U.S. farm markets were mostly higher on Thursday, as traders continued to wrestle with supply disruptions due Russia – Ukraine war.
Markets have closely followed the talks between Ukraine and Russia hoping for a ceasefire, however, the Kremlin said there was no deal yet.
Thus, corn prices fared the best, jumping more than 3.3% higher.
Soybeans firmed around 1.2%.
Soymeal ended 0.82% weaker.
Soybean oil prices rallied back triple digits with May having recovered 1.47%.
May Chicago SRW prices rose 2.69%.
May Kansas City HRW prices added 1.84%.
May MGEX spring wheat climbed 2.74%.
In energy markets, oil prices extended their gains on this morning.
Stall in peace talks between Russia and Ukraine raised again the spectre of tighter sanctions and a prolonged disruption to oil supply.
The supply crunch from sanctions on Russia, a stuttering nuclear talks with Iran, dwindling oil stockpiles and worries about a surge of COVID-19 cases in China that could hit demand, have drove benchmarks on the rollercoaster ride over the week.
RBC Capital analyst Helima Croft cautioned that Russian oil export losses will likely prove enduring and that offsetting barrels are in short supply.
Underscoring tight supplies, consultancy FGE said on-land product stocks at key countries are 39.9 million barrels lower for this time of the year relative to the 2017-2019 average and also 45 million barrels lower year on year.
Meantime, “U.S. Secretary of State Blinken is reportedly preparing to visit UAE and Saudi Arabia later this month and the oil ask will presumably be close to the top of the agenda”.
In this context, Brent crude futures rose 82 cents, or 0.8%, to $107.46 a barrel at 07:42 GMT, after surging nearly 9% on Thursday in the largest percentage gain since mid-2020.
U.S. West Texas Intermediate (WTI) crude futures climbed $1.14, or 1.1%, to $104.12 a barrel, adding to an 8% jump on Thursday.
Despite this rebound, both benchmark contracts were set to end the week down more than 4%, after having traded in a $16 range.
Prices, indeed, have dropped from 14-year highs hit nearly two weeks ago on doubts over both supplies of and demand for oil.
After briefly topping $130 early last week, a barrel of U.S. crude fell to nearly $94 a barrel on Wednesday.
But reports of a sale of Russian crude oil to India and apparent setbacks in peace talks between Ukraine and Russia have renewed concern over possible shortfalls in supplies.
“India imports most of its oil requirements, and is exploring all possibilities in the global energy market.”
Russia has not been a major oil supplier to India so far.
In the freight market, the Baltic Exchange’s dry bulk sea freight index inched lower on Thursday as a drop in the larger capesize segment countered gains in panamax and supramax rates.
The overall index, which factors in rates for capesize, panamax, supramax and handysize shipping vessels, indeed, fell 3 points to 2,588 points.
Particularly, the capesize index slipped 28 points to 2,604 points.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, decreased $234 to $21,596.
The panamax index rose 3 points to 2,850.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, increased $23 to $25,649.
The supramax index was up 16 points to 2,892 points.
In equity markets, U.S. stock indexes on Thursday rallied moderately, with the S&P 500 and Nasdaq 100 posting 2-week highs and the Dow Jones Industrial posting a 4-week high.
Better-than-expected U.S. economic data supported gains in stocks.
Particularly, U.S. weekly initial unemployment claims fell -15,000 to a 10-week low of 214,000, showing a stronger labor market than expectations of 220,000.
The U.S. Mar Philadelphia Fed business outlook survey unexpectedly rose +11.4 to a 4-month high of 27.4, stronger than expectations of a decline to 14.5.
U.S. Feb housing starts rose +6.8% m/m to a 15-1/2 year high of 1.769 million, stronger than expectations of 1.700 million.
Feb building permits, a proxy of future construction, fell -1.9% m/m to 1.859 million, stronger than expectations of a decline to 1.850 million.
U.S. Feb manufacturing production rose +1.2% m/m, stronger than expectations of +1.0% m/m and the biggest increase in 4 months.
