US farm markets were mostly higher to start the week.
Concerns on South America production, higher then expected weekly export inspections and outstanding daily export sales, renoved the bullish sentiment.
Corn prices made substantial inroads with double digit gains, posting an increase of 2.38%.
Soybeans continued their rally to new contract highs, adding another 1.82% to the upside.
Soy meal prices ended the session 2% higher.
Bean oil were steady on the day, after fading from midday gains the front months closed within 3 points of unchanged.
Wheat prices trended between 0.72% and 0.90% higher.
Particularly, Chicago closed up 0.72%.
KC HRW closed 0.76% higher on the day.
MPLS wheat rallied 0.90%.
In energy market, oil prices eased on this morning ahead of the resumption of indirect talks between the United States and Iran which may revive a nuclear deal that could lead to the removal of sanctions on Iranian oil sales, increasing global supplies.
The talks on reviving the 2015 Iran nuclear deal, which are taking place in Vienna, are resume after a 10-day pause on this morning.
The United States has restored some sanctions waivers, while Iran is demanding a full removal of sanctions and a U.S. guarantee of no further punitive steps.
In this context, Brent crude was last down 48 cents, or 0.24%, at $92.47 a barrel by 07:16 GMT, after hitting a seven-year high of $94 on Monday.
U.S. West Texas Intermediate crude was down by 14 cents, or 0.16%, at $91.18 a barrel.
Brent crude, the price basis for international oils, shed 58 cents to $92.69 per barrel in London on Monday.
U.S. West Texas Intermediate crude lost 99 cents to $91.32 per barrel.
Both oil contracts have touched recent seven-year tops, supported by strong global demand, ongoing tensions in Eastern Europe and potential supply disruptions due to cold U.S. weather conditions.
Particularly, Saudi Aramco said on Saturday it had raised prices for all crude grades it sells to Asia in March from February, in line with market expectations, reflecting firm demand in Asia and stronger margins for gasoil and jet fuel.
In the United States, refineries in Texas were knocked out of production on Friday by a citywide power outage, as freezing temperatures from an Arctic cold front swept the Gulf Coast, though some refineries are recovering or have since returned back to near normal operations.
On the other hand, U.S. crude oil and gasoline stockpiles likely rose last week, while distillate inventories were seen falling, a preliminary Reuters poll showed on Monday.
Crude inventories were seen increasing by about 700,000 barrels in the week to Feb. 4.
In the freight market, the Baltic Exchange’s dry bulk sea freight index inched lower on Monday, as a dip in capesize rates countered a rise in the panamax and supramax segments.
Indeed, the overall index, which factors in rates for capesize, panamax and supramax vessels, fell by a point to 1,422.
Particularly, the capesize index fell 94 points, or 7.6%, to 1,148.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, fell by $781 to $9,521.
The panamax index rose 59 points, or 3.3% to 1,855.
Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, increased by $529 to $16,694.
The supramax index gained 44 points to 1,638.
In equities markets, U.S. stock indexes yesterday closed mostly lower as a late-day slide in technology stocks weighed on the overall market.
Particularly, Facebook’s parent, Meta, fell 5.1% and Google’s parent company Alphabet fell 2.9%. Microsoft fell 1.6%.
Also, Monday’s U.S. economic data was bearish for stocks after U.S. Dec consumer credit rose +$18.898 million, weaker than expectations of +$21.900 million.
On the positive side, signs of M&A activity pushed airline stocks higher Monday and were positive for the overall market after Spirit Airlines and Frontier Group announced a merger agreement.
Also, cruise line stocks gained as the pandemic situation in the U.S. continues to improve.
Energy and financial companies made solid gains.
Chevron rose 2% and insurer Allstate rose 2.2%.
In this context, on Wall Street, the S&P 500 sank 0.4% to 4,483.87.
The benchmark index is now 6.5% below its Jan. 3 high.
The Dow Jones Industrial Average was nearly unchanged, adding 1.39 points to 35,091.13.
The Nasdaq composite fell 0.6% to 14,015.67.
Traders are trying to figure out how stocks will be affected as the Fed carries out plans to accelerate the withdrawal of stimulus.
They are waiting for U.S. consumer inflation data Thursday, which might influence Fed planning.
They expect at least four interest rate rises this year, starting next month.
