise ship-ment of delayed loads. * "Freight prices on the Rhine and Danube are not quite back to normal levels and the situation may not fully normalise for a couple of weeks," another trader said. "The low water levels meant more ships were needed to carry consignments as the vessels could not sail fully loaded. This means Rhine and Danube ships are much more widely dispersed than normal and it will take some time before normal vessel positioning and loading patterns are resumed." * The Danube is an important route for Hungarian and other east European maize shipments to the west, especially the giant Dutch animal feed industry. * "Vessel posi-tioning on the Dan-ube may take longer than the Rhine to return to normal," the second trader said. "With the Christmas break also approaching, this means we may not see the first maize shipments from Hun-gary to Holland until the second half of January."

European Wheat/Grains Jaime Nolan Miralles

5th Floor, Portview House Thorncastle St, Dublin 4, Ireland

[email protected] +353 1 6349140



BLACK SEA GRAINS Russia (USD/RUR = 31.73) The harvest is complete. Russia has harvested 97.8 mmt of grain in bunker weight, this includes 59.4 mmt of wheat, 17.7 mmt of barley and 5.8 mmt of corn. This final production level far above last years 63.7 mmt but below the 101.9 mmt in 2009. Higher yields were realized in comparison to years past as growing conditions/practices were favorable this year. Winter grains remain in great condition as moisture levels remain sufficient, but recent warm trend has melted snow, exposing winter grains to cold temperatures. According to SovEcon, the overall condition of the winter grains remains one of the best in recent years. Current export volumes are following the early winter trend as we typically see a decline in exports until March. In the midst of decreasing exports, logistics continue to be an issue with rail car availability as well as port congestion. As of the end of Nov, Russia has exported 15.2 mmt of grain. The Russian Government made the first interven-tion purchase, 83.7k mt in total. This had a minimal effect on domestic prices, but shows the fact that domestic values may be nearing a low. Prices: Corn (FOB)= $210/MT, MW (FOB)=$233/MT(Novo.) $205/MT(Azov), FB(FOB Novo)=$249/MT, FB Rostov -$217/MT Ukraine (USD/UAH = 8.01) Ukraine harvested a total of 57.8 mmt of grains in bunker weight (54.5 mmt net weight) this 1 mmt higher than 2008 making a record pro-duction year since Ukraine’s independence. Average yields were 3.75 mt/ha vs 2.8 mt/ha last year. As previously mentioned the winter crops are far from ideal, this remains the primary concern for market players (I think the attached map speaks for itself). Minister of Ag has ex-pressed his concern, but has yet to implement any type of quota/duty system on wheat. Right now temps are above average (30’s to 40’s), but the lack of snowfall has growers worried if a cold snap arrives. Some rains have been realized, all under a quarter of an inch, and additional showers are forecasted for the coming week. This helping moisture levels, but recent moisture is a little to late. Situation is far from being resolved, but at least conditions are not getting worse. Talks of increased fertilizer application come spring, this adding costs to the producer. According to the Ministry of Ag, as of Dec 8th, 77.5% of winter grains have emerged vs 71% last week. Winter rapeseed was in good condi-tion on 32.9%, this vs. 53.5% last year. Historically the highest amount of winter kill is realized on the rapeseed crop. Export volumes out of Ukraine have continued to be strong, especially for corn as supplies come to market given the lack of storage. Wheat exports remains slow as farmers have bullish attitude, and barley exports remain limited due to the export duties that remain in place. Ukraine grain exports are now forecasted at 23 mmt, down from earlier estimates of 26-27 mmt. Ukraine has exported 7.3 mmt of grain this season, this nearly 2.1 mmt more than LY. This consists of 2.8 mmt of corn, 2.2 mmt of wheat, and 1.8 mmt of barley. Nov exports may exceed 2 mmt, including 1 mmt of corn. The total export capacity of Ukraine remains 3 mmt, but logistical issues much like Russia has been a hindrance. FOB Black Sea Port prices: Corn=$229/MT , FW=$217/MT, MW=$238/MT(11.5%), FB=$258/MT, RS DAF/FOB = $545 SO FOB = $1092/MT (Dec) Kazakhstan (USD/KZT = 147.65) According to the Ag Minsitry of Kazakhstan, a total of 29.9 mmt of grain in bunker weight (26 mmt net weight) has been harvested. Dur-ing November, Kazakhstan exported the highest amount of flour. This the primary function of Kazakhstan's inability to export wheat, mak-ing it more economical to produce flour. Kazakhstan is currently uti-lizing the port of Aktau, but this reducing their export potential. Ex-port potential remains 15 mmt, but due to logistical issues it seems 10 mmt is more of a reality. Export Prices: MW(11.5%) DAF Russia = $154/MT, MW(11.5%) Aktau Port = $191/MT. Bottom Line: Given the competitive nature of global exports, we continue to see wheat prices to remain $235-$245 FOB and corn prices to remain $230 FOB for some time. Much like any farmer around the world right now, they remain hesitant sellers, wheat growers in particular as winter conditions look to be bullish price as conditions remain far from ideal. This crop year the Black Sea should realize 56 mmt of exports, this vs. 21.5 mmt last year, 51 mmt in 2009, and above the previous 2008 record of 53.6 mmt.

