US farm markets started the week mixed but mostly lower.
Corn prices dropped around 1.15%.
Soybeans prices hammared sinking by 1.81% lower.
Soymeal was down 2.05% at the bell.
Soy oil closed the day 1.28% lower.
Wheat prices fared somewhat better.
Chicago wheat closed 0.46% firmer.
HRW futures ended the session 0.42% higher.
Spring wheat futures ended the session 0.97% in the red.
Particularly, March MPLS wheat has posted losses in 9 in the last 11 sessions for a net $1.21 drop.
In energy market, oil prices climbed on this morning, with investors regaining some risk appetite as they await clues from the U.S. Federal Reserve chairman on potential interest rate rises and as some oil producers continued to struggle to beef up output.
Particularly, a U.S. Senate committee holds hearings this week for Federal Reserve Chair Jerome Powell and vice chair nominee Lael Brainard that could provide new details about the U.S. central bank’s plans to tighten monetary policy.
A weaker U.S. dollar helped support oil prices onthis morning, as it makes oil cheaper for those holding other currencies.
Thus, Brent crude futures gained 40 cents, or 0.5%, to $81.27 a barrel at 0529 GMT, after dropping 1% in the previous session.
U.S. West Texas Intermediate (WTI) crude futures rose 52 cents, or 0.7%, to $78.75 a barrel, after falling 0.8% on Monday.
In the freight market, the Baltic Exchange’s dry bulk sea freight index fell to a more than two-week low yesterday, as a decline in smaller vessel rates eclipsed gains in the capesize segment.
The overall index, which factors in rates for capesize, panamax and supramax vessels, indeed, fell 12 points, or 0.5%, to 2,277, its lowest since Dec. 24.
Particularly, the capesize index rose 122 points, or 5%, to 2,554.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, rose by $1,014 to $21,181.
The panamax index, in contrast, dropped 108 points, or 3.7%, to 2,849.
Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, fell by $965 to $25,645.
The supramax index slipped 73 points to its lowest level since April 2021 at 2,001.
On equities markets, U.S. stocks on Monday settled mixed, with the S&P 500 falling to a 3-week low and the Dow Jones Industrials falling to 2-1/2 week low.
A jump in T-note yields undercut technology stocks early Monday and weighed on the overall market after the 10-year T-note yield climbed to a nearly 2-year high at 1.806%.
However, technology stocks rebounded Monday afternoon and helped stock indexes recover from their worst levels after the Nasdaq 100 erased a more than -2% loss from a 2-1/2 month low and closed higher on dip buying.
Monday’s U.S. economic data was bullish for stocks after U.S. Nov wholesale trade sales rose +1.3% m/m, stronger than expectations of +1.0% m/m.
Comments on Monday from Richmond Fed President Barkin were bearish for stocks when he said he “certainly” thinks it’s conceivable that the Fed will be able to raise interest rates at the March FOMC meeting.
High inflation is taking a toll on American families, Federal Reserve Chair Jerome Powell acknowledged in remarks to be delivered at a Tuesday congressional hearing on Powell’s nomination to a second four-year term.
In this context, on Wall Street, a broad wave of selling had the S&P 500 down by 2% in early going, but a late-afternoon burst of buying left the benchmark index with a loss of just 0.1%, at 4,670.29.
The Dow Jones Industrial Average fell 0.5% to 36,068.87 and the tech-heavy Nasdaq eked out a gain of less than 0.1%, after having been down 2.7%, to end at 14,942.83.
The Russell 2000 fell 8.66 points, or 0.4%, to 2,171.15.
Meantime, Asian shares mostly declined in cautious trading on this morning following a retreat on Wall Street.
Investors are keeping an eye on rising numbers of coronavirus cases, especially in China, where a third city has locked down its residents because of a COVID-19 outbreak, raising the number confined to their homes in China to about 20 million people.
Thus, Japan’s benchmark Nikkei 225 fell 0.9% to finish at 28,222.48.
South Korea’s Kospi picked up less than 1 point to 2,927.38.
Australia’s S&P/ASX 200 dipped 0.8% to 7,390.10.
