US markets were closed yesterday.
In energy market, oil prices climbed to their highest level since 2014 on this morning as possible supply disruption after attacks in the Mideast Gulf added to an already tight supply outlook.
Indeed, supply concerns have risen this week after Yemen’s Houthi group attacked the United Arab Emirates, escalating hostilities between the Iran-aligned group and a Saudi Arabian-led coalition.
Also adding to geopolitical price premiums are rising tensions between OPEC+ member Russia and Ukraine.
In this context, Brent crude futures rose $1.02, or 1.2%, to $87.50 a barrel by 09:24 GMT, while U.S. West Texas Intermediate (WTI) crude futures jumped $1.36, or 1.6%, to $85.18 a barrel.
Trade on Monday was subdued as it was a U.S. public holiday.
“The consensus is that the situation will not improve in the foreseeable future and oil demand growth together with supply constraints is inevitably leading to a tighter oil balance,” PVM analyst Tamas Varga said to Reuters.
Goldman Sachs analysts said they expected oil inventories in OECD countries to fall to their lowest since 2000 by the summer, with Brent oil prices rising to $100 later this year.
On the freight market, the Baltic Exchange’s dry bulk sea freight index fell for a seventh straight session on Monday as rates declined across all its vessel segments.
Indeed, the overall index, which factors in rates for capesize, panamax and supramax vessels, slipped 33 points, or 1.9%, to 1,731 for its lowest since early last March.
The capesize index fell 26 points, or 1.7%, to 1,470, its lowest since late February.
Average daily earnings for capesize vessels, which transport 150,000-tonne cargoes such as iron ore and coal, dropped by $217 to $12,190.
The panamax index dipped 49 points, or 2.1%, to 2,326.
Average daily earnings for panamax vessels, which ferry 60,000-70,000 tonne coal or grain cargoes, fell by $441 to $20,935.
The supramax index fell 33 points to its lowest level since April at 1,864.
In equities markets, global shares were mostly lower on this morning following the Martin Luther King Day.
In Europe, France’s CAC 40 dropped 1.2% in early trading to 7,117.76, while Germany’s DAX slipped 1.0% to 15,767.35.
Britain’s FTSE 100 was down 0.7% at 7,555.82.
The future for the Dow industrials was down 0.6% at 35,577.00.
The S&P 500 future fell nearly 1.0% to 4,610.50.
The 2-year Treasury rose above 1%, adding to expectations the U.S. Federal Reserve will soon raise rates to counter inflation.
The Bank of Japan wrapped up a two-day policy meeting with no major changes.
Its benchmark interest rate remains at a longstanding minus 0.1%.
In fact, price increases in Japan have been less pronounced than it is in the U.S. and some other nations, though the central bank raised its inflation forecast for the fiscal year that begins in April to 1.1% from a previous estimate of 0.9%.
Meantime, Japan’s benchmark Nikkei 225 fell 0.3% to 28,257.25.
Australia’s S&P/ASX 200 lost 0.1% to 7,408.80.
South Korea’s Kospi dropped 0.9% to 2,864.24.
Hong Kong’s Hang Seng slipped 0.4% to 24,112.78, while the Shanghai Composite rose 0.8% to 3,569.91.
On the weather side, heavy snow for parts of the Upper Great Lakes on this morning.
Temperatures will be 10 to 25 degrees above average over parts of the Central/Southern Plains.
There is a Critical Risk of fire weather over parts of the Southern High Plains.
There is a Risk of rain/freezing rain over parts of the Southern Ohio/Tennessee Valleys and Middle/Lower Mississippi Valley on Wednesday.
From Canada, Canadian common wheat exports fell 29% week on week to 187,100 mt in the week ended Jan. 9, Canadian Grain Commission data released Jan. 16 showed.
Common wheat exports for the marketing year 2021-22 (August-July) to date were also sharply lower on the year.
Indeed, from Aug. 1 through Jan. 9, Canada shipped 5.2 million mt of common wheat, down from 8.1 million mt in the same period of MY 2020-21.
