The wheat rally rolled on unabated globally, to start the week.
US farm markets, indeed, have seen May Chicago SRW prices captured limit-up gains once more, up 7.03% to $12.94.
May Kansas City HRW contracts climbed 3.05% to $12.4825.
May MGEX spring wheat contracts were up 4.40% to $11.8975.
Corn and soybean prices didn’t follow suit, however.
Corn prices, indeed, retreated 0.46%.
Soybeans finished the session with narrowly mixed results, down 0.06%.
Soy meal weakened with 0.37% losses, while soy oil was up triple digits, with 1.95% gain.
In energy market, oil prices see-sawed on this morning with Brent crude futures trading at $125 per barrel.
That is around 10% below the 14-year high struck in the prior session.
On Monday while US officials said the United States was willing to move ahead with a ban alone, Germany, the biggest buyer of Russian crude, rejected plans for an energy embargo.
European allies, indeed, are not planning to join a possible U.S. ban on Russian oil imports.
Thus Brent crude futures were up $2.01, or 1.63%, at $125 a barrel at 04:40 GMT, after trading as high as $126.35.
U.S. West Texas Intermediate (WTI) crude futures were up $1.53, or 1.28%, at $120 a barrel.
If all of Russia’s oil exports were blocked from global markets, analysts have said prices could rocket to $200 a barrel, while Russia’s deputy prime minister said oil could soar to more than $300.
“There is no capacity in the world in the moment that can replace 7 million barrels of exports”.
Meantime, five analysts polled by Reuters estimated on average that U.S. crude stockpiles decreased by about 800,000 barrels in the week to March 4.
In the freight market, the Baltic Exchange’s dry bulk sea freight index rose on Monday, helped by higher rates in all vessel segments.
The overall index, which factors in rates for capesize, panamax, supramax and handysize shipping vessels, rose 87 points to 2,235 points, its highest since Feb. 23.
Particularly, the capesize index gained 114 points to 1,749 points.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, increased $948 to $14,508.
The panamax index was up 116 points at 2,901 points.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, increased $1,052 to $26,113.
The supramax index rose 54 points to 2,640 points.
In equity markets, U.S. stock indexes Monday sold off to 1-week lows and settled sharply lower.
Soaring in commodity prices could boost inflation and curb economic growth.
The IMF warned that the war in Ukraine and the subsequent sanctions imposed on Russia will have a “severe impact” on the global economy, and price shocks from the war will have a worldwide ripple effect.
Ukraine and Russia held a third round of talks, but the prospects of any meaningful results from the talks are slim, as Russian President Putin said Ukraine must “demilitarize.”
Monday’s U.S. economic data also was bearish for stocks after U.S. Jan consumer credit rose +$6.838 billion, weaker than expectations of +$24.250 billion and the smallest increase in a year.
Russia said it will keep its stock market closed until at least Wednesday.
That would be the longest the Russian stock market has ever been closed.
On Monday, the offshore ruble sank to a new record low of 177.26 rubles/USD.
In this context, on Wall Street, the S&P 500 fell 122.78 points to 4,201.09, to start the week.
The Dow Jones Industrial Average fell 2.4% to 32,817.38.
The tech-heavy Nasdaq composite slid 3.6% to 12,830.96 and is now 20.1% below its record set in November.
That means the index is in what Wall Street calls a bear market.
The S&P 500 is down 12.4% from the peak it set in early January.
Meantime, shares fell in Asia on this morning on the wake of Wall Street.
Japan’s benchmark Nikkei 225, indeed, shed 1.71% to 24.790,95.
Australia’s S&P/ASX 200 sank 0.8% to 6,980.30. South Korea’s Kospi slipped 0.83% to 6.980,30.
Hong Kong’s Hang Seng lost 1.72% to 20.696,22, while the Shanghai Composite fell 2.35% to 3.293,53.
On the weather side, as wetter weather pushes eastward, not much additional rain or snow is likely for the Midwest and Plains, although Nebraska, Kansas, Iowa and northern Missouri could see some additional moisture between today and Friday, per the latest 72-hour cumulative precipitation map from NOAA.
The agency’s 8-to-14-day outlook predicts seasonally wet weather returning to the upper Midwest and eastern Corn Belt between March 14 and 20, with cooler-than-normal conditions settling around the Great Lakes.
Meantime, crop rating on winter wheat is still deteriorating, with only 24% of winter wheat in Kansas judged as good to excellent, 7% in Texas and 15% in Oklahoma.
On the demand side, corn export inspections totaled 1.582 MMT for the week that ended 3/3, moving fractionally lower than the prior week’s tally.
That was up from 1.555 MMT last week and still towards the upper end of trade estimates, but down about 100k MT from the same week last year.
China was the week’s top destination with 35% of the total.
Cumulative totals for the 2021/22 marketing year are still modestly behind last year’s pace, reaching 24.78 MMT.
As for soybean, export inspections reached 766,250 MT last week.
That was up from 738k MT last week and was 15% above the same week last year.
China was the top destination with 32% of the total.
