US farm markets were mixed but mostly higher yesterday.
Soybeans led the charge, jumping more than 2.3% higher.
A strong demand and rising in energy prices, added to lingering worries over South American production.
Soymeal prices were 2.17% higher on the day with March back above the $400/ton mark.
Soybean oil was also up by triple digits, having gained 2.27% for the session.
Corn firmed 1.13% higher as spillover strength from the soybeans complex triggered some technical buying.
Meantime, wheat has been bucked the bullish trend, as traders switched over to technical selling and profit-taking after two consecutive gaining sessions.
A strength dollar’s against all the other currencies weighened still more on wheat prices.
Particularly, Chicago SRW ended off the lows for the day, but still 2.81% down.
That was enough to move the March and the new crop contracts back below the $8/bu mark, though May SRW closed at $8.00 3/4 cents.
KC wheat ended 2.25% weaker.
Spring wheat was the weakest with some 3.27% losses of more than 30 cents.
New crop faded back below the $9/bu mark.
In energy market, crude prices surged on Wednesday, with Brent climbing to $90 a barrel for the first time in seven years.
Both Brent and WTI climbed 2%.
Continued supply challenges and mounting Russia-Ukraine tensions supported crude oil prices.
Particularly, OPEC missed its planned supply increase target in December, highlighting capacity constraints that are limiting supply as global demand recovers from the COVID-19 pandemic.
OPEC+ is gradually relaxing 2020’s output cuts as demand recovers from the demand collapse that year. But many smaller producers can’t raise supply and others have been wary of pumping too much in case of renewed COVID-19 setbacks.
Meantime, oil prices fell on this morning.
Both benchmarks, indeed, pulled back amid a broader decline in financial markets after the Fed telegraphed a March interest rate increase and as the dollar climbed against its major peers.
Also, an increase in crude oil and gasoline inventories in the United States alleviated some of the concerns about supply.
Crude inventories, indeed, rose by 2.4 million barrels in the week to Jan. 21 to 416.2 million barrels, compared with analysts’ expectations for a 728,000-barrel drop, the Energy Information Administration (EIA) said on Wednesday.
Gasoline stockpiles rose by 1.3 million barrels last week to 247.9 million barrels, the EIA said, the most since February 2021.
Thus, Brent crude futures were down 31 cents, or 0.6%, to $89.44 a barrel at 07:20 GMT, after earlier falling by as much as 1.1% to $89.
U.S. West Texas Intermediate (WTI) crude futures were down 58 cents, or 0.6%, to $86.77 a barrel, after falling by as much as 1.2% to $86.34.
In the freight market, the Baltic Exchange’s dry bulk sea freight index fell to its lowest level in a year on Wednesday, pressured by lower rates across all vessel segments.
The overall index, which factors in rates for capesize, panamax and supramax vessels, indeed, slipped 47 points, or 3.5%, to 1,296, its lowest since mid-January 2021.
Particularly, the capesize index dropped 43 points, or 5.8%, to 702, its lowest since June 2020.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, fell by $354 to $5,826.
The panamax index fell 74 points, or 3.7%, to 1,914, its lowest since April.
Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, fell by $666 to $17,224.
The supramax index dipped 39 points to its lowest level since end-February 2021 at 1,654.
In equities markets, U.S. stock indexes on Wednesday gave up an early advance and settled mixed.
Stock indexes yesterday initially had opened higher on better-than-expected quarterly earnings results from Microsoft, Texas Instruments, and AT&T.
Wednesday morning’s data showed U.S. new home sales in December rose by +11.9% m/m to a 9-month high of 811,000, stronger than expectations of 760,000.
However, stock indexes retreated in the afternoon after the FOMC said it would soon be appropriate to begin raising interest rates.
Stocks extended their losses when Fed Chair Powell said he backs a Fed rate hike in March and cannot rule out a rate hike every meeting.
Investors expect as many as four rate hikes this year, starting in March.
