Quote: Chairman of the Senate Foreign Relations Committee Joseph R. Biden, Jr. (D-DE) and Ranking Member Richard G. Lugar (R-IN) applauded the Senate's unanimous passage of their resolution expressing strong support for NATO's statement at the recent Bucharest Summit that the Alliance welcomes the eventual membership of Ukraine and Georgia.
http://www6.lexisnexis.com/publisher/EndUser?Action=UserDisplayFullDocument&orgId=574&topicId=100007539&docId=l:784735285&isRss=true
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Thursday, May 1, 2008
Wednesday, April 30, 2008
Insight: Russian grain could help ease food crisis
Quote: Supply remains variable and volatile. The loss of 50 per cent of the Australian winter wheat harvest during last year’s drought had a dramatic impact on wheat prices. Yet, those losses only accounted for some 3 per cent of global wheat output in a normal year, while wheat prices rose by 30 per cent between September and November. This was a clear indication that prices had become highly sensitive not to the factors driving demand but to historically low inventories.
Inventories have halved in seven years. Fifty days of cereal consumption in stock begins to look more like a crisis than an isolated statistic. Lower inventories can partly be attributed to fewer distortions in the agriculture system and improved supply-chain management.
However, as some price distortions disappear others appear. Export restrictions have been implemented by the likes of Australia, Russia, Ukraine, Argentina and Kazakhstan. Therefore, the rise in the wheat price from $8 a bushel to over $12 a bushel in the first two months of 2008 can be largely attributed to political decisions as grain-exporting countries seek to protect their own food supplies.
The Ukrainian government’s decision to lift its restrictions hopefully negates the possibility these short-term panaceas become permanent fixtures. Recent price declines taking wheat back to US$8/bushel can be largely attributed not only to the possibility of a half-decent harvest but also to the perception that the grain-exporting nations will remove trading restrictions as fast as they imposed them.
A similar theme has emerged in the rice market, but expect prices to decline sharply from the recent $25 a hundredweight level once the current frenzy ends.
We noted that grain supplies are volatile. However, fundamental demand increases will likely be met by countries with highly fertile but under-utilised land. Russia, Ukraine and Kazakhstan top the list of beneficiaries of this changing landscape.
Consider Russia. In 1992 the country had 120m hectares of farmland under cultivation. The change from public to private ownership ensured that one of the few advantages of communal ownership – access to plant and equipment – was lost.
Multiple ownership resulted in a “free rider” dilemma for the new owners of land ie, the efforts of individual contributions are shared equally. Consequently, in the last 15 years, some 40m hectares of rich farmland have lain fallow. And what is farmed is low yielding. Russia grows some two tons of wheat per hectare when it has the potential to produce five tons of wheat per hectare.
The ramifications are significant. From 75m tons of cereal output in 2007, Russia could multiply its grain output several-fold simply by enhancing yield management and bringing fallow land back into production. It could produce some 300m tons of cereals without the necessity of producing on virgin land.
This requires long-term planning and investment. Transferring ownership from inefficient multiple parties with no access to capital to large-scale corporate entities with long-term funding is time-consuming, while repairing fallow land is expensive. To attain higher yields needs lengthy investment in crop rotation. Overall the process can take 4-6 years.
These changes will help restore supply and demand imbalances across key cereal markets. That said, the entrepreneurial zeal transforming the Russian agricultural landscape will only restore some equilibrium to a dynamic market. So, while wheat at $12 a bushel might prove to have been a temporary blip, $4.50 a bushel is unlikely to be seen any time soon – even if it rains again in Australia one day.
Full article: http://www.ft.com/cms/s/0/99c75db4-16c9-11dd-bbfc-0000779fd2ac.html
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Inventories have halved in seven years. Fifty days of cereal consumption in stock begins to look more like a crisis than an isolated statistic. Lower inventories can partly be attributed to fewer distortions in the agriculture system and improved supply-chain management.
However, as some price distortions disappear others appear. Export restrictions have been implemented by the likes of Australia, Russia, Ukraine, Argentina and Kazakhstan. Therefore, the rise in the wheat price from $8 a bushel to over $12 a bushel in the first two months of 2008 can be largely attributed to political decisions as grain-exporting countries seek to protect their own food supplies.
The Ukrainian government’s decision to lift its restrictions hopefully negates the possibility these short-term panaceas become permanent fixtures. Recent price declines taking wheat back to US$8/bushel can be largely attributed not only to the possibility of a half-decent harvest but also to the perception that the grain-exporting nations will remove trading restrictions as fast as they imposed them.
A similar theme has emerged in the rice market, but expect prices to decline sharply from the recent $25 a hundredweight level once the current frenzy ends.
We noted that grain supplies are volatile. However, fundamental demand increases will likely be met by countries with highly fertile but under-utilised land. Russia, Ukraine and Kazakhstan top the list of beneficiaries of this changing landscape.
Consider Russia. In 1992 the country had 120m hectares of farmland under cultivation. The change from public to private ownership ensured that one of the few advantages of communal ownership – access to plant and equipment – was lost.