Meantime, investors expect the European Central Bank to adopt a more hawkish policy at its March meeting for the euro currency used by 17 European Union countries after its board said last week inflation risks were rising.
But, about this, the European Central Bank president, Christine Lagarde, tried Monday to dampen talk of rate hikes, saying any change “will be very gradual.”
Thus, the ECB is expected to take longer to wind down bond purchases that are meant to push down market interest rates by pumping money into the financial system.
Also this week, central banks in India, Thailand and Indonesia hold policy meetings.
Meantime, Asian stock markets were mixed on this morning after Wall Street fell.
Thus, the Shanghai Composite Index lost 1% to 3,393.90 and the Hang Seng in Hong Kong sank 1.7% to 24,163.74.
The Nikkei 225 in Tokyo rose 0.3% to 27,340.40 after the government reported labor cash earnings declined 0.2% from a year earlier in December.
Core household spending fell 1% from the previous month.
The Kospi in Seoul lost less than 0.1% to 2,742.79 while Sydney’s S&P-ASX 200 gained 1.3% to 7,199.50.
India’s Sensex opened down 0.6% at 57,260.54.
New Zealand, Singapore and Bangkok rose while Jakarta declined.
On the weather side, between today and Friday, many parts of the northern U.S. will gather up some light rain or snow, per the latest 72-hour cumulative precipitation map from NOAA.
The agency’s 8-to-14-day outlook predicts more seasonally wet weather for the eastern Corn Belt and Great Lakes region between February 14 and February 20, with warmer-than-normal conditions likely in the Plains.
Meantime, Texas’s State Crop Progress report showed winter wheat conditions have improved for the areas that received decent amounts of moisture, but more will be needed soon.
Particularly, winter wheat headed reached 7 percent, up 5 points from the previous year and 3 points above normal as of 2/6.
Conditions showed 0% for excellent and just 9% for good – with a whopping 71% poor/very poor.
Oats headed reached 6 percent, up 1 point from the previous year and up 4 points from normal.
On the demand side, the weekly Export Inspections data showed 1.053 MMT of corn was exported during the week that ended 2/3.
That was up 17,419 MT from last week, but well below the 1.586 MMT shipped during the same week last season.
Japan was the top destination for the week’s corn export, with 28.6% of the total, though Mexico, China, and Colombia were all shipped +100k MT each.
Corn’s accumulated export program reached 18.597 MMT (732.15 mbu) through 2/3.
That is 30.2% of the Jan forecasted total trailing last year’s pace by 13.9% compared to the 11.9% forecasted drop off.
As for soybeans, the report showed soybean shipments were 1.218 MMT for the week that ended 2/3.
That was down 198k wk/wk and 688k MT from the same week last season.
China was the week’s top destination with 765,329 MT shipped to the PRC last week.
The season’s total export program to all destinations reached 37.643 MMT as of 2/3.
That is 67.4% of the Jan WASDE forecasted total.
Meantime, the USDA reported a large soybean sale of 507k MT to unknown this morning under the daily system.
That was split 249k MT old crop and 258k MT for new crop delivery.
As for wheat, the report showed 417,750 MT of wheat was shipped during the week that ended 2/3.
That was up from 376,524 MT last week but down 67,795 MT from the same week last year.
179k MT of the week’s export was HRW, with another 100k MT as HRS.
White wheat also made up 93k MT of the total, leaving only 45k MT for SRW shipments.
USDA listed the season’s export pace at 14.025 MMT through 2/3.
That trails last season’s pace by 17.7%, compared to the Jan WASDE which is calls for a 16.8% drop off.
In this context, corn basis bids were steady to mixed to start the week, moving as much as 2 cents higher at an Iowa processor and as much as 6 cents lower at an Ohio elevator.
Soybean basis bids were mostly steady, but did trend 7 cents higher at an Iowa river terminal and 4 cents lower at an Illinois river terminal.
The funds were net buyers yesterday for 19,000 lots of corn, 17,000 lots of soybeans and 2,500 lots of wheat.
Thus their positions in soybeans are returning to long positions at their highest level in recent years.
From Canada, Canadian shipping week 26 exports were 238.2k mt for a season total of 5.8 million mt, down 42% from last year.
