Reports that Russia had withdrawn some troops from the Ukrainian border triggered a broad sell-off on commodities markets, that significantly trimmed prices.
US farm markets have not been spared and were sold off, yesterday.
Corn prices, indeed, slumped more then 2.7%% lower.
Soybeans dropped nearly 1.2%.
Soybean meal ended the day 2.14% lower.
Bean oil was firmer by the close, fading just 0.27% at the bell, even thought at one point down by triple digits on Tuesday.
The wheat complex was the most hammered, with some contracts down more then 2.7% by the close.
Particularly, Chicago wheat futures were down 2.44% with a 19 1/2 cent pull back for March.
KC wheat closed 2.72% weaker, with March, however, holding above the $8 mark, but went home on a 22 1/2 cent dip.
Minneapolis wheat closed 1.35% in the red, with a 13 cent drop in March.
In energy market, oil prices steadied on this morning after retreating more than 3% in the previous session.
Thus, Brent traded at $93.19 a barrel at 02:53 GMT, down 10 cents, having slid 3.3% overnight.
U.S. West Texas Intermediate (WTI) crude also held steady and last traded at $92.13 at 02:47GMT, after the contract ended Tuesday’s session down 3.6%.
Beyond the Ukraine tension, the oil market remains tight and prices are still on course for a move towards $100 a barrel, analysts said.
Both benchmarks had hit their highest since September 2014 on Monday, with Brent touching $96.78 and WTI reaching $95.82.
The price of Brent jumped 50% in 2021, while WTI soared about 60%.
On the freight market, the Baltic Exchange’s dry bulk sea freight index snapped a five-session winning streak yesterday as demand for capesize and panamax vessels weakened.
The overall index, which factors in rates for capesize, panamax and supramax vessels, indeed, was down 16 points, or 0.81%, at 1,968, breaking its winning streak.
Particularly, the capesize index dipped 82 points, or 4.6%, to 1,713, falling for the fourth session.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, fell by $679 to $14,209.
The panamax index inched 18 points lower, or 0.7%, at 2,400.
Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, fell by $162 to $21,601.
The supramax index, in contrast, was up 49 points to 2,277.
In equities markets, U.S. stock indexes rallied moderately, after Russia announced the start of a pullback of some of its troops from the Ukraine border.
Technology companies led the rebound.
In addition to technology stocks, banks and companies that rely on consumer spending also helped lift the market.
Semiconductor chip stocks rose in anticipation of blowout earnings results from Nvidia on Wednesday.
Meantime, on the negative side, Tuesday’s U.S. Jan producer price data that showed a larger than expected increase in prices.
Particularly, U.S. Jan final-demand PPI rose +1.0% m/m and +9.7% y/y, stronger than expectations of +0.5% m/m and +9.1% y/y.
Also, the Feb Empire manufacturing survey general business conditions index rose +3.8 to 3.1, weaker than expectations of 12.0.
Also, energy stocks retreated Tuesday after crude prices tumbled more than -3%.
In this context, the S&P 500 rose 1.6% to 4,471.07.
Roughly 80% of stocks within the benchmark S&P 500 index notched gains.
The gain snapped a three-day losing streak and nearly made up for all of its losses last week.
The Dow Jones Industrial Average rose rose 422.67 points or 1.2% to 34,988.84 and the tech-heavy Nasdaq composite climbed 348.84 points or 2.5% to 14,139.76.
Smaller company stocks outpaced the broader market, as the Russell 2000 rose 2.8% to 2,076.46.
Bond yields continued rising.
The yield on the 10-year Treasury rose to 2.05% from 1.99% late Monday.
The gains helped lift banks, which rely on higher bond yields to charge more lucrative interest rates on loans.
On this wake, JPMorgan Chase rose 1.5%.
The dollar index, meantime, fell -0.398 (-0.41%).
Meantime, Asian shares also rose this morning.
Indeed, Japan’s benchmark Nikkei 225 jumped 2.2% in afternoon trading to 27,457.55.
Australia’s S&P/ASX 200 rose 1.1% to 7,284.90.
South Korea’s Kospi surged 1.9% to 2,727.39.
Hong Kong’s Hang Seng added 1.2% to 24,635.41, while the Shanghai Composite gained 0.6% to 3,466.14.
Meantime, the Chinese government reported consumer prices rose 0.9% over a year earlier in January while prices of goods as they left the factory rose 9.1%.
China has been hit by the same supply disruptions that are pushing prices up in the United States and Europe, but the impact on Chinese consumers has been smaller.
January inflation was down from December’s 1.5%.
Analysts expect it to decline further.
On the weather side, a cross-country storm (dubbed “Winter Storm Miles” by the Weather Channel) is moving across the country this week and will be dropping rain, snow, ice and high winds across a wide swath of the U.S. along the way.
Further out, NOAA’s 8-to-14-dayoutlook predicts warmer-than-normal conditions for the eastern half of the United States between February 22 and February 28, with seasonally wet weather likely for the Midwest and Plains.
