US farm markets were mixed but mostly lower yesterday.
Indeed, corn prices more then 1.9%.
Soybeans continued to find positive forward momentum and althought couldn’t hold on to 30-cent overnight gains but still trended another 1.1% higher.
Soymeal fell by 0.21%.
Soyoil ended the session 0.23% higher, but futures had 130+ point ranges during the session.
Wheat prices, meanwhile, lost between 1% and 2% after a round of technical selling and profit-taking that caused double digit drops.
Particularly, Chicago SRW futures ended the session with 1.82% drops.
KC HRW ended the session with 2.13% losses.
MPLS wheat closed 0.77% in the red.
In energy market, oil prices eased on this morning following weak U.S. payrolls data and some profit taking, but remained underpinned by tight supply as OPEC+ producers stuck to planned moderate output increases.
U.S. private payrolls, indeed, fell for the first time in a year in January, raising the risk of a sharp decline in employment that would deal a temporary setback to the labour market.
Prices were also pressured late on Wednesday after Iran’s Oil Minister said the country was ready to return to the oil market as quickly as possible, but offered few details.
Meantime, OPEC+, agreed on Wednesday to stick to moderate rises of 400,000 barrels per day (bpd) in its oil output.
The group blamed surging prices on the failure of consuming nations to ensure adequate investment in fossil fuels as they shift to greener energy, while several OPEC+ sources also said prices had been pushed up by Russia-U.S. tensions.
Meantime, the OPEC+ Joint Technical Committee said in a report that it expects the overall surplus in 2022 to reach 1.3 million bpd, slightly less than its previous forecast of 1.4 million bpd.
On the other hand, U.S. crude stockpiles fell by 1 million barrels last week, the U.S. Energy Information Administration said on Wednesday, against expectations for an increase.
Distillate inventories also dropped amid strong demand both domestically and in export markets.
In this context, Brent crude fell 17 cents, or 0.2%, to $89.30 a barrel by 04:20 GMT, after rising 31 cents on Wednesday.
U.S. West Texas Intermediate crude was down 31 cents, or 0.4%, at $87.95 a barrel, having gained 6 cents the previous day.
To note, that a major winter storm is expected to wallop much of the central United States and stretch to parts of the Northeast this week, bringing heavy snow, freezing rain and ice, the National Weather Service said.
The storm comes days after a deadly winter blast and could boost prices of oil, especially as some regions substitute out natural gas where supply may be scarce.
On the freight market, the Baltic Exchange’s dry bulk sea freight index snapped four straight sessions of gains on Wednesday, weighed down by lower rates across all vessel segments.
The overall index, which factors in rates for capesize, panamax and supramax vessels, indeed, eased 21 points, or 1.5%, to 1,419.
Particularly, the capesize index slipped 17 points, or 1.3%, to 1,280.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, declined by $137 to $10,616.
The panamax index dipped 46 points, or 2.5%, to 1,765, its lowest since April.
Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, fell $411 to $15,885.
The supramax index fell 8 points to its lowest level since February 2021 at 1,570.
Meantime, on week 5, freight rates in the Baltic region demonstrated an increase.
The rates were affected by both a significant reduction in open positions of small-tonnage fleet, and the reluctance of many shipowners to take cargo from the ports of St. Petersburg and Ust-Luga, due to ice convoy, Sea Lines shipbrokers explain.
As a result, the freight rate from Ust-Luga to Gent has increased to 64 euro per ton.
According to Sea Lines, rates for 3-5K dwt bulkers from Ust-Luga to Riga make €35 pmt, and those to Gdansk €39 pmt.
Freight rates from Ust-Luga made €38 pmt to Szczecin, €45 to Flensburg, and €61 to Hamburg.
Rates from Ust-Luga were €64 pmt to ARAG, €66 pmt to East Britain, €69 pmt to West Britain, and €73 pmt to Dublin.
On equities market, U.S. stock indexes yesterday posted moderate gains, with the S&P 500 and Nasdaq 100 climbing to 1-1/2 week highs and the Dow Jones Industrials climbing to a 2-1/2 week high.
