Wheat prices remained red-hot on US farm markets yesterday, even if the trading session focused on bear spreading in many contracts.
Indeed, SRW May contract, went home gaining 7.62%, lockking limit up.
HRW faded back from their expanded limit gains, however, went home 7.2% stronger.
Spring wheat gains were much more modest as were only 0.4% higher.
Corn closed 0.1% lower, with narrowly mixed results.
Soybeans spilled early into the red, down 1.6%, as profit-takers entered the fray.
Soymeal also retreated with 1.39% losses.
Soy oil prices were 0.45% weaker at the bell.
In energy market, oil prices extended their rally on this morning, with Brent rising above $118 a barrel.
U.S. crude stocks fell to multi-year lows.
Tanks at the key Cushing, Oklahoma crude hub were at their lowest since 2018, while U.S. strategic reserves dropped to a near 20-year low.
Also, the OPEC+, decided to maintain an increase in output by 400,000 barrels per day in March despite the price surge, ignoring the Ukraine crisis during their talks and snubbing calls from consumers for more crude.
Thus, Brent crude futures rose as high as $118.22 a barrel, the highest since February 2013. The contract was at $116.60 a barrel, up $3.67, or 3.2%, by 04:15 GMT.
U.S. West Texas Intermediate crude hit an 11-year high of $114.70 a barrel and was at $113.01 a barrel, up $2.41, or 2.2%.
In this context, Australia’s ANZ raised its short-term target for oil to $125 a barrel, adding that supply shortages could see further upside.
In the freight market, the Baltic Exchange’s dry bulk sea freight index rose for a second session on Wednesday, helped by an uptick in rates across all vessel segments.
The overall index, which factors in rates for capesize, panamax, supramax and handysize shipping vessels, indeed, rose 68 points, or 3.3%, to 2,137 points.
Particularly, the capesize index gained 150 points, or 8.9%, to 1,840 points.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, rose $1,239 to $15,258.
The panamax index was up 33 points, or 1.3%, at 2,634 points.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, increased $293 to $23,703.
Among smaller vessels, the supramax index added 28 points to 2,471 points.
In equities markets, U.S. stock indexes on Wednesday rallied moderately, initially following European stocks higher after Russia and Ukraine agreed to talks on this morning.
U.S. stocks moved even higher, on signs of strength in the labor market after the Feb ADP employment change rose more than expected.
U.S. Feb ADP employment change, indeed, rose +475,000, showing a stronger labor market than expectations of +375,000.
Also, Jan ADP employment was revised upward to show a gain of +509,000 from the previously reported -301,000 decline.
Stock gains accelerated after Fed Chair Powell said the Fed would “proceed carefully,” and he favored raising interest rates by only 25 bp at the March FOMC meeting.
On Wednesday, Canada’s central bank raised a key interest rate by 0.25%, as acknowledged Russia’s attack will add to global inflation but said Canadian economic growth “is now looking more solid.”
Russia kept its stock market closed for a third day Wednesday.
That is the longest closure since Russia’s debt crisis in 1998.
The offshore ruble continued to weaken and sank to a new record low of 122.249 rubles/USD.
In this context, on Wall Street, the S&P 500 rose to 4,386.54.
The Dow Jones Industrial Average gained 1.8% to 33,891.35.
The Nasdaq composite advanced 1.6% to 13,752.02.
Meantime, Asian stock markets rebounded on this morning on the wake of Wall Street, even if Russian forces bombarded the Ukraine’s second-largest city, Kharkiv, and besieged two ports.
Particularly, the Nikkei 225 in Tokyo rose 0.8% to 26,605.94 and the Hang Seng in Hong Kong gained 0.5% to 22,453.50.
The Shanghai Composite Index advanced 0.1% to 3,487.54.
The Kospi in Seoul added 1.5% to 2,743.37 and Sydney’s S&P-ASX 200 was 0.7% higher at 7,164.00.
