Coconut oil prices rule steady on good demand-supply

Coconut oil prices ruled steady in both Tamil Nadu and Kerala markets. There is good demand which is backed by fairly adequate supply and the prices are likely to remain steady in the coming days, sources in the trade said.

Coconut oil was quoting at Rs 84 per kg in the Kerala markets while it ruled at Rs 80 per kg in Tamil Nadu. Copra prices, meanwhile, were at Rs 60 per kg in Kerala as against Rs 58 per kg in Tamil Nadu. Although there has been increased demand for raw coconuts from all South Indian States on account of the Sabarimala season, it has been backed by adequate supplies.

The pilgrimage demand for raw nut is emanating mainly from States like Andhra Pradesh, Tamil Nadu, Karnataka and Kerala, but the production from the individual States is more than adequate to meet this seasonal demand. Moreover, production in Tamil Nadu has now become virtually a round-the-year activity and there is no paucity of raw nuts in the market, Mr Talat Mahmood, President of the Cochin Oil Merchants Association (COMA), said.

As most of its stocks have depleted, Kerafed has been an active buyer in the market. Kerafed has been procuring 60-70 lorry loads on a daily basis from the Kerala and Tamil Nadu markets, sources in the trade said. With cheaper conversion and processing facilities on offer in Tamil Nadu, loads of coconut has also been moving from the Northern districts of Kannur and Kasargode in Kerala to Kangayam in Tamil Nadu. These raw nuts are converted into copra and coconut oil and then transported back to Kerala, Mr Mahmood said.

Although this is the off-season in Kerala, arrivals from Tamil Nadu continue to be good and there is no pressure on prices. Buttressed by firm trends in palm oil and palm kernel oil, coconut oil prices are expected to remain firm, sources in the market said. Palm oil prices have slackened after gains last week while palm kernel oil prices were quoting at Rs 75 a kg.

The Hindu

Fonterra Aims to Double China Dairy After Milk Scandal

By Bloomberg News

(Updates with analyst comment in fourth paragraph.)

Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, aims to double sales in China, Theo Spierings said during his first trip as chief executive officer to the nation where a 2008 tainted milk scandal led to the collapse of its local partner.

China’s dairy market will increase in value by more than 10 percent a year in the next few years and Fonterra plans to double sales by 2020, Auckland-based Spierings said in an interview on Bloomberg Television.

Fonterra, which accounts for about 40 percent of the global trade in dairy products, is expanding in China after melamine- tainted milk killed at least six infants. The ensuing investigation led to the collapse of partner Sanlu Group and the imprisonment of former chairwoman Tian Wenhua, as well as the trial and execution of two other people and a surge in the sale of imported milk.

“The scandal of a couple a years ago is pretty much imprinted on a lot of Chinese consumers’ minds,” said Michael Creed, a Melbourne-based agribusiness economist at National Australia Bank. “If you do have a foreign-owned dairy company producing milk and milk powders or dairy products in China there’s possibly a perception that their standards may be somewhat higher.”

Consumption of food commodities including dairy is rising in China as economic growth lifts incomes and spurs increased sales of protein-rich meals. China’s demand for New Zealand milk products last year surged more than fivefold from 2008 to about 353 million kilograms, according to the company.

Double-Digit Growth

“Demand in this country is growing at double-digits, so in that sense it’s fantastic,” said Spierings, 47, in the interview aired yesterday that continued the company’s expansion in China undertaken by his predecessor. “Supply is also growing in China, but supply will not be able to cope with demand.”

China’s imports have surged after milk powder in the country was found in 2008 to be tainted with melamine, an industrial chemical. Along with the deaths, more than 54,000 were hospitalized after 22 companies including Sanlu sold formula made from contaminated milk.

Global consumption of liquid-dairy products may increase by 30 percent over the next decade as the middle classes expand in China and India, Tetra Pak Group said July 11.

“The only direction for milk demand in China is up,” National Australia’s Creed said by phone. “You do have a combination of rising per capita income and increasing westernization of the Chinese diet as well as rising protein consumption.”

