US farm markets were mixed but mostly higher to start the week.
The surge in wheat prices due to the tensions between Ukraine and Russia, supported grain prices.
Indeed, corn prices after struggled early in the morning, ultimately pulled higher, closing with gains more then 0.75%.
The Monday soy complex closed mixed but mostly lower.
Indeed, soybean prices closed 0.80% in the red.
Soymeal recovered into the close, going home within +0.31%. Soybean oil bounced from the intra day lows, but the front months were still triple digits weaker at the bell.
The wheat, meantime, rose substantially higher posting doble digit gains.
The winter wheat futures led the rally with 2.63% gains in SRW and 2.5% to 3.1% gains in HRW.
Spring wheat futures were up by 1.34% higher at the close.
In energy market, oil prices bounced back on this morning, recovering some of the previous day’s losses, as growing tension in Eastern Europe and the Middle East fuelled concerns over possible supply disruptions.
Indeed, Brent crude futures rose 61 cents, or 0.7%, to $86.88 a barrel at 07:22 GMT after touching a session high of $87.27 a barrel earlier, reversing a 1.8% fall in the previous session.
U.S. West Texas Intermediate (WTI) crude futures climbed 44 cents, or 0.5%, to $83.75 a barrel, having slid 2.2% on Monday.
In the freight market, the Baltic Exchange’s dry bulk sea freight index fell for a 12th straight session on Monday, hurt by declining capesize rates.
Particularly, the overall index, which factors in rates for capesize, panamax and supramax vessels, fell 24 points, or 1.7%, to 1,391, its lowest since mid-February 2021.
The capesize index slipped 55 points, or 6.2%, to 836, its lowest since June 2020.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, dropped by $455 to $6,935.
The panamax index edged 3 points higher to 2,013, snapping an 11-session losing streak.
Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, rose by $32 to $18,119.
The supramax index fell 21 points to its lowest level since end-February 2021 at 1,728.
In equities markets, U.S. stock indexes yesterday recovered from sharp losses and closed moderately higher.
Stocks initially sold off as the S&P 500 dropped to a 7-month low, the Dow Jones Industrials sank to a 9-1/2 month low, and the Nasdaq 100 fell to a 7-1/2 month low.
A sell-off in technology stocks initially led the overall market lower on concern the Fed will announce after its Tue/Wed FOMC meeting that it will start raising interest rates as soon as March.
However, stock indexes recovered their losses in the afternoon and moved higher after dip buyers emerged near the lows.
Stocks were also under pressure yesterday on increasing geopolitical risks in Ukraine as concerns mount that Russia will soon invade the country.
A report from Dow Jones said the Pentagon had placed U.S. troops on standby for deployment in Eastern Europe.
Meantime, Monday’s U.S. economic data was also bearish for stocks. Indeed, the U.S. Jan Markit manufacturing PMI fell -2.7 to 55.0, weaker than expectations of 56.7 and the slowest pace of expansion in 15 months.
Also, the Dec Chicago Fed national activity index fell -0.59 to -0.15, the steepest pace of contraction in 10 months.
However, a late-day buying spree pushed the benchmark S&P 500 index to a 0.3% gain after pulling it out of so-called correction territory — a drop of 10% or more from its most recent high – being fell as much as – 4% in the morning session.
The Dow Jones Industrial Average had declined more than 1,000 points before rallying and ending higher.
The tech-heavy Nasdaq index rose 0.6% after recovering from a nearly 5% descent.
Particularly, the S&P 500 rose 12.19 points to 4,410.13.
It’s now 8.1% below the all-time high it set on Jan. 3.
The Dow rose 99.13 points to 34,364.50.
The Nasdaq gained 86.21 points to 13,855.13.
Small company stocks also bounced back.
The Russell 2000 rose 45.59 points, or 2.3%, to 2,033.51. The index had been down 2.8%.
The surprise turnaround in U.S. market overnight does not seem to provide any relief into Asia’s session today,” said Yeap Jun Rong, market strategist at IG.
