Omicron has scared all markets.
Indeed, mounting warries that the new covid variant could spark a global economic slowdown led to a broad selloff yesterday affecting everything from stocks and energy prices to grain and livestock futures.
Thus, corn prices faded 2.41% lower.
Soybeans prices were down around 1.95%.
Soymeal was the only “star ligth” into the nigth, gaining around 0,32%, but it had lost around 2.39% into the prior session.
Soy oil stumbled 5,41%.
Chicago wheat tumbled 4,18%.
Kansas wheat shedded 4,26%.
Minneapolis wheat fell 2,13%.
On macro markets, Brent crude futures had slumped 3.9% and U.S. West Texas Intermediate (WTI) crude futures, dropped by 5.4%.
However, oil prices rose more than 3% on this morning, recouping a big chunk of yesterday session’s steep losses, as major producers prepared to discuss how to respond to the threat of a hit to fuel demand from the Omicron variant of the coronavirus.
Thus, Brent crude futures rose $2.46, or 3.6%, to $71.69 a barrel at 07:42 GMT, after rising to as high as $71.95 earlier in the day.
U.S. West Texas Intermediate (WTI) crude futures rose $2.13, or 3.2%, to $68.31 a barrel.
On equities markets, U.S. stock indexes yesterday settled sharply lower, with the S&P 500 falling to a 1-month low and the Dow Jones Industrials dropping to a 1-1/2 month low.
Losses in stocks accelerated Tuesday on hawkish comments from Fed Chair Powell, who said the need for support from asset buying has clearly diminished and “it’s appropriate” for the FOMC to talk about accelerating the tapering speed at the next meeting in December from the current level of $15 billion per month.
Global markets saw this as the canary in the coal mine and proceeded to move to risk-off mode in earnest.
This is a fundamental shift in the position of the Federal Reserve but not a surprise.
Also, Tuesday’s U.S. economic data was bearish for stocks.
Indeed, the U.S. Nov MNI Chicago PMI fell -6.6 to a 9-month low of 61.8, weaker than expectations of 67.0.
The Conference Board U.S. Nov consumer confidence fell -2.1 to a 9-month low of 109.5, weaker than expectations of 110.9.
In this context, the S&P 500 Index closed down -1.90%, the Dow Jones Industrials Index closed down -1.85%, and the Nasdaq 100 Index closed down -1.61%.
Meantime, Asian shares were mostly higher on this morning.
Japan’s benchmark Nikkei 225 rose 0.4% to finish at 27,935.62.
South Korea’s Kospi jumped 2.1% to 2,899.72.
Australia’s S&P/ASX 200 dipped 0.3% to 7,235.90.
Hong Kong’s Hang Seng gained 1.1% to 23,734.59, while the Shanghai Composite added 0.4% to 3,576.89.
On the weather side, not much rain or snow is expected to fall in the central U.S. between today and Saturday, but parts of the eastern Corn Belt and Great Lakes region could see some measurable moisture during that time, per the latest 72-hour cumulative precipitation map from NOAA.
The agency’s 8-to-14-day outlook predicts warmer-than-normal conditions for the entire country between December 7 and December 13, with some seasonally wet weather returning to parts of the Northern Plains and upper Midwest.
Coming back on grain markets, all commodity prices gave ground significantly in Chicago yesterday.
Corn lost ground, certainly thanks to sales from funds, but above all in the wake of other products.
The ethanol sector, which has been very dynamic since the start of the campaign, could suffer from a drop in demand in the wake of oil in the event of re-containment or travel restrictions imposed by a number of countries.
Soybeans had also experiencing massive sales in a context where, barring the impact of the La Nina effect at the start of next year, Brazil could post a record harvest.
Meantime, USDA announced a private export sale for 132k MT of soybeans to unknown yesterday.
Ahead of today’s USDA monthly soy crush data, traders surveyed expect October crush to come in at 195.6 mbu.
For bean oil stocks, the average pre-report estimate is to see 2.34 billion lbs.
As for wheat in the absence of new fundamental elements about the consequence of the Omicron variant and its impact on the world economy, it is the financial players who are leading the dance for the moment.
Presumably, they liquidated a large portion of their Chicago long positions in this commodity within just 3 days.
Such volatility can only encourage prudence and economic reasoning and management framework.
In fact, funds are currently as long Kansas as they have been for this time of year.
In the KC wheat contract such fund length can create some issues because liquidity tends to dry up in an exit event which can amplify market movements.
In this context, corn basis bids were mostly steady to firm after ticking 2 to 5 cents higher at four Midwestern locations.
An Illinois ethanol plant bucked the overall trend after sinking 6 cents lower.
