Yesterday US farm markets were mixed but mostly higher, thanks to some uneven technical maneuvering.
Indeed, corn lifted moderately gaining 0,90%.
Soybean prices posted gains around 1.25%, partly spurred by surging soymeal prices, which jumped 4,09% higher.
Soybean oil tumbled by 2,08% meantime.
Wheat complex suffered a modest setback, but losses were mostly minimal.
Indeed, March Chicago SRW futures dropped 0,22% to $7.87.
March Kansas City HRW futures eased 0,09% to $8.1160.
March MGEX spring wheat futures gained 0.27% to $10.21.
On macro markets, oil prices fell for a third day straight on this morning on growing expectations that supply growth will outpace demand growth next year.
Indeed, the International Energy Agency (IEA) on Tuesday said a surge in COVID-19 cases with the emergence of the Omicron variant will dent global demand for oil at the same time that crude output is set to increase, especially in the United States, with supply set to exceed demand through at least the end of next year.
Also weighing on the market is a firming U.S. dollar.
Another bearish indicator, was industry data showed that U.S. crude inventories last week did not decline as much as expected, as American Petroleum Institute data showed U.S. crude stocks fell by 815,000 barrels in the week ended Dec. 10, according to market sources, compared with a 2.1 million barrel drop that analysts expected.
However, distillate stocks fell by 1 million barrels, compared with analysts’ forecasts for an increase of 700,000 barrels, and gasoline stocks rose by 426,000 barrels, which was a smaller build than expected.
Weekly data from the U.S. Energy Information Administration is due later on this morning.
In this context, U.S. West Texas Intermediate (WTI) crude futures fell $1.05, or 1.5%, to $69.68 a barrel by 07:34 GMT, after losing 56 cents in the previous session.
Brent crude futures fell 91 cents, or 1.2%, to $72.79 a barrel, after losing 69 cents on Tuesday.
On the freight market, the Baltic Exchange’s dry bulk sea freight index fell for a fourth straight session on Tuesday to mark its worst day since early November, as rates slipped across all vessel segments.
The overall index, which factors in rates for capesize, panamax and supramax vessels, dropped 284 points, or 8.8% – biggest since Nov. 3 – to 2,932.
The capesize index lost 758 points, or 16.1%, to 3,960, its lowest level since Nov. 26.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, decreased by $6,289 to $32,838.
The panamax index shed 116 points, or 3.9%, to its lowest in almost two weeks at 2,879.
Average daily earnings for panamaxes, which carry 60,000-70,000 tonne coal or grain cargoes, decreased by $1,041 to $25,911.
The supramax index fell 2 points to 2,550, snapping a 15-session winning streak.
On equities markets, US stock indexes on Tuesday settled lower for a second consecutive day, with the S&P 500 and Nasdaq 100 falling to 1- week lows.
Weakness in technology stocks on Tuesday weighed on the overall market.
Also, stocks moved lower on signs of rising U.S. price pressures that may prompt the Fed to tighten monetary policy sooner than expected after U.S. Nov PPI rose at a record year-on-year pace.
U.S. Nov PPI final demand rose +0.8% m/m and +9.6% y/y, stronger than expectations of +0.5% m/m and +9.2% y/y.
The +9.6% y/y increase was the largest in the history of the series that has data going back to 2010.
U.S. Nov PPI ex-food & energy rose +0.7% m/m and +7.7% y/y, stronger than expectations of +0.4% m/m and +7.2% y/y.
The +7.7% y/y increase was the largest in the history of the series that has data going back to 2010.
In this context, The S&P 500 Index on Tuesday closed down -0.75%, the Dow Jones Industrials Index closed down -0.30%, and the Nasdaq 100 Index closed down -1.04%.
The yield on the 10-year Treasury fell to 1.42% from 1.44% late Tuesday.
At the same time, also Asian stocks were mostly lower on this morning.
In fact, Tokyo’s Nikkei 225 index edged 0.1% higher to 28,459.72 and the Kospi in Seoul was nearly unchanged at 2,988.71.
In Sydney, the S&P/ASX 200 gave up 0.7% to 7,327.10.
Hong Kong’s Hang Seng index slipped 0.4% to 23,548.10, while the Shanghai Composite index lost 0.2% to 3,655.92.
Shares fell in Singapore and India but rose in Taiwan.
Meantime, China reported its retail sales slowed in November, rising 3.9% from a year earlier compared with a 4.9% increase in October.
