Mr. Gary Drimmer

GLG News by Mr. Gary Drimmer, Chief Executive Officer

GLG News is now G+ Insights

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Does High CBOT Soybean Prices Result in Increase South American Acreage?

July 30, 2007

Analysis of:Grain Price Outlook: Soybeans-What will South American Do? | www.farmdoc.uiuc.edu

With US soybean inventories dropping, will South American farmers have enough economic incentive to increase their planted soybean acreage at the end of the year? The US had a major shift in acreage this year from soybeans to corn. With current use levels and estimated yields from the current crop, the USDA as well as Darrell Good in his normal superb economic review, show that the carryout next year will be very low. A significant increase in the South American crop is needed to make up for the drop in US production, that is unless the world doesn't demand as many soybeans.

Consolidation of Ethanol Industry off to the Races

July 26, 2007

Analysis of:3 ethanol plants to boost VeraSun | www.argusleader.com

Getting big. Getting interesting. Will oil companies find a 1 billion gallon ethanol company worth their while? This is the first really significant consolidation move in the ethanol industry with a price tag of $725 million for 330 million gallons a year of capacity, we see a valuation of $2.20/gallon of ethanol production per year. VeraSun with this acquisition will become the 3rd billion gallon producer next year when new plant construction is completed. ADM is already there and POET will reach the billion gallon plateau later this year.

Sounds Corny? 13 Billion Bushels of Corn is a Lot of Ears

July 3, 2007

Analysis of:"Shocking" USDA Acreage Report Spurs Speculation About 13-Billion-Bushel Corn Crop | www.grainnet.com

The USDA's acreage of report has shocked some in the market. It is a further 3% jump from the March corn planting intentions. At the same time, soybean acreage is down 15% from last year's record. There are many winners and losers. Seed and biotech companies are having a great year, with corn seed being sold out around the country for obvious reasons (Monsanto, DuPont, Syngenta, BASF and Bayer are major players). Livestock and poultry companies (Tyson, Pilgrims Pride, Smithfield, Cargill and Wayne Farms) and ethanol companies (ADM Grain storage companies (GSI and Buhler among others) and grain transportation companies (BNSF, NS, UP, CP,CN and CSXT) as well as grain handling and processing companies (Cargill, ADM and Bunge) should all do well with the extra volume. But, we still have to make the crops.

We're #1-ADM plans move into Brazil's sugarcane to ethanol industry

June 28, 2007

Analysis of:Archer Daniels Midland to Enter Brazil Sugar-Cane Ethanol Market | energy.seekingalpha.com

ADM has been the major political lobbyist of US subsidies for the US domestic ethanol industry since 1979,  as well as the $0.54/gallon duty on imported ethanol. A the largest producer of ethanol in the US, they are now looking to enter Brazil's sugarcane to ethanol industry. Will this mean they will now support the elimination of on of their most significant legislative masterpieces, and are they willing to feel the wrath of the US corn grower if they start importing Brazilian ethanol? Brazil is an agricultural powerhouse, and one that ADM,  Bunge, Cargill and Louis Dreyfus all have a presence in. It is too big to ignore as it will probably surpass the US as the largest producer of soybeans next year. In ethanol, it is the second largest producer in the world behind the US and the largest exporter. Clearly if ADM is going to maintain its position as the largest ethanol producer in the world (just look at their CEO's background), Brazil is a must, but is the timing right?

Menu Foods, Wilbur Ellis and China show weakness in the food inspection systems

May 11, 2007

Analysis of:Filler in Animal Feed Is Open Secret in China | www.nytimes.com

The recent recall of pet foods have shown a weakness in the US food and feed inspection system, as well as the corruption of the ingredient system in China. Protein in animal feeds is measured by an analysis of the nitrogen in the feed. It is not unusual to use urea as a source of nitrogen in ruminant (multi-stomach: cows, sheep and goats) animal feeds where a certain level can be absorbed and transformed into a usable form by the animal. The same is not true for monogastric (one stomach: humans, poultry, dogs, cats and hogs) who have a greater need for a well balanced protein made up of essential amino acids.

Some mixed Q1 results for ethanol industry

May 11, 2007

Analysis of:Ethanol Jitters-Pacific Ethanol meets Q1 expectations, calming investors | www.redherring.com

ADM and VeraSun Energy posted results that were disappointing an led to drops in their stock as well as other publicly traded ethanol stocks. Now Pacific Energy has met Wall Street estimates and you can hear a sigh of relief all the ways around the world starting in the fields of Iowa and not stopping until you reach the new ethanol plants in China. Other publicly trades stocks such as Great Plains Renewable Energy and US Bioenergy have also seen significant price moves this past week due to these profit reports. Higher corn and new investment costs impacted the whole sector. Higher ethanol prices and additional production offset most, and in some cases all of the additional expenses. There were some winners like Pacific Ethanol and other companies that were on line for over a year, but as was seen in the results of large agri-processing companies, you can have lower earnings even if commodity prices are going up.

