US farm markets, spilled back into the red yesterday.

Corn prices were down 1.92%.

Soybean prices down 1.57%. 

Soymeal prices closed 1.75% weaker.

Soybean oil futures ended the session 1.57% in the red. 

The wheat complex was also hammered reporting double digits losses by the close. 

In deed, CBOT SRW was down 1.45%. 

KC HRW futures closed with a loss of 2.35%. 

Spring wheat gave back 2.72%, ending the day below $9 for the first time since late September. 

In energy market, oil futures reversed losses on Friday on a weaker dollar although an imminent release of crude reserves from top importer China capped price gains.

Particularly, crude prices turned positive as the dollar heads for its largest weekly fall in more than a year. 

A weaker dollar makes commodities more affordable for holders of other currencies.

However, gains were limited after Reuters reported that China plans to release oil reserves around the Lunar New Year holidays as part of a plan coordinated by the United States with other major consumers to reduce global prices. 

Indeed, China agreed to release a relatively bigger amount if oil is above $85 a barrel, and a smaller volume if oil stays near $75 level.

Meantime the U.S. Energy Department said on Thursday it had sold 18 million barrels of strategic crude oil reserves to six companies, including Exxon Mobil and a unit of refiner Valero Energy Corp.

In this context, Brent crude futures rose 32 cents, or 0.4%, to $84.79 a barrel at 07:30 GMT. 

U.S. West Texas Intermediate crude gained 11 cents, or 0.1%, to $82.23 a barrel.

Nevertheless, both Brent and WTI prices are set to climb for a fourth week in a row, supported by supply and geopolitical concerns in Libya and Kazakhstan and a drop in U.S. crude inventories to 2018 lows.

In the freight market, the Baltic Exchange’s dry bulk sea freight index fell for a fifth straight session on Thursday, and touched a fresh 10-month low on waning demand across vessel segments.

Indeed, the overall index, which factors in rates for capesize, panamax and supramax vessels, slipped 154 points, or 7.6%, to 1,873, its lowest since early March 2021.

The capesize index dropped 351 points, or 16.7%, to 1,746, its biggest daily percentage decline in four weeks.

Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, dropped by $2,913 to $14,477.

The panamax index fell 113 points, or 4.4%, to 2,452, its lowest since Dec. 22.

Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, fell by $1,012 to $22,069.

The supramax index fell 21 points to its lowest level since April at 1,915.

On equities markets, U.S. stock indexes on Thursday posted moderate losses, except for the Nasdaq, which fell sharply. 

Indeed, a sell-off in mega-cap technology stocks led the overall market lower.  

Also, an unexpected increase in U.S. weekly jobless claims to an 8-week high weighed on stocks.  

Fed comments on Thursday were negative for stocks, although U.S. producer price data for December showed a moderation in prices and was mildly supportive for stocks. 

Particularly, Thursday’s U.S. weekly claims data was bearish for stocks after weekly initial unemployment claims unexpectedly rose +23,000 to an 8-week high of 230,000, showing a weaker labor market than expectations of a decline to 200,000.

U.S. Dec PPI final demand rose +0.2% m/m and +9.7% y/y, weaker than expectations of +0.4% m/m and +9.8% y/y.

U.S. Dec PPI ex-food & energy a record +8.3% y/y (data from 2010), stronger than expectations of +8.0% y/y.

Meantime, Fed Governor Brainard said, “we do have a powerful tool, and we are going to use it to bring inflation down over time.”

Philadelphia Fed President Harker said, “the inescapable logical conclusion of this situation where inflation is higher than we want and the jobs market is very robust, is to tighten monetary policy.”

In this context, technology companies led a sell-off on Wall Street that pulled the major indexes into the red for the week.

Thus, the S&P 500 fell 1.4% to 4,659.03. 

The tech-heavy Nasdaq slumped 2.5% to 14,806.81. 

The Dow Jones Industrial Average fell 0.5% to 36,113.62.

Smaller company stocks also fell. 

The Russell 2000 slid 16.62 points, or 0.8%, to 2,159.44.

The selling came as investors gauged company earnings reports and new data pointing to rising prices at the wholesale level. 

