US farm markets have anchored to solid gains yesterday.
Emerging concerns about dry conditions in South America helped a Cristmas rally on corn and soybean.
Indeed, corn finished with gains of over 1.2%.
Soybeans also captured double-digit gains, closing more than 1.2% higher.
Soymeal prices extended their Monday gains, with a rally taking front month futures up 2.02%.
Soybean oil turned around from the 90+ point drops to start the week, to a gain of 1.81%, though ended the session still net red from the week’s start.
Wheat prices saw a substantial spike higher yesterday as red-hot energy prices and an uptick in global demand optimism after several new tenders were issued during the session.
Thus, March Chicago SRW futures rose 2,73% to close at $7.99.
March Kansas City HRW futures climbed 3.47% to end at $8.414. March MGEX spring wheat futures added only 0,56% ending to $10.254.
In energy markets, oil prices were steady on this morning, with market players on the lookout for fuel demand pointers amid COVID-19 concerns after Singapore suspended quarantine-free travel and Australia renewed its vaccination push due to a surge in Omicron variant cases.
However, yesterday industry data showed that U.S. crude inventories last week registered a larger-than-expected decline, as, American Petroleum Institute data showed U.S. crude stocks fell 3.7 million barrels for the week ended Dec. 17, compared with a 2.8 million barrel drop that eight analysts polled by Reuters had expected.
Weekly data from the U.S. Energy Information Administration is due later on this morning.
On the supply side, investors are looking ahead to a meeting of the OPEC+ producers group, set for Jan. 4.
With the growing production issues in Russia and various others in the Atlantic Basin, it is likely that Middle Eastern producers could push for a continuation of monthly quota increases, consultancy JBC Energy said in a note.
In this context, U.S. West Texas Intermediate (WTI) crude futures rose 24 cents, or 0.3%, to $71.36 a barrel at 06:10 GMT after jumping 3.7% on Tuesday.
Brent crude futures rose 8 cents, or 0.1%, to $74.06 a barrel after gaining 3.4% in the last session.
On the freight market, the Baltic Exchange’s dry bulk sea freight index fell for the ninth straight session on Tuesday, hovering near an eight-month low, tracking a retreat across its vessel segments.
Indeed, the overall index, which factors in rates for capesize, panamax and supramax vessels, shed 77 points, or 3.3%, to 2,294, its lowest since April 14.
The capesize index dropped 144 points, or 5.1%, to 2,663, its lowest since June 9.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, decreased by $1,195 to $22,088.
The panamax index fell 45 points, or 1.9%, to 2,311, its lowest level in a month.
Average daily earnings for panamaxes, which carry 60,000-70,000 tonne coal or grain cargoes, decreased by $408 to $20,796.
The supramax index lost 53 points and fell to its lowest in three weeks at 2,383.
On equities market, US stock indexes on Tuesday rallied sharply and recovered all of Monday’s losses.
Indeed, a rally of more than +10% in Micron Technology boosted technology stocks and lifted the overall market after Micron forecasted a bullish revenue outlook.
Also, optimism that parts of President Biden’s economic plan can be salvaged gave stocks a lift Tuesday on a report that President Biden spoke by phone to Democratic Senator Manchin, which bolstered speculation that talks on President Biden’s economic package may continue.
In addition, optimism that current vaccines will limit the severity of the omicron variant pushed travel and hospitality stocks higher.
On the other hand, the U.S. Nov Q3 current account deficit widened to a 15-year high of -$214.8 billion, wider than expectations of -$205.0 billion.
The 7-day average of new U.S. Covid infections rose to a 3-month high of 140,194 on Monday.
In this context, on Wall Street, the benchmark S&P 500 rose 1.8% to 4,649.23.
The benchmark index is within 1.4% of its Dec. 10 all-time high.
The Dow Jones Industrial Average gained 1.6% to 35,492.70.
The Nasdaq composite gained 2.4% to 15,341.09.
Citrix Systems climbed 13.6% for the biggest gain in the S&P 500.
Micron Technology, as we just said, jumped 10.5%.
Retailers, restaurant chains and other companies that rely on consumer spending also rose.
Tesla climbed 4.3%, Amazon.com rose 2% and Starbucks rose 2.1%.
The dollar index , which tracks the greenback against a basket of currencies of other major trading partners, was down at 96.42.
Meantime, Asian stock markets followed Wall Street higher on this morning.