India’s Sensex opened up less than 0.1% at 55,500.49.
New Zealand and Southeast Asian markets also advanced.
On the weather side, rain and snow will return to parts of the Plains and Midwest between today and Sunday, with South Dakota, Iowa, Minnesota and Wisconsin likely to see the highest amounts, per the latest 72-hour cumulative precipitation map from NOAA.
The agency’s 8-to-14-day outlook predicts more seasonally wet conditions for the upper Midwest and Northern Plains between March 9 and March 15, with cooler-than-normal weather sweeping into the central U.S.
On the demand side, weekly EIA data showed ethanol producers averaged 997k barrels of production per day during the week that ended 2/18.
That was down 27k barrels per day from the week prior and was just the 2nd week below 1m since October.
Ethanol stocks retreated by 574k barrels to 24.933 million.
Meantime, private exporters reported to the USDA, having sold 264,000 metric tons of soybeans for delivery to unknown destinations.
Of the total, 198,000 metric tons is for delivery during the 2021/2022 marketing year and 66,000 metric tons is for delivery during the 2022/2023 marketing year.
Private exporters also sold 266,000 metric tons of soybeans for delivery to China.
Of the total, 198,000 metric tons is for delivery during the 2021/2022 marketing year and 68,000 metric tons is for delivery during the 2022/2023 marketing year.
Ahead of the next USDA export report, out on this afternoon and covering the week through February 24, analysts expect the agency to show corn sales ranging between 600k and 1.2 MMT.
Actual volume will need to land toward the higher end of these estimates to move above the prior week’s tally.
New crop corn bookings are expected to be below 400k MT.
As for soybean, analysts think the agency will show soybean sales ranging between 600k MT and 1.05 MMT of old crop for the week ending February 24.
New crop bookings are expected to be between 600k MT and 1.3 MMT.
Analysts also expect to see soymeal sales ranging between 100,000 and 250,000 metric tons for 21/22 and an additional 150k MT or less for 22/23.
Soy oil sales are expected between 5,000 MT to 30,000 MT.
As for wheat, analysts expect to see wheat sales ranging between 200k and 650k MT for old crop.
New crop sales from the week that ended 2/24 are estimated between 50,000 and 275,000 MT.
In this context, corn basis bids were steady to weak on Wednesday after dropping 3 to 4 cents at three Midwestern ethanol plants and sliding 1 to 3 cents lower at two processors.
Soybean basis bids were mostly steady across the central U.S., but did tilt 5 cents lower at an Iowa processor.
The funds were net buyers yesterday for 17,500 lots of wheat but net sellers for 4,000 lots of corn and 12,000 lots of soybeans.
From Canada, yesterday Canadian Canola Prices in the March contract printed a new all time high of $1,109 CAD/MT.
From South America, Brazil’s 2021/2022 soybean crop is likely to produce 121.17 million tonnes, StoneX consultancy forecast on Wednesday, cutting 4.2% off its February projection due to a drought that has hurt farms in the south.
StoneX cut its forecast for the southern state of Rio Grande do Sul to 8.9 million tonnes, 60% below its 2020/21 output.
“Not even the positive adjustments in the states of Goiás, Mato Grosso, São Paulo, Northeastern and Northern states were able to significantly offset the strong expected losses,” said StoneX analyst Ana Luiza Lodi in a note.
Meantime, Brazilian second crop corn is estimated to be 64% planted, well ahead of last year’s 39%.
Last year was delayed by a late soybean harvest, and that pushed critical pollination and ear fill later into the dry season.
This year’s earlier planting should aid in getting the crop established.
Argentina has suffered under months of drought, but a new problem is emerging late into the 2021/22 season.
Heavy rains, with more in the forecasts, which could create harvest problems for both corn and soybeans.
But for the time being, analysts are welcoming the much-needed moisture, as rains allow is to sustain current outlook by the Buenos Aires grains exchange.
