US farm markets were mixed but mostly higher yesterday.
Corn prices tested moderate gains with front month up around 0,04%, but with March and May contracts down 0,13% and 0,21% respectively.
Soybeans gathered up moderate gains around aorund 0,4%
Meantime, we have seen big gains in wheat, which saw most contracts rise more than 1%.
In fact, Chicago wheat was, at one point during the session, 21.75usc/bu higher but still managed to close 9.5usc/bu in the black.
Minni wheat put on 7usc/bu while Kansas wheat increased 10.5usc/bu.
All wheat complex was spurred by export optimism and the prospect of tightening global supplies.
On macro markets, oil prices fell on this morning, wiping out yesterday’s gains, as the dollar continued to gain on bets the U.S. central bank will bring forward plans to raise rates to tame inflation.
Thus U.S. West Texas Intermediate (WTI) crude futures fell 61 cents, or 0.8%, to $80.98 a barrel at 0749 GMT, reversing Thursday’s 25 cent gain.
Brent crude futures dropped 65 cents, or 0.8%, to $82.22 a barrel.
Both benchmark crude contracts were poised to end the week lower after sharp moves up and down, driven by a soaring dollar and speculation on whether the Biden administration might release oil from the U.S. Strategic Petroleum Reserve to cool prices.
On equities markets, US stocks on Thursday settled mixed.
Strength in technology stocks on Thursday lifted the S&P 500 and Nasdaq 100.
However, the Dow Jones Industrials closed lower due to a -7% plunge in Disney.
U.S. stocks also had carry-over support from a +1% rally in the Shanghai Composite on speculation the Chinese government will ease its crackdown on property developers.
There was no cash Treasury trading Thursday with the market closed for the Veteran’s Day holiday.
Thus, the S&P 500 Index closed up +0.06%, the Dow Jones Industrials Index closed down -0.44%, and the Nasdaq 100 Index closed up +0.29%.
Meantime, Asian shares advanced on this morning.
Although the Chinese economy has been slowing after bouncing back from a pandemic downturn, the record $139.1 billion spent by shoppers during the country’s annual Nov. 11 Singles’ Day shopping extravaganza suggested potential for resilient retail demand.
Reports that regulators were considering easing curbs on borrowing in the property sector that have fueled fears of possible defaults and depressed sale have soothed worries over financial troubles for some of the country’s biggest developers.
Official data also showed a rebound in mortgage lending in October, suggesting the Chinese central bank wants to ensure adequate financing for housing purchases, which is considered relatively safe.
Thus, Hong Kong’s Hang Seng index gained 0.3% to 25,327.97.
The Shanghai Composite index edged 0.2% higher to 3,539.10.
In Tokyo, the Nikkei 225 jumped 1.1% to 29,609.97, while the Kospi in South Korea added 1.5% to 2,968.80.
In Sydney, the S&P/ASX 200 gained 0.8% to 7,443.00.
Coming back on grains market, corn prices are rising in the wake of wheat, but to a lesser extent.
Thus the price gap between wheat and corn remains very high, prompting feed manufacturers to incorporate corn at all in their formulations.
Soybeans are still advancing against a backdrop of lower yields than USDA expected.
Wheat prices soared significantly higher, and traders handed out another round of gains after engaging in more technical buying.
Rising in European and Russian prices helped, as did sustained export optimism.
On the weather side, not much moisture is in store for the central U.S. between today and Monday, per the latest 72-hour cumulative precipitation map from NOAA.
Very few areas will gather much more than 0.1” during this time.
NOAA’s 8-to-14-day outlook predicts near-normal temperatures for most of the Midwest and Plains between November 18 and November 24, with drier-than-normal conditions emerging across the Central Plains.
Meantime, snow and high winds over the northern Plains/upper Midwest gradually subside today as locally heavy rain and strong thunderstorms move across the Northeast and Mid-Atlantic.
Flash flooding potential to continue over the Pacific Northwest into early Saturday as onslaught of heavy rainfall continues.
An Alberta clipper will deliver another around of snow/rain and gusty winds across the northern Plains Saturday into early Sunday.
A large and energetic low pressure system that has brought snow and high winds across the northern Plains and upper Midwest will steadily weaken today as it moves across the Great Lakes and then retreats into Canada tonight.
Nevertheless, very strong and gusty winds on the back side of this system will initially bring blowing snow and reduced visibility over
portions of the northern Plains this morning before conditions steadily improve later today.
