The South American weather story has been put on the back burner on Wedsneday, while operators were more focused on inflation concerns and potential supply chain issues due to tensions with Russia and Ukraine.  

In this context, US farm markets staged a double-digits rally for all grains.

Particularly, corn prices rallied by 1.83% and ending the session back above the $6 mark.

The double digit bounce back for Wobble Wednesday ended with beans 1.74% to 2.2% in the black. 

Soymeal also bounced back with 1.67% to 2.1% gains in the front months. 

Soybean oil futures rallied triple digits to close 2.72% to 2.84% stronger. 

TheCME Synthetic Soy Crush was back up some for Midday to $1.55/bu. 

It was above $2/bu on the board before the meal weakness to start the week. 

As for the wheat complex, prices had extended their bounce by double digits again for a the secon consecutive session yesterday. 

Indeed, Chicago prices were up 3.3% to 3.75% at the bell, which left the May contract a penny under the $8 mark. 

KC wheat got back above the $8 mark on 3.5% to 3.6% gains. 

Spring wheat futures closed 2.9% to 3.6% higher.

In energy market, oil steadied on this morning, even if strong demand and short-term supply disruptions continue to support prices close to their highest levels since late 2014.

Underpinning oil prices is the broad post-coronavirus pandemic recovery in demand for fuel.

Indeed, “the International Energy Agency said global oil demand is on track to hit pre-pandemic levels”.

Meantime, “Brent crude rallied sharply after reports a key oil pipeline running from Iraq to Turkey was knocked out by an explosion”, even if now the flow of crude oil through the Kirkuk-Ceyhan pipeline has resumed.

Supply concerns had mounted this week after Yemen’s Houthi group attacked the United Arab Emirates.

Meanwhile Russia, the world’s second-largest oil producer, has built up a large troop presence near Ukraine’s border, stoking fears of invasion and subsequent supply uncertainties.

In this context, Brent crude futures fell 17 cents, or 0.2%, to $88.27 a barrel, as of 04:18 GMT, having dropped more than $1 earlier in the session. 

The global benchmark touched $89.17 a barrel on Wednesday, its highest since October 2014.

U.S. West Texas Intermediate (WTI) crude futures were up 7 cents, or 0.1%, to stand at $87.03 a barrel, having also shed nearly $1 earlier. 

WTI climbed to as much as $87.91 on Wednesday, the highest since October 2014.

Meanwhile, U.S. crude and gasoline stocks rose while distillate inventories fell last week, according to market sources citing American Petroleum Institute figures on Wednesday.

Particularly, crude stocks rose by 1.4 million barrels for the week ended Jan. 14. 

Gasoline inventories rose by 3.5 million barrels while distillate stocks fell by 1.2 million barrels, according to the sources, who spoke on condition of anonymity.

On the freight market, the Baltic Exchange’s dry bulk sea freight index fell for a ninth straight session on Wednesday, touching its lowest level in about a year, on weaker demand across all vessel segments.

Indeed, the overall index, which factors in rates for capesize, panamax and supramax vessels, fell 74 points, or 4.5%, to 1,570, its lowest since February 2021.

The capesize index dropped 90 points, or 6.8%, to 1,226, its lowest since mid-February last year.

Average daily earnings for capesize vessels, which transport 150,000-tonne cargoes such as iron ore and coal, dropped by $744 to $10,169.

The panamax index slipped 128 points, or 5.8%, to its lowest since April at 2,095.

Average daily earnings for panamax vessels, which ferry 60,000-70,000 tonne coal or grain cargoes, fell $1,159 to $18,852.

The supramax index eased 28 points to 1,812.

There are significantly fewer companies wishing to sign up for a voyage to England/Ireland, since it is difficult to find a back cargo and it is expensive to make a ballast passage, Sea Lines shipbrokers report.

There are a lot of spot positions open in the southern and western Baltic. 

Many European shipowners are running out of their current contracts. 

The main demand from charterers is for small-tonnage vessels up to 4000 mt.

