USDA December WASDE report tipically is never been notorious for shaking up grain prices.
However, yesterday data put a dent into wheat prices, as showed higher ending stocks and an expected drop in US exports.
Thus, CBOT wheat futures tumbled 2,23%.
KC HRW fell 1,91%.
MPLS spring wheat shedded 1,26%.
Corn and soybeans were spared the same fate.
Indeed, corn prices were 0.77% higher.
Soybean prices lifted 0.28%.
Soymeal prices gained 0,70%.
Soy oil fell 1,26%, meantime.
On macro markets, oil prices dipped also on this morning.
Prices are under pressure as China’s domestic air traffic, is faltering amid a zero-COVID policy that has led to tighter travel rules in Beijing and weaker consumer confidence after repeated small outbreaks.
Meanwhile, ratings agency Fitch downgraded property developers China Evergrande Group and Kaisa Group, saying they had defaulted on offshore bonds.
That reinforced fears of a potential slowdown in China’s property sector, as well as the broader economy of the world’s biggest oil importer.
In addition, headlines about a Japanese study showing Omicron is more than four times as transmissible as the Delta variant also sparked some selling.
A stronger dollar, rising ahead of U.S. inflation data due later on Friday, also weighed on oil prices.
Thus, U.S. West Texas Intermediate (WTI) crude futures lost 26 cents, or 0.4%, to $70.68 a barrel at 07:35 GMT, after sliding 2% in a volatile session the previous day.
Brent crude futures dropped 0.6%, or 41 cents, to $74.01 a barrel after falling 1.9% on Thursday.
However, both benchmark were still on course to rise more than 6% this week.
Their first weekly gain in seven weeks if realized.
On equities markets, US stock indexes yesterday closed steady to lower on the renoved concern that the rapid spread of the omicron Covid variant will weigh on the economy.
However, yesterday’s weekly U.S. jobless claims data were bullish for stocks, helping to limit losses.
Indeed, U.S. weekly initial unemployment claims fell -43,000 to a 52-year low of 184,000, showing a stronger labor market than expectations of 220,000.
In this context, the S&P 500 Index closed down -0.72%, the Dow Jones Industrials Index closed unchanged, and the Nasdaq 100 Index closed down -1.49%.
Meantime, Asian stock markets followed Wall Street lower on this morning.
Indeed, New Zealand gained while all Southeast Asian markets declined.
The Shanghai Composite Index lost 0.3% to 3,661.12 and the Nikkei 225 in Tokyo shed 0.5% to 28,582.83.
The Hang Seng in Hong Kong retreated 0.5% to 24,132.85.
The Kospi in Seoul gave up 0.6% to 3,009.85 and Sydney’s S&P-ASX 200 was 0.3% lower at 7,359.10.
India’s Sensex lost 0.3% to 58,640.25.
On the freight market, the Baltic Exchange’s dry bulk sea freight index ended a 10-session winning streak yesterday, as rates of the larger segments, capesize and panamax, vessel fell.
Indeed, the overall index, which factors in rates for capesize, panamax and supramax vessels, shedded 80 points, or 2.3%, to 3,343.
The capesize index dropped 200 points, or 3.9%, to 4,989, slipping from a more than one-month peak scaled in the previous session.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, decreased by $1,651 to $41,379.
The panamax index fell 76 points, or 2.4%, to 3,145, its lowest level in nearly a week.
Average daily earnings for panamaxes, which carry 60,000-70,000 tonne coal or grain cargoes, decreased by $686 to $28,306.
However, the supramax index gained 21 points to 2,541, its highest level since Nov. 4.
Dry bulk market is unlikely to bounce back to the levels seen in October due uncertainty in Chinese iron ore demand and a likely short-lived surge in coal demand, according to some analysts.
Benchmark iron ore futures in Asia pulled back from six-week peaks hit during a relief rally earlier this week that was mainly driven by China’s policy support, particularly for its debt-saddled property developers.
On the weather side, more wets will be moving through the central U.S. later this week, with the eastern Corn Belt likely to see the largest accumulations, per the latest 72-hour cumulative precipitation map from NOAA.
The agency’s 8-to-14-day outlook predicts more seasonally wet weather in store for the Midwest between December 16 and December 22, with warmer-than-normal conditions probable for the eastern two-thirds of the country.
Meantime, as we know, December WASDE report was released during yesterday’s session.
Particularly, USDA made no domestic changes to the corn balance sheet in their monthly update.
Exports were maintained at 2.5 bbu, with 5.25 billion for ethanol usage.
Stocks are steady at 1.493 MMT, for a consistent stocks to use ratio of 10.06%.