Local Production

Fonterra will increase its sales through imports and also through expansion of local milk production via its three farms, Spierings said. The company agreed with Yutian county’s government in Hebei province to build a “world-class” farm, which will increase its milk production in China to about 90 million liters a year, it said July 19.

There is another farm in Hebei and one in Tangshan, which has doubled to more than 6,000 cows since it opened in 2007. Currently, the two farms are producing raw materials for other dairy makers such as Inner Mongolia Yili Industrial Group Co. and China Mengniu Dairy Co., Spierings said.

The melamine tainting caused the collapse of Fonterra’s local partner Sanlu and resulted in the execution of two people after a trial about their involvement in the poisonings.

Big Hit

The scandal “was a big hit for the dairy industry” in China, Spierings said. Fonterra will build a “fully integrated model in China in order to take full control of the supply chain” so that safety won’t be an issue, Spierings said.

In the aftermath of the poisonings, “consolidation of the fragmented, small producers will continue as the regulation will be tighter and tighter,” he said.

Chinese urban dwellers consumed 22.72 kilograms of dairy products per capita in 2008, up 57 percent from 2000, according to the Ministry of Agriculture. The rural population consumed only 4.81 kilograms per capita in 2008, ministry data showed. China demand will continue to “outpace its own supply and imports will grow,” Spierings said.

Spierings previously headed Dutch co-operative Royal Friesland Foods.

--Elisabeth Behrmann, Feiwen Rong, with assistance from Phoebe Sedgman in Melbourne. Editors: Andrew Hobbs, Jarrett Banks

To contact Bloomberg News staff for this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net; Feiwen Rong in Beijing at frong2@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net

Rice Storage Scheme to Stockpile Rice by BAAC

Some farmers in pledging scheme can store their own rice, BAAC decides

The Bank for Agriculture and Agricultural Cooperatives (BAAC) is allowing farmers participating in the pledging scheme to stockpile rice in their own silos.

The BAAC board agreed to the move to make the subsidy programme more flexible, Boonchuay Chiadamrongchai, executive vice president of the bank, said yesterday.

Farmers in the North and Northeast are eligible for this new rule, which will apply from December 1 to February 29, he said. The bank targets purchase of 1 million tonnes of rice from these farms.

Farmers can redeem their rice within four months after they pledge it with the government, he said. However, they generally will not do so as they will get higher prices from the government than the market.

The new rule was put in place after fewer millers participated in the rice-subsidy scheme than anticipated. Previously the government required farmers to sell their produce to it via millers and targeted buying 25 million tonnes of unmilled rice, which would be stored in the millers' silos.

The government has agreed to pay Bt20,000 per tonne of Hom Mali fragrant rice, Bt16,000 per tonne of long-grain sticky rice and Bt15,000 per tonne for short-grain sticky rice.

In a related development, 341,496 farmers have asked for flood-damage compensation from the government via the BAAC for a combined amount of Bt6.74 billion, Boonchuay said. Each will get compensation of Bt1,437 per tonne of damaged rice.

The bank also pledged to offer farmers new loans for flood recovery and a debt moratorium for three years, he added.

The Nation

Short rains expected to boost agricultural stocks at NSE

Agricultural stocks have gained value since the beginning of the year. Williamson Tea has maintained the top spot with 46 per cent share price growth

The onset of the short rains season has raised expectations that agricultural stocks will record improved production this year, lifting their share prices at the stock market.

Williamson Tea, Limuru Tea, and Kakuzi share prices edged up in Monday’s trading at the Nairobi Securities Exchange on expectations that the relatively weak shilling will also boost the plantation firms’ earnings.

Williamson Tea’s share price closed at Sh285 from Sh270, a 5.56 per cent increase from Friday’s level.

Prices of other agriculturals including Kakuzi (Sh125), Limuru Tea (Sh356), Rea Vipingo (Sh19) and Eagads (Sh35.25) held firm at a time when most stocks at the NSE were on a decline, while Sasini Tea’s share dropped by 1.49 per cent to Sh13.25 from Sh13.40.

“People are expecting good results because we have had good weather and prices,” said Mr Robert Munuku, a research analyst at Drummond Investment Bank.