Multiple ownership resulted in a “free rider” dilemma for the new owners of land ie, the efforts of individual contributions are shared equally. Consequently, in the last 15 years, some 40m hectares of rich farmland have lain fallow. And what is farmed is low yielding. Russia grows some two tons of wheat per hectare when it has the potential to produce five tons of wheat per hectare.
The ramifications are significant. From 75m tons of cereal output in 2007, Russia could multiply its grain output several-fold simply by enhancing yield management and bringing fallow land back into production. It could produce some 300m tons of cereals without the necessity of producing on virgin land.
This requires long-term planning and investment. Transferring ownership from inefficient multiple parties with no access to capital to large-scale corporate entities with long-term funding is time-consuming, while repairing fallow land is expensive. To attain higher yields needs lengthy investment in crop rotation. Overall the process can take 4-6 years.
These changes will help restore supply and demand imbalances across key cereal markets. That said, the entrepreneurial zeal transforming the Russian agricultural landscape will only restore some equilibrium to a dynamic market. So, while wheat at $12 a bushel might prove to have been a temporary blip, $4.50 a bushel is unlikely to be seen any time soon – even if it rains again in Australia one day.
Full article: http://www.ft.com/cms/s/0/99c75db4-16c9-11dd-bbfc-0000779fd2ac.html
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Monday, April 28, 2008
Prodi declines South Stream post
Quote: Romano Prodi, Italy’s outgoing prime minister, has declined a proposal by Vladimir Putin, Russian president, to head the South Stream pipeline project bringing Russian natural gas to Europe once he leaves office next month.
Aides suggested, however, that Mr Prodi’s answer was not final. One close associate said the former European Commission president had not made a decision about his future following his imminent departure from Italian politics.
But the associate doubted that Mr Prodi, 68, would want to experience the kind of opprobrium that greeted Gerhard Schröder when he stepped down as German chancellor in 2005 and accepted from Mr Putin a top post in the Nord Stream Baltic pipeline that they had promoted together.
South Stream, the company that plans to pipe Russian gas across the Black Sea, is jointly owned by Russia’s Gazprom and Italy’s Eni. Mr Prodi and Mr Putin first discussed the concept over dinner in the Black Sea resort of Sochi in late 2006.
Alexei Miller, chief executive of Gazprom, was in Rome on Monday for lunch with Mr Prodi and Paolo Scaroni, the head of Eni, which is Gazprom’s biggest European buyer.
Mr Scaroni, a key player in developing closer energy ties between Italy and Russia, on Monday endorsed the idea of having Mr Prodi in charge of the $10bn (€6.4bn, £5bn) South Stream project.
South Stream’s route or routes into Europe once it crosses the Black Sea into Bulgaria have not been finally agreed. Hungary, Greece and the Balkans are all possibilities, as well as Italy. Kostas Karamanlis, Greece’s prime minister, visited Moscow on Monday. The Greek embassy said the visit was likely to lead to Athens being involved in the project.
South Stream is projected to carry 33bn cubic metres of gas a year to south and central Europe.
Russia wants alternative routes for the gas it sells to Europe to reduce its reliance on routes through Ukraine and Belarus, where pricing disputes and concerns over inadequate infrastructure risk interrupting supplies.
The EU and the US want to cut Europe’s reliance on Russian gas by promoting the Nabucco pipeline, which would bring gas from the Caspian region through Turkey. Russia insists the South Stream pipeline is not a rival to Nabucco.
Gazprom took further steps to strengthen its hold on natural gas supplies to Europe this month by signing a joint venture with Libya and entering preliminary talks on a project to pipe Nigerian gas to Europe across the Sahara.
http://www.ft.com/cms/s/0/ecc3b47a-153b-11dd-996c-0000779fd2ac.html?nclick_check=1
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Aides suggested, however, that Mr Prodi’s answer was not final. One close associate said the former European Commission president had not made a decision about his future following his imminent departure from Italian politics.
But the associate doubted that Mr Prodi, 68, would want to experience the kind of opprobrium that greeted Gerhard Schröder when he stepped down as German chancellor in 2005 and accepted from Mr Putin a top post in the Nord Stream Baltic pipeline that they had promoted together.
South Stream, the company that plans to pipe Russian gas across the Black Sea, is jointly owned by Russia’s Gazprom and Italy’s Eni. Mr Prodi and Mr Putin first discussed the concept over dinner in the Black Sea resort of Sochi in late 2006.
Alexei Miller, chief executive of Gazprom, was in Rome on Monday for lunch with Mr Prodi and Paolo Scaroni, the head of Eni, which is Gazprom’s biggest European buyer.
Mr Scaroni, a key player in developing closer energy ties between Italy and Russia, on Monday endorsed the idea of having Mr Prodi in charge of the $10bn (€6.4bn, £5bn) South Stream project.
South Stream’s route or routes into Europe once it crosses the Black Sea into Bulgaria have not been finally agreed. Hungary, Greece and the Balkans are all possibilities, as well as Italy. Kostas Karamanlis, Greece’s prime minister, visited Moscow on Monday. The Greek embassy said the visit was likely to lead to Athens being involved in the project.
