Good morning Farmer Family …
US farm markets were set for another round of gains, yesterday.
However, after a worse-than-expected inflation report that showed year-over-year US inflation is 8.3%, a broad selloff on Wall Street applied enough downward pressure to push corn and soybeans back into the red.
Corn prices, indeed, ended 0.47% weaker.
Soybean went home with a 0.64% losse.
Meal prices closed shedded 2.48%.
Soybean oil, in contrast, stayed positive on the day and ended the session 0.86% higher.
Corn and soybean prices however remained near their nearly three-month highs as the USDA’s reduced forecasts for this year’s harvests continued to underpin prices.
The wheat complex, on its part, stayed firm on lingering concerns about Ukraine’s ongoing production and export risks.
Thus, Chicago SRW wheat prices ended 0.2% higher.
Kansas City HRW wheat prices closed with 0.73% gains.
Spring wheat prices in Minneapolis were 0.51% stronger at the bell.
Meantime, a railroad workers strike is looming, which would be very bad for US supply chain logistics if it ends up occurring, as around 30% of the nation’s freight is shipped via rail.
On this wake, some U.S. railroads will start halting crop shipments on Thursday, a day ahead of the potential work stoppage.
With farmers starting to harvest autumn crops that are shipped to meat and biofuels producers, the shipping disruptions could add to already high inflation.
Farmers also plan to add fertilizer to fields after the harvest, and shipments of fertilizer are being delayed.
By some accounts, the strike would cost the U.S. economy more than $2 billion per day.
The U.S. Environmental Protection Agency intends to finalize a rule before next summer to allow the year-round sale of gasoline blended with a higher level of ethanol in several states, EPA Administrator Michael Regan said on Tuesday.
The EPA has engaged with several Midwestern governors after they asked the agency earlier this year to allow year-round sales of the blend, known as E15.
The move would be a win for the ethanol industry, which wants E15 to be sold year-round to expand sales for corn-based ethanol.
In this context, corn basis bids were mostly steady to weak across the central U.S. after spilling 5 to 15 cents low at four Midwestern locations on Tuesday.
An Iowa processor, had bucked the overall trend after climbing 20 cents higher.
Soybean basis bids tumbled 30 cents lower at an Ohio river terminal and fell 3 cents at an Ohio elevator while holding steady elsewhere across the central U.S..
The funds were net buyers yesterday for 1,000 lots of wheat but net sellers for 4,500 lots of soybeans and 4,000 lots of corn.
On this morning, Chicago corn prices dipped in Asian trading, as traders chose to pocket profits from recent gains, while risks of a global economic slowdown fuelled concerns about demand prospects.
Thus, the most-traded corn contract on the Chicago Board of Trade was down 0.3% at $6.90-3/4 a bushel, as of 06:13 GMT, extending losses of the previus session.
CBOT soybeans, in contrast, edged up 0.2% at $14.81-1/2 a bushel.
CBOT wheat also rose by 0.5% to $8.64-1/2 a bushel.
In energy markets, oil prices inched lower on Wednesday.
Brent crude futures, indeed, fell 17 cents, or 0.2%, to $93.00 a barrel by 06:33 GMT.
U.S. West Texas Intermediate crude was at $87.20 a barrel, down 11 cents, or 0.1%.
U.S. benchmark crude lost 47 cents to $87.31 on Tuesday, while Brent crude, gave up 83 cents to $93.17 per barrel.
A strong U.S. dollar and an expectation for another super-sized rate hike by the Fed next week, weighed on sentiment.
On the supply side, U.S. crude stocks rose by about 6 million barrels for the week ended Sept. 9, according to market sources citing American Petroleum Institute figures on Wednesday.
The U.S. government will release inventory data at 10:30 a.m. EDT (1430 GMT) on Wednesday.
OPEC, however, said in a monthly report that oil demand will increase by 3.1 million barrels per day (bpd) in 2022 and by 2.7 million bpd in 2023, leaving its forecasts unchanged from last month.
In ocean freight marktes, the Baltic Exchange’s main sea freight index, notched up its biggest daily jump in seven months, powered mostly by a 43% jump in the larger capesize segment.