Tea stocks in particular are favoured by investors as global prices and the shilling’s weakening mean higher returns. Sasini Tea is yet to release its results, but analysts said there is interest on the stock especially among investors interested in dividend.

Despite the interest, the share lost ground marginally from Sh13.40 to Sh13.25 yesterday, a 1.12 per cent drop.

“Any stock that gives an investor exposure to tea is good,” said Johnson Nderi, research analyst at Suntra Investment Bank. Williamson Tea’s net profit for the half year ended September 30 rose to Sh805 million from Sh456 million over a similar period in 2010, but the firm’s management was less optimistic on the results being mirrored in the next financial half.

Operational costs

“The performance of the remaining period to year end will be impacted by the behaviour of the Kenyan shilling against foreign currencies and an increase in operational costs. The directors therefore do not expect the current performance to be replicated in the remaining part of the financial period,” said Williamson Tea while releasing its half year results last week. By the close of market Monday, there were 50,000 Sasini Tea bids against 4,600 shares on offer.

The weak shilling has been seen favouring agriculture as it results in higher earnings. The possibility of capital gains could not be ruled out entirely, said Mr Munuku.

Since the beginning of the year agriculturals have gained in value with Williamson Tea maintaining top spot with a 46 per cent increase in its share price to Sh270 from Sh180.

Sasini has gained 0.3 per cent to Sh13.40 from Sh13.35, Limuru Tea 19 per cent to Sh356 from Sh300, Rea Vipingo three per cent or Sh19 from Sh18.45, and Kapchorua 25 per cent to Sh125 from Sh100.

Biogas plant planned at Mysore zoo

Mysore zoo will soon be a model for other zoos in the country, thanks to its eco-friendly initiative. It will set up a biogas plant to convert animal waste into gaseous fuel to be used for cooking.

The work on the project is underway and is expected to be complete in three months.

This will help the zoo authorities cut down on operational cost. Presently, the zoo is consuming a large quantity of LPG every month.

Zoo executive director B P Ravi said they have signed a tripartite agreement with Mysore City Corporation (MCC) and National Institute of Engineering-Centre for Renewable Energy and Sustainable Technologies (NIE-CREST) for the plant planned near vermin-compost unit.

The technology is developed by Babha Atomic Research Centre.Everyday, zoo generates nearly 1.5 tonnes of waste from kitchen and animals, including 700-800 kg of elephant dung.

It is now being used to produce manure which is a source of huge income. Recently, the zoo authorities planned to set up the plant to reduce their dependency on LPG. The zoo is consuming 24 LPG cylinders a month to prepare animal food using horse gram, sweet potato, potato, etc.

NIE-CREST director S Shyamasundar told TOI that they will develop the plant and maintain the same for a year. The plant will use the waste to generate biogas equivalent to approximately 20 kg of LPG (that is 600 kg of biogas per month), the director explained.

Shyamasundar said zoos in Germany, Sri Lanka and Thailand have biogas plants.

"Mysore's is the first zoo to go green in this way. Besides LPG costs, the project helps check pollution," he added.

Initially, the alternative fuel will be used in zoo kitchens and later for the generation of electricity to recharge batteries which run zoo vehicles. However, it is a bit expensive as biogas electricity generators involve huge investment. Ravi said the project is estimated at Rs 20 lakh, of which MCC will bear 90%, while the zoo contributes Rs 2 lakh.

The Times of India

Mexican farmers suffer worst drought in 70 years

Mexico is being battered its worst drought in seven decades, which has devastated farm life and is expected to continue into next year.

The lack of rainfall has affected almost 70 percent of the country and northern states like Coahuila, San Luis Potosi, Sonora, Tamaulipas and Zacatecas have suffered the most acute water shortage.

---- No restorative rain expected before June next year

---- Food supplies already damaged, expect more pain

Due to the drought and a cold snap at the start of the year, the government has cut its forecast for corn production two times in 2011.

It now expects a harvest of 20 million tonnes compared to a previous estimate of 23 million.

Crops that cover tens of thousands of acres have been lost this year and roughly 450,000 cattle have died in arid pastures.

Crucial dams, typically full at this time of year, are at 30 to 40 percent of capacity.

