US farm markets finished Wednesday’s session mostly lower.
A large sell-off swept grain and energy commodities.
Yesterday all eyes were on the Fed’s decisions which weighed heavily on investor sentiment.
Spillover weakness from tumbling energy prices also factored into the mix.
The Chinese government’s warning to its citizens to start stockpiling food for the winter has put other commodities under pressure.
Thus, corn prices slumped more than 1.5% lower.
Soybeans fell by a similar percentage.
Soybean oil futures ended the session with 91 to 96 point losses.
Winter wheat contracts were mostly down 1% to 1.3%.
Spring wheat contracts were hit the hardest, tumbling more than 3% lower by the close.
On the other hand, soymeal prices bucked the overall trend, moving 1% higher.
Lean hog trading took prices $0.90 to $1.70 higher for the midweek session.
Pork cutout futures also closed in the black, adding $0.80 to $1.40 on the day.
Front month fat cattle futures closed the midweek session with $0.95 to $1.70 gains.
Feeder cattle futures were $1.60 to $2.20 stronger on the day as well.
On macro markets, oil prices slid as U.S. inventories grew and Iran announced the resumption of talks on a nuclear accord.
Thus Brent fell US$2.73 per barrel to set $81.99, while U.S. crude lost US$3.05 per barrel to $80.86.
Meantime, oil prices recovered on this morning, lifted by expectations that OPEC+ will stick to slow output increases despite calls from the United States and large importers for additional supply to cool prices.
Consequently, Brent crude was up 94 cents, or 1.2%, at $82.93 a barrel by 09:40 GMT and U.S. West Texas Intermediate crude rose 62 cents, or 0.8%, to $81.48.
OPEC+, meets later on this afternoon and is expected to reconfirm plans to keep monthly supply increases at 400,000 barrels per day.
Meantime, the Baltic Dry Freight Index fell again yesterday, now some 44pc off the highs printed only last month.
This aggressive fall has primarily been driven by a lack of activity amid sluggish China corn and soybean imports.
On the financial side, as we just said, as expected, the Fed announced it would trim its bond buying by $15 billion a week from this month, while leaving open the option to quicken or slow the pace as needed.
The Fed is also still insisting that current inflation rates are “transitory,” which some are interpreting as a signal that interest rate hikes will not arrive anytime soon.
However, Fed Chair Jerome Powell did sound slightly less sure inflationary forces would prove to be fleeting, enough to hit longer-term bonds and bear steepen the yield curve.
Thus, US stocks on Wednesday closed moderately higher, with the S&P 500, Dow Jones Industrials, and Nasdaq 100 all posting new all-time highs for a second straight day.
U.S. stock indexes continued their upward march to new record highs, also because underpinned by strong Q3 quarterly earnings results and bullish economic data.
So, the S&P 500 Index closed up +0.65%, the Dow Jones Industrials Index closed up +0.29%, and the Nasdaq 100 Index closed up +1.08%.
Meantime, Asian shares rose on this morning, boosted by the U.S. Federal Reserve’s announcement on winding down the extraordinary aid for the economy.
Thus, Japan’s benchmark Nikkei 225 gained 0.7% in afternoon trading to 29,729.44.
South Korea’s Kospi added 0.2% to 2,982.96.
Australia’s S&P/ASX 200 edged up 0.5% to 7,428.00.
Hong Kong’s Hang Seng added 0.1% to 25,058.95, while the Shanghai Composite rose 0.7% to 3,521.67.
Coming back on grains market, almost no measurable moisture is expected to fall on the central U.S. between Thursday and Sunday, per the latest 72-hour cumulative precipitation map from NOAA.
The agency’s 8-to-14-day outlook anticipates a return to seasonally wet conditions for the Midwest and Plains between November 10 and November 16, with warmer-than-normal weather developing across the eastern Corn Belt and Great Lakes region.
Meantime, the majority of analysts expect an upward revision of the estimates of corn and soybean production in the United States in view of the observed yields.
