A resurgence in fear over the Omicron variant plumbted stock markets and energy prices yesterday.
However, grain prices has been mostly immune from this drama.
Indeed, US farm markets have seen corn prices faded into the red, but losses were not substantial as limited at 0,38% down.
Soybeans trended 0.54% higher.
Soybean meal continued its rally jumping another 1,77%.
Soy oil in the wake of sell-off in energy contracts, tumbled by 1,74%.
Wheat prices were mixed but mostly higher, as winter wheat contracts were able to move back into the green after overcoming moderate overnight losses, while spring wheat contracts finished the session modestly lower.
Particularly, March Chicago SRW futures picked up 0,35% to close at $7.776.
March Kansas City HRW futures added 0,40% to close $8.132.
March MGEX spring wheat futures faded 0,27% ending to $10.196.
On macro markets, the energy sector was pressured by steep declines in the crude complex.
Brent futures were down 2.98%, and WTI crude oil down 2,72%, pressured by reports showed surging cases of the Omicron coronavirus variant in Europe and the United States
Natural gas futures, in contrast, bucked the trend and were up over 3.9%, supported by cold weather forecast in key consuming regions and a +8% surge in European prices to near all-time highs.
Meantime, oil prices edged higher on this morning, though investors remained worried.
In fact, Brent crude futures increased by 9 cents, or 0.1%, to $71.61 a barrel by 01:05 GMT, while U.S. West Texas Intermediate (WTI) crude futures rose by 23 cents, or 0.3%, to $68.84 a barrel.
On the freight market, the Baltic Exchange’s dry bulk sea freight index slipped for an eighth straight session to its lowest level since mid-April, hurt by a decline in rates across its smaller panamax and supramax vessel segments.
The overall index, which factors in rates for capesize, panamax and supramax vessels, was down 8 points, or 0.3%, to 2,371, its lowest since April 15.
The capesize index added 80 points, or 2.9%, to 2,807, snapping an eight-session losing streak.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, increased by $670 to $23,283.
The panamax index lost 88 points, or 3.6%, to its lowest in a month at 2,356.
Average daily earnings for panamaxes, which carry 60,000-70,000 tonne coal or grain cargoes, decreased by $790 to $21,204.
The supramax index fell 33 points to 2,436, its lowest level in over two weeks.
On equities markets, US stock indexes on Monday tumbled to 2-week lows and settled moderately lower.
Concerns about President Biden’s economic agenda and the rapid global spread of the omicron variant weighened on sentiment.
Democrat Senator Manchin said Sunday that he wouldn’t support President Biden’s $1.75 trillion tax-and-spend package.
That derails hopes for more fiscal stimulus and prompted Goldman Sachs on Monday to cut its U.S. Q1 GDP forecast to 2% from 3%.
Also, concern that the U.S. economy will take a hit from the surge in Covid infections weighed on stocks Monday after the 7-day average of new U.S. Covid infections soared to a 3-month high Sunday.
However, U.S. economic data on Monday was bullish for stocks after U.S. Nov leading indicators rose +1.1% m/m, stronger than expectations of +1.0% m/m and the biggest increase in 6 months.
In this context, S&P 500 1.1% lower to 4,568.02. The Dow Jones Industrial Average fell 1.2%, to 34,932.16. The Nasdaq composite fell 1.2%, to 14,980.94.
Smaller company stocks fared worse than the rest of the market.
Indeed, the Russell 2000 index fell 1.6%, to 2,139.87.
European stocks also ended lower in their worst session for three weeks amid a wider equities sell-off.
The pan-European STOXX 600 dropped -1.4% to its lowest in two weeks.
Oil companies, miners and auto stocks led declines, with all major sub-indexes ending lower.
The FTSE 100 index dropped 1%, driven by weakness in commodity-linked shares – including the drop in oil prices.
The Bundesbank said activity in some service sectors is “significantly hampered,” and the German economy may contract in Q4 as a resurgence of Covid infections triggers fresh restrictions and keeps shoppers at home.
However, ECB Governing Council member de Cos said that the ECB will not raise interest rates in 2022 if inflation behaves as expected and that rate action in 2023 will depend on the evolution of inflation forecasts.
