Reuters – A Saskatchewan lawyer said on Monday that he will file a C$15.4 billion ($15 billion) class action lawsuit against the Canadian government over the dismantling of the Wheat Board’s grain marketing monopoly.
But Agriculture Minister Gerry Ritz called the proposed legal action “baseless” and said it would not affect Ottawa’s moves to overhaul the Wheat Board and create an open grain market in Western Canada.
Lawyer Tony Merchant said the government must pay western farmers for the Canadian Wheat Board’s assets, which he said include C$100 million in cash, 3,402 rail hopper cars, Great Lakes freighters, an office building and other assets.
In addition, Merchant said in an interview, Ottawa should also pay compensation for the value of the CWB itself and the value of its marketing monopoly – including the premium prices some say it gets for grain and savings on transportation costs.
“(The government) can do whatever they like, but when they take away assets, then they have to pay,” Merchant said.
He said the Conservative government must compensate farmers for what they are losing, similar to how the former Liberal government paid farmers for removing a grain transportation subsidy in the 1990s.
The move is the latest of several legal entanglements around the government’s move to end the world’s last major agricultural monopoly, which has sharply divided farmers.
“It’s disappointing to see further misguided legal action against Western Canadian farmers and their right to the same freedoms as farmers in Ontario already enjoy,” Ritz said in a statement.
“This baseless action in no way affects the duly passed Marketing Freedom for Grain Farmers Act or western farmers’ ability to forward contract right now for an open market on August 1, 2012.”
The proposed class action may struggle to prove that the government’s change has hurt farmers, said Gerry Chipeur, a Calgary, Alberta-based lawyer.
“It’s going to be very difficult to say you made less money this year and the reason you made less money is because you don’t have a monopoly anymore,” Chipeur said in an interview.
LEGAL RISKS
Grain handlers are already buying farmers’ next wheat and barley crops through forward contracts, and such deals already carry some legal risk.
Eight of the CWB’s former farmer-elected directors, who were removed when Ottawa took control of the board last month, will ask a Manitoba court on January 17 to suspend the open-market law until another court can determine whether the law is valid.
The Conservative government passed a law in December ending the board’s marketing monopoly over Western Canada’s wheat and barley for milling or export, as of August 2012.
Also in December, a Federal Court judge ruled Agriculture Minister Ritz broke the existing law by not allowing a farmer vote before moving to end the monopoly, but the judge also said that the ruling did not affect the government’s new legislation.
The proposed lawsuit – which has yet to win court approval as a class action – is not likely to rattle the grain industry much since it does not affect the new law, said Wade Sobkowich, executive director of the Western Grain Elevators Association.
“The focus still needs to be on what’s happening at the Manitoba court and the Federal Court – that’s what people are going to be most concerned (about).”
Once the CWB monopoly disappears, Western Canadian farmers will be able to sell their wheat and barley to any buyer, not just the Wheat Board, but some believe the marketing monopoly gave them added clout to receive the highest prices.
Merchant is a former provincial Liberal politician in Saskatchewan, and his wife, Pana Merchant, is currently a Liberal senator. But he said their political affiliation was not a factor in launching the suit against the Conservative government.
The lawyer said he will now seek to sign as many farmers as he can to his class action, which may be certified within six months. It would likely take two or three years to resolve the case, he said.
($1=$1.02 Canadian)
(Reporting by Rod Nickel in Winnipeg; editing by Rob Wilson)

NEW YORK (Dow Jones) – A farm country Federal Reserve official fretted before congress Thursday about the potential impact of monetary policy on the U.S. agricultural sector, which has seen strong growth and big increases in land prices.

Federal Reserve Bank of Kansas City President Thomas Hoenig was speaking before the Senate Committee on Agriculture, Nutrition and Forestry in Washington. The central bank’s most vociferous opponent of the policy to stimulate the economy via a large Treasury debt buying program, the official has long worried the effort will create financial imbalances. Rapidly rising prices for farm land could be one of those problem areas, in the view of some.

“History has taught us that it is nearly impossible to determine how much of the farmland boom may be an unsustainable bubble driven by financial markets and how much results from fundamental changes in demand and supply conditions,” Hoenig said in the prepared text of his testimony. As a result, “it will surprise no one when I say we are watching the market closely, just as we are watching for imbalances emerging elsewhere in the economy.