Rates for 3-5K dwt bulkers from Ust-Luga to Riga make €33 pmt, and those to Gdansk €35 pmt.

Freight rates from Ust-Luga made €36 pmt to Szczecin, €42 to Flensburg, and €58 to Hamburg.

Rates from Ust-Luga were €60 pmt to ARAG, €64 pmt to East Britain, €65 pmt to West Britain, and €69 pmt to Dublin.

On equities markets, U.S. stock indexes yesterday extended Tuesday’s sell-off, with the S&P 500 and Dow Jones Industrials falling to 4-week lows and the Nasdaq 100 dropping to a 3-month low.  

Weakness in technology stocks led the overall market lower as the potential for a Fed interest rate increase in March pushed T-note yields up to 2-year highs this week and has sparked selling of technology stocks. 

Investors were watching the latest round of corporate earnings for indications inflation might be cutting into profits.

Thus, stocks initially moved higher on Q4 corporate earnings optimism after Morgan Stanley, Bank of America, and Procter & Gamble posted better-than-expected quarterly earnings results.  

Household and consumer goods company Procter & Gamble, rose 3.4% after reporting strong financial results. 

The company said consumers have been willing to pay higher prices for dish detergent, diapers and other products.

Also, Wednesday’s lower T-note yields initially sparked short-covering in technology stocks before they gave up their advance and turned lower Wednesday afternoon. 

Also Wednesday’s U.S. housing data was bullish for stocks.  

U.S. Dec housing starts unexpectedly rose +1.4% m/m to a 9-month high of 1.702 million, stronger than expectations of a decline to 1.650 million.  

Also, Dec building permits, a proxy of future construction, unexpectedly rose +9.1% m/m to an 11-month high of 1.873 million, stronger than expectations of a decline to 1.703 million.

But in the meantime, the market “succumbed to renewed fears of inflation/Fed tightening”, after Biden called on the Fed to do more to fight inflation.

Late Tuesday, investors were pricing in a better than 86% probability the Fed will raise short-term rates at its March meeting, according to CME Group. 

That is up from 47% a month ago.

In this context, on Wall Street, the S&P 500 fell to 4,532.76 after a sell-off in tech stocks. 

The technology sector of the S&P 500 has fallen more than 8% this year.

The Dow Jones Industrial Average retreated 1% to 35,028.65.

The Nasdaq composite, dominated by technology stocks, lost 1.1% to 14,340.26. 

The index is 10.7% below its Nov. 19 all-time high.

Apple shed 2.1% and chipmaker Nvidia fell 3.2%. 

Meantime, Asian stock markets rose on this morning after China cut interest rates to shore up flagging economic growth and Japan reported a double-digit rise in exports.

Particularly, the Chinese central bank cut rates on one- and five-year loans after growth in the world’s second-largest economy sank to 4% over a year earlier in the latest quarter following a crackdown on surging debt among real estate developers.

In thiss context, the Shanghai Composite Index rose 0.3% to 3,568.35 and the Hang Seng in Hong Kong advanced 2.5% to 24,735.47.

The Nikkei 225 in Tokyo gained 1.1% to 27,779.99 after December exports rose 17.5% over a year earlier. Growth in auto exports accelerated to 17.5% from November’s 4.1%.

The Kospi in Seoul added 0.5% to 2,855.30 while Sydney’s S&P ASX 200 gained less than 0.1% to 7,339.30.

India’s Sensex opened down 0.7% at 59,694.09. 

New Zealand declined while Southeast Asian markets advanced.

On the weather side, there is a Risk of rain/freezing rain over parts of southern Texas and North Carolina on this morning.

Light snow from parts of the Mid-Atlantic to Southern New England.

Light to moderate snow over parts of the Northern/Central Rockies.

Snow and a Risk of significant rain/freezing rain over parts of the southern Mid-Atlantic on Friday.

Light to moderate snow over parts of the Upper Midwest and Central Rockies on Friday.

The fact that temperatures are dropping rapidly in the American Midwest, again threatening US winter wheat, which has already been suffering from a lack of water for several months. 

