Markets were rattled after Putin recognized the independence of rebel-held areas in Ukraine and sent in troops in defiance of U.S. and European pressure.
According to some analysts, this escalating tensions between the two global crop heavyweights are likely to force wheat, corn and sunflower oil buyers to seek alternative shipments, on potential export disruptions in the Black Sea region.
That could drive more up world food prices already near multi-year highs.
Consequentially, US farm markets have seen corn, soybean and wheat prices all carve out substantial gains on Tuesday.
The wheat complex showed the most upside, with some contracts moved more than 5.5% higher by the close.
Particularly, SRW rallied nearly the limit, up 5.93% form last Friday, with most of the gains late in the session.
KC HRW futures closed 5.57% higher, posting the day’s high within a penny of the limited 45 cents.
Spring wheat futures were also higher, though gains were limited to 2.6%.
Corn jumped more than 3.1% higher.
Soybeans rose nearly 2.1%.
Soymeal ended the day with 1.29% gains.
Soy oil traded triple digits higher as rose 3.82%, with new contract highs set and prices above 70c per lb. at the close.
Oats prices were counter to the other row crops, closing the day 1.34% weaker.
In energy market, oil prices stabilised on this morning after hitting seven-year highs in the last session as it became clear the first wave of U.S. and European sanctions on Russia for sending troops into eastern Ukraine would not disrupt oil supplies.
“The sanctions that are being imposed today as well that could be imposed in the near future are not targeting and will not target oil and gas flows,” a senior U.S. State Department official told reporters late on Tuesday.
Sanctions imposed by the United States, the European Union, Britain, Australia, Canada and Japan were focused on Russian banks and elites, while Germany halted North Stream 2, a major gas pipeline project from Russia.
At the same time, the potential return of more Iranian crude to the market, with Tehran and world powers close to reviving a nuclear agreement, also kept a lid on prices.
Thus, Brent crude rose 11 cents, or 0.01%, to $96.95 a barrel at 07:30 GMT, after soaring as high as $99.50 on Tuesday, the highest since September 2014.
U.S. West Texas Intermediate (WTI) crude futures were up 6 cents, or 0.07%, to $91.97 a barrel, after hitting $96 on Tuesday.
In the freight market, yesterday the Baltic Exchange’s dry bulk sea freight index rose for a third straight session, climbing to its highest in more than a month as rates across vessel segments strengthened.
The overall index, which factors in rates for capesize, panamax and supramax vessels,indeed, rose 103 points to 2,148, its highest level since Jan. 11.
Particularly, the capesize index jumped 166 points, or almost 9%, to 2,015, its highest level since Jan. 12.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, rose by $1,378 to $16,709.
The panamax index rose 155 points to 2,596.
Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, gained $1,397 to $23,366.
The supramax index advanced 17 points to 2,359.
In equities markets, global stock prices sank Tuesday as traders tried to figure out the impact of Russia’s moves and sanctions imposed by Washington, Britain and the 27-nation European Union on its banks, officials and business leaders.
U.S. stock indexes closed down, with the S&P 500 and Dow Jones Industrials falling to 4-week lows and the Nasdaq 100 dropping to an 8-1/2 month low.
However, stock indexes rebounded from their worst levels on relief the sanctions on Russia weren’t more severe.
Indeed, “current U.S. sanctions on Russia are less-than-feared by the market,” said Anderson Alves of ActivTrades in a report.
Alves noted American officials have more “acute options” including reducing Russia’s access to the SWIFT system for global bank transactions.
Meantime, hawkish comments from Fed Governor Bowman were bearish for stocks when she said she favors “forceful action” to quell high inflation and that the FOMC may raise the federal funds rate a half percentage-point next month if incoming readings on inflation come in too high.
Tuesday’s U.S. economic data was bullish for stocks.
Particularly, the Conference Board U.S. Feb consumer confidence index fell -0.6 to 110.5, stronger than expectations of 110.0.
Also, the Feb Markit manufacturing PMI rose +2.0 to 57.5, stronger than expectations of 56.0.
In addition, the Dec S&P CoreLogic composite-20 home price index rose +1.46% m/m and +18.56% y/y, stronger than expectations of +1.1% m/m and +18.1% y/y.
In this context, on Wall Street, the S&P 500 fell 1%closing to 4,304.76.
That puts it 10.3% below its Jan. 3 all-time high and into a correction, or a decline of at least 10% but less than 20%.
The Dow Jones Industrial Average lost 1.4% to 33,596.61.
