ANALYSIS-Subprime fears, 'bubble' unsettle US farm lenders

Reuters: [2008-05-16 18:10:00]

By Christine Stebbins

CHICAGO, May 16 (Reuters) - With U.S. crop prices soaring to historic levels, times are seemingly good for grain farmers and agribusiness firms. So why are lenders worried about the U.S. farm economy?

Despite the trappings of a "golden age" of agriculture, bankers and regulators are nervously watching two pressure points in farm finance -- grain marketing and soaring farmland prices -- in hopes that a rural credit crunch does not take root.

Ironically, high grain prices could be bad for farmers in at least one way. The recent doubling or tripling of grain prices from historical norms has thrown a wrench into a century-old system that farmers have used for selling grain and financing their production.

"As long as this price keeps trending up, the credit outstanding is enormous," said economist Mike Swanson at Wells Fargo, the largest private bank lender to U.S. agribusiness.

That credit crunch has broken down cash grain markets.

For decades, farmers secured money for spring planting by selling crops "forward" -- signing contracts with local elevators for harvest delivery. To protect itself, or hedge, the elevator sells Chicago Board of Trade futures contracts to lock in prices. Banks demand such hedges as loan collateral.

But in 2007 and again this year, the system has broken down.

Grain firms that sold futures have watched prices soar to record highs -- and then keep rising. To hold hedges, agribusiness companies have bled cash and borrowed hundreds of millions of dollars to keep paying "margin" -- the good-faith payments needed to keep holding their "short" futures positions -- to the CBOT.

Finally, early this year many country elevators as well as large grain buyers like Archer Daniels Midland Co <ADM.N> and Cargill Inc [CARG.UL] told farmers they were unwilling to buy grain more than 60 days in advance. Their finances were stretched. The farmers, and farmer-owned cooperatives, would need to finance their own hedges.

One result: the government-linked Farm Credit System, the dominant lender to farmers and co-ops, saw credit demand in January-March 2008 surge $10 billion, up 7 percent from 2007, as more and more grain elevators asked for expansions on their lines of credit to hold short futures positions.

"The Farm Credit System is overall financially strong. We've seen the increase in demand coming from the Midwest because that's primarily where grain elevators are located," said Andrew Jacob, director of the Farm Credit Administration.

BUBBLE

The Federal Reserve, the ultimate overseer of U.S. banking, is also keeping a sharp eye on credit demand. A survey of 300 rural banks this winter in the Kansas City Federal Reserve Bank's district found those in greatest stress were in wheat-growing areas: western Kansas, eastern Colorado and the Oklahoma Panhandle.

"Our smaller banks are doing a lot more participations. As collateral requirements go up, if the bank individually cannot handle it, they'll partner or participate with another bank to pull a line of credit and make it work," said Jason Henderson, an economist at the Omaha, Nebraska, office of the Kansas City Fed.

Farmland prices, like grains, are also at record levels in the U.S. Plains and Midwest, where more than 200 million acres are planted to cash crops like wheat, corn and soybeans.

But soaring land prices make regulators nervous, reminding them of past boom-bust cycles. Could there be a credit "bubble" in farmland to echo subprime housing woes?

"If there has been too much leveraged or loaned against the inflated value of farm land, the bubble will burst," Thomas Gronstal, Iowa's superintendent of banking, told the U.S. Senate banking committee in testimony on March 4.

Gronstal, whose state and Illinois usually produce a third of all U.S. corn and soybeans, said that the current speculative frenzy in farmland had elements of the 1970s "boom" before a crash that left thousands in ruins.

BIOFUELS CRAZE

What could cause the speculative farm bubble to burst?

Biofuels, possibly. The craze to make fuel from corn and soybeans hit a crescendo in December as Congress -- pushed hard by farm lobbyists -- passed a stunning mandate to increase biofuels output five-fold over 15 years.

The frenzy of speculation that followed the December law took "the battle for acres" to epic heights. Corn and soybeans set record highs. Wheat and rice soared three to five times historical levels on fears of lost acres and dwindling supply.

