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  • It's been referred to as the largest construction project in the history of mankind, and it has a lot to do with the grain that passes through your augers on its way to destinations around the world.A Chinese company has broken ground on the Nicaragua Canal, a 170-mile-plus waterway that could take 5 years and $50 billion to complete and would accommodate the world's largest barges and create a new, more efficient way for grain to make it through the Americas to ports on either the Pacific or Atlantic oceans. Amid immediate questions that the project could even be finished, officials broke ground on the canal that would cross Lake Nicaragua earlier this year.A canal crossing the nation just north of the current Panama Canal has a long history. Napoleon III proposed such a waterway in the 1800s, though any thoughts of developing the area for commercial traffic was halted when the U.S. built the Panama Canal in the 1910s.A century later, though, times have changed immensely; the Panama Canal, which itself is nearing the end of a decade-long renovation that will make it better able to accommodate barges common in long-distance commercial transportation, still falls short, proponents of the Nicaragua Canal say. It takes a lot of time for a large vessel to cross the 48-mile canal, and those backing the new waterway to the north say that's a growing impediment to the global movement of freight, like corn and soybeans. In the last 4 decades alone, the amount of freight traversing the world's oceans has quadrupled, according to a National Academy of Engineering (NAE) report, with more than 50,000 vessels moving freight worldwide.The 30,000-foot ViewAging canal infrastructure, vessel technology and growth is driving new canal's construction.Shorter shipping distances and greater efficiency can save as much as $1 million/trip.As many as 50,000 vessels are moving goods and commodities at sea at any given time.The Nicaragua Canal could take 5 years and $50 billion to construct.So, in stepped the Beijing, China-based "infrastructure development firm" HKND Group, whose CEO Wang Jing, a 43-year-old billionaire, has backed "major infrastructure, mining, aviation and telecommunications" projects in 35 countries. The company cites World Trade Organization data that shows world trade accounts for more than $18 trillion in annual global revenue, with 90% of the world's "total global commerce" hinging on the world's transportation system, including infrastructure like the Suez, Panama and potential Nicaragua canals. These numbers, coupled with general economic growth in China and elsewhere in the world, make up just part of the force behind the canal's construction, according to HKND Group."The first decade of the 21st century saw unprecedented changes in global maritime trade. Volume of global trade increased rapidly prior to the 2008-09 financial crisis, with one of the drivers being China’s own growth and the fact that China became a main trading partner of many developed and developing economies alike. Post financial crisis, China and many other countries in the global economy have faced lower economic growth trajectories. Yet after some consolidation, China should be expected to again accelerate its own economic growth in the coming decades, while many other countries will re-establish more respectable growth rates than those experienced in recent years," according to an HKND Group report. "At the same time, from the mid-'90s onward, container vessel sizes have increased some three fold, contributing not only to the rapid growth of maritime trade and containerization but also to continued revolutions in the lowering of transportation costs per unit and, as a result, lower costs for consumer goods around the world."Infrastructure improvements badly neededThough some see the canal's construction as a shot by China to simply get more for less on the global market via cheaper and more efficient global transportation, it's not the only development going on in the Americas to upgrade overall shipping facilities. Improvements have been underway at ports on both east and west coasts of the U.S. to allow more efficient movement of barges of increasing size, according to NAE."Port infrastructure is being continuously adapted to increases in ship size. Port planning is driven by pressures to increase productivity and throughput and reduce air emissions from the terminal equipment, as well as from the ships, trains, and trucks entering and leaving the port," according to an NAE report by Keith Michel, chairman of Herbert Engineering Corporation, and Peter Noble, chief naval architect at ConocoPhillips. "The ports of Los Angeles and Long Beach, the largest container ports in the United States, have been in the forefront of these changes. For example, new cranes with greater vertical clearance and outreach that require less power are highly automated to improve productivity."Size mattersAnd, in the realm of international shipping, size definitely matters. The largest barges on the water today can carry as much as 14,000 twenty-foot equivalent units (TEU, a common measure for maritime transport capacity). But, the Panama Canal, even once improvements are completed (expected next year), can handle barges up to 13,000 TEU. So, HKND Group officials say that makes the Nicaragua Canal a vital piece of the future of global trade."Currently, some of the largest global trade lanes remain to the US West Coast and the US East Coast. The majority of container shipping volumes to the US East Coast rely on a Panama Canal transit. At the same time, a substantial portion of containers unloaded on the U.S. West Coast transit further eastward, with some traveling to the same destinations as containers unloaded on the US East Coast. The fact that the US can receive more and more larger vessels is itself already a big leap for U.S. ports. But this shift-up in vessel sizes has been in the works for about the last decade. We believe, partly also because of the recent further acceleration in vessel sizes, that further North America infrastructure upsizing will likely take place post 2020," according to HKND Group. "Due to the drive for continued trade globalization, and the further enhancement of growth in developing economies, international container shipment volume will continue to grow."With the rapid increase in East-West trade volume and increasing ship sizes, there is a sufficient justification for a second Interoceanic Canal spanning Central America. The trend of increasing ship size alone demonstrates there is a huge market potential for the Nicaragua Canal. This market belongs to the Nicaragua canal," an HKND Group report continues. "We believe, in 2030, 16 years from now, the combined value of goods passing through the Nicaragua Canal and Panama Canal will surpass 1.4 trillion dollars.  This will be one of the most important concentrations of shipping in the world. In addition, the fuel savings will be considerable for Super Post Panamax ships passing through Nicaragua Canal. For example, from Shanghai to Baltimore, the Nicaragua canal route is shorter than Suez Canal route and Cape of Good Hope route by 4000km, and 7500km respectively. Based on current fuel cost and average scale container ships, this results in round trip savings of $0.5m and $1m, respectively."

