US farm markets closed on a positive note yesterday.
Particularly, as more and more experts predict this season’s Brazilian soybean crop will fail to reach 136 MMT, soybean prices jumped more than 2.5% higher on Tuesday.
Soymeal prices added 4.08% to the upside.
Soyoil ended with 1.56% gains.
Corn prices followed suit, tracking 1.40% higher.
The wheat complex also ended the session in the black, turnarounding the trend.
CBOT SRW, indeed, recovered 1.02%.
KC HRW futures ended the day with 0.64% gains.
Spring wheat futures on the MGE were back up by 0.94%.
In energy market, oil prices climbed on this morning toward last week’s seven-year highs as a draw in U.S. crude stocks confirmed strong demand and a lack of supply.
Indeed, according to market sources citing American Petroleum Institute figures, U.S. crude stocks fell by 1.6 million barrels for the week ended Jan. 28, against analysts’ estimate of an increase of 1.5 million barrels, althought gasoline inventories rose by 5.8 million barrels, above analysts’ expectations for a 1.6 million barrel build.
Meantime, investors remained cautious ahead of an OPEC+ meeting later in the day.
“OPEC+ is likely to maintain its policy unchanged, which means a supply shortage and an upward trend in oil prices will continue”.
“If Saudi and Russia show any signs of raising their production to shoulder shortfalls of some members who cannot meet their output targets, oil prices will likely fall,”
Meantime, Brent crude rose 17 cents, or 0.2%, to $89.33 a barrel by 03:39 GMT, after easing 10 cents on Tuesday.
U.S. West Texas Intermediate crude was up 16 cents, or 0.2%, at $88.36 a barrel, having gained 5 cents the previous day.
Tight global supplies and geopolitical tensions in Eastern Europe and the Middle East have boosted oil prices by about 15% so far this year.
On Friday, crude benchmarks hit their highest prices since October 2014, with Brent touching $91.70 and U.S. crude hitting $88.84.
In the freight market, the Baltic Exchange’s dry bulk sea freight index rose for a fourth straight session on Tuesday as higher capesize rates offset losses in the panamax and supramax segments.
The overall index, which factors in rates for capesize, panamax and supramax vessels, indeed, gained 22 points, or 1.6%, to 1,440.
The capesize index rose 89 points, or 7.4%, to 1,297, its highest level in two weeks.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, rose by $738 to $10,753.
The panamax index eased 17 points to 1,811, its lowest since April.
Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, fell $158 to $16,296.
The supramax index fell 9 points to its lowest level since February 2021 at 1,578.
In equities markets, U.S. stock indexes yesterday rose to 1-1/2 week highs and closed moderately higher.
Strength in energy stocks was supportive for the overall market Tuesday after crude prices climbed to a new 7-1/4 year high.
Also, strength in corporate quarterly earnings results boosted stock prices.
Of the 183 companies in the S&P 500 that have reported earnings so far this season, more than 82% have beaten or met estimates, and profits are coming in about 5.2% higher than projected levels. Tuesday’s U.S. economic data was mixed for stocks.
Particularly, the U.S. Jan ISM manufacturing index fell -1.2 to a 14-month low of 57.6 but was still slightly stronger than expectations for a decline to s57.5.
Meantime, U.S. Dec JOLTS job openings unexpectedly rose +150,000 to 10.925 million, showing a stronger labor market than expectations of a decline to 10.300 million.
U.S. Dec construction spending rose +0.2% m/m, weaker than expectations of +0.6% m/m.
In this context, on Wall Street the S&P 500 rose 0.7% to 4,546.54, boosted by gains for energy and tech stocks in a late burst of buying.
Exxon Mobil rose 6.4% after the company reported strong fourth quarter profit.
Hewlett Packard Enterprise rose 2.9%.
However, the S&P is stiil 5.2% below the Jan. 3 all-time high.
The Dow Jones Industrial Average gained 0.8% to 35,405.24.
The Nasdaq composite added 0.7% to 14,346.
U.S. stocks are coming off their worst month since early in the pandemic nearly two years ago.
Investors are trying to figure out how the economy and corporate profits will be affected by upcoming Federal Reserve rate hikes, intended to cool inflation that has surged to a four-decade high.