But rising food prices around the world, which have sparked protests and hoarding of wheat and rice, have prompted a backlash against biofuels and calls for a rethink on last December's mandate. If that happens, the farmland and grain price bubbles could pop.

That could have a silver lining for grain hedgers. Indeed, wheat prices have fallen sharply since the winter panic, easing margin calls on wheat hedgers.

But it may be just the calm before the storm. All eyes are now on the volatile corn market. CBOT corn hit a record high of $6.79 per bushel last week, and corn remains the largest market for CBOT hedges, with 2007 production at 13.1 billion bushels.

"The problem for these markets is what high point you have to go through and whether you have sufficient credit to make it through the high spike," said Swanson at Wells Fargo.

"That's what the risk is this summer. If we get enough volatility we could break one of the links in the chain and all sorts of deals become unraveled." (Reporting by Christine Stebbins, editing by Matthew Lewis) ((christine.stebbins@thomsonreuters.com; + 1 312 408 8720; Reuters Messaging:christine.stebbins.reuters.com@reuters.net)) Keywords: USA CROPS/FINANCE

Proposed WTO subsidy waiver "threatens fish stocks"

Reuters: [2008-05-16 17:41:00]

By Jonathan Lynn

GENEVA, May 16 (Reuters) - Major developing countries have proposed exemptions to a planned trade deal on fishing subsidies but a leading environmental group said on Friday the waiver would undermine efforts to restrain overfishing.

The joint proposal this week by China, India and Indonesia aims to give special treatment to poor countries, in line with the development mandate of the World Trade Organisation's (WTO) Doha round to open up global commerce.

But it highlights the tension between development and environment needs, with the United States saying that by effectively allowing subsidies to commercial fleets it could destroy fish stocks in all members, rich and poor.

"How we decide this will have an impact on fish as a food source in the future," said Courtney Sakai, senior campaign director of advocacy group Oceana, which advises the U.S. government.

There is broad agreement in the Doha round that fishing subsidies should be limited, and that developing countries should have special treatment, especially for many small-scale fishermen who live in poverty.

BLANK CHEQUE

But critics of the new proposal say it gives a "blank cheque" to developing countries, some of whom are already big producers of fish, to subsidise commercial operations on the high seas far from home.

Sakai said the proposal undermined the spirit of the WTO negotiations, where the chapter on trade rules includes fisheries subsidies.

"The fisheries subsidies proposal... would likely result in detrimental harm to the millions of people who depend on fish and fishing for their livelihood and sustenance," she said.

Under the new joint proposal, developing countries would be able to subsidise fishing vessels up to 24 meters (74 feet) in length instead of up to 10 meters as proposed in the current negotiating draft.

It would allow developing countries to use indigenous methods to control overfishing instead of a formal fisheries management system, as currently proposed.

India has argued that developing countries may not have the capacity to operate a formal fisheries management system.

"It seems to be unfair to restrict the very subsidies that developed countries have historically given to their fishermen," the joint proposal said.

Developing countries are not the only ones to seek changes to the current proposals. Banning operating subsidies on materials such as fuel, bait and ice would make many fishing fleets uneconomic.

Last month Canada proposed letting all countries, developed and developing, continue subsidising small-scale fishing by allowing subsidies for fleets in territorial waters up to a yet to be negotiated share of the value of the previous catch.

The Canadian proposal particularly aims to protect the fishing rights of indigenous peoples but Oceana said it could be used by other countries to continue industrial-scale fishing.

The Canadian proposal won support from the European Union, Japan and South Korea, but came under fire from many developing countries as well as Australia and New Zealand, who also criticised this week's joint proposal.

Japanese fishing firms such as Maruha Nichiro Holdings <1334.T> and Nippon Suisan Kasha <1332.T> will be following the talks closely.