Indeed, Asian shares skidded on this morning following the volatile day on Wall Street.
Thus, Japan’s benchmark Nikkei 225 slipped 1.7% to finish at 27,131.34.
Australia’s S&P/ASX 200 dropped 2.5% to 6,961.60.
South Korea’s Kospi lost 2.7% to 2,717.38.
Hong Kong’s Hang Seng shed 1.9% to 24,198.37, while the Shanghai Composite dipped 2.3% to 3,444.65.
On the weather side, not much rain and snow are expected to fall on the Midwest and Plains between today and Friday, although some areas will receive some measurable moisture during that time, per the latest 72-hour cumulative precipitation map from NOAA.
The agency’s 8-to-14-day outlook predicts a return to seasonally wet weather in the central U.S. between January 31 and February 6, with cooler-than-normal conditions creeping back into the Northern Plains and upper Midwest next week.
Meantime, condition ratings for winter wheat fell during January in most U.S. Plains states, including Kansas and Oklahoma, the top two producers, the U.S. Department of Agriculture (USDA) said on Monday.
Particularly, the USDA rated 30% of the Kansas winter wheat crop in good to excellent condition as of Jan. 23, down from 33% at the start of the month.
In Oklahoma, 16% of the state’s wheat was rated good to excellent, down from 20% by Jan. 3.
The USDA rated 16% of the North Dakota crop as good to excellent by Jan. 24, down from 39% by Jan. 2.
Wheat ratings also declined in Colorado, Nebraska and South Dakota, but improved slightly in Montana.
U.S. farmers planted 34.4 million acres of winter wheat for 2022, the most in six years, the USDA said this month.
However, most of the Plains breadbasket is in the grip of a drought that is expected to persist through April, according to the latest seasonal outlook from the U.S. Climate Prediction Center.
Farmers in the Plains states grow hard red winter wheat, the largest U.S. wheat class, which is milled into flour for bread.
Ratings also fell sharply in Illinois, where farmers grow soft red winter wheat used to make cookies and snack foods.
The USDA rated 42% of the Illinois crop as good to excellent by Jan. 24, down from 75% by Jan. 2.
On the demand side, USDA announced a private corn sale, as unknown destinations bought 150k MT of old crop corn.
Also, USDA reported a soybean sale to China under the daily reporting system.
Of the 132k MT booked, half is for old crop and the other 66k MT is for new crop delivery, basically one vessel of each.
Meantime, USDA’s weekly Export Inspections report showed corn shipments were 1.115 MMT during the week that ended 1/20, sliding 10% below the prior week’s tally, but was still on the lower end of trade estimates.
Particularly, that was down from 1.237 MMT last week and below the 1.4 MMT shipped during the same week last year.
China was the week’s top destination with 347,449 MT, followed by Mexico with 305k MT.
The weekly data had MYTD corn exports at 16.44 MMT, compared to 18.9 MMT at the same point last season.
As for soybean, Weekly Export Inspections data showed 1.3 MMT of soybeans were exported during the week that ended 1/20.
That was down 429k MT from the week prior and 806k MT below the same week last year.
As for wheat, shipments from the week that ended 1/20 were 400,973 MT firming 4.3% from a week ago.
That, indeed, compares to 384,291 MT from the week prior and 571,677 MT during the same week last year.
USDA’s data had the majority of the shipment (161k MT) as HRW, with 122k MT as HRS.
MYTD wheat exports reached 13.218 MMT through 1/20.
That trails last season’s pace by 18%.
In this context, corn basis bids were steady to firm after rising 2 to 3 cents higher at three Midwestern locations.
Soybean basis bids were steady to weak after dropping 3 to 5 cents at three Midwestern locations.
The funds were net buyers yesterday for 13,000 lots of wheat and 6,000 lots of corn. They were net sellers for 9,000 lots of soybeans.
From Canada, according to Mercantile Consulting Venture Inc., cash prices in Saskatchewan were higher last week given the increase in futures prices.
Basis levels were sideways to slightly higher.
Although futures prices have dropped from their December
highs, basis prices have helped to soften the decrease in futures on cash prices.
