Autumn Deluge Destroys More Than $1 Billion Of Delta Crops

October 30, 2009

Weeks of almost-continuous, torrential rains have destroyed over a billion dollars worth of what was originally expected to be a bumper fall crop in the U.S. Delta.

ARKANSAS: “It’s a serious problem right now. At this stage, yield/quality losses for Arkansas ‘ major row crops could easily exceed $650 million,” said Arkansas Farm Bureau President Randy Veach Thursday.

The state has received measurable rainfall every day for the past seven consecutive weeks, preventing fields from drying out, and overripe crops from being harvested. Arkansas farmers still have 85% of their cotton, 61% of all soybeans, 10% of their corn and 5% of all grain sorghum remaining to harvest; at a time when picking is usually of most commodities is already complete.

“We’re going to try to do as much as we can as quickly as we can, but assessing the damage—and what the damage is— does require some time,” said Sen. Blanche Lincoln (D., Ark.), chair of the Senate Agriculture Committee. “I wouldn’t be surprised if all 75 counties in this state are declared a disaster,” thus making producers eligible for U.S. Department of Agriculture emergency loans.

On average, all areas of Arkansas have received 17 inches more rain than normal during 2009. Even with two months left to go, 2009 is already the 11th-wettest year on record in Little Rock , which has been flooded with 62.57 inches of rain. That total will only increase, as the National Weather Service was predicting another 2 of rain for portions of Arkansas, by nightfall Friday.

MISSISSIPPI: Non-stop rains have also taken $371 million from the pockets of Mississippi producers this autumn, according to calculations made this week by the Mississippi State University .

“Total losses for row crops are expected to be around 23% of the potential value of the crop,” said MSU agricultural economist John Michael Riley. With nearly 40% of all fields still standing, soybeans have suffered the worst hit in cash-value hit, losing 30.2% of their expected value, or $212 million in all.

“Half of the crop left in the field is very poor, to possibly a complete loss,” said MSU extension soybean specialist Trey Koger. “Damage estimates for the portion of the soybean crop we last harvested nearly two weeks ago, averaged 8%-15%. Final damage to the state’s soybean crop may reach levels as high as 50%.”

Earlier this month the USDA forecast the Mississippi fall grain harvest at 92.3 million bushels of corn, nearly 83.5 million bushels of soybeans, 16.184 million hundredweight of rice, and 888,000 bushels of sorghum. Economic losses have been measured at $91 million for cotton/cottonseed, representing about 47% of that crop’s original prospective value.

“Environmental conditions in 2009 have proven to be the most difficult that many growers have ever experienced,” said Darrin Dodds, MSU cotton specialist.

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Fall Downpours Causing Major Damage To Unharvested US Grain Crop

October 27, 2009

Guide Rock farmer Jim Richardson says the quality of the 2009 corn crop in the Republican River Valley of Nebraska has now deteriorated to the point where the top 3 inches of unharvested ears are simply rotting off and falling to the ground.

“My neighbor say it’s the weirdest thing you’ve ever seen…they pull into the field with the combine and see all these half-ears laying all over,” he said. “It seems to be connected to variety…and all this rain.”

The variety of moisture-loving pathogens reportedly affecting unpicked U.S. row crops reads like the nutrition label of a Halloween witches brew: mycotoxins, mold, mildew, fungus, and other diseases.

Most sections of the U.S. grain belt have received more than twice as much precipitation as normal this month, causing unprecedented delays in the harvest of the nation’s two-most important cash-crops. The resulting quality degradation is so bad that some producers are harvesting their remaining acreage with a plow, instead of a combine.

“We’ve had 28 inches of rain here since Oct. 1,” southwestern Arkansas grower Jim Caswell told Dow Jones Newswires Monday. “There is a big farmer down here who’s disking under 7,000 acres of corn, because it’s got such bad mold that the elevator won’t take it anymore…and it’d been yielding 185 (bushels an acre).”

Overripe grain in the Delta is under the greatest threat of deterioration, with many fields standing exposed to weeks of nearly continuous rain.

“The longer it’s out in the field, the more likely it will develop grain quality problems, weak stalks or seed quality damage,” said Jim Herbek, grain crops specialist with the University of Kentucky.

Harvest figures released by USDA Monday said half of the nation’s top-producing corn states still had more than 80-90% of their corn and half of their soybeans standing in the field, at a time when some are nearing completion.

“You can’t find a year in USDA’s data (which goes back to 1972) on corn harvest activity that is as slow as this year [20% complete]. Period. That underscores just how tough this fall has been,” said Roger Bernard of Pro Farmer. “In soybeans, the 44% complete on harvest is the slowest pace since 1985 and 1986.”

