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  • European events driving grain prices Monday. Corn and soybean futures were lower and wheat was higher in overnight trading as a couple of developing stories in Europe could cause those price trends to continue through Monday's trade and beyond. First, an election in Greece could open the door for that fiscally embattled nation to start taking action on its massive debt. That's fundamentally bullish for the U.S. Dollar index, and that could be bearish for the grain markets in the U.S. But, the wheat trade may not care if a Ukrainian port sees an interruption from potential military action between Russia and Ukraine there soon. That could continue to send U.S. wheat futures higher."The U.S. dollar index rallied to new 11-year highs with the dollar up 2.5% last week. Now the results from Greece: The leftist Greek party Syriza won by a large margin in the Greek election. I think that the large margin of victory by Syriza in the Greek election opens the door for Greece to try and renegotiate their debt problem, which is long term negative for the Euro currency and positive for the U.S. dollar," says Kluis Commodities market analyst and broker Al Kluis. "Will wheat rally today? The Russian separatists are moving into a major battle for the export port city of Mariupol in Eastern Ukraine. This is a critical port and could disrupt the export of both Ukrainian and Russian wheat."See the latest grain prices See more on the situation developing in UkraineMeanwhile, Mother Nature's helping the U.S. wheat crop.This would normally be bearish for the wheat market, but the Ukrainian events are overshadowing the market's view of the weather in the Plains and Midwest that has been awfully friendly to the region's wheat crop lately. That looks to continue -- snow cover in the northern and eastern wheat-growing regions and mild temps and moisture in the Plains -- and keep the winterkill risk low for the next week at least, forecasters say. "Snow cover should remain in place across the northern and eastern Midwest, as more snow is expected there today and again later this week. Meanwhile, showers in the southwestern Plains by the end of the week will improve moisture supplies a bit for wheat," says MDA Weather Services senior ag meteorologist Don Keeney. "Mild temperatures in the Plains and southwestern Midwest will maintain low winterkill threats for wheat."Check your weather conditions & outlookICYMI: Farmland is the worst investment out there, analyst says.Late last week featured the Land Investment Expo in West Des Moines, Iowa. The event had just shy of 700 land brokers and ag lenders in attendance and featured speakers like Donald Trump. But, it was Dennis Gartman, an equities market analyst, who drew major reaction from some of his remarks. The air was practically sucked out of the room when he said "The investment I'd probably stay away from: land." He also said he thinks ethanol "is dead" and once that industry is gone soon, he says as much as $2/bushel could come out of the corn market. Brokers actually involved in these markets, however, said Gartman was a bit off, specifically ignoring the fundamentals of supply and demand for a farmland market that's still fairly strong in relation to other ag commodities and inputs. What do you think?Worst Investment Out There? Farmland, Investor Says

  • A group of bipartisan business and government leaders released a report Friday that looks at the economic effects climate change is likely to bring to the Midwest, including the region’s farmers. The report concludes that in some of the region’s southern counties, it will be difficult to grow corn by the end of this century.“If we continue on our current emissions path without significant adaptation, by the end of the century, the Midwest will likely see overall agricultural losses for corn and wheat of 11% to 69% across the region as a whole, with a 1-in-20 chance of more than an 80% decline,” says a report from the Risky Business Project called “Heat in the Heartland: Climate Change and Economic Risk in the Midwest.”Former Treasury Secretary Henry Paulson Jr. and former Cargill CEO Gregory Page talked about the report at a noon webcast from the Economic Club of Minnesota in Minneapolis. (You should still be able to view the webcast here.)Unlike the many scientific reports on climate change, the Risky Business Project aims to lay out the economic risks that climate change poses for businesses and doesn’t tell them how to respond, said Paulson, who along with former New York City Mayor Michael Bloomberg and former hedge fund manager and political activist Tom Steyer, founded the group.“The focus wasn’t going to be on solutions, which can be very divisive,” Paulson said. “The other thing that appealed to me about this is it’s bipartisan,” he said. The group’s Risk Committee includes George P. Schultz, a former Republican Secretary of State. Democrats on the committee include former Secretary of Housing and Urban Development Henry Cisneros.Page, who hinted that it took arm twisting by Paulson to get him on the group's committee, said he knows how divisive the issue of climate change is among farmers, but he likes the approach. “It speaks the language of business,” he said.“We really want to try to be a voice to call out to agriculture, whether it’s the land grant universities, the genetics companies, John Deere, to get engaged in this discussion and be seen, not necessarily as believers, and certainly not as deniers, but to be discussers,” he said.Page mentioned one effect of changing climate for Cargill — greater transportation risks in barge shipments of grain caused by weather extremes that have left the Mississippi River too dry to support barge traffic in parts of some years and so flooded that barges couldn’t get through locks in parts of others. His company was among those urging Congress for three years to raise barge taxes so that the nation’s aging locks and dams can be better prepared for such changes.