Also, an easing of Russian default concerns was supportive for stocks after Bloomberg reported that JPMorgan Case processed funds that were earmarked for interest payments due on dollar bonds issued by Russia.
In addition, the surge of more than +8% crude prices boosted energy stocks.
On the bearish side, stocks indexes early the session were under pressure after Russian spokesman Peskov dismissed reports that Russia and Ukraine were moving closer to a settlement.
Also, Pentagon spokesman Kirby said Russia continues to “hammer” cities like Kharkiv and Cherniyiv with bombardments and rocket systems and isn’t acting like it wants to settle.
The war, and plans for US President Joe Biden to speak with Chinese President Xi Jinping later Friday were among the uncertainties overhanging markets.
In addition, the Organization for Economic Cooperation and Development (OECD) said the war in Ukraine would take more than one percentage point off global growth this year and drive up inflation by two percentage points.
In this context, on Wall Street, the S&P 500 climbed 1.2% closing at 4,411.67, after surging more than 2% in each of the prior two days for its best back-to-back performance in nearly two years.
The Dow Jones Industrial Average added 1.2% to 34,480.76.
The Nasdaq rose 1.3% to 13,614.78.
The tech-heavy index is on pace for its biggest weekly gain in more than a year.
Smaller company stocks outpaced the broader market.
The Russell 2000 index surged 1.7% to 2,065.02.
In other trading, the yield on the US 10-year Treasury note fell to 2.17% from 2.20% late Thursday.
Meantime, shares advanced in most Asian markets on this morning after the Wall Street extended a rally into a third day.
On Thursday, the Chinese government said companies in Shenzhen , a major business center, will be allowed to reopen while efforts to contain coronavirus outbreaks progress.
Their earlier closures had rattled financial markets.
Wrapping up a two-day meeting, the Bank of Japan opted to keep its monetary policy unchanged, with its benchmark interest rate at minus 0.1%, after pumping tens of billions of dollars into the world’s third largest economy for years, trying to spur faster growth.
In this context, Tokyo’s Nikkei 225 index rose 0.7% to 26,827.43 and the S&P/ASX 200 in Sydney gained 0.6%, to 7,294.40.
Hong Kong’s Hang Seng slipped 0.4% to 21,412,40.
The Shanghai Composite index added 1.1% to 3,251.07
In currency markets, the dollar rose to 118.76 Japanese yen from 118.60 yen.
The euro rose to $1.1094 from $1.1092.
The dollar index on Thursday fell -0.64%, adding to Wednesday’s losses.
On the weather side, the first day of spring is this coming Monday, and some springlike weather is already showing up around some parts of the Midwest and Plains, with areas as far north as Detroit reaching 70 degrees.
Looking further ahead, NOAA’s 8-to-14-day outlook predicts some seasonally cool weather returning to parts of the central U.S. between March 24 and March 30, with seasonally dry weather stretching from the West Coast all the way into the Ohio River Valley.
Faced with already dry conditions this winter, these medium-term weather forecasts carried out by the NOAA for the USA which still put forward rainfall below the seasonal averages, are supporting new crop prices, due to the development of winter crops, for which crop condition, show ratings still very poor levels in some states compared to past years at this time of year.
On the demand side, USDA data showed 1.836 MMT of old crop corn was sold for export during the week that ended 3/10.
Trade expectations were looking for less than 1.4 MMT.
Japan, Unknown, Mexico, Colombia, and South Korea had all booked more than 100k MT, led by 538k MT from Japan.
For new crop corn sales, China was the exclusive buyer for the week that ended 3/10 with 204k MT.
Corn exports were at 1.273 MMT.
That was down from last week’s 1.7 MMT and was 43% under shipments from the same week last year.
Accumulated corn exports reached 28.8 MMT (1.134 bbu), or 45% of USDA’s forecasted total.
As for soybeans, the report showed 1.253 MMT of old crop beans were sold during the week that ended 3/10.
That was inline with estimates.
New crop sales were 477k MT, with analysts’ expectations for at least 500k MT.
Soybean exports from the week came in at 714k MT, for a season total of 42.325 MMT (1.555 bbu).
That is 74.4% of USDA’s forecast.
