US farm markets were mixed but mostly higher yesterday.
Winter wheat contracts were once again the session’s big winner, jumping both more then 2% higher, on concerns about U.S. crop quality and anxiety about whether Russia will invade Ukraine.
However, the wheat market lost momentum in the afternoon, fading midday highs by more than a dime.
Particularly, spring wheat for March contract was down 0.13% by the close even if new crop HRS was still 9 cents in the black at the bell.
Chicago SRW closed 2.19% higher.
HRW was also up by double digits despite the afternoon fade, ending the day 2.02% higher.
Soybeans dropped from their midday highs, but were still up 0.30% at the close.
Bean oil gained back 0.87%.
Soymeal ended the day with 0.48% losses.
Meanwhile corn prices faded slightly lower.
Indeed, after having rallied more than 1% through midday, the front month corn futures complex faded into the close.
The March contract was 0.16% down at $6.20/bu – but still up 34 3/4 cents from the Jan 14th low.
The other front months held on to 1 to 3 1/2 cent gains.
In energy market, oil prices slipped on this morning.
Investors, indeed locked in profits just in case of a collapse in global share prices following the Fed’s update on its monetary policy.
Weekly U.S. inventory data released overnight by the American Petroleum Institute met expectations.
Market sources saud the data showed U.S. crude and distillate stocks fell while gasoline inventories rose for the week ended Jan. 21.
Traders were now looking forward to the the EIA report, due for release at 1530 GMT, for confirmation of those trends.
Separately, the U.S. Department of Energy said on Tuesday it had approved an exchange of 13.4 million barrels of crude oil from the Strategic Petroleum Reserve to seven companies as part of Biden’s effort to help control oil prices.
However, concerns over tighter supply amid geopolitical tensions capped losses.
About Ukraine-Russia tensions, U.S. President Joe Biden said on Tuesday he would consider personal sanctions on President Vladimir Putin if Russia invades Ukraine, while Western leaders stepped up military preparations and made plans to shield Europe from a potential energy supply shock. read more
Concerns about the Middle East also rose on Monday, when Yemen’s Iran-aligned Houthi movement launched a missile attack on a United Arab Emirates base hosting the U.S. military, even if the attack was thwarted.
In this context, Brent crude futures were down 32 cents, or 0.4%, at $87.88 a barrel at 05:13 GMT, having jumped 2.2% in the previous session.
U.S. West Texas Intermediate (WTI) crude futures slipped 45 cents, or 0.5%, to $85.15 a barrel, having climbed 2.8% on Tuesday.
In the freight market, the Baltic Exchange’s dry bulk sea freight index fell for a 13th straight session on Tuesday, dragged lower by weaker rates across all vessel segments.
Indeed, the overall index, which factors in rates for capesize, panamax and supramax vessels, fell 48 points, or 3.5%, to 1,343, its lowest since mid-February 2021.
Particularly, the capesize index dropped 91 points, or 10.9%, to 745, its lowest since June 2020.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, dropped by $755 to $6,180.
The panamax index eased 25 points to 1,988, its lowest since April.
Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, fell by $229 to $17,890.
The supramax index dipped 35 points to its lowest level since end-February 2021 at 1,693.
In equities markets, on Wall Street, shares came well off their lows by late afternoon.
But another burst of selling in the final hour of trading pulled them lower again.
A sell-off in technology stocks led the overall market lower Tuesday on concern the FOMC on this morning will announce plans to raise interest rates in March.
Higher interest rates tend to make shares in high-flying tech companies and other expensive growth stocks less attractive.
Also, heightened geopolitical risks in Ukraine have prompted liquidation of stocks after the U.S. announced that 8,500 troops are “ready to go” to Eastern Europe to help bolster NATO forces. On
Yesterday, stocks also retreated after the International Monetary Fund (IMF) cut its 2022 global GDP forecast.
Particularly, the IMF cut its 2022 global GDP forecast to 4.4% from an October estimate of 4.9%, citing weaker growth prospects in the U.S. and China.
Meantime, Tuesday’s U.S. economic data was mixed for stocks.
On the bearish side, the Jan Richmond Fed manufacturing survey fell -8 to a 4-month low of 8, weaker than expectations of 14.
