US farm markets, after having encountered some difficulties in recent sessions, thanks to a new series of bullish export data, particularly for corn and wheat, yesterday finally saw prices pull higher.
Some reports on potential production challenges in South America and on the possibility of wind-damaged winter wheat fields in the U.S. Plains, given an additional support in uptrend.
Thus, corn prices closed with gains of 0,94% in the front months, at 591.2c/bu.
New crop prices were also higher, even if only by 0,64%.
Soybean prices captured double-digit gains as weere up 1,17% to close at 1277.2c/bu.
Soybean oil futures were up triple digits on the day, closing another 118 to 127 points higher, at $54.65.
Soymeal futures were litle mixed but mostly lower, closing only 0,03% higher in the front months at 372.3 smt.
March Chicago SRW futures gained 1,92% to close at 770.4c/bu.
March Kansas City HRW futures rose 2.32% to finish at 803.6c/bu.
March MGEX spring wheat futures climbed 1.73%, posting at 1026.6c/bu.
On macro markets, oil prices dipped on this morning, putting the market on track for a narrow weekly loss, as surging cases of the Omicron coronavirus variant raised fears new curbs may hit fuel demand, while a weaker dollar supported commodity markets broadly.
In fact, Brent crude futures fell 59 cents, or 0.8%, to $74.43 a barrel at 0707 GMT while U.S. West Texas Intermediate (WTI) crude futures dropped 67 cents, or 0.9%, to $71.71 a barrel.
Brent is headed for a 1% loss this week, while WTI is poised to finish the week nearly flat.
Benchmark Brent and WTI both gained around 2% on Thursday, buoyed by record U.S. implied demand and a weaker U.S. dollar as the Bank of England surprised markets with a rate hike, taking a more hawkish stance than the Federal Reserve.
On the freigth market, the Baltic Exchange’s dry bulk sea freight index fell to its lowest level in a month, as rates declined across all its vessel segments, with capesizes touching their lowest in six months.
The overall index, which factors in rates for capesize, panamax and supramax vessels, dropped 167 points, or 6.3%, to 2,498, its lowest since Nov. 18.
The capesize index lost 378 points, or 11.6%, to its lowest since June at 2,894.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, decreased by $3,134 to $24,003.
The panamax index shed 118 points, or 4.3%, to its lowest in almost three weeks at 2,626.
Average daily earnings for panamaxes, which carry 60,000-70,000 tonne coal or grain cargoes, decreased by $1,063 to $23,630.
The supramax index fell 28 points to 2,514, its lowest level in over a week.
Although still fetching relatively healthy levels, the big ships take a massive beating prior Christmas – following a pattern seen so many years before,” shipbroker Fearnleys said in a weekly note dated Wednesday, in reference to capesizes.
Meantime, Chinese steelmaking raw materials futures advanced, with coking coal up 5%, fuelled by hopes of recovering steel production after stringent curbs in the first 11 months of the year.
On equities markets, US stock indexes on Thursday closed moderately lower, except for the Nasdaq, which closed sharply lower.
A sell-off in technology stocks undercut the overall market, led by a -10% plunge in Adobe after it forecast full-year revenue that missed estimates.
Thursday’s U.S. economic data was mixed for stocks.
U.S. weekly initial unemployment claims rose +18,000 to 206,000, showing a weaker labor market than expectations of 200,000.
Weekly continuing claims fell -154,000 to a 20-month low of 1.845 million, showing a stronger labor market than expectations of 1.943 million.
Meantime, U.S. Nov housing starts jumped +11.8% m/m to an 8-month high of 1.679 million, stronger than expectations of 1.567 million.
Nov building permits rose +3.6% m/m to 1.712 million, stronger than expectations of 1.661 million.
The U.S. Dec Markit manufacturing PMI unexpectedly fell -0.5 to a 1-year low of 57.8, weaker than expectations of an increase to 58.5.
The U.S. Dec Philadelphia Fed business outlook survey fell -23.6 to a 1-year low of 15.4, weaker than expectations of 29.1.
The BOE yesterday unexpectedly raised its benchmark rate by +15 bp to 0.25% by a majority 8-1 vote.
The BOE also said UK inflation was likely to peak around 6% in April.