Thus, the Shanghai Composite Index declined to 3,623.14 while the Nikkei 225 in Tokyo advanced 0.2% to 28,562.21.
The Hang Seng in Hong Kong rose 0.2% to 23,004.11.
The Kospi in Seoul added 0.3% to 2,984.48, while Sydney’s S&P-ASX 200 edged 0.1% higher to 7,364.80.
India’s Sensex rose 0.7% to 56,699.01.
New Zealand declined while Southeast Asian markets advanced.
On the weather side, a bit more wet weather will be creeping into parts of the upper Midwest and eastern Corn Belt between today and Saturday, per NOAA’s latest 72-hour cumulative precipitation map.
The agency’s 8-to-14-day outlook predicts seasonally wet weather for most of the Midwest and Plains between December 28 and January 3, with cooler-than-normal conditions moving back into the Northern Plains next week.
On the supply side, analysts are trying to understand how damaging were for winter wheats the hurricane-force winds that whipped across the Plains earlier this month.
Some acres no doubt are gone.
However there is probably a larger set of acres that have been severely damaged, and the weather we get from here on out will play a rignificative role.
Also, the US winter wheats have suffered from a lack of precipitation for several weeks and the weather charts do not anticipate any improvement in the short term.
Meantime, the U.S. Grains Council released their 2021 Harvest Quality report, showing corn test weights were 58.3 lbs/bu on average.
That is down from 58.7 last season but above the 5-yr average.
They cited an ahead of schedule planting and development pace, with warm dry conditions catching timely rains during pollination.
Some ECB states dealt with late rains, as the average moisture content from ECB sourced corn was above other regions (at 16.8% compared to the national 16.3% average and 15.5% in WCB and 15.7% in Northern Plains).
Most toxicity levels were between 2019 and 2020 final results.
In this context, corn basis bids held steady across the central U.S..
Soybean basis bids dropped 3 to 5 cents at three Midwestern processors, while holding steady elsewhere across the central U.S..
The funds were net buyers yesterday for 9,000 lots of corn, 9,500 lots of soybeans and 12,000 lots of wheat.
From South America, in southern Brazil and Argentina, soya and corn crops are currently suffering from lack of water.
Indeed, according to Commodity Weather Group, overly dry conditions are affecting roughly a third of Brazil’s soybean crop at this time, with less than 10% of Argentina’s crops under drought-related stress.
More hot, dry weather is likely moving forward, per the latest mid-range forecasts.
Meantime, Brazil’s state run oil firm, Petrobras, has full funding for their renewable biodiesel testing.
The fuel needs this further testing phase before regulators will allow commercial sales, with Petrobras citing about a 6-month process.
Currently Petrobras’ Repar refinery in Parana can produce 114k MT of soy oil based biodiesel per year.
On European market, yesterday we have seen a nice rise in prices on all products.
Wheat benefits from good export competitiveness on Euronext, and from remarkable activity towards China, which partly compensates for the current loss of the Algerian market.
Indeed, official figures posted by customs, although still incomplete for France, show that wheat exports for the EU stand at 13.36 million tonnes, up from 13.11 million tonnes of last week and above last season, when 12.69 million tonnes had been exported by the same week.
As for durum wheat, EU export were at 315.901 t.
That was up from 278.306 t. of prior week, noticeably up from 110.034 t by the same week in 2020/21, but down from 400.373 t by the same week in 2019/20.
At the same time, EU durum imports reached 765.536 t, up from 717.613 t totalled past week.
That is compared with 1,43 million tonnes imported by the same week in 2020/21 season and with 861.414 t imported in 2019/20.
As for barley, EU data showed 2021/22 exports at 4.4 million tonnes, against 3.75 million a year ago and 4.37 million tonnes reported a week ago.
Meantime, EU corn imports reached 6.52 million tonnes, against a revised 8.18 million a year ago.
EU 2021/22 soybeans import, had reached 5.97 million tonnes, down from 6,97 million tonnes in 2020/21 at same week.
EU 2021/22 rapeseed imports, were at 2,09 million tonnes, down from 3.37 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 2022.
New progress and new record for rapeseed in the wake of palm and canola.
Note the new price records for gas, increasing the price of nitrogen fertilizers when they are available.
From the Black Sea basin, Ukraine’s Ag Ministry reported the nation’s 21/22 corn crop at a record 39.82 MMT, with harvest still incomplete.
