The impact to commodity prices, after Russia has invaded Ukraine, has been immediate.
US farm markets, have seen wheat prices limit up overnight and to stay near their limit gains for most of the session, althought they had a slighting morning pullback.
Particularly, CBOT SRW prices ended 5.71% higher with both March and May going home locked limit higher, therefore, expanded limits for today’s session are 75 cents/bu.
KC wheat closed 5.42% higher.
Spring wheat also rallied on the news, though prices went home “only” 2.9% higher.
Corn also went limit-up but trimmed those gains to around 1.6% by the close.
Soybeans, meantime, saw a 0.8% decline after some technical selling and profit-taking pushed prices into the red.
Indeed, the strong gains overnight were promptly faded in the morning portion of the session.
Soymeal also were in the red at the bell down 1.32%.
Bean oil also faded into the close, but held on to triple digit gains, as closed 1.81% higher.
In energy market, oil prices jumped on this morning by nearly 3% on concerns of global supply disruptions from the impact of trade sanctions on Russia.
“Asian buyers, clearly nervous into the weekend, have piled into oil today sending prices higher once again, helped along by reports of explosions in Kyiv”.
Thus, global benchmark Brent crude rose $2.81, or 2.8%, to $101.89 a barrel at 07:38 GMT, after climbing to as high as $101.99.
U.S. West Texas Intermediate (WTI) crude touched a high of $95.64 a barrel, and was last up $2.37, or 2.6%, at $95.18.
The start of the invasion in Ukraine on Thursday caused prices to surge above $100 a barrel for the first time since 2014, with Brent touching $105, before paring gains by the close of trade.
Oil tanker rates are soaring globally as traders scramble to cope with jitters over possible disruption in Russian supplies, as well as war risk premiums for ships plying the Mediterranean region following Moscow’s invasion of Ukraine.
Fuel tanker rates from the United States to Europe jumped more than 8% on Thursday, surging to their highest level since May 2020.
The cost of bunkering fuel at the world’s largest bunkering hub Singapore jumped 6% on Thursday to $555 per tonne, the highest since 2019.
Top buyers of Russian oil are struggling to secure credit guarantees at Western banks, or find ships to take crude oil.
At least three major buyers of Russian oil were unable to open letters of credit from Western banks to cover purchases on Thursday, four trading sources said.
Rates for Very Large Crude Carriers from the Middle East to China, Asia’s benchmark for crude freight, rose 4.77 Worldscale to 38.82W on Friday, a shipbroker said, referring to points on the pricing index operated by the Worldscale Association that is used as an industry tool to calculate freight charges.
Each VLCC can carry two million barrels of oil.
On the Arab Gulf-Japan route for vessels that can carry about 75,000-90,000 tonnes of clean products, rates have climbed to 77.5 Worldscale, compared with 75 last week.
The shipping index benchmark for Long-Range 1 vessels which can carry 55,000 tonnes of clean products from the Middle East to Japan, also known as TC5, rose to 102.5W as of Friday, up from 97.5W last week.
However, it should to note that Russia will not have its oil and gas flows specifically targeted by sanctions, according to declared by a U.S. official, as the country, is the world’s second-largest crude producer and a major natural gas provider to Europe.
On the freigth market, yesterday the Baltic Exchange’s dry bulk sea freight index snapped a four-session winning streak, weighed down by lower rates for capesize and panamax vessels.
Indeed, the overall index, which factors in rates for capesize, panamax and supramax vessels, slipped 57 points to 2,187.
Particularly, the capesize index fell 192 points, or almost 9%, to 2,000.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, decreased by $1,595 to $16,586.
The panamax index eased 10 points to 2,689.
Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, lost $86 to $24,204.
The supramax index advanced 27 points to 2,415, meantime.
Meantime, in the 8th week, the drop in freight rates stopped in the Azov-Black Sea region.
The rate for a shipmet of 3,000 tons of wheat from Azov to the Marmara Sea ports, indeed, is still kept at the level of $ 33 per ton.
