US farm markets started the week’s market mixed but mostly higher after the long weekend of Martin Luther King Day.
Indeed, corn prices trended more then 0.5% higher by the close.
Soybeans prices stumbled, in contrast, succumbing to a round of technical selling that left prices with losses more then 0.6%.
Soymeal led the way, pulling back 3.82%.
Bean oil closed with gains of 1.06% in the front months.
Meantime, worries over rising tensions between Russia and Ukraine, along with lingering quality concerns for the U.S. crop, helped wheat prices surge more then 3% in all three contracts.
Particularly, Chicago futures were 3.71% stronger.
KC HRW prices were up by 3.72%.
Spring wheat closed 3.27% higher.
In energy market, oil prices rose for a fourth day consecutive on this morning as an outage on a pipeline from Iraq to Turkey increased concerns about an already tight supply outlook amid worrisome geopolitical troubles in Russia and the United Arab Emirates.
Particularly, Turkey’s state pipeline operator said it put out a blaze following an explosion that cut oil flow at the Kirkuk-Ceyhan pipeline, adding that it would be operational “as soon as possible”.
The cause of the explosion is not known.
The UAE late on Tuesday called for a meeting of the United Nations Security Council to condemn an attack on Abu Dhabi on Monday by Yemen’s Houthi movement, which has threatened further attacks.
Meanwhile, Russian troops are lined up on the border of Ukraine, with the White House calling the crisis extremely dangerous and saying Russia could invade at any point.
On the other hand, jet fuel consumption is rising with growth in international flights, while road traffic is much higher than the same time last year, Commonwealth Bank commodities analyst Vivek Dhar said in a note.
In this context, Brent crude futures rose 39 cents, or 0.5%, to $87.90 a barrel at 07:40 GMT, adding to a 1.2% jump in the previous session. The benchmark contract climbed to as much as $89.05 earlier in the session, its highest since Oct. 13, 2014.
U.S. West Texas Intermediate (WTI) crude futures climbed 64 cents, or 0.8%, to $86.07 a barrel, adding to a 1.9% gain on Tuesday.
WTI earlier jumped to $87.08, its highest since Oct. 9, 2014.
On the freight market, the Baltic Exchange’s dry bulk sea freight index dropped to an 11-month low yesterday, pressured by weaker demand across all vessel segments.
Indeed, the overall index, which factors in rates for capesize, panamax and supramax vessels, fell 87 points, or 5%, to 1,644, its lowest level since mid-February.
The capesize index dropped 153 points, or 10.5%, to 1,316, its lowest since February.
Average daily earnings for capesize vessels, which transport 150,000-tonne cargoes such as iron ore and coal, dropped by $1,277 to $10,913.
The panamax index slipped 103 points, or 4.4%, to its lowest since April at 2,223.
Average daily earnings for panamax vessels, which ferry 60,000-70,000 tonne coal or grain cargoes, fell $924 to $20,011.
The supramax index eased 24 points to 1,840.
On equities markets, U.S. stock indexes yesterday settled sharply lower, with the S&P 500 and Dow Jones Industrials falling to 4-week lows.
Particularly, U.S. stocks on Tuesday moved sharply lower after a surge in T-note yields sent technology stocks tumbling and weighed on the overall market.
Indeed, the 10-year T-note yield climbed to a 2-year high Tuesday at 1.877%, the highest since January 2020.
It was at 1.77% late Friday.
Also, Goldman Sachs closed down nearly -7% Tuesday to undercut bank stocks after it reported weaker than expected Q4 trading revenue.
US stocks maintained sharp losses Tuesday also on weaker than expected U.S. economic data.
Indeed, the U.S. Jan Empire manufacturing survey general business conditions fell -32.6 to -0.7, weaker than expectations of 25.0 and the steepest pace of contraction in 19 months.
Also, the Jan NAHB housing market index unexpectedly fell -1 to 83, weaker than expectations of no change at 84.
Finally, investors are now pricing in a better than 86% probability that the Fed will raise short-term rates at its meeting of policymakers in March.
A month ago, they saw less than a 47% chance of that, according to CME Group.
In this context, on Wall Street the S&P 500 fell 1.8% to 4,577.11, with about 90% of the stocks in the benchmark index closing in the red.
The Nasdaq, which is heavily weighted with technology stocks, slid 2.6% to 14,506.90.
The Dow Jones Industrial Average fell 1.5% to 35,368.47.
Small company stocks, a gauge of confidence in economic growth, also lost ground.
Indeed, the Russell 2000 index fell 3.1%, to 2,096.23.
The Nasdaq has borne the brunt of the losses this month, shedding 7.3%.
That puts the index within 2.7% of a correction, Wall Street-speak for when a stock or index falls 10% or more from its last peak.
The S&P 500 is down almost 4% for the month after setting an all-time high on the first trading day of the year.
Meantime, Asian shares fell in cautious trading on this morning, with Tokyo’s Nikkei 225 down nearly 3%.
Particularly, Japan’s benchmark Nikkei 225 dropped 2.9% to 27,439.95, its lowest level since August, on heavy selling of big manufacturers like Toyota Motor Corp., which lost 5%, and Sony Corp., which plunged 12.8%, in line with other tech shares.
