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.
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
.
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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Saturday, April 26, 2008
Crude oil prices close to $120 on Gulf action
Quote: On Friday, oil jumped by more than $3 after a US military vessel fired on an Iranian boat in the Gulf, fuelling concerns about a conflict escalating between Washington and Tehran.
Nymex June West Texas Intermediate jumped $3.32 to a session high of $119.38 a barrel yesterday before easing back to trade $3 higher at $119.06, up 2 per cent this week. ICE June Brent surged $2.66 to $117.00 a barrel, up 2.7 per cent this week.
Oil hit a record $119.90 a barrel on Tuesday amid concerns about the outlook for supplies from Saudi Arabia, production disruptions in Nigeria and evidence of strong demand from China.
Adam Sieminski, of Deutsche Bank, said the cost of getting oil out of the ground was rising rapidly - around 20 per cent annually - and the price could reach $150 a barrel in another five years. "There is a huge risk that the oil price will continue to escalate until it gets to some level, perhaps $200 a barrel, when demand will finally collapse," said Mr Sieminski.
US petrol prices reached the $3 a gallon level for the first time this week and Nymex May RBOB unleaded gasoline spiked to a record $3.0815 a gallon yesterday, up 3.1 per cent this week.
Gold firmed 0.6 per cent to $890.25 a troy ounce yesterday, down 2.8 per cent this week. Some traders think the dollar could be close to a turning point if the Federal Reserve signals an end to interest rate cuts next week, and this may be deterring some investors from opening new long positions in gold.
In agricultural markets, US wheat prices dropped to a five-month low after Ukraine eased restrictions on exports. The move by one of the world's largest wheat exporters could put pressure on Russia to remove its export tax. CBOT May wheat fell 6.2 per cent to $8.16 a bushel this week.
Some US corn plantings have been delayed by rain and farmers are watching weather forecasts anxiously. CBOT May corn dipped 2.2 per cent to $5.86 a bushel this week. Rice traded at record levels with indicative prices for Thai medium-quality white rice, the global benchmark, quoted above $1,000 a tonne. Exporters offering rice to Japan at $1,300 a tonne were rejected.
http://search.ft.com/nonFtArticle?id=080426000121&ct=0
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Nymex June West Texas Intermediate jumped $3.32 to a session high of $119.38 a barrel yesterday before easing back to trade $3 higher at $119.06, up 2 per cent this week. ICE June Brent surged $2.66 to $117.00 a barrel, up 2.7 per cent this week.
Oil hit a record $119.90 a barrel on Tuesday amid concerns about the outlook for supplies from Saudi Arabia, production disruptions in Nigeria and evidence of strong demand from China.
Adam Sieminski, of Deutsche Bank, said the cost of getting oil out of the ground was rising rapidly - around 20 per cent annually - and the price could reach $150 a barrel in another five years. "There is a huge risk that the oil price will continue to escalate until it gets to some level, perhaps $200 a barrel, when demand will finally collapse," said Mr Sieminski.
US petrol prices reached the $3 a gallon level for the first time this week and Nymex May RBOB unleaded gasoline spiked to a record $3.0815 a gallon yesterday, up 3.1 per cent this week.
Gold firmed 0.6 per cent to $890.25 a troy ounce yesterday, down 2.8 per cent this week. Some traders think the dollar could be close to a turning point if the Federal Reserve signals an end to interest rate cuts next week, and this may be deterring some investors from opening new long positions in gold.
In agricultural markets, US wheat prices dropped to a five-month low after Ukraine eased restrictions on exports. The move by one of the world's largest wheat exporters could put pressure on Russia to remove its export tax. CBOT May wheat fell 6.2 per cent to $8.16 a bushel this week.
Some US corn plantings have been delayed by rain and farmers are watching weather forecasts anxiously. CBOT May corn dipped 2.2 per cent to $5.86 a bushel this week. Rice traded at record levels with indicative prices for Thai medium-quality white rice, the global benchmark, quoted above $1,000 a tonne. Exporters offering rice to Japan at $1,300 a tonne were rejected.
http://search.ft.com/nonFtArticle?id=080426000121&ct=0
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Friday, April 25, 2008
Russia heats up frozen conflict
Quote: The trouble with frozen conflicts is that they seldom stay that way. The unrecognised rebel region of Abkhazia looks like being the latest that could easily tip back into violence.