In the mean time, a strong cold front associated with this energetic system will sweep through the eastern U.S. today with locally heavy rain and embedded strong thunderstorms.
These storms may lead to local flooding issues later today across New England.
Chillier and drier air will advance into the East Coast tonight behind the strong cold front.
However, a reinforcing cold front will quickly spread a mix of rain and snow from across the Great Lakes through the Appalachians on Saturday and then across New England Saturday night with gusty winds.
Strong west to northwest winds behind this front will usher in colder air through the eastern U.S. Saturday night.
Meanwhile, persistent onshore flow from a modest atmospheric river will continue to bring moderate to heavy rainfall into portions of the Pacific Northwest.
Another 2-4 inches of rain have been forecast for the region over the next 24 hours and rainfall rates over some areas may be as high as 0.5-0.75 inches per hour.
Excessive rainfall will remain be a concern this morning before the threat of heavy rain diminishes later tonight when the main energy penetrates further inland to support a new low pressure center over Alberta, Canada.
This low pressure system is expected to develop over the northern Plains/upper Midwest Saturday night into early Sunday and deliver another around of snow and gusty winds across the region, with rain showers farther south.
In contrast, in the Central/Southern Plains, dry and breezy conditions coinciding with low values of relative humidity has prompted the issuance of an Elevated Risk of fire weather by the Storm Prediction Center through Saturday morning, as these conditions could allow any fires that ignite to spread rapidly.
Temperature-wise, areas from the central Plains to the mid-Mississippi Valley are expected to see temperatures falling into the 30s and 40s later today, which are around 10 to 15 degrees below normal.
As the Plains warm up on Saturday with the advancement of a warm front through the region, cooler temperatures are expected to settle into the Tennessee and Ohio Valleys behind the reinforcing cold front.
With temperatures sitting 10 to 20 degrees below normal, daily highs in these areas will be in the 40s and 50s.
On the demand side, the weekly FAS Export Sales report will be released today in the afternoon, delayed due to yesterday Veteran Day.
As for corn the trade is expecting between 700k and 1.4 MMT of corn was booked during the week that ended 11/04.
In add, new crop’s forward sales are estimated to be below 10,000 MT.
As for soybean, the trade is expecting between 0.95 and 1.8 MMT of beans were sold during the week that ended 11/04.
For new crop’s forward bookings, analysts anticipate fewer than 20k MT.
Soybean meal bookings are estimated between 100-250k MT.
BO bookings are anticipated to come in at less than 15,000 MT.
As for wheat, analysts surveyed expects between 200,000 and 500,000 MT of sales for the week that ended 11/04.
In this context, corn basis bids were steady to mixed after moving as much as 6 cents lower at an Ohio elevator and as much as 10 cents higher at an Illinois processor.
Soybean basis bids were largely steady to weak across the central U.S. after falling 3 to 20 cents lower at three Midwestern locations.
An Indiana processor bucked the overall trend after firming 5 cents.
From South America, Brazil’s Conab slightly raised its estimates for 2021/22 corn production to 116.7 million tonnes.
That would be a year-over-year increase of more than 34%, if realized.
Brazil’s 2020/21 corn crop was hampered by a variety of weather woes, including drought and untimely frosts.
Additionally, Brazil’s Conab is projecting a record soybean production for the 2021/22 season, with a new estimate of 142 million tonnes. That’s up from its October estimate of 140 million tonnes.
The upward revision was due to an increase in expected acres.
This will result in a year-over-year increase of 3.4%, if realized.
Thus, South American production potential could be a key driver for prices this coming year.
Grain prices are heading into 2022 are on the verge of soaring higher or sliding lower with price outlook heavily dependent on the upcoming growing season there.
Thus traders will scrutinize every weather forecast.
Any prolonged hot and dry spell for Brazil or Argentina could provide a $1 rally on soybean futures and a 50-cent rally on corn futures.
Meantime, Brazil approved the sale of an Argentine-developed drought-tolerant GMO wheat strain.
On European market, wheat prices are racing after Russian remarks suggesting new restrictive measures on exports in the event of a rise in world prices, which seems to be looming.
While rumors of the implementation of quotas were already circulating in the market, but this only confirms the tension in wheat balance sheets.
Added to all this are qualitative fears about the future Australian harvest with abundant rains at the end of this cycle.
Finally, the last buoyant element this morning, mainly for quotations on Euronext, the firmness of the dollar against the euro making European origins more competitive on the international scene.
As for fertilizers, the prices of nitrogenous fertilizers remain very high and the threats of Belarus on a gas embargo towards Europe only fuel fears of a continuation of the increase in energies.
