Survey seeks industry insight to determine demand for a captive insurance company
The U.S. Commodity Futures Trading Commission (CFTC) is analyzing its proposed customer protections, i.e. segregated funds, after receiving a lot of criticism for its recent rulings. Customers and trade organizations have voiced concern over proposed protections they deem harmful to small to mid-sized futures commission merchants (FCM), which account for the bulk of agribusiness hedging activity.
Insurance, one form of protection for segregated funds, was excluded from the CFTC’s proposal. The Commodity Customer Coalition (CCC), a non-profit organization formed in response to the bankruptcy of MF Global, headed by co-founders John Roe, president of Roe Capital Management Inc., and James Koutoulas, CEO TyphonCapital Management LLC, is advocating creation of insurance policies for futures customers and has been working on reform initiatives such as an account insurance mechanism and testing alternative forms of collateral segregation, i.e. margining positions though bank account rather than futures broker.
The CCC’s currently pushing a captive insurance company model. To test the validity of that model, the CCC needs to determine if there is a sufficient market interest for an insurance product; what customers seeking that insurance would be willing to pay; what kind of coverage they would be looking for; and collect account-level data in order to formulate the actuarial model to make sure it’s feasible to create an insurance product.
Roe explains: “We’re talking about a small market here — very few people have a commodity trading account so we’re talking about limited exposure here. It’s not possible for an insurance company to produce such policies so we’d have to create a new company. The survey will measure demand, the actuarial ability to produce the product — and then hopefully we’ll have the data we need to roll up our sleeves and let the actuaries go to work.”
The CCC is conducting two surveys to determine the feasibility of customer account insurance. One survey is tailored to the needs of public customers of commodity firms; the other, to National Futures Association’s (NFA) member or member firms.
If the market demand is there, the CCC will develop its own captive insurance company and begin offering insurance policies to commodity customers.
To take the Commodity Insurance Survey, clickhereif you are the customer of a commodity firm or click here if you are an NFA member or member firm.
Corn and soybean basis was mixed across the United States this week with some river terminals showing positive basis gains while others terminals declined
Corn and bean basis were stagnate this week showing no change on average across the country over the past week.
At the Gulf, corn basis found modest strength of 4 cents a bushel but river terminals along the river were mixed. Areas south of St Louis have seen basis retreat while areas along the Mississippi river in Iowa and Illinois saw some limited positive gains. In the ethanol market, basis levels were unchanged on average although some buyers were noticeably weaker as basis levels fell 5 to 10 cents on the week.
For soybeans, river markets showed large variability with some terminals increasing basis 10 cents or more while others dropped by a similar amount. Strong export demand keeps underpinning river basis, but a negative carry in the futures market will keep buyers from wanting to hold inventory for long. For soybean plants, they showed a modest one-cent gain on average as crush margins continue to hold firm helping keep domestic demand strong for beans.
GEAPS is, and rightfully so, proud of it’s 2013 Exchange in Louisville this week, pointing out that it’s the largest event ever. This is my 29th GEAPS. After 29 years we’re supposed to have earned and learned from great experiences, which gives us the right to provide a bit of perspective. Here’s mine:
First, the industry always represents and reflects progress. Perhaps whether we like it or not. The mergers and consolidations we’ve all seen — from farms to feed mills to co-ops — bring some pain. But it also brings progress, builds scale and often improves our opportunity to innovate, to add services and continue growing.
Second, highlighted by the attendance we’ve seen at many sessions here in Louisville, people appreciate ongoing training and education. In talking with a few of my long-time industry friends, we all like the constant emphasis on safety — on keeping our workers safe and healthy. Mark Aljets, speaking in the opening workshop on preventing catastrophic events made that point very well. He asked us to think about the impact in a small community if there is a loss-of-life incident at that town’s elevator. When you see someone at church, watch your kids growing up together, that sense of loss is heartrending. I know we’ll all keep safety training in the forefront.
Third, this market works together. We have two customers at Feed & Grain — our audience and our advertisers. Many of the advertisers I’ve worked with point out that some of their best ideas — where they make the most progress – started with customer input. Listening is a great skill. I think this industry does that.
Finally, for all of these years and more to come, this industry represents fun. To meet again with people first met 29 years ago, to pick up conversations right where we left off, to get updates on business, on what they’re changing — and on kids and grandkids, is gratifying. I’m fortunate to be part of this industry. No wonder 29 years doesn’t feel like a long time!
Average soybean basis slipped a penny in response to this weeks bean rally; corn basis firmed amid lackluster price action
Soybean basis lost one-cent a bushel on average across the country this week, while corn basis managed to post a modest one-cent gain for the week.
