US farm markets were pushed down, yesterday.
Wheat prices were hammered as supply concerns were more easing.
Also, there was a refocusing on stiff global competition.
That triggered a broad sell-off that pushed some contracts nearly 4% lower.
Particularly, March Chicago SRW futures tumbled 3.94% to settle at $7.56.
March Kansas City HRW futures lost 3.23% to close at $7.8475.
March MGEX spring wheat futures dropped by 1.15% to end at $10.092.
Corn prices, meantime, were caught in the crossfire, with an ensuing spillover weakness leading to losses by 0.76% on March futures that closed at $5.856, while May futures dropped by 0,84% to $5.872.
Soybean complex wobbled but finished Wednesday’s session with narrowly mixed results.
In fact, soybean January futures firmed a 0.24% to $12.624, while March futures lifted only 0.06% cents to close at $12.652.
Soybean meal was down 1,25% by the close, posting 372.2/smt.
Soybean oil was up 2,35% to close at $53,47.
On macro markets, oil prices rose on this morning as U.S. implied consumer petroleum demand surged to a record high, even as the Omicron variant of the coronavirus threatens to dent oil consumption globally.
Indeed, U.S. crude inventories sank by 4.6 million barrels in the week to Dec. 10, data from the U.S. Energy Information Administration showed.
That was more than double expectations analysts, that forecasted a 2.1 million-barrel drop.
Product supplied by refineries, a proxy for demand, surged in the most recent week to 23.2 million barrels per day (bpd), due to gains in gasoline, diesel and other refined products.
The rise reflects both expectations for a surge of people travelling for the holidays and the loosening of supply-chain bottlenecks that has more trucks on the road delivering goods.
In this context, Brent crude oil futures rose by 72 cents, or 1%, to $74.60 a barrel by 07:52 GMT extending gains US$0.18 per barrell of prior session, while U.S. West Texas Intermediate (WTI) crude futures increased by 79 cents, or 1.1%, to $71.66, after gained US$0.14 per barrell the prior session.
On the freight market, the Baltic Exchange’s dry bulk sea freight index declined more than 9% on Wednesday to its lowest level in three weeks, weighed down by the capesize vessel segment, which recorded its biggest daily percentage decline in over a year-and-a-half.
The overall index, which factors in rates for capesize, panamax and supramax vessels, shed 267 points, or 9.1%, to 2,665, its lowest since Nov. 24.
The capesize index dropped 688 points, or 17.4% – the biggest decline since May-end 2020 – to 3,272.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, decreased by $5,701 to $27,137.
The panamax index lost 135 points, or 4.7%, to its lowest in over two weeks at 2,744.
Average daily earnings for panamaxes, which carry 60,000-70,000 tonne coal or grain cargoes, decreased by $1,218 to $24,693.
The supramax index fell 8 points to 2,542, its lowest in almost a week.
“Into the current week, the (dry bulk) market is moving overall on a softer note ahead of the holidays with cargo enquiry slowing down, while the seasonally slow Q1 is ahead of us,” shipbroker Intermodal said in a weekly note dated Tuesday.
Meantime, Chinese steel futures hit a one-week high, after data showed industrial output in the world’s biggest producer grew faster than expected in November, but a continued decline in steel production dragged down Dalian iron ore.
On equities markets, US stock indexes on Wednesday shook off early losses and settled moderately higher.
Stocks gained on confidence that the Fed will be able to tame inflation after the FOMC raised its rate hike forecast to three 25 bp interest rate hikes in 2022 and three in 2023.
Stocks also rose on upbeat comments from Fed Chair Powell, who said “economic activity is on track to expand at a robust pace this year.”
Strength in technology stocks led the overall market higher.
Wednesday’s U.S. economic data was mixed for stocks.
In this context, The S&P 500 rose 1.63% to 4,709.85, nearly recouping all of its losses for the week and ending just below the record high it set last Friday.
The Dow Jones Industrial Average rose 1.1% to 35,927.43 and the tech-heavy Nasdaq composite gained 2.2% to 15,565.58.
The Russell 2000 index of smaller-company stocks rose 1.6%.
Bond yields edged higher.
Meantime, stocks climbed in Asia on Thursday, tracking Wall Street’s gains.
Thus, Tokyo’s Nikkei 225 index rose 2.1% to 29,066.32 and the Kospi in South Korea picked up 0.6% to 3,006.41.
The Shanghai Composite index added 0.8% to 3,675.02.
India and Taiwan rose, while Sydney’s S&P/ASX 200 lost 0.4% to 7,295.70.
In Hong Kong, the Hang Seng clawed back from early losses, gaining 0.4% to 23,503.03.
On the weather front, a rapidly strengthening storm system shifted from the four-corners region to the upper Great Lakes with widespread high winds, exceeding 70 mph in some locations, and severe weather including a few tornadoes for parts of the Mississippi River Valley.
Further out, NOAA’s latest 8-to-14-day outlook predicts seasonally cool weather for the Northern Plains between December 22 and December 28, but most of the Corn Belt is likely to see warmer-than-normal conditions during this time.
