Argentina's Cresud Rides Farm Boom To Rapid Regional Expansion
Cresud SA, one of Argentina's leading farming conglomerates, continues to ride a global farming boom to higher profits and swift regional expansion, CEO Alejandro Elsztain said in a conference call with investors.
"We have a perfect platform and intend to keep growing and developing new lands," Elsztain said.
The company plans to expand its farmed area to 218,000 hectares (538,000 acres) next year from 180,000 hectares in 2011 and just 82,000 in 2006.
This year, 100,000 hectares of the total farmed area is in Argentina, 58,000 hectares in Brazil, 22,000 hectares in Bolivia and 3,000 hectares in Paraguay.
Cresud posted a net profit of 213 million pesos ($51 million) during the fiscal year ended June 30, up 14.6% from the previous year. The gain was due to high yields, expanding acreage and soaring commodity prices.
The company managed to refinance its short-term debt and now owes $616 million, most of which comes due in 2017 and 2020.
Most of Cresud's income comes from soybean, corn and beef production, although sugar cane is playing a larger role in Brazil and Bolivia.
Last year, Cresud paid $76 million to raise its stake in Brazilian agricultural company BrasilAgro SA to 36%, and expects to continue its expansion in Brazil's farm sector.
Cresud's beef production has doubled over the past year due to a recovery after a drought in 2009 and as sales prices have shot up 30% in Argentina. Cattle prices are expected to stay firm over the next two years due to tight local supply as ranchers rebuild herds, Elsztain said.
Argentine beef supplies are low after a drought and government price caps led to a massive selloff in 2009. Now many ranchers are getting back into the business after price controls were removed, but the beef chamber Ciccra doesn't expect production to return to normal until 2014.
During the first seven months of the year, just 6.2 million cattle were sent to slaughter in Argentina, the lowest levels seen in over two decades. The number of cattle slaughtered was down 12.8% on the year and down 33.5% from the same period in 2009, according to Ciccra.
While Argentina's Congress is currently debating a land law which would limit farmland purchases by foreigners, Cresud is confident that land prices will hold up. In addition, Argentina is likely to make an exception in the law which will allow foreigners to buy new farmlands for development, which would simply "be a continuation of what they have been doing," Elsztain said.
Itochu To Export Bioethanol From US To Brazil -Nikkei
Itochu Corp. plans to begin buying bioethanol from U.S. cargo bookers as early as next year for export to Brazil, The Nikkei reported early Saturday.
Bioethanol imported from the U.S. would be supplied to market via sales routes the Japanese trading firm has in Brazil. Itochu operates a bioethanol production and sales business in the northeastern Brazilian state of Tocantins and the southeastern state of Minas Gerais jointly with U.S. agribusiness giant Bunge Ltd.
The U.S. is said to have more than 200 factories that make bioethanol from corn. Itochu aims to handle 100,000kl of the alternative fuel annually down the road.
Bioethanol is widely used as a gasoline alternative in automobiles in the South American country. Demand is growing at a 5-10% annual pace and is projected to reach 25 million kiloliters this year. However, supplies have been squeezed after adverse weather conditions resulted in a poor harvest of sugar cane, the primary feedstock for the fuel in Brazil.
German, Baltic Wheat Gets Temporary Rainfall Relief -WeatherEdge
High pressure will bring less rainfall over the next couple of days to Germany and the Baltic States, allowing the harvesting of any outstanding wheat, but quality will remain poor, Edward Smith, meteorological consultant at WeatherEdge forecasters, said.
Still, Smith told Dow Jones Newswires that further unsettled weather is bound for Germany and the Baltic States early next week.
Heavy rainfall that caused delays to harvesting in Germany and the Baltic-fringe countries over the past month, has prompted Strategie Grains to revise down its expectations for European milling wheat production by 3.1 million metric tons to 85.5 million tons during the 2011-2012 crop year.
Excess rain in northeastern and eastern Germany and Poland and abundant precipitation in Central Europe has hampered harvesting this year. Parts of Northeast Germany have received as much as 200 millimeters of rain in two weeks, said the European Union's monitoring body MARS.
"Germany is getting a break in rainfall to finish any outstanding harvest but quality of the remaining crop will be poor, i.e. animal feed," Smith said. He also said that the Baltic states still remain unsettled but with a few decent breaks from rainfall next week.
India's Pulses Imports Will Likely Shrink Despite Fall In Summer-Sown Crop - Trade Executive
India, the world's biggest buyer of pulses, will likely import less of the protein-rich staple during this financial year despite a slight fall in its summer-sown crop output as there are sufficient supplies from last season's bumper crop, a top trade body executive said Friday.
"I think the imports will be around 2.5 million metric tons. There is abundant supply available in India," Pravin Dongre, president of the India Pulses and Grains Association, told Dow Jones Newswires.
He estimated last year's pulses imports at around 3 million tons.
Pulses output overcame almost a decade of stagnation to hit a record 17.29 million tons in the 2010-11 crop year ended June 30.
Different varieties of pulses in India are planted throughout most of the year, with summer pulses accounting for around 40% of the country's annual output.
Dongre also said the output of pulses during this summer season will likely be more than the government's estimate of 6.43 million tons, down from 7.12 million tons last season.
"We will be closer to 7 million tons [during this season's output]," he said, citing good monsoon rains as a factor.
