US farm markets were mixed yesterday amid some uneven technical maneuvering.
Corn and soybeans grabbed double-digit gains on a round of technical buying largely triggered by optimism from March WASDE report and the agency’s weekly export sales report.
Thus, corn market was back up by 3.10%.
The front month soybean futures market went home 0.87% in the black.
Soymeal bounced 1.9% on the day.
Soyoil traded 0.71% stronger.
Wheat prices, swung sharply lower, in contrast, with some contracts losing almost 10% by the close.
Particularly, May Chicago SRW futures tumbled 114.4 cents or 9.53% to $10.87.
May Kansas City HRW futures lost 48.6 cents or 4.37% to $10.656. May MGEX spring wheat futures faded 29 cents or 2.68% to $10.55.
Wheat prices has seen as “too expensive” by some international buyers after jumping to historically high levels last week, and yesterday marked the third consecutive session that prices suffered a major setback.
In energy market, oil prices clawed back some losses on this morning but were on track for their biggest weekly drops since November.
Brent crude futures gained $1.39, or 1.27% to $110.72 a barrel at 07:35 GMT after dropping 1.6% in the previous session.
U.S. West Texas Intermediate (WTI) crude futures were up $1.86, or 1.75%, to $107.88 a barrel, following a 2.5% decline on Thursday.
In a week of volatile trading, Brent, indeed, was on track for a weekly fall of about 6% after hitting a 14-year high of $139.13.
U.S. crude was headed for a drop of around 7% after touching a high of $130.50.
Prices eased this week after it became clear the European Union, heavily reliant on Russian energy, would not join the United States and Britain in banning Russian oil.
However, both contracts could well move sharply below $100 a barrel, from here on any news perceived as easing supply disruptions.
Similarly, both contracts could easily be back at $115.00+ on any negative headlines.
Commonwealth Bank forecasts Brent will average $110 in the second and third quarters of this year, but sees prices potentially climbing as high as $150 in the short term.
All of it is very uncertain.
In the freight market, the Baltic Exchange’s dry bulk sea freight index jumped to its highest in nearly three months on Thursday, as rates rose across vessel segments.
The overall index, which factors in rates for capesize, panamax, supramax and handysize shipping vessels, indeed, rose 146 points to 2,704 points, its highest since Dec. 14.
Particularly, the capesize index gained 331 points, or 14.5%, to 2,613 points, its highest since Dec. 21.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, increased $2,740 to $21,668.
The panamax index was up 39 points at 3,233 points, its highest since Dec. 7.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, increased $353 to $29,097.
The supramax index rose 78 points, its highest in more than four months, to 2,923 points.
In equity markets, U.S. stock indexes Thursday settled moderately lower and were weighed down by weakness in technology stocks that fell after the 10-year T-note yield jumped to a 1-1/2 week high.
Also, a -3% plunge in the Euro Stoxx 50 weighed on the overall market as European stocks fell on signs the Russian-Ukraine war will continue, as talks between the two countries failed again.
In addition, stocks retreated Thursday as German bund yields and T-note yields rose after the ECB announced a faster wind-down of its asset-purchase program.
The ECB, indeed, said it would end its Pandemic Purchase Program (PEPP) in March and unexpectedly said it would slow its asset purchase program (APP) to 30 billion euros a month in May and 20 billion euros in June may end the APP program in Q3.
The ECB also said that any changes in borrowing costs will take place “some time after” the end of net bond purchases and will be “gradual.”
Also, the ECB cut its Eurozone 2022 GDP estimate to 3.7% from 4.2% and raised its Eurozone 2022 inflation forecast to 5.1% from 3.2%.
Meantime, Thursday’s U.S. economic data showed weekly jobless claims rose more than expected, and consumer prices accelerated for a sixth month at the fastest pace in 40 years.
Particularly, U.S. weekly initial unemployment claims rose +11,000 to 227,000, showing a weaker labor market than expectations of 217,000.
U.S. Feb CPI rose +7.9% y/y, right on expectations.
Pressure has been building in Washington to revoke what is formally known as “permanent normal trade relations” with Russia, allowing the U.S. and allies to impose tariffs on Russian imports.
However, stock indexes recovered by the end from their worst levels, as energy stocks rebounded from Wednesday’s plunge and settled higher.
Thus, the S&P 500 dropped 0.4% to 4,259.52.
The benchmark index is now 11.2% below the all-time high it set early this year.
The Dow Jones Industrial Average fell 0.3%, to 33,174.07, while the tech-heavy Nasdaq composite slid 0.9% to 13,129.96.
Smaller company stocks held up better than the broader market.
The Russell 2000 lost 0.2%, to 2,011.67.