The Nasdaq composite lost 1.2% to 13,381.52.
The dollar index fell -0.009 (-0.08%) to 96.011.
The dollar index on Tuesday erased an overnight rally and closed modestly lower, as a recovery in U.S. stock indexes from their worst levels curbed liquidity demand for the dollar.
A rebound in EUR/USD from a 1-week low Tuesday also weighed on the dollar.
Losses in the dollar were limited Tuesday by stronger-than-expected U.S. economic data.
Meantime, Asian stock markets rebounded on this morning.
The Shanghai Composite Index rose 0.6% to 3,476.15 and the Hang Seng in Hong Kong gained 0.7% to 23,682.90.
The Kospi in Seoul advanced 0.5% to 2,720.20 and Sydney’s S&P-ASX 200 added 0.5% to 7,196.40.
New Zealand rose after the central bank raised its benchmark interest rate by one-quarter point to 1% to cool inflation.
The Reserve Bank of New Zealand said its benchmark rate would be raised to more than 3% by next year.
India’s Sensex opened up 0.2% at 57,425.96.
Indonesia gained while Singapore and Bangkok declined.
On the weather side, most parts of the Midwest and Plains will see at least some measurable precipitation between today and Saturday, with the greatest amounts falling on the Ohio River Valley, according to the latest 72-hour cumulative precipitation map from NOAA.
The agency’s 8-to-14-day outlook predicts seasonally cool conditions for the eastern Corn Belt between March 1 and March 7, with wetter-than-normal weather heading for the High Plains and upper Midwest.
Meantime, condition ratings for winter wheat declined during February in Kansas and Oklahoma, the top two U.S. winter wheat producers, the U.S. Department of Agriculture (USDA) said on Tuesday.
The USDA, indeed, rated 26% of the Kansas winter wheat crop in good to excellent condition as of Feb. 20, down from 30% in its previous monthly report released on Jan. 24 and down from 40% a year ago.
In Oklahoma, just 9% of the state’s wheat was rated good to excellent, down from 16% the prior month, and from 48% a year ago.
Wheat ratings also declined in South Dakota (24% g/e vs 31% a month ago and down from 41% a year ago), but improved in Colorado (21% g/e vs 20% in Jan) and Montana (21% g/e vs 14% in Jan).
Wheat ratings improved also in Texas (10% g/e vs 7% a month ago) but are sharply down from 30% a year ago.
U.S. farmers planted 34.4 million acres of winter wheat for 2022, the most in six years, the USDA said last month.
However, most of the Plains breadbasket is in the grip of a drought that is expected to persist through May, according to the latest seasonal outlook from the U.S. Climate Prediction Center.
Ratings improved in Illinois, where farmers grow soft red winter wheat used to make cookies and snack foods.
The USDA rated 59% of the Illinois crop as good to excellent, up from 42% by Jan. 24.
On the demand side, USDA reported 1.577 MMT of corn was shipped during the week that ended 2/17.
That was toward the higher end of trade estimates and was up 8.3% w/w and a 23% increase from the same week last year.
China was the week’s top destination with over 555k MT of the total. Japan was also shipped 388k MT during the week.
USDA’s weekly data showed the season’s total corn shipments reached 21.641 MMT through 2/17.
That compares to 24.196 MMT shipped MYTD at the same point last season.
As for milo, exports were 257,855 MT during the week that ended 2/17.
That was up from 182k LW and 124k MT last year.
MYTD sorghum exports were up to 2.87 MMT, but still trail last season’s pace by 17%.
Soybean export inspections took a modest step lower from a week ago, as report confirmed 975,102 MT of beans were shipped during the week that ended 2/17.
That was the lowest since the week of 9/30 but compares to just 804,038 MT shipped during the same week last year.
FAS’s weekly data showed the accumulated soybean program reached 39.8 MMT through 2/17.
That is still 22% behind last year’s pace.
Wheat export inspections improved moderately week-over-week, moving to 539,366 MT during the week that ended 2/17.
That was up 80k MT from last week, and a 214k MT increase from the same week last year.
The bulk of the wheat shipped was HRW, with 37% of the total, followed by spring wheat’s 28% share.
USDA also added 24,149 MT of wheat shipments to past weeks taking the MYTD shipment to 15.047 MMT.
That compares to 17.8 MMT through the same point last season.
Meantime, private exporters reported to the USDA a sale of 120,000 metric tons of hard red winter wheat for delivery to Nigeria.
