It was a good day yesterday for grain prices.
Corn and soybeans entered in a weather market, with the Argentina and southern Brazil forecast having turned dry again.
This has returned the focus to production cuts and its flow-on impacts to global balances.
Consequentially, in Chicago corn had the best session since the end of June gaining 3,44%.
Soybeans grabbed double-digit gains after trending more then 2.5% higher.
Soybean oil futures were triple digits higher with 3.3% to 3.4% gains.
March BO has now rallied 14% since 12/15.
Soymeal futures were also in the black at the closing bell, ending the day 0,83% higher.
Jan meal set a new LOC high as the delivery process unwinds.
March soymeal also printed a $415.90/ton LOC high on Tuesday.
Wheat prices followed corn and soybeans higher.
Crop quality concerns, particularly in the Central Plains, lent plenty of additional support.
Thus, both winter wheat contracts in Chicago and Kansas City rose 1.58%, while spring wheat contracts in Minneapolis only firming around 0.3%.
In energy market, oil prices steadied on this morning as investors assessed the impact of a massive spike in COVID-19 cases caused by the Omicron variant and U.S. fuel inventories climbed.
Indeed, the United States reported nearly 1 million new coronavirus infections on Monday, the highest daily tally of any country in the world and nearly double the previous U.S. peak set a week ago.
Meanwhile, U.S. gasoline stockpiles rose by 7.1 million barrels in the week to Dec. 31, the American Petroleum Institute (API) reported late on Tuesday.
Distillate stockpiles climbed by 4.4 million barrels in the week.
In this context, Brent crude futures fell 4 cents, or 0.03%, to $80.04 a barrel by 07:16 GMT, while U.S. West Texas Intermediate (WTI) crude futures rose 2 cents, or 0.03%, to $77.01 a barrel.
Yesterday Brent crude futures gained $1.02 cent to $80 a barrel, while U.S. West Texas Intermediate (WTI) crude futures was up US$0.91 per barrel to $76.99 climbing more than 1% as market participants took the decision of major producers to add supply next month, as a sign of confidence that surging COVID-19 cases would not hit demand for long term.
In the freight market, the Baltic Exchange’s dry bulk sea freight index rose on Tuesday, crawling away from a more than eighth month low, helped by strong demand for capesize and panamax vessels.
The overall index, which factors in rates for capesize, panamax and supramax vessels, gained 68 points, or 3.1%, to 2,285, snapping a 12 session losing streak.
The capesize index rose 38 points, or 1.6%, to 2,350.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, increased by $314 to $19,490.
The panamax index added 301 points, or 11.7%, to 2,874.
Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, rose by $2,707 to $25,865.
On equities markets, U.S. stocks on Tuesday settled mixed, with the Dow Jones Industrials posting a new all-time high and the Nasdaq 100 falling to a 1-1/2 week low.
Gains in industrial stocks pushed the Dow Jones Industrials higher Tuesday on optimism the omicron Covid variant is less severe than other variants, which should limit damage to the global economy.
Meantime, worries about higher interest rates led to a sell-off in technology stocks, which took the S&P 500 lower from an early record high.
The 10-year T-note yield climbed to a new 5-week high of 1.684%.
Another negative factor for stocks was Tuesday’s weaker-than-expected U.S. economic data.
In fact, the U.S. Dec ISM manufacturing index fell -2.4 to a 13-month low of 58.7, weaker than expectations of 60.0.
Also, Nov JOLTS job openings fell -529,000 to a 5-month low of 10.562 million, showing a weaker labor market than expectations of 11.079 million.
In this context, the S&P 500 slipped 0.1% to 4,793.54, while the tech-heavy Nasdaq composite fell 1.3% to 15,622.72 after a day of choppy trading.
The Dow rose 0.6% to 36,799.65, thanks partly to solid gains by Caterpillar and JPMorgan Chase, which rose 5.4% and 3.8%, respectively.
The Russell 2000 index fell 0.2%, to 2,268.87.
Meantime, Asian benchmarks mostly slipped on this morning as technology shares in the region echoed to the similar drop in the sector seen on Wall Street.
Thus Japan’s benchmark Nikkei 225 inched up 0.1% to finish at 29,332.16.
Australia’s S&P/ASX 200 dipped 0.3% to 7,565.80.
South Korea’s Kospi dropped 1.3% to 2,950.71.
Hong Kong’s Hang Seng shed 1.3% to 22,985.05, while the Shanghai Composite lost 1.0% to 3,596.03.