South Stream is projected to carry 33bn cubic metres of gas a year to south and central Europe.
Russia wants alternative routes for the gas it sells to Europe to reduce its reliance on routes through Ukraine and Belarus, where pricing disputes and concerns over inadequate infrastructure risk interrupting supplies.
The EU and the US want to cut Europe’s reliance on Russian gas by promoting the Nabucco pipeline, which would bring gas from the Caspian region through Turkey. Russia insists the South Stream pipeline is not a rival to Nabucco.
Gazprom took further steps to strengthen its hold on natural gas supplies to Europe this month by signing a joint venture with Libya and entering preliminary talks on a project to pipe Nigerian gas to Europe across the Sahara.
http://www.ft.com/cms/s/0/ecc3b47a-153b-11dd-996c-0000779fd2ac.html?nclick_check=1
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Now It’s the $6 Loaf of Bread
Quote: From the crowded warrens of Krus na Ligas to the aisles of the Wal-Mart in Las Cruces, N.M., the price of food has become an unavoidable topic of conversation. In January, the bull run of agricultural commodities was an afterthought at the World Economic Forum in Davos, where the subprime crisis, sovereign-wealth funds and the seemingly inexorable rise of petroleum dominated the agenda. But in a few short months, food has replaced oil as the Next Big Threat to the long-running global expansion. In the past year, wheat and corn futures have risen 61 percent and 58 percent, respectively. Rice futures have more than doubled since last August.
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In the recent global boom—five years of synchronous growth that lifted hundreds of millions out of poverty, forged new trading links and brought the hope of a better life to the developing world—the availability of plentiful, cheap food was generally taken for granted. But now much of the recent progress is being threatened by expensive food, whose advent has been a long time coming. As with oil, the rising prices are fueled in part by speculators. And like oil, expensive staples are swiftly upsetting business plans, sparking inflation, causing political instability and inflicting widespread economic pain.
The United Nations' World Food Program says that hunger has reached a crisis level in all the 121 poorest countries it has recently surveyed. High food prices are "creating a silent tsunami threatening to plunge more than 100 million people on every continent into hunger," said WFP executive director Josette Sheeran in London. The tsunami is no longer so silent. Food-related protests have erupted in Cameroon and Egypt. In Haiti, where the desperately hungry have turned to mud pies (concoctions of cooking oil, bits of vegetable and dirt), riots over food toppled the government of President René Préval.
The reasons behind the price spiral are at once complicated and simple. Although grain harvests in 2007 were the largest in the world's history, unfavorable weather has caused crop failures in Ukraine, a big grain producer, and wiped out Australia's once vast rice production. The rising price of energy, which has jacked up the costs of farming (a great deal of fertilizer is made from petroleum), is also a factor. And so, too, is speculation, as momentum investors have piled into the commodity markets. But at root, the rising prices have been fueled mostly by a long-term, steady increase in demand. To put it simply, in recent years people in developing countries, particularly India and China, have been eating more—and eating better—than ever before. In China, the boom has led to vastly greater consumption of meat and dairy products. Grains are the biggest single cost in raising pigs and cows.
http://www.newsweek.com/id/134311
.
placeAd2(commercialNode,'bigbox',false,'')
In the recent global boom—five years of synchronous growth that lifted hundreds of millions out of poverty, forged new trading links and brought the hope of a better life to the developing world—the availability of plentiful, cheap food was generally taken for granted. But now much of the recent progress is being threatened by expensive food, whose advent has been a long time coming. As with oil, the rising prices are fueled in part by speculators. And like oil, expensive staples are swiftly upsetting business plans, sparking inflation, causing political instability and inflicting widespread economic pain.
The United Nations' World Food Program says that hunger has reached a crisis level in all the 121 poorest countries it has recently surveyed. High food prices are "creating a silent tsunami threatening to plunge more than 100 million people on every continent into hunger," said WFP executive director Josette Sheeran in London. The tsunami is no longer so silent. Food-related protests have erupted in Cameroon and Egypt. In Haiti, where the desperately hungry have turned to mud pies (concoctions of cooking oil, bits of vegetable and dirt), riots over food toppled the government of President René Préval.
The reasons behind the price spiral are at once complicated and simple. Although grain harvests in 2007 were the largest in the world's history, unfavorable weather has caused crop failures in Ukraine, a big grain producer, and wiped out Australia's once vast rice production. The rising price of energy, which has jacked up the costs of farming (a great deal of fertilizer is made from petroleum), is also a factor. And so, too, is speculation, as momentum investors have piled into the commodity markets. But at root, the rising prices have been fueled mostly by a long-term, steady increase in demand. To put it simply, in recent years people in developing countries, particularly India and China, have been eating more—and eating better—than ever before. In China, the boom has led to vastly greater consumption of meat and dairy products. Grains are the biggest single cost in raising pigs and cows.
http://www.newsweek.com/id/134311
.
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