Good morning Farmer Family …
US farm markets made it through a choppy session on Wednesday with small to moderate gains by the close.
Worries about tight supplies in the United States and export challenges in Ukraine are still front and center of debat.
Also, investors are squarring their positions, ahead June USDA WASDE Report out tomorrow.
Thus, in spite prices being not still prone to spurre substantial profit-takings, that don’t means that this could not happens in the next sessions.
Indeed, corn prices faded after rallying early in the morning, but then the market consolidated in the afternoon.
Soybeans had set new contract highs during the early session rally.
For July that was $17.58, and November that was $15.73.
By the end, corn prices and soybean prices each improved around 1% and 0.7% respectively.
Soymeal prices turned red during the midweek session, closing the day down by 0.43%.
Soy oil prices closed with 1.84% gains.
The wheat complex spent much of its time on both sides of unchange.
At the end of the session, Chicago wheat prices closed 0.28% higher in the front months after printing 20-30 cent ranges.
Kansas City wheat prices went home with 0.5% gains.
Front month spring wheat prices closed the day 0.59% higher.
In energy markets, oil prices gave up early gains on Thursday after parts of Shanghai imposed new COVID-19 lockdown measures, outweighing news of China’s stronger-than-expected exports in May.
Brent crude futures for August, indeed, dipped 15 cents, or 0.1%, to $123.43 a barrel at 06:30 GMT, while U.S. West Texas Intermediate crude for July was at $121.91 a barrel, down20 cents, or 0.2%.
Both benchmarks closed on Wednesday at their highest since March 8, matching levels seen in 2008.
Brent futures, indeed, yesterday rose $3.01, or 2.5%, to settle at $123.58 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $2.70, or 2.3%, to end at $122.11.
Peak summer gasoline demand in the United States continued to provide a floor to prices.
The U.S. posted a record fall in strategic crude reserves even as commercial stocks rose last week, data from the Energy Information Administration (EIA) showed on Wednesday.
EIA’s data, indeed, showed that apparent demand for all oil products in the United States rose to 19.5 million barrels per day (bpd) while gasoline demand rose to 8.98 million bpd.
Also, China’s May exports jumped 16.9% from a year earlier as easing COVID curbs allowed some factories to restart.
That was the fastest growth since January this year and more than double analysts’ expectations.
However, despite the Chinese trade figures were upbeat, they failed to lift oil prices for long, as of far greater importance has been news that a district of Shanghai has been locked down today.
Residents of sprawling Minhang district, indeed, was ordered to stay home for two days in a bid to control COVID transmission risks.
In freight markets, the Baltic Exchange’s main sea freight index extended losses to hit a more than one-month low on Wednesday, pressured by lower rates across all vessel segments.
The overall index, indeed, lost 104 points, or 4.1%, to 2,410 points.
Particularly, the capesize index fell 211 points, or about 7.9%, to 2,457 points.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were down $1,748 at $20,380.
A drop-off in grain shipments led by closures of Ukrainian ports and China’s strict zero-COVID policy have “naturally caused a reduction in both activity and demand”, analysts said.
China accounts for around 35% of global cargo demand, they added.
The panamax index dropped 68 points, or 2.4%, to 2,747 points.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, decreased by $616 to $24,723.
The supramax index lost 47 points to 2,585 points.
In equity markets, yesterday U.S. stock indexes posted moderate losses.
Global economic concerns weighed on stocks Wednesday after the Organization for Economic Cooperation and Development (OECD) cut its 2022 global GDP forecast to 3.0% from a 4.5% estimate in December.
Greater inflation pressure from the conflict in Ukraine and lockdowns in China prompted the cut.
Stocks also saw downward pressure from inflation concerns as crude oil prices rallied to a 3-month high.
In addition, higher T-note yields undercut stocks after the 10-year T-note yield Wednesday rose +4.9 bp to 3.023%, climbing back above the 3.00% level.
A plunge of more than -5% in Intel pulled chip stocks lower and weighed on the overall market.