Particularly, the Labor Department yesterday reported that its producer price index, which measures prices at the wholesale level, surged by a record 9.7% for all of 2021. 

The increase set an annual record and provides further evidence that inflation is still present at all levels of the U.S. economy. 

Inflation has been a key focus for investors as they try to gauge how rising prices will impact businesses, consumers and the Federal Reserve’s policy on interest rates in 2022.

Meantime, Asian shares slipped on this morning after the retreat on Wall Street.

Meantime, China reported its global trade surplus surged nearly 30% in 2021 to $676.4 billion. 

The trade surplus in December swelled 20.8% over a year earlier to a monthly record of $94.4 billion, customs data showed Friday.

Exports rose to $3.3 trillion in 2021 despite shortages of processor chips for smartphones and other products as global demand rebounded from the pandemic. 

Manufacturers also were hampered by power rationing imposed in some areas.

On the other hand, South Korea’s central bank raised its key interest rate to 1.25% from 1%, acting to counter inflation. 

Particularly inflation surged to 3.7% in December, and the latest rate hike “gives a strong signal that the Bank is prioritizing clamping down on inflation and financial imbalances”.

However, it should to note that while it is dialing back monetary stimulus, having raised the benchmark rate twice so far, the government announced 14 trillion won ($11 billion) in extra spending Friday, mainly to help small businesses recovering from the impact of waves of coronavirus outbreaks.

In this context, South Korea’s Kospi declined 1.4% to 2,920.75.

The Shanghai Composite index lost 0.6% to 3,534.17 and the Hang Seng in Hong Kong lost 1% to 24,179.16. 

Tokyo’s Nikkei 225 lost 1.5% to 28,078.98.

In Sydney, the S&P/ASX 200 shed 0.9% to 7,405.70.

India’s Sensex was 0.4% lower.

On the weather side, winter storm Izzy is going to throw plenty of snow and ice across the Midwest, South and eastern U.S. starting today and extending throughout the weekend. 

Later on, NOAA’s latest 8-to-14-day outlook predicts much cooler-than-normal weather for the Midwest and Plains between January 20 and January 26, with seasonally dry weather returning to the Corn Belt during that time.

On the demand side, FAS data showed corn bookings were 457,675 MT for the week that ended 1/6. 

That was below the pre report expectations and just 31% of the same week last year. 

Corn sales from the prior week were even weaker at 256k MT due in part to the year end holiday. 

Corn shipments from the weekly report were 1.012 MMT. 

That was a 3-week high but still 31% below the same week a year ago. 

Accumulated shipments on the weekly data totaled 15.665 MMT (616.7 mbu). 

That is 25% of the updated USDA forecast, with the 1.6 bbu of commitments at 67%. 

USDA’s weekly report showed milo bookings were 20,870 MT for the week of 1/6. 

Accumulated sorghum commitments are 5.329 MMT. 

As for soybean, USDA’s FAS reported 735,598 MT of beans were sold during the week that ended 1/6. 

That was 92% above last week but down 19% yr/yr. 

Of that, China bought 301,795 MT or 41% of the total. 

MYTD China’s commitments account for 57% of the 1.559 bbu total. 

Those commitments are 76% of the WASDE forecast. 

As for the products, weekly Export Sales data showed soymeal bookings were 104,232 MT. 

That was inline with the pre-report estimates and up 230% wk/wk. 

Total meal commitments were 6.23 MMT as of 1/6, which is now 40.4% of the updated MY forecast. 

BO bookings were net reduced by 2,936 MT as Canada canceled 3k MT. 

USDA reported 12,582 MT of soy oil was exported during the week, which was down 70% from last week, but was 12% above the same week last season. 

Accumulated exports match last year’s pace.  

As for wheat, wheat bookings were reported at 264,435 MT for the week that ended 11/6. 

That was up from last week’s low 48k MT and was 19% above the same week last year. 

Ahead of the report analysts were looking for between 150k and 400k MT. 

Wheat shipments from the weekly FAS release were 258,415 MT. 

That was 22.5% higher wk/wk but down 28% from the same week last year. 

Accumulated wheat shipments are 50% of the revised USDA forecast, while total wheat commitments are at 72%. 

