Today is not a great day for history.
After seventy-seven years, the world has officially returned to the brink of world war.
Whatever the reasons for the parties, we hope that peace and order can be restored as soon as possible.
We are close to the entire civilian population, to our friends and partners living in the Black Sea region.
Consequently, we are going to face today’s analysis, with great attention and the impartiality that distinguishes us, aware that the topics covered are very delicate and can undergo profound changes both during this day and in the days to come.
Russian forces invaded Ukraine with strikes on major cities, official and media said on this morning.
As a consequence, global stocks and U.S. bond yields dived, while the dollar, gold, oil prices, corn, soybean and wheat rocketed higher.
Oil surged above $100 for first time since 2014.
Wheat hitting a fresh nine-year high to $9.2275 a bushel in Chicago, the highest since September 2012.
Palm oil in Malaysia climbed to a record 6,139 ringgit a ton.
The initial signals had brought US farm markets firmly in the green, already yesterday.
Particularly, the Wednesday corn market began by fading overnight gains with a wide range on either side of unchange.
However, by the close, they has rallied back to set new contract highs, ending 1.33% higher.
The soybean rally extended the big gains from Tuesday into Wednesday, closing with 2.45% gains.
The March contract, indeed, was up by another 40 cents to new life of contract highs.
Soymeal prices were also 3.84% higher with March having rallied $17.4/ton and to within $3.60/ton of the prior contract high.
Soybean oil went to home with 0.81% gains.
The wheat complex were higher again on Wednesday.
Winter wheat prices (SRW) led the charge again, rising around 3.76% higher by the close.
KC wheat ended with another 3.6% higher – and crossed the $9-per-bushel benchmark for the first time since 2013.
Spring wheat rallied another 1.55%on the day, carrying old crop back to above the $10/bu mark.
Oats Futures Prices went again counter to the other row crops, dropping another 1/2 to 3 cents per bushel.
In energy market, as we said, on this morning oil prices surged, with Brent breaching $100 a barrel for the first time since 2014.
Brent crude hit a high of $102.48 a barrel, the loftiest since September 2014, and was at $102.06 a barrel at 05:47 GMT, up $5.22, or 5.4%.
U.S. West Texas Intermediate (WTI) crude futures jumped $4.85, or 5.3%, to $96.95 a barrel, after rising to as much as $97.40, the highest since August 2014.
Oil prices have surged more than $20 a barrel since the start of 2022.
“Soaring oil prices come at an especially difficult time,” HSBC economist Frederic Neumann said.
The U.S. and Iran have been engaged in indirect nuclear talks in Vienna, in which a deal could lead to the removal of sanctions on Iranian oil sales and increase global supply.
However, Iran on Wednesday however urged Western powers to be “realistic” in talks to revive the 2015 nuclear deal, and said its top negotiator was returning to Tehran for consultations, suggesting a breakthrough in its discussions is not imminent.
Meantime, U.S. crude stockpiles rose 6 million barrels last week while distillate stocks fell, according to market sources who were citing American Petroleum Institute figures late on Tuesday.
Ahead of government data on Thursday, analysts forecast a 400,000-barrel build in crude and a drawdown in fuel stockpiles.
Gasoline inventories rose by 427,000 barrels and distillates stockpiles fell by 985,000 barrels, the API data showed according to the sources, who spoke on condition of anonymity.
On the freigth market, the Baltic Exchange’s dry bulk sea freight index rose for a fourth straight session on Wednesday to its highest in more than six weeks, on gains in rates across vessel segments.
The overall index, which factors in rates for capesize, panamax and supramax vessels, rose 96 points to 2,244, its highest level since Jan. 10.
The capesize index jumped 177 points, or almost 9%, to 2,192, its highest level since Jan. 11.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, increased by $1,472 to $18,181.
The panamax index rose 103 points to 2,699.
Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, gained $924 to $24,290.
The supramax index advanced 29 points to 2,388.