Meantime, stock prices in Tokyo and Sydney followed Wall Street higher on this morning while China, South Korea and Southeast Asian markets were closed for the Lunar New Year.
Particularly, the Nikkei 225 in Tokyo rose 1.8% to 27,552.61 and Sydney’s S&P-ASX 200 added 1.3% to 7,094.80.
India’s Sensex opened up 0.9% at 59,403.16.
New Zealand’s benchmark gained 1.9% after the government reported record-low unemployment of 3.2% in the final quarter of 2021.
Jakarta also advanced.
On the weather side, snow from a dusting to 6 inches in HRW areas will not be a trend changer and below-average soil moisture will prevail.
Most of HRW areas got two to six inches of snow, which result in 0.10 to 0.35 inches of moisture in the western parts and 0.60 inches in the eastern region.
Nebraska got a dusting to two inches of snow.
Meanwhile eastern areas of the wheat country got more snow.
Eastern Oklahoma and northwestern Arkansas through central Missouri to the heart of Illinois, northern Indiana, southeastern Michigan and northern Ohio got six to 15 inches, with localized totals up to 20 inches.
The Ohio River Valley, Tennessee River Basin and northern Delta got freezing rain, sleet and rain.
After this snow event, are forecasting bitter cold temperatures will return to the north-central U.S. today into Friday, with Thursday being the coldest.
Thus, winterkill will be most likely in Nebraska and in northern Kansas without adequate snowcover.
Plenty of rain and snow will be arriving later this week, delivering significant amounts of moisture in a band stretching from eastern Texas all the way through the Northeast between today and Saturday, per the latest 72-hour cumulative precipitation map from NOAA.
The agency’s 8-to-14-day outlook predicts a return to seasonally dry conditions for a large portion of the Corn Belt between February 8 and February 14, with warmer-than-normal temperatures likely for the Northern Plains.
Meantime, Texas winter wheat was rated 76% poor/very poor and just 6% good/ex for a Brugler500 score of 178 in their weekly Crop Progress update.
On the demand side, USDA reported the December corn use for ethanol at 485.816 mbu.
That was the second largest on record for any month, behind December of 2018’s 487.7 mbu.
MYTD corn use reached 1.828 bbu, which is a 3-yr high for the first 4 months and is 34.3% of the full year WASDE forecast.
Also, USDA reported 198.22 mbu of soybeans were crushed in December.
That was above the average estimate and at the top end of the expected range, for the largest single month crush on record.
The previous record was earlier this season with 196.92 mbu crushed in October.
The 21/22 marketing year crush reached 747.15 mbu through the first 4 months, which is 8.1 mbu behind last year’s record pace and 34.1% of the USDA forecasted total.
Soy oil stocks were below estimates, but still up from November, at 2.466b lbs.
Meantime, private exporters reported selling 110k MT of old crop corn to Mexico via the USDA daily reporting system.
Also, USDA announced a 132k MT new crop (22/23 marketing year) sale of soybeans to China.
In this context, corn basis bids were steady to mixed on Tuesday, moving as much as 9 cents higher at an Illinois river terminal and spilling as much as 4 cents lower at an Iowa processor.
Soybean basis bids were steady to mixed, after plummeting 35 cents lower at an Iowa processor while firming 7 to 8 cents at two interior river terminals.
The funds were net buyers yesterday for 12,000 lots of corn, 18,000 lots of soybeans and 4,000 lots of wheat.
Meantime, farmer sentiment dropped six points as the January Purdue University/CME Group Ag Economy Barometer declined to its second-lowest reading since July 2020, but still remain at a net positive of 119.
One of the main drivers of decline was farmers’ thoughts about the 2022 financial performance.
Indeed, “rising farm input costs and ongoing supply chain disruptions appear to be contributing to producers’ weaker perception of current conditions and expectations of their farm’s financial performance in 2022 when compared to last year,” according to Purdue’s James Mintert.
Of particular note – 37% of respondents indicated they will reduce nitrogen application rates versus a year ago.
The Farm Financial Performance Index fell sharply in January to a reading of 83, a 30% decline compared to a year earlier and 27% lower than in December 2021.