Conversely, the Nov S&P CoreLogic composite-20 home price index rose +1.2% m/m and +18.3% y/y, stronger than expectations of +0.9% m/m and +18.0% y/y.
Also, the Conference Board U.S. Jan consumer confidence index fell -1.4 to 113.8, stronger than expectations for a decline to 111.2.
In this context, the S&P 500 fell 53.68 or 1.2% points to 4,356.45, after having been down as much as 2.8%.
The benchmark index has been falling steadily all month and is now down 9.2% from the all-time high it set Jan. 3.
An +8% jump in American Express, after the credit card company reported that its fourth-quarter earnings rose 20% from a year earlier, limited losses.
That is the biggest gain in the S&P 500.
The Dow fell 66.77 points or 0.2% to 34,297.73.
The Nasdaq fell 315.83 points or 2.3% to 13,539.29.
The index had initially slumped 3.2%.
It entered a correction last week and is now down more than 15% from its high set on Nov. 19.
The blue-chip index had been down 818 points in morning trading.
Microsoft fell 2.7%.
Retailers and communications companies also fell.
Home Depot fell 1.3% and Netflix fell 5.4%.
Small company stocks also lost ground.
The Russell 2000 index fell 29.48 points, or 1.5%, to 2,004.03.
Meantime, Asian shares were mixed in muted trading on this morning as many investors stayed on the sidelines ahead of a U.S. Federal Reserve meeting.
Thus, Japan’s benchmark Nikkei 225 slipped 0.4% to finish at 27,011.33.
South Korea’s Kospi edged down 0.4% to 2,709.24.
Hong Kong’s Hang Seng was little changed, gaining less than 0.1% to 24,244.27, while the Shanghai Composite rose 0.6% to 3,453.34.
Australian markets were closed for a holiday.
On the weather side, pattern remains mostly quiet in the midweek but this may change by the weekend as confidence is increasing on a winter storm along the East Coast.
On Wednesday, expect below normal temperatures for the Eastern half of the U.S., locally heavy snow in the southern Rockies and High Plains, showers and isolated thunderstorms in Florida and air stagnation issues in the Northwest.
Snow will diminish across the central High Plains tonight, while lingering over the Southern Rockies/High Plains into early Wednesday.
Arctic air to overtake much of the eastern U.S. through Thursday.
Meantime, ADM is optimistic about corn plantings in the USA, despite the rise in fertilizer prices, estimating the areas at 93 million acres and those of soybeans at 87 million.
This contradicts other analyzes that predict a sharp drop in corn plantings.
In this context, corn basis bids trended 1 to 3 cents higher at three Midwestern locations on Tuesday while holding steady elsewhere across the central U.S..
Soybean basis bids were steady at most Midwestern locations but did slide a penny lower at an Ohio elevator.
The funds were net buyers for 5,000 lots of corn, 2,500 lots of soybeans and 9,000 lots of wheat.
From South America, Argentine rains in recent weeks have brought a “water bomb” to key farming areas in the northwest of Buenos Aires province, though there has been less water further to the south, the important Rosario grains exchange said in a report.
The South American country had been suffering a prolonged drought since December which has hit soybeans and corn, but rains in recent weeks have limited crop losses.
The arrival of the rains has overall improved the harvest outlook in Argentina.
Some more rains are expected in coming days.
Meantime, AgRural reported Brazil at 5% harvested for 21/22 soybeans.
AgRural expects the total soy output to reach 133.4 MMT.
Meantime, farmers in Mato Grosso had planted 9.7% of 2021/22 safrinha corn vs 1% YoY and 6.4% average according Imea.
Deral reported that farmers in Parana had planted 2%.
In Europe new bullish session yesterday on Euronext in the face of the Ukrainian crisis.
Meantime, European Union soft wheat exports during the 2021/22 marketing year have reached 15.62 million tonnes through January 23, which is 3.9% above last year’s pace before, despite having incomplete French data.
EU barley exports are also up from a year ago, with 4.91 million tonnes against 4.33 last year.
European Union corn imports during the 2021/22 marketing year are trending moderately below last year’s pace, according to the latest data from the European Commission.
Imports, indeed, reached 8.87 million tonnes through January 23, against 9.75 last year.
European Union soybean imports during the 2021/22 marketing year have reached 7,34 million tonne through January 23.