“It took them over three years to get them to raise our taxes by 9 cents a gallon,” Page said. “We saw it as critical to dealing with some of the probabilities that climate change could put in front of us and to fund that effort on behalf of farmers who need those riverways to market their crops,” he said. For businesses in the Midwest, rising temperatures will likely mean higher energy costs as summer demand for air conditioning rises, as well as a less productive labor force and, in cities, rising crime, since crime tends to go up during hot weather.For agriculture, as farmers already know, the effects of changing climate vary a lot by region, something the report recognizes.“Over the next five to 25 years, without significant adaptation by farmers, some counties in Missouri, Illinois, and Indiana will likely see average commodity crop losses of 18% to 24% because of extreme heat each year,” the report says. “On the other hand, warmer winters may extend growing seasons in Minnesota, Wisconsin, and Michigan, allowing farmers to practice double-cropping,” the report says.The Risky Business Project has already released a national assessment of the economic costs of climate change. The report released Friday is its first look at the effects on a region.Its lead author, Kate Gordon, told Friday that the report’s scientific basis is an aggregation of 40 different climate models, similar to data used by the National Climate Assessment, a report mandated by Congress, and the work of the International Panel on Climate Change.“We tried to be very conservative about the data,” she said. Although the report is conservative, it also shows what could happen under the 1-in-20 chance that the most likely results of the modeling either show too little warming or too much. Since commodity prices by the end of the century can’t really be predicted, the report doesn’t attempt to show the cost of climate change to individual farmers. “It’s basically impossible,” Gordon said.Instead, the report lays out ranges in potential changes in yields for corn, soybeans, and wheat in eight states: Illinois, Indiana, Iowa, Michigan, Minnesota, Missouri, Ohio, and Wisconsin. Those potential changes are shown in three 20-year increments, beginning in 2020. The report also includes expected trendline increases in yields from crop breeding and is adjusted for how farmers have already changed practices such as irrigation as climate has changed. “We did model that expected adaptation,” she said. Gordon also said that in private meetings with farmers who are active in trade associations, she has found that farmers are making changes in their operations to adjust to changing climate.“In fact, they’re very responsive to climate data,” she said. 

  • The U.S. dollar is heading higher, crude oil and grain markets are staying low, and the worst investment out there is .  . . farmland?Dennis Gartman, longtime capital market analyst and publisher of The Gartman Letter, told 600-plus farmland investors this news Friday at the Peoples Company Land Investment Expo in West Des Moines, Iowa. That last bit just about sucked the air out of the packed banquet room, though many say this assertion ignores basic supply-and-demand principles in a continued tight environment for land in much of the Corn Belt. So, what's actually working?"My first rule of trading: Do more of the things that have been working and do less of the things that have not. What has been working? Stocks. They've been going upward on a consistent basis," he says. "The investment I'd probably stay away from: land."Gartman's precedent for what he expects in the farmland market is the housing crash of the early 21st century, which he calls "the best thing to ever happen in the U.S." The demolition of the housing market between 2005 and 2009, he argues, convinced the marketplace that housing "is not an investment," and farmland, though likely not facing a market deconstruction like housing a decade ago, will start losing value as related markets continue to slump as the U.S. dollar index surges. "I think we're in an environment here where the wind is at our back, but it's a mild wind, a pleasant wind; it's not going to take us forward rushing to higher levels, but compared to the rest of the world, we're so much better off in the U.S.," Gartman says. "We have to get used to the fact the dollar's going higher and oil's low. Buy stocks, don't buy land."That stronger dollar is going to continue to pressure all commodities lower -- a "harsh reality" for those in the ag sector -- and a virtually even corn-to-soybean acreage picture Gartman expects to unfold in the next year that will cause as much as a $2 drop in corn prices."This year, we're probably going to plant 88 million acres corn and 88 million acres of soybeans. Because of the corn-bean ratio, more farmers are going to put soybeans in the ground given these prices right now. Ethanol is going to go south. Ethanol is probably gone, and if that happens, you could see corn prices a lot lower. A whole lot lower. Way lower. I trust I'm clear. They could take a buck and a half to $2 out of corn without any problem," Gartman says, adding the value of land is grossly inflated right now. "In the past several years, if you take a look at corn prices to soybean prices to land prices, land is extraordinarily expensive. If you want to make the implied bet, cash your lot against the rising dollar, inflationary forces, and if you want to buy $8,000/acre land in Iowa, I think you'll fail. I think it'll get very ugly."So, Gartman says land and grain prices will get slammed while the U.S. dollar index continues to climb. What about crude oil? Especially considering the continued increase in production in the U.S. -- which will essentially make the nation a net-exporter of crude oil in a few years -- Gartman has a grave prediction for that market despite the implications of