In this context, the S&P 500 index fell 1.1% to 4,115.77.
The Dow Jones Industrial Average shed 0.8% to 32,910.90 and the Nasdaq slipped 0.7% to 12,086.27.
Smaller company stocks fell more than the rest of the market.
The Russell 2000 declined 1.5% to 1,891.01.
Meantime, shares were mostly lower in Asia on Thursday.
Benchmarks declined across the region, except in Tokyo, where a weakening yen sent issues of some Japanese exporters higher.
Nintendo Co. issues surged 1.9% in afternoon trading, while Honda Motor Co. stocks gained more than 0.9%.
The Japanese yen has recently slid to fresh 20-year lows against the U.S. dollar, a trend the International Monetary Fund and other analysts expect to continue for a while because of higher interest rates in the U.S. and Europe, compared to Japan, where long-term interest rates remain at near-zero.
In this context, Japan’s benchmark Nikkei 225 gained 0.2% in afternoon trading to 28,290.06.
Australia’s S&P/ASX 200 slipped 1.2% to 7,037.10.
South Korea’s Kospi fell 0.4% to 2,616.46.
Hong Kong’s Hang Seng shed 1.0% to 21,788.94, while the Shanghai Composite lost 1.1% to 3,228.08.
In currency trading, the dollar was trading at 133.80 Japanese yen after hitting 134 yen levels earlier in the day, down from 134.20 yen late Wednesday.
The euro cost $1.0721, inching up from $1.0718.
On the weather side, between today and Sunday, most of the central U.S. will see at least some measurable rainfall, but few areas will gather much more than 0.25” during this time, per the latest 72-hour cumulative precipitation map from NOAA.
The agency’s 8-to-14-day outlook predicts seasonally warm and dry conditions for most of the Midwest and Plains between June 15 and June 21.
On the demand side, Weekly EIA data showed ethanol producers averaged 1.039m barrels per day through the week that ended 6/3.
That was a 32k bpd pullback from last week’s calendar year high, but marked the 3rd consecutive +1m bpd weekly output.
Ethanol stocks increased by 675k barrels to 23.638 million.
Going into today’s weekly Export Sales report, analysts surveyed expect old crop corn sales were between 125k and 500k MT.
New crop sales are estimated to be less than 600k MT from the week that ended 6/2.
As for soybean, estimates range 100k to 500k MT for old crop and range 200k to 700k MT for new crop.
Survey results show the trade is looking for between 150,000 and 300,000 MT of soymeal sales from the week that ended 6/2.
Soy oil bookings are expected to be below 25k MT in Thursday’s USDA weekly report.
As for wheat, pre-report estimates showed traders anticipate seeing between 75k MT of net cancelations and 50k MT of net new sales for old crop wheat during the week that ended 6/2.
New crop wheat sales are estimated to be between 250k and 500k MT.
In this context, corn basis bids were steady to firm on Wednesday, jumping as much as 15 cents higher at an Illinois processor and firming 3 to 5 cents at five other Midwestern locations.
Soybean basis bids were steady to mixed, especially at several Midwestern processors, which firmed 10 cents at an Indiana location, while tumbling 20 cents lower at an Iowa location.
Commodity funds were net buyers of CBOT soybean, soyoil, corn and wheat futures contracts on Wednesday, traders said.
They were net sellers of soymeal.
From South America, CONAB reported Brazil’s 2nd corn crop estimate at 88.015 MMT, up 323k MT from May on a slight yield boost.
Their total corn crop was lifted by 635k MT (0.5%) relative to the May report to 115.223 MMT.
This increase confirms the record volumes expected this year in the country.
Pre-WASDE estimates show the trade is looking for USDA to trim Brazil’s corn crop by 1.6 MMT to 114.4 MMT.
As for soybean, CONAB put their June estimate for soybean production at 124.268 MMT.
That was up slightly from last month’s 123.829 MMT figure.
Yields were hardly lifted implying a larger harvested area.