Of the total, 60,000 metric tons is for delivery during the 2021/2022 marketing year and 60,000 metric tons is for delivery during the 2022/2023 marketing year.
Also, reported a sale of 132,000 metric tons of soybeans for delivery to China during the 2022/2023 marketing year.
In this context, corn basis bids were steady to firm after tracking 1 to 5 cents higher across four Midwestern locations on Tuesday.
Soybean basis bids were mostly steady across the central U.S., but did track 2 cents higher at an Ohio elevator and firm 3 cents at an Illinois river terminal.
Meantime, very strong activity on the fund side yesterday which showed net buyers for 23,500 lots of corn, 18,500 lots of soybeans and 19,000 lots of corn.
From Canada, last Friday, the AAFC cut Canadian wheat exports by another 1.0 million mt to 13.0 million mt.
Feed use was raised by 459k mt.
Ending stocks were seen 500k mt higher at 3.5 million mt.
Higher beginning stocks for the 2022/’23 year led AAFC to raise their feed use number by 250k mt while the remaining 205k mt went into ending stocks which rose to 4.3 million mt.
Canadian shipping week 27 exports were 309.0k mt for a season total of 6.4 million mt, down 41% (-4.5 million mt) from last year.
Weekly exports needed to meet AAFC’s recently lowered projection are 276k mt per week.
This is possible, but it will require to do better than the current pace of 228k mt per week.
As for durum, the AAFC raised 2022/23 beginning stocks of durum and decreased feed use by 100k mt for a 150k mt increase in ending stocks to 900k mt.
Year-to-date US commercial durum sales are 168k mt which is just 26% of last year’s volume.
Similarly, Canadian week 28 durum exports were 75.8k mt for a seasonal total of 1.4 million mt.
This is 45% (-1.7 million mt) of last year’s volume.
The AAFC is still expecting that Canada will export 2.4 million mt of durum, which means average weekly exports need to be 39k mt per week.
From South America, in northern Brazil in the state of Mato Grosso, the rains are hampering harvesting sites, while the south of the country remains plagued by water deficit.
According to Ag Rural, the soybean harvest in Brazil would be completed at 33% against 15% last year to date.
53% of second corn crop (safrina) is sown, compared to 24% last year.
Meantime, Brazil’s Anec estimates that Brazilian February soybean exports will total 6.7 MMT, which is slightly above the projection it made a week ago.
Anec also estimates that Brazilian corn exports will reach 1.83 MMT this month.
Meantime, U.S. grains merchant Archer-Daniels-Midland Co said on Tuesday it has carried out the largest soybean shipment in the history of the Ponta da Montanha Grain Terminal (TGPM), located in the northern Brazilian city of Barcarena, as it shipped 84,802 tonnes in a single vessel.
It also represented the largest volume ever shipped on a grain vessel from ports located in the Amazon Basin, the company told Reuters.
“This showed us that we have one more option to move soybeans through the TGPM, using our own vessel… This is definitely something we will do again more often”, ADM’s South America Logistics Director, Vitor Vinuesa, said in a statement.
ADM-owned bulk carrier MV Harvest Frost, which is 237 meters (777.56 ft) long and 40 meters wide, set sail last week for the port of Rotterdam in the Netherlands, where the company also owns a terminal.
The company said all the soybeans moved will be crushed by ADM itself, obtaining products such as soymeal, cooking oil and biodiesel.
The previous record for shipments from Brazil’s northern region was set at the port of Santarem in 2020, when 82,531 tonnes of soybean were moved in a single vessel.
While it marks a bullish sign for soybean markets, the move shows that Brazilian shipping logistics are becoming efficient enough to compete with American soybean exporters.
Meantime, BAGE maintained their 51 MMT forecast for Argentina’s 21/22 corn output, though cited a potential further downward revision as dryness is expected to persist.
The Exchange maintained its 42 MMT soy production outlook for Argentina.
Argentinian grains inspectors went on strike on Monday.
The organized strike, seeking a bonus payment, was to last 24-hours though without a counter offer it could be prolonged.
Meantime, Argentine farmers have sold 39.2 million tonnes of soybeans from the 2020/21 season so far after selling some 368,200 tonnes in the most recent week period, the Agriculture Ministry said on Tuesday in a report that included data through Feb. 16.
The pace of sales of the country’s main cash crop was slightly behind the previous season, when sales of 40.7 million tonnes of the oilseed had been recorded by the same date.
Regarding Argentina’s 2021/22 soybean crop, the planting of which is almost complete, there have already been sales of 7.8 million tonnes, according to official data.