That’s a year-over-year decline of 12.3% so far.
EU soymeal imports are also trending moderately below last year’s pace, with 9.01 million metric tons.
Rapeseed imports, on the other hand, remained low last week and amounted to 2.7 Mt since the start of the campaign, ie a drop of 1.3 Mt compared to last year!
Meantime, China’s agriculture ministry said on this morning it had suspended pork imports from Italy after African swine fever was detected in a wild boar in the country.
From the Black Sea basin, in 2021, the share of agricultural products in the overall Ukrainian exports decreased to 41% from 45% in 2020.
However, agricultural products remained the core of the Ukrainian exports, declared the Deputy Director at the National scientific center “Institute of Agrarian Economics”, Academician of the National Academy of Agrarian Sciences (NAAS), Nikolai Pugachev.
In 2021, Ukraine set several records in agricultural exports – 20.071 mln tonnes of wheat, 459 thsd tonnes of poultry, 38 mln tonnes of pasta.
Particularly, Ukraine increased shipments to the EU as well as Asian and African countries.
Meantime, according to Ukrainian Sea Ports Administration, as of 8 a.m. January 25, 2022, heavy snow restricted grain handling in ports of Chornomorsk, Odessa, Pivdenniy, Olvia, Mykolaiv and Kherson.
The same reason restricted grain handling in ports of Berdiansk, Chornomorsk, Mariupol, Mykolaiv and Kherson as of 8 a.m. January 24, as well as the strong wind did not allow piloting in ports of Odessa and Pivdenniy.
Limited grain handling was observed in the port of Berdiansk as of 8 a.m. January 23 due to the sown.
The rest of Ukrainian ports are working as usual.
Meantime, during the second ten-day period of January, winter crops were in dormancy in Ukraine, informed Ukrhydrometcenter.
“In the first half of the reporting period, during the most significant cold spell, the minimal temperature of soil at rooting depth fell to 5-9°С below zero, locally in varied at 10-11°С below zero, that was higher than the critical temperature of winterkilling”, – they said.
From the Middle Kingdom, China’s use of wheat in animal rations in 2021/22 is expected to be less than half of the amount of last season, analysts and traders said, as elevated prices cut demand.
Thus, the volume of wheat used in feed could fall to between 10 and 24 million tonnes in the season that began in June, down from more than 40 million tonnes the previous year if current price trends persist, five traders and analysts estimated.
“We have stopped using domestic wheat,” said a manager with a feed producer in southern China.
“Can’t use it anymore, as the price is too high,” added the manager.
Meantime, corn prices have slipped below wheat since October in key feeding hub Zhengzhou, Henan province, which is a top grower of both grains.
Corn there traded around 2,780 yuan ($439.49) per tonne this week, compared with 2,860 yuan for wheat.
In 2021, corn prices in Zhengzhou and several other key feeding hubs traded as much as 500 yuan a tonne higher than wheat for several months, incentivising feed producers to make large scale substitution of wheat for corn in rations.
Consequentially, less use of wheat, which has more protein than corn, means greater demand for both corn and soymeal, the main protein sources in animal feeds, according to the analysts.
China consumes more than 140 million tonnes of wheat a year, and imports of wheat, which soared to a record in 2021 of 9.77 million tonnes, were still just a small portion.
Meantime, on January 26, 2022, China auctioned 24387 tons of soybeans via state reserves , 19387 tons or 79.49% were sold, the average price was 6021.27 yuan.
($1 = 6.3255 Chinese yuan).
On the international trade scenario, Iranian state-owned animal feed importer SLAL has issued international tenders to purchase up to 60,000 tonnes of animal feed barley, 60,000 tonnes of feed corn and 60,000 tonnes of soymeal.
The deadline for submission of price offers in the tender is on this morning, Wednesday, Jan. 26.
Shipment for all the grains and soymeal was sought in February and March.
Another Iranian state agency, the Government Trading Corporation (GTC), has been purchasing wheat heavily in the last two months.
The Philippines purchased 35.000 t of animal feed wheat from Australia in an international tender that closed yesterday.
The grain is for shipment in April.
French operators will closely monitor Algeria’s attitude on its latest call for tenders, in order to see whether the tensions between the two countries persist or not.
Author: Sandro F. Puglisi