A rally in technology stocks gave a boost to the overall market, with Alphabet closing up more than +7% at a record high after it reported better-than-expected quarterly earnings.
Also, chipmakers rallied, led by an +5% gain in Advanced Micro Devices after it reported stronger than expected Q4 revenue.
Health care companies also accounted for a big share of the gains.
Meanwhile, big retailers and other companies that rely directly on consumer spending fell.
Amazon slid 0.4% and Gap fell 3.3%.
But the big surprise came after Wednesday’s close, when Meta Platforms (FB) plunged -20% as it forecast Q1 revenue of $27-$29 billion, well below the consensus of $30.25 billion.
Wednesday’s U.S. economic data was bearish for stocks after the Jan ADP employment change unexpectedly fell -301,000, weaker than expectations of a +180,000 increase and the biggest decline in 1-3/4 years.
In this context, on Wall Street the S&P 500 rose 0.9% to 4,589.38.
The Dow Jones Industrial Average rose 0.6% to 35,629.33 and the Nasdaq added 0.5% to 14,417.55.
Small company stocks bucked the broader market rally as the Russell 2000 index fell 1% to 2,029.52.
Meantime, investors in Asia were rattled when Facebook parent company Meta Platforms plunged 22.9% in after-hours trading.
Thus, shares were mixed in Asia on this morning, with Tokyo’s Nikkei 225 index lost 1.1% to 27,241.31 while the S&P/ASX 200 gave up 0.1% to 7,078.00.
Seoul’s Kospi climbed 1.7% to 2,707.82, catching up on earlier gains elsewhere after markets in South Korea reopened from holidays.
Markets in China remained closed for Lunar New Year holidays.
On the weather side, as we just said, Winter Storm Landon is in the process of delivering a 2,000-mile stretch of snow and ice from Arizona and Texas through the U.S. Northeast.
But some key parts of the Midwest, including Iowa, South Dakota and Nebraska, are unlikely to see any measurable moisture between today and Sunday, per the latest 72-hour cumulative precipitation map from NOAA.
Further out, the agency’s 8-to-14-day outlook predicts some seasonally wet weather possible for the Northern Plains between February 9 and February 15, with warmer-than-normal conditions emerging in the Central and Northern Plains.
On the demand side, EIA’s weekly ethanol data showed producers averaged 1.041m bpd of production during the week that ended 1/28.
That was 6k barrels per day more than the week prior.
Ethanol stocks continued to build, with another 1.378 million to 25.854 million barrels.
Midwestern stocks were another 400k barrels higher on the week to a new record 10.507 million.
Meantime, USDA reported Tuesday in the afternoon that the U.S. produced 2.073 million tons of distiller’s dried grains with solubles (DDGS) in December, which was up from 1.787 million tons a year ago.
And another 485.9 million bushels of corn were used to produce ethanol in December, which was above year-over-year totals of 431.7 million bushels.
Also, USDA reported on Tuesday that around 198 million bushels of soybeans were crushed in December.
That’s slightly ahead of November’s crush, which totaled around 190 million bushels.
Ahead of this morning’s export report from USDA, analysts think the agency will show corn sales ranging between 600k MT and 1.3 MMT from the week that ended 1/27.
For new crop bookings are estimated to be below 250,0000 MT.
As for soybean, pre report estimates show analysts are anticipating 600,000 MT to 1.2 MMT of soybean bookings from the week of 1/27.
New crop sales are expected between 250k and 550k MT.
For the products, traders surveyed anticipate the USDA to report 100k to 450k MT of soymeal was sold during the week that ended 1/27.
The trade is looking for less than 30k MT of soy oil bookings.
As for wheat, analysts surveyed expect to see between 200,000 and 675,000 MT of wheat sales from the week that ended 1/27.
Forward sales from the same week are estimated to be below 200k MT from the same week.
Meantime, USDA announced a large private soybean sale under the daily system, as unknown destinations booked 380k MT of old crop beans.