Meantime, Argentina’s farm sector has asked a federal court to rule taxes levied on grain exports as unconstitutional, a challenge that threatens a key source of the country’s tax revenue.
Major farm group Argentine Rural Society (SRA) said late on Monday it had filed a case arguing that grain export taxes have been illegally charged since Jan. 1, 2022.
Argentina currently charges taxes of 33% on soybean exports, 31% on soymeal and soy oil, and 12% on wheat and corn shipments.
In Europe, market reacted strongly too, to the situation in Ukraine by displaying their nervousness.
Thus, the prices of wheat and corn on Euronext rose 4.5 and 4.75 €/t, respectvily, while rapeseed soared to more than 729 €/t in the 2021 harvest, and more than 635 €/t in the 2022 harvest.
In this context, French Finance Minister Bruno Le Maire told BFM TV and RMC Radio on Wednesday that he was keeping a close eye on rising wheat prices, which could add to inflationary pressures affecting many consumers in France.
Meantime, European Union soft wheat exports during the 2021/22 marketing year reached 17.68 million tonnes through February 20, tracking slightly above the prior year’s pace so far, when reached 17.25 million tonnes.
EU barley exports are also slightly higher year-over-year, with 5.17 million tonnes against 5.04 last year.
EU corn imports are at 10.55 million tonnes through February 20, which is slightly below year-ago results of 10.79 million.
European Union soybean imports during the 2021/22 marketing year have reached 8.66 MMT, which is moderately below last year’s pace so far.
EU soymeal imports are also down year-over-year, with 10.51 million metric tons.
Rapeseed imports at European level are posted on February 20 at 3.23 million tonnes against 4.39 million last year to date.
From North Africa, Tunisians are suffering delays to salary payments and shortages of grains, medicines and sugar, a foretaste, some economists say, of a rapidly looming public finances crisis that looks increasingly hard to avert.
Economists, indeed, say that Tunisia is running out of money and so is struggling to pay state workers and foreign suppliers.
Talks on an International Monetary Fund (IMF) rescue package have been repeatedly stopped and started because of Tunisia’s political tumult, but they recommenced last month.
An IMF deal is seen as necessary to unlock further bilateral help from Western allies and Gulf states as Tunisia tries to finance its deficit and make debt repayments.
Central bank governor, Marouane Abbasi, has said Tunisia risks a crisis on the scale of those in Lebanon or Venezuela.
Since December, labour union officials at the port of Sfax have said numerous grain shipments have not docked or unloaded because the state cannot pay for them.
Trade Minister Fadila Rabhi has denied this, saying the delays were caused by labour union strikes and that there is enough grain to last until May.
Other subsidised staples, including sugar and semolina are also in short supply through government agencies, said a wholesaler.
A national bakers association says there has been a continuous shortage of flour for three months, disrupting activity and pushing hundreds of bakeries towards collapse.
At pharmacies, some centrally bought medicines including for diabetes and heart conditions, are no longer available.
From the Black Sea basin, quality of Russian wheat of the harvest-2021 is the record high over the last years, declared Irina Zaychenko, deputy general director of Federal State-Funded Institution «Federal Centre of Quality and Safety Assurance for Grain».
“Food wheat production amounted to 65.5 mln tonnes in Russia in 2021, out of the total harvest of 76 mln tonnes (according to Rosstat data).
It is the largest food wheat crop in recent years.
She added that the share of wheat with protein higher than 13.5% increased.
“We have the maximal volume of such wheat – 37 mln tonnes. The volume of wheat with the protein content higher than 12.5% totaled 59 mln tonnes” – the expert said.
Zaychenko told that the volume of feed wheat decreased sizably to 9.7 mln tonnes or 12.9% of the overall production.
It is the lowest figure over the last 20 years.
However, the Russian grain market has been going through a period of sluggishness lately due to the prevailing export taxes.
Its future evolution will now depend on the country’s next military decisions as well as the impact of the sanctions that will be imposed on it.
Meantime, the weakening of the ruble against the US dollar is likely to support local prices, but sluggish demand for Russian sources, rising inventories in the south of the country and impending increases in freight prices should drive prices down in the local market.
On the other hand, according to the State Customs Service, Ukraine exported 17.1 mln tonnes of wheat in July-January 2021/22 MY at the sum of 4.4 bln USD, up by 31% y/y in volume terms and up by 68% in monetary terms.
Turkey doubled the import of Ukrainian wheat in July-January 2021/22 MY to 1.6 mln tonnes.