In equities markets, U.S. stock indexes on Wednesday closed lower, with the S&P 500 falling to a 1-month low, the Dow Jones Industrials dropping to a 10-3/4 month low, and the Nasdaq 100 sliding to an 8-3/4 month low.
Stock losses accelerated Wednesday afternoon after President Biden expanded sanctions against Russia.
San Francisco Fed President Daly said inflation is too high, price pressures have begun to spread, and it is time for the Fed to move away from extraordinary support.
Thus, on Wall Street, the S&P 500 fell by 1.8% to 4,225.50.
That put it 11.9% below its Jan. 3 record, solidly in a correction, or a decline of more than 10% from its latest peak.
More than 85% of stocks in the S&P 500 fell, with tech companiesweighing down the index most.
The Nasdaq, dominated by technology stocks, lost 2.6% to 13,037.49, led by steep losses in Apple and Microsoft.
Since the start of the year, Facebook parent Meta is down 41.4%, Tesla is off 36.3% and Microsoft is down 16.3%, while Apple and Google’s parent Alphabet are both down 12.9%.
That put the index 18.8% below its November 2021 high.
The Dow Jones Industrial Average fell 1.4% to 33,131.76.
Meantime, the future for Germany’s benchmark DAX index lost more than 4% and London’s FTSE 100 was off 2.2%.
The ruble fell 5% against the dollar.
Asian stock markets also plunged on this morning.
The Nikkei 225 in Tokyo fell 2.2% to 25,855.04 and the Hang Seng in Hong Kong lost 3.1% to 22,925.60.
The Shanghai Composite Index was off 0.9% at 3,458.12.
The Kospi in Seoul lost 2.6% to 2,649.29 and Sydney’s S&P-ASX 200 fell 3.1% to 6,983.40.
India’s Sensex was down 3% at 55,493.95.
New Zealand lost 3.3% and Southeast Asian markets also fell.
Asian economies face lower risks than Europe does, but those that need imported oil might be hit by higher prices if supplies from Russia, the third-largest producer, are disrupted, forecasters say.
On the weather side, winter Storm Oaklee is moving across the Midwest and Plains this week, delivering snow, ice and other inclement weather along the way.
According to NOAA’s latest 72-hour cumulative precipitation map shows the Ohio River Valley is still set to gather the most moisture between today and Sunday.
NOAA’s 8-to-14-day outlook predicts seasonally wet weather for most of the Midwest and Plains between March 2 and March 8, with warmer-than-normal conditions likely for most of the Corn Belt during this time.
Meantime, USDA kicks off its annual Agricultural Outlook Forum on this morning (2/24/22) at 7am CST.
USDA’s 2022 Commodity Outlook reports will be released to the public at that time also.
Analysts show an estimate of corn surfaces to come in the USA at 91.8 million acres and around 89.2 million acres in soybeans.
As for wheat all wheat is expected to 47.8 million acres.
Of that, 1.5 million acres would be for durum.
As for corn, assuming average yields of 179.2 bushels per acre, that would lead to a total production of 15.053 billion bushels this season.
For soybean, assuming average yields of 51.5 bushels per acre, that would lead to a total production of 4.556 billion bushels.
For wheat, assuming average yields of 48.5 bushels per acre, that would lead to a total production of 1.920 billion bushels.
However, operators will follow planting intentions more closely, which will only be published on March 31.
On the demand side, the weekly EIA data was delayed on this morning in recognition of the President’s Day holiday, but will show only average daily ethanol production and stocks changes in today’s release.
Meantime, USDA reported another 132k MT new crop soybean sale to China in a private announcement under the daily reporting system.
In this context, corn basis bids were mostly steady to firm on Wednesday after trending 2 to 4 cents higher at three Midwestern locations.
An Illinois river terminal bucked the overall trend after sliding a penny lower.
Soybean basis bids jumped 8 cents higher at an Ohio elevator and 16 cents higher at an Illinois river terminal while dipping 2 cents lower at another Illinois river terminal.
Other Midwest locations held steady.
The funds were net buyers for 15,000 lots of corn, 17,000 lots of soybeans and 15,000 lots of wheat.