In this context, corn basis bids were mostly steady on Wednesday but did tilt 7 cents lower at an Indiana ethanol plant while firming 4 cents higher at an Ohio elevator.
Soybean basis bids held steady at most Midwestern locations, but did shift 3 cents higher at an Ohio river terminal while sliding 5 cents lower at an Iowa processor.
The funds were net buyers yesterday for 9,000 lots of soybeans but net sellers for 15,000 lots of corn and 9,500 lots of wheat.
From South America, the heat and dry condition persist in Brazil, Paraguay and northern Argentina.
Updated rainfall shows some relief in Brazil but nothing in Argentina.
Meantime, agribusiness consultancies Cogo and Datagro on Wednesday slashed their forecasts for Brazil’s 2021/22 soybean production, joining a series of private firms that cut their estimates earlier in the week as bad weather affects the crop outlook.
Cogo said it now sees oilseed output reaching 125 million tonnes, down from a previous forecast of 131 million tonnes and 14.2% below its initial projection for this season.
Cogo’s managing partner Carlos Cogo said in a report sent to Reuters that further downward revisions are not ruled out yet.
Meantime, Datagro estimated Brazil’s soybean crop at 130 million tonnes, versus 142.05 million in its December projection and 144.06 million tonnes initially forecast for 2021/22, citing weather problems caused by the La Nina weather pattern.
Datagro said the drought’s impact on production would have been larger if planted area had not grown 3.7% year-on-year to 40.51 million hectares (100.1 million acres).
All consultancies see now Brazil’s soybean crop now falling short of the 130 million-tonne threshold.
Brazil’s food supply and statistics agency Conab is expected to release its new official forecast on Feb. 10.
In Europe, Euronext continues the sessions with high volatility and increases the uncertainty of many market players.
Tensions between Russia and Ukraine seem to be easing slightly, which is contributing to the decline in prices.
A drop in prices is also due to EU export activity which is slowing down, and climatic risks which seem at this stage to be more or less priced now.
Finally, the rise of the euro against the dollar penalizes EU export competitiveness.
However, caution is still required.
Meantime, non-commercial market participants increased their net long position in Euronext’s milling wheat futures and options in the week to Jan. 28, data published by Euronext on Wednesday showed.
Non-commercial participants, which include investment funds and financial institutions, raised their net long position to 129,801 contracts from 115,925 a week earlier, the data showed.
Commercial participants similarly lifted their net short position to 143,267 contracts from 128,914 a week earlier.
Commercials’ short positions accounted for 64.7% of the total short position, while commercial long positions accounted for 42.1% of total long positions.
Non-commercial short positions represented 35.3% of total short positions, while non-commercial net long positions accounted for 57.9% of the total longs.
In Euronext’s rapeseed futures and options, non-commercial market participants extended their net long position to 5,677 contracts from 4,611 a week earlier.
Commercial participants upped their net short position in rapeseed to 6,349 contracts from 5,162 a week earlier.
From North Africa, USDA attaché note the Algeria Normalized Difference Vegetation Index (NDVI) chart by region shows that the vegetation index looks normal on the Mediterranean coast and below normal in the high lands but remains within Min/Max level.
Traders indicate that the Algerian Office of Cereals (OAIC) continued buying wheat on the international market throughout 2021 and are continuing to do so into 2022.
The government increased prices for grains domestic procurement from farmers to encourage production and grain collection.
Meantime, yesterday Egypt’s supply minister reported that the country’s strategic wheat reserves are sufficient to cover five months, and its strategic reserves of vegetable oils is adequate for 5.5 months.
From Levant, according USDA attaché, the Turkish government continues its efforts to rein in inflation, which was made worse in recent months by the steep depreciation of the Turkish Lira against the US dollar and drought-related grain production losses in MY 2021/22.
In response to the situation, the government has zeroed out import tariffs for certain imported grains and the Turkish Grain Board (TMO) has purchased about 5.75 million metric tons (MMT) of imported grain – wheat, barley and corn – since June 2021 to stabilize local prices.
MY 2021/22 grain import figures have been adjusted to reflect these sizeable purchases.