Traders estimate USDA will reduce Brazil’s soy crop by 300k MT on average to 124.7 MMT.
Conab also expects to see corn exports at 37 MMT in the current marketing year.
Abiove projects soybean exports will come in around 76,99 MMT.
Soymeal exports are steady from prior estimates of 18.3 million metric tons, with soybean oil exports anticipated to reach 2.0 MMT.
In other news, Brazilian officials are considering a biodiesel blend of 15% for later this year, up from the current 10% requirement, citing trucking fuel shortages domestically – according to wire reports.
Responding to the news, Abiove suggests current production and stocks would allow for a 12% blend, though to reach 15% they would need to crush 3 MMT more beans per year, or import soy oil.
In Argentina, soybean yields are a little better than expected, especially in northern.
As a result, Crop Consultant Dr. Michael Cordonnier raised his Argentine soybean crop estimate by 1 MMT to 41 MM.
Cordonnier kept his Argentine corn crop estimate at 49 MMT.
In Europe, markets continued to evolve according to discussions between Turkey and Russia to set up a so-called food corridor and allow Ukraine to export its grains.
From what we can gather, Russia and Turkey seem to be forging ahead with some kind of agreement, but Ukraine is a) not involved and b) not excited about the prospect of having an unprotected coastline. The clearing of the mines sounds like no easy process either and, should the US and/or UK navy get involved somehow may be they would have a thing or two to say.
Thus, in view of the difficulties in setting up these exports in complete safety, it seems that the road to reaching a compromise acceptable to everyone is still very long.
In any case, nervousness remains in place on the commodity markets and funds are reducing their positions.
Thus, European grain prices fell into negative territory at the end of the session, although wheat export premiums in France remained firm, however, supported by talk of a latest run of sales to Morocco, and reported interest from southeast Asian millers.
Meanwhile rapeseed prices found their way up, in the wake of the oil complex.
Crude oil was also rallied higher in response to strike threats in Norway and tight US inventories.
In France, showers on Wednesday may provide further relief for grains and oilseeds after spring drought.
Early harvesting of winter barley started last week in part of southwest France but a clearer picture of yield trends is not expected until late June.
Meantime, non-commercial market participants reduced their net long position in Euronext’s milling wheat futures and options in the week to June 3, data published by Euronext on Wednesday showed.
Non-commercial participants, which include investment funds and financial institutions, lowered their net long position to 177,663 contracts from 191,890 a week earlier, the data showed.
Commercial participants similarly cut their net short position to 183,920 contracts from 198,951 a week earlier.
Commercials’ short positions accounted for 66.7% of the total short position, while commercial long positions accounted for 33.8% of total long positions.
Non-commercial short positions represented 33.3% of total short positions, while non-commercial net long positions accounted for 66.2% of the total longs.
In Euronext’s rapeseed futures and options, non-commercial market participants extended their net short position to 12,467 contracts from 6,092 a week earlier.
Commercial participants expanded their net long position in rapeseed to 14,759 contracts from 8,476 a week earlier.
Meantime, farm office FranceAgriMer on Thursday lowered its forecast for French soft wheat exports outside the European Union in the current 2021/22 season to 9.1 million tonnes from 9.25 million estimated in May.
FranceAgriMer kept unchanged its forecast of French soft wheat exports within the 27-country EU at 8.0 million tonnes.
It also held steady its projection for French soft wheat stocks at the end of the season at 3.2 million tonnes, with the reduced outlook for non-EU exports offset by a downward revision to harvest supply.
Forecast corn stocks in 2021/22 were increased, to 2.6 million tonnes from 2.2 million, as the office again raised its estimated harvest supply and lowered projected demand for livestock feed.
FranceAgriMer has warned that a worst-ever bird flu outbreak in France would affect poultry feed consumption, particularly for corn.
Projected barley stocks were raised to 1.4 million tonnes from 1.3 million last month, reflecting cuts to expected exports and feed demand, FranceAgriMer’s data showed.