On the weather side, frigid weather is heading to the central U.S. later this week.
By Thursday morning, subzero temperatures will be prevalent across the Northern Plains and upper Midwest, and even southern cities such as Memphis and Atlanta will see temperatures in the low to mid 30s.
NOAA predicts a return to seasonally warm weather for most of the country between January 11 and January 17, per its latest 8-to-14-day outlook, meantime.
Drier-than-normal conditions will also be prevalent next week.
Widespread drought conditions and high winds continue to apply negative pressure to winter wheat quality in the Central Plains.
As we know, the USDA stops posting their good-to-excellent ratings over winter, but the individual states continue to put out numbers.
Yeaterday we have seen good-to-excellent ratings have been slashed over December, with Kansas down 29 points, Oklahoma down 28 points and Colorado down 13 points.
However, though the correlation between pre dormancy conditions and final yield in US wheat is pretty low, the market has noted this drop in favourable conditions leading into the depths of winter.
On the demand side, seems the market is comfortable the US will feature in the Iraq tender – now just about when and how much – still nothing official.
In this context, corn basis bids were mostly steady to firm after rising 2 to 6 cents higher at a handful of Midwestern locations.
An Illinois ethanol plant bucked the overall trend, fading 2 cents lower.
Soybean basis bids were steady to firm on Tuesday after rising 1 to 8 cents higher at three Midwestern locations.
Meantime, the funds were net buyers yesterday for 22,500 lots of corn, 17,500 lots of soybeans and 6,500 lots of wheat.
From Canada wheat exports during weeks 19 & 20 amounted to 389k Canadian and are lagging last year’s by ~37%.
For durum, wheat exports during weeks 19 & 20 added to only 49k Canadian and are lagging last year’s by ~45%.
Algeria purchased around 300k Canadian durum wheat at $720-725/Canadian just before Christmas.
Cash bids for durum have remained strong around $20.30/bu.
From South America, according to the Commodity Weather Group, the dryness has expanded to cover half of the corn and soybean crops in Argentina.
Mentime, after StoneX, also Dr. Cordonnier cut his bean production estimate for both Brazil and Argentina.
Indeed, he lowered Brazil production by 2 MMT to 138 MMT and sliced Argentina by 3 MMT to 45 MMT.
He also reduced the Brazilian corn estimate 1 MMT to 113 MMT but left Argentina unchanged at 52 MMT.
Particularly, he left his projected corn crop estimates for Argentina and Paraguay unchanged.
However, given the probability of little improvement in drought afflicting southern Brazil, northern Argentina, Paraguay and Uruguay, projections may continue dropping.
To remember that most of the corn Brazilian production is carried out by Safrina, that is to say that produced as a second crop behind soybeans.
On European market, Euronext wheat rose sharply on Tuesday, rebounding from a two-week low as weather concerns fuelled a broad rally in global grain markets.
March milling wheat on Paris-based Euronext settled up 5.25 euros, or 1.9%, at 279.25 euros ($315.22) a tonne.
The contract had found chart support after falling on Monday to 272.25 euros, its lowest since Dec. 16.
Euronext wheat had reached a record high in November on the back of tightening global supplies.
The market has since seen bouts of selling, encouraged by bumper harvests in Argentina and Australia, although analysts see supply tensions persisting until the next northern hemisphere harvests.
Rapeseed prices started to rise again, in the wake of soybeans and palm, whose stocks for the latter are expected to drop, as a result of bad weather in Malaysia.
Particularly, February futures on Euronext ended up 2.2% at 788.25 euros, approaching last week’s high of 791.50 euros that was a record peak for Euronext.
Meantime, yesterday European Union data showed EU soft wheat exports so far in 2021/22 had reached 14.1 million tonnes, up from 13.6 million a year earlier, although figures for France remained incomplete.
That is a year-over-year increase of 2.8% so far.
Barley exports stand at 4.52 million tonnes against 3.86 last year.
Corn imports stand at 7.33 million tonnes against 8.66 million last year, which is a year-over-year decline of 15.4% so far.
Rapeseed imports at European level stand at 2.41 million tonnes on January 2 against 3.65 million tonnes last year to date.
European Union soybean imports during the 2021/22 marketing year have reached 6,47 MMT through January 2, which is a year-over-year decline of 13.5% so far.
EU soymeal imports are also moderately lower from a year ago, with 8.01 million metric tons.