As for the products, USDA reported 147,363 MT of soymeal was sold during the week that ended 3/10.
That was inline with pre-report estimates, but was 56% below last week and 44% below the same week last year.
Soymeal exports were 252k MT for a MYTD total of 5.69 MMT.
Soy oil bookings were reported at 22,639 MT.
Soy oil shipments were a 6-week low of 6.6k MT, leaving accumulated shipments 17% behind last year’s pace at 415.7k MT through 3/10.
As for wheat, USDA reported weekly wheat export sales of 145,930 MT.
That was below estimates and was 67% below the same week last year.
As for new crop bookings USDA had 258k MT sold, which was enough to push total forward sales to over 1 MMT.
That is just 2% shy of this year’s forward sales pace.
Wheat export were at 249,466 MT.
That was down 35% from last week and 62% from the same week last year.
Accumulated exports sit at 14.78 MMT, which trails last season’s pace by 21%.
The USDA has a 19.4% dip yr/yr built into their March forecast.
Meantime, private exporters reported to the USDA a large sale of 136,000 metric tons of corn for delivery to unknown destinations during the 2021/2022 marketing year.
On the other hand, USDA said freight rates for shipping US grains from the Gulf of Mexico to Japan hit US$79/t, up 12pc from the start of the year, and 37pc from the same time last year.
In this context, corn basis bids were steady to weak after falling 1 to 7 cents lower across four Midwestern locations.
Soybean basis bids were steady to mixed on Thursday after falling 2 to 10 cents lower at two river terminals and firming a penny at an Ohio elevator.
On Wednesday, commodity funds were net sellers of all major grain contracts, including corn (-20,000), soybeans (-6,000), soymeal (-5,000), soyoil (-1,000) and CBOT wheat (-15,000).
From South America, Argentina’s government has ceased the new issuance of export registrations for soy products.
Existing contracts are still able to leave, but until the new export laws are finalized no new sales are allowed.
The current rates are 31% for the products and 33% for the whole bean.
Industry insiders are preparing for a 2ppt hike to get the products matched with beans at 33%.
Argentinian data suggests inflation is running at ~52%.
According to Agroconsult, Brazil’s soybean area will likely grow at a slower pace than in previous years because farmers face a looming fertilizer shortage.
Brazil’s soy area has been consistently growing between 1 million and 1.5 million hectares (3.7 million acres) annually, a level unlikely to be seen for next crop.
The consultancy now, indeed, estimate between 500,000 hectares and 1 million hectares of soy area growth, but given the current scenario, it would be closer to 500,000 hectares.
After surveying soybean fields in large farm states, Agroconsult experts said Brazil’s soy production will fall almost 11% to just below 125 million tonnes in 2022.
Crops in Paraná and Rio Grande do Sul, have seen average yields fell by 38.7% and 56.2%, respectively although in top grain supplier Mato Grosso, average yields rose almost 5% to 60.7 60-kilo bags per hectare.
The consultancy also estimated Brazil’s second corn production at 92.2 million tonnes this season, referring to the cereal that is planted after soy is reaped on the same fields, and which represents 70-75% of total corn output in a given year.
Meantime, Brazil’s Agroconsult predicts the country’s 2022 soybean exports will total 78 MMT.
Agroconsult also estimates that Brazilian corn exports will total 41.6MMT this year.
In Europe, market context remains just as volatile.
Euronext wheat regained some ground on Thursday as investors turned more cautious about peace talks between Ukraine and Russia while analysts continued to forecast that the countries’ war would cause massive disruption to Black Sea grain exports.
The absence of a ceasefire reinforced risks of prolonged disruption to international grain flows, with buyers forced to seek alternative supply sources such as the European Union and India.
Some 11 million tonnes of wheat will be lost from the global market in the 2021/22 season because of the conflict between Russia and Ukraine, said Strategie Grains.
In its monthly report, France’s Strategie Grains indeed, cut its projection for wheat exports out of Ukraine by almost 6 million tonnes and from Russia by 5 million tonnes.
Consequently, the consultancy lifted its estimate for wheat shipments from the 27-member European Union this season by 2 million tonnes to 32.5 million tonnes.