“My nagging concern remains that current distortions in financial markets are increasing the risk that imbalances in asset markets will catch agriculture–and the U.S. economy more generally–by surprise once again,” the policymaker said.

Thus far, the gains in farmland prices appear to the product of strong profit growth amid big demand for U.S. agricultural products, the official said. He added, agriculture is “benefiting directly from the rebounding economic strength of China and other emerging-market economies, where rapid income growth is driving up food demand.”

Hoenig expressed concern about the day the Fed does begin to push up interest rates. While agricultural balance sheets look good, a tightening cycle could be difficult to navigate, the central banker warned.

“Rising interest rates often coincide with falling farm revenues and higher capitalization rates, a depressing combination for farmland values,” Hoenig said. “Even if crop prices remain high but capitalization rates return to their historic average, farmland values could fall by as much as a third, which most certainly would erode the financial health of the farm sector.”

Yahoo Finance – Food is becoming more expensive by the day according to the U.N. Food and Agriculture Organization’s Food Price Index. Food prices are at an all-time high having gone up for seven consecutive months.

So, why is food getting more expensive?

Ben Bernanke has taken a lot of the blame from critics who assert the U.S. Fed’s loose money policy has stoked global commodity inflation. But Eurasia Group’s Ian Bremmer says there are actually MORE important reasons to explain why food prices have been on the rise, citing these three in particular:

Reason #1 – Climate Change

Reason #2 – Rising Biofuel Demand

Reason #3 – Emerging Market Growth

While the impact of more expensive food is definitely felt here at home, it pales in comparison to the impact felt around the world, particularly in emerging markets and poor countries like Egypt.

Americans are not likely to stop spending and eating, where by contrast those in developing nations are not likely to have much of a choice but to go hungry or stage a huge political upheaval.

Just take Egypt where much of the country lived in poverty and 25 percent of the youth were unemployed.

On the face of it, politics and timing were largely responsible for sparking the social uprising in Egypt more than two weeks ago, says Bremmer. “[Politics] was the torch that actually got people out into the streets,” he tells Aaron and Dan on the accompanying video “But were it not for these underlying pressures particularity around food prices, these demonstrations don’t happen.”

There are many countries – many ruled by authoritarian regimes — facing food instability around the globe, but most won’t end like Egypt because the political conditions have to be just right, Bremmer explains. Poor nations, like many in Africa, tend to have high rural populations that are not as educated and are not able to mobilize as effectively as the people in Egypt.

After the uprisings in Tunisia and Egypt, there has been talk that governments might increase subsidies for food. Bremmer agrees that greater inefficiencies in the marketplace — such as subsidies and export controls — are likley to occur as time goes on, but there is a somewhat of a silverlining in all of this.

“One of the good things about food, unlike oil, is that food production is reasonably well distributed around the world,” he points out. Therefore, inefficiencies in one country won’t hugely impact prices in another — as least one can only hope.

Bloomberg – Corn, wheat and soybean futures jumped to the highest since 2008 after a U.S. government report showed smaller crops and rising demand are eroding global inventories as food prices surge.

The U.S. Department of Agriculture cut its forecasts for inventories held before this year’s harvests and said world supplies of the crops will slump 2.2 percent. Droughts in Russia, Ukraine and other parts of Europe and adverse weather in the U.S., Canada and Australia slashed output as the world economy rebounded from the most-severe recession in 70 years.

“There is not one crop you can point to that is without supply problems,” Steve Nicholson, a commodity procurement specialist at International Food Products Corp. in St. Louis, said before today’s USDA report. “Production is not keeping up with demand, exacerbating the global food crisis.”

Before today, the price of corn, used to make livestock feed and ethanol, jumped 89 percent in the past year, wheat was up 81 percent and soybeans rallied 54 percent. Last week, rice futures reached the highest since 2008.

Global food prices rose to a record in January as costs to buy dairy, sugar and cereals increased, and high prices may persist for the next several months, the United Nations reported Feb. 2.

Corn futures for March delivery rose 26.25 cents, or 3.9 percent, to $7 a bushel at 12:34 p.m. on the Chicago Board of Trade. Earlier, the price reached $7.0075, the highest since July 2008.