However, exports of durum wheat rose to 19,600 mt in the week to Jan. 9 from 13,100 mt the week before, the data showed.
Durum wheat exports over Aug. 1-Jan. 9 totaled 1.2 million mt, down more than 52% from the same period of of MY 2020-21.
Canada exported a total of 26.4 million mt of wheat in MY 2020-21.
Agriculture and Agri-Food Canada has estimated the country’s wheat exports in MY 2021-22 to fall sharply to 16.1 million mt, while the US Department of Agriculture has forecast Canada’s wheat exports at 15 million mt for MY 2021-22.
Also, 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, the AAFC said.
The USDA too, has pegged Canada’s wheat output in MY 2021-22 at 21.7 million mt.
Meantime, the price of 13.5% CWRS wheat FOB Vancouver for 30-45 days forward was assessed at $376.35/mt Jan. 14 and the FOB Vancouver price of 13.5% CWRS wheat for 45-60 days forward at $377.82/mt, both down $6.34/mt day on day, S&P Global Platts data showed.
From South America, Brazil’s harvesting of the 2022 soybean crop reached 1.7% of the estimated area amid delays in the center and north of the country caused by rainfall, according to agribusiness consultancy Patria Agronegocios on Monday.
Still, the pace of harvesting is ahead of last year when the oilseed was planted later.
At this time a year ago, only 0.22% of the area had been harvested.
The five-year average is 1.49%, Patria Agronegocios said.
Next week, an expected drop in precipitation levels and the prospect of open skies will help Brazil’s soybean harvesting to evolve more quickly, especially in center-western states, Patria Agronegocios said.
The government estimates Brazil sowed a 40.3 million hectare (99.58 million acres) soy area this season.
In a separate statement, AgRural, another agribusiness forecaster, estimated 1.2% of the soybean area has been harvested so far, versus 0.4% in 2021.
There have been reports of damaged beans due to excess moisture in the mid-north of that state, but the problem is not widespread, AgRural said.
Yields are looking good in Mato Grosso, with some farmers collecting a whopping 72 60 kg-bags per hectare in the west of the state, according to AgRural.
In Parana state, where the impact of a drought harmed the crop the most, yields shrank to a meager three bags per hectare there, AgRural said.
In Rio Grande do Sul, another large producer, harvesting has not yet begun.
Meantime, heavy rainfall has brought relief to Argentina’s main agricultural areas over the weekend, interrupting several weeks of dry weather that had led the Rosario grains exchange to trim its forecasts for both soybean and corn production.
The Rosario grains exchange last week, indeed, had cut its projection for Argentina’s 2021/22 corn crop to 48 million tonnes from 56 million tonnes due to the recent heat wave, while the soybean crop was estimated at 40 million tonnes, down from a previous forecast of 45 million tonnes.
The weekend showers came as expected, reaching 15-60 millimeters in Argentina’s main farm belt on Saturday and Sunday.
Consequentially, that is expected to bring some relief in the coming days.
On the other hand, wheat harvest is finalized in Argentina.
According to BAGE planted area is 6.6 million ha.
The area suitable for harvesting stood at 6.34 million hectares.
In absolute numbers, harvesting accumulated 21.8 million tons.
The work advanced 0.7 percentage point in the last week.
In Europe, Euronext wheat rose yesterday, recovering from Friday’s three-month low, helped by technical support and hopes that competitive prices will bring fresh European exports and offset stalled French sales to Algeria.
The loss of French market share in the country’s main overseas outlet its added to concern over lagging European Union exports in the face of strong competition from South American and Australian supplies.
However, attractive French prices were continuing to draw interest from feed wheat importers in Asia while demand from Morocco is absorbing some milling supplies.
Meantime, standard 12% protein wheat for delivery in January onwards in Hamburg was offered for sale at about 13 euros over Euronext March after trade was reported at 12.50 euros over on Friday.