AAFC released their January estimates for the 2021/’22 crop, along with their first 2022/’23 supply and demand estimates.
For the 2021 crop, imports were reduced by 100k MT to 200k MT.
Feed use was decreased by an equal amount for an unchanged ending stock number of 3.0 million MT (compared to 5 million MT the previous year).
For the 2022 crop, AAFC expects seeded area to rise by 5% from last year to 7.6 million ha.
Yield was put at 3.44 MT per ha, which is 28% more than last year, but is essentially the 5-year average.
Production is expected to rise to 25.6 million MT (+25% y/y).
Low beginning stocks will cause total supply to be 19% higher than last year at 28.7 million MT.
Exports are up to 17.0 million MT reflecting the increase in total supply.
Overall, ending stocks are expected to be 4.0 million MT which is still almost 1.0 million MT less than average (excluding 2021).
Wheat movement in Canadian shipping week 24 was relatively strong.
Producers delivered 406k MT of wheat into the elevator system.
Exports were 304k MT for the week, creating a season total of 5.5 million mt.
Exports are now 41% (-3.7 million mt) smaller than last year compared to AAFC’s projected 35% decline.
The slow pace of wheat exports is concerning.
Seasonally, Canadian exports decrease into the heart of winter before picking up again in March through May.
The seasonal pattern will have to prove true in a big way this year.
They are 46% of the way through the marketing year and have exported just 39% of AAFC’s projected 14.0 million MT exports.
For now they would sell 2 CWRS at $11.50 per bushel or better.
As for durum, Canadian durum bids have backed off somewhat, in contrast with the global market.
AAFC estimated 2022/’23 durum seeded area up 9% from last year at 2.45 million ha.
Yield was put exactly at the 5-year average of 2.30 MT per ha for a production number of 5.5 million MT – 8% more than last year.
Ending stocks are projected at 751k MT (up 37%), which is in-line with 2020/’21 levels.
Week 24 exports of Canadian durum were a small 11.2k MT for a season total of 1.2 million MT.
This is now 47% (-1.3 million MT) of last year’s volume.
Durum producers have delivered 1.5 million MT (58%) of the total 2021 durum crop.
This leaves ~1.11 million MT of durum remaining on farm.
Producers will need~ 240k MT of supplies for seed.
So, at the current pace of deliveries, on farm stocks would run out by week 38.
Of course, this will not be the case, but durum deliveries will slow rapidly moving forward.
According to Agricensus, traders are expecting to look to Canada for additional supplies in late-Feb or early-Mar as stockpiles shrink in other countries.
Prices could increase locally, but it will be hard for exporters to have a sustained program due to low stocks.
From South America, in Mato Grosso 5% of soybean areas are harvested, just as it is estimated that 5% of second crop corn is also sown.
Yields are deemed satisfactory, as this region of Brazil received the rainfall necessary for the development of crops, unlike Parana.
National production is expected around 133 million tons.
The beneficial rains in Argentina also contributed to the decline in prices.
In Europe, wheat prices are rising, as a conflict inevitably could leading to disruptions in logistics, not to mention the retaliatory measures that could be taken against Russia.
Corn also progressed, on fears of a logistical disruption from Ukraine and on the competitiveness of French sources on the European scene.
Rapeseed fell back very sharply yesterday in a context of falling oil prices and canola, despite a very tight balance sheet in Canada.
Canadian Canola Prices indeed, were sharply lower on Monday with a 2.64% drop.
Malaysian Palm Prices were down 0.85% on Monday after printing new highs.
Consequentially, European Rapeseed Futures were down nearly 5%.
Chartist breakout considerations were also contributed to selling off.
Meantime, warmer temperatures and increased rain has benefited winter crops in most parts of Europe, though a lack of hardiness due to mild conditions could leave some grain crops exposed to frost, the EU’s crop monitoring service MARS said on Monday.
Grain crops such as barley and wheat in northern and central-eastern parts of Europe have almost fully hardened by now, but areas around the Black Sea have limited snow cover, and a a cold snap would lead to frost damage, especially in late-sown fields, MARS said.