Eastern Europe Weekly Matt Ammermann, Dan Hofstad

300 Hwy 169 South, Suite 350 St. Louis Park, MN 55426




BRAZILIAN SOYBEANS LOW DOMESTIC PRICES The Brazilian spot market presented a high during most of the week, although presenting declines on Friday, influenced by the international market.In Paranaguá, the premiums registered a slight weakening, with the December delivery quoted 65 points higher than the 2012 futures contracts. CONAB REDUCES BRAZILIAN SOY PRODUCTION TO 71.3 MILLION In the third crop survey released by Conab for the 2011/12 cycle, the country's soybean production estimate was reduced to 71.3 million tonnes. This represents a decrease of 5.4% over the previous year. Despite the 0.7% increase in planted area, production should be lower due to a productivity drop, estimated to be below 3,000 kg/ha in the national average. The La Niña phenomenon is expected to affect Brazil’s cli-mate, causing a longer dry period during the crop and harming the grain’s productivity. Graph – Planted Area– Soybean- Brasil Graph – Production and Productivity– Soybean- Brasil

Also according to Conab, as of November 30th, planting activities were finalized in 88.5% of the total area provided. 70% of the already planted area is in the vegetative growth period. Therefore, it is increasingly important to monitor the weather in producing areas, which will be essential to determining the production volume and the productivity level of the Brazilian grain. PARANÁ AND MATO GROSSO’S PRODUCERS START TO WORRY ABOUT THE LACK OF RAIN It has not rained for some days in several major soybean producing regions of the country (especially Paraná and Mato Grosso) and farmers have begun to worry about the drought. The rainfalls in November are well below those recorded in the same period last year, which could affect soil moisture and grain development. The situation may become critical, with noticeable losses if dry continues this week. The weather forecast does not indi-cate the occurrence of rains in the next 10 days in the southern region. In Mato Grosso, rains are possible, but it will be necessary to observe whether the volume will be suffi-cient to restore soil moisture.

Brazilian Soybeans Planning & Research Department

Ala Oeste - Sala 203 Campinas, Sao Paulo 13091-611

[email protected] 55 19 2102 1335



AUSTRALIAN WHEAT/GRAINS Cash Grains – Domestic Australian wheat values are beginning to be on the nose at the moment, almost like a bucket of prawns left out in the sun with interior basis relative both ASX and international benchmark CME falling off a cliff and hitting every branch on the way down. Values falling as much as $A8-10 basis ASX for ASW/SFW grades in the interior, as a combination of quality downgrading rains and the consumer full up to his gills we now see grade spreads at -$A24 and -$A31 against base grade delivered APW $A216. With the crop feeling bigger with reports (ABARE increased total production to 28.2 mmt up 2.2mmt) you get the feeling that basis may still have a little way to fall until we hit our lows, par-ticularly for these sub milling quality grades unless overseas values where to pummelled and triggered selling resistance. Cash Grains - Export With November being a relatively liquid the beginning of December has been much tougher, as the market seems more concerned with Christmas parties. The consumers are stepping in and buying cover for 8 months out on the lower grades. Grower selling is still rather quiet on wheat as they are storing 60-70% of their grain. FED1 CNF SEA boxes is well offered at //262 US JFM with very few bids. The domestic consumer is still aggressively bidding above export parity. The milling wheats have gone quiet as the CNF consumer still believes the price will come off. After Fridays USDA report the market today is trying to figure out fair value. Crop Report They say lightning doesn’t strike twice and with another dose of widespread rain across a vast area of unharvested crop along the east coast growers are beginning to shrug their shoulders at the crushing hand they have been dealt in two years consecutive years. Harvest progress is now at 80% for NSW and 55% for Victoria with heavy downgrading expected on the remaining unharvested acres. Having said that we don’t expect Feed wheat numbers to eclipse the sky scraping numbers national 10/11 Feed Wheat carry out, estimated at 3.5 mmt of the total 7.3 mmt wheat carry out. Graincorp recievals on the east coast are now estimated at 4.4 mmt, with some of the merchants having the feeling the deliveries into the system are up as a portion of crop with growers opting to warehouse with total sales estimated at just 40%.

