3 BIG THINGS TODAY, MARCH 21

SOYBEANS, CORN HIGHER OVERNIGHT; FED INTEREST RATE HIKE ADDS TO BORROWING COSTS.

1. BEANS, CORN HIGHER ON BARGAIN HUNTING, WHEAT RISES AMID ADVERSE WEATHER

Soybeans and corn were higher overnight as bargain hunters again came calling, and wheat futures gained amid adverse weather in the U.S.

Soybeans closed yesterday about 3¢ below the psychological $10 mark, leading some investors to seek contracts on speculation that overseas buyers will snap up supplies while they’re cheap. Corn also rose on increased prospects for demand.

Wheat futures were higher as dry weather in the Southern Plains – where little or no rain has fallen for at least 30 days, according to the National Weather Service – threatens the emerging hard red winter crop. A deep freeze in parts of the eastern Midwest is putting soft red winter varieties at risk.

Soybean futures for May delivery rose 7¼¢ to $10.05¼ a bushel overnight on the Chicago Board of Trade. Soy meal added $1.90 to $329.50 a short ton, and soy oil gained 0.28¢ to 32.50¢ a pound.

Corn added 2½¢ to $3.66 a bushel in Chicago.

Wheat futures rose 2½¢ to $4.38½ a bushel, and Kansas City wheat for May delivery gained 2¾¢ to $4.50 a bushel.

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2. FEDERAL RESERVE UNSURPRISINGLY RAISES BASE INTEREST RATE, INCREASING COST TO BORROW

That new tractor you wanted just got more expensive.

In what could be deemed the least surprising action taken by a government agency in a while, the U.S. Federal Reserve raised its base interest rate to 0.75% to 1% on Wednesday, increasing the cost of borrowing for everything from homes to farm equipment.

The Federal Open Markets Committee (FOMC) voted to raise the Federal Funds rate, as it’s called, as the economy continues to show signs of strengthening. A jobs report last week showed employers added 235,000 workers to payrolls, easily topping expectations for a gain of 200,000.

The Fed also said the economy is on track to reach the agency’s goal of returning to 2% inflation.

“In view of realized and expected labor market conditions and inflation, the committee decided to raise the target range for the federal funds rate to 0.75% to 1%,” Fed Chair Janet Yellen said in prepared remarks after the FOMC made its decision. “The stance of monetary policy remains accommodative, thereby, supporting some further strengthening in labor market conditions and a sustained return to 2% inflation.”

The increase is the first in 2017 after the Fed raised rates in December 2016 and December 2015. Analysts have said they’re expecting between two and three more increases this year as the economy strengthens.

That means the cost of borrowing – more so for large-ticket items such as equipment and land – will increase for producers who plan on adding new machinery or holdings this year. Generally, loans with shorter terms including cars aren’t affected as much by increases in the Federal Funds rate, though with rates creeping up, they likely will impact borrowing on credit cards and home-equity loans, analysts said.

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3. PERSISTENT DEEP FREEZE FROM MISSOURI TO FLORIDA HURTING WHEAT, BERRIES

A big chunk of land stretching from the Iowa-Missouri border all the way into central Florida is under a freeze threat again this morning.

Temperatures in much of Missouri and southern Illinois were reading into the teens this morning, according to the National Weather Service. They’re expected to rise above freezing in much of the affected area by 10 a.m., the NWS said in a report early Thursday.

Winter wheat that isn’t covered by a protective layer of snow tends to do poorly when temperatures drop below 28˚F. for more than a couple hours, as they have the past few nights. Record low temperatures in some areas are hurting everything from winter wheat to strawberries, according to news reports.

GROWING CATTLE HERD MEANS CONTINUED STRONG DEMAND FOR CORN

The March 13 daily livestock report, sponsored by the CME Group, indicated beef production through March 11 was 3.6% larger than a year ago. This report also indicated that year-to-date cow slaughter is down 6.1% and, perhaps most interesting, average dressed weight for the past week was 820 pounds, down from 834 pounds a year ago. 

A quick summary would suggest that producers are not shipping cows and are pulling fed cattle ahead due to higher cash prices compared with futures. Yet, with April futures well below current cash prices, the expectation is for an increased supply of market animals in the weeks ahead.

Bottom line, the numbers suggest the herd is continuing to grow. A growing herd means continued and stronger demand for corn. Part of the reason the cattle herd may be growing is ample and inexpensive projected supplies of corn, especially in the western Corn Belt.

As demand grows, there is less room for error with the upcoming crop. In other words, corn is a relatively cheaply priced commodity, more so after prices slid this past week.