"This is very serious," Ignacio Rivera, an official at the Ministry of Agriculture and Rural Development, told Reuters.

"Statistics on precipitation in the country show us that this year has been the driest in the last 70 years." The country has total arable land of 22 million hectares (54.4 million acres) that can be tilled over two planting seasons while the national cattle herd last year was just over 32.6 million.

Mexico is one of the world's five top corn producers and the government expects output to recover to 25 million tonnes in 2012, aided by reorganisation of the cultivated areas.

Rivera said that of the 8.1 million hectares of farmland insured by the government against natural disaster, some 600,000 claims have been lodged to recover losses on 3.8 million hectares.

The Mexican government has so far set aside some 1.6 billion pesos ($113 million) to cover the losses.

Forecasts do not signal any near-term relief, but rather more losses ahead as the winter season brings damaging frost.

"It's a troubling situation, and is more worrisome because the rainy season is over...

the hope is that by June it starts to rain," said Felipe Arreguin, deputy director of the National Water Commission (Conagua).

In the northern state of Durango, where a third of the population lives in the countryside, authorities expect significant losses in grain and seed production as well as bean and corn, which are a staple in the Mexican diet.

"It's a tragedy because there is virtually no harvest.

It's a critical situation that we don't even have beans for home consumption," the state governor Jorge Herrera told Reuters.

Official figures show an expected 28 percent loss in production of beans this year, while the recovery to historical levels of 1.2 million tonnes will depend on the weather.

If the drought does not lift soon, analysts say authorities will be forced to raise its food imports to cover lower domestic production.

Ghanaians cautioned about misuse of pesticide

(GNA) The Presbyterian Agricultural Services has raised concerns about the increasing rate at which pesticides and other agro-chemicals were poisoning people causing 14 percent of occupational injuries in the agricultural sector.

It said even though Government might want to increase food security by introducing agro-chemicals into farming to enhance yield, the effects of these chemicals were more injurious and deadly.

The Presbyterian Church said the World Health Organization’s estimates that 1-5 million cases of pesticide poisoning occurs every year resulting in 20,000 fatalities among agricultural workers most of who were in the developing countries such as Ghana.

Mr Dan Kolbila, National Agriculture Coordinator of the Presbyterian Church of Ghana, raised these concerns in Tamale on Thursday during the launch of a campaign dubbed: “Misuse of pesticides in Ghana, the time to act is now”.

He said owing to the serious consequences associated with the misuse of chemicals, there was the need for all stakeholders to have a collective effort at addressing the situation before the country reaches a crisis situation.

Mr Sylvester Adongo, a Retired Agriculturalist said agro-chemicals misuse was responsible for most of the male impotence in most of the farming communities in the country adding that most of the farmers misapplied the agro-chemicals meant to kill pest which however turn destroy their own reproductive system.

He said it was sad that most of the chemicals were being tasted by most farmers to determine its potency adding that by so doing they end up harming themselves.

Mr Adongo said that the use of ‘DDT’(a poisonous chemical) though it has been banned in the country is still being used by most fishermen and hunters in killing meat and fish and sell them to consumers.

Mr Moses Bukari Mabengba, the Northern Regional Minister, said he was very worried with the recent cases of food poisoning that occurred in some parts of the region cautioning that farmers must be careful when applying their chemicals.

The Minister who’s speech was read for him called on the Environmental Protection Agency (EPA) and other regulatory bodies to introduce more measures that will monitor and ensure that food poisoning was reduced through the proper application of chemicals.

Mr Christopher Y. Akai, of Northern Regional Directorate of the Ministry of Food and Agriculture, said the region’s use of chemicals had increased from 1,822 metric tons in 2009 to 2,130 metric tons in 2010 and 2248 metric tons in 2011. 

CBOT wheat falls, nears 5-month low on firm dollar

CHICAGO: Chicago Board of Trade soft red winter wheat futures fell in an abbreviated trading session on Friday, pressured by a firm dollar and continued concerns surrounding the debt crisis in Europe, traders said.