Meantime, shares fell on this morning in Asia.
Volatility has become the norm since Russia – Ukraine war start.
So, investors are keeping to the sidelines ahead of the weekend, given the potential for big surprises while markets are closed.
Thus, Tokyo’s Nikkei 225 index was down 660 points or 2.6% at 25,032.61 and the Hang Seng in Hong Kong shed 667 points or 3.2% to 20,222.79.
The Shanghai Composite index lost 2.2% to 3,224.92 after Chinese Premier Li Keqiang, the country’s No. 2 leader, said the government hopes to generate as many as 13 million new jobs this year while trying to reverse a painful economic slowdown.
Premier Li Keqiang promised “pro-job policies” including tax and fee cuts totaling 2.5 trillion yuan ($400 billion) for businesses.
Economic growth slid to 4% over a year earlier in the final quarter of 2021, down from the full year’s 8.1% expansion.
The Kospi in Seoul declined 1.1% to 2,651.22.
In Australia, the S&P/ASX 200 gave up 0.7% to 7,079.10.
India gained 0.2% but other regional markets declined.
In the currency market, the euro was 0.12% higher at $1.0994, as the hawkish tone from the ECB failed to boost momentum for the single currency substantially.
The yen eased to its weakest level against the dollar since January 2017 at 116.72 per dollar.
The dollar index held steady at 98.561, below a more than 1-1/2 year high of 99.418 hit on Monday.
On the weather side, starting yesterday, snow showers has fall in a band stretching from Arizona all the way through northwest Ohio, delivering between 1 to 4 inches along the way.
Further out, NOAA’s 8-to-14-day outlook predicts a return to seasonally dry conditions for the Central and Southern Plains, with warmer-than-normal weather likely for most of the United States between Marc 17 and March 23.
On the demand side, USDA’s weekly Export Sales data showed 2.143 MMT of old crop was booked during the week that ended 3/3.
That was well above estimates, a MY high, and a +500% increase yr/yr.
Unknown destinations were the top buyer.
USDA also reported new crop bookings at 22,860 MT for the week.
That was down from 222k last week, though the forward book is still 24% ahead of last year’s pace.
As for export shipments, USDA reported 1.763 MMT were sent out during the week with 555k of that to China.
The accumulated shipment reached 1.08 bbu, or 43% of USDA’s forecast.
As for soybean, the report showed a 20-week high for bean bookings, as 2.204 MMT were sold from the week that ended 3/3.
China was the week’s top buyer with over 1 MMT.
Weekly exports were just 834k MT.
Accumulated shipments reached 1.53 bbu, or 73% of the updated USDA forecast. USDA had new crop sales at 895k MT.
Accumulated shipments reached 1.53 bbu, or 73% of the updated USDA forecast.
Also, USDA reported soymeal sales at 316,107 MT from the week that ended 3/3.
That was a 6-week high and was 170% above the same week last year.
Meal exports were 253,121 MT setting the MY total to 5.44 MMT.
As for soyoil sales were 16,612 MT during the week that ended 3/3.
That was up from 6.5k MT wk/wk, though down from 35k MT two week’s prior.
As for wheat bookings during the week that ended 3/3 were at 307,213 MT.
That was up 2% from last week and was down by 7% yr/yr.
The trade wasn’t expecting more than 400k MT.
Shipments were 384,467 MT, and also higher on the week and lower yr/yr.
HRW exports, having reached 177 mbu, were 55% of the updated USDA forecast – with commitments at 85%. SRW sits at 59% of the new forecasted export, with commitments at 85%.
In this context, corn basis bids were steady to mixed across multiple Midwestern locations, trending as much as 5 cents in either direction.
Soybean basis bids were mostly steady, but did shift 4 cents higher at an Illinois river terminal while eroding 15 cents lower at an Iowa river terminal.
The funds were net buyers yesterday for 20,000 lots of corn and 11,000 lots of soybeans.
They were net sellers for 20,000 lots of wheat.
From South America, with growth of more than 10 million tons compared to the previous cycle, grain production should reach 265.7 million tons, according to the 6th Survey of the 2021/22 Crop carried out by the National Supply Company (Conab).
Published this Thursday , the document also shows an increase of 4.3% in the area to be planted, estimated at 72.7 million hectares – which corresponds to the incorporation of 3 million hectares, mainly influenced by by the growth of soybean and corn area.
Despite the expectation of an increase in the harvest when compared to the result obtained in the 2020/21 period, there is a slight loss in production of 0.9% over the volume released in the last month, when 268.2 million tons were expected.