Traders also cited continuing Chinese demand for new-crop French feed barley for shipment this summer.
Meantime, rapeseed lost ground yesterday, still showing volatility.
On the other hand, the CEO of Italy’s second largest pasta producer has warned that pasta prices will increase by 38% due to rising costs of raw materials and energy.
Indeed, in an interview with daily Il Sole 24 Ore, the CEO of Divella, Vincenzo Divella, said that one kilo of pasta, bought by the large-scale retail trade, went up from €1.10 in September 2021 to the current €1.40 and is set to increase to €1.52 by the end of January, or 38% more.
According to Divella, the price of wheat on the Foggia Stock Exchange has risen by 90% since June 2021, adding that semolina represents 60% of the entire cost of pasta production.
This was followed by other increases, such as cellophane (+25%), gas (+300%) and electricity.
The price of wheat has risen because harvests in Canada and the United States, the world’s main producers, have collapsed by 50%.
Italian pasta makers have had to buy the share of wheat not covered by domestic production (20-30%) at higher prices, Divella explained.
The price of Italian wheat has reached €0.56/kg, while the price of Canadian wheat went up to €0.65, and Divella is worried that the increases may not end there.
An analysis of Italian farmers association Coldiretti reveals that the sowing costs for wheat production for pasta and bread have practically doubled due to over 50% higher diesel fuel prices.
At the same time, the costs of agricultural equipment, plant protection products and fertilisers have increased threefold.
Despite this, the amount paid to farmers for Italian durum wheat is less than that of imported wheat, which accounts for 40% of pasta production the lobby said.
From the Black Sea basin, 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 January 13, Russia exported 31.5 mln tonnes of grains and oilseeds and their by-products (including deliveries to the territory of the Customs Union countries).
That was down 18% compared to the same period of the last year.
The export of grains and pulses totaled 28.1 mln tonnes, including 26.9 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 (127 countries the year ago).
Particularly, in the reporting period Russia exported 22.7 mln tonnes of wheat (down 18%), 2.7 mln tonnes of barley (down 33%), 1.4 mln tonnes of corn (up 11%), 0.9 mln tonnes of peas (up 77%), 0.5 mln tonnes of wheat bran (up 25%), 0.2 mln tonnes of chickpeas and 0.1 mln tonnes of wheat flour (up 38%).
Turkey remains the leading importer of Russian wheat with 4.56 Mt imported until January 13, even if the country is gradually turning to buying Ukrainian wheat.
Egypt is the second largest importer, with 3.47 Mt of wheat imported from Russia.
In addition, Russia exported 0.3 mln tonnes of soybeans, 0.6 mln tonnes of sunflower meal and 0.5 mln tonnes of flaxseed (up 31%).
Also, in January-November 2021, Russia exported 29.96 mln tonnes of wheat and meslin at the general sum of 7.94 bln USD.
The export in volume terms decreased by 10.8% compared to the same period of 2020, but it was up by 13.1% in monetary terms, reported the Federal Customs Service on January 14.
In January-November, Russia exported 2.82 mln tonnes of sunflower oil at the general sum of 3.6 bln USD (down by 14.8% in volume terms and up by 46% in monetary terms).
Export of mineral fertilizers totaled 33.93 mln tonnes at the sum of 10.72 bln USD.
From Ukraine, in January-November 2021, export of grains from Ukraine amounted to 10.739 bln USD, up 25.8% compared to the same period of 2020.
Meanwhile, import of grains decreased by 6.2% y/y to 152.2 mln USD, informed the State Statistics Service of Ukraine on January 14.
Export of fatty oils totaled 6.082 bln USD (up 27.5%), import – 402.2 mln USD (up 63.9%).
Export of live animals and ingredients of animal origin increased by 11.2% to 1.206 bln USD, import – by 24.7% to 1.395 bln USD.
Shipments of prepared food grew by 13.9% to 3.427bln USD, import – by 21.1% to 3.194 bln USD.