In this context, corn basis bids trended 4 cents higher at an Iowa processor on Thursday while falling 2 to 8 cents lower at two other Midwestern locations and holding steady elsewhere across the central U.S..

Soybean basis bids were steady to weak after falling 5 cents lower at an Ohio elevator and dropping 10 cents at an Illinois river terminal.

The funds were net sellers yesterday for 16,000 lots of corn, 14,000 lots of soybeans and 8,000 lots of wheat.

From South America, private firm Planalytics reduced their projected soybean yield for Brazil and Argentina. 

For Brazil they cut 0.08 MT/HA for a 3.44 MT/HA yield (51.15 bpa), and for Argentina they trimmed soy yield by 0.03 to 2.86 MT/HA (42.52 bpa). 

USDA’s WAOB went with 51.15 bpa and 42.68 bpa on Wedsneday respectively. 

Abiove also reduced their forecast for Brazil, going with a 4.8 MMT reduction to 140 MMT output projection and 91.1 MMT for exports. 

USDA had Brazilian output at 139 MMT with 94 MMT for export.  

Brazilian agribusiness consultant, Agroconsult, called the Brazialian bean crop at 134.2Mt, down from 144.3Mt.

Meantime, in Argentina, the Buenos Aires Stock Exchange shows a crop rating for soybeans at 31% from good to excellent against 48% previously. 

The soybeans are estimated to be sown at 92.5%. 

In maize, the crop rating stands at 23% against 40% previously and sowing is done at 86.4%. 

Also, the Rosario Grain Exchange cut their soybean estimate to 40Mt (down 5Mt) and 48Mt on corn (down 8Mt). 

USDA currently 46.5Mt and 54Mt respectively. 

The market clearly more focused in the pending rainfall than the exchange cuts which seem pretty aggressive in corn. 

Thus, the rains expected from this weekend will therefore be largely decisive for the further development of prices. 

In Europe, Euronext again accelerated into the red on Thursday evening.

Volatility remains and the correction can also be considered excessive, just as the rise was in its time. 

Rapeseed posted a sharp drop in prices, especially on the eve of the closing of options for the February deadline. 

Indeed, rapeseeds were down 2.9% on yesterday alone. 

Obviusly, also the rise in the euro contributed to the decline in prices.

Meantime, consultancy Strategie Grains cut its forecast for European Union soft wheat exports in 2021/22 on Thursday due to strong competition from Argentina and Black Sea countries in Africa, especially for French wheat on the Algerian market.

In a monthly grain report, the consultancy lowered its outlook for EU exports of common wheat, or soft wheat, this season to 31.2 million tonnes from 31.5 million tonnes projected in December.

It also slightly cut its barley export outlook on declining demand in Saudi Arabia, while maize exports would suffer from lower Bulgarian and Romanian sales due to dwindling supplies and mounting competition from Ukrainian maize.

In contrast, improved competitiveness of the three cereals against oilseed meal in the EU prompted the consultancy to lift its estimate for the use in animal feed by a total of 800,000 tonnes in 2021/22.

All in all it raised its estimate for stocks of the three cereals at the end of the 2021/22 campaign, with barley and wheat now at high levels, which should continue to weigh on prices that have come off highs in the past months, it said.

For the upcoming 2022/23 season, Strategie Grains slightly lifted its EU wheat crop estimate, to 127.7 million tonnes from 127.6 million forecast last month, while leaving estimated barley and maize crops unchanged at 51.8 and 66.4 million tonnes respectively.

EU wheat and maize production are both expected to fall by 2 million tonnes from 2021 due to smaller areas and lower yields.

Total demand for wheat was forecast to increase in 2022/23 on the EU market, supported by an economic recovery.

But on the export market, Strategie Grains expected EU wheat sales to fall in 2022/23 due to an expected rebound in harvests in Russia and North America, leaving wheat stocks in 2022/23 relatively steady.

From North Africa, Tunisia’s grain stocks are sufficient to cover the needs of the local market until May 2022, the trade ministry said on Thursday.

It added the stocks include soft and durum wheat and barley. 

From the Black Sea basin, grain prices lost some ground yesterday, but to a lesser extent than on the international scene. 

Particularly, wheat prices closed down $3.25/t in a context of reduced activity during this period in this region.