From North Africa, Egypt has strategic wheat reserves sufficient until the end of this year, a supply ministry official said on Wednesday.
The country also has strategic reserves of sugar sufficient for 5 months, vegetable oils for 6 months and rice for more than 3 months, the official added.
Meantime, Egypt has extended the ban on the export of wheat, flour, corn, lentils, pasta, fava beans and all kinds of vegetable oil for three more months, its trade ministry said on Wednesday.
The ministry said it would allow exports of any excess of the local market’s needs of these goods but only after approval from the ministry.
This excess amount would be estimated by the ministry of supply.
Egypt banned exporting these staples in March.
From the Black Sea basin ,Ukrainian grain exports almost halved in the first seven days in June compared to the same period in 2021 to 252,000 tonnes, the agriculture ministry’s data showed on Thursday.
The volumes included 225,000 tonnes of corn, 17,000 tonnes of wheat and 9,000 tonnes of barley, the data showed.
Ukraine is exporting grain by train via its western border or via its small Danube river ports.
In Russia, according to the forecast of the Ministry of Agriculture, this year the farmers of the Russian Federation will purchase 5 million tons of mineral fertilizers, which is 500 thousand tons more than in 2021.
By the beginning of June, Russian farmers purchased 3.4 million tons of mineral fertilizers (in terms of 100% nutrients), increasing purchases by 12% compared to the same period last year.
This was reported by the Russian Association of Fertilizer Producers (RAFP).
For 5 months, Russian manufacturers have provided more than 70% of the forecast needs of the agro-industrial complex for mineral fertilizers for the whole of 2022.
At the same time, during the spring sowing campaign, Russian agricultural producers refused more than 10% of mineral fertilizers ordered earlier.
Some farmers were forced to redirect funds intended for providing mineral nutrition to prepayment for other technology elements: plant protection products, equipment.
Mineral fertilizer producers, in turn, did not change the sales system, which is based on advance order of products directly from the manufacturer.
In the first quarter of 2022, Kazakhstan exported 2 mln tonnes of wheat and meslin (up 64%) at the general sum of 592.3 mln USD (up 2.1 times), informed energyprom.kz.
CIS countries were the key destinations for Kazakh wheat, which imported 1.3 mln tonnes, up 43.9% y/y.
Particularly, Uzbekistan imported 874.1 thsd tonnes of Kazakh wheat, Tajikistan – 175.8 thsd tonnes and Turkmenistan – 149.5 thsd tonnes.
Rest 744.7 thsd tonnes of Kazakh wheat were exported outside the CIS, up 2.2 times y/y.
Particularly, Iran imported 358.4 thsd tonnes (up 3.9 times), Afghanistan – 227.4 thsd tonnes and Italy – 110.1 thsd tonnes.
In March 2022, the export prices of wheat increased by 9.2% m/m, by 12.1% since the start of the year, and by 32.1% y/y.
Meantime, prospects for the development of the flour processing sector are not good.
Flour mills of Kazakhstan, indeed, are ready to transfer production to Russia.
The market is not profitable.
In this situation, the country’s millers thought about moving their enterprises to Russia, where there is cheap grain, and flour exports are not limited in any way.
Now Kazakh wheat at the Saryagash station costs $420-430 per ton.
Russian flour also costs $460 there.
Thus millers can offer Kazakh flour no cheaper than $480 although the fair price, taking into account current prices for raw materials, is $525 per ton (plus 25% to the price of grain).
That is, it’s not that we don’t earn now – we lose 10% on each ton of flour, millers said.
“Working in Russia on the Russian wheat, we will be able to sell flour to Afghanistan or Uzbekistan at $380 per ton – cheaper than Kazakh wheat, – highlighted Talgatbek Alikhan Kairatbekuly, Vice-President of the Union of Grain Processors of Kazakhstan said.
As a result, the demand for grain in the domestic market of Kazakhstan will fall by 3-4 million tons per year.
And, of course, it will decrease in the foreign market under the increasing pressure of the Russian flour supplied to the same Central Asian countries, he added.
