US farm markets were mixed but mostly lower following USDA’s highly anticipated World Agricultural Supply and Demand Estimates (WASDE) report, which the agency released yesterday late in the morning. 

Corn prices wobbled and ultimately closed with losses of 0.33%.

Soybeans were the session’s lone winner, moving more then 0.9% higher after USDA showed lower-than-expected South American production estimates. 

Soymeal prices ended the day 0.75% higher. 

Soy oil prices were 0.85% higher. 

In contrast, the wheat complex incurred in double-digit losses after USDA showed higher-than-expected planted acres for 2022 and US wheat ending stocks were notably raised. 

Indeed, for CBOT SRW wheat the board went home 1.62% down. 

KC wheat prices closed with 1.74% losses. 

Spring wheat ended the day down by 0.83%. 

In energy market, oil prices slipped on this morning, trimming big gains from the previous two sessions, amid uncertainty over near-term demand as cases of the highly contagious Omicron variant of the coronavirus surge around the globe.

Data from the U.S. Energy Information Administration on Wednesday showed fuel demand has taken a hit from Omicron, with gasoline stockpiles increasing by 8 million barrels in the week to Jan. 7, compared with analyst expectations for 2.4 million-barrel rise.

Total crude oil inventories fell 4.8 million barrels but were more than offset by a stock build across refined products.

In add the drop in crude inventories might have been related to end-of-year tax issues on oil stocks onshore in Texas and Louisiana.

Also, U.S. supplies are set to rise as producers are paving the way for faster production by expanding well completions in the country’s top shale oil field, the Permian Basin of west Texas and New Mexico, according to research data. 

Separately, concerns about inflation putting pressure on the Federal Reserve to speed up the timeline for kicking off interest rate hikes are weighing on markets.

In this context, U.S. West Texas Intermediate (WTI) crude futures slipped 43 cents, or 0.5%, to $82.21 a barrel at 07:28 GMT, after climbing 1.7% in the previous session.

Brent crude futures shed 44 cents, or 0.5%, to $84.23 a barrel, after rising 1.3% on Wednesday.

On the freight market, the Baltic Exchange’s dry bulk sea freight index extended losses on Wednesday to a 10-month low, pressured by lower rates across all its vessel segments.

Indeed, the overall index, which factors in rates for capesize, panamax and supramax vessels, fell 124 points, or 5.8%, to 2,027, its lowest since March 16.

Particularly, the capesize index dropped 228 points, or 9.8%, to a 10-month low of 2,097.

Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, dropped by $1,894 to $17,390.

The panamax index fell 150 points, or 5.5%, to 2,565, its lowest since Dec. 23.

Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, fell by $1,354 to $23,081.

The supramax index fell 22 points to its lowest level since April at 1,936.

On equities markets, U.S. stocks yesterday posted moderate gains after Wednesday’s data showed U.S. consumer prices for December came in close to expectations.  

Particularly, the price data eased inflation concerns and lowered T-note yields, which gave technology stocks a boost.  

Wednesday’s Fed Beige Book was neutral for stocks as it said the economy grew at a modest pace in the final weeks of 2021, but businesses’ expectations for growth over the next several months cooled in some places. 

U.S. Dec CPI rose +0.5% m/m and +7.0% y/y slightly stronger than expectations of +0.4% m/m and +7.0% y/y with the +7.0% y/y gain the largest annual increase in 39-1/2 years.

U.S. Dec CPI ex-food & energy rose +0.6% m/m and +5.5% y/y, stronger than expectations of +0.5% m/m and +5.4% y/y with te +5.5% y/y gain the largest annual increase in nearly 31 years.

The sharp increase in consumer prices , which was in line with economists’ forecasts, came a day after Fed Chair Jerome Powell told Congress that the central bank stands ready to raise rates to fight inflation.

The central bank is reducing bond purchases that helped keep interest rates low throughout the virus pandemic.

The market now puts the chances of the Fed raising short-term rates by at least a quarter point in March at around 75%. 

A month ago, it was about 36%.

In this context, on Wall Street the S&P 500 rose 0.3% to 4,726.35. 

The Dow Jones Industrial Average eked out a 0.1% gain, closing at 36,290.32. 

The Nasdaq composite rose 0.2% to 15,188.39. 

All are on pace for a weekly gain, however.

Smaller company stocks lost ground, meantime. 

Indeed, the Russell 2000 index fell 0.8% to 2,176.06.

Meantime, Asian shares were mostly lower on this morning.

