US farm markets had a sharp drop in prices for all products yesterday, in a context of profit taking.
Wheat, suffered significant losses in a market dominated mainly by position adjustments as the end of the year approached.
Corn and soybeans prices fell, as some operators also consider that the risk premium on South American crops is currently overestimated, especially since rainfall is now expected in the driest areas of Brazil.
Thus, corn prices faded on turnaround Tuesday giving back more than 1,60%.
Afternoon trading for soybeans left the board down by 0,24% for the sessio, despite beans were up by double digits during the session, setting new highs for the move.
Soymeal also faded into the close, but still gained 0,27% on the day. Beanoil closed 0,3% weaker.
The wheat complex, after starting the week in red, on Tuesday left the board with another double digits weaker by the close.
Indeed, CBT SRW futures were down 2.55%.
KC HRW prices faded another 2.98%.
Minneapolis wheat closed the day with a drop by 2.44%.
In energy markets, U.S. oil rose for a sixth consecutive session on Wednesday while Brent gained more ground after a broad-based rally in global markets supporting prices on Monday.
Particularly, Brent crude rose by 34 cents, or 0.43%, to $78.94 a barrel. U.S. West Texas Intermediate (WTI) crude rose 41 cents, or 0.54%%, to $75.98.
On this morning, oil prices still edged higher, as industry data showed a decline in U.S. inventories, boosting demand sentiment.
Indeed, American Petroleum Institute data showed U.S. crude stocks fell by 3.1 million barrels in the week ended Dec. 24, market sources said late on Tuesday, in line with expectations of analysts.
Meanwhile, gasoline inventories registered a lower-than-expected decline of 319,000 barrels, while distillate stocks dropped by 716,000 barrels compared with hopes of a 200,000 barrels drop.
Weekly data from the U.S. Energy Information Administration is due later on this morning.
In this context, Brent crude rose 26 cents, or 0.3%, at $79.20 a barrel by 07:59 GMT.
U.S. West Texas Intermediate (WTI) crude climbed 19 cents, or 0.2%, to $76.17 a barrel.
Both contracts are trading near their highest levels in a month, aided by the strength in global equities, but have been underpinned also by three oil producers declaring forces majeure this month on part of their oil production because of maintenance issues and oilfield shutdowns.
On the freight market, the Baltic Dry Index decreased by 01 points, reaching 2217 points.
On equities markets, U.S. stocks yesterday settled mixed, with the Dow Jones Industrials posting a 1-1/2 month high.
Weakness in technology stocks pressured the overall market, although losses were contained.
Global stocks saw support Tuesday after China’s central bank injected cash into the financial system.
The PBOC, indeed, added 200 billion yuan ($31 billion) of cash into the financial system through seven-day reverse repurchase agreements, the largest cash injection in two months.
Meantime, Tuesday’s U.S. economic data was bullish for stocks.
The U.S. Oct FHFA house price index rose +1.1% m/m, stronger than expectations of +0.9% m/m.
Also, the Dec Richmond Fed manufacturing survey rose +4 to a 5-month high of 16, stronger than expectations of no change at 11.
In this context, the S&P 500 slipped 4.84 points to 4,786.35.
The Dow rose 95.83 points to 36,398.21.
The tech-heavy Nasdaq dropped 89.54 points to 15,781.72.
The Russell 2000 gave up 14.95 points to 2,246.51.
The major U.S. stock indexes are on pace to close out 2021 with strong gains.
The S&P 500 is up 27.4% with three trading days to go this year.
Meantime, Asian shares mostly slipped on this morning.
Indeed, Japan’s benchmark Nikkei 225 lost 0.6% to finish at 28,906.88.
South Korea’s Kospi slipped 0.9% to 2,993.29, while Australia’s S&P/ASX 200 jumped 1.2% to 7,509.80.
Hong Kong’s Hang Seng dropped 1.1% to 23,033.49, and the Shanghai Composite shed 0.9% to 3,597.00.
On the weather side, according to NOAA’s short-range forecasts, snowfall continues to hammer the Northern Plains and Upper Midwest.
Heavy winds reaching up to 30-35 mph will prompt blizzard warnings and create hazardous driving conditions in both regions even though the total snow accumulation is not likely to top one to three inches.
The same system will likely drop another inch of rain in the Eastern Corn Belt over the next 24 hours.
The snow system in the west that dropped 9 feet of snow on Lake Tahoe on the California – Nevada border will begin to shift east and could bring much-needed moisture to the Plains by the end of the week.
Spring-like weather to stick around in the South.
Enhanced Risk for severe storms and a Slight Risk for Excessive Rainfall posted in parts of the Deep South today.
Going in to the monthly Fats and Oils reports, analysts surveyed expect the November soy crush was 191.7 mbu.
NOPA members reported processing 179.462 mbu in November.
If realized that would match the Nov ’20 record of 191.02 mbu.
Soybean oil stocks are estimated at 2.39b lbs.