‘Enough Corn’

“There is going to be enough corn for food, for feed, for fuel and for export opportunities,” Tom Vilsack, the agriculture secretary, said today at a press conference in Washington.

Wheat futures for March delivery advanced 16 cents, or 1.8 percent, to $8.9025 a bushel. Earlier, the price reached $8.9325, the highest since August 2008.

Soybean futures for March delivery rose 18 cents, or 1.3 percent, to $14.5225 a bushel. Earlier, the price reached $14.54, the highest since July 2008.

Rice futures for March delivery gained 33.5 cents, or 2.1 percent, to $16.25 per 100 pounds. Before today, the price climbed 64 percent since the end of June.

Record agricultural exports have provided a boost for President Barrack Obama. The U.S. is the world’s leading shipper of corn, soybeans and wheat and the third-biggest for rice.

Record Prices

The record highs for the commodities were $7.9925 for corn on June 27, 2008; $16.3675 for soybeans on July 3, 2008; $13.495 for wheat on Feb. 27, 2008; and $25.07 for rice on April 24, 2008.

Reduced grain supplies may increase livestock-feed expenses for meat companies such as Tyson Foods Inc. and Smithfield Foods Inc. Makers of corn-based ethanol including Valero Energy Corp. and Archer Daniels Midland Co. may face narrowing margins.

Fertilizer producers such as CF Industries Holdings Inc., Mosaic Co. and Potash Corp of Saskatchewan Inc. may boost sales of plant nutrients.

The Standard & Poor’s GSCI Agriculture Index, which tracks eight commodities including grains, sugar, cotton, coffee and cocoa, surged 72 percent in the past year, reaching record 567.7 today.

The rally has bolstered the financial health of U.S. farmers, sending Midwest cropland to record values and boosting profits for rural banks and equipment makers, according to a report yesterday by the Federal Reserve Bank of Kansas City.

Farmer Incomes

Higher incomes allowed farmers to repay debt in the fourth quarter, reducing delinquencies and increasing profit for agriculture lenders, the Fed said.

The USDA forecast global production of corn, soybeans and wheat would total 1.716 billion metric tons, down from 1.755 billion last year.

The U.S. is the leading producer of corn and soybeans.

Stockpiles of corn on Aug. 31 in the U.S. will plunge 60 percent from a year earlier to 675 million bushels, down from a January forecast of 745 million, the USDA said. That represents 5 percent of projected usage and on par with the record low in 1995.

World inventories are forecast to fall 16 percent to 122.51 million tons from a year earlier, the USDA said. Reserves as a percentage of global use will fall to 14.6 percent, down from 15.2 percent forecast last month and the lowest since 1974.

U.S. ethanol production will consume an estimated 4.95 billion bushels of corn this year, up from 4.9 billion estimated in January and up 8.4 percent from a record 4.568 billion last year.

Planting Outlook

Reduced inventories means farmers would need to plant at least 93 million acres of corn this year, up from 88.2 million sown last year, to return domestic supply to more comfortable levels, said Jerry Gidel, a market analyst at North American Risk Management Services Inc. in Chicago.

“We have to raise prices to slow down demand and provide more incentives to plant corn this spring,” Gidel said. “All the markets will be pushing prices higher to attract more acres.”

World soybean inventories before the next Northern Hemisphere harvest will be smaller than forecast in January because of reduced production from Argentina, the USDA said.

Stockpiles will total 58.21 million tons of Sept. 30, compared with 58.28 million forecast a month ago, the USDA said. Argentina will harvest 49.5 million tons, less than the 50.5 million projected in January.

Wheat Stockpiles

U.S. wheat reserves on May 31 will drop to 818 million bushels (22.26 million tons), unchanged from a forecast in January and down from 976 million a year earlier, the government said.

The USDA cut its estimate of global wheat inventories to 177.77 million tons as of May 31, down 0.1 percent the January projection.

“Increased consumption around the world eroded stockpiles,” Roy Huckabay, an executive vice president at the Linn Group in Chicago, said before the report. “The current supply-and-demand imbalance looks to last for multiple years and has emboldened new investment money to flow into agricultural futures.”