Corn prices, on their part, are rising in the wake of wheat, even if a lesser extent.
In fact the price gap between wheat and corn remains very high, but this are prompting feed manufacturers to incorporate corn at all in their formulations.
Rapeseed continues to grow beyond the psychological threshold of 700 € / t in close deliveries in the wake of palm and soybeans.
From the Black Sea basin, Russia is in the news at the moment with comments on possible new measures to curb grain price inflation, either by imposing new taxes or by putting in place quotas at the same time ‘export early next year.
Indeed, Russia’s wheat export quota is now set to activate in mid-February.
Meantime, wheat prices in Ukraine are at their highest levels since 2013, accompanying rising prices on the international scene.
Maize prices are not being outdone, with logistical problems also in the country.
From the Middle Kingdom, in China, corn prices are on the rise again in a context of delayed harvesting due to rainfall and rising energy costs for drying grains.
To this must be added the logistical problems which have been particularly acute in recent times.
From Australia more rain is on the map!
Falls continued along the east coast and in South Australia yesterday with rainfall ranging from 10-40mm in areas.
This will yet again keep the harvest at a standstill for a large part of the eastern and South Australia, while WA gets a run on harvest and a clear run into the weekend.
Harvest in the Western Australian grainbelt has been a stop-start affair due to continued rainfall events and the unseasonal cool conditions slowing down the “finish” of crops, according to the latest report from the Grain Industry Association of WA (GIWA).
In this context, growers are finding all crops are yielding better than expected except for the badly frosted areas in the north-eastern and far eastern regions of the state.
The cool conditions in spring have had a major impact on allowing crops to fill heads and add weight in all regions.
The full impact of the frosts across large areas of the central grain growing regions and more recently in the southern regions is still unknown, although it is now clear there will be more grain around than estimated a month ago.
In all regions where harvesting has been underway for a few weeks, canola crops are yielding higher than expected even where there were losses from the repeated wind events over the last few weeks.
Canola crops in the southern regions have benefited from the soft finish as well and total production could end up just short of three million tonnes.
Cereal crops are yielding better than expected although results so far are mainly from the better paddocks.
Lupin, pulse and oat grain yields will all be above average.
Meantime, there have been a series of storm events that have caused significant loss from hail in strips, although the overall impact on total grain production for the state will be minimal.
However, grain quality is starting to be impacted by the wet conditions and will start to slide if wet weather continues.
Harvest is behind schedule for most growers and the large crop with good prices has growers nervous because “you can’t count it until it’s in the bin”.
In this context, Aussie grain markets yet again continued higher.
Grower cash bids were up $4-5/t, wheat trade markets by 5-6/t.
With harvest delays and uncertainty around quality little liquidity is coming to the table.
ASX eastern wheat futures contracts were active again with the demand to secure milling wheat contracts.
Barley bids were again a touch stronger.
Prompt demand is still popping up in the market for November/December vessel and domestic demand to fill holes as the stop start harvest continues.
On the international trade scenario, South Korea’s MFG booked 137k MT of corn via an international tender, likely sourced from South America or South Africa, in a private deal yesterday.
The grain is for arrival in late February.
South Korea is tendering for 115k MT of non-GMO beans for fish feed.
South Korea yesterday bought 65,000 t of corn from the southern hemisphere.
Turkey is on the market to buy 325,000 MT of corn.
Egypt’s GASC cancelled their soybean and sunflower oil tenders declining to cite the reasoning.
Japan’s MOA issued their regular tender, seeking 157,987 MT of wheat from the U.S., Canada, and Australia.
Of the total, 39% was sourced from the U.S.
The grain is for arrival in late February.
Bangladesh issued an international tender to purchase 1.8 million bushels of milling wheat from optional origins that closes on November 22. The grain is for shipment 40 days after a contract is signed.
More generally, the UN released a report indicating developing nations will feel the brunt of increased import costs for food.
Food import costs will increase 11pc for developed countries but a staggering 20pc for developing nations.
While freight has accounted for a large portion of this increase it was also noted that increased farm input prices, such as fertiliser, will continue to drive costs higher.
Certantly, Agriculture has been well supported over the last month with wheat and cotton hitting highs not seen since the mid to early 2000s.
However, when looking at the relative performance vs energy and equities the performance looks a little muted.
Crude and ethanol have clearly outperformed with crude starting the year at US$48/bbl to close last night at US$81.60/bbl.
Author: Sandro F. Puglisi