In this context, the Santa Claus rally substantially waned, and profit-taking was the name of the game for the few traders sticking in the markets through the holiday season.
Indeed, it was another day of slow holiday trading.
March, May, and July 2022 futures held steady just above the $6/bushel benchmark.
But even with $6/bushel corn, farmers across the Heartland were slow to book new sales as cash bids remained unchanged and growers hedged their bets on higher prices closer to peak export season, which is slated to ramp up in late February.
As for soybean, the updated forecasts on South America weather, that are calling for an “active rain pattern” in Northern Brazil in the coming days, trigghered technical selling and profit-taking, even if not to the extent of those realized for corn.
Also, Indonesia, the world’s largest producer and exporter of palm oil, expects that production will increase 2.6% in 2022 to 51.01 million tonnes.
Palm oil is a direct competitor to other edible oils – namely soyoil – and its price movements often have an impact on pricing for other edible oils.
Thus, the higher forecast and the chance for more normalized prices next year contributed to some weakness in the soyoil futures market.
Soymeal prices continued slightly higher as higher livestock and poultry demand during the holiday week and rail delays drove up cash prices at rail and truck terminals.
As for the wheat complex, wheat prices continued their sell-off.
The trade found the weekly volumes inspected has been discouraging despite the increased global demand for wheat.
But bear in mind that with few traders in the market during the holidays, some of the price moves can be over exacerbated and magnify price moves amid smaller trading volumes.
Meantime, the funds were net sellers in corn for 9,500 lots, soybeans for 1,500 lots and wheat for 7,500 lots.
On the other hand, fertiliser prices, as reflected by US Gulf Urea, are up 218 per cent for the year so far.
From South America, updated weather forecasts in heat-stressed South-Eastern Brazil show a chance of “limited relief” in the form of showers late in the week.
The prospect eases supply concerns for first and second corn crops in the region, contributing to selloff in the Chicago futures market.
However, water stress remains significant in the south of the country as well as in Argentina.
Most of the soybean belt is set to only receive 30-40 per cent of normal rainfall for the next 15 days.
Consequentially, dryness has kept the sellers at bay in the row-crop pits.
In this context, Dr. Cordonnier trimmed his Brazilian corn crop estimate by 1 MMT to 114 MMT.
Some firms have reduced projected first crop or summer corn production below 24 MMT, from around 29 MMT.
This is due to dryness in southern Brazil.
In Brazil for the first maize harvest, sowing is currently being done at 88.3%, 3.3% ahead of last year to date.
Also, private analyst Michael Cordonnier, revised his Brazilian soy output 2 MMT lower to 140 flat.
Meantime, Brazilian agricultural consultancy Anec expects the recent dry weather will take a toll on 2021/22 corn export volumes for the South American country.
Anec revised its December 2021 corn exports forecast 12% lower this morning to 3,45 MMT.
Current vessel loading projections from Eikon peg December shipping volumes at 3,89 MMT for December 2021.
Also Anec predicts that Brazilian soybean exports inched slightly higher despite the lower loading volumes for corn and negative crush margins persisting in top global soy buyer China.
Anec’s latest soy export forecast pegged December 2021 volumes at 2,78, up by 0.2%.
Vessel data reported by Eikon shows that only a handful of soybean shipments are left to leave from Brazilian ports in the coming days, with total December 2021 volumes totaling 2,45 MMT.
On European market, a sharp decline in wheat prices on Euronext in a very tight market context at the end of the year and on profit taking after recent increases.
Wheat prices were down in the wake of the drop in grain prices in the United States, after having risen a lot last week.
Corn prices hesitated.
Rapeseed prices continued to show very high volatility with a drop of more than € 10 / t yesterday on the February deadline after reaching a new record the day before.
Abnormally high temperatures in France lead to an early recovery of vegetation.
From the Black Sea basin, little devolution yesterday in a very narrow market context.
However, the competitiveness of Black Sea wheat on the international scene has also pulled European and American quotations into the red.
Tensions on the border between Ukraine and Russia seem set to ease with a partial withdrawal of Russian troops.
Meantime, the thermometer reads – 12 degrees this morning in Moscow, – 7 degrees in Kiev and + 9 degrees in Krasnodar.
In China, Dalian Corn Prices were down another 7 yuan on 12/27, for a 66 yuan slide since 12/16 to 2,625 yuan/MT (~$10.47/bu).
From Australia, growers continued to harvest over the Christmas break, and for the first time this harvest, growers can comfortably look at the Bureau of Meteorology’s eight-day forecast and see a very clear run that should bring the season to its tail end for a large part of the Aussie cropping belts.
Meantime, local markets have gotten back into the swing of things after the Christmas break, and early cashboard pricing has kicked off relatively unchanged from before Christmas.
On the international trade scene, Egypt is taking advantage of this decline to launch a new call for tenders in wheat for loadings between February 15 and March 3.
The Black Sea origins will probably be retained again.
Author: Sandro F. Puglisi