The last time the Fed raised rates and shrank its balance sheet at the same time was in late 2018 and the S&P 500 lost nearly 20%.
Strength in technology stocks kept the Nasdaq 100 in positive territory.
Thus, on Wall Street, the S&P 500 slipped to 4,349.93 after being up 2.2% ahead of the Fed announcement.
The Dow Jones Industrial Average fell 0.4% to 34,168.09.
The Nasdaq composite was little-changed at 13,542.12, shedding a 3.4% gain earlier in the day.
The dollar rose on higher U.S. Treasury yields, lifting the U.S. dollar index, which measures the greenback against major peers, to 96.604, near five-week highs.
The strength of the dollar against all the other currencies weighs on prices denominated in American currency, losing their export competitiveness.
Meantime, Asian stock markets tumbled by unusually wide margins on this morning.
The Nikkei 225 in Tokyo fell 3.2% to 26,152.12 and the Hang Seng in Hong Kong retreated 2.6% to 23,664.80.
The Kospi in Seoul sank 2.9% to 2,630.78 after a stunning market debut for battery maker LG Energy Solutions, whose shares opened at nearly twice their offer price of 300,000 won ($250) after an initial public offering that drew 13 trillion won (nearly $11 billion) in bids.
The Shanghai Composite Index declined 0.9% to 3,425.28 and Sydney’s S&P-ASX 200 shed 2% to 6,822.10.
India’s Sensex opened down 1.8% at 56,809.30.
New Zealand and Southeast Asian markets also declined.
On the weather side, very few parts of the Midwest and Plains can expect to see additional rain or snow fall between today and ending January, per the latest 72-hour cumulative precipitation map from NOAA.
NOAA’s 7-day QPF shows moisture moving inland from the gulf with precip topping out at 1 1/4”for the TX/OK border.
Kansas will also get some moisture but accumulations are topped at 3/4” along the S.E. corner with about 1/2” accumulation for the Eastern half of the state through the next week.
The agency’s 8-to-14-day outlook predicts some cooler-than-normal conditions creeping back into the upper Midwest between February 2 and February 8, with seasonally wet weather likely for the eastern half of the U.S. during that time.
However, some of the US winter wheat crops, received beneficial snowfall to start the week.
Particularly, Western Kansas and Oklahoma now enjoys a protective cloak against the further drop in temperatures.
On the supply side, IHS Markit Agribusiness is now projecting 2022 U.S. corn plantings at 91.489 million acres.
That’s slightly down from the group’s December estimate of 91.578 million acres and nearly 2 million acres below 2021’s tally of 93.357 million acres.
As for soybean, IHS Markit Agribusiness is now forecasting 2022 U.S. soybean plantings at 87.805 million acres, which is lower than its December estimate of 88.815 million acres but still ahead of 2021’s tally of 87.195 million acres.
As for wheat, IHS Markit Agribusiness estimates that 2022 U.S. winter wheat plantings reached 34.397 million acres, which would be moderately above 2021’s tally of 33.648 million acres, if realized.
On the demand side, traders will closely scrutinize the week’s export sales will published on this afternoon.
Ahead of the weekly Export Sales report the trade is looking for USDA to report corn bookings between 600,000 MT and 1.2 MMT.
New crop sales are estimated to be below 200k MT for the week that ended 1/20.
As for soybean, export sales estimates ahead of the weekly report range 0.5 to 1.3 MMT for old crop beans.
The trade expects to see between 250k and 600k MT of new crop was forward booked during the week that ended 1/20.
For soymeal, estimates range from 100k MT to 400k MT.
Soybean oil export sales are estimated to be less than 35k MT from the week that ended 1/20.
As for wheat, analysts surveyed expect wheat bookings to be reported between 200k and 600k MT.
New crop sales from the week that ended 1/20 are estimated to have been less than 100k MT.
Meantime, EIA’s weekly data showed ethanol producers averaged 1.035m barrels per day during week that ended 1/21.