It is worth noting that at the beginning of the week, there was a shortage of spot and prompt tonnage, which stopped the market falling.
However, since yesterday, due to the tense geopolitical and military situation in the region, it has been announced that the movement of vesels in the Azov Sea and the ADMK channel will be closed for an indefinite period.
It is still difficult to say how the current situation will affect the Russian and Ukrainian markets in the near future.
In equities markets, U.S. stock indexes on Thursday recovered from sharp early losses and settled sharply higher.
Stock indexes, indeed, were initially sold off, with the Dow Jones Industrials falling to an 11-month low and the S&P 500 and Nasdaq 100 dropping to 9-month lows.
However, comments Thursday afternoon from President Biden sparked a rally in cybersecurity stocks and prompted a slide in oil prices from a 7-1/2 year high that reduced inflation concerns and sparked buying of technology stocks.
Thursday’s mostly better than expected U.S. economic data was supportive for stocks.
U.S. weekly initial unemployment claims fell -17,000 to 232,000, showing a stronger labor market than expectations of 235,000.
U.S. Q4 GDP was revised slightly higher by +0.1 point to 7.0% (q/q annualized) from +6.9%, right on expectations.
Q4 core PCE was unexpectedly revised upward by +0.1 point to 5.0%, stronger than expectations of unchanged at 4.9%.
The U.S. Jan Chicago Fed national activity index rose +0.62 to 0.69, stronger than expectations of 0.16.
U.S. Jan new home sales fell -4.5% m/m to 801,000, slightly weaker than expectations of 803,000.
On the other hand, the U.S. Fed looks certain to raise rates beginning next month for the first time since 2018, despite the conlflic.
It has sometimes delayed big policy decisions in times of geopolitical uncertainty, such as the Kosovo war and the U.S. invasion of Iraq.
Thus, on Wall Street, the S&P 500 rallied 1.5% to 4,288.70 after erasing an early 2.6% loss, while the Nasdaq staged an even bigger comeback, gaining 3.3% to 13,473.59.
The Dow Jones Industrial Average, which isn’t as influenced by big tech stocks, rose a more modest 0.3% to 33,223.83.
Huge swings also have rocked the bond market, where yields initially sank as money moved into investments that looked to offer safer returns than stocks.
But yields recovered through the day, and the 10-year Treasury yield was at 1.96% Friday, close to Wednesday’s 1.97%.
Meantime, Asian shares mostly rose on this morning after U.S. stocks recovered.
Japan’s benchmark Nikkei 225 surged 1.9% in afternoon trading to 26,450.84.
Australia’s S&P/ASX 200 lost some of its earlier gains to close 0.1% higher at 6,997.80.
South Korea’s Kospi jumped 1.2% to 2,679.56.
Hong Kong’s Hang Seng edged down 0.4% to 22,821.87, while the Shanghai Composite rose 0.7% to 3,452.84.
While most nations in Asia rallied to support Ukraine, China denounced sanctions against Russia and blamed the United States and its allies for provoking Moscow.
On the weather side, much of the Plains will be completely dry between today and Monday, while there’s a chance of additional rain or snow along the eastern Corn Belt during this time, per the latest 72-hour cumulative precipitation map from NOAA.
The agency’s 8-to-14-day outlook predicts warmer-than-normal conditions returning to the lower Midwest between March 3 and March 9.
Meantime, USDA released is initial 2022-23 balance sheets at the start of its annual Ag Outlook Forum, yesterday in the morning.
As for corn, its expect a planted acreage of 92.0 million, with harvested acres of 84.2 million and a yield of 181 bu. per acre.
That would produce a crop of 15.24 billion bushels.
Total supply is projected at 16.805 billion bushels.
Total use is projected at 14.840 billion bu., including 5.65 billion bu. for feed and residual, 6.84 billion bu. for food, seed and industrial (5.4 billion bu. for ethanol) and 2.35 billion bu. for exports.