Meantime, Asian shares were mostly higher on this morning after yesterday worldwide slump for financial markets as the real estate stocks extended their rebound amid growing signs of marginal policy easing by Beijing to prevent a hard landing of the sector.
Thus, Tokyo’s Nikkei 225 index rose 2% to 28,496.83 and the Hang Seng in Hong Kong added 0.3% to 22,798.23.
In Seoul, the Kospi gained 0.3% to 2,972.79, while the Shanghai Composite index picked up 0.2% to 3,601.53.
In Sydney, the S&P/ASX 200 climbed 0.4% to 7,323.90.
On the weather side, mostly dry conditions are expected across the Midwest and Plains between today and Friday, per the latest 72-hour cumulative precipitation map from NOAA. North Dakota, Minnesota, Wisconsin and Michigan could see some additional rain or snow during this time.
NOAA’s 8-to-14-day outlook predicts a return to seasonally colder weather for the Northern Plains between December 27 and January 2, with wetter-than-normal conditions likely for most of the central U.S.
Meantime, slight rise in wheat yesterday in Chicago against a backdrop of declining winter wheat crops, particularly in Kansas.
Added to this is a persistent water deficit in southern Brazil and Argentina, this time particularly supporting soybean prices. 55% of surfaces in Brazil and only 20% of surfaces in Argentina have received rainfall this weekend.
On the demand side, USDA’s weekly Export Inspections report showed 1.001 MMT of corn was shipped during the week that ended 12/16.
That was up 84,428 MT from last week and was 231,406 MT above the same week last year.
Mexico was the top destination with 35% of the total, though China and Japan were also each shipped over 200k MT.
USDA also added over 100k MT of corn exports to past reports.
The season’s total corn export was up to 11.31 MMT, which now only trails 2020/21’s pace by 12%.
As for sorghum, the weekly FAS data showed 316,359 MT were exported.
That was more than double the week prior and was 52% above the same week last season.
Mexico and Japan combined for 3,282 MT with China taking the rest. MYTD sorghum exports were at 1.55 MMT as of 12/16, compared to 1.93 MMT at the same point last year.
As for soybean, weekly FAS data showed 1.679 MMT of soybeans were exported during the week that ended 12/16.
That was down 67k MT from last week but was 41% under the same week last year.
China alone was the destination for 56% of the total.
USDA’s weekly data had the season’s total export at 27.15 MMT as of 12/16, that compares to 35.18 MMT last year.
As for wheat, the FAS Export Inspections report showed 211,880 MT of wheat was exported during the week that ended 12/16.
That is down 56,960 MT from last week and 180,298 MT lighter than the same week last year.
Half of the total was HRW wheat, with 35% as spring wheat.
The weekly data has 11.6 MMT of wheat exports MYTD, compared to 14.1 MMT at the same point last year.
In this context, corn basis bids dropped 6 to 11 cents lower at two processors while firming a penny at an Ohio elevator and holding steady at most other Midwestern locations.
Soybean basis bids firmed 2 cents at an Ohio elevator and dropped 2 to 5 cents lower at two other Midwestern locations while holding steady elsewhere across the central U.S..
The funds were net buyers yesterday for 3,500 lots of soybeans and 1,000 lots of wheat. They were net sellers for 2,500 lots of corn.
From Canada, Canadian exports during week 19 were 189.9k mt for a season total of 4.52 million mt.
This is 61% of last year’s amount.
Visible supplies in the Canadian elevator system fell 50k mt to 2.83 million mt.
Supplies in Vancouver grew slightly to 69.5k mt but shrank in Prince Rupert to 24.9k mt.
Week 19 exports of Canadian durum were 3.4k mt which makes for a season total of 1.12 million mt.
This is just 52% (-1.02 million mt) of last year’s amount. Visible supplies fell to 776.0k mt.
There is 101.1k mt of durum sitting in terminals at Thunder Bay and an additional 271.7k mt of durum sitting in terminals on the St. Lawrence.
As of week 19, (out of 52), 51% of the Canadian exportable supplies has been shipped.
Meantime, durum prices were relatively unchanged from last week.