From South America, Brazilian consultancy Datagro increased its forecast for 2021/22 total corn production by 2.3% to reach 117.81 MMT.
Also, Brazilian consultancy Datagro slightly raised its estimates for the country’s 2021/22 soybean production, moving up to 130.25 MMT.
This is one of the more bullish estimates currently being floated for this season’s production.
Meantime, AgRural reported 33% of Brazilian soybeans had been harvested through 2/17, that compares with Brazil’s 15% pace last year.
On the weather side, Rains are expected on the South American continent, relieving a little of the water stress that has persisted for several weeks, particularly in Argentina.
Buenos Aires Grains Exchange, however, maintained its 42 MMT soy production outlook for Argentina.
In Europe too, Euronext maintained a rapid bullish pace on Wednesday.
Indeed, the consequences of the conflict in the Black Sea region, at the agricultural level would be felt above all in the rise in wheat and corn prices.
However, of the nearly 160 billion euros in Russian exports in 2021, 60% concern energy products (hydrocarbons and refined petroleum products).
The EU imported 35% of its gas needs from Russia last year.
The same goes for oil , and for fertilizers , Russia providing a quarter of European imports.
Thus, rapeseed prices also progressed very clearly in the wake of other oils.
Russia and Ukraine are the two leading sunflower producing countries in the world.
Ukraine alone exports more than 50% of sunflower oil in the world.
Meantime, non-commercial market participants increased their net long position in Euronext’s milling wheat futures and options in the week to Feb. 18, data published by Euronext showed.
Non-commercial participants, which include investment funds and financial institutions, raised their net long position to 134,160 contracts from 116,429 a week earlier, the data showed.
Commercial participants expanded their net short position to 142,722 contracts from 125,599 a week earlier.
In Euronext’s rapeseed futures and options, non-commercial market participants increased their net long position to 5,315 contracts from 3,994 a week earlier.
Commercial participants raised their net short position in rapeseed to 6,482 contracts from 4,907 a week earlier.
From the Black Sea basin, war has been declared in Ukraine and the world markets are panicking.
It is difficult in the current context to predict the full consequences of Russian action on the markets, knowing that ports like Mariupol and Odessa are becoming inoperative this morning due to the bombardments.
Exports from the Black Sea has been interrupted, with the implication of an increase in prices for all products combined.
Russia, indeed, has suspended movement of commercial vessels in the Azov sea until further notice, but kept its ports in the Black Sea open for navigation, its officials and five grain industry sources said on Thursday.
The Azov sea is home to shallow water ports of smaller capacity.
Meantime, Ukraine asked Turkey to close the Bosphorus and Dardanelles straits to the Russian ships, the Ukrainian ambassador to Ankara said earlier on Thursday.
However, there has been no reaction yet to Ankara’s request.
Yesterday Ukrainian President Volodymyr Zelenskiy declared a state of emergency across the country.
Coming back on agriculture side, soft winter in the southern Russia promoted the early start of spring crops.
As of February 22, 20.3 thsd ha were planted with spring crops, informed the Ministry of Agriculture.
Particularly, Russian farmers planted 19 mln ha with winter crops.
97% of crops are in good and satisfactory conditions that is higher than the last year.
The overall planted area is forecasted at 81.3 mln ha.
In Ukraine too, there was a soft winter weather.
Wintering of crops is coming to an end under satisfactory conditions, informed Ukrhydrometcenter.
The minimal temperature at roots depth was 2-7°С below zero during the second ten-day period of February that was significantly higher compared to the critical temperature of winterkilling.
Winter crops resumed vegetating in the last days of the reporting period in Mykolaiv, Odessa, Kherson Cherkasy oblasts, partially in Kyiv and Zakarpattia oblasts.
Meantime, in January 2022, Ukrainian agricultural organizations increased the selling volumes of grains and pulses by 75.9% in comparison with the same period of 2021 to 3.662 mln tonnes, reported the State Statistics Service.