The ECB confirmed that its pandemic emergency asset purchase program (PEPP) would wind down in March, but the ECB raised its longer-term asset purchase program (APP) by 20 billion euros to 40 billion euros a month starting in Q2-2022.
The ECB will then taper the asset purchases to 30 billion euros a month in Q3 before returning to the current pace of 20 billion euros a month in October.
In this context, Thursday’s sell-off on Wall Street took the S&P 500 0.9% lower to 4,668.67, erasing about half of its gains from the day before.
The Nasdaq slid 2.5% to 15,180.43, its biggest drop since September.
The Dow Jones Industrial Average slipped 0.1% to 35,897.64.
Small company stocks also took heavy losses.
The Russell 2000 index gave up 2% to 2,152.46.
All the major indexes are on pace for a weekly loss.
On this wake, Asian shares also fell on Friday, weighed tensions between Beijing and Washington too.
Tensions between the U.S. and China were in the spotlight after the U.S. Congress approved legislation barring all imports from China’s Xinjiang region unless businesses can prove they were produced without forced labor.
Thus, Tokyo’s Nikkei 225 index dropped 1.8% to 28,545.68, while the Kospi in Seoul recovered from earlier losses to gain 0.2%, at 3,012.78. In Australia, the S&P/ASX 200 edged 0.1% higher to 7,304.00.
Hong Kong’s Hang Seng lost 1% to 23,236.47.
The Shanghai Composite index gave up 1% to 3,638.03.
On the weather side, a look at the latest 72-hour cumulative precipitation map from NOAA shows more rains are possible for the Mid-South and eastern Corn Belt between Friday and Monday, with some areas set to gather another 1” or more. The agency’s 8-to-14-day outlook predicts seasonally dry weather returning to the Central Plains between December 23 and December 29, with warmer-than-normal conditions for most of the Corn Belt.
Particularly, quasi-stationary boundary to produce heavy rain and potentially severe thunderstorms from the Southern Plains to the Ohio Valley through Saturday morning.
Moderate to heavy snow and freezing rain to impact interior New England on Saturday.
Elevated Fire Weather Risk for the Southern High Plains into the weekend.
Temperatures expected to remain well above average from the Southern Plains to the Northeast.
Meantime, the weather patterns have left the young wheat crop with shallow root systems and smaller plants.
Warmer temperatures have also delayed the start of the crop’s key dormancy phase, entered during the winter months before resuming growth in the spring.
Favorable weather conditions in the spring could ensure that current adverse crop conditions are offset in terms of yield potential.
But while the crop is far from being a failure, it lacks some of the key characteristics to increase its resiliency to more adverse winter conditions which are inevitable in the coming months.
Dry soils and lack of snow cover will make wheat more susceptible to harsh winter weather, so that will be watched.
Meantime, IHS Markit raised their projected 2022 US corn area from 90.784m acres to 91.578 million.
They left their 21 area at 93.304 and their yield at 179 bpa.
USDA was at 93.3 and 177 as of December’s data.
The IHS production figure for 2021 corn was 285 mbu above the USDA at 15.347 bbu.
As for soybean, IHS Markit raised their projected 2022 soy area 880k acres to 88.815 million.
They left their 21 area at 87.235 and their yield at 51.5 bpa.
USDA was at 87.2 and 51.2 as of December’s data.
The IHS production figure for 2021 beans was 12 mbu above the USDA at 4.473 bbu.
As for wheat, IHS Markit projects 2022 wheat area will reach 48.603m acres.
That compares to their November forecast of 49.373m acres.
They reduced their winter wheat area by 360k acres from their Nov figure to 34.033m acres.
The consulting firm sees spring wheat planted area reaching 12.72m acres, down from their Nov figure of 13.03m but still a 1.3m acre boost yr/yr.
Coming back on grain markets, the latest grain export sales report from USDA, out yesterday and covering the week through December 9, helded mostly bullish data for traders to digest.
Indeed, corn volume reached a marketing-year high for 2021/22, as did wheat.
Soybean sales were relatively muted, in contrast, sliding 20% below the prior week’s tally.
Particularly, old crop corn export sales jumped 74% above the prior four-week average and captured a new marketing-year high, with 1,948,700 MT, up 1.3% yr/yr.
New crop sales added another 754,400 MT, for a total tally of 2.702.702 MT.
That was on the upper end of analyst estimates.