On the demand side, private exporters reported to the USDA sales of 101,000 metric tons of soybeans for delivery to Mexico.
Of the total, 53,500 metric tons is for delivery during the 2021/2022 marketing year and 47,500 metric tons is for delivery during the 2022/2023 marketing year.
We will keep a close eye on the latest ethanol data from the U.S. Energy Information Administration, out on this morning.
Production for the week ending February 4 took a moderate hit and fell below the 1-million-barrel-per-day benchmark for the first time since last October.
Meantime, soybean crushing activity declined according to Nopa, while remaining at a high level compared to previous years.
Yesterday’s NOPA crush report, indeed, had 182.216 mbu of soybeans processed during January.
That was below the 186.7 mbu the trade expected and 2.44 mbu lower yr/yr.
NOPA members reported soy oil stocks of 2.026 billion lbs, which was just under the average pre report estimate of 2.03b lbs.
Meantime, Indiana reported a “presumptive-positive case” of H5 bird flu at a commercial turkey farm on Tuesday, after a separate outbreak in turkeys last week put the U.S. poultry industry on high alert for the disease.
Samples from the flock of 26,473 birds in Dubois County are being verified at a U.S. Department of Agriculture lab in Iowa, the Indiana State Board of Animal Health said.
Officials identified a highly lethal H5 strain of the flu in turkeys in Dubois County last week and in a commercial chicken flock in Kentucky on Monday.
In this context, corn basis bids were mostly steady across the central U.S., but did firm 3 cents higher at an Ohio elevator.
Soybean basis bids were mostly steady across the central U.S., but did improve 3 cents at an Iowa river terminal.
The funds were net sellers yesterday for 25,000 lots of corn, 14,500 lots of soybeans and 13,000 lots of wheat.
From South America, according to some models, rain prospects are building, and many are reviewing the lower end of estimates which may be a little too aggressive in light of better conditions in parts of Brazil.
AgroConsult estimates Brazilian soy output at 125.8 MMT, down by 8.4 from their prior figure.
USDA’s Ag Attache reported 134.5 MMT as their Brazilian soybean crop estimate dated the 9th.
Meantime, Brazil’s Ag Rural reported soybean harvest at 24% complete.
On the other hand, Brazil’s Anec estimates that the country will export 7,1 million tonnes of soybeans in February, which is a reduction of 5.3% from the group’s projection a week ago.
Anec also estimates that Brazilian corn exports this month will total 350.538 t.
Meantime, producers of ethanol in Brazil sold 32% less of the fuel in January compared to the same month a year earlier, industry group Unica said in a report on Tuesday, after high prices dented demand.
Total sales in January, indeed, were 1.76 billion liters, considering both local and export markets.
That was the smallest volume since at least April 2021.
Sales of hydrous ethanol, the type that competes with gasoline for car owners’ preference at the pumps, fell 44% to 918 million liters.
In Argentina, Argentina’s farm belt is set for days of hot and dry weather ahead, weather experts said on Tuesday, stoking fears among grains farmers whose corn and soy crops are in sore need of rainfall after spells of drought.
Even in Europe, it was enough for the Russians to announce a partial withdrawal of their troops, to have a sharp drop in grain prices on Euronext.
Rapeseed prices gave way in the 2022 harvest but remained firm in the 2021 harvest.
Meantime, per the latest data from the European Commission, 2021/22 EU corn imports reached 10.12 million tonnes through February 13, which is slightly behind last year’s pace so far when reached 10.46 million tonnes.
European Union soybean imports during the 2021/22 marketing year have reached 8,27 million tonnes through February 13, trending 10% below last year’s pace so far.
EU soymeal imports are also down year-over-year, with 10.15 million metric tons since the beginning of July.
Rapeseed imports within the EU were at 3.18 million tonnes on February 13, compared to 4.39 million last year to date.
Wheat exports are posted at 17.27 million tonnes against 16.87 last year.
Barley exports stand at 5.15 million tonnes against 4.85.
Meantime, the Netherlands will cull about 77,000 chickens on a farm where a case of highly contagious bird flu was detected, the agriculture ministry said on Wednesday.
About 20 cases of the highly lethal form of avian flu have been reported in the Netherlands this year.
On the production side, “the weather conditions throughout Europe are considered satisfactory for the moment, allowing us to remain confident about the state of the crops”, underlines Agritel firm.
From the Black Sea basin, SovEcon raised their 2022 Russian wheat crop estimate by 3.6 MMT to 84.8 MMT, noting favorable weather to start the season.
If realized, this would be 11.6% above last year’s production but just shy of 2020’s record-breaking effort.
Meantime, in Russia, the grain export quota came into effect yesterday, February 15, and will be maintained until June 30, 2022.
The quota for wheat will be 8 Mt, and 3 Mt for rye, barley and corn.