From the Black Sea basin, yesterday Black Sea wheat was down US$2/t.
According to Refinitiv Black Sea Agriculture Market Analyst, Svetlana Malysh, BlackSea wheat export prices dipped because of slow foreign demand and sliding futures.
Fears about an armed conflict between Russia and Ukraine eased a bit, but foreign demand remained muted. With main importers covered for the nearest months, Black Sea wheat looks more buyers’ market right now, traders said.
Asking prices for 12.5% protein Russian wheat lost $10 during the week and eased to $325-330 per tonne and to $318-320 per tonne FOB for Ukraine 11.5% protein wheat for March-April delivery.
Meantime, according to State Custom Service of Ukraine, since the beginning of 2021/22 MY and as of February 2 Ukraine exported 38.625 mln tonnes of grains and pulses, up by 9.272 mln tonnes y/y, reported the press-service of Ministry of Agrarian Policy and Food of Ukraine.
Particularly, Ukraine has exported 152 thsd tonnes of grain in February.
The total included 17.079 mln tonnes of wheat (+3.986 mln tonnes y/y), 5.482 mln tonnes of barley (+1.53 mln tonnes), 156.5 thsd tonnes of rye (+154.8 thsd tonnes) and 15.644 mln tonnes of corn (+3.842 mln tonnes).
Moreover, Ukraine exported 63.8 thsd tonnes of flour (-23.7 thsd tonnes) including 62.7 thsd tonnes of wheat flour (-24.1 thsd tonnes).
On the other hand, since the start of 2022 and as of January 23, Russia exported agricultural products at the general sum of 1.595 bln USD, down 15% y/y, informed Agroexport Center at the Ministry of Agriculture of Russia.
Particularly, Russia decreased export of grain by 48% to 379 mln USD, while the export of fat&oil products increased by 19% to 437 mln USD, products of food and processing industry up by 23% to 187 mln USD, meat and dairy products up by 15% to 71 mln USD.
The EU remained the leading importer of Russian agricultural products (18.8% in the overall structure).
It increased import of Russian products by 46% to 300 mln USD. Supplies to Turkey (13.4%) decreased by 31% to 214 mln USD.
The export to China (11.3%) decreased by 59% to180 mln USD.
TOP-10 importers of Russian agricultural products included South Korea (8.9%), Egypt (8.5%), Saudi Arabia (3.6%), Ukraine (3.3%), Uzbekistan (3%), Norway (2.9%) and Algeria (2.7%).
From the Middle Kingdom, the Chinese New Year period has historically been a quiet one for export business, and any business would be therefore be viewed as even more bullish.
However, according to the USDA attaché in China, the latter could import 20 million tons of corn this year, compared to 26 million tons displayed in the last USDA report.
From Australia, scattered showers are pushing across South Australia this morning, while more rain is rolling through the regions where sorghum is being harvested.
Road freight still remains tight going into Feb and March with big export programs ongoing, and domestic interstate movements happening from New South Wales into South Australia.
Price movements for feedgrains in eastern Australia were modest this week as the export market remains preoccupied with execution for nearby shipment, and domestic consumers hold off buying in the hope of a price softening.
Fuelling their hopes in the south is the strong and early run on growers buying inputs for the upcoming winter crop plant, often as the backload on a grain delivery.
In the north, growers continue to push barley and off-spec wheat into the market as they make way for a big sorghum crop which for most growers is getting bigger with the benefit of late rain.
Meantime, markets remained largely unchanged for wheat and barley yesterday.
Canola showed some more strength as we now see depot site bids through Victoria push up to $800/t or better.
On the international trade scene, Bangladesh’s state grains buyer has issued an international tender to purchase 50,000 tonnes of milling wheat.
The deadline for submission of price offers is Feb. 14, they said.
Bangladesh has issued a series of wheat and rice tenders in recent months.
The country is importing grains to bolster reserves after extreme weather, from floods to heatwaves, damaged crops.
Price offers in the latest wheat tender are sought on CIF liner out terms, which include ship unloading costs for the seller.