Annualized exports at the current pace would only reach 11.6 million mt compared to AAFC’s 14.0 million mt export projection, thus, Canadian farmers are concerning as they are heavily reliant on exports.
Consequentially, they are looking to sell all spring wheat old crop and 20% of new crop at $10.50 or better.
As for durum wheat, week 26 Durum exports were 46.3k mt for a seasonal total of 1.3 million mt.
That is down 56% from last year.
However, annualizing, with the current pace they gets to 2.6 million mt, so AAFC’s 2.3 million mt is reasonable so long as they continue to export ~40k mt of durum per week.
On this wake, they have sold out of old crop durum while the sales window is shrinking and new crop durum will be available in the next 4-6 weeks.
Consequentially, they are looking at selling also partially the new crop for $13 or better for a #3 CWAD.
Today will be observed the Statcan report on the state of stocks in Canada as of December 31st.
Canadian canola stocks expected to be at 7.5mmt vs. 13.259mmt last year.
Barley stocks are expected to be at 3.3 mmt vs. 5.58 mmt last year.
All wheat stocks are expected to be 17.3 mmt vs. 25.028 mmt last year.
Durum stocks are expected at 2mmt vs. 4.806mmt last year.
From South America, the weather market kicked off by driving soybeans, and now the market is increasingly concerned about safrinha corn.
Southern Brazil into northern Argentina is only expected to receive between 30-40 per cent of normal rainfall for the next two weeks, significant given they would normally see 80-100 millimetres fall over this period. Additionally, the heat won’t give up in Argentina, with maximum temperatures 3-4 degrees Celsius above normal.
Rio Grande do Sul accounts for 16-18pc of Brazil’s soybean harvest, and harvest reports will be watch closely as this state has experienced some of the more extreme weather.
Meantime, USDA attaché, revised down its 2021/22 forecast corn harvest to 113 million metric tons (MMT) compared with the official 115 MT forecast, on the account of disappointing first-crop corn volumes.
The attaché particularly cited 23.5 MMT for Brazil’s first crop which is currently being harvested.
Consequently, the corn export forecast is also lowered to 42 MMT. Meanwhile, imports will remain above average levels, though they will continue to be sourced mostly from the Mercosur trade bloc.
For ending stocks, the attaché went with 4.5 MMT, which is the tightest since 11/12.
According to Ag Rural, the soybean harvest in Brazil would be done at 16% and that of the first corn crop at 18%.
The sowing of the second maize crop is 23% ahead of last year.
On the other hand, USDA attaché, forecasts wheat production at 7.7 MMT for the 2021/22 season, an increase of over 1.45 MMT from the current season thanks to forecast expansion in the planted area.
Wheat imports are projected to rebound after the low volumes registered over the last two seasons.
Wheat exports will remain high, thanks to a diverse buyers’ base.
Going into the Feb WASDE report, for corn the average estimate is to see USDA go with 113.3 MMT for Brazilian corn production and 52.1 MMT for Argentinian output.
For soybean the average estimate is to see 133.5 MMT for Brazil and 443 MMT for Argentina.
In Europe, grain prices managed to stay in the green on Monday evening.
Wheat prices are regaining tension in reaction to the new military escalation reported at the Ukrainian borders.
The eyes of the operators were also focused on the discussions between Putin and Macron.
Tensions remain even as talks continue.
The markets are likely to experience a new phase of volatility.
Wheat prices however, were impacted by the fall in prices in the Black Sea basin, in tough competition with the French previously traditional markets, such as Algeria or China.
About this, French wheat shipments in January hit their lowest since September.
Indeed, France last month shipped 775,000t of soft wheat to non-EU countries, down from 808,200t in December but up from 546,000t a year earlier, preliminary line-up data indicate.
Morocco was the primary destination of French soft wheat last month, with shipments to the country reaching 317,600t. Exports to
China remained robust, despite edging down on the month, at a combined 281,600t.
In contrast, no shipments to Algeria — traditionally the largest buyer of French wheat — were recorded in January.
Meanwhile, feed wheat shipments totalled 53,000t last month, with China as the sole receiver of crop.
Combined soft wheat shipments, including feed wheat, since the start of the 2021-22 marketing year in July have now reached 5.32mn t.