Particularly, farmers increased corn sales by 81.7% to 2.91 mln tonnes, wheat – by 50.7% to 621.9 thsd tonnes.
The sales of barley increased by 2.4 times to 88.26 thsd tonnes, rye – by 2.7 times to 14.72 thsd tonnes.
Besides, farmers rise the sales of oilseeds by 50.6% to 826.8 thsd tonnes. Particularly, the sales of sunflower seed was up by 55.3% to 717.42 thsd tonnes, soybean – by 22.9% to 103.97 thsd tonnes, rapeseed – by 2.9 times to 3.73 thsd tonnes.
Meantime, as of February 1, the stocks of grains and pulses totaled 26.6 mln tonnes in Ukraine, up by 8.3 mln tonnes compared to the same date of the last year, informed the State Statistic Service.
Particularly, 16.2 mln tonnes of grains and pulses were stored at agricultural enterprises, up 40% compared to the year ago, and 10.4 mln tonnes were stored at processing and storing enterprises, up 52%.
As of February 1, the stocks of wheat totaled to 8.2 mln tonnes (+60%), barley – 1.3 mln tones (+39%), corn for grain – 16.5 mln tonnes (+44%), rye – 157 thsd tonnes (-5%), sunflower seed – 6.1 mln tonnes (+43%).
From the Middle Kingdom, China’s soymeal prices rallied to a record high on Thursday even as the government plans to release soybeans from reserves amid worries over tight supplies in the market.
China’s soymeal futures prices DSMcv1 rose 3.6% to hit 4,006 yuan ($634.10) per tonne, up 10% since the Lunar New Year holiday.
Soymeal cash prices in Rizhao in Shandong province, a main processing hub in eastern China, rallied to 4,400 yuan per tonne, up 250 yuan just this week, and the highest in almost nine years.
($1 = 6.3176 Chinese yuan renminbi)
From Australia, domestic feed wheat and barley markets have firmed this week on offshore rallies, and competition from exporters drawing grain from across state borders.
SFW wheat is the hot property in the trade, and is being sought by feedmills and exporters with equal enthusiasm.
The weight of a bumper sorghum crop has put some pressure on export bids as the supply chain starts to fill, and with harvest thought to be less than 20 per cent through.
However, Aussie local markets take time to digest volatile and fast-moving offshore markets.
Indeed, despite the large moves in futures markets yesterday, and again overnight, the local wheat market has really only firmed A$5/t if that.
Markets continue to show wide bid-offer spreads, or one-sided markets, while buyers handle what they need for the short term in terms of export and domestic demand.
On the international trade scene, Taiwan’s MFIG purchasing group 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 in the tender is Feb. 25.
Egypt launched a wheat tender yesterday evening for shipment from April 11-21, but in the current context it is difficult to predict whether this tender will be maintained, or even which sources would be selected.
Iran closed yesterday an international tender to purchase 60,000 metric tons of soymeal.
In a separate tender, Iran also is seeking to buy 60.000 t of animal feed barley.
The country has been an active grain buyer in recent months after coming off the worst drought in five decades.
Turkey issued an international tender to purchase 435,000 t of milling wheat from optional origins that closes March 2.
The grain is for shipment starting on March 10.
Turkey’s state grain board TMO provisionally bought about 6,000 tonnes of crude sunflower oil in an international tender to purchase and import the same volume.
It was said to have been purchased at an estimated $1,474.90 a tonne c&f from trading house Prime.
Turkey remains an active grain buyer as it continues to shore up domestic supplies after harvesting a drought-damaged crop.
Importers in Thailand closed yesterday an international tender to purchase 294.600 t of animal feed wheat from optional origins.
The grain is split into several consignments that will be shipped between March and June.
Bangladesh purchased 50.000 t of milling wheat from optional origins in an international tender that closed last week.
The grain is for shipment 40 days after the contract is signed.
Traders said the purchase was made at an estimated $390.92 a tonne CIF liner out from trading house Agrocorp.
That’s all.
To all of you I wish you a good day.
Author: Sandro F. Puglisi
