en-us http://www.indianagrain.com/blog Sun, 14 Mar 2010 12:44:00 CDT http://www.indianagrain.com/blog/cme-and-eurex-in-cross-listing-deals You may have noticed that we at Indiana Grain have been writing about the CME Group a lot lately. But, conversely, you may have also noticed that our friends at CME have been making a lot of headlines. Two of the world's biggest derivatives exchanges in the US and Europe announced cross-listing agreements with their Asian counterparts in a sign that cross-listing represents an increasingly important part of their strategy to deepen ties with markets in the region. Two of three deals involved the National Stock Exchange (NSE) of India as the country taps overseas traders to use its rapidly growing derivatives markets. The developments come as Asian exchanges are growing faster than many western rivals, which see them as an opportunity to access new market participants. The NSE signed an arrangement with CME Group, the largest US futures exchange, under which the Indian exchange's S&P CNX Nifty index, the leading Indian benchmark index for large companies, will be made available to the Chicago operator for the creation and listing of US dollardenominated futures contracts for trading on CME. CME will make the rights to the S&P 500 and Dow Jones Industrial Average indices available to the Indian exchange for the creation and listing of rupee-denominated futures contracts for trading in India on the NSE. Ravi Narain, NSE chief executive, said: "We have aspirations to go global . . . This association with CME Group will make . . . products across various Indiarelated asset classes, available to a much larger community of traders and investors. At the same time, investors in India will have access to new exchange traded products." NSE agreed a similar deal with Singapore Exchange which will soon start offering trading of the Nifty index. Separately, Eurex, the derivatives exchange owned by Deutsche Börse, said it would in August launch contracts based on the Korea Exchange's Kospi 200 stock-index options. The moves come the same week as the CME agreed a deal to take a small stake in the Mexican Bolsa. Source: Financial Times Sun, 14 Mar 2010 12:24:00 CDT http://www.indianagrain.com/blog/ethanol-making-a-comeback-on-cheaper-corn Ethanol, the commodity that cost Bill Gates more than $44 million the last time prices collapsed, is poised to rally as much as 20 percent as the fastest drop since 2008 spurs demand. Falling corn prices and record ethanol supplies have driven the price down more than 17 percent in three months to $1.585 a gallon Friday, its worst run since 2008's fourth quarter. It will average $1.96 a gallon at the peak of the U.S. summer driving season as refiners from Valero Energy to Sunoco mix more into gasoline made from increasingly pricey oil, according to the median of 10 analyst estimates compiled by Bloomberg. Four years after George W. Bush made ethanol a centerpiece of his presidency's push to cut dependence on foreign oil, three of the biggest producers have sought bankruptcy protection and prices have fallen 61 percent from their mid-2006 record. Now demand is rebounding because ethanol is almost 66 cents cheaper than gasoline, the biggest discount in 14 months. The potential gains prompted Valero and Sunoco to buy failed distilleries. “Margins today are better than a year ago, absolutely,” said Todd Becker, the chief executive officer of Green Plains Renewable Energy, the fourth biggest producer, in an interview. “The industry is on pretty good footing for 2010.” The Omaha, Nebraska company reported a record fourth-quarter profit of $23.1 million last month, up from a $1.85 million loss a year ago. Green Plains sold new shares in March, the first producer to do so in almost two years. Source: Bloomberg Sun, 14 Mar 2010 12:21:00 CDT http://www.indianagrain.com/blog/google-pulling-out-of-china- Google is reportedly close to shutting down its search business in China. According to the Financial Times, executives of the search engine have apparently finalized plans to orchestrate an orderly closure of google.cn. The report quoted a company insider who said talks between Google and the Chinese government over internet censorship are going nowhere. This week, China's minister of information technology issued a stern response to Google's efforts to end the censorship, stating the company would bear the consequences if it continued its stance. Google executives say the company is far from exiting China entirely as it has a healthy sales and research operation there. Source: Financial Times Fri, 12 Mar 2010 02:10:00 CST http://www.indianagrain.com/blog/energy-trading-limits-at-what-cost- Economist and oil analyst Philip Verleger has a dire forecast regarding proposed limits on energy trading: “Great harm to the American economy will result from these unenlightened actions.” That’s just one of the highlights from the text of a speech Verleger will give today at the Futures Industry Association, BusinessWeek reported. According to Verleger, the oil markets have been "functioning perfectly." He argues that record-high inventories in oil and gas kept energy prices stable this winter even as temperatures dropped and energy demand rose, demonstrating that the free-market incentives to store oil ended up benefiting consumers. If position limits curb the incentive to stockpile inventories, he proposes, there could be shortages during the next cold snap, sending prices spiking