The overall index, indeed, rose 152 points, or 12.1%, its biggest gain since early February, to 1,408.
Particularly, the capesize index gained 323 points, or 43%, to hit its highest since mid-August at 1,079,
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as coal and steel-making ingredient iron-ore used in construction, rose by $2,682 to$8,952.
The panamax index gained about 8%, or 125 points, to 2,074, its highest since July 25.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, gained $1,364 at $18,666.
The supramax index, meanwhile, snapped a 12-session long falling streak, and rose by 11 points to 1,484.
In equity markets, US stocks dived yesterday because inflation was higher than expected in August.
Tuesday’s report, indeed, showed U.S. inflation slowed only to 8.3% in August , instead of the 8.1% economists expected.
Particularly, U.S. Aug CPI rose +0.1% m/m and +8.3% y/y, stronger than expectations of -0.1% m/m and +8.1% y/y.
U.S. Aug CPI ex-food & energy rose +0.6% m/m and +6.3% y/y, stronger than expectations of +0.3% m/m and +6.1% y/y.
Still, Tuesday’s Aug CPI report of +8.3% y/y remained below June’s 40-year peak of +9.1%, and yesterday’s core CPI report of +6.3% y/y remained below March’s 40-year peak of +6.5% y/y.
That, nevertheless, dashed hopes that inflation was falling back to more normal levels.
Thus, traders now see a one-in-three chance the Fed may hike its benchmark rate by a full percentage point next week, quadruple the usual move.
The rate is currently in a range of 2.25% to 2.50%.
Higher rates hurt the economy, as a consequence the Dow lost more than 1,250 points, the S&P 500 sank 4.3%, and the Nasdaq composite closed 5.2% lower.
Bond prices fell sharply, sending their yields higher.
The yield on the two-year Treasury, which tends to track expectations for Fed actions, soared to 3.74% from 3.57% late Monday.
The 10-year yield, which helps dictate where mortgages and rates for other loans are heading, rose to 3.42% from 3.36%.
On this morning, world markets slipped in the wake of Wall Street.
European benchmarks were marginally lower while Asia saw bigger losses.
Particularly, Germany’s DAX lost 0.2% to 13,165.86 and the CAC 40 in Paris gave up 0.3% to 6,2275.
Britain’s FTSE 10 shed 0.7% to 7,334.75.
Hong Kong’s Hang Seng index lost 2.3% to 18,875.59 and the Shanghai Composite index declined 0.8%, to 3,237.54.
Tokyo’s benchmark Nikkei 225 lost 2.8% to 27,818.62, while Sydney’s S&P/ASX 200 declined 2.6% to 6,828.60.
In Seoul, the Kospi lost 1.6% to 2,411.42.
Tensions between the U.S. and China also were weighing on sentiment.
The U.S. is meanwhile reportedly considering new sanctions against Beijing aimed at deterring aggression against Taiwan.
Meantime, Chinese leader Xi Jinping and Russian President Vladimir Putin are due to meet on Thursday in Samarkand, Uzbekistan, on the sidelines of a summit of a security pact dominated by Moscow and Beijing, reflect the strong ties between the two countries now locked in rivalry with the U.S..
In currency trading, expectations for a more aggressive Fed have also helped the dollar add to its already strong gains for this year.
The U.S. Dollar Index, indeed, rose nearly 1600 points to 109.81 it is just 98 points off the high, on Tuesday.
That was the largest single day upswing in the dollar since Covid.
On this morning, the dollar bought 143.47 Japanese yen, down from 144.57 yen late Tuesday.
The euro rose to 0.9981 cents, up from 0.9969 cents.
From South America, according to Brazil’s grain exporters association, the corn export figure for the week ending 17 September is expected to be 1.9Mt, which would put total exports so far in marketing year 2022, since 1 March, to 22.3Mt.
Brazil’s Anec expects the country’s corn exports to reach 7.88 MMT in September.
That forecast is up 24.9% from Anec’s prior estimate made a week earlier.
In 2021, Brazil corn exports totalled 20.6Mt on the back of lower supply.
This year, corn exports may reach 41Mt reflecting a record harvest.
The corn marketing year in Brazil runs from March to February.