Georgia and Russia are at loggerheads over the territory, once the holiday playground of Moscow's elite. Georgia accuses Russia of creeping annexation, Abkhazia accuses Georgia of provocation and Russia is merrily exploiting their antagonism to demonstrate that it remains the dominant power.
Moscow has chosen an acutely sensitive moment, when Georgia is in the throes of a hotly disputed parliamentary election, to step up its formal ties with the secessionist republic. Tbilisi is incensed; the US, Nato and the European Union have expressed concern. That was before Monday, when a Georgian unmanned reconnaissance aircraft was shot down - allegedly by a Russian MiG-29 - over Abkhazia. Yesterday the United Nations Security Council held a closed session at Georgia's request to hear the claims and counter-claims.
"It's a very bad game that Moscow is playing," says Giorgi Baramidze, Georgia's deputy prime minister. "It is very dangerous and provocative. Russia is flexing its muscles. It is a challenge for the west."
Vladimir Putin, Russia's president, says he is being reasonable and legal, acting to protect Russian citizens in those regions. He adds that Georgia should never be flying aircraft over Abkhazia, in terms of the UN-secured ceasefire there.
Yet the Russian action is also a deliberate response to two other western moves in recent weeks, seen as hostile in Moscow: the US-backed decision by Kosovo, supported by most of the EU, to declare unilateral independence from Russia's ally Serbia; and the tentative agreement by Nato allies at their Bucharest summit to open the door to eventual membership for both Georgia and Ukraine.
It may well be more. Mr Putin seems to have opted to back hard-liners in Moscow, who favour de facto annexation of Abkhazia while stopping short of recognising independence, presenting a fait accompli to his successor, Dmitry Medvedev. Cooler Russian analysts have argued against any action that would appear to encourage self-determination for a former Soviet region. After all, just such an action was the excuse for two wars in Chechnya.
The Abkhazian conflict goes back to the 19th century, when thousands of Abkhazians were deported or forced to flee when they resisted Moscow's rule. In the Soviet era, Stalin subjected them to forced Georgianisation, closing Abkhaz language schools, and then encouraged further mass migration of other minorities to repopulate the region.
After the collapse of the Soviet Union, resurgent nationalism tipped Georgia and Abkhazia into a civil war. Today there are still at least 200,000 refugees in Georgia. For Tbilisi, it is a burning issue of national pride: no party in the election is prepared to defend Abkhazian independence, or Russia's actions. They are convinced that Russia is stirring it up.
Mikheil Saakashvili, the Georgian president, has offered a form of federal state, with a guaranteed post of vice-president for Abkhazia, and a veto on any changes to the constitution. But it seems it is too late. The Abkhaz population is trapped between a desire to escape Georgia, and fear of being sucked back into Russia.
http://search.ft.com/nonFtArticle?id=080424000213&ct=0
.
Georgia and Russia are at loggerheads over the territory, once the holiday playground of Moscow's elite. Georgia accuses Russia of creeping annexation, Abkhazia accuses Georgia of provocation and Russia is merrily exploiting their antagonism to demonstrate that it remains the dominant power.
Moscow has chosen an acutely sensitive moment, when Georgia is in the throes of a hotly disputed parliamentary election, to step up its formal ties with the secessionist republic. Tbilisi is incensed; the US, Nato and the European Union have expressed concern. That was before Monday, when a Georgian unmanned reconnaissance aircraft was shot down - allegedly by a Russian MiG-29 - over Abkhazia. Yesterday the United Nations Security Council held a closed session at Georgia's request to hear the claims and counter-claims.
"It's a very bad game that Moscow is playing," says Giorgi Baramidze, Georgia's deputy prime minister. "It is very dangerous and provocative. Russia is flexing its muscles. It is a challenge for the west."