Global corn carryout is 1.1 MMT higher than last month at 305.5 MMT.
The trade was looking for 304.5 MMT going in.
As for soybean, global output was raised 4.1 MMT, with no change to South America.
The monthly WASDE report left the domestic bean balance sheet unchanged from November. Stocks remained at 340 mbu, compared to the pre report estimate of 354.7 mbu.
Exports and Crush were both unchanged at 2.05 and 2.19 bbu respectively.
Global soybean stocks were estimated at 102 MMT, which was 1.78 MMT lower than November.
Going in the trade expected to see a 600k MT increase.
World soybean production was cut 2.22 MMT to 381.78, though both Brazil and Argentina were unchanged.
The production cut came via China, however their imports were steady at 100 MMT.
As for wheat, USDA reported wheat ending stocks at 598 mbu, up 15 mbu from last month.
Exports were cut by 20 to 840 mbu, while the import number was revised another 5 mbu lower to 110.
On the world stage, the USDA raised wheat carryout by 2.38 MMT to 278.18 MMT.
The trade was looking for 276 MMT on average.
Most of the change came from upward production revisions, as Australia was boosted 3.5 MMT to a record 34 MMT (2 MMT is absorbed with higher shipments).
Russia was also bumped 1 MMT.
The cash average price for corn was unchanged at $5.45/bu in the December WASDE.
As for soybean, USDA had the average cash soybean price at $12.90, unchanged from Nov. report.
Soymeal’s expected cash price in the WASDE was $5/ton higher at $330.
As for wheat, the new cash average price from USDA is $7.05/bu for wheat, which was 15 cents higher on the month.
At the same time, Weekly Export Sales report was released yesterday by FAS.
Particularly, as for corn, data showed 1.132 MMT of corn was sold during the week that ended 12/2.
That was near the top end of the range of estimates, and up 11% wk/wk and 2% above the prior four-week average.
Corn shipments slipped 4% below the prior four-week average at 904k MT during the week, which left accumulated shipments at 10.55 MMT.
As for soybean, data showed soybean bookings were 1.64 MMT during the week that ended 12/2.
That was 27% higher than the prior four-week average.
Bean shipments were 2.434 MMT, which was up 4.6% on the week but remained 7% below the prior four-week average and 9.8% below the same week last year.
As for soymeal, USDA showed 202,480 MT were booked.
That was 38% higher from last week and boosted MYTD commitments to 5.63 MMT.
Soybean oil bookings were reported at 5,311 MT for the week.
That was at the bottom range of estimates.
As for wheat export bookings were 239,898 MT, moving noticeably above last week’s tally, but remaining 27% lower than the prior four-week average
That was within the 50k to 400k MT expected, but still below the 616k MT sold during the same week last year.
Meantime, wheat export shipments fell 43% lower week-over-week and were 25% below the prior four-week average.
Total wheat commitments, at 535 mbu, are still 24% below last year’s pace.
Meantime, yesterday private exporters announced to USDA the sale of 280,000 t of soybeans to unknown destinations.
Half of that total is for delivery during the current marketing year, which began September 1, and the remaining half is for delivery in 2022/23.
In this context, corn March futures each picked up 4.4 cents to close at $5.916.
Soybean January futures added 3.4 cents to $12.644.
March Chicago SRW futures faded 17.6 cents to $7.766.
March Kansas City HRW futures lost 15.4 cents to $7.964.
March MGEX spring wheat futures dropped 13 cents to $10.222.
Corn basis bids were steady to mixed, meantime, moving as much as 4 cents lower at an Ohio elevator and as much as 5 cents higher at an Illinois river terminal.
Soybean basis bids were steady to weak, after eroding 4 to 6 cents lower at four Midwestern locations.
The funds were net buyers yesterday for 2,500 corn lots and net sellers for 1,500 soybean lots and 9,500 wheat lots.
From South America, the Brazilian CONAB S&D update showed Brazilian corn output at 117.2 MMT, with a 29 MMT first crop and 86.3 MMT 2nd crop.
That would best last year’s drought-plagued crop by nearly 35%, if realized.
USDA is at 118 MMT.
Corn exports are expected to reach 36,8 MMT this marketing year.
Also, CONAB data showed 142.8 MMT of soybeans would be produced this season.
That would be a record if realized and up from 137.3 MMT last year, a year-over-year increase of nearly 4%.
However, that is still below USDA (144 MMT).
That would come via a record 52.62 bpa yield.
Brazilian soybean exports in 2021 are expected to reach 85,78 MMT.
Argentine corn farmers are set for a late season planting blitz to avoid possible dryness over the months ahead, a strategy expected to propel both a record harvest and record exports from the world’s second largest supplier of the grain.