Indeed, IHS Markit, formally Informa, revised their estimated 2021/22 U.S. corn yield to 178.7 bpa.
As for soybean they calling for a national 51.5 bpa soybean crop for 4.454 bbu.
Going into next week’s monthly WASDE update, the trade on average expects USDA to add 0.4 to the national yield taking it to 176.9 bpa.
The range of estimates going in runs 174.9 and 178.9 bpa in a Bloomberg poll.
As for soybean pre report estimates calling for a 51.9 bpa average yield.
The full range of survey responses is from 51 bpa to 52.5 bpa with USDA’s prior guess at 51.5.
Production figures average 4.482 bbu going in, between 4.408 and 4.536, compared to 4.448 last month.
As for wheat, survey results forecasting USDA’s WASDE data call for a domestic 1.9 mbu bump to wheat carryout.
That would leave it at 581.9 mbu.
Globally the trade is looking for USDA to report 276.9 MMT for stocks, which would be down 200k MT from October’s estimate.
We will see next November 09, the results.
Meantime, EIA reported ethanol producers averaged 1.107 million barrels per day of production through the week of 10/29.
That was up 1,000 barrels per day from the week prior and was just 1,000 barrels per day off the record set in ’08.
Unlike last week however, ethanol stocks had risen 204,000 barrels to 20.129 million above the average guess of 19-19.94 mbbl.
That was a 5-week high.
Trader estimates ahead of the weekly Export Sales report are to see between 700,000 and 1.4 MMT of corn booked through the week that ended 10/28.
NMY bookings during the same week are expected to be less than 20k MT.
As for soybean pre-report estimates are for between 1 and 2 MMT booked during the week that ended 10/28.
Forward sales for the 22/23 crop are estimated to be less than 20,000 MT during the same week.
For the products, trader estimates ahead of the report call for between 100k and 250k MT of soymeal bookings and 0 to 20k MT for soy oil sold during the week that ended 10/28.
As for wheat, analysts surveyed ahead of USDA’s weekly Export Sales report are looking for wheat bookings to be between 180,000 and 500,000 MT for the week that ended 10/28.
USDA’s FAS will release the data as scheduled later in the afternoon.
On the other hand, global fertilizer prices show no signs of abating and the subsequent impact on global grain production for the upcoming seasons is now firmly in focus.
The US Gulf Granular Urea price hit a fresh high of US$720/st.
In this context, corn prices took a moderate hit.
Soybean prices trended around 1% lower.
Wheat prices stumbled in tandem with corn and soybeans after a round of technical selling and profit-taking pushed prices back below multiyear highs captured earlier this week.
Spillover weakness from tumbling energy prices also factored into the mix.
Meantime, corn basis bids were mostly steady to lower after falling 2 to 5 cents lower across five Midwestern locations.
An Indiana ethanol plant bucked the overall trend after bids rose 5 cents at that facility.
Ditto for soybean basis bids that were steady to mixed across the central U.S. after sliding 2 to 4 cents lower at two interior river terminals while firming 1 to 5 cents higher at three other Midwestern locations.
From South America, soybean planting in Brazil is going under very good conditions, which allows for the moment to envisage a record harvest to come for this country.
Thus, StoneX estimates the next Brazilian soybean harvest at 144.73 million tonnes and that of second crop corn at 87.53 million.
Meantime, soybean exports from Brazil in October stood at 3.30 million tonnes against 2.42 last year.
However, Brazil’s Anec estimates that the country’s soybean exports will fall to 1,92 million tonne in November.
That would represent a monthly decline of 43.8%, if realized.
Brazil’s Anec estimates also that the country’s corn exports will reach 1,96 million tonne in November.
That would be a month-over-month decline of 8.3%, if realized.
On European market, Euronext retreated after reaching historic levels at the start of the week.
The rapid decline in crude oil prices and some technical considerations dragged Euronext down.
Thus Euronext showed that non-commercials reduced their long positions in wheat from 160,364 contracts last week to 147,108 lots this week.
