Tags: Glencore | Grain | crops | seed

Glencore Sees ‘Unprecedented’ Situation in Grain in Second Half

Tuesday, 21 Aug 2012 07:53 AM

Glencore International Plc said the situation in grains and oilseeds in the second half of the year will be “unprecedented” as drought slashes U.S. crops, while a ban on Russian exports is unlikely at the moment.

Corn production in the U.S. may come to 260 million to 265 million metric tons amid drought that is comparable to the Dust Bowl years of the 1930s, Chris Mahoney, director for agricultural products, said on a conference call Tuesday. The U.S. Department of Agriculture estimates the corn crop at 273.8 million tons and exports at 33 million tons. It’s “debatable” whether U.S. exports will meet the USDA target, Mahoney said.

“We’ve had crop problems in the past, notably in 2008,” Mahoney said. “But I think we’ve seen nothing of the scale of this. It is an unprecedented situation, which will make the second half of the year rather interesting.”

Oilseeds and grains are the best-performing commodities this year among 80 tracked by Bloomberg. Soybeans jumped 42 percent in 2012, the biggest increase on the Standard & Poor’s GSCI Spot Index, wheat rallied 39 percent and corn advanced 28 percent.

“Trade flows will switch and change around, there will be considerable dislocation,” Mahoney said. “A company like ours will be required to think out of the box a bit.”

A ban on Russian grain exports is “not very likely at the moment,” while the authorities may review plans if overseas deliveries accelerate and the country runs out of exportable surplus. Glencore has a hedging strategy in place and there will be no negative impact on earnings in case of any restrictions out of Russia, Mahoney said.

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