Hedging does not prevent losses

May 1, 2007

Analysis of:Bunge's losses show heightened risks in U.S. grains | www.reuters.com

Bunge, one of the largest ag-processing companies in the world just reported disappointing earning due to losses on hedges on their South American soybean position. They are not involved in ethanol production yet, though a big player in biodiesel in Europe. Their dry corn milling which has had many great years, had a little set back.

ADM didn't have the same problem, reporting good results thanks to higher ethanol prices and margins. ADM also had excellent earnings from their wet corn milling industry.

The pure wet corn miller player in the industry, Corn Products International also reported excellent results, thanks to higher selling prices and hedges on their corn position. The US was the star performer while South America held its own.

HOT and DRY in Europe

April 27, 2007

Analysis of:Europe swelters in record spring heatwave | www.forbes.com

This week's rain in the corn and soybean belt has been driving up grain prices. Or is the prospect of drought this year in Europe? How about the drought in China, the possible continued drought in Australia or South Africa. On average the world would be just about right. For crops, that just doesn't work.

Europe's current drought and warm spring temperatures are focusing attention to the tight wheat supply around the world. These tight supplies will impact major wheat millers such as Cargill and ADM, as well as major bakers and food producers such as Kellogg, Interstate Baking, Nestle, Unilever, Tyson and Conagra among just a few. A run up in wheat prices will pull corn and corn will pull soybeans. High bread prices or the scarcity of bread have been known to cause revolutions.

I drove down from Chicago to Bloomington/Normal Illinois yesterday, entering some of the most beautiful farmland in the Midwest. As it was raining and cool, there was not a single tractor in the fields. The fields I saw only showed early signs of Spring work, and this is late April. The yields on corn in this area begins to drop for corn seeding after May 7.

This region, home to ADM, 150 miles north of Bunge North America's headquarters and Monsanto's global headquarters, not to mention Caterpillar and John Deere and a growing number of ethanol plants, could use the heat and clear skies in Europe. Too bad it doesn't work that way.

Up up and away with biofuels

April 25, 2007

Analysis of:Boeing in scheme to develop biofuel | www.checkbiotech.org

Will we able to fuel airplanes in 10 or 20 years, and if we can, will it cause too much damage to the environment? Already airlines like Virgin Atlantic Airlines have begun to explore ways to conserve fuel and reduce greenhouse gas emissions. Sir Richard Branson has proposed towing their planes to the runway and announced a major purchase of Boeing's 787 Dreamliners that burn 27% less fuel then the planes that they will be replacing. Branson is one of the forces helping to push Boeing to research new fuels.

General Electric, who is involved in building jet engines, is also involved in the testing and development of alternative fuels. GE is a major "green" company already with their CFL bulbs, wind turbines and nuclear power.

Sir Richard Branson has made a pledge (see link below) to make his planes more environmentally friendly and could be flying with green jet fuel within 2 years. It will be a major push for the biofuel market to be able to replace a significant share of that market. At the same time it could result in a major reduction in CO2 emissions and help keep planes flying in the future.

link:http://www.24dash.com/environment/19721.htm

Motley Fool no Fool on Biofuels debate

April 23, 2007

Analysis of:Fueling the Debate: Ethanol vs. Biodiesel | www.fool.com

To ethanol or to biodiesel, that i the question, or at least the question that the Motley Fool addresses in this article. Their conclusion is right on: not a single one of these will solve our transportation fuel dilemma, but it must be a combination of them all.

The article is up to date, talking of the Tyson and ConocoPhilipps joint venture to produce biodiesel from animal fats, and VeraSun's latest ethanol plant announcement. Archer Daniel Midland (ADM), is also mentioned, though reference to its announcement last week to employ federal finds with Perdue University is not included.

After reviewing ethanol and biodiesel the article touches DuPont's and BP efforts on biobutanol as well as a couple of the companies working on cellulosic ethanol with support from the US Government which include BlueFire, Iogen and Range Fuels, not to mention Brion which is changing its name.

For those of us concerned about the next 3-5 years and if there will be enough corn and soybeans to feed the new plants that are coming on line or beginning construction, it would be nice to see some time lines on the new projects.

A farmer's dilema

April 23, 2007

Analysis of:Ethanol fuels planting debate | www.siouxcityjournal.com

It looks like farmers have a few dilemmas this year, including how much corn to plant and what to do with all the money they will be making. Margins for farmers have been tight more years then not, especially if one calculates returns based on high land values.