As for corn, the war was likely to remove 12 million tonnes of Black Sea supplies from the world market.
These would need to be replaced by exports from North and South America and India.
The rally in grain and energy prices, is taking a toll on animal farming.
As a result Strategie Grains cut projected grain demand from the EU animal sector in 2021/22 by close to 1 million tonnes.
For next season, the consultancy slashed by 40% its forecast of Ukraine’s grain production.
In detail, Strategie Grains cut its monthly Ukrainian wheat production forecasts for 2022/23 by 17 million tonnes for maize, 13 million tonnes for wheat and 5 million tonnes for barley.
It also cut its outlook for combined exports from Russia and Ukraine by 17 million tonnes in wheat, 8 million tonnes for corn and 4 million tonnes for barley.
Germany was among EU countries seeing brisk export demand, so much so that supplies from eastern EU countries were also being brought to German ports, according to traders.
A first harvest estimate by Germany’s association of farm cooperatives, projecting the 2022 wheat crop up 5.8% on the year at 22.61 million tonnes, was welcomed by traders as a hope that stocks depleted by exports will be replenished.
The country’s association of farm cooperatives also forecasted Germany’s 2022 winter rapeseed crop to rise 11.6% from last summer’s crop, to 3.90 million tonnes after an increase of 8.6% in the area planted.
Germany’s winter barley crop, will fall 0.4% on the year to 8.85 million tonnes following a reduction in sowing.
The spring barley crop, will increase 13.3% after an expansion in sowing, to 1.72 million tonnes.
Corn crop will fall 7% to 4.13 million tonnes because of an expected reduction in yield.
German grains had developed well after a mild winter without major frost damage to crops.
However, crops are not winter hardened and some could be vulnerable to late season frosts.
Also, cuts in fertiliser supplies caused by sanctions against major producer Russia left German farmers facing fertiliser costs up to four times as high as last year and this, could mean negative impacts on crop size and quality.
Meantime, low water levels after recent dry weather are preventing cargo vessels from sailing fully loaded on the Rhine river in Germany and adding surcharges to the usual freight rates.
Low water is hampering shipping on parts of the river south of Cologne including the chokepoint of Kaub.
The Rhine is an important shipping route for commodities including grains, minerals, coal and oil products including heating oil.
In rapeseed, May futures added as much as 5.4% to 948.50 euros a tonne, a new record for Euronext.
Traders cited renewed tensions in old-crop supply in Europe, with deferred positions for 2022 crop trading lower.
Meantime, some 92% of French soft wheat crops were in good or excellent condition by March 14, unchanged from a week earlier and above a year-ago rating of 87%, farm office FranceAgriMer said on Friday.
Spring barley sowing was 90% complete compared with 76% a week earlier but lagging 96% progress seen a year ago, FranceAgriMer said in a cereal crop report.
In this context, Finland’s government is to direct 300 million euros ($331 million) to Finnish farmers facing an “acute liquidity crisis” caused by high inflation and rising energy prices, finance minister Annika Saarikko said on Thursday.
“Farmers are out of cash at a time when they need to buy fertilisers, seeds and livestock feed every day,” Saarikko told.
Saarikko said she expected the European Union to decide by next week if the bloc’s rules could be loosened to allow higher subsidies to be paid to farmers under existing support schemes, otherwise Finland would introduce a new national crisis support mechanism.
Finland’s government also plans to boost defence spending and is looking into ways of supporting the transport sector, which is also struggling with rising energy costs.
Neighbouring Sweden on Monday said it would cut fuel taxes to ease high prices.
From North Africa, Egyptian farmers will have to sell at least 60% of their wheat to the government this season or risk losing financial support, according to a document circulated by traders.
The Supply Ministry document said farmers would have to sell at least 12 ardebs (150 kg) of wheat per feddan (acre).
A feddan usually produces an average of 20 ardebs.
The rules also apply to any third party that purchased wheat from farmers before the decision was taken.
After meeting the quota, farmers would need a permit from the government to sell the rest of their wheat elsewhere.