Brazil’s Anec also expects the country’s soybean exports to reach 4.47 MMT in September, which is 14% above its prior projection from a week ago.
Anec also sees Brazilian soymeal exports trending higher, with an estimated 2.115 million metric tons this month.
Meantime, Brazil is 17% planted for their 22/23 first corn crop production.
In Argentina, Argentine soybean farmers have sold around 57% of the 2021/22 crop, the agriculture ministry said on Tuesday citing data through last week.
The Sept. 5-7 boost in soybean sales came immediately after the government bumped up the value of the country’s cash crop by allowing sales to tap a 200 pesos per U.S. dollar exchange rate, compared to the tightly controlled official rate of about 140 per greenback.
During the first week of September, farmers indeed sold 2.1 million tonnes of soybeans compared with just 268,100 tonnes the previous week, according to agricultural ministry data.
Meanwhile, almost two-thirds of Argentina’s 2021/22 corn harvest, estimated at 59 million tonnes, had been sold through last week, official data showed.
Some 30% of Argentina’s estimated 5.2 million tonnes of wheat from the upcoming 2022/23 season had also been sold, according to the Rosario Grains Exchange.
The exchange said wheat exports for the season are seen at around 12 million tonnes, down from 15 million tonnes during the previous season.
In Europe, markets continued to digest Monday’s USDA report yesterday, showing a firmness in the futures markets, not necessarily reflected in the physical market, as there was an absence of new significant transactions.
The European market, indeed, remained in positive territory on Tuesday, mainly due to the evolution of the eurodollar.
Also, markets remain suspended on the evolution of the situation in the Black Sea basin.
As for durum wheat, prices continue to deteriorate gradually on the French market.
Buying interest is very limited.
Spanish demand is well-covered, while there is a declining of Italian operators.
The Canadian origin, meantime, is recording a very rapid resurgence in competitiveness, making the European origin out of the international market.
France’s Farm Ministry reduced its forecast for this year’s drought-hit corn crop by 1Mt yesterday to 11.33Mt, the smallest crop since 1990.
“A decline in planting, linked to the surge in fertilizer and gas prices, has been coupled with a sharp drop in yields caused by drought,” the ministry said.
Meantime, its 2022/23 common wheat production forecast was lifted 200,000t, to 34.1Mt (35.4mt previous year).
Rapeseed production forecast was also increased by 200,000t, to 4.5Mt (3.3Mt).
Total barley production forecast was maintained at 11.4Mt (11.5Mt).
Finally, in sunflower production was revised down to 1.86 million against 1.92.
From North Africa, Egypt’s state grains buyer has agreed to replace a detained Ukrainian wheat shipment with a new 60,000-tonne cargo.
The GASC will buy a new cargo of Russian or Ukrainian wheat from the same supplier, Olam, at a price of $361.25 per tonne on a cost and freight basis.
That is the same price that was agreed for the original 60,000 tonne cargo.
The new cargo will be shipped between Sept. 15 and Oct. 15.
The original cargo was purchased by GASC in a December tender for shipment in February.
Egypt’s strategic wheat reserves currently stand at 6.6 months, Supply Minister Ali Moselhy said on Monday.
Meantime, Egypt’s Ministry of Trade and Industry lifted this week its ban on the export of several staple food commodities, including wheat, flour and fava beans for six months since March.
From the Black Sea basin, the United Nations is pushing Russia and Ukraine to agree on an ammonia gas deal which could stabilise the landmark grain deal.
The proposed ammonia deal, first reported by the Financial Times, would allow ammonia – a key ingredient for nitrate fertiliser – to be exported from Russia through Ukraine and then onto global markets.
Under the proposal, ammonia gas owned by Russian fertiliser producer Uralchem would be brought via pipeline to the Russia-Ukraine border and there it would be purchased by U.S.-headquarted commodities trader Trammo.
The pipeline, which transports ammonia from Russia’s Volga region to the Ukrainian Black Sea port of Odesa, was built about 40 years ago and is designed to pump up to 2.5 million tonnes of ammonia per year.
The actual financial flows are not insignificant.