  • The dollar is skyrocketing, and the grains are lower. After Tuesday's trade that saw corn and wheat futures move higher (soybeans closed lower, but 10 cents off the day's lows), things turned around in the overnight trade.There is one big outside fundamental factor in the driver's seat heading into today's trade that's likely to start in the red: the dollar. It's flirting with major highs, and if it moves a little higher today, it could be a while before it turns around. Meanwhile, traders are seemingly looking ahead to spring planting just as much as farmers are, and weather progress toward planting is front and center in traders' minds, says Kluis Commodities market analyst Bob Linneman."The U.S. dollar is dangerously close to scoring new multiyear highs again. If the U.S. dollar pushes through the January high of 95.85, then we should see a quick move to 96.17, which is the 50% retracement of the 2001 high and the 2008 low. If the market does not slow down there, then it will likely take a run at 102.10, which is the 62% retracement," he says. "Is it too early to start watching U.S. weather? NO, it is not! I want to keep a close eye on the drought map and long-range forecasts.  Most people would agree that long-range forecasting is far from perfected, but funds will still buy or sell based on this information. Thus, we need to pay attention to what those forecasts are saying."Check the latest grain prices Speaking of spring planting weather . . . Temperatures are still in the basement in much of the Midwest Wednesday, and it will remain on the cool side through the rest of this week, forecasters say. It won't last, though: By midmonth, temperatures should be into the 40s and 50s as far north as the Dakotas. The spring warm-up is on the way, but a good stretch of warmer temps will be critical to waking up soils that have gone through one of the coldest months of February in decades. This could mean a slow start to planting, but it won't feature major delays, forecasters say."January and February featured very cold weather across the eastern U.S., including most of the major corn and soybean production areas in the Midwest. This cold weather has also led to very low soil temperatures relative to normal," says MDA Weather Services senior ag meteorologist Kyle Tapley. "Given this very cold starting point for soil temperatures, it will likely take longer than normal for soil temperatures to reach a point where planting of corn is possible, leading to a delayed start to planting."See more on the early spring planting forecastWatch Plains wheat conditions heading into spring.The winter wheat crop in the Plains has had a tough winter, too. As the crop is poised to break out of dormancy and start on its latter half of growth toward maturity, a few issues are popping up in spots around the Wheat Belt. Leaf rust is starting to show up in Texas, while stripe rust worries have farmers applying fungicides in Oklahoma. Hessian fly is the issue in Kansas, having been found in fields planted to varieties that are supposed to have a high resistance to the pest. Despite it all, USDA is rating the crop in mostly good shape as the spring thaw approaches. Watch wheat conditions for market direction in that pit. If you're a wheat farmer, how's your crop looking?See more on wheat conditions

  • Prices are rapidly rolling from record-high prices in 2014 –- driven by massive PEDv death rumors-turned-reality –- down to five-year lows near $45 per hundredweight, landing the hog markets in what may be the greatest collapse of hog prices ever. Even while PEDv was killing millions of pigs, 2014 pork production was only down 2%; now it's skyrocketing past hog supply projections in 2015. Chris Hurt, professor of agricultural economics at Purdue University, calls it a “classic boom-and bust-price pattern.” The looming question: Did prices overshoot to the downside and will they soon recover, or does the larger-than-expected pork supply justify the current low prices?February pork supplies were anticipated to increase around 3%. Actual supplies? Up 7%. February pork supplies were expected to be up about 3%, while actual supplies have been up 7% due to 4% more hogs reaching the market than anticipated. Based on USDA’s December farrowing intentions and sow numbers survey, pork supplies are looking to boost 6% to 7% in the last half of 2015. Since we saw a full 4% more hogs reaching the market in February alone, imagine what we could see come year’s end.Hog Market ‘Yo-Yo’ to Continue in 2015Third Strain of PEDv Identified in MinnesotaLatest Innovation in Pork ProductsUsing 2015 prices thus far and futures forecast for the remainder of the year, Hurt predicts an average price around $55 per live hundredweight, an improvement from recent $45 prices.Hold Onto the 2014 Profits; 2015 is Much More ModestLet’s be honest, 2014 was a year for the books. Pork producers raked in huge profits in lieu of PEDv tormenting the nation’s hog supply and meager crop prices. As you may have guessed, a bust in hog prices also means modest profits, especially when you put the figures next to last year’s estimated profits of $53 a hog. The previous annual record profit was $39 per head in 2005.“Given current anticipated hog prices and costs, modest losses are expected in the first and fourth quarters this year with about $19 per head of profits in the second and third quarters,” explains Hurt. “For the year, a modest profit of $8 per head is anticipated.”… Luckily, Production Costs Are LowerLessening the strain and worry for pork producers are the low costs of production – a five-year low, in fact. Production costs are estimated to be $52.25 per live hundredweight in 2015 compared to about $57 in 2014. Much of the credit goes to the struggling grain prices for helping feed prices take the plunge.“The biggest decrease in feed costs in 2015 is expected to come from soybean meal which may be $120 a ton lower ($360 per ton this year vs. $478 in 2014 based on Decatur high-protein prices),” says Hurt. Average corn costs (based on U.S. farm prices) are expected to land at around $3.83 per bushel this calendar year, down from $4.09 in 2014. Yes, feed prices are to be the lowest we’ve seen since 2010, but remember that yield variability has been high in those years. However, fewer corn acres plus lower yields could push prices up. Don't Expand the Herd Just YetHurt lays out two questions to be answered before producers dive head first into expanding their herds.1. How important will PED losses be to hog numbers this year?2. Has the industry already expanded more than USDA picked up in the December Hogs and Pigs report? On March 27, the March Hogs and Pigs report will give information regarding the degree of herd expansion. As previously mentioned, December’s report showed expectations far short of the actual number of hogs.“If the industry has already expanded sufficiently to drive prices down near costs of production, further expansion could push the industry into losses,” says Hurt. See the full report from Farm Doc Daily: http://farmdocdaily.illinois.edu/2015/03/porks-boom-and-bust-price-pattern.html