France is expected to export 9mn t of soft wheat to non-EU countries this marketing season, under government agriculture and sea products agency FranceAgriMer estimates, up from 7.42mn t shipped last year.
However, this last estimate has been revised down constantly from an initial projection of 10.5mn t in July.
Corn prices, on its part, were also driven up by the persistent dry weather conditions in southern Brazil and a large part of Argentina.
Rapeseed prices benefited yesterday from the firmness of soybeans and canola.
From North Africa, Egypt aims to procure 4 million tonnes of local wheat in its harvest season which begins in mid-April, the supply ministry said on Monday, up from 3.6 million last year.
The ministry said Egypt’s storage capacity was sufficient to contain 4.6 million tonnes of the grain this year.
From the Black Sea basin, Ukrainian winter grain crops sown to 2022 harvest were mostly in good or satisfactory condition as of Feb 3, APK-Inform agriculture consultancy reported on Monday, citing Ukraine’s service of food protection.
It said the proportion of living plants was from 91% to 99% depending of region and most “have good regenerative capacity”.
Ukrainian agricultural companies sowed 6.2 million hectares of winter wheat for the 2022 harvest, or almost 94% of the planned area of 6.66 million hectares.
Meantime, Ukraine has exported 39.2 million tonnes of grain so far in the 2021/22 July-June season.
That was up 32.8% from the same stage a season earlier.
The total volume included 17.2 million tonnes of wheat, 5.5 million tonnes of barley and 16.1 million tonnes of corn, the data showed.
As of February 3, since the start of the 2021/22 campaign (July 1, 2021), Russia has exported 34 Mt of cereals and oilseeds according to data from Rosselkhoznadzor (Federal Service for Veterinary and Phytosanitary Surveillance).
This figure is 19% lower than the same period last season.
In detail, the country exported 23.9 Mt of wheat (-21% vs last year), 2.8 Mt of barley (-33%), 1.8 Mt of corn (+23%).
On the other hand, Russia has extended its geographical area for its exports by selling to 141 countries in the world, while on the same date a year earlier, their number was only 131.
From the Middle East, Iraq will import yellow corn and soybeans according to the domestic market’s needs, the country’s state news agency reported on Monday, citing an agriculture ministry spokesperson.
Meantime, Iraq is expected to produce 3 million tonnes of wheat this season, the agriculture minister said on Monday.
This season’s expected wheat production is lower than last season’s, the minister told Reuters, adding that the country had reduced the winter agricultural plan by half.
Iraq is a major Middle East grain importer and needs between 4.5 million and 5 million tonnes of wheat a year to supply its massive food rationing programme.
From the Middle Kingdom, China’s agriculture and energy related futures rallied on the first day of trade after the Lunar New Year break, with contracts hitting record and multi-year highs early in the session, boosted by supply concerns and external market gains.
Indeed, the Dalian Commodity Exchange soybean meal futures DSMcv1 and the rapeseed meal contract CRSMcv1 on the Zhengzhou Commodity Exchange jumped by at least 8%, with Zhengzhou’s rapeseed meal contract hitting a record 3,445 yuan ($542.06) per tonne on Monday before closing 8.4% up at 3,425 yuan.
For edible oils, soyoil DBYcv1 and palm oil futures DCPcv1 on the Dalian exchange rose as much as 5%-6%, with the contracts climbing to their highest since September 2012 and July 2008 respectively.
Meanwhile, Zhengzhou’s rapeseed oil futures COIcv1 also hit a record 12,916 yuan per tonne before closing 1.3% higher at 12,720 yuan.
China’s most active crude oil futures ISCH2 on the Shanghai Futures Exchange jumped as much as 5% on Monday following the gains, while Dalian’s liquefied petroleum gas contract DPGcv1 surged 10%.
Shanghai fuel oil futures SFUcv1 also rose to hit a three-year high, while the low-sulfur fuel oil contract ILUcv1 gained as much as 6% to its highest since its listing in mid-2020.
($1 = 6.3554 yuan).
From South East Asia, the Oilseeds and Products Update from USDA attaché, reported that Indonesia kicked off 2022 by rolling out several market intervention policies in response to recent rising prices for cooking oil.
From January 19-31, 2022, Indonesia implemented a temporary cooking oil subsidy program utilizing the Crude Palm Oil (CPO) fund, the same funding source that subsidizes the biodiesel mandate program.