Old crop durum can still be sold for $21.00-$21.50 per bushel.
However, buyers don’t seem too interested in putting on a position during the remaining weeks of the year.
They will likely start looking at putting some programs together in the new year.
From South America, weather remains very dry in southern Brazil and northern Argentina, which is causing growing concern within the market.
Meantime, Argentina announced grain crop export restrictions for the 2021/22 MY, including a preliminary 25 MMT corn export cap.
The restriction will be revised as the corn output is realized.
At the same time, Argentina announced a 21/22 wheat export cap with intentions of keeping local prices at an equilibrium level.
Initially the export cap is set at 2 MMT to maintain the 12.5 MMT equilibrium quantity.
Both are subject to change through the season.
On European market, grain prices started the week mostly on a negative note, swept into the red by panic over the new variant Omicron is indeed spreading rapidly in the Western world and is currently causing an escalation in health restrictions.
In this context, crude prices lower more than 5% at the close of Euronext, took down with them all agricultural commodities with excepition of wheat, that managed to erase its losses at the end of the session to finally settle in positive territory at the close.
The shortage and surge in fertilizer prices remains a topical issue and if the situation does not improve in January, the market could take into account a drop in world cereal production.
Gas prices hit new highs.
Rapeseed prices continue to evolve in a context of high volatility.
From the Black Sea basin, Russian agriculture consultancy Sovecon raised its forecast for Russia’s 2022 wheat crop to 81.3 million tonnes from the previously expected 80.7 million tonnes thanks to good weather conditions for sowings across the country.
Also, Sovecon said that the Russian state weather forecaster saw the share of winter grain crops in the country in poor condition now at only 3%.
A year earlier, that number was 22%, and the average for the previous five years is 8.4%.
Good condition of the sowings will fully offset lower winter grain sowing area, which dropped this year by 900,000 hectares to 18.4 million hectares, Sovecon added.
Also, Sovecon estimates that the country’s wheat exports in December will reach 3,9 MMT, which would be the highest monthly total since September, if realized.
Meantime, Russia announced their official wheat export quota at 8 MMT for the Feb 15 – June 30th window.
MYTD wheat exports were tallied at 20.4 MMT through 12/16 according to government data.
That was 16% below Russia’s 2020/21 volume.
As of December 1, agrarians of Ukraine harvested 84.57 mln tonnes of grains and pulses with the average yield of 5.5 t/ha throughout 15.38 mln ha.
Particularly, agrarians harvested 32.72 mln tonnes of wheat with the yield of 4.64 t/ha throughout 7.06 mln ha, 9.65 mln tonnes of barley with the yield of 3.92 t/ha throughout 2.46 mln ha and 177.3 thsd tonnes of oats with the yield of 2.79 t/ha throughout 495 thsd ha.
Also, as of December 1, farmers harvested 87.8 thsd tonnes of buckwheat with the yield of 1.3 t/ha throughout 113.4 thsd ha, 205.7 thsd tonnes of millet with the yield of 2.52 t/ha throughout 205.7 thsd ha.
Production of corn totaled 39.82 mln tonnes with the yield of 8.01 t/ha harvested throughout 4.97 mln ha.
Production of sunflower seed reached 16.44 mln tonnes with the yield of 2.52 t/ha harvested throughout 6.52 mln ha, soybean – 3.41 mln tonnes with the yield of 2.68 t/ha harvested throughout 1.27 mln ha.
Meantime, according to State Custom Service of Ukraine, since the beginning of 2021/22 MY and as of December 20 Ukraine exported 29.373 mln tonnes of grains and pulses, up by 5.276 mln tonnes year-on-year, reported the press-service of Ministry of Agrarian Policy and Food of Ukraine.
Grains exported were 3.277 mln tonnes.
Particularly, Ukraine exported 15.402 mln tonnes of wheat (+3.18 mln tonnes y-o-y), 5.1 mln tonnes of barley (+1.355 mln thsd tonnes), 86.7 thsd tonnes of rye (+85 thsd tonnes) and 8.553 mln tonnes of corn (+0.804 mln tonnes).