If you are an end user, you should be prepared to more aggressively buy corn or use call options to defend against higher corn prices. 

The majority of the world’s corn is produced in the Northern Hemisphere and, therefore, with growing demand, weather for the upcoming crop will be a critical factor determining crop size and ultimately prices. In a very short period of time, corn supplies could go from record large to too tight.

If one can accurately outguess the weather, then one can likely guess price direction. Rather than try to guess either, we suggest being prepared in case prices do make a substantial rally due to weather consequences. Consider buying out-of-the-money September and December corn calls against future purchases of corn. Or, with prices still below the cost of production, book supplies for the rest of the year.

Low rainfall will affect food production this year – NIMET

The Nigeria Meteorological Agency (NIMET) has revealed that most parts of the country will experience below normal rainfall this year, a situation the agency says will pose a challenge to food production.

While unveiling the 2017 Seasonal Rainfall Prediction compiled by NIMET in Abuja on Tuesday, the Minister of State for Aviation, Hadi Sirika, charged stakeholders in the agriculture and aviation sectors to take seriously the recommendations contained in the Seasonal Rainfall Prediction(SRP).

The SRP report stated that rain-fed agricultural production in Nigeria this year is needed to be backed up by irrigation to enable farmers achieve bumper harvest apart from the provision of good seeds, fertiliser and other necessary inputs.

“The expected below normal rainfall will pose challenge to enhanced food production and the Federal Government’s policy on agriculture and food security as a business towards foreign exchange earnings” the report noted

The report also warned that farmers who wished to cultivate crops such as maize and other cereals twice during the season, may face some challenges due to the predicted shorter length of the growing season this year, unless they choose the appropriate variety and undertake water-catchment measures.

“Government should, therefore, take these predictions very serious to enable it meet its projections in the current policy.” it added

Update: GEMS4 DFID pilot test on tomato transport records success

Post harvest losses in tomatoes may soon become history as GEMS4DFID pilot test on Returnable Plastic Crates (RPCs) turns out to be successful.

The test which involved the transportation of 585 Returnable Plastic Crates of tomatoes via train from Kano state to Lagos state came to a conclusion when the train arrived at Iddo terminus on Wednesday, at about 7pm.

In an interview with AgroNigeria, the Vice-President of the Nigerian Agribusiness Group (NABG) and Chairman, Best Foods Global Limited, Emmanuel Ijewere, noted that the innovation would bring a new paradigm to the sector and the country at large.

“For many years, the Federal Government has been pained by the amount of losses the farmers suffer. With this now, we are beginning to see those changes come to be and this is a perfect relationship between the public and private sector” Ijewere said.

Ijewere said the federal and state governments can come up with policies that will promote the application of these innovations aimed at reducing post harvest losses while the private sector drives the policies into action.

While commending the Nigerian railway corporation for their support towards the execution of the pilot test, he affirmed that there were still some issues which would be addressed as soon as possible. He added that once the use of RPCs becomes a routine, tomato production in Nigeria will go into a new era.

“The baskets were covered with paper and stacked on one another sitting directly on the produce and this increases the risk of spoilage. However, the use of this plastic crates prevents squashing as the crates though placed on each other do not seat directly on the produce. They also allow for more ventilation and retain the fresh state of the produce” he explained.

WACOT’S N10BN MILL EXCITES KEBBI RICE COMMUNITIES

The Anchor Borrowers programme on dry season rice and wheat farming, launched a year ago by President Muhammadu Buhari in Kebbi State, has seen an increase in the number of millers and traders trooping to the state.

Come April this year, WACOT will commission its Rice Mill located on the Argungu-Sokoto road, about 55km from Birnin Kebbi and 90 kilometres from Sokoto. The mill was built on 10 hectares of land.

The N10 billion rice mill has a production capacity of 100,000 tonnes annually; silos for storing 18,000 tonnes of paddy and a warehouse for storing additional 12,000 tonnes of paddy. When operational, it is expected to generate direct and indirect employment for 3,500 people and its procurement will reach out to 50,000 farmers.

Expressing joy for getting a rice mill in Argungu, his hometown, a retired Justice of the Supreme Court and patron of Kebbi State Rice Farmers Association, Uthman Mohammed, said, “Before the coming of WACOT, the rice companies simply came here to purchase our rice and take it to mill elsewhere. We discussed with the emir that we would appreciate a company to be set up in Argungu for milling our rice, and we are ready to feed such mill.

“Now that WACOT is here, we have gone round to tell our farmers that we now have a rice mill. We urged them to grow more rice so that the mill will produce round the clock. When our people heard about it they were very excited.  Many are happy that they no longer have to go seeking for jobs elsewhere because of the job opportunities created in Argungu. It is an interesting thing for me to be a rice farmer.