Grain shipments accounted for 17.5% of the overall Ukrainian export in January-November, fatty oils – 9.9%, livestock products – 2%, prepared food – 5.6%.
From the Middle Kingdom, China’s 2021 corn imports almost tripled in volume from the previous year, hitting a new record, customs data showed on Tuesday, as buyers turned to cheaper alternatives overseas amid soaring prices and a domestic supply crunch.
China, the world’s top grains market, brought in 28.35 million tonnes of corn in all of 2021, up 152% from an annual record figure of 11.3 million in 2020, data from the General Administration of Customs showed.
Imports of wheat in the first 12 months of the year also hit a record at 9.77 million tonnes, and were up 16.6% from 8.38 million in 2020, the data showed.
China’s corn prices hit record highs in 2021 after Beijing whittled down its massive temporary stockpile of the grain and bad weather hit output in the main production region the previous year.
However, China’s appetite for imported grains showed signs of waning in the later months of the year, as a bigger corn crop pushed down domestic prices, while feed demand from the livestock sector weakened on plunging hog margins.
Indeed, corn imports in December were at 1.33 million tonnes, down 39.9% from the previous year, according to customs data.
From South East Asia, palm oil futures closed at a record high as persisting worries about weaker production in second-biggest grower Malaysia offset poor exports from the nation.
Futures for March delivery in Kuala Lumpur finished 1.3 per cent stronger at 5188 ringgit per tonne after climbing for a fourth week on Friday.
The tropical oil has gained more than 10pc since January 1 after jumping more than 30pc last year
From India, sources report India is likely to earmark nearly $19 billion in its federal budget to compensate fertiliser companies for selling their products to farmers at lower-than-market prices, according to people with knowledge of the matter.
From Australia, with the wet weather through the north and the sorghum crop staggered across the region, the rain that comes and goes should not have a huge impact on quality, although we may see it cause some delays for January programs which we have seen trading at a premium.
Rain has pushed across southern and central New South Wales this morning, causing further delays for the last 5pc of southern NSW growers still getting on paddocks to finish harvest.
Western Victoria growers will be coming to the tail end of their harvest program by the end of the week, weather permitting.
Meantime, local markets were largely unchanged as we kicked off the week, and liquidity was also on the quiet side.
APW1 wheat values in Western Australia have held at around A$365 free in store, while Victorian APW1 values are at $360-$365/t track.
Barley continues to hold around $300-$310/t delivered Geelong and Melbourne, and canola continues to lag at the moment because of lacklustre bidding for now.
On the international trade scene, Algeria’s state grains agency is seeking 50,000t of feed barley for shipment in the second half of February and first half of March.
Turkey’s state grain board TMO has started making provisional purchases of wheat in an international tender which closed on this morning with about 100,000 tonnes initially bought.
The tender seeks 335,000 tonnes and more purchases are expected later in the afternoon.
The tonnages purchased in TMO’s tenders are provisional and still subject to final confirmation in coming days.
Purchases can be reduced or cancelled completely.
Particuilarly, red milling wheat of 12.5% and 13.5% protein content is sought in a series of consignments to several Turkish ports.
Both imports and wheat already in warehouses in Turkey can be offered in the tender.
Traders said some export houses have been shipping Russian wheat into Turkey in advance of sales to escape repeated increases in Russia’s export taxes.
Traders reported these provisional purchases with port of unloading/delivery, tonnes sold, protein content, seller, price in dollars a tonne c&f and if to be delivered from a warehouse in Turkey:
Port Tonnes Protein Seller Price If warehouse Iskenderun 25,000 12.5% Altin Ates $345.70 warehouse Iskenderun 25,000 12.5% Viterra $345.80 warehouse Mersin 50,000 12.5% Tiryaki $351.40 warehouse.
In its last reported wheat tender on Dec. 21, the TMO bought about 320,000 tonnes at the lowest price of $354.90 a tonne c&f.
Author: Sandro F. Puglisi