The drop is a reflection of the severe drought observed, especially in the states of the southern region of the country and in the center-south of Mato Grosso do Sul.
The adverse weather had a significant impact on the productivity of soybean and corn 1st harvest, mainly.
With soybean planting completed on 40.7 million hectares, an increase of 3.8% in the planted area compared to the 2021/22 crop, attention is turned to the progress of the oilseed harvest, which already exceeds 50% throughout the year.
As observed by the Company’s technicians, the yields obtained reflect the climate scenario during the crop cycle.
Production is expected to reach 122.76 million tons.
The advance of the soybean harvest dictates the pace of second crop corn planting.
Currently, Conab estimates 74.8% of the area already sown. Highlight for Mato Grosso with 94% planted.
The forecast is for planting in an area of approximately 16 million hectares, which represents an increase of 6.7% over the previous harvest.
Conab’s current expectation is that the total production of the cereal will grow 29%, reaching 112.3 million tons.
The increase is driven by the better performance, mainly of the second harvest of the grain, which tends to increase from 60.7 million tons in the 2020/21 period to 86.2 million tons in the current season.
Meantime, Conab presented the percentage share of fertilizers in costs for soybean, corn and wheat crops.
According to the study, currently the share of these products is within a margin between 30% and 40% in variable costs, depending on the producing region and the product analyzed.
It is worth mentioning, however, that this percentage includes the values practiced until February of this year, when the conflict between Russia and Ukraine was not began.
The impact, both on the prices received by the producers and on the amounts paid for the inputs, will be better measured in the calculations to be carried out throughout this month.
In the case of wheat, fertilizers represent about 33% of variable costs in Passo Fundo, Rio Grande do Sul, while in Cascavel, Paraná, the percentage reaches 38%.
For 2nd harvest corn, the weight of these inputs reaches 33% in Sorriso (MT).
In the cultivation of soybeans in the municipality of Mato Grosso, the percentage of participation of fertilizers reaches an index of 37%.
Any increase in fertilizer prices has a significant impact on costs for producers, which tends to influence the prices of final products made available to consumers.
According to data from the Secretariat of Foreign Trade, about 22% of fertilizers imported in the last year originated in Russia, followed by China with 15% and Canada with 10%.
Meantime, Conab exports estimate for soybeans, corn and beans remained stable at 80 million tons, 35 million tons and 200 thousand tons, respectively.
In the case of wheat, shipments remain above the historical average, with more than 800,000 tons of the product being sold in February, according to data from the Foreign Trade Secretariat.
In view of this, there was a new increase in estimates for exports of the 2021 crop, whose commercial year runs until July this year.
The new forecast is that 2.1 million tons will be shipped by the end of this period.
As for the expected ending stocks, for corn the changes were not significant, with the carryover stock forecast for the 2021/22 crop at 10.3 million tons, an increase of 32.15% compared to the previous period.
As for soybeans, stocks at the end of December 2022 are expected to be 2.41 million tons, a reduction of 9.1% compared to the February survey.
The drop is explained by the further reduction in the production estimate for the year 2022.
As for wheat, in this survey, despite the increase in the forecast for exports from 1.9 million tons to 2.1 million tons, carryover stocks end the 2021 crop at 180,000 tons, a stable volume compared to the February survey. .
The greater volume exported tends to be offset by the increase in imports from 6.8 million tons to 7 million tons.
In Argentine, the Rosario grains exchange cut its forecasts for 2021/22 soy and corn production on Thursday due to the impact of drought that has hit crops since the start of the year.
The exchange trimmed its soybean production estimate to 40 million tonnes from 40.5 million tonnes previously, and its corn outlook to 47.7 million tonnes from 48 million tonnes before, it said in its monthly grains report.
The Buenos Aires grains exchange estimates the harvest of the oilseed at 42 million tonnes.
Argentine farmers will begin harvesting the first batches of soy in the coming weeks.
Regarding 2021/22 corn, the exchange said recent rains were tempering the impact of the earlier drought and had arrived just in time for the late-planted corn now in key growth stages.
“The yield projections for the late (corn) sowings would temper the very poor performance of the early ones in the central belt,” the exchange said, which had late last year before the drought forecast 56 million tonnes of the crop.
Argentine farmers have harvested some 8% of the areas planted with corn.
In Europe, volatility is still part of the markets.
The absence of flows from the Black Sea basin continues to direct buyers towards other sources of supply, in particular towards Europe and mainly towards France.
Adding to potential demand for French wheat, there was talk of further sales to Mexico, with four cargoes reportedly booked this week following another four last week.
In Germany, buyers of standard wheat for March onwards delivery in Hamburg offered on Wedsneday around 28 euros a tonne over Euronext May, with sellers seeking about 30 euros over.