Uruguay's WTO ambassador Guillermo Valles Galmes, who chairs the talks on trade rules, has said he plans to issue a new document in the coming weeks to summarise the state of negotiations and serve as a blueprint for a deal in that area. ((For more on world trade talks, users of 3000 Xtra can click on [ID:nL01774870])) ((jonathan.lynn@reuters.com ; +41 22 733 3831; Reuters Messaging: jonathan.lynn.reuters.com@reuters.net ))

Keywords: TRADE WTO/FISHING

Italian Stocks - Factors to watch on May 16

Reuters: [2008-05-16 08:06:00]

    MILAN, May 16 (Reuters) - The following factors could affect 
Italian markets on Friday. 
    Reuters has not verified the newspaper reports, and cannot 
vouch for their accuracy. New items are marked with (*). 
     
  * FIAT <FIA.MI> 
    April new car sales in western Europe gained 9.5 percent, 
thanks to a statistical quirk, while those for the Fiat brand 
went up 7.9 percent, according to the latest figures from ACEA, 
an industry body. 
    For a full story, double click on [nWEB5509]. 
     
    BULGARI <BULG.MI> 
    Bulgari said net profit fell 4.6 percent in the first 
quarter due to higher costs and a sales slowdown, but the 
jeweller confirmed its outlook for the year as long as a tough 
economic climate does not worsen. 
    For a full story, double click on [nL15833385]. 
     
    PARMALAT <PLT.MI> 
    The U.S. trial began in the dairy company's case against 
Citigroup <C.N>. 
    For a full story, double click on [nN15291317]. 
     
    The company's shares fell sharply on Thursday on 
disappointment over its first-quarter results. 
     
    UNICREDIT <CRDI.MI> 
    Turkish bank Yapi Kredi, which UniCredit controls with Koc 
Holding <KCHOL.IS>, said it would launch a 920 million Turkish 
lira ($736 million) capital increase. 
    For more, double click on [YKBNK.IS-LEN-RTRS] 
     
    INTESA SANPAOLO <ISP.MI> 
    The bank said on Thursday it had launched a 1 billion euros 
subordinated Lower tier 2 eurobond targeted to international 
markets. 
    For a story, double click on [nMAT008210]. 
     
  * TELECOM ITALIA <TLIT.MI> 
    Bolivia said Telecom Italia had transferred some $90 million 
to foreign accounts from its subsidiary Entel, recently 
nationalized by the government. 
    Describing the transfer as a "reproachable" act, it said it  
would affect negotiations over compensation with the Italian 
telecommunications operator. 
    For a full story, double click on [nN15346368]. 
     
    TERNA <TRN.MI> 
    Moody's downgraded Terna to "A1" and cut its long-term 
unsecured issue and debt ratings to "AA3" from "A1" 
    For more details, double click on [nWNA0963]. 
     
    ITALCEMENTI <ITAI.MI> 
    Moody's changed the outlook on Italcement's "BAA1" rating to 
"negative". 
    For more details, double click on [nWNA0959]. 
     
    CREDITO EMILIANO <EMBI.MI> 
    The bank said it wanted to raise up to 500 million euros in 
a maximum five years through offering options and would seek 
shareholders' approval. 
     
    BANCO POPOLARE <BAPO.MI> 
    The bank turned in a 9.1 percent fall in net profit to 260 
million euros for the first quarter. 
    For a full story, double click on [nMAT008208]. 
     
    GAS PLUS <GSP.MI> 
    Italy's fourth-biggest gas company said it had suspended gas 
supply talks with Russia's Gazprom <GAZP.MM> but is still 
evaluating a deal. 
    For a full story, double click on [nL1584093]. 
     
    SORIN <SORN.MI> 
    The medical devices maker said in a statement late on 
Thursday it had obtained approval to market the CRT model of its 
OVATIO^OM family from U.S. regulators. The device helps 
physicians treat patients of heart failure. 
     