Vladimir Putin, Russia's president, says he is being reasonable and legal, acting to protect Russian citizens in those regions. He adds that Georgia should never be flying aircraft over Abkhazia, in terms of the UN-secured ceasefire there.
Yet the Russian action is also a deliberate response to two other western moves in recent weeks, seen as hostile in Moscow: the US-backed decision by Kosovo, supported by most of the EU, to declare unilateral independence from Russia's ally Serbia; and the tentative agreement by Nato allies at their Bucharest summit to open the door to eventual membership for both Georgia and Ukraine.
It may well be more. Mr Putin seems to have opted to back hard-liners in Moscow, who favour de facto annexation of Abkhazia while stopping short of recognising independence, presenting a fait accompli to his successor, Dmitry Medvedev. Cooler Russian analysts have argued against any action that would appear to encourage self-determination for a former Soviet region. After all, just such an action was the excuse for two wars in Chechnya.
The Abkhazian conflict goes back to the 19th century, when thousands of Abkhazians were deported or forced to flee when they resisted Moscow's rule. In the Soviet era, Stalin subjected them to forced Georgianisation, closing Abkhaz language schools, and then encouraged further mass migration of other minorities to repopulate the region.
After the collapse of the Soviet Union, resurgent nationalism tipped Georgia and Abkhazia into a civil war. Today there are still at least 200,000 refugees in Georgia. For Tbilisi, it is a burning issue of national pride: no party in the election is prepared to defend Abkhazian independence, or Russia's actions. They are convinced that Russia is stirring it up.
Mikheil Saakashvili, the Georgian president, has offered a form of federal state, with a guaranteed post of vice-president for Abkhazia, and a veto on any changes to the constitution. But it seems it is too late. The Abkhaz population is trapped between a desire to escape Georgia, and fear of being sucked back into Russia.
http://search.ft.com/nonFtArticle?id=080424000213&ct=0
.
Kiev move sees cost of wheat fall
Quote: Wheat prices fell to a six-month low yesterday after Ukraine, one of the world's largest exporters of the grain, cut back its restrictions on exports.
Ukraine's return to the global market came on top of prospects of a bumper crop in breadbasket areas such as the Black Sea basin, Canada and the European Union, prompting some analysts to say the worst of the wheat price inflation was now over.
In Chicago, wheat prices fell to $8.04½ a bushel, the lowest level since November and 40 per cent below the $13.49½ a bushel record set in February. In Paris, milling wheat dropped to €187.25 a tonne, the lowest level since July.
However, wheat prices remain 70 per cent above their level a year ago and well above their historical average of $3-$4 a bushel. Executives from the food industry said it was unlikely consumers would benefit soon from the drop in wholesale costs as bread companies had not yet passed on previous price increases.
Ukraine said it would allow exports of 1.2m tonnes in the next two months, up from a previous quota of just 200,000 tonnes.
Sorin Vaslobal, of Paris-based cereals broker Plantureux, said Kiev's decision could trigger a domino effect. "We see Ukraine's move as applying pressure on Russia to remove its 40 per cent export tax," he said. Argentina and Kazakhstan have also restricted their wheat exports.
The International Monetary Fund and the World Bank have asked agriculture commodities exporters to scrap or at least ease their foreign sales restrictions.
The International Grains Council yesterday said the global wheat crop will hit a record 645m tonnes this year, up from 603.5m tonnes in 2007, as weather improves and farmers sow more wheat at the expense of crops such as corn. Luke Chandler, a cereal analyst at Rabobank in Sydney, said: "Wheat prices are expected to ease in the second half of 2008 as a potential record-breaking world wheat crop looms."
http://search.ft.com/nonFtArticle?id=080425000167&ct=0
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Ukraine's return to the global market came on top of prospects of a bumper crop in breadbasket areas such as the Black Sea basin, Canada and the European Union, prompting some analysts to say the worst of the wheat price inflation was now over.
In Chicago, wheat prices fell to $8.04½ a bushel, the lowest level since November and 40 per cent below the $13.49½ a bushel record set in February. In Paris, milling wheat dropped to €187.25 a tonne, the lowest level since July.