lower oil to the ag sector."In my lifetime, we will never see $75 crude oil ever again. Not ever, not no-how," Gartman says. "Take a look at the futures markets in oil. The back months are now $15 above the spot month. It's called a contango. That's profitable for frackers. Not only that, we're seeing people taking delivery of crude oil because you can make money buying it, selling forward futures and redelivering it when you have a contango. Crude oil is bidding for storage"You hear people say $45 crude will stop fracking. But, two years out, futures are at 60 dollars. Any bank will lend money hedged at $60 a barrel," Gartman continues. "I think we might have a chance to think $1.85 gasoline looks expensive. It means cheap fertilizer. It makes for very cheap nitrogen supplies. That's going to be wonderful for you guys in the business of growing crops. It will help overcome the fact that grain prices, I don't think, are going anywhere."Good Deflation?With the falling yield on U.S. 10-year Treasury notes, declining worker wages, a weaker Consumer Price Index, and lower commodities, the idea of a U.S. deflationary period ahead for the economy is on the minds of some economists.Dennis Gartman, longtime capital market analyst and publisher of The Gartman Letter, says the talk of deflation in the U.S. should be better described."There is good deflation and bad inflation," Gartman says.For instance, computer prices have been deflated all along. We get so much more out of our computer for $1,500 than you ever used to get out of it for $1,500," Gartman says. "There's more computing capability in my iPhone for $500 than there was that launched the moonshot. And how much did we pay for that? That is a perfect example of perfect, good deflation."In addition, in the 1890s, the U.S. witnessed good deflation when canals were opened up in the middle part of the country, Gartman says. "That drove down grain prices dramatically. But it increased exports dramatically. That was good deflation." Meanwhile, the talk of U.S. interest rates going higher is overblown, Gartman says. "It's amazing the number of years that it's been that 'Wall Streeters' keep saying the rates are going to go up. Write this down. Interest rates will go up when they go up. Until then, they are not going to go up."Editor's Note: Mike McGinnis contributed to this report.

  • If you think China's a big market right now, look out.Sub-Saharan Africa is poised to take over as the world's biggest marketplace for ag products, but at the same time, the region's ag infrastructure is weak compared to the U.S. and Europe. That makes it the perfect place to direct ag investment money, one South African ag investment company leader says."We liken agriculture to the highway system in the U.S. in the 1950s. We are connecting the dots in Africa," says Susan Payne, executive chairman of EMVEST, an ag investment organization she says is aimed at connecting Africa's "massive resources" with the investment money necessary to move those resources to ag markets both domestically and abroad. Right now, these connections are hugely important considering the demographic changes underway. Payne, speaking at the Peoples Company Land Investment Expo in West Des Moines, Iowa, Friday, says there are currently 1 billion people in Africa, with that number expected to double by 2050. The continent is 10 times the size of India and 3 times the size of China, and 2 Sub-Saharan African nations' projected GDP growth are among the world's leaders; Mozambique's GDP is expected to grow 159% in the next 3 decades, with Zambia expected to grow by 100%."Africa has enormous resources for expansion going forward. It's a sleeping giant for agriculture," Payne says. "Half of the population is is under 18 years old and we will surpass China in population by 2050. Nowhere has the assets for growth like Africa."Payne says there are a few reasons the African continent has such immense potential for ag expansion -- including investment from parts of the world like the U.S. -- in the next 3 decades. First off, farmland is cheap. Good, irrigated land in Zambia, for example, currently sells for $500 to $1,500/acre. The same land, Payne says, would sell for $10,000/acre in the U.S., $18,000 in the United Kingdom and $23,000 to $25,000/acre in western Europe. Secondly, Payne says there's immense potential demand. Payne says the entire continent imports $33 billion in food each year "but it doesn't have to import anything."There are hurdles to local investment in countries like South Africa, Mozambique, Zimbabwe and Zambia, Payne says. First off, financing isn't cheap. In South Africa and Mozambique, for example, interest rates run from 9% to 22%, with rates even higher in parts of Zimbabwe versus rates closer to 5% in the U.S. "You have to have a budget and a financial backer," she says. "You can't just walk into a bank and get financing like you can here."There's also a lot of work to be done before these nations' agriculture is commercially viable on a widespread basis. And, managing from afar isn't easy, especially in a region where government and official corruption is common. "Investors have to be on the same wavelength. Fifteen or 20 years may  be needed to recapitalize some areas," she says. "Trustworthy local management sounds like a given, but when you're working with people an 8- or 9-hour flight away, you have to kiss a lot of frogs before you get the right prince."But, despite these challenges, the farmers of sub-Saharan Africa are up to the challenge of developing the region's agriculture. With the right investment from nations like the U.S., that part of the world could be poised to become a major world ag producer."The reason why Zimbabwe's are such good farmers is they're good planners. They barter, they understand how to get products to the market, they know some of it is in the streets, some of it is in the supermarkets," Payne says. "These are sophisticated farmers."