That was down 18k bpd from the week prior.
Ethanol stocks continued to increase, specifically in the Midwest’s PADD 2 district.
Storage space is becoming a concern.
Ethanol stocks in the Midwest increased another 193k barrels to a new record 10.107 million.
Total stocks were 884k higher at 24.476m – a 91-wk high, since before Covid.
In this context, corn basis bids were steady to mixed, sliding 2 to 3 cents lower at two Midwestern processors while firming 2 to 3 cents higher at two other central U.S. locations.
Soybean basis bids were steady to firm after rising a penny higher at an Ohio elevator and improving 4 cents at an Iowa river terminal.
The funds were net buyers yesterday for 7,500 lots of corn and 15,000 lots of soybeans.
They were net sellers for 12,000 lots of wheat.
From Canada, StatsCan reported the Canadian canola crush at 705k MT for December.
That was 22% lighter than Dec 2020’s crush.
They had the MYTD crushing total at 3.802 MMT through December, which trails last season by 13%.
From South America, observers believe that the recent rains in Argentina are still insufficient to fully boost potential and the prospect of a dry month of February again in South America is not to reassure the market.
The Mato Grosso Do Sul (MGDS) state agency indicating that soybean yields would fall 20pc from an earlier estimate of 62.84 bags per hectare to 50.5 bags/ha.
On this wake, oil World’s private analysts expect the combined South America (Brazil, Argentina, Paraguay, and Uruguay) soy output to be a 4-yr low of 186.3 MMT.
USDA still has those countries reaching 196.6 MMT, which would be a record though below earlier estimates.
Meantime, Brazil’s Anec estimates that the Brazil’s soybean exports for January will reach 3,39 million tonnes.
Anec also estimates that Brazil will export an additional 2.7 million tonnes of corn this month.
Meantime, Brazil’s Safras & Mercado estimates that the country’s 2022 soybean exports will total 85.51 million tonnes.
That would be a year-over-year reduction of 5%, if realized.
In Europe, wheat prices on Euronext yielded the ground gained the day before, thus confirming the extreme volatility of the markets currently driven mainly by geopolitics.
The state of winter crops in France seems satisfactory for the moment.
Rapeseed prices rebounded, after their sharp fall in recent days.
From the Black Sea basin, as of January 1, 2022, according to Rosstat, Russia’s official statistical service, grain stocks in agricultural enterprises in the Russian Federation are estimated at 24.6 Mt, almost the same level as in 2021.
At the same time, wheat stocks are up by 458 Kt (+3%) compared to last year and are estimated at the beginning of January at 13.9 Mt, and corn at 3.7 Mt, i.e. 221 Kt more than in 2021 (+6%).
At the beginning of January, sunflower stocks amounted to 2.5 Mt, an increase of 977.5 Kt (+66%).
Since the start of 2021 and as of January 23, Russia exported agricultural products at the general sum of 1.109 bln USD, down 9% compared to the same date year ago, informed Agroexport Center at the Ministry of Agriculture of Russia.
Particularly, Russia decreased export of grain by 39% to 316 mln USD, while the shipments of fat&oil products increased by 16% to 303 mln USD, products of food and processing industry by 22% to 21 mln USD, meat and dairy products by 19% to 47 mln USD.
The EU remained the leading importer of Russian agricultural products (17% in the overall structure).
It increased import of Russian products by 35% to 189 mln USD. Supplies to Turkey (16.6%) decreased by 15% to 184 mln USD.
The export to China (10.5%) declined by 45% to 117 mln USD.
TOP-10 importers of Russian agricultural products included South Korea (7.7%), Egypt (7.7%), Saudi Arabia (4.8%), Algeria (3.8%), Ukraine (3.3%), Pakistan (2.3%) and Uzbekistan (2.2%).