The report authors explain farmers expect income to decline sharply in 2022.
The Farm Capital Investment Index also weakened this month, falling four points.
In January, 52% of respondents said they plan to reduce their farm machinery purchases in the upcoming year.
Farmers also expect input prices to increase.
Fifty-seven percent of survey respondents expect farm input prices to rise by 20% or more in 2022 and 34% of producers expect prices to increase by 30% or more.
This month, 27% of respondents expect to have a larger operating loan in 2022 than a year earlier, 10 points higher than last year’s survey and 12 points higher than two years ago.
Traders will closely scrutinize the next USDA report due next week on February 9th.
From Canada, current Canadian soil maps show dryness in key production areas, and there is strong evidence that the yield drag after last year’s drought year could be more pronounced that what AAFC is thinking.
Particularly, AAFC is currently expecting that durum yield will rebound to 34.2 bu/acre.
This is an 187% increase from last year.
However, storically, in the years following the droughts of 2001 and 2007, the yield improvement was just 116% and 118% respectively.
Thus, AAFC’s 34.2 bu/acre yield might be at the top end of what is possible, but if true, the balance sheet is still not burdensome.
If acres increase by 9%, ending stocks would still be in the sub-600k mt range which is quite low.
Meantime, week 25 durum exports were 41.6k mt for a seasonal total of 1.3 million mt, down 54% from last year.
Weekly exports needed to reach AAFC’s 2.3 million mt number is 41.8 million mt.
This will leave ending stocks very low.
Meantime, local durum prices have backed off.
On the other hand, Canadian common wheat shipping week 25 exports were uninspiring at 104.6k mt, for a season total of 5.6 million mt.
This is 43% (-4.2 million mt) less than last year.
They are now 48% through the marketing year and Canada has exported 40% of AAFC’s 14.0 million mt projection.
Exports will increase in the latter half of the year, but the current pace does not suggest that they will do much better than what AAFC is suggesting.
From South America, on Tuesday, analysts at brokerage platform StoneX lowered their estimate for Brazil’s soybean harvest by 6% to 126.5 million tonnes, while the US Department of Agriculture (USDA) still expects 139 million tons.
Crop Consultant Dr. Michael Cordonnier cut his Brazilian soybean crop estimate by 4 MMT to 130 MMT.
He explained soybeans could not recover from record or near-record temps coupled with intense sunlight, which resulted in extreme moisture deficits for southern Brazil areas, including western Parana, southern Mato Grosso do Sul, Santa Catarina and Rio Grande do Sul.
Meantime, Brazilian corn exports reached 2,82 MMT in January, which was a year-over-year increase of 20.3%, according to the latest available governmental data.
Brazilian soybean exports reached 2,47 MMT in January, which was exponentially higher than year-ago results of just 1.8 million bushels, according to governmental data released yesterday.
On the other hand, corn crop conditions in Argentina improved after last week’s rains, with 32% rated good vs. 22% last week.
Soybean crop condition ratings in Argentina also continue to improve following recent rains, with 38% of the soy crop rated good vs. 30% last week.
However, Cordonnier lowered his Argentine soybean production forecast by 1 MMT to 42 MMT.
He noted less- than-optimum plant populations and soybean planting was completed later than average as the reasons for his cut.
Late last week, soybean planting in Argentina was reported 99.3% complete, compared to 100% last year and 100% average.
Meantime, Argentine exports of grain, oilseeds and their derivatives totaled some $2.4 billion in January, the country’s CIARA-CEC chamber of oilseed crushers and export companies said on Tuesday, slightly down versus a month earlier.
In December, the country registered $2.68 billion in grains exports, with a total $32.8 billion in 2021.
The CIARA-CEC chamber said high global prices boosted export values, but the total was capped by lower sales of value-added processed soy and transportation issues due to the low level of the Parana river, an important grains shipment route.
The chamber said the oilseed grains complex made up over 40% of the country’s total exports.
Meantime, Cordonnier left his Paraguay soybean production estimate at 6 MMT.