–Editors: Patrick McKiernan, Steve Stroth

To contact the reporters on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net; Whitney McFerron in Washington at wmcferron1@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

Bloomberg – India will import 1,000 metric tons of onions and kept a ban on export of edible oils and lentils to cool prices, ahead of a report today that may show inflation accelerated last month.

The benchmark wholesale-price index probably gained 8.4 percent in December, the median forecast of 30 economists in a Bloomberg News survey showed. The gauge rose 7.48 percent the previous month. The commerce ministry is scheduled to release the data in New Delhi at around noon.

The arrival of onions, a key ingredient in the local cuisine, from Pakistan will help check price gains, according to a statement from the Indian prime minister’s office yesterday. Reserve Bank of India Governor Duvvuri Subbarao may add to government efforts to curb inflation and join counterparts in South Korea and Thailand in raising borrowing costs this month.

“Policy makers are firing on all cylinders to contain inflation,” said D.H. Pai Panandiker, president of RPG Foundation, an economic policy group in New Delhi. “The RBI may likely hike rates this month.”

The benchmark nine-year government bond yield fell three basis points to 8.14 percent at close of trading in Mumbai yesterday. The yield has gained 23 basis points this month on speculation Subbarao may boost rates for the seventh time in a year at the Jan. 25 policy meeting. The RBI’s benchmark repurchase rate is 6.25 percent.

The Bombay Stock Exchange’s Sensitive Index lost 1.8 percent yesterday while the rupee weakened 0.2 percent to 45.24 against the dollar.

‘Unacceptable Rates’

“Our experience in the recent past has been that while prices of most manufactured goods and services have been reasonably stable, food prices have frequently risen at unacceptable rates,” the statement showed. “The current bout of inflation is driven by a rise in prices of vegetables and fruits, which is more difficult to manage because these commodities are not held in public stocks.”

An index measuring wholesale prices of farm products rose 16.91 percent in the week ended Jan. 1, the commerce ministry said yesterday. The gauge gained 18.32 percent the previous week and has remained above 12 percent for four straight weeks. Onion costs surged 70 percent in the week to Jan. 1.

High food costs for a sustained period will lead to more wage demands, stoking inflation, Chakravarthy Rangarajan, the top economic adviser to Prime Minister Manmohan Singh, said last week as he sought “some action” from the central bank.

Policy Action

Subbarao, who raised rates the most in Asia in 2010, held off on boosting borrowing costs in the last policy statement on Dec. 16 as a record 1.1 trillion rupees ($24.4 billion) of share sales by companies including Coal India Ltd. caused a cash squeeze at lenders.

Even so, officials across Asia have tightened monetary policy in recent weeks.

The Bank of Korea yesterday raised borrowing costs for the third time since the global financial crisis while Thailand on Jan. 12 increased its benchmark rate for the fourth time in seven months. China boosted rates twice in the fourth quarter of last year.

South Korea also said it aims to freeze the cost of utilities, including electricity and gas, cut food tariffs and ask steelmakers to refrain from boosting prices to help stabilize commodity costs.

Onion Subsidy

India plans to sell onions at 35 rupees a kilogram and review import and export policies of all “essential commodities” to improve supplies, the statement from the prime minister’s office said. Export of edible oils, pulses and non- basmati rice will “remain banned,” according to the statement.

The price gains in a nation where the World Bank says 828 million people live on less than $2 a day have exposed Singh’s government to criticism from opposition parties, which are planning nationwide protests from this month.

The main opposition Bharatiya Janata Party, or BJP, will hold demonstrations and stage sit-ins in India’s major towns for a month starting Jan. 20, party spokesman Ravi Shankar Prasad said in New Delhi on Jan. 11.

The government measures may not staunch inflation as weather disruptions to crops globally keep prices high.

“Given extreme weather patterns across the globe — floods in Australia, snowstorms in the northern hemisphere — price rises could persist in the coming months,” Rohini Malkani and Anushka Shah, economists at Citigroup Inc., wrote in a Jan. 10 report. “This poses upside risks to our inflation forecasts.”

Global Prices

World food prices reached an all-time high in December on higher sugar, grain and oilseed costs, the United Nations said, exceeding levels reached in 2008 that sparked deadly riots from Haiti to Egypt.