Ending stocks are projected to climb to 1.965 billion bu. (13.2% stocks:use), with the average cash price expected to decline to $5.00.
As for soybeans, the planted acreage is at 88.0 million, with harvested acres of 87.2 million and a yield of 51.5 bu. per acre.
That would produce a crop of 4.49 billion bushels.
Total supply is projected at 4.83 billion bushels.
Total use is projected at 4.525 billion bu., including a record 2.25 billion bu. of crush and exports of 2.15 billion bushels.
That would lower ending stocks to 305 million bu. (6.7% stocks:use). The average cash price is projected to fall to $12.75.
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As for wheat, total planted acreage is at 48.0 million, with harvested acreage at 39.5 million and yield of 49.1 bu. per acre.
That would produce a crop of 1.94 billion bushels.
Total supply is projected at 2.708 billion bushels.
Total use is projected at 1.977 billion bu., including domestic use of 1.127 billion bu. and exports of 850 million bushels.
That would raise ending stocks to 731 million bu. (37.0% stocks:use) and lower the average cash price to $6.80.
On the demand side, USDA expects U.S. farm exports to see a record-high value of $183.5 billion in FY 2022.
The top two destinations of U.S. agricultural goods this year are expected to be China ($36.0 billion) and Mexico ($27.0 billion).
Ethanol production shifted higher for the second consecutive week, per the latest data from the U.S. Energy Information Administration.
Production averaged 1.024 million barrels per day during the week ending February 18, up from a daily average of 1.009 million barrels a week earlier.
That was up 15k bpd from the week prior and was a 3-week high.
Stocks were higher in the weekly update, up by 24k barrels to 25.507 million.
Going into the weekly Export Sales report, that will out on this afternoon, analysts are expecting between 500k and 900k MT of old crop corn bookings.
New crop sales are estimated to be below 300k MT.
As for soybean, analysts are looking to see old crop soybean sales between 0.5 and 1.2 MMT.
New crop sales are estimated to be between 450k and 850k MT.
For meal the trade expects between 100k and 400k MT were booked during the week that ended 2/17.
Survey respondents anticipate seeing between 8k and 40k MT of soy oil sales.
As for wheat, traders surveyed going into the weekly Export Sales report are looking to see USDA report between 100k MT of wheat sales and 450k MT.
New crop’s forward sales from the week that ended 2/17 are expected below 100k MT.
In this context, corn basis bids were steady to mixed after falling 2 to 4 cents at two interior river terminal and dropping 2 cents at an Indiana elevator while firming a penny higher at two other Midwestern locations on Thursday.
Soybean basis bids tumbled 16 to 25 cents lower at two interior river terminals, while firming 2 cents higher at an Ohio elevator and holding steady elsewhere across the central U.S.
The funds were net buyers yesterday for 17,500 lots of corn and 21,000 lots of wheat.
On the other hand, they were net sellers for 13,500 lots of soybeans.
From South America, Brazilian agricultural exports may lose their competitive edge due to soaring fertilizer prices and scarce supplies if the Russian invasion of Ukraine triggers Western sanctions on suppliers there, according to analysts.
Brazil relies on imports for about 85% of its fertilizer needs.
Russia is its biggest supplier of the NPK mixture of nitrogen, phosphorus and potassium.
Thus, the situation raises doubts about whether Brazil can expand its area planted with soy for the 2022/2023 crop, as costs may become prohibitive.
Brazil bought about 40 million tonnes of fertilizer products in 2021, a record high, with Russia accounting for some 9 million tonnes of imports, according to data compiled by Agrinvest.
There is a real possibility of Brazil having an immediate “potassium supply crisis,” said Marcelo Mello, head of the fertilizer desk at StoneX, referring to the commodity that has farmers the most worried.
However, Datagro forecasts Brazil’s corn output at 117.82 MMT, which is up by 2.6 MMT from their prior estimate.