Seasonally wet weather is also probable for the Northern Plains, upper Midwest and eastern Corn Belt.
Coming back on grain markets, ahead of the FAS weekly Export Sales report traders anticipate between 1.2 MMT and 2 MMT of corn was sold during the week that ended 12/9. New crop bookings from the same week are estimated between 725k and 900k MT.
Export Sales estimates show the trade is looking for between 1.1 MMT and 1.775 MMT of soybeans booked during the week that ended 12/9.
Traders are also anticipating up to 125k MT of new crop bookings.
For soymeal, estimates are calling for between 100k and 250k MT. BO bookings are expected to be less than 25,000 MT.
US wheat sales have been woeful last week.
The market will be sensitive to any low print this week and 330,000t export sales figure is what is needed to hit the USDA run rate.
Survey estimates for wheat export sales range 200,000 and 400,000 MT for the week that ended 12/9.
Meantime, ethanol production eased slightly for the week ending December 10, sliding from a daily average of 1.090 million barrels down to 1.087 million barrels, per information from the U.S. Energy Information Administration out yesterday.
However, production remains near record levels.
That was 3,000 bpd lighter than the week prior, but above the 5-week average.
Stocks increased 419k barrels higher to 20.88 million barrels, reaching the highest levels in nearly four months.
That was mostly in the East Coast region, which was recently (11/12) at a 6-yr low supply.
The National Oilseed Processors Association (NOPA) reported a November soybean crush of 179.462 million bushels earlier today. That was below most estimates from analysts, who offered an average trade guess of 181.640 million bushels.
And was down 2.5% from October’s report, and was 1.56 mbu below November last year’s NOPA number.
The total, however, was still the second-largest November crush on record and the seventh-highest volume for any month.
Soyoil stocks fell for the first time since June, sliding to 1.832 billion pounds.
October stocks were 1.834b lbs, but Nov ’20 stocks were 1.558b.
In this context, there was very sharp decline in wheat prices last night on Chicago likely on lack of competitiveness of U.S. produced goods internationally.
Corn also gave up some ground, following wheat and a drop in ethanol production.
Soybeans, meantime, found support in the NOPA figures which showed a drop in soybean oil stocks at the end of November.
Corn basis bids held steady across most Midwestern locations, but did tip 2 cents lower at an Illinois ethanol plant.
Soybean basis bids remained unchanged across most Midwestern locations, but did trend 3 cents higher at an Ohio elevator .
Meantime, funds were net buyers yesterday on 1,000 lots of soybeans but net sellers on 5,000 lots of corn and 20,000 lots of wheat.
From South America, Argentine soybean sales for the 2020/21 season are lagging behind last year’s pace but have reached 35.7 million tonnes through December 8, per the latest data from the country’s agriculture ministry.
Meantime, Argentina will cut export taxes on soybeans, corn and wheat, but only if they are organics, which currently make up a small fraction of the major grains producer’s harvest.
The South American country’s government said many organic and ecological products would see export tariffs eliminated.
Organic wheat, corn and soy would pay reduced rates under the scheme to encourage production and bring in export dollars.
The tariff cuts will include organic wines, sauces, fruits and vegetables.
Organic corn and wheat will see rates cut to 7% from 12% previously, while organic soybeans and soy meal will see cuts to 28% and 25% respectively from 33% and 30% now.
Argentina is a major organics producer, but the segment makes up a small part of its farm produce.
On European market, according to the European Commission, soft wheat exports from the EU in the 2021/22 season that started in July continued to run last week.
Indeed, as of Dec. 12, EU soft wheat exports had reached 13.11 million tonnes, up from 12.84 million tonnes of last week and above last season, when 12.06 million tonnes had been exported by the same week.
As for durum wheat, EU export were at 278.306 t.
That was up from 255.087 of prior week, noticeably up from 110.034 t by the same week in 2020/21, but down from 365.434 t by the same week in 2019/20.
At the same time, EU durum imports reached 717.613 t past week.
That is compared with 1,32 million tonnes imported by the same week in 2020/21 season and with 805.212 t imported in 2019/20.
As for barley, EU data showed 2021/22 exports at 4.37 million tonnes, against 3.59 million a year ago and 4.31 million tonnes reported a week ago.
Meantime, EU corn imports reached 5.94 million tonnes, against a revised 7.77 million a year ago.
EU 2021/22 soybeans import, had reached 5.77 million tonnes, down from 6,66 million tonnes in 2020/21 at same week.
EU 2021/22 rapeseed imports, were at 2,08 million tonnes, down from 3.23 million tonnes a year ago.
In this report data for France are still incomplete.
Weekly figures on European Union exports and imports of cereal and oilseed products should be complete with French data, likely from the start of January, an EU official said yesterday.
Meantime, non-commercial market participants lowered their net long position in Euronext’s milling wheat futures and options in the week to Dec. 10, data published by Euronext on Wednesday showed.
Non-commercial participants, indeed, cut their net long position to 181,779 contracts from 189,272 a week earlier.
Commercial participants similarly reduced their net short position to 202,729 contracts from 213,046 a week earlier.