Palm oil, which accounts for 80 percent of India’s annual cooking oil imports worth $8.4 billion, have surged 56 percent in the past six months in Malaysia, while soybean oil climbed 43 percent in 2010, because of adverse weather in the producing nations.

The outlook for higher inflation is prompting local banks in India to join Goldman Sachs Group Inc. in predicting RBI’s benchmark borrowing costs will climb 1 percentage point in 2011.

Tushar Poddar, a Mumbai-based economist at Goldman Sachs who correctly predicted that the central bank would raise the benchmark repurchase rate by 150 basis points in 2010, said in an interview Jan. 10 that the biggest risk to inflation is higher food and commodity prices. Poddar told reporters in Mumbai on Dec. 8 that he expects the central bank to lift interest rates 100 basis points in 2011.

–With assistance from Thomas Kutty Abraham in Mumbai and Kartik Goyal, Pratik Parija and Manish Modi in New Delhi Editors: Cherian Thomas, Abhay Singh

To contact the reporter on this story: Tushar Dhara in New Delhi at tdhara1@bloomberg.net. Unni Krishnan in New Delhi at ukrishnan2@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

ST. PETERSBURG, Fla. (AP) – December’s wave of unusually cold weather has destroyed much of Florida’s green beans and sweet corn, which means shoppers will pay more at the grocery store and see more imports on the shelves.

Florida is the nation’s largest producer of green beans and sweet corn — the kind of corn we eat, not the kind we put in our gas tanks.

According to the Florida Department of Agriculture, the state lost $273 million from the December freezes alone — including nearly 9,000 acres of crops. The statistics are compiled only through Dec. 20, which means they don’t even account for the problems caused by this week’s cold.

2010 dealt a one-two punch for the state’s farms. An 11-day spell in January was one of the area’s coldest periods on record, and December has had an unprecedented trio of cold fronts.

Sam Accursio lost nearly all of his pickling cucumbers at his Homestead farm last January. Eleven months later, about half of his new crop has been wiped out.

“It’s crazy,” Accursio said. “I’ve never experienced a growing season where we’ve had four frosts in one year.”

Gov. Charlie Crist extended the state of emergency for Florida’s agricultural community this week. The order eliminates all weight restrictions on trucks carrying agricultural products so farmers can harvest and ship as much produce as possible before more damage is done.

But if any Florida corn, cucumbers or beans find their way onto grocery store shelves in coming weeks, prices will be higher.

J.D. Poole, the vice president and sales manager of Pioneer Growers Cooperative in Belle Glade, said corn was selling at $8 a box at the beginning of December. Now it’s selling for $30 a box (there are 48 ears of corn in a box).

About 80 percent of the crop in western Palm Beach County — where most Florida sweet corn is grown — was destroyed during the first cold snap in December. Corn farmers farther south in Homestead are still trying to determine what, if any, damage was done to their young plants by this week’s weather.

“Obviously the supply has dwindled down to nothing,” Poole said. “Everybody’s cupboards are bare.”

Until Florida’s farmers can replant and grow another crop, families in the U.S. will be getting much of their produce from overseas.

“You’re going to see product being sourced out of Mexico,” said Brad Bergmann, the co-owner of Hugh H. Branch, Inc., a Belle Glade company that stores, ships and markets corn, beans and romaine lettuce grown by farmers near Florida’s Everglades. “As far as Florida product, it’s still going to take some time to see the full effects of this. But you’re going to see higher pricing.”

While strawberry and citrus farmers can use sprinklers and other irrigation methods to coat fruit with insulating water during a freeze, that doesn’t work with vegetables. Those growing beans and corn have turned to another, more expensive, line of defense: helicopters.

Farmers pay about $2,500 an hour to fly a helicopter back and forth over the crops, pushing warm air 50 feet above the plants onto the cold ground. The warmer air prevents cold and frost from settling on the plants.

But the technique can be used only when there is no wind. And it’s dangerous; three helicopters crashed in separate accidents while trying to warm crops in Palm Beach County in early December. One of the pilots suffered serious injuries, the other two had minor scrapes and bruises.

It’s not just corn that has suffered. Florida’s agriculture department released a list of losses this week:

– The eggplant crop is down by 80 percent, with the total U.S. market down 8.5 percent — nearly all attributed to Florida’s losses.