However, wheat prices remain 70 per cent above their level a year ago and well above their historical average of $3-$4 a bushel. Executives from the food industry said it was unlikely consumers would benefit soon from the drop in wholesale costs as bread companies had not yet passed on previous price increases.
Ukraine said it would allow exports of 1.2m tonnes in the next two months, up from a previous quota of just 200,000 tonnes.
Sorin Vaslobal, of Paris-based cereals broker Plantureux, said Kiev's decision could trigger a domino effect. "We see Ukraine's move as applying pressure on Russia to remove its 40 per cent export tax," he said. Argentina and Kazakhstan have also restricted their wheat exports.
The International Monetary Fund and the World Bank have asked agriculture commodities exporters to scrap or at least ease their foreign sales restrictions.
The International Grains Council yesterday said the global wheat crop will hit a record 645m tonnes this year, up from 603.5m tonnes in 2007, as weather improves and farmers sow more wheat at the expense of crops such as corn. Luke Chandler, a cereal analyst at Rabobank in Sydney, said: "Wheat prices are expected to ease in the second half of 2008 as a potential record-breaking world wheat crop looms."
http://search.ft.com/nonFtArticle?id=080425000167&ct=0
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Nick Louth: A bread and better punt
Quote: Food supplies across the world have become very tight. With 30 per cent of this year’s US maize crop disappearing into vehicle fuel tanks – aided by a federal biofuel subsidy – farmers there have been rushing to grow maize instead of soyabeans, wheat and other cereals. The result has been soaring prices, which have proved catastrophic for poorer nations.
Piling into commodity futures might yield a profit, but I wouldn’t feel comfortable helping raise prices. What I’d like is to invest in a company that helps increase the supply of cereals to ease the shortages.
That is what attracted me to Landkom, an Aim-listed Ukrainian farming group, in which I bought shares at 78p in January. Landkom is destined to be the largest grain producer in Europe and will drag Ukrainian farming practices and output into the 21st century.
In 1991, when Ukraine got independence, the government split up land ownership, allocating a hectare per person, with disastrous results. Access to capital was poor, many farms fell into disuse and output slumped. As a result, 40 per cent of Ukraine’s fertile black soil has been lying fallow for eight to 10 years, according to Libertas Capital, Landkom’s broker. Wheat output from the former “bread basket” plummeted from 50m tonnes at the end of the Soviet era to 20m tonnes in 2000.
Landkom has spent years stitching together rental agreements to turn a patchwork of smallholdings into a 62,500ha farm. With modern machinery and practices, it is expecting a 47,000 tonne harvest of wheat and rapeseed oil in 2008. This will increase to 1.2m tonnes in 2013.
Based on prices of $225 per tonne for wheat and $438 for rapeseed oil, revenues are expected to soar from $16.2m in 2008 to $317m in 2013. These are now very conservative figures. The May 2008 delivery futures prices for wheat and rapeseed oil are $320 and $620 per tonne respectively, 50 per cent above assumed projections. And though the world price of wheat has recently fallen, Ukraine’s decision this week to end an export ban is good news for Landkom as it gives the company access to these higher global prices.
Farming isn’t rocket science, but costs can be hard to control. I took a hard look at Landkom’s projections. Land rental is very cheap in the Ukraine, $50 per ha has been agreed in the first year, and $35 in subsequent years. In Canada or Australia, you would be talking about $60-$70.
Labour is much cheaper in Ukraine than in rival regions, so overall costs are competitive. According to the Scottish Agricultural College, average production costs per hectare for wheat (aside from land) are $100 in Ukraine, compared with $160 in the UK or US.
A bigger risk is politics. Landkom needs to stay on the right side of local politicians. By offering to pay a 25 per cent tax and employ 900 staff it has made a good start.
http://www.ft.com/cms/s/0/fc70c588-12e4-11dd-8d91-0000779fd2ac.html
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Piling into commodity futures might yield a profit, but I wouldn’t feel comfortable helping raise prices. What I’d like is to invest in a company that helps increase the supply of cereals to ease the shortages.