Fear of dry weather ahead has driven a shift towards late season planting from December onwards, with some 55%-60% of expected corn planting to come in that period, according to local corn industry chamber MAIZAR, up from 52% last season.
The strategy is likely to drive record corn exports from the current 2021/22 crop year just as global corn demand nears historic highs.
With late planting starting this month, the Buenos Aires Grains Exchange said on Thursday that only 39.5% of this season’s corn has been sown so far, versus 47% at the same point last season.
A week earlier the exchange increased its 2021/22 corn harvest forecast to a record 57 million tonnes. Argentina ships some 70% of its corn overseas.
Early-sown corn in Argentina is harvested in March through April, while harvesting of late-planted crops goes through July.
Through November exporters bought 10.8 million tonnes of 2021/22 corn from Argentine farmers in the forward market, up from 10.2 million tonnes at the same 2020/21 period.
Top importers of Argentine corn include Vietnam, Egypt and Algeria.
On this wake, total area expected to be planted with corn in Argentina is estimated by the exchange at 7.3 million hectares (18 million acres) in 2021/22, up from 6.9 million hectares in the 2020/21 season.
On European market, grain prices were mostly down Thursday afternoon, pending USDA reports.
Meantime, according to the European Commission, biofuel consumption in the European Union is set to fall by 2031 as road transport moves away from fossil fuel, while palm oil imports would plummet, slashed by stricter environment regulation.
In its 2021-2031 Agricultural Outlook, the Commission projected that EU biodiesel use will fall 24% to 14.3 billion litres in 2031 after a peak at 18.9 billion litres in 2023.
Bioethanol use would be less affected as it also has non-fuel applications, but it would still shed 10% to 6.4 billion litres in 2031 after rising to 7.1 billion litres in 2023.
The decline in biodiesel would mostly affect palm oil use due to stricter sustainability criteria, while rapeseed oil use is expected to remain stable, representing around half of biodiesel feedstock.
Under the EU’s renewable energy directive, palm oil-based fuels are to be phased out by 2030, since palm oil has been classified by the bloc as resulting in excessive deforestation, a move that raised outcry from the world’s two largest palm oil producers Malaysia and Indonesia.
Palm oil imports in the EU are expected to decline to 4.0 million tonnes by 2031 from 6.5 million tonnes in 2021, with most of the decrease attributed to falling demand for biodiesel, the Commission said.
The EU is expected to remain a net importer of biofuels but biodiesel imports are also likely to be limited by countervailing duties on imports from Argentina and Indonesia.
In ethanol production, the Commission expects maize to remain the principal feedstock, with a share of around 44% while use of wheat is set to fall and other cereals and sugar beet would remain relatively stable.
IN this context, wheat remained into the red by the close, corn prices were higher, while rapeseed prices evolved in dispersed order, increasing in the near distance but falling slightly in the far distance.
On the other hand, fertilizer deliveries are still struggling in France specifically in ammonitrate.
The InVivo group has announced that it has officially completed its purchase of the Soufflet group.
From the Black Sea basin, yesterday there was a fall in wheat prices, while corn prices evolved more in dispersed order.
The bid price of barley have started declining in Russian ports this week.
The downward trend is based on the reduction of the barley prices on the external market and smaller export supplies.
As of December 9, Russian agrarians harvested 15.9 mln tonnes of corn for grain throughout the area of 2.9 mln ha, reported the press-service of the Ministry of Agriculture of Russia.
Agrarians harvested 15.8 mln tonnes of sunflower seed throughout 9.6 mln ha.
Meantime, Russian agrarians planted winter crops throughout 18.4 mln ha.
The Agricultural Ministry of Russia maintains its estimate of grain crop at 123 mln tonnes this year, declared the Minister of Agriculture Dmitry Patrushev on December 8.
They expect the production of grain to reach more than 123 mln tonnes in net weight, oilseeds about 23 mln tonnes.
At the same time, the Minister said that the current crop size can already cover the needs of Russian domestic market.
Also, he pointed out that the floating export duty on grains allowed to keep the internal prices at the level lower that the world prices.
However, he reminded that the tariff quota on grains would be implemented in the first half of 2022 netherless.
It will include a separate quota for wheat.
The size of quota will be determined at the end of the year basing on the updated production estimate as well as the export pace in the first half of the season.
Meantime, for the period December 15- 21, Russian grains duty, in usd per mt will be 91,0 (+6,1) for wheat, 54,4 (+0,1) for corn, 78,7 (+3,6) for barley.
From the Middle Kingdom, Evergrande has officially been called into default.