upwards and costing consumers as much as $20 billion. The proposed regulations aim to prevent such a disruptive price spike; it was 2008’s soaring oil prices, when a barrel of crude topped $147, that prompted renewed efforts to curb the speculative activity that many blame for record-high prices. Of course, there are just as many fans of the CFTCs proposals as there are critics. While Verleger worries that the CFTC will cripple energy markets, others have criticized the CFTC’s position limits for being too soft, as the limits would only affect the ten biggest position holders in the oil and gas markets. Source: BusinessWeek Fri, 12 Mar 2010 01:59:00 CST http://www.indianagrain.com/blog/is-monsanto-the-new-target-of-tom-vilsack- We at Indiana Grain will be curious to see what Agriculture Secretary Tom Vilsack has to say today. The Justice Department began an antitrust investigation of the seed industry last year, with an apparent focus on Monsanto, which controls much of the market for the expensive bioengineered traits that make crops resistant to insect pests and herbicides. The investigation is just one facet of a push by the Obama administration to take a closer look at competition (or the lack thereof) in agriculture, from the dairy industry to livestock to commodity crops, like corn and soybeans. Today, as the spring planting season approaches, Eric H. Holder Jr., the attorney general, and Tom Vilsack will speak at the first of a series of public meetings aimed at letting farmers and industry executives voice their ideas. The meeting, in Ankeny, Iowa, will include a session on the seed industry. The Iowa attorney general, Tom Miller, has also been scrutinizing Monsanto’s market dominance. The company’s genetically engineered traits are in the vast majority of corn and soybeans grown in the United States, Mr. Miller said. “That gives them considerable power, and questions arise about how that power is used,” he said. Critics charge that Monsanto has used license agreements with smaller seed companies to gain an unfair advantage over competitors and to block cheaper generic versions of its seeds from eventually entering the market. DuPont, a rival company, also claims Monsanto has unfairly barred it from combining biotech traits in a way that would benefit farmers. In a recent interview at Monsanto’s headquarters in St. Louis, its chief executive, Hugh Grant, said that while his company might be the market leader, competition was increasing as the era of biotech crops matured. In a seed market that Monsanto dominates, the jump in prices has been nothing short of stunning. Including the sharp increases last year, Agriculture Department figures show that corn seed prices have risen 135 % since 2001. Soybean prices went up 108 percent over that period. By contrast, the Consumer Price Index rose only 20 percent in that period. Many farmers have been willing to pay a premium price because the genetically engineered seeds that make up most of the market come with advantages. Genetic modifications for both corn and soybeans make the crops resistant to herbicides, simplifying weed control and saving labor, fuel and machinery costs. Many genetically engineered corn and cotton seeds also resist insect pests, which cuts down on chemical spraying. Today more than 90 percent of soybeans and more than 80 percent of the corn grown in this country are genetically engineered. A majority of those crops contain one or more Monsanto genes. Source: Bloomberg, New York Times Fri, 12 Mar 2010 01:45:00 CST http://www.indianagrain.com/blog/cboe-files-for-300-million-ipo The last major private exchange left in the U.S., the Chicago Board Options Exchange, filed for an initial public offering of up to $300 million Thursday. The CBOE plans to convert from a member-owned organization to a publicly traded corporation known as CBOE Holdings Inc. The Chicago exchange, the largest platform for options trading in the U.S., did not say when it plans to go public or how many shares it hopes to sell. The CBOE has wanted to go public for a long time. It settled a dispute over payment for ownership with the CME Group Inc., which operates the Chicago Mercantile Exchange and the Chicago Board of Trade, in August 2008, clearing the way for an IPO. "It's the last of the bigger, well-known exchanges" to go public, said Raymond James analyst Patrick O'Shaughnessy. Other popular exchanges, NYSE Euronext, Nasdaq OMX Group Inc., CME Group and IntercontinentalExchange Inc., are already public companies. The CBOE is making its move after years of growth. Founded in 1973, the CBOE was the world's first marketplace for options. The CBOE could be worth up to $5 billion if current members have to pay monthly fees to continue trading after it goes public, O'Shaughnessy said. The company is also facing increasing competition from other exchanges. Its share of options traded in the U.S. fell to 31 percent last year from 45 percent in 2000. CBOE says it wants to grow by launching C2, an all-electronic market, later this year and introducing more proprietary trading products such as the VIX. It also hopes to capitalize on proposed regulation. The push for investors to move from unlisted, "over the counter" trading to more visible trading on exchanges could boost its business, CBOE said. CBOE says it plans to pay a yearly dividend of 20 to 30 percent of adjusted income from the previous year. Thu, 11 Mar 2010 00:31:00 CST http://www.indianagrain.com/blog/biggest-hedge-fund-manager-jpmorgan