Soybean harvest in the country is approaching 50% complete and yield reports continue to be very disappointing, which is no surprise given the extreme weather they have experienced the last few weeks, according to Cordonnier.
In Europe while early in the season, the pattern remains dry for southern and western, most of growing areas (Europe, UK, France, Spain, Italy and Hungary) would normally only be looking for 25 millimetres of rain in the next 15 days.
However, for now much of the southern growing belt, has not received any moisture since the start of the year, and deficit likely will build.
Meantime, Strategie Grains estimates 22/23 world corn output will increase 1% to 1.167b MT.
Barley output is also forecasted 6% higher yr/yr to 154 MMT.
Strategie Grains estimates 22/23 world wheat output to increase 3% to 762 MMT.
Barley output is also forecasted 6% higher yr/yr to 154 MMT.
On the demand side, soft wheat exports from the European Union so far this season had reached 16.64 million tonnes by Jan. 30, weekly official data showed on Tuesday.
That was up 1 million tonnes from the previous update after delayed French figures were incorporated.
A week ago the European Commission had reported EU soft wheat exports for the 2021/22 season that began in July at 15.62 million, indicating that figures for France were only complete up to December.
A breakdown of volumes for the EU’s 27 member states indicated 4.88 million tonnes of soft wheat exports for France, against 4.15 million reported by the Commission last week.
The updated French tally in the EU report is closer to the approximately 5 million tonnes suggested by Refinitiv loading data.
The retrieval of the French data put the bloc’s soft wheat exports so far in 2021/22 well above last season, when 15.66 million tonnes had been exported by the same week, the data showed.
Among EU soft wheat exporting countries, France is now slightly ahead of Romania, which has exported 4.54 million tonnes this season.
Germany was showing the third-largest volume with 1.96 million tonnes.
Algeria was the biggest destination for EU soft wheat so far in 2021/22 at 2.58 million tonnes, followed by Egypt’s 1.64 million tonnes and China’s 1.62 million tonnes, the data showed.
EU 2021/22 barley exports have reached 5.07 million tonnes, against 4.58 million tonnes a year ago.
EU maize imports so far in 2021/22 were at 9.44 million tonnes, against 10.02 million tonnes a year ago.
That’s a year-over-year reduction of 5.8% so far.
Spain was by far the largest EU maize importer, with 3.91 million tonnes, while Ukraine was the leading supplier of maize to the EU with 4.65 million tonnes.
European Union soybean imports during the 2021/22 marketing year have fallen moderately below last year’s pace, with 7,78 MMT through January 30.
EU soymeal imports are also down moderately from a year ago, with 9.56 million metric tons.
Lastly, rapeseed imports currently stand at 3.01 million tonnes, down from last year at 4.09 million.
Meantime, authorities have discovered an outbreak of what they suspect is the highly-contagious bird flu strain at a farm in the Netherlands and about 168,000 chickens will be culled, the Agriculture Ministry said in a statement on Tuesday.
There are no other poultry farms in the immediate vicinity but those within a radius of 10 kilometers (six miles) have been banned from transporting poultry, eggs and poultry waste to prevent the spread of the H5N1 virus, the ministry said.
Hundreds of thousands of chickens, ducks, turkeys and dozens of wild birds have been culled in the Netherlands since outbreaks of the disease began in 2021.
Meantime, the geopolitical crisis in the Black Sea remains at the center of all attention and causes instability that is particularly difficult to read for many operators and observers.
The scenario of a disruption of trade flows in the Black Sea thus still lacks credibility, but still motivates a significant risk premium.
Thus, volatility is undeniable on the markets with a rebound in cereal prices on Euronext yesterday after the sharp drop observed on Monday.
Rapeseed prices also were on the rise again in the 2021 harvest in the wake of other oils, including canola.
From the Black Sea basin, in Russia, from March 1, the sunflower oil export tax will increase to $260.1/t, from $251.4/t in February, according to Ministry of Agriculture data released yesterday.
This rise follows the rise in the target price for sunflower oil, which rose from 1,359.2 to 1,371.7 $/t.
As a reminder, the mechanism of the tax on this product has been in force in Russia since September 1, 2021 until August 31, 2022.