Right now farmers around the country are working hard to get their spring crops in. The only thing stopping them now after a cold spring, would be wet fields, and that doesn't seem to be a major issue right now. There is the question addressed in this article of corn after corn planting, as opposed to the normal corn-soybean rotation.

The impact of higher corn prices on cattle, hog and poultry farmers and consumers, as well as the major meat producers such as Tyson, Smithfield, Cargill, Premium Standard Farms, Pilgrims Pride and Seaboard is hard to estimate at this time, as it will depend on how much production is cut back and how much prices increase. People and countries with lower incomes will suffer the most from higher food prices, while farmers and all those who supply them with inputs will benefit.

The intended corn acreage for 2007/2008 will be the highest since 1944. A lot has changed since then.

Rabobank realistic on timing of cellulosic ethanol

April 22, 2007

Analysis of:Biofuel market from cellulose not seen before 2015 | www.checkbiotech.org

When Rabobank, the leading agriculturally oriented bank in the world says that there won't be cellulosic ethanol until 2015, you have to listen.

Rabobank not only is a major lender to the agriculture sector, it is one of the leading economic researcher following the industry on a worldwide basis. They have been right more times then not on their sector analysis thanks to the top level of their economic researchers.

So, when they say that the second generation of biofuels (read cellulose) will not be commercially viable until 2015, it is likely to be the case. They could be off by a year or two, or even three years, but that means that companies investing in the sector should be aware that payback from commercial cellulose is at least 5 years off, but probably more likely in the 6-8 year range.

With so many companies investing in R&D and test plants including ADM, DuPont, and the enzyme companies (Diversa, Iogen, Genencor, Novozymes and Dyadic International) as well as the projects that will be receiving Department of Energy funding (most recently Abengoa, Alico, BlueFire Ethanol, Brion Companies, Iogen Corporation and Range Fuels), it is clear that there will only be a few winners, and they will need to have deep pockets.

Palm oil demand from China, India and EU pushes prices up

April 19, 2007

Analysis of:Palm Oil climbs a new high in more than eight years on exports | www.financialexpress.com

Indonesia and Malaysia, the two major palm oil producers and exporters are enjoying higher production and prices thanks to both food and biodiesel demand.

China's imports of palm oil has jumped in the last year and China plans major investments in new palm oil plantations.

India just reduced vegetable oil import prices with the hope of curbing inflation pressures. It appears that there announcement along with lower harvest then anticipated led to the last jump in palm oil prices.

The EU has been a major importer of palm oil for biodiesel, but this has received criticism from the Friends of the Earth who report that the clearing of rain forests and bogs are actually causing a net increase in carbon gas emissions and destroying the habitat of the Orangutan.

The last play around palm oil is the trans fat issue. While palm oil is high in saturated fats, Europe and most developing countries are not as concerned with saturated fats as they are in trans fats (Europe) and the cost of food (developing world).

2 out of 3 major Southern Hemisphere Grain Producers Suffer Drought

April 19, 2007

Analysis of:Drought in Southern Africa | earthobservatory.nasa.gov

NASA's Earth Observatory is showing dramatic pictures of the drought that is effecting South Africa. The corn crop there which was projected to be a normal 10 million metric tons, is now estimated to be no more then 6 million metric tons by the USDA.

Australia has also been suffering from a prolonged drought. Fortunately Argentina and Brazil have just harvested bumper crops of soybeans, corn and wheat.

Now as we look to crop development in  the Northern Hemisphere there are reports of a drought in northern China and the potential of climatic changes in North America due to the formation of a La Nina.

Bean (soybeans) in the teens

April 18, 2007

Analysis of:How high can soybean market soar? | deltafarmpress.com

It may seem strange to talk of higher soybean prices just as they slump to around 10% below their contract high. It probably is even more far fetched to talk about soybeans in the teens (above thirTEEN dollars a bushel), but there are clouds gathering on the horizon that might push this market higher.

As the article states, it seems that when there is bullish news in the soybena market, there is even bigger bearish news. We have seen soybean oil pull soybean prices up thanks to the global demand of biodiesel. Poor crops in Brazil in 2005 and 2006 also helped reduce global oilseed inventories. Demand for corn is diverting acres from soybeans, which should reduce carryover in the US next year. But the turnaround in South American harvests this year, as well as improved harvests in Russia and the Former Soviet Union countries following the US large harvest last Fall are all adding bearish pressure to the market.

What will could push the soybean market up (though not to the teens) are new factors that are not fully being considered.