“I have over 50 hectares of rice field. I harvested over 1,000 bags of rice last year. People come on excursion to my farm to see what I have done there.

Last year, a bag of paddy was sold for N10,000 and because of that, most of the young men and farmers have gone into rice farming. If you go to the FADAMA area in Argungu, you will be amazed.”

Justice Uthman also said: “When the federal government asked Governor Atiku Bagudu if they could get a million metric tons of rice from Kebbi last year, I told him we would achieve the target and we did. There is no reason for us to import what we can grow in our country and I am happy the farmers have taken up the challenge very seriously, particularly now that we have a rice mill in Argungu.”

The Emir of Argungu, Alhaji Ismaila Muhammad Mera, also a rice farmer, expressed delight over the development of rice production in Kebbi State.

“For a very long time, Argungu has always been known for its rice farming. When you talk about agriculture here, it is rice first and other crops follow.

“The late emir of Argungu started the dry season farming in the state.

“It would be good for our farmers to have available markets for their produce and with WACOT, this feat can now be guaranteed. A 100kg bag of rice previously cost N3,000 to N4,000. People simply farmed to feed their families and sell what little they have left.

“However, for two years now, rice farming has become a profitable endeavour,” he said.

He said these days, they  see company directors closing their offices and coming into the farm business because there is a guaranteed market for the produce.

“This is because of the presence of companies like WACOT in the state.

In the future I see every able person in this country going back to the farm. I had a discussion with the governor on land distribution for farming where he told me to reserve land for the state for redistribution to those that might be rehabilitated from drug addiction and go into farming. This is happening because there now exists a conducive market for the farm produce.

“With WACOT’s presence and its proposed plans for farming, I see a big change in our society soon,” he said.

The general manager, WACOT Rice Limited, Mr Amit Gupta, while assuring on his company’s commitment to rice production in the country, said the Argungu rice mill project was initiated in 2016 to actualize some of the federal government’s economic objectives.

“We plan to complete it within 16 months and when completed, it would be bigger than any rice mill that have been set up in the country,” he said.

It is the first rice mill to be conceptualized and executed with an expectation of being commissioned within the Buhari administration.

“Initially, we were faced with the challenges of getting the piece of land to set up the factory because of the type of soil required. We were also faced with the consideration of getting enough paddies to sustain our production and the need for a place that is economically viable. Kebbi is a remote location with no access to many contractors, as compared to Lagos and Abuja, for the building of our heavy machines and equipment. We were, however lucky to get partnership with a number of good engineering contractors.

“The government has been very supportive about the whole process. Our patron is the Emir of Argungu, he is extremely up and doing in mobilizing public opinion and giving us guidance on how to go about getting people and the resources needed.

“Like I said, we had operational challenges but we were able to overcome them, perhaps because of the dynamism of our management team,” he said.

Expressing his optimism about the major role his company aims to play in the effort to boost rice production in the country, he said, “This country consumes an average of five million tons of rice per year. What we as a company are excited about is the fact that we already have farmers. We started the outgrowers in 2015. We have been working all along with over 5,000 farmers in Kebbi State.

“We trained about 5,000 farmers on good agricultural practices. We engaged them on multiple levels such as the field and demonstration farms. We also set up farmers’ business school to teach them financial management, cost of production, and best ways of investing money.

“We have also worked with a lot of female-led organisations to create self-sustainable groups and make them economically viable.”

On quality, Mr. Gupta said WACOT has the capacity to produce world class rice that could be compared with those produced in Thailand and India because it has the required machines, boilers and other equipment needed to produce high quality rice.

“We need to change the impression that Nigerian rice is inferior to Thai rice. Our rice has passed through food safety standards and control and we are set to meet our targets.

“We need 100,000 tons of paddy to produce 16,000 tons of finished rice per year. With the capacity of our equipment and the interactions built over the years with farmers, this would not be difficult for us to meet. The rice mill cost us N10 billion to set up. We are confident of our entry into the market,” he said.

When fully operational, he said, WACOT would employ over 600 full time workers in the mill. In addition, there would be over 400 labourers. He said the company aims to also create about 3,500 indirect workers.

“The mill will have a parking lot, which is expected to attract mechanics, auto electricians, drivers, off loaders, vulcanisers, food sellers and others. Anyone who wants to make or sell polythene bag already has a market here. Our objective is to set up a self-sustaining factory with freedom that will give rise to other initiatives,” he said.

SOURCEDaily Trust