Hong Kong’s Hang Seng shed 0.5% to 23,624.11, while the Shanghai Composite index sank 0.8% to 3,564.61.
On the weather side, we don’t expect much additional rain or snow in the Midwest and Plains between today and Friday.
Particularly, bitter cold in the Northeast through early Wednesday, while milder air begins to expand across the Central United States.
Meantime, heavy rain may lead to instances of flooding throughout parts of western Washington over the next few days.
NOAA’s latest 72-hour cumulative precipitation map only shows light totals around the Great Lakes region later this week.
The agency’s 8-to-14-day outlook predicts some seasonally wet weather for the Northern Plains between January 17 and January 23, with seasonally cool weather settling into the eastern half of the U.S. during that time.
In this context, US winter wheat conditions remain well below normal, and 65 per cent of the country is in drought according to the latest release of the drought monitor.
However, we know that the correlation at this time of the year to final yields is low, but the market will be wary until it can find more confidence.
On the demand side, weekly export inspections report showed 1.023 MMT of corn was shipped through the week that ended 1/6.
That was up from 759,563 MT last week but still under the same week last year.
Mexico and China were the week’s top destinations.
USDA also added 163,478 MT of corn exports to past reports, taking the season’s total to 14.084 MMT.
Last year’s pace was for 16.56 MMT as of 1/7.
As for soybean, FAS reported 905,149 MT of soybeans were shipped during the week that ended 1/6.
That was down from 1.61 MMT last week and 1.91 MMT during the same week last season.
Corrections to past reports added 418,738 MT through 49 entries, which left the season’s total at 31.65 MMT.
Shipments last year had reached 41.13 MMT as of 1/7.
As for wheat, export inspections data showed 233,159 MT of wheat was shipped during the week that ended 1/6.
That was up 3k form last week but was 48,197 MT lighter yr/yr.
USDA revised past reports and added 111,148 MT.
That left the season’s wheat export program at 12.432 MMT as of 1/6, compared to 15.3 MMT last year.
Meantime, yesterday Mexico booked 132k MT of corn via a large private sale.
Of the total, 77k MT is for 21/22 delivery with the remaining 55kMT for delivery in 22/23.
Meantime, ahead of USDA’s Jan reports analysts are looking for a 1.8 MMT trim in Brazilian corn production and a 900k MT reduction for Argentina on average.
World corn carryout is estimated at 303.6 MMT, which would be 2.1 MMT lower if realized.
Grain stocks are figured at 11.607 bbu.
As for soybean, traders are looking to see a USDA trim Brazil’s soy production by 2.4 MMT to 141.6 MMT on average.
Argentina soybeans are expected to be reported at 48.2 MMT, which would be a 1.3 MMT cut if realized.
Global soybean carryout is expected to be 2.3 MMT lighter at 99.7 MMT.
As for the quarterly stocks, the average of pre report estimates is to see NASS find 3.127 bbu of soybeans as of Dec 1.
As for wheat, pre-report estimates are to see wheat stocks at 1.415 bbu as of Dec 1, which if realized would imply 364.4 mbu of Q3 use.
USDA will also provide winter wheat plantings data, the trade is expecting to see a 700k acre increase from 21/22 at 34.3m acres on average.
WASDE estimates show the trade looking to see a U.S. carryout bump to 609.3 mbu, and a world bump to 287.7 MMT.
In this context, corn basis bids held steady across the central U.S. to start the week.
Soybean basis bids were mostly steady across the central U.S., but did tilt 3 cents higher at an Indiana processor and 5 cents lower at an Iowa processor.
The funds were net sellers yesterday for 11,000 lots of corn and 14,000 lots of soybeans.
They were net buyers for 2,000 lots of wheat.
From Canada, Canadian common wheat exports rose 32.5% in the week ended Jan. 2, Canadian Grain Commission data released Jan. 9 showed.
Exports increased to 263,800 mt from 199,100 mt the week before, according to the data.
However, overall common wheat exports for the marketing year 2021-22 (August-July) remained sharply lower on the year at around 5 million mt, down over 41%.