From the Middle Kingdom, China imported 20% more soybeans in May than in April, as some delayed cargoes arrived, customs data showed on Thursday.
China, indeed, brought in 9.67 million tonnes of the oilseed in May, up from 8.08 million tonnes in April, data from the General Administration of Customs showed.
The May figures, slightly higher than 9.61 million tonnes a year earlier, were on the high end of market expectations.
Poor crush margins in China have weighed down demand from crushers.
China’s soybean imports during the January-May period came in at 38.04 million tonnes, down 0.4% from the same period a year earlier, customs data showed, as high soybean costs and flat demand from the feed sector curbed crushers’ appetite.
Crushers in Rizhao, Shandong province, a key soybean processing hub in northern China, are losing 9 yuan ($1.35) per tonne of the oilseed processed, versus a record high of nearly 1,500 yuan of profit in March.
($1 = 6.6872 Chinese yuan renminbi).
From South East Asia, Indonesia has launched an export acceleration scheme aimed at shipping at least 1 million tonnes of crude palm oil and some derivatives, according to a trade ministry regulation made public on Thursday.
The regulation was signed on June 7 and is effective immediately.
The scheme applies until July 31.
From Australia, prices moves in eastern Australia’s feedgrain market have been mixed and modest in the past week as traders weigh up the impact of rain in New South Wales, and grower interest in selling grain from July onwards increases.
Traders are reporting a drop-off in export demand for SFW-type wheat, which has consumers more comfortable about securing supplies and also booking trucks to carry it from bulk and on-farm storages.
While barley appears to be in short supply, prospects of an average or better season across southern Australia, and a late swing into barley in the north because of the excessively wet conditions, have consumers feeling confident that tonnes will be flowing to market in coming months.
Meantime, local markets were relatively quiet yesterday with only small amounts of old crop trading, mainly in WA where feed barley was trading at $400/t FIS.
The ongoing challenges for ports keeping up to the vessels continues.
The May export volume looks like we will see under 4 million tonnes (Mt) of grain exports including containers.
June is shaping up to be an optimistic 4.5Mt before we factor in containers.
On the weather side, the 8-day forecast is looking dry for Qld and northern NSW which will help to dry out very wet paddocks and hopefully allow for more of the winter crop to be sown.
Although for many it will take longer than 8 days without rain to get going.
There is less than 5mm forecast for central and southern NSW which could be a nuisance.
WA looks set to pick up the highest totals over the next 8 days with 15-25mm expected for most.
On international trade scene, Egypt’s state grains buyer GASC said it has canceled its international tender for vegetable oils on Wednesday.
Instead, it bought 52,500 tonnes of locally produced soyoil in a separate tender, said a statement by the ministry of supply.
The lowest offer presented in the international tender was $1,800 a tonne C&F for soyoil, around 3.6 percent more than the lowest offer purchased in the local production tender.
GASC was seeking an unspecified quantity of soyoil and sunflower oil in the international tender for arrival Aug. 5-25.
It was also seeking locally produced vegetable oils in a separate tender for arrival Jul. 25 – Aug. 15.
This is the second time in a row that the state buyer cancels its international tender, opting to buy the cheaper local oils in April.
Offers in Wednesday’s international tender, however, were around 8 percent lower than the lowest offer in GASC’s last tender in April.
Jordan’s state grain buyer has issued an international tender to buy 120,000 tonnes of milling wheat which can be sourced from optional origins.
The deadline for submission of price offers in the tender is said to be June 14.
Shipment in new tender is sought in a series of possible combinations in 60,000 tonne consignments.
Possible shipment combinations are in the full month of September and/or the full month of October.
A new announcement had been expected after Jordan made no purchase in its previous tender for 120,000 tonnes of wheat on Tuesday in which only one trading house participated.
Meanwhile, yesterday Jordan’s state grain buyer, bought 60,000 t of optional feed barley.
That’s all.
To all of you, we wish you a good day.
Author: Sandro F. Puglisi