Harvest season rains have robbed southern soybean growers of what was expected to be a bumper crop.

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Wall Street’s Math Wizards Forgot a Few Variables

September 14, 2009

by Steve Lohr
Monday, September 14, 2009
The New York Times

In the aftermath of the great meltdown of 2008, Wall Street’s quants have been cast as the financial engineers of profit-driven innovation run amok. They, after all, invented the exotic securities that proved so troublesome.

But the real failure, according to finance experts and economists, was in the quants’ mathematical models of risk that suggested the arcane stuff was safe.

The risk models proved myopic, they say, because they were too simple-minded. They focused mainly on figures like the expected returns and the default risk of financial instruments. What they didn’t sufficiently take into account was human behavior, specifically the potential for widespread panic. When lots of investors got too scared to buy or sell, markets seized up and the models failed.

That failure suggests new frontiers for financial engineering and risk management, including trying to model the mechanics of panic and the patterns of human behavior.

“What wasn’t recognized was the importance of a different species of risk — liquidity risk,” said Stephen Figlewski, a professor of finance at the Leonard N. Stern School of Business at New York University. “When trust in counterparties is lost, and markets freeze up so there are no prices,” he said, it “really showed how different the real world was from our models.”

In the future, experts say, models need to be opened up to accommodate more variables and more dimensions of uncertainty.

The drive to measure, model and perhaps even predict waves of group behavior is an emerging field of research that can be applied in fields well beyond finance.

Much of the early work has been done tracking online behavior. The Web provides researchers with vast data sets for tracking the spread of all manner of things — news stories, ideas, videos, music, slang and popular fads — through social networks. That research has potential applications in politics, public health, online advertising and Internet commerce. And it is being done by academics and researchers at Google, Microsoft, Yahoo and Facebook.

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Everybody hurts…sometimes

March 11, 2009

The World’s Billionaires

03.11.09, 06:00 PM EDT
Luisa Kroll, Matthew Miller and Tatiana Serafin
Forbes.com

It’s been a tough year for the richest people in the world. Last year there were 1,125 billionaires. This year there are just 793 people rich enough to make our list.

The world has become a wealth wasteland. Like the rest of us, the richest people in the world have endured a financial disaster over the past year. Today there are 793 people on our list of the World’s Billionaires, a 30% decline from a year ago.

Of the 1,125 billionaires who made last year’s ranking, 373 fell off the list–355 from declining fortunes and 18 who died. There are 38 newcomers, plus three moguls who returned to the list after regaining their 10-figure fortunes. It is the first time since 2003 that the world has had a net loss in the number of billionaires.

The world’s richest are also a lot poorer. Their collective net worth is $2.4 trillion, down $2 trillion from a year ago. Their average net worth fell 23% to $3 billion. The last time the average was that low was in 2003.

Bill Gates lost $18 billion but regained his title as the world’s richest man. Warren Buffett, last year’s No. 1, saw his fortune decline $25 billion as shares of Berkshire Hathaway (BRK.A) fell nearly 50% in 12 months, but he still managed to slip just one spot to No. 2. Mexican telecom titan Carlos Slim Helú also lost $25 billion and dropped one spot to No. 3.

It was hard to avoid the carnage, whether you were in stocks, commodities, real estate or technology. Even people running profitable businesses were hammered by frozen credit markets, weak consumer spending or declining currencies.

The biggest loser in the world this year, by dollars, was last year’s biggest gainer. India’s Anil Ambani lost $32 billion–76% of his fortune–as shares of his Reliance Communications, Reliance Power and Reliance Capital all collapsed.

Ambani is one of 24 Indian billionaires, all but one of whom are poorer than a year ago. Another 29 Indians lost their billionaire status entirely as India’s stock market tumbled 44% in the past year and the Indian rupee depreciated 18% against the dollar. It is no longer the top spot in Asia for billionaires, ceding that title to China, which has 28.

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Stocks tumble after government bailout of AIG

September 17, 2008

Wednesday September 17, 5:54 pm ET
By Tim Paradis, AP Business Writer

Wall Street sinks again after Fed bails out AIG, Barclays buys Lehman businesses; Dow down 450

NEW YORK (AP) — Wall Street plunged again Wednesday as anxieties about the financial system ran high after the government’s bailout of insurer American International Group Inc. (AIG) and left investors with little confidence in many banking stocks. The Dow Jones industrial average lost about 450 points, giving it a shortfall of more than 800 so far this week.

As investors fled stocks, they sought the safety of hard assets and government debt, sending gold, oil and short-term Treasurys soaring.