Industrial production picked up slightly, growing 3.8% from a year earlier compared with October’s 3.5%.
On weather side, most of the Midwest and Plains will see at least some measurable rain or snow between today and Saturday, per the latest 72-hour cumulative precipitation map from NOAA.
The Mid-South and upper Midwest are the areas likely to see the most moisture later this week.
Seasonally wet weather could extend across the Northern Plains and upper Midwest between December 21 and December 27, per NOAA’s latest 8-to-14-day outlook.
Much of the Corn Belt will experience warmer-than-normal conditions during this time.
Meantime, Kansas, the No. 1 wheat producer in America, has 51% of its 2021/22 winter wheat crop rated in good-to-excellent condition through December 12, per the latest updates from USDA-NASS.
Another 35% of the crop is rated fair, with the remaining 14% rated poor or very poor.
However, only 37% of the state’s topsoil moisture supplies are considered “adequate” right now, with 39% rated “short” and 24% rated “very short.”
Coming back on grain markets, US grain price were lacklustre at best which is clear evidence that the US is over-priced relative to other origins.
HRW would be the closest US wheat class to get interest but, with the exception of last week, export sales have been sluggish at best.
Corn and soybean struggled for traction but went into the green on uncertainty about South American production, which is plagued by water shortages, particularly in the southern part of the continent.
Meantime, ahead of the next monthly report from the National Oilseed Processors Association (NOPA), out later in the afternoon, analysts expect to show a November soybean crush totaling 181.640 million bushels.
If realized, that will be the fifth-largest monthly total on record but still 1.3% below October totals.
Soyoil stocks are expected to rise for the fifth consecutive month to 1.903 billion pounds.
In this context, corn basis bids were steady to mixed across the central U.S., moving as much as 5 cents higher at an Indiana ethanol plant and as much as 5 cents lower at an Indiana elevator.
Soybean basis bids trended 5 cents higher at two interior river terminals and slid a penny lower at an Ohio elevator while holding steady elsewhere across the central U.S.
Funds were net buyers yesterday for 5,500 lots of corn and 10,500 lots of soybeans.
They were net sellers for 2,500 lots of wheat.
From South America, according to AgRural, 96% of the soybean acreage is now planted, with crops in the North looking good, but concerns exist with dry conditions in the South.
However, according to Dr. Cordonnier, bean planting in the state of Mato Grosso was record fast this year, and crops are looking good.
Mato Grosso is the largest bean-producing state in that country (27%), and it is estimated they put in 10.86 million hectares.
At the same time, Cordonnier has left his production estimate at 144 MMT, meanwhile ABIOVE, the Brazilian Oilseed Processing Organization, bumped their estimate up 700k MT to 144.8 MMT.
Abiove also predicts exports could reach 93.40 MMT in 2022.
Meantime, Brazil’s Anec estimates that the country’s soybean exports in December will reach 2.8 MMT.
That estimate is 8.6% higher than Anec’s prior estimate made a week ago and 17 times higher than the 161,024 mt shipped in December 2020.
On the other hand, due to the ongoing dry weather, Cordonnier lowered his Brazilian corn production estimate 1 MMT to 116 MMT.
Meantime, Brazil’s Anec estimates that the country’s corn exports could reach 3.9 MMT in December, trending 12.9% above Anec’s forecast from a week ago.
In Argentina, the Buenos Aires Grains Exchange is anticipating lower-than-normal rainfall this summer due to prevailing La Niña conditions, which could create “strong challenges to production” for both corn and soybeans this season, per the group’s latest report.
Corn planting progress is at 39,5%, with soybeans at 56,3%.
However, the Buenos Aires Stock Exchange still seems a little optimistic with production forecasts of 57 million tons of corn and 44 million tons of soybeans.
On European market, seems that we are entering a new period of high market volatility, accentuated by the end-of-year adjustment operations.
Indeed, Euronext was tinged red again on Tuesday evening.
The European Union’s crop monitoring service, commonly known as MARS, reported that winter grain crops in the E.U. bloc are largely considered to be in good condition as winter approaches.
MARS warned that crops in the Black Sea region are likely to be more susceptible to frost after dry weather delayed planting progress in the region.
Indeed, lack of snow cover also removes a layer of insulation for the winter crops against hard freezes though no measurable snow has fallen in the region as of late.
Late planted crops in Eastern European countries, including Romania, Bulgaria, and Ukraine, have so far not fallen victim to frost and – thankfully – no hard freezes are in the short-term forecast.