Nothing goes to waste but the Squeal at Tyson

April 18, 2007

Analysis of:Squeezing diesel out of animal fat | www.usatoday.com

It used to be said that in the stockyards of Chicago nothing went to waste in the processing of hogs except for the squeal, so it is no surprise that with higher energy prices Tyson would look to maximize the value of their fat and tallow scarps. ConocoPhillips, as other major oil processors need to take action on the search for alternative fuels, so this joint venture is made in heaven (though I don't think the cattle, hogs and chicken would agree with that comment).

Tyson and the other meat processors are feeling a squeeze on their margins as a result of another biofuel: ethanol. Ethanol has cause a major increase in the price of corn, which especially is impacting the production cost of chickens and impacting negatively their margins.

Biodiesel from animal fats appears to have the best margins in the US right now. This is a better alternative for Tyson now that natural gas prices have declined, but will animal processors eventually need the calories of these renderings for their own feeds?

WInter wheat quality and quantity chilled out

April 11, 2007

Analysis of:Icy cores in winter wheat mark freeze | deltafarmpress.com

It is April 11th and there is snow falling in Chicago and it remains cold throughout the midwest. More snow storms and cold weather are still on their way. While the moisture is always welcome in the winter wheat belt, the weather over the past 5 days has been terrible for the winter wheat crop and any early seeded crops in the midsouth region.

The warm weather of March had brought the winter wheat crop out of dormancy just in time to get socked by this cold spell. As Mr. Freeze (have to love the name) says this is not what the poor winter wheat farmers were looking for.

Wheat exporters (Cargill, ADM, Bunge and others), as well as bakers of cakes (Sarah Lee, Entenmann's, etc.) and the producers of many types of breads (Wonder Bread, Flowers Food, Orowheat, Nature's Own among the largest brands) will all be impacted by what will be lower quality and a lower yielding harvest. AB Mauri and other producers of flour improvers will benefit more demand for their products.

Which way are winds blowing on corn market?

April 11, 2007

Analysis of:Too much corn to move this fall? | deltafarmpress.com

The corn markets seem to be changing week by week, if not day by day. Farmers are going to be planting a lot more corn, that is if they can get their seed in on time.

This article quotes Richard Brock, one of the best recognized grain analysts in the US. He is quoted is saying that we will have a big surge of corn if producers stay with their initial intention to seed over 88 million acres of corn and if their is no drought there will be a gigantic harvest with huge pressure on the basis at harvest time.

The implications of Brock's and the seed company's (Monsanto, DuPont, BASF and Syngenta) comments on yields from acres diverted from other crops are significant on potential carryout numbers. A big carryout should result in moderate corn prices with favorable implications for corn processors (ADM, Bunge, Cargill, Tate & Lyle, and Corn Products International), livestock producers (Cargill, Tyson, Smithfield and Pilgrims Pride) as well as food producers (Kelloggs, Conagra and many others). In the end a large crop with still relatively high corn prices would be a win-win for the whole economy. Food inflation at 3.5% has been above overall inflation for the past 12 months. This should moderate if corn prices remain in the $3.30-$3.80/bushel range. But, will mother nature allow this happiness, or will she continue to give us the cold sholder?

Monsanto and BASF: Marriage Made in a Laboratory?

March 23, 2007

Analysis of:Monsanto, BASF Join Forces | www.forbes.com

Would some consider this the sequel to Frankenstein as Monsanto and BASF announced this week that they are going to collaborate on R&D to bring new traits to market quickly tied to increased demand for gains and oilseeds tied to biofuels?

With only a hand full of potential dancing partners in the plant biotechnology arena, and the difficulty of new acquisitions due to government constraints on monopolies, it is not surprising to see another collaboration announced between big plant biotech players as well as between biotech companies and agri-processing companies.

At this time demand for grains and oilseeds is growing, not only from the biofuels sector mentioned in this article, but from the growing food and feed markets globally. It is critical that new genetically engineered traits that produce drought resistant and higher yielding crops be introduced in an accelerated fashion after they are proven safe and economically viable.

When a little girl (La Niña) is a bad girl

February 21, 2007

Analysis of:La Nina could mean dry summer in Midwest and Plains | www.reuters.com

La Niña could be returning to the Pacific once again. In what is becoming a rapid swing between water surface temperatures in the Pacific we are looking at a potential major change in this summer's weather. Or maybe not.

According to this article, a major weather forecaster announced last week that we could begin to see the influence of a La Niña by April. La Niña years tend to be dry in the corn belt and plains, which could cause reduced corn and soybean crops, just when we need a large crop. This is especially true for corn given the reduction of US and world ending stocks for the current crop year. Other forecasters say that we could also be in for a wet spring that would switch some acres from corn to soybeans and leave corn with reduced root systems that would be even more vulnerable to a drought.

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