* A stronger greenback makes US wheat relatively more expensive to overseas buyers. Demand for US wheat on the export market has been hurt as importers have found cheaper supplies from countries such as Russia and Ukraine.

* CBOT front-month December wheat dipped to $5.72-1/4 per bushel, the lowest spot wheat price on continuous price charts in nearly five months.

* For the week, wheat was down 3.8 percent, its fourth straight weekly decline.

* December options expired on Friday.

* USDA reported export sales of all varieties of US wheat in the latest week at 614,500 tonnes, the most in nine weeks and above trader estimates ranging from 300,000 to 450,000 tonnes. South Korea and China were the top destinations.

* Ukraine's grain exports are unlikely to exceed 20 million tonnes in the 2011/12 season due to a shortage of railway grain wagons, the head of Ukrainian Grain Association traders' union was quoted as saying on Friday.

* International Grains Council on Thursday cut its forecast for global wheat production in 2011/12 by 1 million tonnes to 683 million, above the prior season's 653 million. Global wheat consumption was raised but world wheat stocks still seen at highest in a decade, IGC said.

Gadkari aims to make agriculture profitable

NAGPUR: Bharatiya Janata Party (BJP) national president Nitin Gadkari, who has big plans for making agriculture a profitable vocation in the region, is organizing the second exposition for farmers - Agrovision 2012. Leaders of other political parties have been roped in to ensure maximum participation. The expo will be held from January 27 to 30 at Reshimbagh Ground.

Addressing a press conference on Saturday, Gadkari said that the organizing committee had planned to hold a large number of programmes for increasing the income of farmers. "This will have to be achieved by going in for new crops, using the right kind of fertilizers and pesticides. Load-shedding is a major problem so we will promote solar energy," he said.

The BJP leader said that he is trying to rope in companies from Brazil and Israel that had pioneered new methods in agriculture and also are good manufacturers of farm equipment.

The committee would set up outlets for marketing organically-farmed products. "We have got a cold storage in this area with government help," he said while stressing it was a apolitical initiative aimed at welfare of farmers.

Gadkari appealed to the leaders from all political parties to take initiative in water conservation. "Water is a major farming in Vidarbha. As a pilot project we have built a check dam in Wardha district, which is providing irrigation to 1,500 hectares and drinking water to 12 villages," he said.

He further said that Saoner MLA Sunil Kedar is encouraging custard apple farming in his constituency. "We will inform other farmers about this and extend all possible to the farmers who have gone for it," Gadkari said. The organizing committee has decided to rope in women self help groups (SHGs) to provide employment to women.

Ex-minister Sulekha Kumbhare will coordinate these activities.

Turning to the expo itself, Gadkari said that arrangements would be made for cheap food for the farmers. Musical programmes would be held in the evenings. "We are trying to make railways and state transport provide tickets to them at subsidized rates" he said.

Girish Gandhi, Ravi Boratkar, Ashok Dhawad and Ramesh Mankar were also present in the press conference.

Times of India

China develops technology to use sandy Yellow River water

New filtering technology has allowed water from the sandy Yellow River to bring life to west China's arid farms, paving the way for the system's use to become widespread.

The Gansu Provincial Bureau of Science and Technology said in Lanzhou on Thursday the technology developed by Ruisheng-Yamit High-Tech Agriculture Co. Ltd. has tackled the problem of using the Yellow River's water for "drip irrigation," a method which allows water to drip slowly to the roots of plants, and commonly used where water is scarce.

The local authority's appraisement makes way for the roll-out of the technology and makes way for China's sandy ground water to be used for drip irrigation, which otherwise should use clean underground water.

He said farmers in west China had until now been restricted to using underground water for drip irrigation because solids contained in the region's unusually sandy ground water can block the pipeline. However, by installing sand-separating settings to drip-lines, the ground water can be filtered before free-flowing to the pipelines.

The company has seen the facility applied on 35,000 hectares of farmland in Gansu as well as Ningxia Hui, Inner Mongolia and Xinjiang Uygur autonomous regions since the product was launched last year.

The company has received orders from 11 Chinese provinces and regions for the patented drip-line facilities.

An official with the Gansu science bureau said that many irrigation facilities by the river's bank in the northwestern region are left unused because of the sand problem.