From the Black Sea basin, in Moscow we record – 6 degrees this morning and in Kiev as in Krasnodar positive temperatures of + 7 degrees.
Meantime, SovEcon raised its forecast of Russian wheat export for 2021/22 MY by 0.2 mln tonnes to 34.1 mln tonnes, informed Refinitiv.
“After a weak export pace in the first half of November, exporters speeded up shipments, as the competitiveness of Russian wheat improved on the world market along with a rise of the global prices and ahead of the coming export quota on wheat for a period from February 15 to June 30, 2022”, – SovEcon said.
Besides, a preliminary estimation shows that Russia exported about 3.9 mln tonnes of wheat in December that is the highest December volume since 2017.
In 2021, the start of calendar winter was quite favorable for winter grains in terms of both temperature and precipitations, the NAAS of Ukraine said.
“High temperatures and sufficient soil moisture allowed plants to vegetate slightly, despite the fact that the active vegetation was stopped in autumn earlier than the multiyear average”, – they said.
Generally, taking into account the development of plants and hydrothermal regime, the weather conditions were favorable for wintering of grain crops during most of December.
Meantime, According to State Custom Service of Ukraine, since the beginning of 2021/22 MY and as of December 31 Ukraine exported 32.199 mln tonnes of grains and pulses, up by 6.135 mln tonnes year-on-year, reported the press-service of Ministry of Agrarian Policy and Food of Ukraine.
Particularly, Ukraine exported 6.103 mln tonnes of grain in December.
In particular, Ukraine exported 15.819 mln tonnes of wheat (+3.33 mln tonnes y-o-y), 5.196 mln tonnes of barley (+1.42 mln thsd tonnes), 121.3 thsd tonnes of rye (+119.6 thsd tonnes) and 10.824 mln tonnes of corn (+1.417 mln tonnes).
Moreover, Ukraine exported 59.3 thsd tonnes of flour (-19.8 thsd tonnes) including 58.4 thsd tonnes of wheat flour (-20.1 thsd tonnes).
In this context, wheat market overnight have seen values unchanged in early trading, but added $2-4/t in the back end.
Corn prices in Ukraine rose slightly but in a still very narrow market context, especially since it was still a public holiday on Monday.
From Australia, weather through Victoria’s Western Districts is slowing the wheat harvest.
Showers of rain overnight and cool mild temperatures are sweeping into Victoria’s Western Districts, slowing harvest.
However, overall, harvest across Australia is coming to an end.
Meantime, VITERRA has received 5.57 million tonnes (Mt) of grain in the harvest to January 2, according to its first harvest report after the Christmas-New Year break.
Between December 20 2021 and January 2 2022, growers delivered 684,636t of grain into the Viterra network in South Australia, and its two sites in western Victoria.
The majority of deliveries were wheat, followed by barley, faba beans and canola.
Meantime, a couple of barley vessels that were expected to load in December have rolled into January, which will leave us with around a 930,000t shipped in December.
January has around 700,000t of barley on the stem so far.
Local road freight has tightened, and rates continue to hike higher.
Operations at some local depot sites have been hit by COVID causing shutdowns or limiting staff, therefore putting more strain on the flow of grain from sites to up-country homes, or into port for export commitments.
In this context, Aussie local markets have kicked off the year wide and thin through the trade, while bids to grower were relatively unchanged across the boards.
Indeed, ASX east coast wheat traded lower yesterday, and lost $15/t.
Liquidity in Western Australia continues to trade for small volumes on wheat and barley.
Canola values have been very sluggish relative to offshore moves on the MATIF exchange.
On international trade scene, Tunisia’s state grains agency has issued international tenders to purchase about 125,000 tonnes of soft wheat, 75,000 tonnes of durum wheat and 75,000 tonnes of animal feed barley.
The deadline for offers is on this morning.
For the soft wheat, Tunisia was seeking five consigments of 25,000 tonnes each for shipment on various dates between Feb. 1 and March 25 depending on the origin supplied, the traders said.
The durum tender sought three 25,000 tonne consignments for shipment between Jan. 25 and Feb. 25 while the barley tender requested three 25,000 tonne cargoes for shipment between Feb. 1 and March 5, the traders added.
In its previous grain tenders in early December, Tunisia purchased about 100,000 tonnes of soft wheat, 92,000 tonnes of durum and 100,000 tonnes of barley.
Author: Sandro F. Puglisi