Cumulative totals for the 2021/22 marketing year remain significantly behind last year’s pace, with 41.375 MMT .
Wheat export inspections faced a week-over-week decline of 29%, sliding to 343,463 MT and was under the same week last year by 179k MT.
That was very close to the middle of trade estimates.
It was broken down 50% HRW, 25% white, 20% HRS and just 16k MT of SRW.
Mexico led all destinations.
Cumulative totals for the 2021/22 marketing year are still running moderately below last year’s pace, with 15.852 MMT.
Meantime, private exporters reported to the USDA sold 132,000 metric tons of soybeans for delivery to China.
Of the total, 66,000 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.
In this context, corn basis bids were steady to weak across multiple Midwestern locations to start the week, slumping as much as 24 to 28 cents lower at two interior river terminals.
Soybean basis bids were steady to weak, after sliding 10 to 12 cents lower at two interior river terminals and eroding 4 to 10 cents lower at two other Midwestern locations.
The funds were net buyers yesterday for 14,000 lots of wheat but net sellers for 2,500 lots of corn and 1,000 lots of soybeans.
From Canada, Canadian wheat movement continues to trundle along with another 281.6k mt of wheat being exported during shipping week 30.
Year-to-date exports are now 6.9 million mt which is 40% (-4.5 million mt) less than last year.
Week 30 exports were just over the 279k mt/week needed to meet the AAFC’s 13 million mt number.
As for durum, thirty-four tonnes of Canadian durum were shipped during week 30 for a season total of 1.5 million mt, which is just 43% of last year’s amount.
Exports are poised to step up into spring as elevators fill with March contracts.
However, CP Rail is set to go on strike on March 16th, which would be a huge blow to Canadian agriculture.
From South America, AgResource Company released their latest soybean crop production estimate for Brazil, and it shows a crop size of 119.5 MMT.
The last time Brazil’s crop was under 120 MMT was during the 2018//2019 season when Brazil’s crop came in at 119.7.
Rio Grande De Sol yields have been off anywhere between 45% and 50%,” says Dan Basse of AgResource Company, but we also saw some crop degradation in Mato Grosso Do Sul, the southern part of that state, and in Mato Grosso because of all the rain.
Basse also says when you factor in potential losses in Argentina and Paraguay, the loss is even steeper.
“All combined, we’re looking at 40 million metric tons of soybeans that were lost”.
Meantime, SAFRAS and Mercado indicates that second crop corn planting in Mato Grosso is 94% completed, well ahead of last year’s much delayed 74% at this point.
SAFRAS also indicates that 51% of the Brazilian soybean crop has now been harvested, above the 5 year average pace of 41%.
Mato Grosso is 91% harvested.
Safras and Mercado reduced their Brazilian soy output by 2 MMT to 125 MMT, citing worse than expected yields in Parana and RGDS.
More rains expected in coming days will help Argentina’s corn and soy crops in their late development stages.
The Buenos Aires grains exchange estimates the soybean harvest at 42 million tonnes and the corn crop at 51 million tonnes, after having cut their forecasts by 2 million tonnes and 5 million tonnes respectively due to the drought.
The Rosario exchange is more pessimistic, pegging soy production at 40.5 million tonnes and corn at 48 million tonnes.
The Argentine soybean harvest usually begins in the last weeks of March, when the austral autumn begins.
Corn threshing has already started, earlier than normal due to the drought, and is around 5% complete.
Going into the March WASDE report, pre-trade estimates are seeking a 1.4 MMT cut for Brazil and a 2.1 MMT cut for Argentina corn.
As for soybeans, South American production is expected to be cut 2 MMT in Argentina on average and 5.1 MMT in Brazil on average.
The lowest estimates are 40 (-5 MMT) and 121.2 (-12.8 MMT) respectively.
In Europe, historical record beaten, with the wheat May contract on Euronext at 396.50 euros/t.
French origin is soughterest.
In this context, leading German agricultural trading group BayWa AG, criticised Hungary, over its decision to ban grain exports following a surge in prices.
The decision to stop exports was “inappropriate and lacking highly in solidarity,” said BayWa CEO Klaus Josef Lutz in a statement.
Bulgaria, on its part, said it would bolster its wheat reserves while producers fear an export ban.
Romania, on the other hand, has enough grain and food reserves to weather the crisis sparked by Russia’s actions and is not considering limiting wheat exports at the moment, Farm Minister Adrian Chesnoiu said.
From the Black Sea basin, the ruble is collapsing, meantime, Russia is asking foreing companies present in the country to repay their debts in roubles.
Meantime, according to SovEcon, Russia had exported 27.7 million tonnes of wheat in the period July-February.
On this wake, it cut its forecast for Russian wheat exports for the period July 2021-June 2022 by 0.8 million tonnes to 33.5 million tonnes, basing its latest assessment on the assumption that active military operations in the Black Sea region would slow the pace of exports in March-April.
SovEcon also said exports in the March-April period would have to go overland, and would amount to about 1 million tonnes per month, while in May and June, it expected exports to grow to more than 2 million tonnes a month.
Russian Black Sea terminals are working, but shipowners are not yet ready to send their ships to the region.