In January-November 2021, Russia decreased the export volumes of cereal crops by 8.9% compared with the same period of the last year to 38.973 mln tonnes, reported the Federal State Statistics Service (Rosstat).
In particular, in the reporting period wheat and meslin traditionally formed the basis of grain export supplies – 24.538 mln tonnes, down 24.5% compared with January-November 2020.
Russia exported 3.612 mln tonnes of barley (-19.9%), 2.731 mln tonnes of corn (+35%).
Moreover, Russia shipped abroad 116 thsd tonnes of rice (-4.2%) and 222 thsd tonnes of wheat and wheat-rye flour (-6%).
Exports of sunflower seed from Russia totaled 57 thsd tonnes in January-November (-95.5%).
Meantime, most of Ukraine’s major Black Sea ports are working normally, resuming operations affected by poor weather earlier this week, the state seaport authority said on this morning.
The restrictions of grain-loading operations had applied to the ports of Odessa, Chornomorsk, Mykolayiv, Pivdeny, Kherson and Olvia.
The authority said the restrictions still remain in the port of Kherson and Reni.
Ukraine is among the world’s biggest global grain exporters and plans to ship about 65 million tonnes of grain in the 2021/22 season.
In this context, Black Sea wheat was down US$7.75/t yesterday.
From the Middle Kingdom, China’s agriculture ministry will promote intercropping of soybeans with corn on more than 1 million hectares of land this year, it said on Wednesday, seeking to boost output of the oilseed without reducing production of corn.
China, the world’s top soybean importer, said late last year that increasing its output of the oilseed was a political priority, but it has given little detail on how it will achieve an increase.
Output fell 16% in 2021 from the previous year, as some farmers switched to more profitable crops like corn.
The Ministry of Agriculture and Rural Affairs said in a statement it will promote “strip compound planting”, or growing soybeans and corn in rows alongside each other, on 1 million hectares of land.
The approach would achieve “basically no decrease in corn output” while adding an extra soybean season, it said.
Soybean acreage had previously been estimated at 8.4 million hectares in the 2021/22 crop year, while corn will be grown on 43 million hectares.
The ministry did not say how much intercropping is currently used, but it has been studied in China for years, and shown elsewhere to benefit soil health and improve nutrients in the crops.
The latest research and new machinery has opened up “a new technical path for expanding soybean planting and improving soybean production capacity”, added the ministry.
China has often cited the need to boost domestic output of soybeans in recent years to secure grain security and cut reliance on imports from the United States.
It is targetting production of about 23 million tonnes of soybeans by the end of 2025, up 40% from current output levels of 16.4 million tonnes, according to a recently published plan.
From Japan, Japanese trading house Marubeni Corp 8002.T will sell the grains business of its U.S. unit Gavilon to commodities trader Glencore PLC’s GLEN.L Viterra arm for $1.125 billion, plus working capital, Viterra said on Wednesday.
Marubeni said it expected to gain a total of 300 billion to 400 billion yen ($2.6 billion to $3.5 billion), including loans to grains merchant Gavilon, through the deal, due to be completed after the restructuring of U.S. operations.
Marubeni will keep Gavilon’s fertilizer business and some facilities for grain export.
The deal, subject to closing conditions and regulatory approvals, is expected to close by March 31, 2023.
For Marubeni, the sale will mark the end of a painful journey as it booked a series of impairment losses, totalling 120 billion yen, since buying Gavilon for $2.7 billion in 2013, due to weaker grain prices and market volatility.
Marubeni said it had decided on the deal as it saw an opportunity with reasonable terms, reflecting Gavilon’s improved outcomes amid a recovery in the grain supply industry.
Despite the sale, Marubeni is looking to further strengthen its grain business to meet demand for grain in Asia, especially Japan, while reinforcing the handling of speciality crops and developing its processing and downstream businesses, it said. ($1=113.9000 yen).
From India, India’s wheat exports are likely to rise to a record high this fiscal on the back of good demand for countries in South Asia and South-East Asia regions.