– Shipments of bell peppers from Florida are down some 50 percent, while pepper shipments from the Dominican Republic, Mexico and Nicaragua are up.

– Green beans were heavily affected by the freeze — prices have skyrocketed from about $8.85 a bushel around Thanksgiving to about $35 now. Meanwhile, imports from Guatemala are up by 75 percent.

– Lettuces also took a hit. Endive and escarole harvests are down 40 percent, and Bergmann said about 6,000 acres of Romaine have “gone kaput.”

One bright spot: strawberries. The fruit on the vine survived, and farmers’ only worry is that coming weeks’ crops will be delayed because the cold weather slowed plants’ growth.

It’s still unknown how citrus, the state’s biggest crop, was affected by December’s weather. About 90 percent of Florida’s orange crop is used for juice, and processors won’t tally deliveries and the amount of juice until June. Damage to trees also is slow to reveal itself.

The state’s kumquat crop definitely suffered. Kumquats, which look like tiny oranges but taste slightly more bitter, are highly susceptible to cold weather and freeze at 26 degrees.

Greg Gude, the general manager of Kumquat Growers, Inc. in Dade City, said they’ve lost 20 percent of the crop this year, after losing 50 percent in January.

“It has been one of the coldest years we’ve ever dealt with,” Gude said. “Every week, we’ve been staying up watching the temperatures. It’s really just more of a worry time for us. There’s really nothing you can do.”

Bloomberg – Legend International Holdings Inc., backed by Soros Fund Management LLC, will next week approach buyers for part of its Australian phosphate project that’s worth as much as $1 billion, according to a person with knowledge of the matter.

The Melbourne-based company will ask for preliminary bids in early January, said the person who declined to be identified because the details are private. Legend International hired Nomura Holdings Inc. to advise on strategic transactions for the deposits in the Georgina Basin in Queensland state, according to a Dec. 2 statement.

“We’re looking for a strategic partner who has expertise in phosphate fertilizers and also has the financial muscle to assist us in building an $800 million plant,” Chief Executive Officer Joseph Gutnick said in an interview, without giving a timeframe. “It’s very hard to put a value until we get into production or we export phosphate rocks. I wouldn’t like to guess a figure at this stage.”

The company is planning to build a plant that will start output in 2013 at an annual rate of 1.8 million metric tons of nutrient fertilizers a year, it said in the statement. Demand for fertilizers is rising as shrinking arable land and rising world food demand spurs consumption and takeovers.

Legend International’s phosphate deposits may be valued at between $500 million to $1 billion, the person said. The company owns total mineral deposits of 1.2 billion tons near the city of Mount Isa, according to its website.

Asian Buyers

The company will approach potential partners in China, Korea, Japan, India and Southeast Asia, Gutnick said. He hasn’t decided whether to sell a majority or minority stake as that will depend on the partner who may choose to take out a loan or invest in the project, Gutnick said.

Anne Lui, a Hong Kong spokeswoman at Nomura, declined to comment.

World food prices climbed for a fifth month in November, rising to the highest level in more than two years, according to the United Nations’ Food and Agriculture Organization. The FAO’s index of 55 food commodities jumped to 205.4 points, the highest level since July 2008, the Rome-based agency said in a monthly report on Dec. 1.

Soros Fund Management LLC owns 10.4 percent of the company, Atticus Capital LP, a New York-based hedge fund, owns 13.5 percent, according to Legend’s website.

Takeovers

Legend’s phosphate and mining business consists of three phosphate deposits in Mount Isa in the Georgina Basin. The company proposes developing the project in two stages, including a phosphate fertilizer complex and a beneficiation plant that will be used to upgrade phosphate ores mined, the statement said.

“The outlook for global phosphate demand and prices is very attractive on the back of the growth in global food demand, increasing importance of food security and emergence of phosphate fertilizer as a key ingredient in enhancing food supply,” said Sheryar Chishty, global head of industrials investment banking at Nomura, in the statement.

K+S AG, Europe’s largest potash producer, agreed to buy Canada’s Potash One Inc. for C$434 million ($427 million) in November, the same month that BHP Billiton Ltd. abandoned its $40 billion bid for Potash Corp. of Saskatchewan Inc. after Canada’s government objected.