The shipment is sought 40 days after the date of contract signing. The wheat can be sourced from any worldwide origins except Israel and is sought for shipment to two ports, Chattogram and Mongla.
Tunisia’s state grains agency is believed to have purchased about 100,000 tonnes of soft wheat, 75,000 tonnes of durum and 75,000 tonnes of barley in a international tender which closed on Wednesday.
The grains can all be sourced from optional origins.
The soft wheat was sought in four 25,000 tonne consignments for shipment between March 20 and April 25, depending on origin supplied.
One wheat consignment was said to have been bought from Cargill at $350.64, Casillo at $348.69 and also a second consignment from Casillo at $350.69 and from Lecureur at $350.77, with all prices dollars a tonne c&f.
The durum was sought in three consignments of 25,000 tonnes for shipment between Feb. 25 and March 30 also depending on origin supplied.
The durum was all said to have been bought from trading house Viterra, in three consignments at $643, $646 and $649 all per tonne c&f.
The barley was sought in three 25,000 tonne consignments for shipment between March 5 and April 15 depending on origin.
The barley was bought in three consignments, from Aston at $342, from Casillo at $332.69 and from Cargill at $339.70 all per tonne c&f.
Jordan’s state grain buyer made no purchase in an international tender for 120,000 tonnes of animal feed barley which closed on Wednesday.
A new tender with the same shipment positions is expected to be issued closing on Feb. 8.
Trading houses participating on Wednesday were believed to be CHS, Cargill and Viterra, with price offers not disclosed.
Outlook:
Soybeans and corn are both showing themselves as overbought, and most of the flow in overnight trade was focused on taking some chips off the table ahead of next week’s USDA WASDE report.
Corn has had a solid demand base which has underpinned the buying, but it makes sense that the trade takes advantage of the recent strength.
However, with a heavy technical background due South America’s crop production concerns, soybeans can’t break for now.
Wheat lacks a fundamental at the moment outside of the Russia-Ukraine dispute.
Thus, wheat will follow corn and soybeans and all the growing risk is in front of US futures.
However, wheat needs another spark to take a leg higher.
Meantime, according to the FAO, the U.N. food agency, world food prices rebounded in January and remained near 10-year highs, led by a jump in the vegetable oils index.
Indeed, the Food and Agriculture Organization’s (FAO) food price index, which tracks the most globally traded food commodities, averaged 135.7 points last month against an upwardly revised 134.1 in December.
That figure was previously given as 133.7.
Particularly, FAO said its vegetable oils index rose 4.2% month-on-month in January to reach record levels.
The FAO dairy price index also increased 2.4%, its fifth consecutive monthly rise, with the steepest gains registered by skim milk powder and butter.
The cereal price index rose just 0.1%, with maize posting a 3.8% gain on the month, spurred by worries about persistent drought conditions in South America.
By contrast, world wheat prices fell 3.1% on the back of large harvests in Australia and Argentina.
Meat prices edged up in January, while sugar was the sole index to post a decrease, shedding 3.1% from the previous month due partly to favourable production prospects in major exporters India and Thailand.
Higher food prices have contributed to a broader surge in inflation, and the FAO has warned that the higher costs are putting poorer populations at risk in countries reliant on imports.
Meantime, FAO said it raised its projection of global cereal production in 2021 because of larger-than-previously estimated wheat outputs in Argentina and Australia, along with slightly higher production estimates in Russia and Ukraine.
Particularly, FAO raised its projection of global cereal production in 2021 to 2.793 billion tonnes from a previous estimate of 2.791 billion tonnes.
“For 2022, global wheat plantings are expected to expand, buoyed by mostly conducive weather conditions in the northern hemisphere, although high input costs could deter a larger expansion,” FAO said.
World cereal utilization in 2021/22 was forecast to rise 1.6% above the 2020/21 level, hitting 2.805 billion tonnes.
FAO’s forecast for world cereal stocks by the close of seasons in 2022 stood at 824 million tonnes, up 2.2 million tonnes since November and only slightly lower than their opening levels.
Author: Sandro F. Puglisi