Cumulative sales for the 2021/22 marketing year are still a bit behind last year’s pace after moving to 11.643.974 MT.
While total corn commitments were 38.51 MMT.
That trails last season’s pace by 3.4% and by 7.2% respectively. .
Corn export shipments trended 21% higher week-over-week and 11% above the prior four-week average, with 1,093,500 MT.
Mexico was the No. 1 destination.
China, Japan, Canada and Colombia rounded out the top five.
USDA also confirmed 331,917 MT of sorghum was booked during the week of 12/9.
That was up 16.8k MT on the week and 6.5k MT above the same week last year.
Total milo commitments were up to 4.68 MMT as of 12/9.
Old crop soybean export sales fell 20% lower week-over-week and slid 6% below the prior four-week average, with 1,308,600 MT.
New crop sales added another 140,000 MT, for a total of 1.447.855 MT.
That was toward the lower end of trade estimates.
Cumulative totals for the 2021/22 marketing year are still moderately trailing last year’s pace, with 25.421.837.
Soybean export shipments were down 21 percent from the previous week and 17% below the prior four-week average, with 1,918,200 MT.
China accounted for more than half of the total.
Egypt, Mexico, Spain and Thailand filled out the top five.
Weekly FAS data showed 10,586 MT of soy oil was sold during the week of 12/9.
That was up from 5,311 MT last week, but just 30% of the 5-week average.
Meantime, private exporters yesterday reported sales of 20,000 metric tons of soybean oil for delivery to India during the 2021/2022 marketing year.
For soymeal, sales were reported at 95,553 MT during the week that ended 12/9.
The trade was looking for at least 100k MT.
Wheat export sales climbed to a marketing-year high and trended noticeably above the prior four-week average, 650,600 metric tons.
That was also higher than the entire range of trade guesses.
Half of the week’s business was HRW, with spring wheat accounting for 20%.
Cumulative totals for the 2021/22 marketing year remain moderately behind last year’s pace, with 10.314.609 MT.
Wheat export shipments were up 29% from a week ago and matched the prior four-week average, with 274,400 MT.
Japan was the No. 1 destination.
Mexico, Nigeria, Taiwan and Venezuela rounded out the top five.
In this context, corn basis bids were steady across most Midwestern locations but did track 7 cents lower at an Illinois river terminal.
Soybean basis bids dropped 5 cents at an Indiana processor, while moving 1 to 8 cents higher at two other Midwestern locations and holding steady elsewhere across the central U.S..
On Wednesday, commodity funds were net buyers of soybeans (+1,000) and soyoil (+2,000) contracts but were net sellers of corn (-5,000), soymeal (-2,000) and CBOT wheat (-20,000).
Meanwhile, yesterday they had buying again on all commodities in Chicago thanks to the decline in the dollar.
Indeed, they bought 6,000 lots of corn, 10,500 lots of soybeans and 8,500 lots of wheat.
From South America, Northern Argentina and southern Brazil still have moisture deficits with their basis suggesting the struggle is real.
The state of Rio Grande do Sul, located in the far south of Brazil, said Thursday that rainfall is unlikely to be sufficient for spring and summer crops given the heavy evaporation .
These degraded conditions could reduce yields.
In this context, it should be noted that AgRural finally reduced its Brazilian soybean and corn harvest estimates by 700 kt and 1.1 Mt respectively, to 144.7 Mt and 114.4 Mt.
Meantime, Argentina’s Buenos Aires grains exchange said on Thursday it could raise its estimate for the 2021/22 wheat harvest, already at a record 21 million tonnes, thanks to high yields as harvesting of the crop progresses.
The first results (of harvests) show yields that exceed 45 quintals (4.5 tonnes) per hectare, and if these averages are sustained, they would have a positive impact on our production projection, the Buenos Aires exchange said in a weekly report.
This hike would join the other major Rosario exchange, which has raised its wheat estimate to 22.1 million tonnes.
Farmers have already harvested 65% of the 6.6 million hectares dedicated to grain.
While good rainfall has helped wheat, 2021/22 season soybeans and corn are just in the sowing stages and could face a “big challenge” in months ahead with lower-than-normal rainfall expected in the austral summer.
Argentina’s central farm belt is set for very high temperatures in coming days, followed by moderate to heavy rains.