 ((Milan newsroom, +39 02 6612 9507, fax +39 02 801149, 
milan.newsroom@news.reuters.com)) 
     
    For Italian market data and news, click on codes in 
brackets: 
    20 biggest gainers (in percentage)............<.PG.MI> 
    20 biggest losers (in percentage).............<.PL.MI> 
    Mibtel index.......... <.MIBTEL> 
    S&P/Mib index......... <.SPMIB> 
    Indice Mib-30......... <.MIB30> 
    Midex index........... <.MIDEX> 
    Allstars index........ <.ALLST> 
    Block trades.......... <.BLK.MI> 
    Stories on Italy...... <IT-LEN> 
     
    For pan-European market data and news, click on codes in 
 brackets: 
    European Equities speed guide...................<EUR/EQUITY> 
    FTSEurofirst 300 index..............................<.FTEU3> 
    DJ STOXX index......................................<.STOXX> 
    Top 10 STOXX sectors...........................<.PGL.STOXXS> 
    Top 10 EUROSTOXX sectors......................<.PGL.STOXXES> 
    Top 10 Eurofirst 300 sectors...................<.PGL.FTEU3S> 
    Top 25 European pct gainers.......................<.PG.PEUR> 
    Top 25 European pct losers........................<.PL.PEUR> 
     
    Main stock markets: 
    Dow Jones...............<.DJI>  Wall Street report .....[.N] 
    Nikkei 225.............<.N225>  Tokyo report............[.T] 
    FTSE 100...............<.FTSE>  London report...........[.L] 
    Xetra DAX.............<.GDAXI>  Frankfurt market stories[.F] 
    CAC-40.................<.FCHI>  Paris market stories...[.PA] 
    World Indices.....................................<0#.INDEX> 
    Reuters survey of world bourse outlook.........<EQUITYPOLL1> 
    Western European IPO diary..........................<WEUIPO> 
    European Asset Allocation........................[EUR/ASSET] 
    Reuters News at a Glance: Equities...............[TOP/EQE] 
    Main currency report:...............................[FRX/] 
 ($1=1.250 Turkish Lira) 
  Keywords: ITALY MARKETS/FACTORS 
    
    

Italian Stocks - Factors to watch on May 16

Reuters: [2008-05-16 07:11:00]

    MILAN, May 16 (Reuters) - The following factors could affect 
Italian markets on Friday. 
    Reuters has not verified the newspaper reports, and cannot 
vouch for their accuracy. New items are marked with (*). 
     
    BULGARI <BULG.MI> 
    Bulgari said net profit fell 4.6 percent in the first 
quarter due to higher costs and a sales slowdown, but the 
jeweller confirmed its outlook for the year as long as a tough 
economic climate does not worsen. 
    For a full story, double click on [nL15833385] 
     
    PARMALAT <PLT.MI> 
    The U.S. trial began in the dairy company's case against 
Citigroup <C.N>. 
    For a full story, double click on [nN15291317] 
     
    The company's shares fell sharply on Thursday on 
disappointment over its first-quarter results. 
     
    UNICREDIT <CRDI.MI> 
    Turkish bank Yapi Kredi, which UniCredit controls with Koc 
Holding <KCHOL.IS>, said it would launch a 920 million Turkish 
lira ($736 million) capital increase. 
    For more, double click on [YKBNK.IS-LEN-RTRS] 
     
    INTESA SANPAOLO <ISP.MI> 
    The bank said on Thursday it had launched a 1 billion euros 
subordinated Lower tier 2 eurobond targeted to international 
markets. 
    For a story, double click on [nMAT008210] 
     
    TERNA <TRN.MI> 
    Moody's downgraded Terna to "A1" and cut its long-term 
unsecured issue and debt ratings to "AA3" from "A1" 
    For more details, double click on [nWNA0963] 
     
    ITALCEMENTI <ITAI.MI> 
    Moody's changed the outlook on Italcement's "BAA1" rating to 
"negative". 
    For more details, double click on [nWNA0959] 
     
    CREDITO EMILIANO <EMBI.MI> 
    The bank said it wanted to raise up to 500 million euros in 
a maximum five years through offering options and would seek 
shareholders' approval. 
     