Copyright APP (Associated Press of Pakistan), 2011

The future of raw drinking milk

Press Release: Federated Farmers

The future of raw drinking milk

(Scoop Independent News) The future of raw drinking milk sales from the farm gate has Federated Farmers stepping back into the fresh milk issue. The Federation believes farmers and consumers should have the option of selling and buying raw drinking milk from the farm gate.

"What we're consulting members on is the legal means to sell raw milk from the farm gate. Not that we want to compete with the supermarkets," says Willy Leferink, Federated Farmers Dairy chairperson.

"Why on earth would we when you can buy two litres of fresh milk cheaper at Karori New World than at Coles in Sydney? Perhaps some have realised consumers aren't being ripped off; let's face it milk has fallen off the electoral radar.

"What we're talking to our members about is the old 'five litre rule' for selling unpasteurised or raw milk from the farm gate. These rules are long in the tooth and come from a time when pasteurised milk in rural areas was hard to get and fridges were a luxury item.

"Federated Farmers believes farmers and consumers should have the ability to sell and buy raw drinking milk. It's why we need members to complete our online survey to give us the data we need. There are several options going forward and we need their help to form the right view.

"One option is to enforce requirements for a registered Risk Management Programme (RMP) on farm gate sales of raw drinking milk. That's unattractive at the smaller sales end of a spectrum. Even the Ministry of Agriculture and Forestry (MAF) believes the cost involved with an RMP would see an end to most farm gate sales.

"MAF's preferred option is audited self-management, which would see farms granted an exemption to an RMP. In return, participating farms would have to meet certain animal health and hygiene requirements. MAF is also proposing a daily sales limit of 120 litres and six litres per customer.

"Going down that road would mean greater standards around storage, transportation and a paper trail to ensure compliance. A paper trail would also help in case the worst happened.

"Farmers would also have to assume legal liability for what they sell but buyers would be subject to caveat emptor; 'let the buyer beware'.

"Members would have received the survey electronically. If not, they can to ring 0800 327 646 (0800 FARMING) or email policy advisor, Ann Thompson, at athompson@fedfarm.org.nz.

"The survey will give us some vital information to inform MAF about what's really happening. Farmers and Federated Farmers can then help MAF write workable rules and policy that will shape the sale of raw milk at the farm gate," Mr Leferink concluded.

Canada Wheat Board forecasts lower values

The Canadian Wheat Board projected lower wheat values on Thursday for the 2011-12 (August-July) marketing year.

Values vary depending on class, grade and protein level.

Wheat values down $1 to $14 per tonne from last month's outlook.

Concerns about world economy and global wheat fundamentals pressure wheat prices.

Significant wheat export competition also weighs down prices.

CWB has priced about 40 percent of the expected wheat crop, expects wheat pricing to reach 50 percent by end December.

Durum values lost between $1 and $25 per tonne.

Durum weakened by buyer resistance to high prices.

Overall durum prices still historically high and buyers are substituting non-durum wheat where possible.

Malting barley drop $4 per tonne, feed barley down $3.

Feed prices under pressure from large barley crops in Australia and Argentina.

Malting barley prices declined as international competition increases into China, the largest malting barley importer.

PROs are estimates of crop year returns that the CWB - which holds a monopoly on sales of wheat and barley to millers, maltsters and export markets from Canada's Prairie Provinces - reviews monthly to give farmers a sense of projected returns.

Argentine farmers say costly credit may hurt output

Argentine farmers face higher interest rates on bank loans during a key part of the planting season, which they say could affect world grains supply by reducing local investment in production.

Loans for prefinancing late-year sowing of soya and corn have popped 3 to 4 percentage points higher.

The trend started in early October but sped up at the start of this month, after the government adopted controls meant to halt capital flight.

"All of this works against productivity," said Ernesto Ambrosetti, chief economist at the Argentine Rural Society, which represents some of the country's biggest soya farms.

"Growers will invest more cautiously to reduce risks, meaning they will invest less," he added.

"Borrowing money to prefinance planting has become riskier today than it was before." Argentina is the world's No 1 soyameal and soyaoil exporter, as well as its third-biggest soyabean supplier.