During the same period of MY 2020-21, Canada had shipped out slightly over 8.5 million mt of the food grain.
Exports of the food grain rose in the week to Jan. 2 as demand for the crop increased from countries in the Middle East amid a sharp decline in prices.
However, prices have recovered slightly, traders said.
In the same week, however, exports of durum wheat fell sharply to 13,100 mt from 45,400 mt the week before.
From Aug. 1 to Jan. 2, exports of durum wheat totaled 1.2 million mt, against 2.5 million mt during the same period last year.
In MY 2020-21, Canada exported a total of 26.4 million mt of wheat.
Agriculture and Agri-Food Canada has estimated the country’s wheat exports in MY 2021-22 to fall sharply to 16.1 million mt.
The US Department of Agriculture expects Canada’s wheat exports at 15 million mt for MY 2021-22.
Canada’s wheat exports are expected to see a sharp fall in this marketing year as the exportable surplus is seen tightening with output at lowest in more than 14 years amid one of the warmest and driest summers on record.
In MY 2021-22, Canada is likely to harvest 21.7 million mt of wheat, down sharply from 35.2 million mt the year before, AAFC said.
On the price side, CWRS wheat FOB 13.5% Vancouver for 30-45 days forward was assessed at $385.17/mt Jan. 7, up $4.96, and FOB prices of 13.5% CWRS Vancouver for 45-60 days forward at $386.64/mt, up $4,59/mt, S&P Global Platts data showed.
From South America, conditions are set to improve throughout southern Brazil into the middle of Argentina.
According to meteorologist Don Keeney, weather patterns will change next week, resulting in wetter conditions in the northern half of Argentina and southern Brazil, while northern Brazil will have a welcome break from the rainfall.
Meantime, the 2021/22 Brazilian soybean harvest has just begun, with just 0.2% progress so far, according to the AgRural consultancy.
Reports of good yields are coming out of the top production state of Mato Grosso, while optimism over yields in Paraná is much more muted after seeing plenty of hot, dry weather throughout the season.
AgRural is currently expecting to see total production to come in around 4.902 billion bushels.
Certantly, the start of the Brazilian harvests and this forecast of 15-day rains over a large part of Argentina and Brazil weighed on the markets trend yesterday.
Meantime, USDA attache reduced its projected Marketing Year (MY) 2021/22 soybean production to 46.5 million metric tons (MMT), 3 MMT below USDA Official.
More advanced drought conditions in Paraguay could reduce Argentine imports below the current projected 4.5 MMT, which is 300,000 metric tons below USDA Official.
Argentine MY 2021/22 sunflowerseed and peanut production projections are unchanged at 3.4 MMT and 1.3 MMT respectively.
On European market, wheat prices rose slightly on Euronext, testing support zones which encourage chartists to reposition themselves.
Particularly, a withdrawal of the Eurodollar parity allowed European wheat to remain in the green.
The recent fall on Euronext has increased the competitiveness of French wheat, raising hopes of further sales to destinations like Morocco.
German wheat traders were awaiting signs of more import demand.
“Overall, EU wheat is looking pretty competitive in world markets as Russia’s export taxes continue to hinder Russian exports, but there is an absence of demand with no new international tenders for wheat issued as the week starts,” one German trader said.
“There are expectations of more demand in January from importers like Egypt, Morocco and sub-Saharan Africa, along with Iran.”
Traders said two ships each with about 65,000 tonnes of German wheat sailed for Iran last week, following large purchases made by the country in late 2021.
Meantime, French customs showed intra-Community corn exports of 528,000 t in November against 322,100 t in October 2021, and 266,000 t in November 2020.
Spain remains the leading destination.
Corn prices, however, were stable yesterday.
As we approach February delivery in MATIF rapeseed, the market is showing extreme signs of volatility.
Imports of canola are not doing enough to quell the nearby shorts, and the European oil market is shrugging off any COVID-related demand concerns.
From the Black Sea basin, weather setup remains friendly for the Black Sea wheat, especially for the Russian South.