JPMorgan Chase is the king of the hedge fund castle, at least in terms of heft, according to a new ranking by Pensions and Investments magazine. The bank’s two hedge fund units, JPMorgan Asset Management and Highbridge Capital Management, came out on top with a combined $53.5 billion in assets under management as of Dec. 31, the publication said. The figure represents an 18.9 percent increase for the banks’ hedge fund assets at the end of of 2007, when Pensions and Investments compiled its last industry ranking. Coming in at number two was Bridgewater Associates, with $43.6 billion hedge fund assets, up 21 percent from the end of 2007. Moving up from number eight to take the number three spot, Paulson & Company had $32 billion in assets under management at the end of 2009, a 10 percent increase from the publication’s 2007 rankings. They were followed by Brevan Howard Asset Management and Soros Fund Management, each with $27 billion; and Man Group, with $25.3 billion, Pensions & Investments said. According to the latest ranking, 11 firms hit or passed the $20 billion mark, earning them a spot on the publication’s list of the world’s largest hedge funds. While Pensions and Investments found that the total assets under management of the 11 firms was relatively flat ($316.2 billion at the end of 2009, compared with $316 at the end of 2007) it said the figures belied the turmoil in the industry. Source: CNBC, New York Times Wed, 10 Mar 2010 23:27:00 CST http://www.indianagrain.com/blog/traders-watching-cotton-s-conductivity- We at Indiana Grain are fascinated by a story out of New York this week. Scientists behind an interesting experiment say they have developed cotton threads that can conduct electricity as well as a l wire, yet remain light and flexible enough to wear. Researchers led by Cornell University Assistant Professor Juan Hinestroza say the technology might some day allow your T-shirt to cool you on a hot day, analyze your perspiration or monitor your heart rate. Your pillow will be able to monitor your brain waves and a dress might be able to charge an iPod. The scientists say that's not science fiction - it's cotton in 2010. Could this new application for cotton ultimately spark a heightened global demand? That's what come traders are wondering. Using nanotechnology developed at Cornell in collaboration with universities at Bologna and Cagliari, Italy, Hinestroza and his colleagues developed a technique to permanently coat cotton fibers with electrically conductive nanoparticles. "We can definitively have sections of a traditional cotton fabric becoming conductive, hence a great myriad of applications can be achieved," Hinestroza said. "Previous technologies have achieved conductivity, but the resulting fiber becomes rigid and heavy. Our new techniques make our yarns friendly to further processing, such as weaving, sewing and knitting." A solar-powered dress using the newly developed technology will be featured Saturday during the annual Cornell Design League Fashion Show at the Ithaca, N.Y., university. We at Indiana Grain think this is a "shocking" development to say the least. Source: Bloomberg, UPI Wed, 10 Mar 2010 23:18:00 CST http://www.indianagrain.com/blog/ubs-pushes-commodities-on-lse Swiss bank UBS has launched a series of 69 exchange-traded notes on the London Stock Exchange track the performance of the UBS Bloomberg Constant Maturity Commodity Index (CMCI) and its sub-indices. The notes will reflect underlying price moves in a number of commodities including crude oil, sugar and gold, and commodity baskets such as energy, livestock and food. The return on the exchange-traded commodities (ETCs) is directly linked to the performance of the relevant index, the bank said in its release, which is based on the performance of the underlying commodity. The ETCs allow investors to gain exposure to commodities without taking physical delivery of them, which can be expensive. Unlike some exchange-traded products, they are not physically backed. Each index is available in U.S. dollars, sterling and euros, the bank said. "Up until recently, the market for commodities investment has been largely restricted to sophisticated investors," Zak Cherkaoui, commodity index structurer at UBS, said in the release. "A broader investor base in the UK will now be able to gain exposure to the commodities market." Wed, 10 Mar 2010 10:27:00 CST http://www.indianagrain.com/blog/soybean-crop-estimate-cut The initial reaction among many traders to today's USDA crop report is that the data is bearish to corn and wheat and friendly to soybeans. The reduction in corn was on par with estimates, but few expected the sharp reduction in exports (100 million bushels). Earlier reports suggested that exports would be reduced by 50 million bushels not by 100 million. The USDA estimated 2009-10 U.S. crop production at 13.131 million bushels vs. the average analysts estimate of 13.081 and its January estimate of 13.151 million. In addition, the U.S. corn yield was pegged at 164.9 bushels per acre compared to the average analysts estimate of 164.5 and its previous estimate of 165.2 bushels per acre. For soybeans, the USDA estimated U.S. 200-10 production at 3.359 billion bushels vs. the average analysts estimate of 3.35 billion and its January estimate of 3.361. Also, the USDA estimated U.S. soybean yield at 44 bushels per acre compared to the average analysts estimate of 43.8 and its January estimate of 44.0 bushels per acre.