The South American country is also a major supplier of corn and wheat.

Farmers are currently planting 2011/12 soya and corn, both of which could yield record crops.

Wheat harvesting has started in some areas of the country but begins in earnest next month.

"The increase in interest rates is coming at a bad time, when production is in full force," said Julio Curras, first vice president of the Argentine Agrarian Federation, which represents small- and medium-sized farmers.

"Today, when growers go to the bank, they can't get credit as easily as before," he said.

With its vast, fertile Pampas, Argentina is in a good position to cash in on soaring world food demand.

But it lags its neighbours in attracting private capital.

Investors fear the government's unorthodox and hard-to-predict policies may leave the country vulnerable to fallout from the slow world economy, particularly if key commodities client China has a hard landing.

Many Argentines, fearing that the government would allow a sharp depreciation of the local peso after the expected re-election of President Cristina Fernandez on October 23, began shifting from pesos to dollars starting in late September.

To convince more depositors to keep their pesos in the bank, financial institutions started offering higher interest rates.

The Badlar reference rate for large 30-day peso deposits rose from about 12 percent at the end of September to 19 percent by November 21.

This is still below consumer inflation, which is estimated at between 20 percent and 25 percent, meaning the interest rates are negative in real, or inflation-adjusted, terms.

To compensate for the higher rates paid to depositors, banks raised rates on loans tto farms and other businesses After easily winning a second term in last month's election, Fernandez cracked down on the peso-to-dollar trade through a series of controls that economists said were aimed at halting capital flight.

Coffee Supply Crunch Spurs Rally After Folgers Cut

Coffee’s biggest slump in three years may be ending as weather damages crops from Colombia to Indonesia, reducing U.S. inventories to the lowest since 2000 just as Kraft Foods Inc. and J.M. Smucker Co. cut prices.

Stockpiles in warehouses monitored by ICE Futures U.S. fell 16 percent since December, declining for a fourth year, exchange data show. Arabica-coffee futures, already poised for the highest annual average price on record, may rise 15 percent to $2.71 a pound by March, according to the average estimate of 13 traders and analysts surveyed by Bloomberg.

Prices rallied 7.1 percent from a nine-month low in October as the heaviest rains in two decades damaged Central American plantations, Colombia reported a 19 percent drop in output last month, while exports slowed from Brazil, the world’s top grower. The London-based International Coffee Organization already expects production of arabica, the most-consumed variety, to decline 3.7 percent this year.

“These problems are mostly weather-related, which will mean lower volume,” said Christian B. Wolthers, the president of Wolthers America, an importer in Fort Lauderdale, Florida, who has traded coffee for more than two decades. “We just don’t know how bad it is yet.”

Arabica futures jumped 74 percent since the end of 2009 on ICE Futures U.S. in New York, second only to silver among 24 commodities tracked by the S&P GSCI Index, which rose 22 percent. The MSCI All-Country World Index of equities fell 6 percent in the period, while Treasuries rose 16 percent, Bank of America Corp. indexes show.

Output Cut

J.M. Smucker, based in Orville, Ohio, cut prices of Folgers, the best-selling U.S. retail coffee, by 6 percent on Aug. 16. It was the first reduction after four increases totaling 38 percent in the year through May. Kraft, based in Northfield, Illinois, followed a week later with lower prices for its Maxwell House brand.

Global coffee production in the year ending Sept. 30 will drop about 4 percent to 127.4 million 60-kilogram (132-pound) bags from a year earlier, the ICO said in a report Nov. 10. It had previously forecast 129.5 million bags and now anticipates declines in India, Indonesia, Vietnam, Brazil, El Salvador, Guatemala and Mexico. About 80.11 million bags will be arabica and the rest robusta, a lower grade used in instant coffee.

Largest Exporter

Drier-than-normal weather in Brazil from April to early October will curb gains in the harvest that starts in May, according to Somar Meteorologia. Marco Antonio dos Santos, an agronomist at the Sao Paulo-based weather forecaster, cut his forecast for the nation’s crop to 55 million bags from 58 million in a report Nov. 1. Cooxupe, a growers’ cooperative and Brazil’s largest exporter, said Nov. 17 its output will be 15 percent smaller than during the previous on-cycle crop because of dry weather.