That is what attracted me to Landkom, an Aim-listed Ukrainian farming group, in which I bought shares at 78p in January. Landkom is destined to be the largest grain producer in Europe and will drag Ukrainian farming practices and output into the 21st century.
In 1991, when Ukraine got independence, the government split up land ownership, allocating a hectare per person, with disastrous results. Access to capital was poor, many farms fell into disuse and output slumped. As a result, 40 per cent of Ukraine’s fertile black soil has been lying fallow for eight to 10 years, according to Libertas Capital, Landkom’s broker. Wheat output from the former “bread basket” plummeted from 50m tonnes at the end of the Soviet era to 20m tonnes in 2000.
Landkom has spent years stitching together rental agreements to turn a patchwork of smallholdings into a 62,500ha farm. With modern machinery and practices, it is expecting a 47,000 tonne harvest of wheat and rapeseed oil in 2008. This will increase to 1.2m tonnes in 2013.
Based on prices of $225 per tonne for wheat and $438 for rapeseed oil, revenues are expected to soar from $16.2m in 2008 to $317m in 2013. These are now very conservative figures. The May 2008 delivery futures prices for wheat and rapeseed oil are $320 and $620 per tonne respectively, 50 per cent above assumed projections. And though the world price of wheat has recently fallen, Ukraine’s decision this week to end an export ban is good news for Landkom as it gives the company access to these higher global prices.
Farming isn’t rocket science, but costs can be hard to control. I took a hard look at Landkom’s projections. Land rental is very cheap in the Ukraine, $50 per ha has been agreed in the first year, and $35 in subsequent years. In Canada or Australia, you would be talking about $60-$70.
Labour is much cheaper in Ukraine than in rival regions, so overall costs are competitive. According to the Scottish Agricultural College, average production costs per hectare for wheat (aside from land) are $100 in Ukraine, compared with $160 in the UK or US.
A bigger risk is politics. Landkom needs to stay on the right side of local politicians. By offering to pay a 25 per cent tax and employ 900 staff it has made a good start.
http://www.ft.com/cms/s/0/fc70c588-12e4-11dd-8d91-0000779fd2ac.html
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Thursday, April 24, 2008
Ukraine feels strain as inflation soars
Quote: Vasyl Kuznetsov, a cash-strapped Ukrainian pensioner, makes no bones about his views of spiralling food prices as he shops for groceries in Kiev’s Volodymyrsky market.
“This bazaar should be demolished and those responsible for these prices jailed,” says the 77-year-old, standing in front of a meat counter. “How can we survive and buy meat when it has doubled in the past year to nearly $10 per kilogram? Everything has gone up – cooking oil, my electricity and gas bills. I can’t even afford to buy meat for this week’s Easter holidays.”
While inflation is re-emerging as an economic threat around the world, it is hitting Ukraine particularly hard. At 26 per cent year-on-year, last month’s jump in consumer prices was Europe’s biggest and among the highest in the world, excluding crisis-stricken states such as Zimbabwe.
Among stable economies only Venezuela, with 29 per cent, saw higher inflation. Asia’s largest increase was Vietnam’s 11 per cent rise.
Ukraine is not unique in central and eastern Europe. Inflation is high in some of the European Union’s new member states, including the Baltic states (11-17 per cent last month) and Bulgaria (14 per cent). In Russia, the region’s biggest economy, it is 13 per cent. Hans-Jörg Rudloff, chairman of Barclays Capital, told a Russia business conference: “Inflation clearly is a bigger problem right now than the slowdown of economic activity around the world.”
Like other countries, the region’s high-inflation states also face rising global food and energy prices. But it is clear that domestic economic developments are adding fuel to the flames. Some neighbouring countries have so far managed to keep a tighter lid on prices – in Poland, last month’s inflation was just 4.1 per cent.
To an extent, Ukraine is a victim of its own success – its high inflation is partly a by-product of rapid economic growth, which has averaged nearly 8 per cent annually since 2000, despite the political upheavals associated with the Orange Revolution. Economic growth has been accompanied by rapid credit growth, with the money supply rising at 50 per cent a year since 2004 as companies boost investment and householders spend on everything from cars to kitchens.