However, on Thursday, wheat on Euronext, ended the session with gains only on new crop, while old season prices fell back into negative territory, after Tunisia having canceled Tusday’s tender.
Fears in the Black sea region about the 2022 harvest, however, are growing as the days go by.
Also, the rise in fertilizer prices remains a matter of concern for all producers, also European.
In rapeseed, May futures eased on the wake of crude oil retreated.
From North Africa, Egypt will ban the export of lentils, pasta, wheat, flour and fava beans for three months from March 11, its trade ministry said in a document seen by Reuters on Thursday.
From Levant , Jordan’s wheat stock will cover local consumption for 14 months, Yanal Barmawi, the Ministry of Industry, Trade and Supply’s spokesperson told The Jordan Times on Wednesday.
Barmawi added that the strategic reserve of grains will cover the local market needs for a good period of time.
Also, Barmawi said that the government will “take full responsibility for price differences in wheat”, despite sharp increases in international prices, whilet the government will continue to provide bread subsidies.
Jordan’s imports of barley and wheat are mainly from the US, Romania and many other countries.
Barmawi stated that the country’s storage of barley will also meet the local market needs for ten and a half months.
Barmawi noted that in regard of the global price hike for sunflower seed oil and corn oil, the government put a price cap for retailers operating in the Kingdom in order to protect consumers.
From the Black Sea basin, Russia could ban grain exports to the Eurasian Economic Union (EEU) from March 15 to Aug. 31, Interfax news agency said on Thursday, citing a source familiar with legislation preparation.
The source added that Russia could also ban sugar exports to beyond the EEU, membership of which comprises Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia itself.
Meantime, according to APK-Inform, the export prices of new-crop Russian wheat surged this week due to the same development on the global market.
As of March 9, indeed, the offer prices of 12.5% wheat amounted to 385-400 USD/t FOB deep-sea ports (July-August), sometimes the prices reached 410 USD/t FOB.
However, they are just indicatives.
Russian operators hope that will get the opportunity to supply wheat to their traditional buyers.
However, there is no activity on the forward market now.
No one knows what currency rate will be, how shipping in the Sea of Azov and the Black Sea will function, how to perform exchange operations, etc..
The export duty remains in force in Russia, despite any critics.
At the current prices, the duty may reach 150 USD/t.
Meantime, under economic sanctions imposed on Russia, Georgia is looking for alternative sources of wheat import, head of Association of wheat and flour producers Levan Silagava said.
Georgia cannot import wheat and flour from Russia, as the country is not able to pay for the products in foreign currency.
Currently, the country has wheat stocks sufficient for one month, the same for flour.
Kazakhstan and Romania could be as the possible sources for wheat import.
Meantime, in 2022, Kazakhstan to continue decreasing planted area under wheat, as the county is aimed on diversification of production of agricultural crops, declared the first vice-minister of agriculture Aydarbek Saparov.
Thus, the planted area under wheat will be cut by 285 thsd ha.
Area under ice will be decreased by 6.5 thsd ha to 89.9 thsd ha.
At the same time, the area under fodder crops will reach 3.6 mln ha.
Area under oilseed crops will be decreased by 61.7 thsd ha, including those under flaxseed, safflower, mustard seed, while the area under sunflower seed will be increased.
The total planted area under agricultural crops will increase by 125 thsd ha to 23.1 mln ha in 2022.
In Ukraine, according the deputy chairman of Ukrainian Agri Council Denys Marchuk, planting campaign in 2022 will be focused on spring crops that can be harvested as soon as in summer.
“We do not how the situation will develop. Thus, the focus will be on buckwheat, peas to cover the needs of population” – he said.
Most of agrarians from regions with quite calm situation informed that they mainly had all needed resources for planting campaign.
However, they provide some part of the fuel they accumulated for army’s needs.
One more problem is the disruption of supply chain of crop protection products and seeds.
Farmers cannot receive products they paid for.
From the Middle East, the Board of Directors of the Saudi Grains Organization (SAGO) approved an increase in the purchase price of local wheat for the current agricultural season, bringing it to an amount of SR1,700 per ton ($453.14).
This is the second increase of wheat price for this season.
It is noteworthy that SAGO’s purchase of local wheat from farmers comes in implementation of a Cabinet decision and amendment, regarding the controls to stop the cultivation of green fodder.
The Cabinet had also directed SAGO to purchase wheat from farmers if they choose to grow wheat as an alternative to green fodder for a period of five years, and not exceeding one and a half million tons per year, at prices determined by the SAGO in line with the prevailing international prices.