Australian Wheat/Grains Brett Cooper

Level 10, 151 Macquarie Street Sydney, NSW 2000

[email protected] 02 8094 2000



ARGENTINE AG HIGHLIGHTS WEEKLY HIGHLIGHTS � Good evolution for crops and plantings activities during the last week. � Wheat harvest is having a good rhythm, almost done in the north and starting in the south. � Small rains expected for the incoming week. Wheat Harvest is complete in the north of the country and close to be finished in north-central Santa Fe. At the same time, fieldwork is very fluid in Cordoba and Entre Rios and it is beginning to ex-pand into north La Pampa and west Buenos Aires. Warm and dry weather conditions favored crops maturity and fieldwork. To date, harvest is 39.5% complete. Weekly and YoY progress stand at 10.3% and 13.1% respectively. So far, production is estimated at 4 M tons with an average yield at 2.3tn/ha. Average yields are expected to increase as harvest ex-pands into the south and center of the wheat –producing area. The good yields projected for south-central Buenos Aires are likely to further increase our final production estimate, currently at 13 M tons. It’s worth mentioning that Southwest, southeast and the center of Buenos Aires account for 42% of the total planted area. Corn Planting progress is more fluid compared to previous weeks due to the planting of late crops. To date, fieldwork is 69.5% com-plete in a total area estimated at 3.74M HA. Weekly Progress stands at 4.7%. Early crops in south Cordoba are currently at their flowering stage and with good soil moisture levels. Crops in north-central Santa Fe are now at their grain-filling stage and with very good soil moisture towards the north of the belt, both moisture levels and crop conditions are very good. Soybeans To date, planting is 68.8% complete, expanding into 13M ha of a total area estimated at 18.85Mha. Weekly progress stands at 12.6%. Good soil moisture conditions coupled with direct-planting into wheat and soybean stubble fostered fieldwork. The North and south of the belt, which accounts for 32% of the na-tional area, reports good/very good conditions. However, soil moisture in northern Buenos Aires is reported in fair-to-good conditions. Finally, our weather outlook for the next seven days, forecasts abundant precipitations over the north of Argentina but of a lower intensity over the rest of the agricultural area (less tan 10mm).

INTL FCStone Argentina Sarmiento 459 Buenos Aires

[email protected] 54-114-390-7530



MACRO-ECONOMIC HIGHLIGHTS Euro Crisis The news was full of headlines on the European summit before the grand announcement by the Euro leaders at the end of last week. Before writing about the Euro Crisis news, I wanted to comment and reflect on the results of the last twenty summits. If twenty summits have not produced a resolution, we cannot expect a near-term positive outcome regarding sovereign debt crisis. The issue is too complex and involves too many countries to be solved in a short time period. When the leaders of nations formed the EU, some sovereign control over national budgets was given up in exchange for a common market and currency. Ten of the twenty-seven members of the EU opted out of the Euro as the “official currency” due to sovereign concerns. When seventeen official EU currency members decide at the summit on how to proceed to aid the weaker economies in the EU that use the Euro as a currency, the effect on global financing and international money markets will be affected. Regardless of the news that was released on Friday, the safety of sovereign bond principal from investing in government debt is being ques-tioned. Governments in the Euro cannot continue to run budget deficits and issue unlimited amounts of bonds without upsetting the economies or currencies of other members. Even if the Euro countries come to an agreement, the safety of the European debt will be questioned as more liabilities will be issued to provide short-term liquidity. The result will be higher rates in the EU as bond investors avoid credit default risk. American money market funds may be hurt as the search for yield has resulted in a global movement of capital to Europe. Last week I men-tioned the Federal Reserve acted as a shortage of U.S. Dollars developed due to money market funds pulling investments from Europe. The result was a liquidity squeeze. American banks will not be immune to the Euro crisis. The loans made by American banks to Euro countries is over $1.6 trillion. Credit Default Swaps may be the next issue to watch as the possibility of counterparty defaults may be the consequence from government debt issues. For your information, the top five issuers of Credit Default Swaps in the United States are J.P. Morgan, Morgan Stanley, Goldman Sachs, Bank America, and Citigroup. On the next page, I created a chart to forecast the funding requirements in the European Union for 2012. Analysts suggest $1.5 billion will be required in 2012 by members in the EU. Using the 2012 budget deficit estimates for some of the Euro members along with current analyst estimates for some of the larger countries in the EU suggests a minimum of $1.3 trillion in funding requirements will be needed. The figure does not include the budget surplus in Sweden. How the debt is financed along with additional bank capital requirements for the region will remain after the latest Euro summit is over. Additional financial dominos that may be next are the United Kingdom, France, and Germany if private capital continues to exit the region. Most of the news expected from the region was released later in the week. The news earlier in the week started out with Italy, Ireland, and Greece releasing austerity budgets. Geithner went to Europe to offer U.S. views on the crisis, and was “very encouraged” about the new treaty to strengthen fiscal euro-zone rules. Obama was involved with phone calls with various European leaders as the global politician's are trying to reach decisions on how to resolve the crisis. After leaders in Germany and France wanted treaty changes before signing off on any bailout, the rumor talk focused on amending the treaty versus every country approving a new treaty. A new treaty would need to be approved in at least seventeen different political systems before enacted. Germany and France appear in agreement that all EU countries must amend their constitutions to require balanced budgets, institute enforcea-ble penalties for countries that run deficits, and after terms are approved increasing the EU’s financial capacity to bail out countries in trouble. The ten countries that do not use the Euro as a currency are concerned that they are being left out of discussions that affect Europe. However, these nations may not want to give away national budget authority to the EU. A couple of articles mentioned that European Banks will need $810 billion in Euros to meet loans coming due in 2012. In addition, British banks will need an estimate of $110 billion Euros in financing next year. The ECB did announce that they will provide banks with new credit lines up to three years to provide liquidity provided relief. On Friday Euro leaders wanted the new treaty to speed through approval, but Brit-ain vetoed the agreement. The treaty will likely need to go back to each country for ratification as all members did not agree. The new treaty moves forward with fiscal union, debt brakes for individual countries in national constitutions, and automatic penalties for deficits that exceed the accord. The Euro leaders agreed on the IMF support as I mentioned last week. Leaders agreed that the ESM would replace the EFSF by July, 2012 and be limited to $500 billion Euros. The other proposal in the new treaty is 85% of the members must agree to any future bailouts. Six other countries that do not use the Euro as currency want to join the new treaty and officially use the Euro. Denmark, Latvia, Lithuania, Poland, Romania, and Bulgaria may join the 17 other members. Holdouts from joining other nations who use the Euro appear to be Britain, Hungary, Sweden, and the Czech Republic. Ireland may need to hold a referendum before approval of the new treaty.