  • A slow start . . . but not too slow. Right now, that's the outlook for corn and soybean planting the next few weeks in the U.S., as winter slowly loosens its grip over the central portion of the country. After a record-cold February (at least in some spots), spring thaw may take a little more time than usual, meaning corn and soybean planting could be held up by Mother Nature . . . just not too long.Keep your eye on the forecast for the middle third of this month, forecasters say. In the 11- to 15-day forecast, temperatures are expected to remain higher than normal with less-than-normal precipitation, two trends that could help the Midwestern soils wake up from winter and lay the groundwork for this spring's planting window. Don't look for that window to get thrown wide open just yet, though, especially considering the conditions that will have preceded that warm-up."As is well known by this point, January and February featured very cold weather across the eastern U.S., including most of the major corn and soybean production areas in the Midwest. This cold weather has also led to very low soil temperatures relative to normal," says MDA Weather Services senior ag meteorologist Kyle Tapley. "Given this very cold starting point for soil temperatures, it will likely take longer than normal for soil temperatures to reach a point where planting of corn is possible, leading to a delayed start to planting. While snow cover is above normal across the central and southern Midwest, the snow pack is actually thinner than normal across the northern Plains and far northwestern Midwest."A good example of this lower-than-normal starting point for temperature accumulation is the state of Nebraska. As of early March, all of that state's soil is below the normal temperature, some spots by as much as 8 degrees F., a deficiency that can be tough to make up on the normal time frame for a spring thaw, forecasters say. After the mid-March warm-up, what does the "normal" corn-planting window look like for the Corn Belt? Temperatures will likely remain on the cooler side, emphasizing the importance of just how much things thaw out later this month. If temperatures snap higher earlier on, the cooler -- and possibly wetter -- conditions later on won't be as big of an issue. If the opposite is true for mid-March, it could become a slog, Tapley says. A lot depends on how much rain falls, too."During April, seasonal to slightly-below-normal temperatures are expected, with the coolest temperatures relative to normal expected across the southwestern Midwest and Delta. These cool temperatures, combined with the colder-than-normal soil temperatures currently seen across the central U.S., will likely act to delay the start of planting," he says. "However, precipitation is expected to be below normal across much of the Corn Belt, which should lower the probability of major delays in planting due to excessive wetness or flooding."If the first half of planting season keeps progress at a snail's pace on your farm, don't throw in the towel just yet. May looks better, Tapley says, with warmer temperatures helping kick things back on schedule in general."By May, temperatures are expected to be normal or even above normal across the Corn Belt, which should favor planting of corn and soybeans. Normal rainfall is expected across most of the Midwest, although some wetter-than-normal conditions will be possible across Minnesota," he says. "Bottom line: A delayed start to spring planting is likely across the U.S. Corn Belt due to cold winter weather, but our current spring forecast would argue against major delays in planting."Beyond May, though, forecasts don't show much direction yet; farmers expect conditions to turn hot and dry as summer unfolds. And even now, just as the winter homestrech rolls around, farmers say they may start making grain marketing decisions based on the fact that prices could go higher if a drought hits this year."A hot, dry 2015 summer would be a game-changer, and there are a lot of bears on one side of the boat," says Agriculture.com Marketing Talk senior adviser BA Deere. "I honestly don't know, but if a guy can gamble or buy a 'call' to leave your topside open, it would be a contrarian move."What do you think? How do you see your planting season and resulting grain sales shaping up?

 

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