It was the third largest importer of the grain.
Egypt was on the second place.
It raised the import of Ukrainian wheat by 60% to 2.5 mln tonnes. Indonesia was the largest importer.
It bought 2.7 mln tonnes of Ukrainian wheat, up by 21%.
Additionally, Saudi Arabia increased the import of Ukrainian wheat by 11 times to 690.5 thsd tonnes. It was on the fifth position in the list of importers.
APK-Inform forecasts the export of Ukrainian wheat at22.5 mln tonnes in 2021/22 MY, up 35% y/y.
The country has already shipped 76% of its wheat export potential over 7 months of the season.
From the Middle Kingdom, China will maintain stable grain planting acreage, and improve production capacity of soybean and other oilseeds, in an effort to bolster food security, a document issued on Tuesday showed.
Consequentially, China will increase subsidies for land rotation programmes and reward for edible oils production counties.
Beijing also said it will actively deal with unfavourable impact from late planting of wheat and strictly control corn-based fuel ethanol production, according to the key rural document for 2022, Xinhua reported.
Meantime, China will sell some soybeans from its state reserves to boost supplies to the world’s biggest oilseed market, said the National Food and Strategic Reserves Administration on Tuesday.
The administration did not give details of volumes and timing of the auctions.
Soymeal prices have jumped, just as pig farmers are struggling with low prices for their hogs.
China crushes soybeans to produce soymeal to feed its huge livestock industry.
The state reserves will also sell some edible oils as part of a rotation of its oil stocks, it said.
From South East Asia, India on Tuesday dispatched the first in a series of aid shipments containing wheat to Afghanistan as the country faces poverty and hunger since the takeover by the Taliban last year.
The first convoy of 50 trucks carrying 2,500 metric tonnes of wheat left the north Indian city of Amritsar after a ceremony attended by India’s foreign secretary Harsh Vardhan Shringla, India’s foreign ministry said in a statement.
“India remains committed to its special relationship with the people of Afghanistan,” the statement said.
In total, India plans to send 50,000 tonnes of wheat to Afghanistan on an infrequently used land route through Pakistan.
From Australia, more moisture build in the eight-day BOM forecast, with 50 millimetres possible in Queensland and northern New South Wales cropping regions.
Meantime, local markets were firm yesterday amid increased volume traded.
Barley markets were relatively steady, while canola continued to rally along the east coast.
On the international trade scene, Jordan’s state grain buyer made no purchase in an international tender for 120,000 tonnes of animal feed barley which closed on Tuesday.
Two trading houses participated in the tender on Tuesday, CHS and Viterra.
Meantime, on this morning, Jordan’s state grains buyer has issued a new international tender to purchase 120,000 tonnes of animal feed barley.
The deadline for submission of price offers in the tender is March 1.
Shipment in the new tender is sought in a series of possible combinations in 60,000 tonne consignments.
Possible shipment combinations are between July 16-31, Aug. 1-15, Aug. 16-31 and Sept. 1-15.
A separate tender from Jordan to purchase 120,000 tonnes of milling wheat also closes on this morning.
The lowest price offered in the tender from Turkey’s state grain board TMO on Wednesday to purchase and import about 6,000 tonnes of crude sunflower oil was estimated at $1,512.49 a tonne c&f.
The offer was believed to have been placed by trading house Prime.
No purchase has yet been reported with price negotiations continuing and provisional results are expected later on Wednesday.
Only one other offer was reported, from trading house Aston at $1,535 a tonne c&f. Shipment is sought between March 2 and March 25 with unloading in the Turkish port of Tekirdag.
Turkey would also have bought around 255,000 t of feed barley from optional sources.
The tender seeks shipment between March 1-31 to a series of Turkish ports.
Supplies already in warehouses in Turkey can be offered in the tender.
Traders said that purchases were made as followed:
Iskenderun 25,000 t offered by Yayla at $327.90 ex warehouse;
Iskenderun 25,000 t offered by Viterra at $328.03 ex warehouse;
Iskenderun 25,000 t by GTCS at $325.00;
Mersin 25,000 t by Viterra at $328.17 ex warehouse;
Mersin 25,000 t by GTCS at $325.00;
Derince 25,000 t by GTCS at $325.00.
Taiwan issued an international tender to purchase 66.000 t of animal feed corn sourced from the United States, South America or South Africa.
The deadline for offers is on Friday, and the grain is for shipment in May or early June.
That’s all.
To all of you I wish you a good day.
Author: Sandro F. Puglisi