The market was more unnerved than comforted by news that the Federal Reserve is giving a two-year, $85 billion loan to AIG in exchange for a nearly 80 percent stake in the company, which lost billions in the risky business of insuring against bond defaults. Wall Street had feared that the conglomerate, which has extensive ties to various financial services industries around the world, would follow the investment bank Lehman Brothers Holdings Inc. (LEH) into bankruptcy. However, the ramifications of the world’s largest insurer going under likely would have far surpassed the demise of Lehman.

“People are scared to death,” said Bill Stone, chief investment strategist for PNC Wealth Management. “Who would have imagined that AIG would have gotten into this position?”

He said the anxiety gripping the markets reflects investors’ concerns that AIG wasn’t able to find a lifeline in the private sector and that Wall Street is now fretting about what other institutions could falter. Over the past year, companies including Lehman and AIG have sought to reassure investors that they weren’t in trouble, but as market conditions have worsened the market appears distrustful of any assurances.

“No one’s going to be believing anybody now because AIG said they were OK along with everybody else,” Stone said.

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Investing: Playing the Brazil Boom

June 10, 2008

New wealth from commodities is fueling growth and expanding the consumer economy. And that presents great opportunities for investors

by David Bogoslaw
businessweek.com

The Brazilian economy is barely recognizable to those who knew it more than five years ago. In those days it was plagued by mountains of debt and boom-and-bust cycles. Now everything is different. Indeed, 2008 is quickly shaping up to be the Year of Brazil.

The economy is ready to burst at the seams—but this time the growth looks sustainable. And foreign investors are taking notice in a big way. Should you join them?

First, it’s worth looking at some telling figures. Brazil’s gross domestic product increased 4.5%, to $1.3 trillion, in 2007, and grew by 5.8% in the first quarter of 2008. The country’s benchmark stock index, the Bovespa, is up 5.9% thus far in 2008.

Brazil is on the right side of the global commodities boom. It has enjoyed a 65% price hike for the high-grade iron ore it sells to steelmakers around the world. In the midst of a staggering increase in world energy prices, Brazil stands ready to capitalize on newly discovered offshore oil deposits that may be part of one of the biggest oil fields in the world. Major credit-rating agencies have given their stamp of approval on its government debt by upgrading the country’s sovereign rating from junk.

What makes the story even more compelling is how Latin America’s biggest economy has largely kept a lid on inflation, even as central banks around the globe continue to battle it. The reason: Brazil’s self-sufficiency in many of the commodities whose price run-ups are causing consumer prices to soar worldwide.

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Storms on the Horizon by FOMCs Richard W. Fisher

May 29, 2008

Richard W. Fisher – Federal Open Market Committee (FOMC)

Excerpt from remarks before the Commonwealth Club of California
San Francisco, California
May 28, 2008

Storms on the Horizon

Tonight, I want to talk about a different matter. In keeping with Bill Martin’s advice, I have been scanning the horizon for danger signals even as we continue working to recover from the recent turmoil. In the distance, I see a frightful storm brewing in the form of untethered government debt. I choose the words-“frightful storm”-deliberately to avoid hyperbole. Unless we take steps to deal with it, the long-term fiscal situation of the federal government will be unimaginably more devastating to our economic prosperity than the subprime debacle and the recent debauching of credit markets that we are now working so hard to correct.

You might wonder why a central banker would be concerned with fiscal matters. Fiscal policy is, after all, the responsibility of the Congress, not the Federal Reserve. Congress, and Congress alone, has the power to tax and spend. From this monetary policymaker’s point of view, though, deficits matter for what we do at the Fed. There are many reasons why. Economists have found that structural deficits raise long-run interest rates, complicating the Fed’s dual mandate to develop a monetary policy that promotes sustainable, noninflationary growth. The even more disturbing dark and dirty secret about deficits-especially when they careen out of control-is that they create political pressure on central bankers to adopt looser monetary policy down the road. I will return to that shortly. First, let me give you the unvarnished facts of our nation’s fiscal predicament.

Eight years ago, our federal budget, crafted by a Democratic president and enacted by a Republican Congress, produced a fiscal surplus of $236 billion, the first surplus in almost 40 years and the highest nominal-dollar surplus in American history. While the Fed is scrupulously nonpartisan and nonpolitical, I mention this to emphasize that the deficit/debt issue knows no party and can be solved only by both parties working together. For a brief time, with surpluses projected into the future as far as the eye could see, economists and policymakers alike began to contemplate a bucolic future in which interest payments would form an ever-declining share of federal outlays, a future where Treasury bonds and debt-ceiling legislation would become dusty relics of a long-forgotten past. The Fed even had concerns about how open market operations would be conducted in a marketplace short of Treasury debt.

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