On Wednesday, US farm markets added more gains to this extraordinary week.
Corn prices moved up 2,61%.
Soybean lifthed around 0,4%.
Chicago wheat rallied 3,15%.
Kansas put on 3,02%.
Minni added 2,20%.
On macro markets, oil prices were mainly steady on this morning after falling in the previous session on concerns rising inflation in the United States, spurred by climbing energy costs, may prompt the government to release more strategic crude stockpiles to drive down prices.
Indeed, after reports on U.S. inflation showed an increase at the fastest rate in 30 years, the dollar higher and the US government released some strategic reserves.
Thus on Wednesday, Brent crude futures fell by 2.5% and West Texas Intermediate (WTI) futures dropped by 3.3%
On this morning Brent crude futures gained 14 cents, or 0.2%, to $82.78 a barrel at 07:55 GMT, while WTI futures rose 18 cents, or 0.2%, to $81.52.
On the freigth markets, after 12 down days the Baltic Dry Shipping index has had 2 up days.
Yesterday’s settlement still represents a 50.35pc fall from the highs set at the beginning of Oct this year.
On equities markets, stocks settled moderately lower, with the Nasdaq 100 falling to a 1-week low.
Inflation concerns sent T-note yields soaring and undercut stock prices.
U.S. October consumer prices, indeed, rose more than expected at their fastest pace in more than three decades as we just said.
Particularly U.S. Oct CPI rose +0.9% m/m and +6.2% y/y, stronger than expectations of +0.6% m/m and +5.0% y/y with the +6.2% y/y gain the largest year-on-year increase in nearly 31 years.
Also, Oct CPI ex-food & energy rose +0.6% m/m and +4.6% y/y, stronger than expectations of +0.4% m/m and +4.3% y/y, with the +4.6% y/y gain the largest year-on-year increase in over 30 years.
Thus, the S&P 500 Index closed down -0.82%, the Dow Jones Industrials Index closed down -0.66%, and the Nasdaq 100 Index closed down -1.44%.
Asian shares, meantime, were mixed on this morning.
A recent regulatory crackdown in China has weighed on technology issues, but some stocks are recovering as investors decide the selloff may have been overdone.
Thus, in Japan, where investors are awaiting an economic stimulus package from newly elected Prime Minister Fumio Kishida, the benchmark Nikkei 225 climbed 0.5% to 29,255.02.
Australia’s S&P/ASX 200 fell 0.6% to 7,381.90.
South Korea’s Kospi shed 0.4% to 2,917.44.
Hong Kong’s Hang Seng rose 0.5% to 25,116.36, while the Shanghai Composite gained 1.0% to 3,527.62.
Coming back on grains market, there is a slight risk of excessive rainfall over parts of the Pacific Northwest through Friday morning.
Snow for the Upper Midwest.
Temperatures will be above average over parts of the Northeast/Mid-Atlantic.
Moisture will stream into the Pacific Northwest ahead of the next front that will come onshore by Friday afternoon.
A deep low over the Upper Midwest will produce rain and snow over parts of the Upper Midwest.
The snow will march southward over the Northern Plains, the Upper Mississippi Valley, and parts of the Middle Mississippi Valley by Friday afternoon.
Overnight Friday, light snow will move into parts of the Ohio Valley and the Great Lakes, as the snow over the Upper Mississippi Valley tapers off.
Rain will develop along and ahead of the associated front from the Upper Great Lakes to the Middle Mississippi Valley. By Friday, the rain will move eastward into the Great Lakes and Ohio Valley.
Showers and thunderstorms will develop over parts of the Lower Mississippi and Tennessee Valleys into the Western Gulf Coast.
By Thursday evening the showers and thunderstorms move into parts of the Central Gulf Coast, as rain fills in over the Tennessee valley and the Southeast.
The rain starts to taper off on Friday morning over the Southeast.
The American harvests, have to deal with this regular rainfall.
The showers have certainly finally been measured in recent days by markets, but substantial rains are now expected at the end of the week over a very large part of the Corn Belt.
The winter wheat producing states have received some beneficial inputs but still insufficient to recharge the soil.
A slight deficit has also widened in Kansas since the beginning of the month.
On the demand side, Export Sales data report is delayed until Friday in recognition of Veteran’s Day.
Meantime, EIA’s weekly ethanol production data release showed 1.039 million barrels of ethanol were produced per day during the week that ended 11/05.
That was down from near record levels each of the last two weeks. Stocks increased during the week by 157k barrels to 20.286 million.
The soy market had hit the 11-month low before the U.S. Department of Agriculture on Tuesday issued a lower-than-expected U.S. soybean crop estimate in a monthly crop report.