Moreover, Ukraine exported 57.8 thsd tonnes of flour (-16.9 thsd tonnes) including 57 thsd tonnes of wheat flour (-17.1 thsd tonnes).
On the weather side, today and tomorrow low temperatures in Russia with this morning recorded -16 degrees in Moscow and zero degrees in Krasnodar. In Kiev this morning, it is 7 degrees.
Meantime, corn and wheat prices in the Black Sea basin showed some firmness at the start of the week.
From the Middle Kingdom, China’s General Administration of Customs reported bringing in 8.57 MMT of soybeans during November.
Of that, 3.63 MMT were U.S. sourced and 3.75 MMT were from Brazil.
From India, in order to curb speculation, India’s market regulator on Monday asked commodity exchanges not to launch futures contracts of soybean, crude palm oil, wheat, rice, chickpea, green gram, rapeseed and mustard for one year.
For running contracts, the Securities and Exchange Board of India (SEBI) said no new positions would be allowed in these commodities, according to a SEBI order.
Meantime, India cuts base import duty on RBD palm olein to 12.5% from 17.5%, now the total import duty is 13.75%.
With effect from 21 Dec 2021.
From Australia, yesterday the government said it had struck a deal with fertiliser manufacturer Incitec Pivot to secure local production of urea needed to make a diesel additive essential for trucks, as China curbs fertiliser exports to contain prices at home.
Under the agreement, Incitec Pivot will scale-up manufacturing of technical grade granular urea (TGU), a critical component of diesel exhaust fluid known as AdBlue, Federal Energy Minister Angus Taylor said in a statement.
The Australian Trucking Association early this month raised concerns about a looming shortage of AdBlue, which it said could hit trucking operations and threaten goods transport, prompting authorities to ask Indonesia, Saudi Arabia, the United Arab Emirates, Qatar and Japan for urea.
Indonesia has offered to provide 5,000 tonnes of refined urea in January, enough to make around a month’s worth of AdBlue, Trade Minister Dan Tehan said on Monday.
He added shipping companies would prioritise the loading of urea and AdBlue that are already on their way to Australia.
Prices for Urea, also widely used as a fertiliser, have surged more than 200% this year amid rising demand and lower supply, while some countries began rationing AdBlue as panic buying by drivers worsened the shortage.
On the weather side, after some harvest delays over the weekend through Victoria due to rain, growers are now back in the paddock with a clear run set for WA, SA, Victoria and Southern NSW, while northern NSW and Queensland are set for another 25-30mm widespread rain event over the next eight days on the BOM.
Summer crops are benefiting from rain now in what looks to be a healthy sorghum and cotton crop.
Meantime, WA quality seeing 20pc more ASW than normal (and on a record size crop) at the expense of APW and higher grades.
SA quality has seen a 20pc swing from Hard wheats to “other” which is largely going to be AGP and below grades.
East coast quality is anecdotal, but Victoria seems to be ok for the most part, NSW estimated to have 7Mt or more of AGP and lower wheat, whilst Queensland quality for the most part is pretty good.
The lower grades in SA and NSW are all about falling number problems, the test weight and protein have been okay in many cases but falling number is a big issue.
Meantime, receivals in WA into CBH system continue to break records now taking in over 18.3Mt of all grains. Growers through Geraldton and Northern Kwinana zone are albeit finished or will be all tidied up by Christmas. Other zones are still going in what is a record WA crop now.
Along the east coast GrainCorp network has taken in 10.4Mt now for the 21/22 season harvest.
In this context, cashboards kicked off the week with some firmness back in the market, although liquidity is thin.
Wheat was up $3-5/t along the east coast.
South Australian values up $5/t while WA wheat bids were relatively unchanged
Barley was a fraction stronger by $1-2/t and canola kept pulling back with selling activity drying up, we expect till the New Year now.
On international trade scene, Algeria issued an international tender to purchase 50.000 t of durum wheat (although the country often purchases substantially more than the nominal amount listed) from optional origins that closes on this morning.
The grain is for shipment in February.
Jordan issued an international tender to purchase 120.000 t of milling wheat from optional origins that closes on December 29.
The grain is for shipment between mid-June and mid-August.
Author: Sandro F. Puglisi