Australia’s S&P/ASX 200 fell 1.0% to 7,332.50.
South Korea’s Kospi dropped 0.8% to 2,842.28.
Hong Kong’s Hang Seng fell 0.2% to 24,064.48, while the Shanghai Composite lost 0.3% to 3,559.00.
On the weather side, between today and Saturday, many parts of the Midwest will remain dry, although the Northern Plains could see some additional snows later this week, per the new 72-hour cumulative precipitation map from NOAA.
The agency’s latest 8-to-14-day outlook predicts a return to seasonally dry conditions for most of the Corn Belt between January 25 and January 31, with colder-than-normal weather likely for the eastern half of the U.S. as the month draws to a close.
That is surging ongoing crop quality concerns in the U.S. Plains.
Particularly, the cold spell that currently raging in the USA, is raising fears about winter wheat weakened by this autumn’s water deficit.
Infact, the Drought Monitor, published by the University of Nebraska-Lincoln and the National Center for Drought Management last week, showed that Kansas, Oklahoma and Montana were experiencing “extreme” drought in places .
The area of winter wheat experiencing drought conditions has risen to 4% from last week to 69%.
Most of the week-over-week increase was in Kansas.
This is the fourth level of five listed by the Center, the three states being among the largest producers of winter wheat variety Hard Red Winter Wheat, listed in Kansas City (Missouri).
At first, this announcement, which came at the end of last week, “has taken a back seat, because there were many other factors, in particular the report US Department of Agriculture’s monthly Wasde, published Wednesday.
But after a three-day weekend, the operators are “back and are oriented by the weather “.
On the demand side, delayed FAS’s weekly Export Inspections report had 1.204 MMT of corn shipped during the week that ended 1/13.
That was up 181k MT wk/wk and was 270k MT above the same week last year.
China and Mexico were the top destinations for the week with 349k and 347k MT each respectively.
USDA had the MYTD accumulated corn export at 15.288 MMT according to the weekly data.
That is 12.6% behind last year’s pace, while the updated S&D tables are calling for a full year 11.9% drop.
As for sorghum, the report showed 141,850 MT of milo were shipped during the week that ended 1/13.
China was nearly the exclusive destination with just 2,421 MT to Mexico.
Accumulated sorghum exports were at 2.072 MMT as of 1/13.
As for soybean, the data showed 1.72 MMT of soybeans were shipped during the week that ended 1/13.
That was 735k MT above last week but still 1.484 MMT below the same week from last season.
Accumulated bean shipments reached 33.45 MMT, which is 23% under last season’s pace.
The USDA’s forecast is for a 9.5% drop in bean shipments yr/yr.
As for wheat, weekly export inspections data showed 369,188 MT of wheat was shipped during the week that ended 1/13.
That was up 135k MT wk/wk and 85k MT yr/yr.
MYTD wheat shipments still trail last season’s pace by 17.8% with 12.8 MMT shipped through 1/13.
Meantime, USDA announced a large private sorghum sale to unknown destinations for 126k MT of old crop.
Also USDA reported a private export sale of 239,486 MT of old crop beans to Mexico in a mandatory daily announcement.
On the other hand, NOPA members reported processing 186.438 mbu of soybeans in December.
That was above the average trade estimate and a record for any month, surpassing 185.245 mbu in October 2020.
Bean oil stocks were reported at 2.031 billion lbs, which was the most since April of 2020 and above the trade average guess.
In this context, corn basis bids were mostly steady to weak across the central U.S., after falling 1 to 10 cents lower at four Midwestern locations.
Soybean basis bids were steady to mixed to start the week, firming 2 cents at an Indiana processor while falling 3 to 5 cents lower at two interior river terminals.
The funds were net buyers for 1,000 lots of corn and 15,500 lots of wheat.
They were net sellers for 6,500 lots of soybeans.
From Canada, Canadian exports during week 23 were 187.1k MT for a season total of 5.2 million MT.
This is 58% (-3.8 million MT) of last year’s amount.
Seasonally, Canadian Spring wheat export trend lower into the February before increasing again between March and May when the Lakes open up again.
This trend will need to hold this year as wheat remains heavily reliant on exports.
From South America, weather in Brazil is showing some improvements in southern and northern areas, but recent rains were irregular in Parana and Rio Grande do Sul and the heavier amounts favoured the Atlantic coast, while the soybeans are grown mostly in the western regions of those states.
As a result, crop consultant Michael Cordonnier cut his Brazilian soybean crop estimate another 1 million tonnes (Mt) to 134Mt.
Dr Cordonnier left his Brazilian corn crop estimate at 112Mt, but lowered his Paraguay soybean crop estimate by 1Mt to 7Mt.
He left his Argentine soybean and corn production forecasts at 43Mt and 51Mt respectively.
Meantime, Safras and Mercado also forecasted down Brazilian corn output at 115.6 MMT.
That is compared with 116.08 MMT forecasted in December, but still 600k MT above the USDA official forecast for Brazil.