The volumes to be exported were allocated according to the principle of historical sales of the companies.
Thus, the largest of them have logically obtained the largest shares.
Small businesses, on the other hand, have obtained minimal volumes that they will not necessarily be able to export, particularly because of logistics costs.
However, Russian market experts believe that grain exports may be lower than the volumes displayed, with a consensus for wheat exports for this period that ranged of 7.3-8 Mt.
On the other hand, London’s marine insurance market on Tuesday added the Ukrainian and Russian waters around the Black Sea and Sea of Azov to its list of areas deemed high risk.
Their guidance is watched closely and influences underwriters’ considerations over insurance premiums.
The Joint War Committee, which comprises syndicate members from the Lloyd’s Market Association and representatives from the London insurance company market, normally meets every quarter to review areas it considers high risk for merchant vessels and prone to war, strikes, terrorism and related perils.
“The application of this list on individual contracts will be a matter for specific negotiation,” the circular issued on Tuesday said, without providing further detail.
Meantime, Ukraine’s exported over 300,000 mt of wheat during the week to Feb. 14, taking overall shipments to 17.5 million mt since the beginning of marketing year 2021-22 (July-June), according to data released by agriculture ministry on Feb. 14.
Wheat exports through Feb. 14 were up 33% on the year.
Ukraine shipped out 16.6 million mt of wheat in MY 2020-21.
Meantime, according to agriculture ministry data, farmers in Ukraine planted winter wheat across 6.5 million hectares for MY 2022-23, winter barley areas 1 mln ha, winter rapeseeds areas 1,02 mln ha.
On the other hand, despite the face pace of shipments, Ukraine’s wheat export prices have softened over the month and decline $13/mt.
S&P Global Platts assessed FOB prices of 11.5% protein wheat from Ukraine at $306/mt on Feb. 14, down $1/mt on the day.
From the Middle Kingdom, Dalian Corn Prices in China were weaker on Tuesday as well, dropping 4 yuan to 2,699 yuan/MT (~$10.81/bu).
From South East Asia, Pakistan will allow India to use its territory to transport 50,000 metric tonnes of wheat and medicine to Afghanistan, beginning this month, Pakistani customs officials said on Tuesday.
It marks a response to the humanitarian crisis in Afghanistan, where poverty and hunger have spiralled since the Taliban took power last year.
The first convoy of 60 trucks will cross from India to Pakistan at the Wagah border – a key goods transit point between the two countries – on Feb. 22, Additional Director of Customs Beelam Ramzan told Reuters.
From Australia, local markets took a breather yesterday.
Wheat values were A$1/t stronger.
Liquidity was on the quiet side and we saw much the same through barley.
Canola values were off $5-$10/t along the east coast.
The sorghum market is holding, despite the large harvest and selling activity remaining fluid across the board.
There is still a big focus on getting trucks and storage while export margins remain very attractive.
On the international trade scene, Turkey’s state grain board TMO has issued an international tender to purchase and import about 6,000 tonnes of crude sunflower oil.
The deadline for submission of price offers in the tender is Feb. 23.
Shipment is sought between March 2 and March 25 with unloading in the Turkish port of Tekirdag.
South Korea issued tenders to purchase 82,000 t from the United States and Canada that closes tomorrow.
Of the total, 61% is expected to be sourced from the U.S. The grain is for shipment in April.
South Korea bought 400,000 T of Indian wheat last week, according to Reuters.
Philippines, Southeast Asian importers take Australian wheat,
But Indian wheat is one of the cheapest origins available, quoted last week at $315 a tonne, including cost and freight (C&F), to Asian destinations.
Australian Standard White (ASW) wheat is being offered at $335 a tonne C&F.
In comparison, wheat from the Black Sea is around $355 a tonne C&F.
Japan issued a regular tender to purchase 54,692 MT of food-quality wheat from the United States that closes on Thursday.
The grain is for shipment between March 21 and April 20.
Egypt, the world’s top wheat buyer, has strategic reserves sufficient for the next 4.2 months, according to the country’s supply minister, Ali Moselhy, consequentially, Egypt will launch a new tender to import wheat next week, Egypt’s Supply Minister Ali al-Moselhi told Al Sharq TV on Tuesday.
Jordan’s state grain buyer has issued an international tender to buy 120,000 tonnes of milling wheat sourced from optional origins.
The deadline for submission of price offers is Feb. 23, with shipment sought in a series of possible combinations in 60,000 tonne consignments.
Possible shipment combinations are July 16-31, Aug. 1-15, Aug. 16-31 and Sept. 1-15.
The country has also issued a tender for 120,000 tonnes of animal feed barley, closing on Feb. 22.
In its last wheat tender on Feb. 1, Jordan’s state grains buyer purchased 60,000 tonnes after also seeking offers for 120,000 tonnes.
That’s all.
To all of you I wish you a good day.
Author: Sandro F. Puglisi