On the demand side, We cannot ignore the recent purchase of around 1.5 million tonnes of US corn by China as the Phase One trade deal expires.

Also, China imported 6.09 million tonnes of soybean from the USA in December against 3.63 million in November. 

This should also be compared to 5.84 million tonnes in December 2020. 

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. 

In this context, the funds were net buyers yesterday for 15,000 lots of corn, 15,500 lots of wheat and 16,500 lots of soybeans.

From South America, BAGE adjusted their corn crop estimate for Argentina to 57 MMT. 

That compares to USDA’s forecast of 54 MMT. 

The Rosario Grains Exchange is looking to see 48 MMT. 

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. 

Safras and Mercado forecasted Brazilian corn output at 115.6 MMT. 

That was down from 116.08 MMT forecasted in December, but still 600k MT above the USDA official forecast for Brazil. 

As for soybean, the Buenos Aires Grains Exchange expects Argentina’s soy crop to be 44 MMT. 

The USDA had Argentina at 46.5 MMT in their Jan WASDE report. 

The Rosario Grains Exchange was calling for a 40 MMT bean crop. 

USDA’s Ag Attaché reduced their Brazilian soy crop estimate to 136 MMT on a 3.391 MT/HA yield. 

USDA’s official WASDE forecast last week was for 139 MMT and 3.44 MT/HA. 

The attaché cited heavy rains for flooding and disease in Mato Grosso as the main rationale for the yield cut. 

As for wheat, BAGE estimated Argentina’s 2021/22 wheat crop at a record 21.8 MMT on a 3.44 MT/HA average yield. 

USDA’s Jan WASDE report pegged Argentine output at 20.5 MMT. 

Meantime, Argentine farmers have sold 37.5 million tonnes of soybeans from the 2020/21 season so far including 261,200 tonnes in the seven days to Jan. 12, the Agriculture Ministry said on Wednesday.

The rhythm of sales was behind that of the previous season.

At this time last year, sales of 38.6 million tonnes of soybeans had been registered, according to official data.

In Europe, sharp rise yesterday for all products. 

The scenario of an armed conflict with Russia would disrupt the world grain market, particularly wheat, in the short and medium term. 

In Poland, however, currency strength and low demand weighed on export prices.

Exporter purchase prices for 12.5% protein wheat dropped to 1,280 zloty (282.8 euros) a tonne for January/February delivery to port silos from 1,310 zloty last week.

“There is still very slack export business in Poland although Polish wheat is looking competitive in export markets,” one Polish trader said.

Traders said no large ships can be seen currently as scheduled to load Polish wheat for exports outside the EU.

One ship has just left Gdynia with 55,000 tonnes of wheat for Nigeria. 

Another left Szczecin with 26,000 tonnes for Morocco.

“Weather in Poland is just about perfect for winter grains with mild temperatures and a lot of rain and snow in whole country,” the trader added, in keeping with generally favourable conditions for EU crops

($1 = 0.8814 euros).

Rapeseed prices are on the rise again in the wake of palm oil in particular. 

In Malaysia the government plans to limit its exports in order to limit domestic inflation. 

However, this appears to contradict the decision to test B40 at the national level. 

Meantime, non-commercial market participants lowered their net long position in Euronext’s milling wheat futures and options in the week to Jan. 14, data published by Euronext on Wednesday showed.

Non-commercial participants, which include investment funds and financial institutions, cut their net long position to 115,853 contracts from 142,122 a week earlier, the data showed.

Commercial participants similarly lowered their net short position to 132,515 contracts from 155,138 a week earlier.

Commercials’ short positions accounted for 63.9% of the total short position, while commercial long positions accounted for 43% of total long positions.

Non-commercial short positions represented 36.1% of total short positions, while non-commercial net long positions accounted for 57% of the total longs.

In Euronext’s rapeseed futures and options, non-commercial market participants lifted their net long position to 3,553 contracts from 1,889 a week earlier.