In add, USDA reported global soybean production at 384.01 MMT in their November update.
That was down 1.13 MMT from their October forecast, reflecting cuts to America and Argentina, but remains 18 MMT above last season’s output.
Regarding global trade, the USDA trimmed their export figure by 1 MMT to 172.09 MMT, of which 32.4% will be U.S. sourced.
Last MY, the U.S. market share was 37.4% of the global total, and the USDA was calling for a 32.8% portion in their October balance sheet.
Consequently, the market now is readjusting to the notion of smaller rather than larger 21/22 supplies.
Afternoon strength, after Russian Ag Minister, Dmitry Patrushev said in a government meeting that Russia could increase export taxes if prices surged, carried the Wednesday wheat markets into 20 cent gains territory.
Thus, KC HRW futures printed new highs for the move, which for December is now $8.19/bu.
CBT SRW futures ended the session 20 3/4 to 24 1/2 cents in the black.
New crop futures also set new highs on the day, but for December, the prior high of $8.07 was still 3 1/4 cents away.
Spring wheat gained back 22 to 23 1/2 cents on Wednesday.
December’s still $10.86 3/4 cent high is still intact.
Funds have been a feature of the recent round of buying.
Unfortunately, we will have to wait to see how much length they have added because the current-period CFTC reporting window will miss the rally which took place last night.
From South America, the first Brazilian maize harvest and the national soybean crops, have benefited from very good weather conditions for almost a month now.
Seeding has thus been able to progress very quickly and the growing conditions are now excellent.
The Rio Grande do Sul and Mato Grosso still lack water a little, but the national situation is overall very good and the short-term forecasts are very encouraging.
Argentine farmers have sold 33.6 million tonnes of soybeans from the 2020/21 crop year, meantime.
The sales pace was behind that of the previous season.
The country’s 2020/21 soybean harvest ended in June at 43.1 million tonnes, according to the Buenos Aires Grains Exchange, which estimated the 2019/20 harvest at 49 million tonnes.
Regarding 2021/22 soy, planting of which began last month in Argentina, there have already been sales of 2.9 million tonnes, according to official data.
The exchange estimates the upcoming soy harvest at 44 million tonnes.
For the 2020/21 corn crop, the government said sales have been registered for 44.1 million tonnes, 4.3 million tonnes more than on the same date in the previous season.
The 2020/21 corn harvest was 50.5 million tonnes, according to the exchange.
The government reported that 9.7 million tonnes of corn from the upcoming 2021/22 season had been sold so far.
The sowing of corn for the new season is already underway, with the exchange forecasting the harvest at a record 55 million tonnes.
On European market, Euronext pushed the accelerator on Wednesday evening to seek historically high and highly symbolic levels.
Indeed, wheat comes in particular to flirt with 300 € / t while rapeseed has finally succeeded in exceeding the exceptional barrier of 700 € / t!
However, it should be noted that a larger wheat harvest than initially anticipated and a sharply lowered French export target resulted in a significant increase in the latest FranceAgriMer balance sheet.
Particularly, France AgriMer indicated that wheat stocks went up from their Oct estimate of 2.36Mt to 3.17Mt, contrary to what many have suggested given the port activity.
That would represent a jump of 840 kt compared to last year.
There has been an inversion of the ratio between common wheat and corn for use in animal feed,” noted Marc Zribi, head of the grains and sugar unit at FranceAgriMer on 10 November.
The Department of Statistics and Foresight (SSP) estimated the French production and collection of soft wheat to increase in 2021, bringing the availability for the market to 35.55 million tonnes (Mt), 215,000 tonnes of more than estimated a month ago. Domestic uses have been “totally revised opposite”, especially incorporations into animal feed, therefore.
They are now evaluated at 4.75 Mt, against 5.15 Mt in October .
Conversely, the volumes of grain corn intended for the manufacture of animal feed would reach 3.2 Mt over this season, “a sharp increase compared to the first estimates which were from 2.8 to 2.9 Mt”, according to Marc Zribi.
This “major change in forage uses” is explained by the increased competitiveness of corn compared to common wheat . Marc Zribi continues: “with prices of 288 € / t for soft wheat and 230-240 for corn, the difference is considerable! “
Especially since the corn harvest promises to be very good this year: 13.68 Mt according to FranceAgriMer (a record since 2014), or even more because “transfers of silage areas to grain corn are still possible”.
Another major change in the uses of common wheat in 2021/22 is export activity: exports are expected to drop by 410,000 tonnes compared to last month’s forecasts.