Gains in corn basis were most notably tied to ethanol plants, which saw a 2-cent gain over the last week. Ethanol margins continue to improve off their lows from the start of the year as ethanol prices have firmed and corn prices have eased off. At the Gulf, corn basis was unchanged and limited changes occurred along river terminals as barge rates were mostly stable.
For beans, basis levels were off 1-cent a bushel across the country this week. Soybean crushing plants were lower by 2-cents a bushel, while some processors in the Eastern Cornbelt were off 5 to 10-cents on the week. River markets were slightly stronger as export business continues to be strong for this time of year.
Sustainability, commodity prices, weather top AFIA president's list
While at the 2013 International Poultry & Production Expo (IPPE) in Atlanta, GA, from Jan. 29-31, I caught up with American Feed Industry Association (AFIA) president Joel Newman to discuss his top predictions for agriculture as we look into 2013. Topping his list:
Focus on sustainability
High commodity prices
Market and weather volatility
“Feeding a population of 9.1 billion people by the year 2050 is a huge undertaking by the industry, but one that I think we can achieve on a global basis,” expressed Newman.
To meet this challenge, Newman said the AFIA established a sustainability initiative two years ago, which focuses on six key points and relies on a special committee to discuss and make recommendations for addressing those issues.
High commodity prices and market volatility are two more trends Newman predicted will extend into 2013. Companies in the feed industry will benefit from solid risk managements plans because “as we go into spring, we’re all hoping for a successful planting season, but we need to recognize we’re still in a drought condition,” Newman said. “The open question is how will spring planting go and will we have enough moisture to produce a good crop.”
To watch more of my interview with Newman, click here.
U.S corn and soybean basis diverged this week as soybean basis slumped in the face of corn strength.
Corn and soybean basis moved in opposite directions this week as farm soybean sales picked up and weakening Gulf bids pushed basis lower. For the week, corn basis was up 2 cents a bushel while soybean basis lost 2 cents a bushel.
For corn, basis levels were firmer by 3 cents a bushel at ethanol plants as margin levels for processing corn to ethanol improved the past week for the first time in about a month. Nonetheless, margins continue to be tight and about 6 plants have idled production in the past few weeks. At the Gulf, export basis levels were up 4 cents on the week and river terminals posted a 3-cent advance
In soybeans, basis weakness was widespread across much of the country with the exception being Eastern Cornbelt regions. On average, soybean basis dipped 2 cents over the last week as a 50-cent advance in nearby soybean futures pushed more farmer beans in to the pipeline. At the Gulf, basis levels weakened sharply, dropping 14 cents a bushel as export business starts to cool. As a result, river markets showed an 11-cent loss for the week, while soybean plants were off 3 cents for the week.
In the letter, a response to an insurance agent’s inquiry about the restrictions involved with employees working in a grain bin with an energized sweep auger, OSHA stated that it is in violation of the Grain Handling Standard (1910.272 (g) (1) (ii) to do so unless the employer eliminates all hazards posed by an unguarded sweep auger. Many believe the now infamous letter exposed a fundamental lack of understanding of how a sweep auger works — as well as how grain is handled — since the implications would make operation difficult, if not impossible, while remaining in compliance with the standard.
Politicians and industry leaders, like the National Grain and Feed Association (NGFA), have reached out to OSHA, but despite their efforts, the agency has failed to deliver concrete guidance for acceptable procedures or alternatives for in-bin energized sweep auger operation. However, more than three years later, as these cases are making their way to litigation, grain companies are finally getting a glimpse of what may be expected of them.
Recently, attorneys in Epstein Becker Green’s national OSHA practice group made headway when representing an Illinois grain handler, who despite having “employed a combination of administrative and engineering controls to ensure that no employee was ever within the zone of danger,” received a citation for allowing an employee to operate a sweep auger while in the grain bin.
The law firm contested the citation, and worked with an OSHA area director and regional administrator to develop a set of safety principles to satisfy the “equally effective means or methods” language of the grain standard.
Ultimately, OSHA withdrew the citation; and as part of the settlement agreement, the company will incorporate a set of “10 Sweep Auger Safety Principles,” which if satisfied, would allow an employee to work inside a grain bin with an energized sweep auger. It also developed and submitted for OSHA’s review and approval a “Sweep Auger Policy,” which outlines engineering and administrative controls used to ensure worker safety.
Attorney Eric Conn, head of OSHA practice with Epstein Becker Green, is confident this ruling may guide future policy, and commends the willingness of the agency to work with his client to find a reasonable solution.
While the outcome of this settlement is a step in the right direction, on a national level, an elevator who adheres to these principles is not guaranteed protection from a citation until this or another directive becomes final policy, warns Jess McCluer, NGFA’s director of safety and regulatory affairs.
The outcome of this case may not be the final word on the issue, but it does point to a potential resolution in the near future. To read a detailed account of the case as told by the attorneys involved, click here.
