Tuesday, 27 April 2010 - Rumours of a fire at a major rapeseed processing facility on the continent turned out to be true, with a Bunge-owned plant on Friesenheim island at Mannheim in Germany the unlucky victim.The fire apparently started at around 12.30 yesterday lunchtime and took 72 fire fighters to bring under control.The plant had a processing capacity of 1.1-1.3 MMT of oilseeds and is expected to be out of action for some time. Reports suggest that force majeure has already been claimed on contracts for delivery in the next 2-3 months.

China has sold a further 1.1m tonnes of corn from state reserves, amid signs that its selldowns are cooling the rally in domestic prices which has spurred some processors to investigate imports. All 800,000 tonnes offered in the north eastern provinces sold, the National Grain & Oil Trade Centre said. Trade was slower further south from the main producing regions, with successful bids for only half the 570,000 tonnes offered in Hebei, Jiangsu and Shandong. The trends echoed those of last week, China’s first selldown of state reserves this year, when Beijing sold some 850,000 tonnes of 1.1m tonnes on offer. However, prices were modestly lower this time, falling by 1.6% to 1,702 remninbi a tonne in the north east. On China’s Dalian exchange, the near-term May contract closed down 0.3% at 1,925 remninbi a tonne, losing all but 4 remninbi of its premium over the July lot. Dalian prices have recorded a slight decline since Beijing two weeks ago unveiled its auction plans, after an increase some 12% in the previous two months. The rally, which in some areas has driven prices to record highs, has prompted some feed mills to make inquiries over importing corn, rumours of which drove Chicago prices sharply higher earlier this month. China, the world’s second biggest producer and consumer of corn, has not imported the grain in any quantity since the early 1990s. The country has also this month ramped up imports from the US of distiller’s grains, a by-product of corn ethanol plants used in animal feed. Beijing is estimated by China Zhongzhou Futures to have “temporary” corn reserves of some 10m tonnes, largely held over from the bumper 2007 and 2008 harvest, with an unknown quantity of further stocks.

Article taken from The Times (UK) dated March 25 after the first Iceland volcano eruption.Quote:A volcano that has been dormant for almost 200 years erupted on Sunday. Eyjafjallajökull volcano in southern Iceland erupted with a sheet of fire and spewing out rivers of lava, forcing hundreds of people to evacuate their homes. For an Icelandic volcano this was a relatively small eruption, but there are fears that it could set off the nearby Katla volcano, a far more violent beast capable of inflicting immense damage.The precedents are not good. In the past 1,000 years, Eyjafjallajökull has erupted three times, in AD920, 1612 and 1821, and each time the Katla volcano blew up soon afterwards. And because Katla lies under a glacier, it sets off colossal floods as the ice rapidly melts. Worse still, Katla can shoot up enormous plumes of ash, gas and acid high into the atmosphere, blocking out the Sun’s energy and creating a deep chill.The effects on the UK could be severe. In June 1783 the Laki volcano close to Katla erupted for several months with clouds of poisonous gas that killed 9,000 people in Iceland. But the eruption also created a cold fog that spread across much of Europe and North America, in some places causing the coldest summer for 500 years as the Sun’s warmth was blotted out.“The summer of the year 1783 was an amazing and portentous one, and full of horrible phenomena,” wrote the naturalist Gilbert White in Hampshire. “The country people look with a kind of superstitious awe at the red louring aspect of the sun thro’ the fog.” The climate across the northern hemisphere was sent into upheaval, even weakening the monsoon rains in Africa and India, leading to famine in Egypt and India.

As a floor broker I find it worthwhile to identify points at which the market, any market, seems vulnerable. Such vulnerability may be cause for trading opportunity, however mostly it benefits short term trading. Longer term trades may also benefit from identifying those places where a market is vulnerable, but the size of the move should also be larger for positions held overnight in these markets.

What are helpful features of vulnerability? Chart points such as highs and lows obviously, as well as moving average levels, but beyond those you might also consider as a market approaches option expiration those strike prices that contain significant open interest. Countless times we have see a shift in a market to move towards a strike price.

Currently the coffee market is approaching option expiration and while earlier this week it appeared as if 140 would be the better candidate, yet low and behold here we are the day before expry trading 135….Now that is an example. The point being that whenever a market approaches expiration, and coffee isn’t there until tomorrow afternoon, it may always be a good idea to consider the vulnerability of prices reaching out for a strike price….and usually one that isn’t as obvious offers specs a cheap play and those seeking a hedge a reasonable opportunity.

It  has been an interesting week her on the NYMEX as the flatprice in crude has rallied to new highs at $87 but the wti spreads have weakened considerably especially in the front months as now May/June and June/July have a handle of -63 on it now.  Jun/Dec has weakend all the way from -130 to -230.  The backs are holding up well with Dec10/Dec11 trading at -135 but this has also come down from -90.  Is this a sign that the flatprice will come off in the next few days?  It may be a sign but just wait and see what happens on Wednesdays inventroy report.

Gold has recently climbed to test the triple top of $1,150 that has been a big hindrance to the yellow metal even as the USD strengthens up against other major currencies.  Gold needs to break above the $1,160 level to test the all time high and I think that you will see this later on in the year.  Right now the big hurdle is right in its path so watch for the next few days as this market tries to bust through this level.

Unexpectedly, we have plenty to talk about today. Deutche bank announced they are expanding their coverage of agricultural commodities to encompass soybeans and kc wheat. This goes against earlier stories that they are contracting coverage. The latter story was a rehash of the story from october 2009.

The second story involves Brazil and the US concerning ethanol. This is a major shift if its true. An elimination of a 20% import tariff would be a bullish impact on corn.

More to follow as its made available.

MPI