Datagro also estimated Brazil’s soybean crop at 130.25 MMT, which was up from 130 flat in January.
In Argentina, a severe drought and export caps are limiting Argentine farmers’ ability to take advantage of spiking wheat and soy prices.
Argentina is the world’s top exporter of soybean oil and meal, a major supplier of wheat and the global No.2 corn exporter.
Idigoras said, however, that there was little remaining wheat authorized for overseas sales due to export caps.
Farmers completed the wheat harvest in early January.
Other grains have been hit by drought since late last year, hurting production.
Argentina’s 2021/22 wheat production reached 22.1 million tonnes, according to official data, but farmers have already sold 15.5 million tonnes of the grain and the domestic demand for wheat is 6 million tonnes.
Idigoras said that with export limits to ensure local supply “we have very little remaining, less than 1 million tonnes, with which we are not going to be able to take advantage of any price or price displacement benefit from Ukraine”.
Meantime, rainfall over the last 24 hours in Argentina’s central farm belt and forecasts for strong precipitation in coming days is helping relieve parched corn and soybean crops, the Buenos Aires grains exchange said on Thursday, holding its harvest forecasts steady.
The Buenos Aires exchange said that many areas still had a shortage of water, but that a slow-moving storm front would produce several days of intermittent rainfall, with storms in some areas bringing abundant precipitation to key farming zones.
Thus, its current outlook remain for 42 million tonnes of soy and 51 million tonnes of corn.
Argentina farmers have already completed planting soybeans and corn, with most plants now in important stages of yield development.
Argentine producers have already started harvesting some early batches of corn due to the drought.
In Europe, MATIF wheat and rapeseed futures traded an almost 10 per cent day price range, the wheat closing 7pc firmer and rapeseed 3pc.
Markets has showed a great nervousness and in the current context volatility is unprecedented.
For example, the wheat March contract, posted a high of €344/t and a low of €307.25/t, representing a variation of 12% intraday.
Euronext maize (corn) also surged.
The most active June maize contract on maize futures settled up 3.5% at 274.75 euros a tonne, after earlier setting a life-of-contract high at 300.00 euros.
The consequences of the conflict on the Black Sea basin are difficult to analyze.
Meantime, the European Commission on Thursday lowered its forecast of 2021/22 usable production of common wheat, or soft wheat, to 129.8 million tonnes from 130.5 million previously.
In monthly supply and demand projections, the Commission also reduced its outlook for common wheat stocks at the end of the season, to 12.6 million tonnes from 13.3 million, while keeping unchanged its forecast of 2021/22 common wheat exports at 32.0 million tonnes.
For corn, the Commission raised sharply its forecast of 2021/22 usable production in the EU’s 27 member countries, to 72.5 million tonnes from 69.0 million a month ago, and kept unchanged its forecast of EU corn imports in 2021/22 at 14.5 million tonnes.
The higher harvest estimate outweighed a 1 million tonne upward revision to expected EU corn exports, to 6 million tonnes, leading the Commission to raise its forecast of 2021/22 corn ending stocks to 19.8 million tonnes from 18.8 million.
In oilseeds, the Commission left unchanged its projections of EU imports of rapeseed and sunflower oil in 2021/22, at 4.9 million and 2.0 million tonnes respectively.
From North Africa, Tunisia, which imports about half of its grain needs from Russia and Ukraine, completed its necessary grain purchase orders before the outbreak of the war in Ukraine and will not face any shortage until the harvest season in the summer, an official in the agriculture ministry told Reuters on Thursday.
Hamed Dali added Tunisia’s stock will be sufficient until this June.
Egypt was forced to cancel its call for tenders yesterday, having only received one offer of French origin.
From Levant, while Ukraine has addressed the government of Turkey asking to close the Bosporus and the Dardanelles for Russian vessels, an independent expert of Sunseedman Veysel Kaya said that “it is not that easy for Turkish government to take such measures, as the country prefers to wait and see”.