U.S. average soybean basis levels unchanged on the week as futures prices climbed following the January WASDE, and Grain Stocks report.
Both corn and soybean basis levels saw limited movement this week, as futures markets climbed on renewed concerns about short supplies. For the week, U.S. average corn and soybean basis were unchanged.
In the corn market, higher than expected feed use reported in last week’s USDA report cut the old-crop ending stocks forecast below trade estimates. But, continued lack of business in the export market and ethanol sector has kept basis levels stable to weaker. For the week, ethanol plants lowered their basis by 1-cent a bushel. On Wednesday, EIA showed ethanol production took a hit for the week as production averaged 784,000 bushels per day, the lowest level since the agency started releasing weekly data in June 2010. Grain Hedge still expects final corn use for ethanol to fall short of USDA’s current target of 4,500 MB as weak margins for ethanol producers should limit production.
For the soybean market, Gulf basis levels were off 9 cents a bushel which pushed river terminals down by 3 cents a bushel. Export sales continue to be on a torrid pace as this week’s total of 1.6 MMT was a marketing year high thanks to aggressive Chinese purchases. Domestically, soybean crushing margins have started to weaken but still remain exceptionally high compared to historical norms. For the week, soybean plants increased basis by nearly one-cent a bushel.
After almost a decade on the job, I can say with certainty, the last month of each year is a always a blur. Back-to-back issues, relentless deadlines, business travel, planning meetings — it all comes raining down in December. However, for me, it is also one of the most valuable times of the year because I find myself especially connected to Feed & Grain readers, who, to be honest, make it all worthwhile.
Earlier this week I attended the National Grain & Feed Association’s (NGFA) 41st Annual Country Elevator Conference and Trade Show, held in Omaha, NE. Though very topically diverse, the conference sessions mirrored my December reality with a common theme: “Let the past guide you.”
Reading my coverage of the event, you may wonder how I came to this conclusion, but to me the connection was obvious. Reading between the lines during the presentations on financial reform, historic weather patterns, and quality control systems, dealing with unfavorable conditions — drought, volatility, the stresses of risk and uncertainty — the ability to cope, strategize and persevere comes from lessons learned from past experiences, either your own or by seeking guidance from those in the agribusiness community who have been there before. It’s that sense of community, the shared experiences, that get us through.
Working the Feed & Grain booth at the trade show, I had the chance to speak to a number of our readers and took time to ask them about the information they hoped to glean from the sessions and bring back to their businesses; about the last year; the management challenges that keep them up at night; and what they would like to read about in the magazine, etc. It may seem like idle chatter, but this one-on-one time is invaluable to me, someone who sits as a spectator on the sidelines of a robust, complex and, oftentimes, nuanced industry.
Meanwhile, in my free time, I have been cold-calling subscribers at random in hopes of tracking the developing trends the magazine should cover in 2013. While this exercise is meant to gather industry insight, I am often floored by the participants’ willingness to share their knowledge and the sincerity I encounter when they elaborate on the challenges they face; to describe the decades of change that have come up around them; and to frankly discuss what they feel the future holds for their business and themselves.
To those of you who have taken the time to chat, you have my gratitude for the keen guidance you have provided; and on that note, to any of you who have considered sending in a story idea or sharing an experience you think may be helpful to one of your peers, please do not hesitate to reach out to me directly. After all, I’m here to serve you.
Here’s to the ag community! May we all learn and grow from the year to come.
A collection of the most popular equipment and services of the year
Technology offers an infinite amount of data collection opportunities — too many, some may argue; however, the ease-of-access and accuracy of the information means nothing if you're not going to use it in a way that gives it relevance. When attempting to identify trends, programs like Google Analytics, a service that generates detailed website traffic statistics, allow the numbers — and the consumer — to speak for themselves.
Within a print edition of Feed & Grain magazine, our "Product Spotlight" features aim to provide relevant information by taking a cross-platform approach. You see, each product we run includes a unique URL directing readers to product/company information in our Online Buyer's Guide, allowing the interested party to view additional product information or contact the company directly. This practice, as well as organic searches, account for most of our Buyer's Guide traffic and gives us a solid indication of the products readers are interested in purchasing.
Meanwhile, Feed & Grain's surveys consistently reveal two timeless trends among our readership: a) product information ranks high in terms of relevance and demand; b) almost everyone is interested in reading about what their peers are up to — from a purchasing and best practices standpoint. Then it occurred to me: Why not give them both?
Using the data collected by Google Analytics from Jan. 1 until Dec. 31, 2012, here is a list of Feed & Grain's "Top 10 Products" of 2012:
Corn and soybeans moved another leg higher today. Today Grain TV discusses the move and what prices may offer resistance to further gains. Crop progress was released after the closing bell, showing corn and soybean pace still lagging.