Meantime, Russian President Vladimir Putin and Indian Prime Minister Narendra Modi will meet in Uzbekistan on Friday and discuss trade as well as sales of Russian fertilizers and mutual food supplies, the Kremlin said on Tuesday.
“The trade turnover reached $11.5 billion in the first half of 2022, up almost 120% year-on-year,” the Kremlin said.
India’s fertiliser imports from Russia rose to $1.03 billion in April-July compared to $773.54 million in whole of the last fiscal year to March 31, 2022, according to the Indian commerce ministry’s website.
India is looking for a three-year fertiliser import deal with Russia.
As we said, Putin will also meet Chinese President Xi Jinping on the sidelines of the sidelines of the summit in Uzbekistan’s ancient Silk Road city of Samarkand.
India and China are key buyers of Russian energy, helping to cushion Moscow from the effects of Western sanctions and allowing the two Asian economies to secure raw materials at discounts compared to supplies from other countries.
The two Asian nations have not publicly criticised Moscow’s actions in Ukraine, despite the outcry in the West.
From the Middle Kingdom, despite recent heat and drought stress in southern China, the country’s ag ministry kept unchanged its production estimate of this year’s corn crop at 272.56Mt, as yields in northeastern areas are expected to be strong.
Ditto estimates for corn imports for the next marketing year were stable at 18 million mt.
Also for soybeans, China’s Ministry of Agriculture and Rural Affairs (MARA) kept its forecasts for imports and production for the new crop year at 95.2 million mt and 19.48 million mt.
Soybean consumption for 2022/23 remained at 112.87 million mt, leaving the year-end balance between supply and demand unchanged at 1.66 million mt.
The country is expected to produce 27.52 million mt of edible vegetable oil in the 2021/22 marketing year, down 160,000 mt from the previous estimate.
The cut came from lowered rapeseed oil production, with a decline of 160,000 mt from last month’s outlook to 5.78 million mt.
Imports of edible vegetable oil for the current marketing year are pegged at 5.93 million mt, compared with 6.6 million mt estimated in August.
Of the total, rapeoil and soyoil imports for 2021/22 were cut by 300,000 mt and 70,000 mt from their previous outlooks to 1 million mt and 380,000 mt respectively.
Consumption of edible vegetable oil was expected to be stable at 36.34 million mt.
Accordingly, the year-end balance between supply and demand for 2021/22 edible oil dropped 820,000 mt from the previous estimates to -3.16 million mt.
Chinese government analysts have maintained unchanged estimates for edible oil production and imports of 29.25 million mt and 8.43 million mt respectively.
From Australia, local new crop markets suffered a lack of buying appetite yesterday and bids were again a touch weaker.
Current crop protein wheat in eastern Australia was bid firmer, H2 grade trading at prices around $425-430/t track.
The Bureau of Meteorology has declared a La Niña event is underway in the Pacific Ocean and communities in eastern Australia should be prepared for above-average rainfall over spring and early summer.
Most models forecast this event to be weak to moderate in strength, likely to peak during spring and ease during summer.
La Niña is not the only driver influencing this wet outlook because in the west there is a significant negative Indian Ocean Dipole (IOD) event underway, the influence of which is not expected to reduce until late spring or early summer.
On the international trade scene, Taiwan’s MFIG purchasing group bought about 65,000 tonnes of animal feed corn to expected to be sourced from Brazil in an international tender which closed on Wednesday.
It was believed to have been sold by trading house Cargill.
The corn was purchased at an estimated premium of 177.69 U.S. cents a bushel c&f over the Chicago March 2023 corn contract CH3.
Shipment was sought between Nov. 1 and Nov. 20 if the corn is sourced from the U.S. Gulf, Brazil or Argentina.
If sourced from the U.S. Pacific Northwest coast or South Africa, shipment was sought between Nov. 16 and Dec. 5.
Only Brazilian corn was offered in the tender.
Jordan’s grain state buyer is seeking 120,000 tonnes of wheat in an international tender that closes Sept. 20.
The buyer made no purchase in its tender for 120,000 tonnes of wheat on Tuesday after CHS, Cargill and Ameropa took part.
That’s all, thank you.
We wish you a good day.
Author: Sandro F. Puglisi