Moreover, successive governments have struggled to control inflation in the face of pressures to boost public spending. This year, the government is budgeting for a 43 per cent social spending increase, including a 37 per cent pensions’ rise and a 32 per cent increase in the minimum wage. While overall budget deficits have been kept in check, thanks to soaring tax revenues, cash has flowed into consumers’ pockets.
These effects have been compounded by a foreign exchange regime under which the hryvnia is tied to the US dollar. To prevent currency appreciation against a fast-depreciating dollar, the central bank has bought dollars and sold hryvnia, importing inflation. The foreign exchange reserves are up from $9.5bn in 2004 to about $35bn (€22bn, £18bn).
As elsewhere in the region, the global credit crunch is now damping credit growth. Economic growth is forecast to ease this year to about 5 to 5.5 per cent and inflation to slow in the second half. But it may still end the year near 20 per cent – far above the official 9.6 per cent target.
The authorities are taking action, with the central bank raising the discount rate from 10 to 12 per cent this week, tightening bank lending controls and preparing to widen the hryvnia’s trading band against the dollar.
Meanwhile, the government is cutting the planned budget deficit from 2 per cent to 1.5 per cent of gross domestic product. The International Monetary Fund wants bigger cuts but, with presidential elections due in late 2009, politicians are loath to squeeze the economy hard.
“This government is taking action and has the experience to cope with the situation,” a senior government official says.
But Kamen Zahariev, Kiev head of the European Bank for Reconstruction and Development, says: “Inflation remains a huge worry for everybody.”
It is a particular worry for the poor, who are especially exposed to upswings in food and energy prices. Ukrainian food prices have risen even faster than general prices – climbing 42 per cent in the year to March. While other European countries are also seeing such effects, the impact is hardest in Ukraine since food accounts for a bigger part of household spending than in richer states.
So far, like Mr Kuznetsov in the market, Ukrainians are complaining about prices but not coming out on the streets.
http://www.ft.com/cms/s/0/2a6c78cc-1233-11dd-9b49-0000779fd2ac.html?nclick_check=1
.
“This bazaar should be demolished and those responsible for these prices jailed,” says the 77-year-old, standing in front of a meat counter. “How can we survive and buy meat when it has doubled in the past year to nearly $10 per kilogram? Everything has gone up – cooking oil, my electricity and gas bills. I can’t even afford to buy meat for this week’s Easter holidays.”
While inflation is re-emerging as an economic threat around the world, it is hitting Ukraine particularly hard. At 26 per cent year-on-year, last month’s jump in consumer prices was Europe’s biggest and among the highest in the world, excluding crisis-stricken states such as Zimbabwe.
Among stable economies only Venezuela, with 29 per cent, saw higher inflation. Asia’s largest increase was Vietnam’s 11 per cent rise.
Ukraine is not unique in central and eastern Europe. Inflation is high in some of the European Union’s new member states, including the Baltic states (11-17 per cent last month) and Bulgaria (14 per cent). In Russia, the region’s biggest economy, it is 13 per cent. Hans-Jörg Rudloff, chairman of Barclays Capital, told a Russia business conference: “Inflation clearly is a bigger problem right now than the slowdown of economic activity around the world.”
Like other countries, the region’s high-inflation states also face rising global food and energy prices. But it is clear that domestic economic developments are adding fuel to the flames. Some neighbouring countries have so far managed to keep a tighter lid on prices – in Poland, last month’s inflation was just 4.1 per cent.
To an extent, Ukraine is a victim of its own success – its high inflation is partly a by-product of rapid economic growth, which has averaged nearly 8 per cent annually since 2000, despite the political upheavals associated with the Orange Revolution. Economic growth has been accompanied by rapid credit growth, with the money supply rising at 50 per cent a year since 2004 as companies boost investment and householders spend on everything from cars to kitchens.
Moreover, successive governments have struggled to control inflation in the face of pressures to boost public spending. This year, the government is budgeting for a 43 per cent social spending increase, including a 37 per cent pensions’ rise and a 32 per cent increase in the minimum wage. While overall budget deficits have been kept in check, thanks to soaring tax revenues, cash has flowed into consumers’ pockets.