There are no threatening temps with precipitation close or above average.
Particularly, lower temperatures with – 9 degrees displayed in Moscow, – 5 degrees in Kiev and still + 8 degrees in Krasnodar.
The drop in temperatures is expected to continue tomorrow and the day after.
Meantime, according to State Custom Service of Ukraine, since the beginning of 2021/22 MY and as of January 10 Ukraine exported 33.527 mln tonnes of grains and pulses, up by 6.324 mln tonnes year-on-year, reported the press-service of Ministry of Agrarian Policy and Food of Ukraine.
Particularly, Ukraine has exported 1.054 mln tonnes of grain in December.
In particular, Ukraine exported 16.11 mln tonnes of wheat (+3.448 mln tonnes y-o-y), 5.281 mln tonnes of barley (+1.395 mln thsd tonnes), 121.5 thsd tonnes of rye (+119.8 thsd tonnes) and 11.772 mln tonnes of corn (+1.519 mln tonnes).
Moreover, Ukraine exported 60.1 thsd tonnes of flour (-21.4 thsd tonnes) including 59.1 thsd tonnes of wheat flour (-21.7 thsd tonnes).
On the other hand, Russia-West-Ukraine tensions also remain on the agenda.
Russia-US talks started yesterday in Geneva.
“It’s hard to expect a breakthrough while we do believe that any open conflict will provide substantial support to global wheat prices” Andrey Sizov said.
From Malaysia, to note that MPOB confirmed the sharp decline in palm production in the country last month.
MPOB, indeed, posted palm stocks in Malaysia down 12.9% from last month, supporting prices on Monday’s session.
National stocks thus fell by 240 kt to fall to 1.58 Mt, the lowest since last July.
However, on this morning prices gave up a little ground in favor of disappointing export figures and some profit taking.
From Australia with plenty of moisture, the summer-crop program is becoming a dream run for Queensland and northern NSW, with yield potential looking good and the earliest of sorghum to be stripped in the next week
Storage capacity is likely to be a pinch point with the increase in production and the hangover of a large winter crop area.
Meantime, Aussie local wheat markets were a touch firmer both at the terminals and direct to port for January period, and we saw bids up A$10/t in Victoria on selected grades.
The trade wheat markets still have wide spreads between bid and offer.
Barley continues to get a bid and remains very steady across the port zones, and malt premiums remain firm.
The ongoing rain in Victoria and NSW has all but sealed the fate for malt supply now.
We saw some life back in the canola market yesterday across the boards, with Victorian and South Australian prices firmer by $5-10/t.
Australian values remain steeply discounted to the rest of the world for both current and new crop.
On the international trade scene, South Korea, South Korea purchased 130.000 t of corn from optional origins in an international tender that closed yesterday.
Particularly, the KFA’s Incheon section purchased the corn in two consignments each of about 65,000 tonnes, both at an estimated $334.17 a tonne c&f.
Seller was believed to be trading house Viterra.
The first consignment was sought for arrival around March 30.
Shipment was sought between Feb. 24 and March 15 if the corn is sourced from the US Pacific Northwest coast, between Feb. 4-23 if from the US Gulf or Black Sea region/east Europe, between Jan. 30 and Feb. 18 if from South America and Feb. 9-28 if from South Africa.
The second consignment was sought for arrival around April 20. Shipment was sought between March 16 and April 5 if the corn is sourced from the US Pacific Northwest coast, between Feb. 28 and March 16 if from the US Gulf or Black Sea region/east Europe, between Feb. 19 and March 11 if from South America and between March 1-20 if from South Africa.
Iraq’s state grains buyer has extended the deadline for validity of price offers in tender to buy a nominal 50,000 tonnes of milling wheat in which only a limited number of trading companies were asked to participate.
The tender has been restricted to about eight trading houses in the United States and Canada.
The deadline for submission of price offers in the tender was Jan. 3 but Iraq has asked tender participants to extend the validity of their offers until Jan. 13.
No purchase has yet been reported.
The wheat can be sourced optionally from the United States, Canada or Australia.
Author: Sandro F. Puglisi