Elsewhere in the European Union, winter grain conditions remain less worrisome.
Northern and Central Europe have enjoyed above average temperatures and plentiful rains over the past month, favoring crop development.
In top E.U. grain producer France, MARS found that cooler fall temperatures since planting finished in early October have stunted crop development though French farm agency FranceAgriMer maintains that early conditions for winter wheat are very good.
In short, while early surveys of the E.U.’s wheat crop remain mostly favorable there are still weather risks that could hinder crop production next summer.
The E.U. is typically the world’s second largest wheat exporter so hard freezes without snowfall could renew rallies in the wheat market in the coming weeks.
Another factor of uncertainty is the impact of the omicron variant on the world economy, and the monetary policy that will be adopted today by the Fed and tomorrow by the ECB, particularly in an inflationary context.
Meantime, weekly European Union export and import data for cereal and oilseed products have been delayed to Wednesday due to a technical issue.
Also, about Algeria’s current call for wheat tender that could involve a relatively large volume to buy, is tolking that Algeria to have decided to turn away from French origins in favor of Black Sea and Argentinian wheats, even if on paper, the French origin is competitive.
European rapeseed also ended the session in the red.
The oil market was also pulled down by the Malaysian palm, whose exports slowed again in the first half of December.
From the Black Sea basin, SovEcon estimated Russian wheat output at 75.4 MMT, which was a 100k MT bump, indicating improvement from the Siberian crop which will record its highest production in over a decade..
The Russian Ag Ministry has their forecast at 76 MMT.
These compare to IKAR’s bump to 75.5 – 76.7 MMT expectations and USDA’s 1 MMT increased December figure of 75.5 MMT.
Meantime, there is little change in the price of wheat in close delivery.
To note, the corn market in Ukraine is benefiting from new purchases from China, estimated at 400,000 t for January/March deliveries.
A cold spell will be on the cards in Russia in the next few days, with temperatures that could fall below -20 degrees in Moscow.
However, temperatures in Krasnodar should remain within the normal range for the season.
This morning in Kiev the thermometer is around zero degrees and in Moscow around – 3 degrees.
From the Philippine, USDA’s Ag Attache reported Philippine’s ethanol biofuel consumption increased 9% yr/yr as Covid lockdown measures loosened in 2021.
That left consumption at 570m L. 2022 blend rates are unchanged, however the Attache foresees 2022 production increasing 18% to 330m L.
From Australia, weather remains a good run for growers leading into Christmas, however a lot of headers will still be going over the Christmas/New Year period.
Meantime, strong receival data was released this week in the bulk handling networks.
CBH has hit a record for biggest harvest reaching 16.6Mt, surpassing their 2016-17 receivals.
Viterra took in 1.33Mt into their network for the week
In this context, cash boards took a dive.
Indeed, values weakened right across the boards yesterday with wheat and canola bids down $20-30/t and barley also weakened.
Meantime, contract bids got pulled by the day’s end as buyers got their fills.
Today we reset and see where values line up, as harvest continues to power along with good weather.
On international trade scene, Japan’s MOA issued their regular wheat tender, this time seeking 228,783 MT from the United States and Canada that closes on Thursday.
Of the total, 56% is expected to be sourced from the U.S.
Australia was not included in the tender.
The grain is for shipment starting in mid-January.
An importer group in the Philippines is tendering with deadeline offers on Thursday, to purchase up to 220,000 tonnes of animal feed wheat from Australia, Europe or the Black Sea region.
Another Philippines importer group yesterday issued a separate tender to purchase another 120,000 t of feed wheat.
Iranian state agency the Government Trading Corporation (GTC) has issued an international tender to purchase about 180,000 tonnes of milling wheat.
The deadline for submission of price offers in the tender is Wednesday, Dec. 15.
The tender seeks differing delivery methods.
Two 60,000 tonne consignments are sought for ocean shipment to Iranian Gulf sea ports.
Another 30,000 tonnes is sought for shipment through the Caspian Sea which could favour Russian wheat.
A further 30,000 tonnes is sought for delivery by rail which would favour wheat from Kazakhstan.
Shipment of all the wheat is sought in January and February, 2022.
Volumes in Iran’s tenders are nominal and the country regularly buys more than the original tonnage sought.
Algeria started buying optional origin milling wheat in this week’s tender.
Price is between $372 TO $376 a tonne C&F.
Some initial estimates put the volume at 700,000 to 780,000 tonnes.
Author: Sandro F. Puglisi