Credit agency Fitch Ratings cut Evergrande to “restricted default” over its failure to make two coupon payments by the end of the grace period on Monday.
The risk is now that there is potential for the default to snowball.
Fitch’s cut came minutes after it applied the same classification on Kaisa Group Holdings Ltd, which failed to repay a US$400 million dollar bond that matured yesterday.
The two companies, combined, account for 15pc of outstanding dollar bonds sold by Chinese developers.
On the other hand, when China joined the World Trade Organization in 2001, authorities agreed to establish a tariff-rate quota (TRQ) that was meant to open the China wheat market to import business and reduce the government’s monopoly .
Under the TRQ, China now allows up to 9.636 million metric tons (the quota) to be imported at a 1-percent tariff.
Imports in excess of the TRQ can be imported with a 65-percent wheat tariff applied, but it is usually not profitable for millers to import wheat when this tariff is applied.
The TRQ has never been filled in two decades since its establishment.
The surge in use of wheat as feed ingredient has potential to push China’s wheat imports to meet quota for first time in 2021.
Meantime, China’s Ag ministry increased their 21/22 Corn production forecast to 272.55 mmt, up from last month’s est. of 270.96 mmt.
Also, China’s Ag ministry lowered 21/22 Soybean production to 16.4 mmt, down from their Nov’ forecast at 18.65 mmt.
From Australia, more scattered showers pushed through southern NSW and parts of Victoria halting harvest.
The forecast for the next 8-10 days looks relatively clear for a good run of harvest now for SNSW through to WA.
There is more harvest action happening across Victoria and South Australia despite the cold temperatures.
Growers are still getting onto paddocks at every opportunity they can get.
Meantime, Aussie values yesterday were softer across the board.
Markets are now starting to take a breather with wheat and barley all bid softer.
The size of the wheat price drops was mixed.
Across the port zones most were down $5-10/t.
Late in the day contract bids were being pulled or reduced by a further $5/t.
Barley was off $6-8/t on the cashboard bid to the grower and continued to find participants who would trade it.
Canola was well bid with Geelong/Melbourne track values up $5-6/mt.
Growers continue to harvest canola and book the cash at depot price.
Pulses were also stronger over the day with fabas and lentils still well bid in Vic and SA.
December WASDE Report Numbers:
As for wheat USDA lifted the forecast of 2021-22 world wheat production and ending stocks.
It was a moderately bearish report for wheat.
The stocks figure was higher than expected.
Particularly, 21/22 global wheat ending stocks were +2.4Mt at 278.18Mt (276.3Mt expected).
21/22 global wheat production was +2.7Mt at 778.89Mt, of which:
Argentina 20.0Mt (Unchanged);
Australia 34.0Mt (+2.5Mt);
Canada 21.65Mt (+0.65);
EU 138.7Mt (+0.3Mt);
Russia 75.5Mt (+1Mt);
US 44.79Mt;
Ukraine 33Mt.
21/22 China wheat imports was seen -0.5 down, to 9.5Mt.
21/22 Russian wheat exports were unchanged at 36Mt.
US 21/22 total wheat ending stocks were +15mbu at 598mbu (589mbu expected) of which:
HRW 309mbu (+10);
HRS 132mbu (+5);
SRW 93mbu (0);
SWW 46mbu (0);
Durum wheat 17mbu (0).
US 21/22 production was at 1.646bbu (unch).
As for corn and oilseeds, the message to take away from December USDA numbers was that conditions largely are unchanged from previous report.
Consequentially, market implications for both are mostly neutral.
Particularly, all corn 21/22 US figures were unchanged.
US corn ending stocks were at 1.493bbu (1.487bbu expected).
Production was at 15.062bbu.
Yield at 177.0bu/ac.
21/22 China imports unchunged at 26Mt.
21/22 Brazil & Argentina production was unchanged at 118Mt and 54.5Mt respectively.
As for oilseeds, all numbers US 21/22 soybean were unchanged.
Ending stocks at 340mbu (352mbu expected);
Production was at 4.425mbu;
Yield at 51.2bu/ac;
US bean oil 21/22 ending stocks were +4mlbs at 1,916;
US bean meal ending stocks for 21/22 were unchanged at 400,000st;
21/22 world soybean ending stocks were -0.8Mt down at 103.78Mt;
China 21/22 soybean imports were -1Mt down at 101Mt;
Argentina 21/22 production was -1.5Mt down to 49.5Mt;
Brazil 21/22 production was unchanged at 144Mt;
World 21/22 soybean meal stocks +0.65Mt higher at 13.09Mt;
World 21/22 soybean oil stocks were +0.04Mt higher at 4.05Mt.
Author: Sandro F. Puglisi