In Europe, volatility continues to prevail on the markets.
Profit-taking, however, caused old season rapeseed to fall, as well as new crop wheat and corn on the distant side.
The March deadline on Euronext no longer is a reference, a few days before its closing.
However, it will be interesting to see to what extent certain operators could go to the delivery, in order to capture the goods to honor physical contracts.
Meantime, according to the French agricultural group InVivo, the European Union should let farmers cultivate fallow land and offer aid for rising fertiliser prices so the bloc can help replace millions of tonnes of Ukrainian wheat that may be lost due to war.
The ongoing conflict could have lasting effects on grain supply, with some estimates suggesting the Ukraine’s wheat output could drop by at least half and leave the world market short of 20 million tonnes of wheat.
A waiving of set-aside rules under the EU’s Common Agricultural Policy could increase its cultivated area by 10-15% next season.
On this wake, the European Union will consider letting farmers use fallow land, notably to grow protein crops for livestock feed, officials said on Wednesday.
The European Commission is to study how to apply such a move, which would modify EU farm policy rules on preserving soils and biodiversity, and make proposals at a next ministers’ meeting on March 21.
The EU is also considering measures on fertilisers in relation to its wider response to the impact of soaring energy costs, EU Agriculture Commissioner Janusz Wojciechowski told reporters.
Also, the EU will also study relief measures for the pig and poultry sectors, and will discuss with international organisations humanitarian aid for Ukraine and the needs of countries that usually rely on Ukraine for food commodities, he added.
Meantime, the financial implications of cutting Russia off from the world are now being felt, with Fitch rating agency, has cut Russia to junk status amid the first rounds of Eurobond defaults.
This has predictably led to increased scrutiny around cryptocurrencies and the ability to regulate them.
On the weather side, plots lack rainfall in different part of Europe.
After an autumn and a favorable winter for crops, the arrival of spring brings some concerns, as the first deficits are now reported in a large part of the France as well as in Spain.
A noticeable cooling in temperatures has also been observed in recent days, without however bringing any particular risks.
The weather maps now anticipate a gradual thaw and precipitation which will then be necessary to fully revive potential.
From the Black Sea basin, the climate remains ideal in Russia and in all Black Sea region.
Snow blankets protected crops exposed to a new cold spell, while the climate remains particularly mild in southern Russia.
The water status of the soil is also very good and a gradual rise in the thermostat in the production areas.
Meantime, exports from Ukraine or Russia have been reduced to almost zero, the ports in the Black Sea basin no longer being active, with the partial exception of Romanian origins. Shipowners can no longer secure their boats.
In this context, many contracts are canceled due to force majeure, and buyers are forced to find alternative sources,
On the other hand, according to local operators, Kazakhstan is seeing its demand for Russian cereals, mainly from Siberia, increase sharply.
However, the situation on deliveries to Kazakhstan, remain difficult, according to Agritel firm.
Businesses cannot ship or receive goods.
Having no direct access to the sea, the bulk of Kazakh cargo is routed through Russian ports, with which foreign shipping companies have completely stopped working due to the sanctions.
From the Middle Kingdom, China is rapidly positioning itself on international markets to cover its long-term needs for barley, corn, as well as oil and gas.
Yesterday, Dalian Corn Prices were at life of contract highs, with another 21 yuan gain to 2,864 yuan/MT (~ $11.51/bu).
Their new crop November corn price in China was also 25 yuan/MT higher to 2,879 yuan/MT (~ $11.57/bu).
That board carry compares with the domestic $1.12 inverse.
Dalian Soybean Prices in China were also higher on 3/2, up 91 yuan in the May contract to 5,020 yuan/MT (~ $21.61/bu).
Meanwhile, China’s wheat prices on Thursday topped 3,000 yuan per tonne for the first time this week.
Particularly, wheat prices across several key demand hubs in China, have jumped by more than 100 yuan in the past week, with bids as high as 3,250 yuan per tonne in the south, data from Shanghai Intelligence Consultancy showed.