Additionally, on January 27, Indonesia enacted a Domestic Market Obligation (DMO) policy requiring exporters of palm oil products to sell 20 percent of their total export volume domestically, essentially restricting exports of palm oil products to bolster domestic supplies, and upending edible oil markets globally.
Previously, no form of export approval was required for palm oil products.
In a related move, the retail price for cooking oil is now capped at 14,000 IDR ($0.90) per liter.
From Australia, a rain event of 10-25mm is forecast for the WA Wheatbelt, and would provide great relief for farmers given the devastating bushfires still burning in some districts.
Meantime, local markets started the week with a firmer tone.
Wheat values were relatively unchanged in Western Australia, with ASW1 still finding demand at A$330 free in store, while in South Australia, quality wheat and SFW continue to find a bid with H2 in Adelaide zone bid at $410/t.
Barley markets remain supported through Victoria and SA.
With demand hard to draw out, values remained unchanged.
Canola was steady with bids also largely unchanged.
Strength through offshore soybean and canola markets will continue to provide support for local Aussie prices and strong export pace for February and March.
On international trade scene, a Syrian state grains agency has issued an international tender to purchase and import 200,000 tonnes of milling wheat.
The deadline for submission of price offers in the tender is Feb. 14.
Offers will be opened on the same day, but prices submitted must remain valid for 15 days.
Shipment is sought 60 days after contract award.
Syria needs to import more than 1.5 million tonnes of wheat, with majority from Russia, Russia’s Interfax news agency reported Syrian economy minister Mohamed Samer al-Khalil as saying in January.
Taiwan’s MFIG purchasing group has issued an international tender to buy up to 65,000 tonnes of animal feed corn which can be sourced from the United States, Brazil, Argentina or South Africa.
The deadline for submission of price offers is Thursday, Feb. 10.
Some 40,000 to 65,000 tonnes of yellow corn is sought in a single consignment.
Shipment is sought between April 1 and 20 if the corn is sourced from the U.S. Gulf, Brazil or Argentina.
If sourced from the U.S. Pacific Northwest coast or South Africa, shipment is sought between April 16 and May 5.
Price offers are sought at a premium over the Chicago July 2022 corn contract CN2.
The lowest offer in the tender on Monday from leading South Korean animal feedmaker Nonghyup Feed Inc. (NOFI) to buy up to 138,000 tonnes of animal feed corn was believed to be $339.99 a tonne c&f.
The offer was made for 68,000 tonnes with an extra $1.50 a tonne surcharge for additional port unloading.
The tender seeks May arrival of the corn in South Korea.
The lowest offer in the first round of the tender from Turkey’s state grain board TMO to buy 325,000 tonnes of animal feed corn on Tuesday was believed to be $304.70 a tonne for supplies from warehouses in Turkey with the same price also offered for imports.
The lowest offer was said to have been submitted separately by two trading houses each for 25,000 tonnes.
One offer was made by trading house Promaks for corn already in warehouses in Turkey for delivery to the port of Samsun and the other by Bek Tarim for imports for delivery to the port of Karasu.
No purchase has yet been reported, they said.
The TMO traditionally undertakes several rounds of negotiations in tenders seeking lower offers each round.
Shipment/delivery in the tender is sought between Feb. 25 and March 15 to a series of Turkish ports.
Supplies already in warehouses in Turkey along with imports can be offered in the tender.
Lowest offers per tonne for shipment/delivery to other ports were assessed to the port of Derince at $311.70 c&f believed to be for imports, to Iskenderun $318.80 from warehouses, to Mersin $313.80 c&f for imports, to Izmir $309.59 from warehouses, to Bandirma $307.70 from warehouses and to Tekirdag $314.35 c&f for imports.
USDA’s monthly WASDE report is due out on Wednesday.
Given the US balance sheets have locked the production side, the export pull will be the focus; it seems the speculators are comfortable with the downside risk as they added plenty of length in both corn and soybeans.
The trade average guess see USDA raise wheat ending stocks by 5.8 mbu to 633.8 mbu.
Global wheat stocks are expected to be 300k MT higher to 2280.3 MMT on average.
Author: Sandro F. Puglisi