According to Svetlana Malysh, Black Sea Agricolture Markets analyst from Refinitiv, “Ukraine corn CPT-prices picked up to $269-273 per tonne amid tighter supplies during the long winter holidays and export commitments to be covered, but once farmers returned back to the market, export business for corn increased significantly and prices edged down by around $1. 

However, asking prices for Ukraine corn were steady at $278-280 per tonne FOB for Jan-March, underpinned by demand from Chinese buyers and strong domestic prices and with a wide gap to buying ideas.”

Meantime, in Ukraine, the Minister of Agriculture is revising his grain export estimate upwards to 65.2 million tonnes against 64.2 posted previously.

However, Ukraine’s Agriculture Ministry sees no threat to domestic supplies of milling wheat despite the high pace of exports but prompted traders to switch to feed grains for the rest of the 2021/22 July-June season so as not to fuel inflation.

“So far we see no danger for the domestic wheat market,” deputy minister Taras Vysotsky told a meeting with traders and producers.

He said the volume of already exported milling wheat amounted to about 80 percent of the total export volume expected in the current season.

The ministry’s data showed that 10.8 million tonnes of milling wheat were exported so far this season out of a total 13.4 million tonnes expected for the season.

The ministry said 2.6 million tonnes of milling wheat was available for export in the remaining months of this season.

The deputy minister advised traders to switch to the export of feed grains so as not to fuel an increase in domestic prices for wheat.

Ukraine has exported 5.3 million tonnes of feed wheat so far in 2021/22, or around 45% of the volume available for feed wheat exports this season.

Last month, two sources said that Ukraine, a major global grain producer, would consider limiting milling wheat exports in the first half of 2022.

Government officials were concerned strong exports would raise domestic prices for high quality bread-making wheat, making the staple more expensive at a time when Ukraine’s inflation is close to 2018 highs.

Producers and traders, however, say the ministry figures do not take into account contracts already signed by traders.

“Unfortunately, government does not see forecasts for export sales by traders and does not keep statistics on farmsales. 

The introduction of such a practice would make the market transparent,” Elena Neroba, business development manager at brokers Maxigrain, said.

The next meeting of the ministry and traders on the grain market situation is scheduled for early February. 

Meantime, Russia has set out its grain export taxes for Jan. 19-25, the Agriculture Ministry said on this morning.

Particularly, export duty will be for wheat at $97.5 per tonne, for barley at $79.0/t, for corn at $ 46.1/t.

Indicative prices will be $339.3 for wheat, $297.9 for barley and $250.9 for corn.

For Jan 12-18 the tax were $98.2 for wheat, $86.2 for barley, $67.7 for corn.

Indicative price were $340.4, $308.2, $281.8 respectvily.

On the weather side, temperatures are rising this morning, displaying around zero degrees whether in Moscow, Kiev or Krasnodar.

From the Middle Kingdom, China is maintaining its zero-COVID policy which has left the global shipping lines in a complete mess. 

Two major Chinese ports are closed and container vessels are finding other ways and other ports to unload. 

The net result is at least 2 weeks delay.

From South East Asia, the Malaysian Palm Oil Board (MPOB) forecasted yesterday that the country’s crude palm oil production would rise to 19.00 million tonnes this year, up nearly 5% from 18.12 million tonnes in 2021.

MPOB director-general Ahmad Parveez Ghulam Kadir also forecast at a conference that exports this year would be 17.00 million tonnes versus 15.56 million tonnes in 2021. 

Malaysia’s palm oil stockpile was forecast at 1.95 million tonnes in 2022, up from 1.58 million tonnes this year.

Meantime, the Malaysian Biodiesel Association on Thursday urged industry officials to come to terms with a steady decline of imports of palm-based biofuels in the European Union, with the country’s exports this year seen at their lowest level in five years.

The decline in Malaysia’s biofuels shipments are a result of the EU’s decarbonisation agenda, MBA president U.R. Unnithan told an industry conference hosted by the Malaysian Palm Oil Board.

The European Commission in Dec said biofuel consumption in the EU is set to fall by 2031 as road transport moves away from fossil fuel, and palm oil imports will plummet due to stricter sustainability criteria.