Also, the expert added that the TMO’s wheat tender is unlikely to be cancelled, althought the agency may get a low number of offers, probably from Romania and/or France, or it will not get any offer at all.
From the Black Sea basin, commercial activity in the local Black Sea market has been suspended, due to the military activity there.
Ship loadings have been limited or stopped, logistics to ports are severely disrupted.
In the short term, prices are therefore clearly increasing for all products combined.
In the longer term, several questions arise, in particular about the ability of Ukrainians to carry out their work in the fields, and the rest of the world to cope with a continuation of the surge in fertilizer prices, which are closely linked to gas prices.
International buyers could face cancellations from shippers citing force majeure, and switch to sources other than those from the Black Sea, thus contributing to higher prices on both Euronext and Chicago .
Meantime, Russian state bank VTB has reduced its stake in its grain business, Demetra Holding, to 45% after two other shareholders increased their stakes via additional share issues, Interfax newsagency reported on this morning.
According to the Customs data, Russia exported 1 mln tonnes of corn in October-December 2021/22 MY (including deliveries to the Customs Union).
It is up 17% compared to the same period of the previous season (865.3 thsd tonnes).
Stronger export is based on higher corn crop in Russia in 2021 that amounted to 14.6 mln tonnes (+6% y/y), according to the preliminary estimation by Rosstat.
Turkey was the main destination for Russian corn in October-December 2021/22 MY.
It imported 226.3 thsd tonnes (+47%) or 22% of the total volume. South Korea imported 115.8 thsd tonnes of corn (+24%) or 15% of the total volume.
Latvia imported 54.8 thsd tonnes (+73%) or 5% of the total volume.
APK-Inform forecasts Russia to export 3.5 mln tonnes of corn in 2021/22 MY.
The country has already shipped 29% of its corn export potential.
According to the State Customs Service of Ukraine, in October-January 2021/22 MY, the country exported 14.1 mln tonnes of corn (+31% y/y), including 2.8 mln tonnes supplied to the Middle East (up 3 times).
Particularly, Turkey raised the import of Ukrainian corn by more than 3 times y/y from 347.9 thsd tonnes to 1116.9 thsd tonnes.
Supplies to Iran grew by almost 5 times from 172.1 thsd tonnes to 788.8 thsd tonnes.
Israel increased purchases by 76% from 312.4 thsd tonnes to 548.8 thsd tonnes.
APK-Inform forecasts Ukraine to export record 30 mln tonnes of corn in 2021/22 MY, in case of stabilization of the current situation in the country.
According to State Custom Service of Ukraine, since the beginning of 2021/22 MY and as of February 23 Ukraine exported 43.021 mln tonnes of grains and pulses, up by 12.053 mln tonnes y/y, reported the press-service of Ministry of Agrarian Policy and Food of Ukraine.
Ukraine has exported 4.551 mln tonnes of grain in February.
The total export included 17.955 mln tonnes of wheat (+4.631 mln tonnes y/y), 5.628 mln tonnes of barley (+1.672 mln tonnes), 161.8 thsd tonnes of rye (+160.1 thsd tonnes) and 18.982 mln tonnes of corn (+5.817 mln tonnes).
Moreover, Ukraine exported 68 thsd tonnes of flour (-23 thsd tonnes) including 66.6 thsd tonnes of wheat flour (-23.7 thsd tonnes).
The quantities of wheat remaining to be exported by Russia and Ukraine in wheat between now and the next campaign are estimated by Agritel at 8 and 6 million tonnes respectively.
From the Middle Kingdom, Chinese soybean meal prices are reaching historic highs on fears of supply difficulties.
China announced intentions to ‘strictly control’ their corn ethanol industry, citing food security.
From India, about 380,000 tonnes of sunflower oil shipments from the Black sea region to India are stuck at ports and with producers, and new purchases have stalled after ports suspended operations following Russia’s invasion of Ukraine, four dealers told Reuters.