To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net.

To contact the editors responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net;

Bloomberg – Argentina and Brazil are negotiating an alliance with other South American producers of grains and oilseeds to deal jointly with buyers in Asia and elsewhere, according to Brazilian Agriculture Minister Wagner Rossi.

Rossi met his Argentine counterpart Julian Dominguez and ministers from Chile, Paraguay and Uruguay in Santiago today and yesterday. Brazil is seeking to draw up “consistent” policies with its neighbors, Rossi said in an interview in Santiago.

A deal between Argentina, Brazil and Paraguay would combine about half of the world’s soybean production, according to U.S. Department of Agriculture data. Argentina and Brazil are also among the world’s top three corn exporters, according to the USDA. China is the world’s largest soybean importer.

“We can start a new future where we can be associates,” Rossi said. “That way we will not be manipulated by buyers.”

Soybeans have surged 21 percent over the past year on increased import demand from China, reaching $12.35 a bushel yesterday, the highest price since June 2009. Corn traded today at $5.6775 a bushel after gaining 41 percent over the past year.

U.S. soybean sales jumped 85 percent from a week earlier to 2.02 million metric tons in the week to Oct. 14, the U.S. Department of Agriculture said yesterday.

Brazil wouldn’t seek to raise food prices or “manipulate markets” through the alliance, Rossi said. South America’s largest economy is the top producer of coffee and sugar and the second-largest producer of soybeans behind the U.S.

‘Join Forces’

“If we join forces we will become the world’s most important” regional producer of grains, Dominguez said in an interview today in Santiago. “It’s about unifying our supply platform.”

China halted Argentine soybean-oil imports in April because of trade disputes ranging from textiles to kitchen products. China restarted cooking oil imports from Argentina earlier this month, three executives familiar with the deals said on Oct. 15.

Brazil has also fought trade disputes with China through the World Trade Organization during the past decade as the Asian nation banned shipments because of contamination of seeds. China is also the world’s largest consumer of industrial metals, pork and cotton and the second-biggest user of oil, corn and sugar.

Imports Rise

China’s soybean imports for the year from Oct. 1 may rise to 54 million tons, from about 50 million tons in 2009-2010, the China National Grain & Oils Information Center said in an e- mailed report yesterday. That compares with the 55 million tons projected by the U.S. Department of Agriculture.

“What we’re seeing is strong demand for soybeans” from China, Jonathan Barratt, managing director at Commodity Broking Services Pty., said from Sydney today.

China may import as much as 15 million tons of corn in 2015 as demand outstrips local supply and the country enters a “new era” of buying from overseas, the U.S. Grains Council said in July, citing Shanghai JC Intelligence Co. Corn imports may total 1.7 million tons this year and 5.8 million tons next year, the council said, citing Shanghai JC Chairman Hanver Li.

–With assistance from Luzi Ann Javier. Editors: Dale Crofts, Jessica Brice

To contact the reporter on this story: Matt Craze in Santiago at mcraze@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

WASHINGTON (Reuters) – The U.S. corn crop is likely to be far smaller than expected as late summer heat reduced yields across the Corn Belt, and the corn stockpile will shrink to less than a four-week supply by next fall, a government report said on Friday.

In a shock to markets, the U.S. Agriculture Department cut its estimate of the corn crop by 4 percent and soybeans by 2 percent based on conditions Oct. 1. Its forecast of crop size and a bare-bones level of season-ending stocks were well below analysts’ expectations and sent grain prices soaring in Chicago.

“Smaller crops get smaller in both corn and soybeans,” said Don Roose, president of U.S. Commodities in West Des Moines, Iowa. “Soybeans have lost their cushion. South America is going to be most important.”