Shipments to the EU would drop by 210,000 tonnes because “the same causes produce the same effects: there is a lower demand for wheat for fodder destination by the Benelux and Spain, because they are reorienting their formulas towards corn. “.
The expected drop is 200,000 tonnes to third countries, above all “because of Argentinian and Australian wheat, which is very competitive despite the high freight costs”.
The Australian was particularly “high-volume export” this year and appears first house party turn to African markets where it is present little ordinary.
Result: final stocks of common wheat “would increase to 3.17 Mt”, 36% more than estimated in October, concludes the expert.
Exports haven’t been officially reported since July so the increase in stocks was, to many, a surprise.
The French increase in stocks is also at odds with the wider EU.
According to the USDA, Europe hasn’t seen ending stock levels this low since the mid-1990s.
Meantime, EU indicated the consumer cost of staples derived from cereals and vegetable oils jumped 3pc in October, setting a fresh decade high.
As for durum wheat, Agreste raised its French harvest estimate by 40 kt this year, to 1.55 Mt, against 1.3 Mt last year (but 1.7 Mt on a five-year average).
For the next season, sowing work is progressing, with 26% of the sites already completed, ie a rate comparable to last year.
Durum is benefiting from the boom in soft wheat and the lack of Canadian competition.
Durum wheat prices remain positive on the French market. Despite less dense business since the end of October, Italian buying interests are indeed very present and Morocco’s return to business is now expected.
The country plans to proceed with its traditional lifting of taxes on imports soon, having already eliminated duties on wheat tender on 1 st November.
As for corn, corn harvest is significantly higher than initial estimates.
That swells the French balance sheet, but a higher export target this time partly compensates for this excess supply.
FranceAgriMer, indeed, estimates the end-of-season stock at 1.9 Mt, up 100 kt over one year.
From the Black Sea basin, the lack of water in the Black Sea remains under surveillance.
The rains are indeed still too scattered to fill the deficits in Ukraine, as in the South of Russia and the Central Federal State.
The situation is still far from worrying, however, and weather maps point to a noticeable improvement in the Russian climate in the short term.
Ukraine, on the other hand, risks staying dry.
Meantime, Russian Ag Minister, Dmitry Patrushev said in a government meeting that Russia could increase export taxes if prices surged.
Additionally, he reiterated that there will be an export quota for the first half of next year.
A tinkering with the tax rate, which has been in place since mid-year, would only occur if global values continue to rise.
In the meantime, Russia exported 23.9 million tonnes of wheat during the first nine months of 2021, down from 24.7 million in the same period a year earlier, official customs data showed on Thursday.
From Australia, the stop-start to harvest continues yet again for another day with heavy falls of rain across NSW.
Moree has recorded 53mm, Mungindi 35mm, Narrabri 22mm, Coonamble 17mm.
This will again pull headers up and cause more concerns for quality.
The question is how much downgrade wheat the market is estimating.
Rain across eastern Australia in the past week, indeed, has blown out the pricing spread between wheat grades and created some shorts in the domestic and export market.
This has pushed up bids in the southern wheat market in particular because carryover stocks have run down to the wire, and sizeable quantities of new-crop are yet to hit the bins.
The upshot has been the emergence of bids for stockfeed wheat (SFW) at around $20-$30 per tonne below ASW.
SFW is a preferred buy for those milling feed for cattle, pig and poultry, and milling feeds houses said he was keen to include some downgraded wheat in the mix.
One trade source said that spreads between APW and APH (the top-grade bread wheat) have widened considerably in the past two weeks, from as little as $5/t to north of $50/t, to reflect the impact of rain.
More rain is forecast for cropping areas in eastern states until the weekend, and once that clears, grain will be readily available, and is likely to put supply-side pressure on feed grades.
Meantime, more firmness emerged in Aussie markets yesterday.
Grower cash boards were up $5-10/t on wheat across the country.
The ASX January 2022 eastern wheat contract came out the blocks hard in the morning on open trading up to $375/t for smalls in which was up $16/t from previous days settle, it then settled the day out at $368/t.
Barley gained a buck or 2 also over the day on the grower cash boards and canola was up $20/t.
With weakness in the AUD, offshore moves and more weather havoc for Aussie growers we are set to see some more strength in markets again today.
Internationally, Japan’s MOA issued their regular tender, seeking 157,987 MT of wheat from the U.S., Canada, and Australia.
Tunisia bougth 50,000 tonnes of barley on this morning, of that 25,000 tonnes at $356.49 a tonne c&f and 25,000 tonnes at $358.49 a tonne c&f.
Jordan bought 60 k barley at $337.00 a tonne c&f for shipment SH April 2022 from Australian Grain Export.
Author: Sandro F. Puglisi
