Readings: Grain Boom, Broker NPAs, Delayed IPOs
- Wall Street Journal: Farmers Wonder if Boom In Grain Prices Is a Bubble
With corn, wheat, soybeans, barley, sunflowers and other grains selling at or near record prices, U.S. farmers are preparing for a potentially historic planting season. A rush to make biofuels from crops and soaring demand for grains in China, India and other emerging markets have pushed up grain prices world-wide, helping drive food prices higher.
Farmland prices have climbed more than 20% over the past year in many Midwestern states, so the many growers who lease land are shelling out higher rents. Some seed prices have jumped 30%, and fertilizer prices have doubled nearly across the board.
Kip Tom, who farms 12,000 acres in Leesburg, Ind . . . decided to sell 80% of his 2008 corn crop on the futures market — locking in a price at more than $5 a bushel — even though he hasn’t planted a seed yet. Normally, he says, he might have sold only about half of his crop this early in the year. “We just think this rally is too good to be true.”
- Business Standard: Volatile mkts put new issues in troubled waters
Volatility in the secondary markets has forced some initial public offers (IPOs) to revise their price bands as markets continue to be plagued by liquidity problems.
The most recent casualty has been the mega-IPO of Emaar MGF, which has reduced the price band by 9-11%, from Rs 610 to Rs 690 a share to Rs 540 to Rs 630 a share.
Wockhardt Hospitals announced that the company would revise the price band for its IPO to Rs 225 to Rs 260 a share against Rs 280 to Rs 310 a share.
- Economic Times: Brokers saddled with huge NPAs, post-crash
. . . armed with legal notices to recover their dues, known in broking parlance as ‘uncovered debits’. The term is used to denote outstandings on which brokers do not have any collateral that they can seize or liquidate to recover the dues from clients. The legal departments of these brokerages are said to be working overtime since last week as they figure out ways to retrieve the outstanding amount from clients.
Trading terminals at many brokerages were shut on Wednesday as the firms were unable to meet margin requirements to exchanges, even after having liquidated a sizeable chunk of their clients’ outstanding positions. As a result, many clients were unable to trade when the markets rebounded on Wednesday. These clients are citing this as a reason to not pay up their obligations, as they claim to have been denied a chance to recover some of their losses.
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