    BANCO POPOLARE <BAPO.MI> 
    The bank turned in a 9.1 percent fall in net profit to 260 
million euros for the first quarter. 
    For a full story, double click on [nMAT008208] 
     
    GAS PLUS <GSP.MI> 
    Italy's fourth-biggest gas company said it had suspended gas 
supply talks with Russia's Gazprom <GAZP.MM> but is still 
evaluating a deal. 
    For a full story, double click on [nL1584093] 
     
    SORIN <SORN.MI> 
    The medical devices maker said in a statement late on 
Thursday it had obtained approval to market the CRT model of its 
OVATIO^OM family from the U.S. Food and Drugs Administration. 
The device is to allow physicians to treat heart failure 
patients. 
     
 ((Milan newsroom, +39 02 6612 9507, fax +39 02 801149, 
milan.newsroom@news.reuters.com)) 
     
    For Italian market data and news, click on codes in 
brackets: 
    20 biggest gainers (in percentage)............<.PG.MI> 
    20 biggest losers (in percentage).............<.PL.MI> 
    Mibtel index.......... <.MIBTEL> 
    S&P/Mib index......... <.SPMIB> 
    Indice Mib-30......... <.MIB30> 
    Midex index........... <.MIDEX> 
    Allstars index........ <.ALLST> 
    Block trades.......... <.BLK.MI> 
    Stories on Italy...... <IT-LEN> 
     
    For pan-European market data and news, click on codes in 
 brackets: 
    European Equities speed guide...................<EUR/EQUITY> 
    FTSEurofirst 300 index..............................<.FTEU3> 
    DJ STOXX index......................................<.STOXX> 
    Top 10 STOXX sectors...........................<.PGL.STOXXS> 
    Top 10 EUROSTOXX sectors......................<.PGL.STOXXES> 
    Top 10 Eurofirst 300 sectors...................<.PGL.FTEU3S> 
    Top 25 European pct gainers.......................<.PG.PEUR> 
    Top 25 European pct losers........................<.PL.PEUR> 
     
    Main stock markets: 
    Dow Jones...............<.DJI>  Wall Street report .....[.N] 
    Nikkei 225.............<.N225>  Tokyo report............[.T] 
    FTSE 100...............<.FTSE>  London report...........[.L] 
    Xetra DAX.............<.GDAXI>  Frankfurt market stories[.F] 
    CAC-40.................<.FCHI>  Paris market stories...[.PA] 
    World Indices.....................................<0#.INDEX> 
    Reuters survey of world bourse outlook.........<EQUITYPOLL1> 
    Western European IPO diary..........................<WEUIPO> 
    European Asset Allocation........................[EUR/ASSET] 
    Reuters News at a Glance: Equities...............[TOP/EQE] 
    Main currency report:...............................[FRX/] 
 ($1=1.250 Turkish Lira) 
  Keywords: ITALY MARKETS/FACTORS 
    
  

Benelux stocks - Factors to watch on May 16

Reuters: [2008-05-16 07:08:00]

AMSTERDAM/BRUSSELS, May 16 (Reuters) - The following Benelux stocks may be affected by newspaper reports and other factors on Friday:

PHILIPS <PHG.AS>

Philips holds Medical analyst day.

For more double click on [PHG.AS]

ASMI <ASMI.AS>

Semiconductor equipment maker ASM International <ASMI.AS> faces court action over a poison pill bid defence invoked on Wednesday. Pension fund manager Hermes says it will ask for an injunction to have the ASMI preference shares withdrawn.

For more double click on [ASMI.AS]

IPTE <IPTE.BR> f

IPTE reports first-quarter sales up about five percent year-on-year.

For more double click on [IPTE.BR]

BELGACOM <BCOM.BR>

Belgium's dominant telecom operator Belgacom reports first-quarter results.

For more double click on [BCOM.BR]

KINEPOLIS <KIPO.BR>

Belgian cinema operator gives trading update.

For more double click on [KIPO.BR]

((Amsterdam and Brussels newsrooms; Tel. +31 20 504 5000; amsterdam.newsroom@news.reuters.com))

    ** ((Xtra clients: Double click on 
http://topnews.session.rservices.com to see Top News Pages in 
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