The Buenos Aires exchange, however, estimates a record corn harvest of 57 million tonnes and 44 million tonnes of soybeans.
According to the crop report on Thursday, producers have planted 47.7% of the estimated area for corn, while soybean planting is 64.7% complete.
Meantime, Argentina’s Ag Ministry reported 2020/21 farmer soybean sales at 35.7 MMT, down from 36.6 MM last season, though that’s from a smaller 43.1 MMT crop, compared to 49.0 MMT in 2019/20.
On European market, grain prices, are struggling to recover.
As we said, the European Central Bank was highly anticipated yesterday.
It raised its inflation forecasts and announced that it will start reducing its asset purchases under the PEPP at the end of March 2022.
However, Christine Largarde remains very cautious due to the uncertain health and economic context in Europe.
A rate hike in the Eurozone is still considered “very unlikely” for 2022, in contrast to the US where the Fed is considering 3 rate hikes.
However, the Euro/Dollar has recovered since the beginning of the week to test its highs for a month and the strong resistance zone of 1.1360 to 1.1380.
Meantime, the European Commission raised its projection for 2021/22 corn production across the EU by +1 Mt, with a new estimate of 69.4 Mt.
Estimates for corn imports this marketing year held steady, at 14,5 MMT.
Also for barley, the European Commission readjusted upwards its production estimates by +0.2 Mt to 52 MT.
At the same time, the European Commission slightly raised its projection for 2021/22 wheat production across the EU +0,2 Mt, with a new estimate of 130.6 Mt.
Estimates for EU wheat exports held steady, at 32 MMT.
On the other hand, Strategie Grains has raised its estimate for EU soft wheat exports outside the bloc for the current 2021/22 season by more than one million tonnes.
Indeed, in its monthly report, the French firm pegged 2021/22 soft wheat exports outside the 27-country EU at 31.5 million tonnes, up from 30.4 million tonnes estimated last month.
The consultancy also lifted its forecast for EU corn exports in light of strong shipments from Romania and Bulgaria.
At the same time, it raised its estimate for the EU corn harvest to 68.3 million tonnes, from 67.8 million tonnes projected last month.
In this context, Euronext, ended the session on a mixed note with grains still under pressure.
The wheat market, indeed, is still depressed and is struggling to rebound.
On the other way around, the rapeseed continues to rise.
In contrast, after losses recorded earlier in the week, rapeseed prices soared again yesterday on Euronext to mark a new historical high on the February 2022 delivery at 724.75 €/t.
The severe European and global tension on this product is taking over following the rebound observed on the vegetable oil market for both palm and soybean oil.
From the United Kingdom, according to the Britain’s farming ministry, the United Kingdom’s wheat harvest this year rose to 13.99 million tonnes, up 44.8% from the previous season.
However, the estimate was marginally down from an initial forecast of 14.02 million issued in October.
The rise was driven partly by a 29.1% rise in area to 1.79 million hectares following more favourable planting conditions.
Average wheat yields rose 12.2% to 7.8 tonnes per hectare.
Meantime, rapeseed production fell 5.5% to 981,000 tonnes with a decrease in planted area partially offset by a rise in yields.
However, the estimate was marginally above a previous forecast of 977,000 tonnes issued in October.
The planted area fell 19% to 307,000 hectares, far below the peak of 756,000 hectares in 2012.
The average yield was 3.2 tonnes per hectare, up from the prior season’s 2.7 tonnes.
The ministry estimated the barley crop at 6.96 million tonnes, down 14.2%.
From the Black Sea basin, as of December 16, Russian agrarians harvested grains and pulses throughout the areas of 45.4 mln ha.
The production volumes reached 127 mln tonnes of grain, reported the press-service of the Ministry of Agriculture of Russia.
In particular, agrarians harvested 79.1 mln tonnes of wheat throughout 27.8 mln ha. Also, Russia harvested 19 mln tonnes of barley throughout 7.9 mln ha, 16.1 mln tonnes of corn for grain throughout 2.9 mln ha, 1.2 mln tonnes of rice throughout 187.6 thsd ha.
Agrarians harvested 15.8 mln tonnes of sunflower seed throughout 9.6 mln ha.
Meantime, polar cold is expected next week in Russia, possibly reaching the Central and Volga regions.