Even a smaller-than-expected Brazilian crop should be enough to cap the rally in prices in the second quarter. Arabica will decline to $1.95 a pound by May, after peaking in March, according to the average estimate in the Bloomberg survey. Prices are still 24 percent lower than the 14-year high of $3.089 reached May 3 on speculation that slowing growth will erode demand for raw materials and as robusta exports surged from Vietnam, the world’s second-biggest coffee producer.

“The dream of $3 per pound again seems to be just that, a dream,” said Rodrigo Costa, a director at Belo Horizonte, Brazil-based Tangara Importadora e Exportadora SA, an exporter.

World coffee demand fell 2.6 percent in 2009, the most in 16 years, as economies grappled with the worst global recession since World War II, U.S. Department of Agriculture data show.

Costa Rica Harvest

Since then, Costa Rica trimmed its harvest forecast by 1.5 percent after getting as much as 120 percent of normal rainfall in October, according to the country’s National Meteorological Institute. Colombia’s National Federation of Coffee Growers cut its 2011 crop estimate by 5.9 percent on Nov. 21 because of wet weather, after reducing its 2012 forecast on Nov. 4 by 23 percent. Producers also cut their estimates in El Salvador and Guatemala.

Rainfall in Brazil was as much as 20 percent below normal from April to September and damaged trees, Somar’s dos Santos said. The lack of moisture may limit growth, Kona Haque, an analyst at Macquarie Group Ltd. in London, wrote in a report Nov. 3.

Brazilian exports fell to 3.09 million bags last month, from 3.49 million a year earlier, according to data from the nation’s Green Coffee Exporters’ Council, known as Cecafe. Shipments may drop to 3 million bags this month, compared with 3.18 million, Flavour Coffee, a Rio de Janeiro-based broker, said in a report Nov. 17.

Rabobank International

Global inventories will fall to 18 percent of demand by the end of the current marketing season on Sept. 30, compared with 23 percent a year earlier and more than 40 percent in 2003, according to Keith Flury, an analyst at Rabobank International in London.

Arabica futures have averaged $2.5727 this year, heading for an annual record that would top the previous high of $2.39 in 1977, exchange data show.

Inventories tracked by ICE Futures U.S. were at 1.43 million bags yesterday, down from 1.7 million at the end of 2010 and a high three years ago of 4.64 million bags.

Starbucks Corp., the world’s largest coffee-shop operator, raised prices in U.S. markets this month to help recoup higher commodity and rental costs, Alan Hilowitz, a spokesman for the Seattle-based company, said on Nov. 16.

Cost Increases

Caribou Coffee Co., the second-largest U.S. coffee-shop owner, expects to spend $10 million more next year, Chief Financial Officer Tim Hennessy told investors on a conference call Nov. 8. That’s equal to a 15 percent increase for the Brooklyn Center, Minnesota-based company.

Kraft faces “another meaningful increase” in raw-material costs this quarter, and expenses probably will keep rising in the first half of 2012, Chief Financial Officer David Brearton said on a conference call Nov. 2.

There are no signs of slowing demand yet, with the world economy forecast by the International Monetary Fund to expand 4 percent this year and next. Global consumption expanded 2.4 percent to 135 million bags last year, after growing an average of 2.5 percent annually during the last decade, according to a Nov. 10 report by the ICO.

Demand in the U.S., the largest coffee-drinking nation, increased 2.7 percent during the year ended Sept. 30, according to StudyLogic LLC, a market researcher. U.S. consumers spent 18 percent more on coffee in September than a year earlier, three times the increase across all food, Bureau of Labor Statistics data show.

“People still need their cup of Joe,” said Samuel Nahmias, the chief operating officer of StudyLogic in Cedarhurst, New York. “Whether people are employed or unemployed, they will still keep drinking coffee.”

--Editors: Steve Stroth, Daniel Enoch

To contact the reporter on this story: Marvin G. Perez in New York at mperez71@bloomberg.net

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