Farmers who fail to comply would be denied access to subsidized fertilizers in the summer, as well as any support from the Agricultural Bank of Egypt.
The rules also provide for incentives for farmers with plots of more than 25 feddans who sell 90% or more to the government, including subsidised fertilizers.
It was unclear if these rules had received final approval.
From the Black Sea basin, SovEcon managing director Andrey Sizov says activity at Russian ports paused for about a week after the start of the war, but vessels are now moving in and out of the area.
North American grain analysts indicated Russia’s exports have essentially been shut down by the war in Ukraine.
But while Ukraine’s ports are closed, Russia’s ports are open for business and moving a lot of crop, contrary to popular belief, Sizov said.
“In fact, FOB prices in the European Union jumped only by about US$150 per tonne, while there would be a similar response if Russian wheat was suddenly cut off from markets” he added.
On this wake, SovEcon recently upped its forecast for the Russian March wheat exports to two million tonnes from its earlier estimate of 1.6 million tonnes also seeing an overwhelming demand.
Freight rates are substantially higher but so are prices because customers still need Russian wheat.
A weaker ruble is also facilitating trade.
Sizov estimates there are about five million tonnes of Russian wheat remaining to be exported in 2021-22.
Ukraine has another six million tonnes.
If there is a ceasefire in coming days or weeks, Ukraine’s exports would “jump rapidly”, as there has been no damage to key grain export terminals.
Meantime, SovEcon is forecasting for wheat a 19 percent drop year-on-year to 26 million tonnes from 32.1 million tonnes last year in Ukraine.
Corn production would fall by 14 Mt compared to last year, to 27.7 Mt!
That would be an overall 34% drop yr/yr, though some particularly hard felt regions may drop by more than 40%.
APK-Inform is forecasting a 28 percent drop in the country’s winter wheat, rye and barley production based on “the current map of military activity.”
Sizov said there are no substantial issues for Russia’s 2022 wheat crop at present.
Weather has been friendly to the winter crop.
SovEcon most recent estimate is 84.8 million tonnes, up 9.9 million tonnes year-on-year and there is a good chance to revise it higher.
From the Middle Kingdom, rising feed demand coupled with limited availability and higher prices for protein-rich substitutes is expected to increase China’s soybean imports to a record forecast 100 million metric tons (MMT) in Marketing Year (MY) 2022/23.
Estimated soybean imports for MY 2021/22 are reduced to 95 MMT from the previous Post estimate on continuing weak demand in the swine and poultry sectors and announced plans to auction state reserves.
Oilseed production is forecast to increase slightly to 62.4 MMT in MY 22/23 on strong domestic prices and government incentives.
On this wake, China said it expects to increase its soybean planting acreage by more than 20 million mu in 2022, based on preliminary estimates, according to a state media report on Thursday.
Meantime, China has sold 186,000 tonnes of imported soybean oil, and 256,000 tonnes of imported soybeans to boost market supply.
Meantime, Dalian’s most-active soyoil contract rose 1%, while its palm oil contract fell 0.7%.
On the other hand, China’s state planner said on Friday all regions need to ensure supply and stable prices of fertilisers, and it called for quick resumption of production at any shuttered companies.
The National Development and Reform Commission also reiterated the need to stabilise grain output and ensure food security.
From South East Asia, Malaysia’s exports in February rose 16.8% from a year earlier, below forecast, government data showed on Friday.
February’s exports were expected to rise 23.8%, according to 14 economists surveyed in a Reuters poll.
Imports in February grew 18.4% from a year earlier, the data showed.
Analysts were expecting a 25.6% rise, according to 14 economists surveyed in a Reuters poll.
Malaysia’s trade surplus in February was 19.8 billion ringgit.
Analysts had forecast a surplus of 20.3 billion ringgit.
Meantime, Malaysian palm oil futures were set on Friday for their sharpest weekly drop in nine months, even as prices firmed after top producer Indonesia stunned the market by abandoning its export curbs in favour of a hike in export levy.
The benchmark palm oil contract for June delivery on the Bursa Malaysia Derivatives Exchange, indeed, gained 31 ringgit, or 0.52%, to 5,967 ringgit ($1,420.04) a tonne by the midday break.