However, its simulations suggested that no frost had occurred so far in the EU, it added.
The favorable conditions has led to a significant increase in rapeseed sowing area of 12.1% in France and 8.7% in Germany, and has allowed some crops that were lagging behind to partially catch up, the monitor said.
The Mediterranean region from southern Spain to northern Italy has had a rain deficit, but there is no significant impact on winter crops so far, MARS said.
From North Africa, persistent drought conditions in Morocco have negatively impacted the growth and development of winter crops, and rain is “imminently needed” to sustain adequate crop growth in western and central Algeria, MARS monitor said.
Meantime, Algeria’s Ag Minister reported wheat harvest at 2.7 MMT for the 21/22 crop.
That was sufficient for a 26% import reduction forecast on their part.
USDA’s data has Algeria producing 3.6 MMT and importing 20k MT more than 20/21.
From the Black Sea basin, Russia’s Federal Center of Quality and Safety Assurance for Grain reported 23 MMT of wheat had been shipped through Jan 20th, compared to almost 29.1 Mt a year earlier.
Russian barley exports reached 2.72 Mt (4.06 Mt a year earlier).
Total all-grain exports since early July reached 27.3 Mt, down from 34.56 Mt last year.
Russian consultancy Sovecon estimates that the country’s wheat exports will reach 24 million tonne in January.
That would be the lowest monthly tally since last July, if realized.
Meantime, according to the RF Federal Customs Service statistics, during January-November Russia exported 29.9 mn tons of wheat and meslin, down 11.1% year-on-year.
In terms of value, grain export grew by 12.8% up to $7.9 bn.
Wheat import into Russia during January-November 2021 decreased by 19.8% down to 118.4 thousand tons.
Corn import declined by 30.5% down to 32.4 thousand tons.
Barley import made 6.2 thousand tons was down 86.4% year-on-year.
In terms of value, wheat import was down 2.9% to $46.7 mn.
Corn import was down 14% to $100.1 mn, barley import dropped by 72.1% down to $1.9 mn.
In November 2021, wheat and meslin export made 3.2 mn tons, down 25.6% year-on-year and up 13% month-on-month.
In terms of value, it declined by 1% year-on-year and grew by 14.7% month-on-month to make $953.2 mn.
Wheat import in November made 3.2 thousand tons, down 92.6% year-on-year and down 48.4% month-on-month.
Value-wise, wheat import decreased by 89.7% year-on-year and by 51.6% month-on-month to $1.5 mn.
Corn import was down 76.9% year-on-year and up 50% month-on-month making 300 tons.
In terms of value, it was down 81.65% year-on-year and was up 3.5-fold month-on-month to make $700 thousand.
Barley import was non-existent in November.
From the Middle Kingdom, China sold 468,738MT of wheat on auction late last week, which was 94% of the total amount for sale.
Average price was $415.31/MT.
That was the third such auction so far this month as the country’s domestic feed sector continues to search out solutions to high corn prices.
From Australia, no news on this morning due to the Australia Day.
Australia Day is the official national day of Australia.
Observed annually on 26 January, it marks the 1788 landing of the First Fleet at Sydney Cove and raising of the Union Flag by Arthur Phillip following days of exploration of Port Jackson in New South Wales.
In present-day Australia, celebrations aim to reflect the diverse society and landscape of the nation and are marked by community and family events, reflections on Australian history, official community awards and citizenship ceremonies welcoming new members of the Australian community.
On the international scene, Algeria is returning to wheat purchases, but for shipment to small ports which could signal a small purchase is planned.
Diplomatic relations between France and Algeria remain tense, but discussions are underway, making it possible to consider a relaxation, or even a return to this destination for the French origin.
The tender is for 50.000t of milling wheat from optional origins.
The deadline for submission of price offers in the tender is Jan. 26.
Algeria typically buys more than the nominal amount listed.
The grain is for shipment starting in mid-February.
Author: Sandro F. Puglisi