At the Chicago Board of Trade, corn, soybean and wheat futures each rose by the maximum permitted daily amount. Corn for December delivery zoomed 30 cents to $5.28-1/4 a bushel, December soybeans rocketed 70 cents to $11.35 a bushel, and wheat shot up 60 cents to $7.19-1/4. [ID:nN08217278]

Futures prices soared as well in European grain markets and U.S. live cattle and hog futures surged as an inducement to producers to fatten livestock for slaughter in the face of rising feed prices. [ID:nLDE6971M2] [ID:nN08224525]

Fertilizer shares also rose, with analyst Edlain Rodriguez of Broadpoint Glecher saying farmers will need nutrients to expand corn production. Potash Corp (POT.TO) stocks were about 2 percent higher, Agrium (AGU.TO) and Mosaic Co (MOS.N) shares were up nearly 6 percent and CF Industries (CF.N) was up 8 percent. [ID:nN08221292]

Bids for cash ethanol jumped by 12 cents a gallon in response to the smaller corn crop, but there were few or no offers. Corn is the primary U.S. feedstock for fuel ethanol. [ID:nN08253096]

The Obama administration says it will decide in early October whether to allow a 15 percent blend of ethanol in gasoline for late-model cars. The standard blend is 10 percent. [ID:nN04118503]

After lowering its estimate of yields by 4 percent, USDA pegged the corn crop at 12.664 billion bushels. With high demand from feeders, processors and exporters, the corn surplus will shrink to 902 million bushels by the end of this marketing year, the smallest reserve since 883 million bushels in 1996/97. The stocks-to-use ratio would be a tight 6.7 percent.

Despite the slump, the corn crop would be the third-largest on record. The soybean crop would still would be the biggest on record.

Hot weather in August prevented corn and soybeans from reaching peak yields, traders said. Mid-September rains slowed the harvest in the Upper Midwest.

TORONTO (AP) — Potash Corp. of Saskatchewan asked a U.S. court on Wednesday to block a $39 billion hostile takeover by BHP Billiton on the grounds BHP has made “false statements and half-truths” to try to manipulate the perceived value of the Canadian company.

Australia’s BHP Billiton Ltd. launched a hostile $130-per-share takeover bid last month after Potash directors rejected its offer as wholly inadequate. The complaint is the latest defensive move by one of Canada’s largest mining companies and the world’s largest fertilizer company.

Potash’s filing with the U.S. district court for northern Illinois alleges that “because of BHP’s false statements, half-truths, and contradictions” Potash shareholders “lack clear and accurate information about BHP’s intentions and the true value” of its shares.

BHP said in a statement that it believes the lawsuit is “entirely without merit” and that it will contest it. BHP said Potash Corp.’s shareholders “should have the opportunity to decide on the merits of our offer.”

The lawsuit filed by Potash alleges that BHP has violated U.S. securities law by failing to adequately inform shareholders. Potash alleges BHP hasn’t been truthful about its plans to develop its own potash mine in Saskatchewan. Before bidding for Potash Corp. last month, BHP said it was focused on building a massive potash mine in Saskatchewan.

Potash Corp. said BHP only said that so that it could scare investors into thinking BHP could flood the market with potash. Potash Corp. said the real goal was to drive down the stock of a company it wanted to buy.

“By conditioning the market for years to believe that BHP was primed to bring the full force of its worldwide financial and mining power to compete in the potash industry, BHP knew and intended to undermine investor confidence in the potash sector generally and PCS in particular creating an opportunity for BHP to acquire PCS shares for less than their intrinsic value,” the lawsuit states.

Potash noted that BHP made a bid just low enough that it would not trigger a vote by BHP shareholders to approve of the transaction. BHP is required to seek shareholder support for any deal worth 25 percent or more of its market capitalization. According to Potash, BHP’s bid was worth approximately 23 percent of BHP’s market capitalization.

Potash Corp. is Saskatchewan’s largest revenue-generating companies and the province is worried that BHP would operate at full capacity and lower potash prices, leading to less revenue for the province.

BHP CEO Marius Kloppers is in Canada this week to meet with government officials, investors and media in an effort to win support for the bid. Chinese state-owned companies are also interested in making a rival bid.

Canada’s federal government can block a foreign takeover if it’s not a “net benefit” to Canada. Canadian Prime Minister Harper has asked for Saskatchewan Premier Brad Wall’s input.

Wall has said he hasn’t heard anything to convince him that a BHP takeover Potash is a net benefit to his province or Canada.

Shares of Potash were trading down 32 cents to $147.20 in midday trading on the New York Stock Exchange. Potash shares soared to over $230 just before the global recession hit in 2008.

BHP hopes to diversify its assets and profit from rising fertilizer demand in China. BHP has extended the expiration of the bid by one month to Nov. 18.