Particularly, Tokyo’s Nikkei 225 index dropped 1% to 28,489.13, while the Shanghai Composite shed 1% to 3,560.59. 

In Seoul, the Kospi lost 0.4% to 2,962.09.

The Hang Seng in Hong Kong edged 0.1% lower, to 24,379.67 and the S&P/ASX 200 added 0.5% to 7,474.40. 

India’s Sensex edged 0.1% higher.

Taiwan’s benchmark rose 0.3% after TSMC, the world’s largest contract manufacturer of computer chips, reported a record quarterly profit of just over $6 billion.

On the weather side, some additional moisture will fall across some parts of the Midwest and Plains between today and Saturday, per the latest 72-hour cumulative precipitation map from NOAA. 

Into this weekend, expect a winter storm to drop snow and ice in parts of the upper Midwest through the eastern Corn Belt. 

Later on, NOAA’s 8-to-14-day outlook predicts more seasonally wet weather for most of the central U.S. between January 19 and January 25, with seasonally cold weather likely for the Midwest.

Meantime, USDA’s first look at 2022 U.S. wheat acreage was calculated at 34.4 million acres – the largest U.S. winter wheat acreage since 2016’s sowing of 36.1 million acres. 

Soft red winter wheat acres recorded the largest increase, rising over half a million acres to 7.07 million acres.

Durum wheat acres reached to 1,635 million acres.

That was moderatly below year ago when 1,69 million acres were planted, but noticiably up compared to 2019, when had been planted only 1.34 million acres.

On the demand side, USDA flashed a large 100k MT of old crop corn sale to unknown destinations yesterday. 

Also USDA reported a large new crop soybean sale to China for 132k MT. 

Ahead of the weekly Export Sales report out later in the afternoon, analysts surveyed anticipate USDA to report between 0.5 and 1.5 MMT of corn bookings for the week that ended 1/6.

Soybean bookings from the week that ended 1/6 are estimated between 400k MT and 1.2 MMT ahead of the weekly Export Sales report. 

New crop bookings are estimated to come in below 450k MT.

As for wheat, the trade is looking for wheat bookings between 150k and 400k MT for the week that ended 1/6. 

New crop wheat sales are estimated below 50k MT according to survey respondents.

In this context, corn basis bids firmed a penny higher at an Ohio elevator, dipped a penny lower at an Illinois ethanol plant and held steady elsewhere across the central U.S..

Soybean basis bids climbed 9 cents higher at an Ohio elevator, while holding steady elsewhere across the central U.S..

The funds were net sellers yesterday for 2,500 lots of corn and 8,500 lots of wheat. 

They were, however, net buyers for 5,500 soybean lots.

From South America, rains are expected this weekend in Argentina and southern Brazil, but this will remain to be confirmed, especially given the current temperatures which could obscure the beneficial impact of this precipitation.

Meantime, Brazilian oilseed association Abiove slashed its estimates for the country’s 2021/22 soybean production by more than 176 million bushels to 5.144 billion bushels, citing drought and other weather problems. 

That is still above most recent estimates and would be a record harvest, if realized. 

Abiove also lowered its estimates for soybean exports in 2022 to 3.347 billion bushels.

On the other hand, the Buenos Aires stock exchange largely revises down its estimate of corn harvest to 48 million tonnes against 56 previously posted, and that of soybean to 40 million tonnes against 45 million. 

This is the consequence of the current water deficit episode.  

Meantime, Argentine grains ships leaving the main grains port hub of Rosario are having to cut cargoes by some 30% due to a renewed “record” plunge in water levels of the Parana River, the head of the local ports chamber told Reuters on Tuesday.

The Parana, which carries some 80% of Argentina’s farm exports, is key to billions of dollars of grains shipments from the country, which is the world’s top exporter of processed soy, the second largest of corn and a major wheat producer.

This equated to 13,000 tonnes less cargo in a Handymax ship and 16,000 tonnes less in a Panamax.

The river was measured at a reference height of -0.43 meter (-1.4 feet) in Rosario on Tuesday, according to data from the Argentine Naval Prefecture, the lowest since the start of a years-long decline in its level since the end of 2019.

That compares to an average January height of +3.55 meters (+11.65 feet), according to data from the official National Water Institute (INA) between 1996 and 2020. 

The all-time record low was in 1944 when it fell to -1.39 meters (-4.46 feet).

The low level of the Parana adds to concerns about high temperatures and dry conditions hitting farm regions in the South American country, where early-sown corn plots are developing yields and soybean planting is ongoing.