“The Ukraine crisis has some play in it, but the fundamental reason still remains in the domestic supply-demand imbalance,” said a manager, who declined to be named as he was not authorised to talk to media.
Wheat stocks held by Chinese traders and farmers were drawn down sharply in 2021 after local corn prices jumped to a rare premium over wheat to trigger millions of tonnes of wheat use by animal feed producers.
Thus, wheat prices regained a premium over corn late last year, and gathered extra upside momentum in recent days after Russia’s invasion of Ukraine.
To cool prices, Beijing has been conducting regular auctions from its state stockpiles for the past year or so, although the volumes offered have been reduced from around 4 million tonnes at some auctions in 2021 to around 500,000 tonnes recently.
However, the average price of wheat sold in auctions this year is up around 15% than last year.
From Australia, Western Australian bulk handler CBH Group is making additional export capacity available which will help satisfy global demand for grain as world markets come to terms with the impact of Russia’s invasion of Ukraine and what it means for export flows.
Speaking at the Australian Grains Industry Conference (AGIC) Asia 2022 Live event yesterday, CBH head of trading Ben Tiller said the co-operative was already planning to ship more than 17 million tonnes (Mt) of grain in 2021-22 (Oct-Sep).
This beats its previous record of 15Mt.
“Another 500,000t of capacity is being offered to the trade this Friday,” Mr Tiller said.
Meantime, Australian prices rose yesterday for all commodities.
Wheat gained another A$5/t, and we saw volume change hands in Western Australia.
We saw some more interest in new-crop wheat prices, with track South Australia and east coast all over $400/t.
Barley also firmed, and more interest for the nearby popped up, with delivered Geelong bid at $330/t, and SA track values push to $340 levels on the bid side.
More barley continued to trade in SA, with Port Giles being well bid
Current and new-crop canola markets continued to rally locally, and tonnes continue to come to the market; port zones values are now at around $950-960/t.
Feed grain prices have jumped $15-$30 per tonne in the past week on the back of offshore rallies prompted by global market uncertainty now that Russia has invaded Ukraine.
Flooding in southern Queensland and north-eastern New South Wales has further fuelled the rally as some consumers and accumulators scratch to get grain into their sites amid an ever-changing list of cut roads and inaccessible on-farm storages.
Traders say consumers are buying as little as possible during the bull run, and are mostly well covered.
On the international trade scene, Turkey has provisionally purchased 370.000 t of wheat from optional origins.
The purchases are still subject to final confirmation and can still be canceled, however.
Japan purchased around 24.000 t of food-quality wheat from the United States in a regular tender.
The grain is for shipment between April 21 and May 20.
South Korea purchased 135.000 t of animal feed corn from optional origins.
The grain is for between early May and late June.
South Korea’s leading feedmaker Nonghyup Feed Inc. (NOFI) has issued an international tender to purchase up to 276,000 tonnes of animal feed corn and up to 65,000 tonnes of feed wheat with the Black Sea region excluded as an origin.
The deadline for submission of price offers in the tender is today, March 3.
The corn is sought in four consignments each of up to 69,000 tonnes for arrival in South Korea around May 20, June 1, June 10 and June 20.
The feed wheat is sought for arrival around July 15.
Wheat shipment is from the U.S. Pacific Northwest coast/Australia/Canada for June 12-July 1, from the U.S. Gulf for May 23-June 11, from South America for May 13 and June 1, from South Africa between May 28 and June 16 or from India for June 7-26.
The durum wheat market revived with purchases of approximately 250,000 t by Algeria at around $625 a tonne to $630 c&f, and 100,000 t by Tunisia from optional origins in a tender that closed yesterday.
The grain is for shipment in late March or early April, depending on origin.
That’s all.
To all of you I wish you a good day.
Author: Sandro F. Puglisi