These effects have been compounded by a foreign exchange regime under which the hryvnia is tied to the US dollar. To prevent currency appreciation against a fast-depreciating dollar, the central bank has bought dollars and sold hryvnia, importing inflation. The foreign exchange reserves are up from $9.5bn in 2004 to about $35bn (€22bn, £18bn).
As elsewhere in the region, the global credit crunch is now damping credit growth. Economic growth is forecast to ease this year to about 5 to 5.5 per cent and inflation to slow in the second half. But it may still end the year near 20 per cent – far above the official 9.6 per cent target.
The authorities are taking action, with the central bank raising the discount rate from 10 to 12 per cent this week, tightening bank lending controls and preparing to widen the hryvnia’s trading band against the dollar.
Meanwhile, the government is cutting the planned budget deficit from 2 per cent to 1.5 per cent of gross domestic product. The International Monetary Fund wants bigger cuts but, with presidential elections due in late 2009, politicians are loath to squeeze the economy hard.
“This government is taking action and has the experience to cope with the situation,” a senior government official says.
But Kamen Zahariev, Kiev head of the European Bank for Reconstruction and Development, says: “Inflation remains a huge worry for everybody.”
It is a particular worry for the poor, who are especially exposed to upswings in food and energy prices. Ukrainian food prices have risen even faster than general prices – climbing 42 per cent in the year to March. While other European countries are also seeing such effects, the impact is hardest in Ukraine since food accounts for a bigger part of household spending than in richer states.
So far, like Mr Kuznetsov in the market, Ukrainians are complaining about prices but not coming out on the streets.
http://www.ft.com/cms/s/0/2a6c78cc-1233-11dd-9b49-0000779fd2ac.html?nclick_check=1
.
Wednesday, April 23, 2008
Svoboda Activists Throw Eggs At Regions Party Members During Ground-Breaking Ceremony For Building Monument To OUN-UPA Victims In Luhansk
April 23 activists of the All-Ukrainian Union Svoboda threw eggs at the Regions Party members during a ground-breaking ceremony for building a monument to victims of the organization of Ukrainian nationalists and the Ukrainian insurgent army (OUN-UPA) in the Moloda Hvardia public garden in the centre of Luhansk.
While MPs Oleksandr Yefremov and Viktor Tikhonov and also chair of Luhansk regional council Valerii Holenko delivered speeches at the stone laid for future monument to OUN-UPA victims, a column of Svoboda representatives began to approach them.
They were carrying the party flags and crying out: "Glory to Ukraine, glory to the heroes!".
Some of the Regions Party members immediately stood in file in order not to let the column to the improvised stage and to the stone.
The Regions Party representatives, in order to howl down Svoboda slogans, began to sign the song Victory Day and also accuse the opponents of betraying their Motherland.
Then the file of the Regions Party members with some policemen began to press back Svoboda activists.
During this, the opponents were outraging each other and Svoboda representatives threw several eggs at the Regions Party file.
Police stepped in to the conflict and prevented the scuffle.
Before long Svoboda representatives left the public garden.
http://www.ukranews.com/eng/article/119043.html
.
While MPs Oleksandr Yefremov and Viktor Tikhonov and also chair of Luhansk regional council Valerii Holenko delivered speeches at the stone laid for future monument to OUN-UPA victims, a column of Svoboda representatives began to approach them.
They were carrying the party flags and crying out: "Glory to Ukraine, glory to the heroes!".
Some of the Regions Party members immediately stood in file in order not to let the column to the improvised stage and to the stone.
The Regions Party representatives, in order to howl down Svoboda slogans, began to sign the song Victory Day and also accuse the opponents of betraying their Motherland.
Then the file of the Regions Party members with some policemen began to press back Svoboda activists.
During this, the opponents were outraging each other and Svoboda representatives threw several eggs at the Regions Party file.
Police stepped in to the conflict and prevented the scuffle.
Before long Svoboda representatives left the public garden.
http://www.ukranews.com/eng/article/119043.html
.
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