On European market, sharp drop in wheat prices yesterday, in particular following the USDA report.

On Euronext wheat shedded around € 5 / t in the 2021 harvest and € 2 / t in the 2022 harvest.

Rapeseed is losing ground, particularly in the wake of biodiesel prices.

Meantime, Farm office FranceAgriMer on Wednesday lowered its forecast of French soft wheat exports outside the European Union in the 2021/22 season to 9.0 million tonnes from 9.2 million estimated in December.

In a monthly supply and demand outlook for major cereal crops, the office also cut its forecast of French soft wheat exports within the 27-member bloc to 7.7 million tonnes from 7.8 million seen last month.

That put the office to revise downwards its total estimates of wheat exports to 16.84 million tonnes against 17.11 estimated last month.

Meantime, it increased its projection of French soft wheat stocks by the end of the 2021/22 season next June to 3.6 million tonnes from 3.5 million estimated last month.

In corn, exports are revised up slightly to 5.57 million tonnes against 5.55 last month.

From the Black Sea basin, prior to the USDA report, wheat prices in Ukraine were unchanged on the near day but up on the 2022 harvest, the Argus Media office in Kiev reported. 

Ditto for corn prices.

Temperatures are very low this morning, displayed at – 18 degrees in Moscow, – 14 degrees in Kiev and – 7 degrees in Krasnodar.

Meantime, according to regional divisions of the Federal Service for Veterinary and Phytosanitary Surveillance (Rosselkhoznadzor), since the beginning of the season-2021/22 (July 1), and as of December 30, Russia exported 29.9 mln tonnes of grains and oilseeds and their by-products (including deliveries to the territory of the Customs Union countries), down 18% compared to the same period of the last year. 

The export of grains and pulses totaled 26.7 mln tonnes, including 25.7 mln tonnes of grains, reported the Federal State-Funded Institution «Federal Centre of Quality and Safety Assurance for Grain».

Russia shipped the reporting goods to 140 countries (126 countries the year ago).

In the reporting period Russia exported 21.6 mln tonnes of wheat (down 18%), 2.6 mln tonnes of barley (down 33%), 1.3 mln tonnes of corn (up 11%), 0.8 mln tonnes of peas (up 76%), 0.5 mln tonnes of wheat bran (up 24%), 0.2 mln tonnes of chickpeas and 0.1 mln tonnes of wheat flour (up 35%).

In addition, Russia exported 0.3 mln tonnes of soybeans, 0.5 mln tonnes of sunflower meal and 0.5 mln tonnes of flaxseed (up 32%).

On the other hand, according to State Custom Service of Ukraine, since the beginning of 2021/22 MY and as of January 12 Ukraine exported 34.013 mln tonnes of grains and pulses, up by 6.81 mln tonnes year-on-year, reported the press-service of Ministry of Agrarian Policy and Food of Ukraine.

Particularly, Ukraine has exported 1.514 mln tonnes of grain in January.

In particular, Ukraine exported 16.19 mln tonnes of wheat (+3.528 mln tonnes y-o-y), 5.325 mln tonnes of barley (+1.439 mln thsd tonnes), 146.8 thsd tonnes of rye (+145.1 thsd tonnes) and 12.107 mln tonnes of corn (+1.854 mln tonnes).

Moreover, Ukraine exported 60.8 thsd tonnes of flour (-20.8 thsd tonnes) including 59.8 thsd tonnes of wheat flour (-21.1 thsd tonnes).

Also, according to State Custom Service, Ukraine exported 15.9 mln tonnes of wheat at the sum of 4 bln USD in the first half of 2021/22 MY, up 27% y/y in volume terms and up 62% in monetary terms.

Indonesia was the largest importer of Ukrainian wheat. It bought 2.7 mln tonnes of wheat in July-December 2021/22 MY, up 21% y/y. 

Egypt imported 2.4 mln tonnes (+57%), Turkey – 1.5 mln tonnes (up 3 times). 

Supplies of Ukrainian wheat to Turkey in the first half of 2021/22 MY exceeded by 93% the volume shipped in the full 2020/21 MY (794 thsd tonnes).

APK-Inform forecasts Ukrainian wheat export at 22.5 mln tonnes in 2021/22 MY. 

Thus, the export potential has been 71% performed.  

From the Middle Kingdom, the Chinese government is trying to reduce its soybean deficit and aims to increase its national soybean production by 40% by 2025 by producing in 2025 nearly 23 million tonnes compared to 16.4 currently.