Meantime, Russian traders have resumed buying wheat in ports.
On the other hand, Ukraine’s state-owned railway company Ukrzaliznytsia is trying to export grain by train to neighboring countries, to compensate for a loss of exports through Black Sea ports blocked.
Ukrzaliznytsia said it is shipping grain to Romania, Poland, Hungary and Slovakia, from where it can be delivered to European ports.
At full capacity, this would allow Ukraine to deliver 17,000 to 18,000 t of grain per day.
The manner in which USDA deals with estimates of exports from Russia and Ukraine will be interesting on Wedsneday in March’s WASDE report.
US current crop wheat exports still need to increase by 5Mt to meet the previous USDA forecast number.
Given the Ukraine has officially limited exports on various products including wheat it would make sense that the USDA do move the decks around.
From the Middle East, Iraq’s commerce minister announced that the country will set aside $100 million to help bolster its strategic reserves by an additional 3 MMT of wheat in the coming months in an effort to bolster food security and address rising global prices.
From the Middle Kingdom, China’s government is capable of providing sufficient energy despite serious challenges as it will step up production capacity and boost reserves to keep prices under control, state planning officials said on Monday.
On this wake, the state planning body aim to boost output and reserves of oil, gas as well as coal, which powers more than 60% of China’s electricity generation plants.
Particularly, it would accumulate 200 million tonnes of government-deployable coal stocks, add more than 5 billion cubic metres of gas storage and increase the amount of the emergency back-up electricity to more than 30 gigawatts.
Also, some 450 gigawatts (GW) of solar and wind power generation capacity are also planned in the Gobi and other desert regions.
Meantime, the NDRC also pledged not to limit power and gas use unless extreme situations arose, and said, it would step up efforts to stabilise the output and prices of domestic grain, corn and soybeans.
Also, they will make rational use of international resources, strengthen reserve adjustments and maintain a balance between supply and demand.
China would be able to achieve its consumer inflation target of about 3% this year.
Meantime, China released 526,254 MT of wheat from state reserves in an auction on Monday – selling the full offer for 3,054 yuan/MT (~ $483.23/MT).
From South East Asia, Indians are stocking up vegetable oil and fuel, fearing that Russia’s invasion of Ukraine may cause an edible oil shortage.
India imports more than 90% of its sunflower oil from Russia and Ukraine, though sunflower oil accounts for about 14% of its total edible oil imports.
However, supplies of other edible oils – such as palm, soy, rapeseed oil and ground nut – are sufficient and there is no need to panic, said B.V. Mehta, executive director of the Mumbai-based Solvent Extractors’ Association of India.
From Australia, Australia’s east coast logistical nightmare continues as rain plays havoc, road freight has no sign of easing any time soon and fuel prices soar.
Meantime, planting will begin soon.
Farmers are preparing paddocks.
Use of chicken/pig and feedlot manure has increased on the back of higher fertiliser prices and there is still a shortage of farm labour.
In this context, Viterra and nine banks partnered in a finance facility aimed at achieving sustainability targets under ISCC (International Sustainability and Carbon Certification) rules.
Meantime, wheat was up another $5/t across the board.
Demand remained strong in WA and for protein wheat in Victoria and SA.
Barley markets continue to shift higher.
Buyers try to flush out the sellers but they are slow to commit.
Canola bids dipped on Monday, but offshore Matif and Winnipeg values were up sharply so Australian canola bids will rebound today.
On the international scene, Algeria returns to soft wheat purchases.
Tunisia is buying 125,000 t of wheat and 100,000 t of fodder barley.
South Korea received multiple offers in its tender to buy 60,000 metric tons of soymeal that closed yesterday, but made no purchases, as prices were regarded as too high.
Meantime, on this morning, leading South Korean feed maker Nonghyup Feed Inc. has issued an international tender to purchase up to 130,000 tonnes of animal feed wheat with the Black Sea region among areas excluded as a supply origin.
The deadline for submission of price offers in the tender is also Tuesday, March 8.
The wheat in NOFI’s tender is sought in two consignments of 45,000 to 65,000 tonnes.
Argentina, Pakistan, Denmark and China are also excluded as origins.
The first consignment is sought for arrival in South Korea between May 1 and June 30 with the seller free to offer shipment options in this period from the United States Pacific Northwest coast, U.S. Gulf, Canada, Australia, South America, India or South Africa.
The second shipment is sought for arrival around July 15.
If sourced from the U.S. Pacific Northwest coast, Australia or Canada, shipment is sought between June 12-July 1.
If sourced from the U.S. Gulf, shipment is sought between May 23-June 11. If from South America between May 13-June 1, from South Africa between May 28 and June 16 or from India between June 7-June 26.
NOFI on Tuesday also issued a new tender to buy 60,000 tonnes of soymeal.
Taiwan issued an international tender to purchase 49.000 t of grade 1 milling wheat sourced from the United States that closes on March 11.
The grain is for shipment between April 23 and May 7.
That’s all.
To all of you I wish you a good day.
Author: Sandro F. Puglisi