($1=3.7516 riyals)
From South East Asia, India, MNC are buying at 25,500 rupees which is a FOB equivalent cost of around $370 FOB, so export demand will only be attractive at above $370.
In Australia, phones are ringing off the hook in Australia as buyers hunt for supplies of coal, gas and wheat to replace cargoes from Russia and Ukraine, but local producers are being hampered by infrastructural and labour constraints.
In wheat, Australia is set to ship a record 25.3 million tonnes this year, but trucking, rail, port and staffing constraints mean it won’t be able to fill supply gaps at least in the near term.
All the shipping slots are booked up for the next few months on the east and west coast.
All need loaders to get their products to port and onto ships as fast as possible, but there is a shortage of equipment to do the job.
Amid a global shipping crunch, the lead times for acquiring loaders from overseas has blown out to 12 or 13 months.
So, there is a bottleneck now.
Coal producers, too, have been bombarded with calls for supply over the past two weeks from countries like Poland which have been reliant on Russian supply.
However Australia’s coal and LNG producers sell most of their volumes in term contracts, so cannot divert supplies from those customers.
In its December quarterly outlook, the government forecast Australia’s thermal coal exports would rise to 208 million tonnes in the year to June 2022 from 192 million tonnes a year earlier, with the value would more than double to A$35 billion ($26 billion).
On the other hand, for LNG producers, there is no extra gas available to be able to boost output.
Thus, LNG exports are expected to be flat or lower versus last year’s record 80.6 million tonnes, which ranked Australia as the world’s largest LNG exporter.
However, thanks to soaring oil-linked contract prices, the value of Australia’s LNG exports in the year to June 2022 is expected to more than double to A$63 billion from the previous year, according to the government’s December forecast.
Nickel could be a stand out, on the back of an unprecedented surge in prices.
Indeed, Australia’s exports are forecast to jump by 42% to 257,000 tonnes in the year to June 2022 from a year earlier, valued at A$5.2 billion.
($1 = 1.3643 Australian dollars).
Meantime, torrential rain has impacted the rail network travelling into Port Kembla, one of New South Wales’ two bulk grain ports.
It is damage to these rail lines, rather than damage to Kembla’s two terminals, that is causing ongoing headaches for the supply chain, with ship movements delayed by at least one week.
The Moss Vale-to-Unanderra section, which connects Port Kembla to southern NSW grain sites, as well as the Berrima Junction-to-MacArthur interstate line were hit by localised flooding.
Moss Vale received 238 millimetres of rain in the seven days to 9am Thursday, with Wollongong, just north of Port Kembla, recording 269mm.
An Australian Rail Track Corporation (ARTC) spokesperson said services on these lines were suspended due to the conditions.
In this context, local markets were steady yesterday, with wheat bids slightly softer through the port zones, while delivered bids were relatively unchanged.
Barley continued its strength, with bids firming by the day’s end in South Australia.
Canola markets were stronger on the new and old-crop, with old-crop delivered port bids on the east coast hitting A$1000/t.
Liquidity was quiet over the day on cereals with bits and pieces trading.
Pulses were a touch stronger, and we saw more activity in SA on field peas and faba beans.
With strong canola values, we saw a bit more get let go by the grower.
On the international trade scene, Algeria’s state grains agency OAIC purchased about 600,000 tonnes to 700,000 tonnes of optional-origin milling wheat in a tender, with French supplies expected to make up a large share.
The range in Wednesday’s tender exceeded initial estimates of about 500,000 tonnes, with one trader saying more than 700,000 tonnes was purchased.
Algeria does not release results of its tenders and reports are based on traders’ assessments.
Estimates of the purchase price were still around $485 a tonne C&F, similar to those made on Wednesday.
In the previous soft wheat tender reported on Feb. 17, Algeria bought about 700,000 tonnes, largely at prices ranging from $345.50 to $346.50 a tonne C&F.
The agency was reportedly ready to accept wheat with test weights – a measure of flour yield – of 76 kilos per hectolitre, with a tolerance down to 75 kg/hl, compared to a usual range of 78 to 77.
Argentine and Romanian wheat were also seen as possible origins to fill some of the order, traders added.
ODC Tunisia is tendering again for up to 125 000 tonnes of soft wheat and up to 100 000 tonnes of barley
Iran would have bought around 240,000 t of wheat from Europe and 60,000 t of soybean oil from South America.
Japan issued a tender to purchase 163.000 t of food-quality wheat from the United States, Canada and Australia that close on this morning.
Of the total, 51% is expected to be sourced from the U.S. The grain is for shipment beginning on March 21.
That’s all.
To all of you I wish you a good day.
Author: Sandro F. Puglisi