Meantime, Russian data shows corn shipments were 16% ahead of last year’s pace through Jan 27th.
Russian wheat export data showed 23.6 MMT of shipments MYTD through Jan 27.
That was down 21% from last season’s pace due to the export tax regime.
On the other hand, Ukraine has exported 38.6 million tonnes of grain so far in the 2021/22 July-June season, up 31.6% from the same stage a season earlier, agriculture ministry data showed on this morning.
The total included 17 million tonnes of wheat, 5.5 million tonnes of barley and 15.6 million tonnes of corn, the data showed.
Meantime, two major Ukrainian Black Sea ports have restricted grain loading operations due to poor weather, the state seaport authority said on this morning.
The restrictions apply to the ports of Odessa and Chornomorsk.
In this context, Black Sea wheat was up US$1/t yesterday.
From Australia, the sorghum harvest has well and truly kicked off through the north, and more rain forecast is likely to present challenges.
Sites are filling quickly with reports of fantastic yields but quality is a concern.
Meantime, vessel line-ups for February continue to pick up the pace, with barley added a whopping 200,000t to take it to 820,000t nationally.
Canola is sitting around 660,000t now for the month and wheat continues to tick along, but they did lose 100,000t for January that looks to be now pushed into February.
Meantime, markets continued to be a mixed bag across the local boards, wheat bids were a touch softer through the depot sites.
Delivered prices into export and domestic pathways remained relatively unchanged.
Barley values were also largely unchanged through the track markets and canola continued to find a bid through the east coast and into South Australia.
The trade still seemed very focussed on the end-of-month process and execution programs as liquidity starts the week off moderately.
On the international trade scene, Jordan’s state grains buyer purchased 60,000 tonnes of hard milling wheat to be sourced from optional origins in a tender which closed on Tuesday.
It was bought from trading house Ameropa at an estimated $326.00 a tonne c&f for shipment in the second half of August, they said.
Two other trading houses participated in the tender, CHS offered $329.43 a tonne c&f and Cargill offered $335.00 a tonne c&f.
Tunisia’s state grains agency has issued an international tender to purchase an estimated 75,000 tonnes of durum wheat, 100,000 tonnes of soft wheat and 75,000 tonnes of animal feed barley.
The tender closes on this morning Wednesday, Feb. 2.
The grains can be sourced from optional origins.
The durum is sought in three consignments of 25,000 tonnes for shipment between Feb. 25 and March 30 depending on origin supplied.
The soft wheat is sought in four 25,000 tonne consignments for shipment between March 20 and April 25, also depending on origin used.
The barley is sought in three 25,000 tonne consignments for shipment between March 5 and April 15 depending on origin.
Tunisia’s last reported durum, soft wheat and barley purchase was on Jan. 5.
Japan’s Ministry of Agriculture, Forestry and Fisheries(MAFF) is seeking to buy a total of 53,957 tonnes of food-quality wheat from Canada and Australia in regular tenders that will close on Thursday.
Japan, the world’s sixth-biggest wheat importer, keeps a tight grip on imports of the country’s second most important staple after rice and buys the majority of the grain for milling via tenders typically issued three times a month.
Details are as follows (in tonnes):
COUNTRY: Canada;
TYPE: Western Red Spring(protein minimum 13.5 pct);
QUANTITY: 26.807 t;
Loading between March 21 and April 20, 2022.
COUNTRY: Australia;
TYPE: Standard White(West Australia);
QUANTITY: 27.150 t;
Loading between June 1 and June 30, 2022.
Turkey’s state grain board TMO has issued an international tender to purchase about 325,000 tonnes of animal feed corn.
The deadline for submission of price offers is Feb. 8.
Shipment is sought between Feb. 25 and March 15.
The corn is sought for unloading at the Turkish ports of Derince, Iskenderun, Mersin, Izmir, Bandirma, Tekirdag, Samsun and Karasu in a series of consignments of 25,000 tonnes.
The TMO reserves the right to buy up to 5% more or less than the tender volume at its own discretion.
Supplies already in Turkey can also be offered.
The tender continues strong grain demand by Turkey after its crop suffered from drought last summer.
Author: Sandro F. Puglisi