Meantime, China’s agriculture ministry reduced corn consumption estimates for 2021/22 to 11.326 billion bushels, citing lower demand from industrial users and the feed sector.

Meantime, on Jan 14, a total of 106,000 tons of corn imported in 2020 will be auctioned, and 185,000 tons of wheat (crop period from 2016 to 2020) will be auctioned in Henan. 

In addition, the minimum purchase price of 501,283 tons of wheat auctioned yesterday (Jan 12) has all been sold.

From Australia, further harvest delays hit parts of western Victoria as showers push through this morning and still reports of high moisture wheat crops that headers are unable to get onto.

The bulk export program build for the last half of January and into Feb with appx 1.8Mt of all grains on the line-ups across the Aussie port zones. 

Execution programs remain a high priority, with increasing covid-positive cases putting pressure on staffing at sites and the tight logistic market we have had for some time now.

In this context, prices for feedgrain have steadied in eastern Australian markets this week amid thin buying from domestic consumers who are weighing up their many options for ration mixes for coming months.

In the north, a bumper sorghum harvest and a big corn crop are being considered as inputs, while central and southern markets are looking at barley versus off-spec wheat, both of which are in ample supply.

Solid global demand for wheat and barley appears to have put a floor in the market at prices most growers are prepared to hit with only modest amounts as they quantify the quality of what for many was a weather-affected harvest.

However, yesterday Aussie local cereal markets were firmed. 

Indeed, wheat was up $3-5/t yesterday across the board. 

Towards the end of the day we saw more trading activity in WA and SA.

Barley continued to catch a bid with values firmer by $5/t. 

SA port zone values were trading around $310 Adelaide and $315 Port Lincoln.

Canola values were lower over the day with bids softer by $8-10.

On the international trade scenario, S.Korea’s MFG tenders for 140,000 t corn.

The first consignment is for arrival in South Korea around April 23.

The second consignment is for arrival in South Korea around May 3.

The deadline for submission of price offers in the tender is Friday, Jan. 14.

Iranian state agency the Government Trading Corporation (GTC) has issued an international tender to purchase about 60,000 tonnes of milling wheat, European traders said on Wednesday.

The deadline for the submission of price offers in the tender is also Wednesday, Jan. 12.

Volumes in Iran’s tenders are nominal and the country regularly buys more than the original tonnage sought.

Traders said Iran last week purchased about four shipments of wheat each of about 60,000 tonnes likely to be sourced from Germany or Russia and the Black Sea region, traders said.

The new tender seeks shipment in February/March.

Iran has been a regular wheat buyer in recent months with about 740,000 tonnes also bought in December.

Iran needs to import around 8 million tonnes of wheat after its crop was damaged by the worst drought in 50 years, Reuters reported in October.

But western sanctions on Iran continue to make payment difficult, traders said.

Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) said on Wednesday that it will seek 80,000 tonnes of feed wheat and 100,000 tonnes of feed barley to be loaded by Feb. 15 and arrive in Japan by March 17, via a simultaneous buy and sell (SBS) auction that will be held on Jan. 19.

Japan buys and sells its feed wheat and barley via so-called SBS auctions, in which end-users and importers specify the origin, price and quantity of grain, allowing millers to meet their varied needs for the feed grain.

TMO Turkey issued another tender to buy 345.000 MT (+/-5% buyer’s option) of Feed Barley. 

Shipment is Feb 15-Mar 10, 2022.

Closing date is for Jan 20, 2022.

The operators are awaiting the outcome of the Algerian tender.

WASDE summary – January 12, 2022

For corn, December 1st corn stocks were 11.647 bbu, when the trade was looking to see 11.607 bbu. 

That implied a Q1 use of 4.704 bbu, when again the implied pre report average trade guess was very accurate at 4.707. 

The NASS crop production report showed the average corn yield was UNCH from December’s 177 bpa. 

With 0.3m additional harvested acres, that had total 21/22 output at 15.115 billion bushels. 

Figuring carryout off that level led USDA to raise stocks by 47mbu to 1.540 billion bushels. 

Trade ideas had been lower. 

Meantime, exports were reduced 75 mbu but that was offset by a 75 mbu bump to ethanol. 

Meantime, global corn output was reduced 1.77 MMT, as cuts to Brazil, Argentina, and the EU offset increases in U.S. and Ukraine. 

For South American corn output, USDA’s WAOB went with 115 MMT for Brazil and 54 MMT for Argentina. 

CONAB had saw Brazilian corn production at 112.9 MMT, while the trade was looking for USDA to go to 116.2. 

The trade average guess for Argentina was 53.6 MMT.