Given the increase in winter wheat acreage in recent years across this area, there are growing concerns for the crop, even if the combined arrival of snow will reduce the risk of frostkilling.
Also in Ukraine, in the first ten-day period of December, the vegetation of winter crops virtually stopped, informed Ukrhydrometcenter.
The average daily temperature felt below zero degree across western as well as Zhytomyr, Chernihiv, Sumy and Cherkasy oblasts at the start of the reporting period that resulted in the full stop od the vegetation of winter crops.
During the reporting period, slow vegetation processes were observed across southern and partially central regions of Ukraine.
However, there are no danger conditions for wintering of crops.
From Australia, as the Western Australian grain harvest marched south over the last month, grain yields for all crops have continued to exceed pre-harvest estimates, according to the latest report from the Grain Industry Association of WA (GIWA).
Records are being set for individual paddock averages, crop type averages and regional totals over most parts of the state.
Total state production for all grains will exceed 22 million tonnes, around 17 per cent more than the previous record in 2018.
The focus is now “how are they going to deal with so much grain”.
There is more area to be harvested than is normally the case at this time of the year, with most of the country still to be harvested being in the higher rainfall regions where the very high yields are coming in.
There is a lot of grain in bags, particularly in the Esperance port zone and growers elsewhere are racing against the clock to finish before the local bins fill up.
Grain quality downgrades from weather have been isolated to those areas that received several rainfall events at the start of harvest and is not significant in the overall scheme of things.
Low protein from lack of nitrogen has mostly been confined to wet areas where growers were not able to top up during the winter.
However, the usual inverse relationship between grain yield and protein is resulting in low protein where grain yields have been well above average.
The higher protein grades have mostly come off frosted areas.
Harvest ban conditions will kick in place through South Australia today.
There is a clear run in WA and Victoria but southern NSW growers are set for some more light showers over the weekend that could cause further delays.
In this context, Aussie markets continued to weaken across the boards yesterday.
Wheat was down another $10/t, canola was back another $20-30/t, having its biggest drop in months.
Trade markets on wheat, barley and canola were all very thin over the course of the day.
Wheat was notably offer side only.
Meantime, the export for December conditions to get rolled around.
Indeed, we are starting to see some of the December shipments rolled into January.
Barley shipments are looking to push 1Mt this month after an impressive 750,000t in November.
Canola shipments stacking up again in December and January with 430,000t slated for each month on top of the 515,000t for November.
Victoria and NSW are entering the fray with 180,000t in December and 140,000t in January.
On international trade scene, an importer in the Philippines is believed to have bought around 50,000 tonnes of animal feed wheat in an international tender for up to 120,000 tonnes which closed on Thursday, European traders said.
The price was estimated at around $335 a tonne c&f, they said. It was expected to be sourced from Australia for March 2022 shipment.
Another group in the Philippines also bought about 110,000 tonnes of feed wheat in a separate tender for up to 220,000 tonnes which closed on Thursday.
Two consignments each of about 55,000 tonnes were bought, with the price estimated at around $325 a tonne c&f.
The tender had sought up to four 55,000 tonne consignments optionally sourced from Australia, Europe or the Black Sea region for March 15 to May 31, 2022, shipment.
Jordan wheat tender got 6 participants and MIT purchased 60k from Ameropa at 327.50 usd Cfr, to be shipped sh July 2022.
Other offers line up: CHS at 331 usd; Cargill at 335 usd; Anderson at 338 usd; Agrochirnogi at 341 usd; Cerealcom didn’t announce.
Iranian state agency the Government Trading Corporation (GTC) is believed to have purchased around 500,000 tonnes of milling wheat in a tender that 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.
Prices were estimated at around 365 euros and 368 euros ($413.5 to $416.9).
Iran traditionally buys grains in euros rather than U.S. dollars.
Shipment of the wheat was sought in January and February, 2022.
Possible origins of the wheat purchased were thought to be Russia, Germany and the Baltic Sea region
The tender had sought 180,000 tonnes including some to be shipped via the Caspian Sea and for land transport by railway.
Volumes in Iran’s tenders are nominal and the country regularly buys more than the original tonnage sought.
A small volume was also thought to have been purchased for Caspian Sea shipment.
The result of the land transport tender was not known by traders.
A wheat tender from Turkey for 320,000 t is still in progress.
Author: Sandro F. Puglisi
