Grain markets brace for volatility amid Ukraine crisis

Grain markets are roiling from the political crisis in Ukraine, but it appears unlikely there will be major global supply shocks, according to a Reuters report. Wheat already has been harvested and shipped, and global stockpiles of corn can substitute for Ukraine maize.
"The Black Sea region can easily expand or contract at the drop of a dime when it comes to production and exportable supply," said Terry Reilly, senior commodities analyst with Futures International.
The Ukrainian wheat crop of 2013-14 is past the stage of being affected by the crisis because it is already harvested and the export portion shipped. Ukraine is the world's sixth-largest wheat exporter, and ships much of its wheat to Egypt and other countries around the Middle East and North Africa.
Record corn stocks in the U.S. means there is plenty of corn to ship to meet demand if Ukraine shipments are cut off, traders and analysts said.
"If there is any major disruption in corn exports, the market will be comfortable to quickly adapt and turn to U.S. supplies or even South America. There is a lot of wheat that could potentially come on line as well, especially from Canada, India, maybe Australia, and of course the U.S.," Reilly said.
Major grain companies say they are monitoring developments in the Black Sea region, and that shipments have not been slowed so far. However, shippers in the region have begun building risk premiums into freight costs in and out of the region.
As the Ukrainian and Russian currencies continue to fall, farmers see little incentive to unload their grain. And, if economic sanctions further weaken the Russian ruble, grain available for export from the region could tighten further, according to Kevin Van Trump, chief executive of Farm Direction, a consultancy based in Raymore, Missouri.
"The producers might get more tight-fisted with the bushels they're producing and hunker down," Van Trump said. "They're just not going to sell to the exporter."

International Grains Program hosts two grain courses

Understanding current grain markets and the U.S. grain handling system are crucial when working in grain trading or similar environments. The International Grains Program at Kansas State University teamed up with the USDA Cochran Fellowship Program to host two courses, held August 26-September 6, 2013. A total of 10 individuals, four individuals for the USDA Cochran Indonesia Grain Handling and Storage Course and six individuals for USDA Cochran Tunisia and Morocco Grain Management and Storage Course, traveled to IGP to attend these trainings.
The Cochran Program provides participants from middle-income countries or emerging markets with high-quality training to improve their local agricultural systems and enhance trade links with the U.S. Since starting in 1984, the program has provided training for more than 14,300 participants from 123 countries.
Participants began their courses at the International Grain Program Conference Center. Jay O'Neil, senior economist for IGP, and Carlos Campabadal, IGP specialist in feed manufacturing and grain storage, served as the course managers for these trainings. During the two weeks, participants had the opportunity to tour the KSU O.H. Kruse feed mill, a Cargill grain terminal, a local coop, Kansas Grain Inspection Services, Bob Haselwood Farms, Ron Roth Farms, as well as the USDA Center for Grain and Animal Health Research, the Hartland Innovation Center and the Kansas Wheat Commission Innovation Center.
"Trading mechanism and storage handling was my favorite part. Based on the information I received here, I will be able to make a recommendation to the board of directors about how and when anything related to soybean trading happens," says Cahvaningtiyas Rispinatri, grain manager for Perum Bulog in Indonesia.
Her company works as a state trading enterprise that belongs to the Indonesian government. Rispinatri attended this course because the company started trading soybeans, in addition to rice, and soybeans were new territory for everyone.
During the weekend that these groups were in the U.S., they each traveled to different places. The Indonesia group traveled to Topeka and Kansas City to see the sights and tour in the area. The Morocco-Tunisia group traveled to New Orleans where they toured grain facilities, FGIS offices and Bluewater Shipping as well as sightseeing.
One participant attended the course to gain expertise about grain trading, due to her lack of knowledge in this area and her company just starting in this industry.
"In Tunisia, there are few women in the industry. I came to this course to gain knowledge and confidence because I am also new," says Galia Benenita, manager for Les Grand Solios Du Nord in Tunisia.
The company that Benenita works for stores wheat, corn and now soybeans for the Tunisian government. She was able to take advantage of this course opportunity through U.S. Embassy and the USDA. She has learned not only how to understand contracting, but other important aspects of grain purchasing as well.
"Jay taught us that the contract is the most important thing every time. I will now pay more attention to all of the contracts that I make because the contract is so important."
This is one example of the trainings offered by IGP. In addition, IGP faculty also lead courses in flour milling and grain processing, grain marketing and risk management, and feed manufacturing and grain management. 

Futures commission merchant bankruptcies create loss of confidence

The National Grain and Feed Association has told Congress that the cumulative effect of the MF Global Inc. and Peregrine Financial Group insolvencies and the misappropriation of customer funds has created a “huge loss of confidence” in the adequacy of current rules to protect customer funds, as well as the adequacy of regulatory oversight.
The association said the Peregrine incident, in which more than $200 million in customer funds allegedly were fraudulently misappropriated for a variety of illegitimate purposes over an extended time period, demonstrated that the MF Global incident was not a one-time event and that serious risk to customer funds remains. The “cumulative effect” of the MF Global and Peregrine failures within a relatively short time — and “especially the failure of PFG at a time when regulators presumably were on heightened alert for problems” — has reiterated the need for steps to be taken to “begin restoring confidence and to bolster protections for segregated customer funds,” said the association.
At a hearing conducted Aug. 1 by the Senate Agriculture Committee, Diana Klemme, vice president and director of the Grain Division at Grain Service Corp., said the discovery of long-term fraud and misappropriation of customer funds at Peregrine “removed all doubt” that systemic change and more effective regulatory oversight are needed. “We consider the loss of customer confidence in the system to be (a situation that is) both urgent and unsustainable,” said Klemme. “The financial industry, Congress and our regulators all must recognize that trust and confidence are not easily regained. It will take real change, protection of customer funds, real-time transparency and significantly improved (regulatory) oversight — and not after endless regulatory debate and finger pointing.”
During a separate hearing conducted July 26 by the House Agriculture Committee, John Heck, senior vice president of The Scoular Company and a member of the National Grain and Feed Association's executive committee, highlighted a series of legislative, regulatory and other policy recommendations submitted by the association in late June to the House and Senate Agriculture Committees, as well as to the Commodity Futures Trading Commission:

• U.S. bankruptcy code reforms
• fully segregated customer accounts
• insurance for commodity futures customer accounts

Gulf oil slick could impact grain markets

The giant oil slick in the Gulf of Mexico is causing some jitters in the grain market, as shippers assess the potential of the country’s largest grain port to face possible slowing from the disaster.
The port connecting the Gulf with the Mississippi river – known as the Southwest Pass – is the central point of export of soybeans, corn and wheat with between 55% and 65% of these grains moving from the port. If shipping slows, costs could rise as exporters need to find alternative ports or sources.
So far, ships moving in and out of the port have not been affected. The U.S. Coast Guard and shipping companies continue to monitor the situation.