Commercials’ short positions accounted for 65.5% of the total short position, while commercial long positions accounted for 35.8% of total long positions.
Non-commercial short positions represented 34.5% of total short positions, while non-commercial net long positions accounted for 64.2% of the total longs.
At the same time, in Euronext’s rapeseed futures and options, non-commercial market participants switched to a net long position, going to a net long of 870 contracts from a net short of 211 a week earlier.
Commercial participants increased their net short position in rapeseed to 665 contracts from 285 a week earlier.
Meantime, European wheat fell sharply, as harvests in Argentina and Australia are benefiting from a milder climate to accelerate and come into competition with other exporting countries on the international scene.
While the withdrawal of oil pulled rapeseed and corn into the red.
Palmoil suffered its biggest slump since September and is now off 12pc since its October highs as purchasing from China and India slows.
From the Black Sea basin, snowfall this morning in Moscow with temperatures close to zero degrees as in Kiev.
Positive temperatures in Krasnodar.
Meantime, wheat prices in Ukraine fell in the wake of other markets yesterday, while those in Russia held steady.
Corn prices were little changed.
Russian officials are set to release a draft regarding their potential wheat export quota. Initially the quota was proposed at 9 MMT for February 15 to June 30th.
Some wire sources indicate the actual quota may be lower, but others suggest as high as 11 MMT.
Reports suggest Russia will cap the wheat export quota at 8Mt.
Meantime, Russian wheat exports since the beginning of the campaign are down -37.5% compared to last year.
From Australia, pressured markets abounded as prices continued to pull back yesterday across the board.
Harvest pressure is hitting and the lower bids are a sign of buyers getting their fill for the short term.
Wheat cash bids were down another $20-25/t while ASX Jan contract was also off hard early in the day trading down to $364 range.
Post the A$435/mt highs printed in late November, the ASX Jan 22 eastern wheat settlement price was A$367/mt yesterday.
This $68/mt break has outpaced US futures and reflects a clear lack of concern about quality.
Indeed, quality in Victoria wheat harvest is holding up well, with growers pleased.
Taking off what is still a mixed bag but reports of ASW1 or better through Wimmera, Mallee and northeast regions.
It was noted yesterday, given the drawing arc into Victorian sites, that some are now testing for falling numbers.
SA is still a mix of quality but still very good.
Viterra reports that out of just shy of 2Mt of wheat received, approximately 1Mt is APW or better.
Prices for feedgrain fell by up to $20 per tonne in the past week under supply-side pressure from New South Wales growers keen to quit their discounted wheat.
Prices for APW1 and higher grades have fallen further, to reflect the big yields and high quality of the Victorian harvest.
The benchmark ASX January eastern wheat contract has fallen around $60/t since late November.
Market talk is that reasonable test weights and protein in much of NSW’s rain-affected wheat means it is having no trouble finding demand from South-east Asian customers and possibly China too, and domestic consumers are willing buyers at current levels.
Meantime, barley trade markets were a touch stronger by a buck on the bid side yesterday and grower cash bids were off $5-8/t.
Canola markets were also distressed and buyers had got their short term fill for now and leading into the New Year.
Bids were pulled back $30/t across the east coast and in SA while WA FIS prices, at $880-885/t range over the past few days, were relatively unchanged.
However, the number of buyers bidding on the published boards was limited.
Meantime, Australia exported 33.3 million tonnes (Mt) of grain in 2020-21 (Oct-Sep), enough to break the previous record set in 2016-17 of 31.5Mt, according to data released in an Australian Competition and Consumer Commission (ACCC) report.
The 2020-21 figure is up 111 per cent on 2019-20 total of 15.8Mt, which reflects the impact of drought on eastern Australia, and is 37pc above the average since 2011-12 of 24.4Mt.
All states exceeded their average bulk-export levels in 2020-21,with Western Australia, New South Wales and Victoria achieving record bulkexport seasons.
The figures were contained in ACCC’s Bulk grain ports monitoring report – data update, and reflect the large export surplus created by the second-largest grain harvest since the ACCC started collecting grain data in 2011.
On international trade scene, Algeria seems to want to bring down prices of French goods, likely for geopolitical reasons.
It is probably about 700,000 t that would have been contracted yesterday between 372 and 376 usd / t depending on the size of vessels, with goods geographically ranging from Germany to the Baltic, through the Black Sea basin.
Details were not provided.
Argentina could also be retained for part.
Iranian state agency the Government Trading Corporation (GTC) is believed to have purchased around 500,000 tonnes of milling wheat in a tender for which closed on Wednesday.
It was believed to have been bought in eight consignments of around or just over 60,000 tonnes for shipment to Iranian ports in the Middle East Gulf.
Shipment of the wheat was sought in January and February, 2022.
Jordan’s state grain buyer made no purchase in an international tender for 120,000 tonnes of animal feed barley which closed on Wednesday.
A new tender with the same shipment positions is expected to be issued closing on Dec. 23.
Trading houses participating on Wednesday were believed to be CHS, Cargill, Cerealcom Dolj, Viterra, Ameropa and ETG.
Author: Sandro F. Puglisi