Palm has fallen 11% so far this week and is set to snap a three-week rally and erase most of the war Russia-Ukraine risk premium.
Indonesia has significantly raised its maximum palm oil export levy to $375 per tonne when the reference price is at least $1,500 a tonne, as part of efforts to control domestic cooking oil prices after previous measures failed to tackle the problem.
The world’s biggest exporter of the edible oil had announced a day earlier a surprise policy U-turn to remove export volume restrictions on palm oil products.
From Australia, local markets were a touch softer yesterday but liquidity remained sluggish over the day as buyers step back and take a breather and continue to work through execution.
Growers that have received some good falls of rain this week through the Wimmera and Mallee areas have started planting early grazing crops and long-season canola.
Sorghum harvest is hitting its peak in Queensland, and the market has still managed to rally in the past week, with delivered Downs at around $335-340/t.
Sites continue to fill quickly and reach capacity as yields remain impressive.
On the international trade scene, Algerian state agency OAIC is believed to have purchased animal feed barley from optional origins in an international tender which closed on Wednesday.
The volume purchased was unclear, but estimates were about 200,000 tonnes.
The tender had sought a nominal 50,000 tonnes for shipment in two periods: April 1-15 and April 16-30.
It was thought to have been purchased at around $470 a tonne c&f, according to trader estimates.
Although origin was optional, its expected the barley to be sourced from France, Romania and Bulgaria.
The OAIC does not publish details of its tenders and reported results are based on trade estimates.
The International Grains Council March Global S&D forecasts
The International Grains Council (IGC) on Thursday raised its forecast for global corn production in 2021/22 by 4 million tonnes to 1.207 billion tonnes buoyed by improved outlooks for crops in India and the European Union, with no change to Brazil, at 111.5, and a 2 MMT cut in Argentina to 57 MMT.
Global stocks were raised by 6 MMT after IGC reduced world exports.
Ukraine was reduced by 10.9 MMT from the Feb figure to 21 MMT. Both Brazil and Argentina also got export cuts, by 1.5 MMT and 500k MT respectively, though the U.S. was forecasted to grab those 2 MMT.
Meanwhile, the inter-governmental body maintained its forecast for global wheat production in the 2021/22 season at 781 million tonnes.
The IGC also showed a 3 MMT loss in wheat trade, and a comparative 3 MMT boost to carryout (at 194 and 281 MMT respectively).
Australian output was seen 800k MT higher, though trims to the EU and non-reported nations offset.
As for trade, Russian exports were cut back 1.5 MMT to 32, and the Ukraine lost 3.3 MMT to 20.8 MMT.
The EU was set to grab 1.1 MMT of the difference, with the rest to stocks.
The IGC also reduced their forecast for Chinese imports from 10.1 MMT to 9.6 MMT – it was 11 MMT last year.
As for soybean, the International Grains Council cut their global soy output outlook by 3 MMT to 350 flat – mostly via a 2.7 MMT Brazilian reduction.
Global trade was also cut by 3 MMT, with a 1.8 cut to Brazil and a 500k MT cut in Argentina.
The U.S. was forecasted to grab 300k MT with a 57 MMT forecast.
Chinese imports were trimmed 1.5 MMT to 94.8.
Overall global stocks were seen at 42 MMT, just a 1 MMT drop from February.
In this context, the IGC cut its forecast for Ukraine’s grain exports in the current 2021/22 season.
Ukraine’s grain exports were revised to 47.8 million tonnes, sharply down from last month’s forecast of 62.8 million.
“Although there are efforts to increase exports via railway routes through the country’s western borders, overall volumes are likely to be limited,” the IGC said.
Particularly, Ukraine’s corn export outlook was cut to 21.0 million tonnes from 31.9 million while wheat exports were downwardly revised to 20.8 million from 24.5 million.
The IGC also downwardly revised its forecast for Russian grain exports to 37.1 million tones from 37.7 million.
That’s all.
To all of you I wish you a good day.
Author: Sandro F. Puglisi