The key pulse-growing regions in the country, the central state of Madhya Pradesh and the western state of Maharashtra, have received good monsoon rains, but acreage has slipped as many farmers have opted to grow more cotton and sugarcane, which are commanding high prices in the international market.
The area under pulses fell to 10.58 million hectares from 11.72 million hectares as of Sept. 9, government data showed.
Both Farm Minister Sharad Pawar and Farm Secretary P.K. Basu say the government will step up efforts to boost pulses output during this winter season.
India's farm ministry wants to make the country self-sufficient in pulses and has been trying to boost cultivation of the crop by earmarking more funds for supplies of hybrid seeds, as well as other inputs, through special programs.
Dongre said he wasn't anticipating any supply problems from India's main suppliers including Myanmar and Australia, except some reduction is expected in Canada's yellow pea output.
Prices of most staples are likely to remain steady after declining by nearly half from peaks achieved two years ago.
Argentina Beef Exports Still Slack Due To Low Production-Group
Argentina's beef exports continue to languish as ranchers focus on selling to the local market or building up herds which were decimated by a severe drought in 2008-09.
In July, Argentina's beef exports totalled just 12,460 metric tons, down from an average of 14,500 tons over the previous two months, according to the beef chamber Ciccra. Exports during the first seven months of the year were just 95,056 tons, down 19.3% on the year and down 57.5% from the same period in 2009, Ciccra said.
Beef supplies are tight after a drought and government price caps led to a massive selloff in 2009. Now many ranchers are getting back into the business after price controls were removed, but the beef chamber Ciccra doesn't expect production to return to normal until 2014.
During the first seven months of the year, just 6.2 million cattle were sent to slaughter, the lowest levels seen in over two decades. The number of cattle slaughtered was down 12.8% on the year and down 33.5% from the same period in 2009, Ciccra said.
Argentina was the world's No. 4 beef exporter in 2009, when it shipped 655,000 tons, but is expected to slip to 10th place this year, with just 270,000 tons, according to the U.S. Department of Agriculture. Herds were trimmed by 10 million animals over the past 4 years, but the government has set an ambitious target of increasing beef production by 70% by 2020.
Talking Points
UK Farm Ministry Approves GMO Wheat Crop Trial In 2012-13
The U.K.'s farm ministry has given the green light for a trial of genetically-modified wheat to be conducted, in a signal of the government's changing attitude to the controversial technology.
The trial, to be conducted in 2012-13 by scientists from Rothamsted Research station, will allow research on a type of wheat that has been modified to be resistant to attack by aphids, the Department for Environment, Food and Rural Affairs said.
Researchers are "satisfied that the proposed trial will not result in any adverse effect on human health or the environment," Defra said in a statement.
GMO crops are grown widely in many important agricultural producing countries, including the U.S. and Brazil. In Europe, Portugal and Spain this year have this year increased plantings of a type of corn to record highs due to fears of pest concerns, according to the U.S. Department of Agriculture.
Caroline Spelman, U.K. farm minister, has frequently said she wishes to have a more "science-based" debate on biotechnology, given the growing pressure on food resources from the world's expanding population.
"It's right to look at all the technology possible," she told a conference this summer.
Yet many European consumers remain skeptical about the use of such technology and trials in other countries have been damaged or destroyed by anti-GMO protesters many times in the past. There are currently no GMO crop varieties grown commercially in the U.K.
GM Freeze, an anti-GMO campaign group, condemned the move, saying there would be no market for modified crop and not enough was known about the effects of such varieties on local wildlife.
"The decision to approve an open-air trial of GM wheat is a big mistake and premature given the serious lack of information in the application," said Pete Riley of GM Freeze.
Limited Arable Land Will Keep Agri-Commodity Prices Up -Analyst Mistry
Agricultural commodity prices will likely remain high for the next 12-15 months due to limited arable land and tighter rules on land expansion following worries over deforestation, leading vegoil analyst Dorab Mistry said.
"The effort of non-governmental organizations and European Union regulations have slowed down the pace of acreage expansion in Indonesia from 500,000 hectares to around 200,000 hectares a year," he told participants at the Goldman Sachs Commodity Conference in Singapore.
"This slowdown is one of the chief reasons for the bullish outlook for palm oil prices," Mistry, who heads the trading desk at Godrej International Ltd., said.
"Here we are in 2011, facing what is perhaps the best year of CPO production in history, as we see worldwide palm oil supply expand by 6 million-6.5 million tons in a single calendar year. And yet, CPO prices have hardly fallen below $1,000/ton in Rotterdam."
The tropical commodity is supported by diminishing soyoil availability from top exporters Brazil and Argentina.
"The popularity of soy-derived biodiesel and the mandates that are being expanded in both countries will ensure that there is less soyoil for export each year," Mistry said.
As more competing vegetable oils are channeled to renewable energy, palm oil will have to fill the vacuum left by soyoil in the cooking oil segment.
After November, palm oil should "see a gradual recovery which can take prices to MYR4,000 a metric ton by the second quarter of 2012," he said, restating a July forecast, as production of the cooking oil will seasonally be lower at a time when top importers begin to stock up ahead of major festive period in January-February.
But palm oil prices on Malaysia's derivatives exchange may take a hit over the next few months, he said, as September production is widely expected to be significantly higher, with harvesting gathering pace after a lull during the Islamic fasting month of August.
Benchmark November CPO on Bursa Malaysia Derivatives settled 0.4% higher at MYR3,078/ton Thursday.
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