Exports could be 6.5-7 MMT, said Nitin Gupta, Vice-President, Rice and Grains, Olam Agro India Ltd.
From Australia, wheat markets continued to find a find a bid on Tuesday as the market firmed by A$3-$4/t.
We saw more liquidity trade along the east coast, and depot H2 wheat in Victoria and South Australia is still in demand for protein.
The shipping stem for wheat is holding firm at 2.4 million tonnes (Mt) in January and pushing north of 2Mt for February.
It is still unable to hit 900,000t in WA, let alone the 1Mt they had been targeting.
Barley gained a few dollars in Western Australia as we see its stem build up to 660,000t for January now, and looking similar on the line-ups for February.
Canola markets remain steady this week as buyers feel comfortable with coverage levels for the nearby.
January canola line-ups are flat at 730,000t, and February continues to build, with another 200,000t added this week, taking it to 570,000t for the month
Meantime, thunderstorm activity pushed through South Australia again yesterday and overnight with more rain on the Eyre and Yorke peninsulas, and decent falls in the state’s South East.
On international trade scenario, South Korea’s Feed Leaders Committee (FLC) on Wednesday purchased about 60,000 tonnes of animal feed wheat from optional origins in a private deal without issuing an international tender.
The wheat was purchased at an estimated $331.95 a tonne c&f plus a $2.00 a tonne surcharge for additional port unloading.
Seller was believed to be trading house Olam.
The wheat was expected to be sourced from India with shipment between April 26 and May 15.
But if sourced from the U.S. Pacific Northwest coast, Australia or Canada shipment is between May 1-21; from South America between April 6-26 and from east Europe/Black Sea between April 11-May 1.
South Korean animal feedmaker Nonghyup Feed Inc. (NOFI) is believed to have purchased around 193,000 tonnes of animal feed corn in a tender on Wednesday.
The corn was bought in three consignments in a combination of outright prices and premiums over Chicago futures.
The first consignment of 62,000 tonnes for arrival around April 20 was believed to have been bought from trading house ADM at the outright price of $338.95 a tonne c&f and at a premium of 245 U.S. cents over the Chicago May corn contract CK2 plus a $1.50 a tonne surcharge for additional port unloading.
Shipment is between March 18 and April 6 if sourced from the U.S. Pacific Northwest coast; between Feb. 26 and March 17 from the U.S. Gulf or Black Sea/east Europe; Feb. 16-March 7 from South America; or March 3-22 from South Africa.
The second consignment of 65,000 tonnes for arrival around April 30 was said to have been bought from Cofco at $336.77 a tonne c&f and at a premium of 241.44 U.S. cents over the Chicago May corn contract CK2 plus $1.80 a tonne for additional port unloading.
Shipment for the second consignment if from the U.S. Pacific Northwest coast is between March 28 and April 16; from the U.S. Gulf or Black Sea/east Europe between March 8-27; from South America Feb. 26-March 17; or from South Africa March 13-April 1.
The third consignment of 66,000 tonnes for arrival around May 10 was believed to have been bought from Olam at $336.80 a tonne c&f and at a premium of 238 U.S. cents over the Chicago May contract CK2 plus $1.50 a tonne for additional port unloading.
The third consignment involved shipment from the U.S. Pacific Northwest coast between April 7-26, from the U.S. Gulf or Black Sea/east Europe between March 18 and April 6, from South America March 8-27, or from South Africa March 23-April 11.
Jordan’s state grains buyer is believed to have postponed an international tender to purchase 120,000 tonnes of animal feed barley which closed on Wednesday with no purchase made, European traders said.
The reason was said to be poor weather in Jordan’s capital Amman.
A new tender is expected to be issued closing on Feb. 2, they said.
Algeria would have bought around 80,000 t of wheat, probably of Black Sea origin.
The French origin would, however, have apparently been accepted if it had been competitive.
Author: Sandro F. Puglisi