There is no clarity when loading of the cargoes – worth $570 million at current prices – from Ukraine and Russia will resume, pushing Indian buyers to replace sunoil with soyoil and palm oil for March and April shipments, dealers said.
India has contracts for about 510,000 tonnes of sunoil from Black Sea region for shipments in February and March, but only 130,000 tonnes have been loaded so far in February, dealers said.
India imported 125,024 tonnes of sunoil in November 2021, 258,449 tonnes in December 2021, and 307,684 tonnes in January 2022, according to data from the Solvent Extractor’s Association (SEA).
The country, which gets more than two-thirds of its edible oil supplies through imports, buys about 1.25 million tonnes of cooking oil every month.
From Australia, despite large price moves offshore the Aussie cash wheat market yesterday continued.
Sellers continue to come to market and buyers do not feel the need to push values any higher.
Export focus on SFW delivered Geelong Melbourne did push those values $5/t higher.
Wheat basis continues to weaken, both current crop and new crop.
Port Kembla basis is about minus $75/t.
Basis is the difference between the Australian cash price, and the relevant US wheat futures contract.
In Australian-dollar terms, Chicago Mercantile Exchange (CME) wheat futures have risen $85/t since the middle of last week.
However, “the grain price in Australia has not reflected the moves on a like-for-like basis.”
“If we look at basis in Australia, the CME rally of the past week has really pushed it down to extreme lows.
“On a weekly average, Kwinana has dropped to -A$90/t versus -$44 the week prior.
“If the Australian wheat basis was at typical levels, then Aussie wheat price would currently be north of $500.”
However, “Australia is still working through last year’s monster crop in order to get it out of the country”, and “most ports are at capacity.”
Thus the impact on Australian pricing will depend on the severity, extent and length of the Russian invasion.
“If this event continues and exacerbates, further rises are inevitable.”
Barley values also remained largely unchanged.
Canola firmed $10/t yesterday track Port Kembla.
Victorian canola prices exceed $900/t, lifting $105/t in the past month.
The liquidity continues to flow, Clear Grain Exchange reported high volume of trade, 174,000t, much of it in Western Australian wheat and barley.
The demand for delivered commodity in eastern Australia remains strong as truck freight availability continues to be tight and road rates firm.
On the international trade scene, Jordan’s state grain buyer has issued an international tender to buy 120,000 tonnes of milling wheat which can be sourced from optional origins.
The deadline for submission of price offers in the tender is March 2.
A new announcement had been expected after Jordan made no purchase in its previous tender for 120,000 tonnes of wheat on Wednesday.
Taiwan’s MFIG purchasing group rejected all offers and made no purchase in an international tender for up to 65,000 tonnes of animal feed corn which closed on Friday.
Prices were regarded as too high after the surge in grain markets on Thursday following Russia’s invasion of Ukraine.
The lowest price offered in the tender was for U.S.-origin corn at a premium of 341.00 U.S. cents over the Chicago September 2022 corn contract CU2, believed to have been submitted by trading house Amaggi.
In its last tender on Feb. 10, MFIG bought 65,000 tonnes of corn from Argentina at a premium of 253.42 U.S. cents a bushel c&f over the Chicago July 2022 corn contract CN2.
U.S. corn dominated Friday’s tender, with eight companies including Amaggi each offering 65,000 tonnes.
Three offers of each 65,000 tonnes for Argentine corn were reported, the lowest estimated at 349.13 U.S. cents over Chicago September, believed to have been submitted by trading house Pan Ocean.
No offers for Brazilian or South African corn were reported in the tender.
MFIG had sought shipment between May 1 and May 20 if the corn was sourced from the U.S. Gulf, Brazil or Argentina, they said.
If sourced from the U.S. Pacific Northwest coast or South Africa, shipment was sought between May 16 and June 4.
That’s all.
To all of you I wish you a good day.
Author: Sandro F. Puglisi