Rapeseed also fell yesterday in the wake of canola, soybeans and oil.
The market looks set to take a break, although fundamentals remain strong.
The Malaysian palm, indeed, remained well oriented on the Kuala Lumpur Stock Exchange in the face of the prospects of a rapid surge in Chinese demand in the short term.
From North Africa, the Morocco DAP mkt printed a new high of (oddly) US$720/mt.
From the Black Sea basin, in Ukraine, as in Russia, the current water deficit could lead to a reduction in the areas of autumn cereals.
In fact, many plots have not germinated seedlings, which at this stage, at the dawn of winter, could be detrimental to yields.
Meantime, grain prices gave way a bit yesterday, in the wake of other places.
Demand for wheat, however, remains supported by international exporters, all the more so as fears are emerging about the future Australian harvest in view of the current rains.
As for the restrictions on exports of fertilizers that will be imposed by Russia, we have already explored elsewhere.
From the Middle Kingdom, there is a resurgence of cases of covid.
China currently has more provinces fighting Covid-19 outbreaks since the Wuhan outbreak in 2019.
The Covid-zero approach are seemingly not arresting the spread, even with drastic measures.
Meantime, after the government encouraged households to make reserves, especially in vegetables, the latter nevertheless tries to reassure the population by ensuring that it wants to control inflation on foodstuffs.
On the other hand, Joc O’Rourke, the CEO of Mosaic Co. believes Chinese fertiliser exports should normalize after next year.
However his timeline does little to help both hemispheres’ croppers for the upcoming growing season as China accounts for around 30pc of urea, sulphate, and phosphate global trade.
From Australia, Australia will publish September international trade data today.
Analysts expect $12.2bn balance of trade surplus, down from $15.07bn in August.
Meantime, southern markets have dropped this week as some big yields start to weigh on strong price signals coming from global markets, while northern prices have mostly firmed based on buoyant demand from export accumulators.
With plenty of showers forecast for south-eastern Australia in the coming week, domestic feedgrain users are feeling increasingly confident that offers of downgraded wheat will appear before the month is out.
This has kept their buying to a minimum, but they are conscious that grain may be hard to move, either because of the limited supply of road transport, or because rain prevents outturn.
In the week to 0900 Thursday, rainfall registrations were patchy, and in Queensland included: Dalby 11mm; Jondaryan 13mm; Miles 47mm; Roma 16mm; St George 36mm;
In NSW, little if any rain fell in southern and central regions, but the north copped some heavy falls, and registrations include: Narrabri 14mm; Pallamallawa 41mm; Quirindi 18mm; and Warialda and Wee Waa 35mm.
Rain was more general in South Australia, with 5-25mm over much of the Eyre and Yorke peninsulas, 2-10mm over regions north and east of Adelaide, and 15-25mm over much of the South East.
In Victoria, some parts of the Mallee and Wimmera got 5-20mm, and registrations were above 20mm in much of the Western District.
In WA, most growing areas got a few millimetres at most.
Harvest in South Australia has just started to get going in earnest this week, and has ramped up in New South Wales and Victoria, while Queensland has passed the halfway mark.
Western Australia’s bulk handler CBH Grain yesterday said it had received 1 million tonnes of grain into its system from the harvest to date, mostly in the Geraldton zone.
Southern Queensland’s wheat harvest is in full flight, and many growers are getting near-record yields, high protein and good quality.
Internationally, Egypt bought 15,000 t of sunflower oil, for Dec 25 Jan 15 at $1440 C&F at sight.
Jordan 60,000 t of optional hard-origin wheat.
The grain is for shipment in early April.
South Korea switched to purchasing 134 kt of corn, again at very high prices.
TCP Pakistan offer line up 90kmt wheat tender have seen:
Agrocorp at 407,38 usd; Cargill 409 usd; LDC 409,85 usd; CHS 411,99 usd.
Author: Sandro F. Puglisi