Meantime, Brazil’s AgRural reported second crop corn planting at below 1% as bean harvest is just getting underway.
First crop corn harvest was at 6% in the Center-South region, up from 3% last season.
Also, Brazil’s AgRural reported the 2021/22 bean harvest at 1.2% complete as of Jan 13.
That is up from 0.4% last year and compares to 1.1% on average.
In Europe, we have seen a rebound on grain markets yesterday following the downturn at the end of last week, in a context of sustained international demand and the good competitiveness of French origins.
Rapeseed prices, in contrast, plunged Tuesday afternoon, in a context of great volatility for oils.
The spread between the 2021 and 2022 harvests is narrowing sharply.
Meantime, EU wheat exports are marking time, and amount to 15.32 Mt since last July 1 to January 16.
However, that is a volume still up by 800 kt compared to last year whean were exported only 14.56 Mt.
As for barley, exports stand at 4.94 million tonnes against 4.15 last year to date.
Corn imports are recorded at 8.26 million against 9.58 last year.
Soybean imports are still trending moderately below last year’s pace, with 7.01 Mt through January 16.
EU soymeal imports are also moderately lower year-over-year.
Eu rapeseed imports reached 2.57 Mt down from 4.02 Mt last year.
From the Middle East, Syria needs to import more than 1.5 million tonnes of wheat a year, with majority from Russia, Interfax news agency reported Syrian economy minister Mohamed Samer al-Khalil as saying.
Syria’s crop was hit by low rainfall last year, adding pressure on an economy already hit by ten years of internal conflict, U.S. sanctions, a lack of funds to finance imports and the COVID-19 pandemic.
Syria is in talks to increase wheat purchases from Crimea, Interfax reported the minister as saying.
From the Black Sea basin, the Russian meteorological center indicates good conditions for winter crops at present in all major production regions of the country.
The seedlings withstood the sharp drop in temperatures at the start of winter well thanks to the snow that had fallen just before.
According to the center, in the Southern Federal District, the condition of winter crops this year is significantly better than last year.
Only in some bordering regions of Kazakhstan, soil freezing close to the critical point has been observed, crop conditions will be closely monitored by local operators.
In the third dekad of January, weather conditions should be generally good in all the major cereal-growing regions of the country.
Meantime, according to customs data, in July-November of 2021/22 MY, Russia exported 18.2 mln tonnes of wheat (including deliveries to the Customs Union), down 13% y/y.
Lower export was based on the decrease of wheat crop in Russia in 2021 to 75.9 mln tonnes (-12% y/y) according to preliminary estimation by Rosstat.
Iran has been the largest importer of Russian wheat so far this season.
According to APK-Inform, it imported 4.3 mln tonnes of Russian wheat (24% of the overall volume harvested), up 15 times y/y.
Turkey imported 3.7 mln tonnes of Russian wheat (20% of the totaled volume exported), down 5% y/y.
Egypt imported 2.7 mln tonnes (15%), down 35% y/y.
APK-Inform forecasts Russian wheat export at 32.5 mln tonnes in 2021/22 MY.
Thus, Russia has already exported 56% of its overall potential.
Meantime, yesterday Black Sea wheat was quoted as US$3.75/t higher.
On the other hand, social media reports indicate a rail shipment of corn from Ukraine arriving in China over the weekend.
China has a large unshipped book from Ukraine.
From the Middle Kingdom, China’s 2021 corn imports almost tripled Y/Y to new record at 28.4 MMT, up +152% vs. 2020’s record 11.3 MMT!
Buyers turned to cheaper alternatives overseas amid soaring prices and a domestic supply crunch.
A domestic supply gap also led to wheat imports increasing 16.6% from a year ago.
Particularly, wheat imports stood at 9.77 million tonnes against 8.38 million in 2020.
From Australia, more rain has fallen in northern New South Wales, and Moree recorded 56 millimetres in the 24 hours to 9am today.
La Niña is extended, and we continue to see moisture build on the BOM’s eight-day forecast for the east coast
Meantime, Aussie local markets remained largely unchanged yesterday.
Wheat was largely offer side through the wider market along the east coast, and trade markets were mixed across the strip, with wide spreads between bid and offer.
Barley was A$1/t stronger in the Adelaide zone as nearby shipments on the stem build for barley in the back half of January for Adelaide terminals.
Canola remains a dead duck, with very little action after recent pull-backs in the bids now buyers have covered nearby domestic and export demand, and bid and offers remain very wide in the market.
February is now expected to see around 400,000t of canola shipped.
On the international trade scenario, Turkey would have bought around 335,000 t of milling wheat, probably of Russian origin.
Algeria’s state grains importer, Office Algerien Interprofessionnel des Cereales (OAIC), purchased 120,000 mt of barley and paid around $323-324/mt CFR for the February 16-March 15 shipment period.
Taiwan’s 49,395 MT wheat tender is believed to be U.S. origin.
Jordan had 3 participants in its yesterday wheat tender: CHS, Cargill & Ameropa.
And MIT cancelled the tender.
A new tender is expected with closing date Feb. 1, 2022.
Author: Sandro F. Puglisi