Commercial participants increased their net short position in rapeseed to 4,351 contracts from 2,708 a week earlier.

From the Black Sea basin, Russian Deputy Defense Minister Alexander Fomin has announced “unplanned” exercises next month on Belarusian territory. 

These maneuvers will involve the movement of military aircraft and air defense equipment to the territory of its neighbor. 

This operation, described by Fomin as “unplanned”, was nevertheless the subject of an agreement between Belarusian President Lukashenko and Russian President Putin last month. 

Meantime, halfway through the 2021/22 marketing season grain exports from the Black Sea are “contrasted” according to Marc Zribi, head of the Grain and sugar unit of FranceAgriMer.

In Ukraine , the export campaign very dynamic. 

According to UkrAgroConsult, the country shipped 33.16 million tonnes (Mt) of grain in six months, or 53% of its total export target. 

It is also 30% more than last year at the same date.

“More than two-thirds of the objective has been achieved in wheat”: 16.31 Mt out of the 23.5 Mt expected by the end of next June. 

On the corn side, 34% of the objective has been achieved: 11.42 Mt out of 33.8 Mt. 

And almost all the barley intended for export has already been shipped: 5.43 out of 5.85 Mt.

Thus, Ukraine still has a little over 7 Mt of wheat and 22 Mt of corn to export in the second half of the campaign.

On the other hand, less dynamic exports from Russia.

The country indeed exported 20.6 Mt, i.e. 52% of its target for the entire campaign and a drop of 26% compared to January 2021. 

17.46 Mt of Russian wheat were exported between July and December 2021 (55% of the target), 0.94 Mt of corn (23%) and 2.2 Mt of barley (63%).

Russia would therefore still have 14.55 Mt of wheat , 3.26 Mt of corn and 1.3 Mt of barley to export in the next six months.

In this context, Black Sea wheat yestwerday was quoted as US$5.50/t higher.

From the Middle Kingdom, China’s soybean imports from Brazil in 2021 fell from the previous year, customs data showed on Thursday, as lower demand curbed purchases.

The world’s top soybean importer brought in 58.15 million tonnes of the oilseed from Brazil, down 9.5% from 64.28 million in 2020, data from the General Administration of Customs showed.

Annual imports from the United States, in contrast, were 32.3 million tonnes in 2021, up 25% from 25.89 million tonnes in 2020, the data also showed.

However, China’s soybean imports in all of 2021 were 96.52 million tonnes, down 3.8% from 2020.

As we have seen, for December, China’s soy imports from the U.S. were 6.09 million tonnes, almost double compared to the previous month, customs data showed, as more cargoes arrived after earlier delays because of Hurricane Ida.

The figures were up 4% from the 5.84 million tonnes China bought from the U.S. a year earlier, according to the data.

Brazilian shipments in December were 2.12 million tonnes, up 80% from 1.18 million tonnes a year earlier, but down 43% from 3.75 million tonnes in November, the data showed.

From Australia, prices for feedgrain have eased in the northern market this week as growers quit barley and SFW wheat to make room for a bumper sorghum harvest knocking on the door.

In the south, growers have limited interest in selling at current values, and most activity is occurring within the trade.

This includes some up-country consumers swapping out pre-booked ASW wheat for cheaper SFW, with sound grades still making their way into lively export channels.

Local markets showed some life yesterday on the wake of international trend. 

Wheat was firmer by A$5/t, and barley also firmed in nearby slots by $5/t, while canola was again softer.

Rain through the Liverpool Plains in NSW and Queensland’s Downs is hindering the early part of the sorghum harvest.

Selling liquidity has remained thin as growers are still somewhat in holiday mode, and the trade is busy aligning the supply chain to execute existing sales before new business is done.

On the international trade scenario, more wheat tenders stepped back into the market, with Jordan and Iran both issuing new calls for milling wheat.

Particularly, Iran is buying 60,000 t of milling wheat and Jordan is launching a call for tenders for 120,000 t of wheat and 120,000 t of fodder barley.

Author: Sandro F. Puglisi

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