Soybean basis bids were mostly steady across the central U.S., but did firm 2 cents higher at an Ohio elevator and tilt 3 to 5 cents lower at two other Midwestern locations.
The funds were net sellers yesterday for volumes estimated at 30,000 lots of corn, 20,000 lots of soybeans and 22,500 lots of wheat.
On this morning, in pre-opening, prices rebounded in a context of uncertainties which, however, remain very strong.
From South America, Brazil’s National Energy Policy Council issued a statement declaring the minimum 10% biodiesel content level will remain in effect through 2022.
The CNPE lowered the minimum requirement from 13% in September of this year due to high input costs.
Meantime, Brazil’s Anec predicts that the country’s corn exports will total 2,8 MMT in November, which is a decrease of 3.6% from its forecast a week ago.
Also, Brazil’s Anec expects the country’s soybean exports to reach 2,28 MMT in November.
That’s well below its forecast from a week ago, which predicted sales totaling 2,42 MMT this month.
On European market, rapeseed has shown the heaviest toll since last week on the impact of the new variant, in the wake of oil.
This drop in black gold has in fact pulled all raw materials very clearly into the red and Euronext obviously did not resist this pressure with significant losses observed both in wheat, corn and rapeseed.
Also, market remained under pressure after the previous day’s Abares report, in which record wheat and canola productions were announced.
In contrast, EU wheat shipments have been a major driver of the strength in wheat markets, particularly Matif.
Soft wheat shipments from the EU indeed, reached 11.62 Mt as of Nov 28 vs 10.45Mt the same time the previous year, partly incorporating the figures for France, currently at 1.88 million tonnes, figures even lower than the reality, since the market estimates French exports excluding EU area to date to over 3.5 million tonnes.
Additionally the prior year included the UK before it departed the EU in Dec 2020.
EU barley exports totalled 4.12Mt, compared with 3.43Mt a year earlier with China being the top taker at 1.61Mt.
Corn imports increased by 370 kt to 5.2 Mt, down 1.9 Mt from last year.
Rapeseed imports at European level stand at 1.88 million tonnes on November 28, compared to 3.00 million tonnes last year to date.
EU 2021/22 soybeans import, had reached 5.07 million tonnes, down from 6,02 million tonnes in 2020/21 at same week.
From the Middle Kingdom, Chinese Dalian Corn Prices had rallied from September’s 2,429 yuan to 2,734 earlier this month.
Since then, Jan contracts have been in a range from 2,630 to 2,700 yuan/MT, and closed at 2,660 yuan (~ $10.61/bu).
From the Black Sea basin, Ukrainian wheat exports are outpacing last year by 22% through 11/29.
Ag Ministry data showed 14.5 MMT have been shipped MYTD since July 1st.
Recall, Ukraine is limiting exports at 25.3 MMT through June.
Meantime, S&P Global Platts reported Ukrainian wheat prices have risen 11.5% to $342.25/MT.
Thus, even if there is a fall in grain prices also in the Black Sea basin (yesterday, Black Sea wheat was off USD$9.75/t), it is in a more moderate fashion.
Maybe this is a consequence of the export activity that remains strong for these origins.
In add, the specter of setting up export quotas from February by Russia remains, despite the drop in prices in recent days on the international scene.
On the other hand, temperatures are displaying in negative territory over Moscow and Kiev with snowfall, but without raising fears for crops.
From Australia, as half of NSW drowns, world wires were full of reports of bigger Australian production based on the latest ABARES release.
The receival data from bulk handlers GrainCorp and Viterra were still slow going with harvest delays last week due to weather.
However, Viterra have now cracked over 1 million tonnes with large percentage of receivals being barley.
The GrainCorp network has received 4.5Mt.
Meantime, two more canola vessels appeared on the stem in NSW, taking the total to three, potentially these new vessels may have more up the queue in part due to the problems in the wheat stem.
We could be seeing more canola prioritised to the export pathways.
In WA 0.1Mt canola November loadings are being rolled into December, so it is now looking like 0.45Mt November.
Meantime, East coast wheat cash bids to growers were off $3-5/t yesterday.
SA values printed $3-5/t stronger on all wheat grades with a $20 increase on AGP bids in Outer Harbour zone.
East coast barley bids were firmer by $2-3 and SA was off $3-6 by the end of the day with some harvest pressure affecting bids.
Canola was off hard with bids off $20/t and more pressure expected today with international prices lower last night.
On the international trade scene, Japan is shopping for just over 50,000 t of wheat.
ODC Tunisia is tendering tomorrow to buy 25.000 t +10% or more and or 17.000 +10% or more of durum wheat.
ODC also tenders tomorrow to buy 25.000 t +10% or more of soft wheat.
Author: Sandro F. Puglisi