USDA made no changes to Brazil’s exports or domestic demand, with their stocks absorbing the production loss. 

Global corn carryout was below last month but not as much of a cut as anticipated at 303.1 MMT. 

As for soybean December 1st soybean stocks were 3.149 bbu, when the trade was looking to see 3.127 bbu. 

That implied a Q1 use of 1.543 bbu vs. the implied pre report average trade guess was 1.563. 

Yeasterday the NASS crop production report showed the average bean yield was above December’s 51.2 bpa, but in-line with estimates with 51.4 bpa reported. 

With 0.1m fewer acres, that had total 21/22 output at 4.435 billion bushels. 

Figuring carryout off that level raised stocks by 10 mbu to 350 million bushels. 

That was inline with pre-report estimates the Dec 340 mbu figure reflecting the supply. 

Residual was 1 mbu higher, though crush and exports were steady at 2.190 bbu and 2.050 bbu respectively. 

For South American bean output, USDA’s WAOB went with 139 MMT for Brazil and 46.5 MMT for Argentina. 

CONAB had saw Brazilian soy production at 140.5 MMT, while the trade was looking for USDA to go to 141.2. 

The trade average guess for Argentina was 48.2 MMT, while the Ag Attache saw 46.5 MMT. 

Global soybean carryout was below the pre report estimate at 95.2 MMT mostly reflecting the larger South America production cuts than expected. 

As for wheat, USDA’s winter wheat plantings data had 34.397m acres planted for the 22/23 year. 

The trade was looking for 34.3 on average. 

Much of the increase was for SRW which was 400k acres above the average trade guess and 400k acres above last year at 7.07 million. 

HRW acres were reported at 23.8m where the trade had anticipated 24m acres flat. 

Wheat stocks were 1.390bbu on December 1st. 

The trade was looking for 1.415 bbu. 

As for MY ending stocks, the USDA’s WAOB forecasts 628 mbu of wheat will carry into 22/23. 

That is a 30 mbu bump from December’s figure. 

The average trade guess was for an 11 mbu boost. 

Digging deeper into the domestic data, USDA cut feed and residual by 25 mbu to 110. 

Exports were trimmed by 15 mbu to 825 mbu and are now 167 mbu below 2020/21. 

The export trim was exclusive to HRW, which is now forecasted at 335 mbu. 

The WAOB division raised global wheat production by a net 700k MT, with Argentina 500k MT higher. 

World wheat exports were trimmed by 1 MMT, reflecting the U.S. cut and a 1 MMT cut to Russian exports. 

The EU picked up some with a 500k MT boost to 37.5 MMT. 

Global wheat stocks were figured at 279.95 MMT. 

That was up from 278.2 MMT last month, but was inline with pre-report estimates

As for prices, in corn USDA maintained $5.45 as the cash average price. 

The cash average price for sorghum was also left UNCH at $5.45. 

USDA raised the cash average price for soybeans by 50 cents to $12.60. 

The cash average price for soymeal was $45 higher to $375/ton, but USDA left the cash price for soy oil at 65 cents/lb. 

USDA did up the average cash price for wheat by a dime to $7.15.  

This ratio is therefore judged to be bearish in wheat, neutral to bearish in corn and neutral to bullish in soybeans.

Headlines were as follows:

US winter wheat area = trade was looking for 34.255m/ac – USDA gave us 34.397m/ac, up 2% from 2021

Corn stocks = trade looking for 11.602 bbu – USDA gave us 11.6bbu

Wheat stocks = trade looking for 1.421 bbu – USDA released 1.39bbu

Soybean stocks = trade looking for 3.129 bbu – USDA gave us 3.15 bbu

The WASDE report

21/22 global wheat ending stocks +2.4Mt @ 279.95Mt (278.67Mt expected).

21/22 global wheat production +0.7t @ 778.60Mt. Argentina 20.5Mt (+0.5), Australia 34.0Mt (unch), Canada 21.65Mt (unch), EU 138.9Mt (+0.2Mt), Russia 75.5Mt (unch), USA 44.79Mt & Ukraine 33Mt.

US corn ending stocks +47mbu to 1.540bbu (1.472bbu expected).

Corn production 15.115bbu (15.069 expected), slight increase in harvested area.

Soybeans ending stocks 350mbu (348mbu expected);

Soybeans production 4.435 mbu (4.433mbu expected);

21/22 world bean ending stocks 95.2Mt, -6.8Mt (99.93Mt expected).

Author: Sandro F. Puglisi

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