Don Brown INTL FCStone Research

2829 Westown Parkway West Des Moines, IA 50266




WEEKLY FX SUMMARY No Report this week

Charlotte Hampshire INTL Global Currencies

Phoenix House, 18 King William St London EC4V 7BP

[email protected] 0044 (0)207 220 6085



PRECIOUS METALS MARKET REVIEW FROM THE NEWS WIRES SINGAPORE, Dec 12 (Reuters) - Gold prices fell more than 1 percent on Monday on technical selling and concerns that the European Union summit had stopped short of producing a convincing plan to solve the euro zone debt crisis. Europe secured a historic agreement on Friday to draft a new treaty for deeper economic integration in the euro zone, but investors remain skeptical whether the agreement will cure the two-year-old crippling debt crisis. Spot gold lost as much as 1.5 percent to a two-week low of $1,684.19 an ounce, and regained some lost ground to $1,694.40 by 0411 GMT. The most-active U.S. gold futures contract shed 1.7 percent to $1,688, before recovering to $1,699.20. Traders said the price move below $1,700 triggered stop-loss selling. Earlier, silver slid along with industrial metals, losing as much as 2 percent un-der the pressure of technical selling and an uncertain euro zone economic outlook. Spot silver fell to $31.56, before trimming some losses to $31.60. On this week's agenda, bond sales by Italy and Spain will attract much attention from investors. Yields are likely to rise again after the European Central Bank last week dashed hopes for further bond purchases. The euro edged down against the dollar, struggling after hopes for a quick resolution to the euro zone debt crisis were dampened at Friday's summit. Prices of platinum group metals also weakened. Spot palla-dium fell 1.6 percent to $672.49, and spot platinum lost 1.1 percent to $1,494.75. Demand for industrial metals will largely hinge on the growth in China, the world's second-largest economy and top consumer for many raw materials. The slower growth in China's exports and imports in November showed fresh evidence of faltering demand abroad and at home. NEW YORK, Dec 9 (Reuters) - Gold rose on Friday following the previous day's tumble, swept higher in an equities rally as EU leaders agreed to push for a deeper economic integration and as U.S. consumer sentiment hit a six-month high. The precious metal, however, notched its third weekly loss in the past four weeks, hurt by technical selling earlier this week as investors remained doubtful that the European Union would resolve the crippling debt crisis in the long term. U.S. gold futures for February delivery settled up $3.40 at $1,716.80 an ounce, with volume about 60 percent below its 30-day norm, as some traders expecting a disappointing December already closed their books. Among plat-inum group metals, palladium was up 1.6 percent at $681.75, posting its second week of sharp gains. Platinum rose 1.3 percent to $1,509.99. Three-month copper on the London Metal Exchange settled at $7,815 a tonne, up $105 from Thursday. For the week it was down $75.

Jeffrey Rhodes INTL Commodities

Jumeirah Lakes Towers P.O. Box 125942 Dubai, UAE

[email protected] 009 (714) 447-8501



Weekly Commodity Recap - Osage Coop Elevator...Weekly Commodity Recap December 12, 2011 400 600 800...

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