Also, Ukraine’s Ag Ministry reported their 21/22 wheat crop at 32.7 MMT, which was a 29.4% increase.
Meantime, SovEcon expects Russia’s ‘22 wheat crop at 81.3 MMT.
That is above their earlier 80.7 MMT figure.
For Ukraine, SovEcon is at 29.1 MMT.
That is also a bump, though SovEcon raised Ukraine by 2 MMT on favorable rain.
Meantime, prices were without major changes yesterday in the Black Sea basin in wheat in a context of a calm market as the end of the year holidays approach.
Ukraine’s wheat FOB prices shed 4% on month.
Meantime, Ukraine’s 2021-22 wheat exports up 26% on year as of Dec 20.
Russia’s export regulations seen boosting Ukrainian exports.
Platts see 2021-22 Ukraine wheat exports at 22.5 mil mt.
In contrast, corn prices remain trending upward in Ukraine on the back of good international demand.
Meantime, Russia/Ukraine tension isn’t going away and the constant risk of a geopolitical blow-up deserves risk premium.
On the weather side, temperatures in Moscow this morning are – 21 degrees, – 12 degrees in Kiev and – 5 degrees in Krasnodar.
No particular fears for crops yet.
It remains to be watched, however.
From the Middle Kingdom, China’s central bank cut its rates for the first time in 20 months as it tries to stimulate its economy.
Meantime, Dalian Corn Prices in China continued lower through Tuesday, giving back another 16 yuan weaker to 2,649 yuan/MT (~$10.55/bu).
China’s import quality Dalian No2 Soybean Prices were weaker again on Tuesday, closing 10 yuan below Monday at 4,193 yuan/MT (~$17.90/bu).
From Australia, weather forecast maps continue to predict rain for Queensland and northern New South Wales, while the rest of the country continues to get a run at harvest still for the next eight to 10 days.
Meantime, Viterra’s latest receivals released indicated another strong week of harvest activity across South Australia, with 922,270t taken in.
One to note now is that its canola receivals have broken a record with the bulk handler network taking in more than 465,000t for the current harvest.
As for quality, in Western Austrralia, 20pc more ASW than normal is being seen, and in a crop of record size, at the expense of APW and higher grades.
South Australian quality has seen a 20pc swing from Hard wheats to “other” which is largely going to be grades of AGP and below.
Quality in eastern states is anecdotal, but Victoria seems to be okay for the most part, New South Wales is estimated to have 7 million tonnes or more of AGP and lower wheat, while Queensland quality for the most part is pretty good.
The lower grades in SA and NSW are all about falling number problems; the test weight and protein have been okay in many cases but falling numbers is a big issue.
In this context, Aussie local markets kicked a fraction yesterday.
Wheat was firmer on the cashboards by A$2-5/t, and started to find a bid over the day along the east coast, with some lower-grade wheat trading
Barley was $1/t firmer, and canola was up $3-4/t.
On international trade scene, Turkey purchased 320.000 t of milling wheat in an international tender that closed yesterday.
The grain was likely sourced from Ukraine and Russia and is for arrival in February.
The lowest price in the first round of offers, was believed to be $359.77 a tonne c&f.
This was followed by other offers (all per tonne c&f) including $362.77 for shipment to the port of Derince, $366.00 for shipment to Iskenderun, $363.00 to Mersin, $373.50 to Izmir, $365.00 to Bandirma, $363.77 to Tekirdag and $363.77 to Trabzon, traders estimated.
Iranian state agency the Government Trading Corporation (GTC) has issued another international tender to purchase about 180,000 tonnes of milling wheat.
The deadline for submission of price offers in the tender is today, Dec. 22.
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.
A further 30,000 tonnes is sought for delivery by rail.
Shipment of all the wheat is again sought in January and February, 2022.
Volumes in Iran’s tenders are nominal and the country regularly buys more than the original tonnage sought.
At the same time, Iranian state-owned animal feed importer SLAL has issued separate international tenders to purchase up to 60,000 tonnes of animal feed barley, 60,000 tonnes of feed corn and 60,000 tonnes of soymeal.
Egypt, one of the world’s top wheat buyers, has strategic reserves sufficient for more than five months, according to the country’s supply ministry.
Egypt’s vegetable oil reserves are also adequate for more than five months.
Author: Sandro F. Puglisi