Under the EU’s renewable energy directive, palm oil-based fuels are to be phased out by 2030, since the vegetable oil has been classified by the bloc as resulting in excessive deforestation and can no longer be considered a renewable transport fuel.

The world’s largest palm oil producers Indonesia and Malaysia decried the rule and have both launched separate cases with the World Trade Organization, saying the EU law is discriminatory.

In this context, biodiesel exports from Malaysia are pegged to decline to 250,000 tonnes from 300,000 tonnes a year ago, while production is pegged to rise to 1.2 million tonnes from one million tonnes in 2022.

From Australia, a big infeed of east coast moisture is still forecast on the 8-day BOM and will push down into South Australia where widespread falls of 25-50mm are forecast. 

Western Victoria is slated to get 5-10mm. 

Some crop still remains standing in paddocks there.

Meantime, local wheat and barley markets continued to find a bid yesterday and cash bids were relatively unchanged.

Canola values slipped. 

Cash bids were softer by $10-20/t. 

Trade markets found a bid late, not offered.

Meantime, it was announced yesterday that Iraq bought around 150,000t of Aussie milling wheat for late Feb early March shipment at a US$447/t CFR price, and saw SA and Victorian milling wheat pick up on the bid side. 

The firmer bid saw more milling wheat offers come to the market.

On the international trade scenario, Iranian state agency the Government Trading Corporation (GTC) is believed to have purchased around 240,000 tonnes of milling wheat in a tender which closed on Wednesday.

It was believed to have been bought in about four consignments of around or just over 60,000 tonnes.

The wheat was thought likely to be sourced from Russia and/or Germany.

Traders estimated purchase prices at between 360 euros to 364 euros ($412.96 to $417.54) a tonne c&f. 

But one trader said he believed two consignments were bought below 350 euros a tonne c&f.

Iran traditionally declines to buy wheat in U.S. dollars. 

The tender had sought shipment in February and March.

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.

Iran was believed to have also purchased about 240,000 tonnes of wheat last week with about 740,000 tonnes also bought in December, traders said.

Iraq’s state grains buyer is believed to have purchased about 150,000 tonnes of Australian-origin milling wheat in a restricted purchase tender this week.

The wheat was believed to have been purchased at about $447 a tonne c&f.

The tender was restricted to eight trading houses with wheat sought sourced only from the United States, Canada or Australia.

It was unclear what type of milling wheat was bought. 

The deadline for submission of price offers in the tender was originally Jan. 3 but was extended to Jan. 13.

The tender had sought a nominal 50,000 tonnes. 

Iraq plans to import two million tonnes of wheat in the coming year, the director general of the country’s Grain Board said on Dec. 11.

A spokesperson for Iraq’s trade ministry had told Reuters in November that Iraq would issue an international tender to buy 500,000 tonnes of wheat in December or early 2022.

Japan purchased 107,555 MT of food-quality wheat in their weekly MOA tender, with 56,095 MT US specific and the balance from Canada. 

Algeria is in the market for optional origin milling wheat. 

Algeria has not yet taken a decision concerning its call for tenders and the diplomatic tensions with France suggest that there is still debate on the origins selected, knowing that the French origin remains very competitive, in particular following down in prices since the start of the week.

Turkey’s TMO issued an international tender for 335k MT of milling wheat. 

The International Grains Council (IGC) on Thursday raised its forecast for 2021/22 global wheat production, partly driven by an improved outlook for the crop in Australia.

In its monthly update, the inter-governmental body increased its 2021/22 world wheat crop outlook by four million tonnes to 781 million tonnes.

Australia’s wheat crop was revised to 35.5 million tonnes from a previous projection of 32.0 million.

The IGC cut its forecast for global corn (maize) production in the 2021/22 season by 5 million tonnes to 1.207 billion tonnes, reflecting diminished prospects in South America.

Argentina’s corn crop outlook was cut to 61 million tonnes from 63.3 million and Brazil’s production to 112.9 million tonnes from 117.4 million.

The IGC also in its initial outlook indicated wheat production in 2022/23 would rise for a fourth consecutive season to a new record peak but with consumption also projected to climb there is not expected to be much change in stocks.

Author: Sandro F. Puglisi

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