US farm markets, were mixed but mostly weaker yesterday.
While rainy weather across the Corn Belt could hand out additional corn planting delays this spring, this could boost soybean acres this season, and prices shifted moderately higher and lower respectively.
Corn prices, indeed, tried to inch a bit closer to life-of-contract highs, but ended just 0.06% only higher.
The December contract’s new contract high was $7.55 1/2.
The soybean complex was mixed, as soy oil rallied by 3.19% to new all time highs above 90 cents/lb.
Meantime, soybeans faded by 1.16%, also weighened by soymeal which closed down by 2.39%.
Wheat prices also slumped after a disappointing set of export data that prompted some technical selling and profit-taking.
CBOT SRW indeed, closed 0.56% weaker.
KC HRW wheat prices closed with 1.05% losses.
Spring wheat prices closed 0.69% lower.
Thus, in spite Chicago wheat futures are easing also on Friday, they are up 43% in three months, and they are poised for a third straight monthly gain.
The most-active wheat contract on the Chicago Board of Trade (CBOT), indeed, has gained almost 8% in April.
Corn was set for a fifth monthly gain, adding 8.5% this month, while soybeans are up 4.4%.
In energy markets, oil prices rose for a fourth day on Friday as Russian supply disruption fears trumped COVID-19 lockdowns in China.
Brent crude futures, indeed, rose 88 cents, or 0.8%, to $108.47 a barrel by 06:39 GMT after gaining 2.1% in the previous session.
The front-month June contract expires later on Friday.
The more active July contract rose 97 cents to $108.23 a barrel.
U.S. West Texas Intermediate crude gained 55 cents, or 0.5%, to $105.91 a barrel after settling 3.3% higher on Thursday.
Both contracts are set to close the week higher, with WTI on track to post five straight months of gains.
Oil prices will continue to be volatile also in relationship with Beijing choses (read below).
On the supply side, OPEC+ is likely to stick to its existing deal and agree another small output increase for June when it meets on May 5, but Russia’s oil production may fall by as much as 17% in 2022.
Sanctions have also made it increasingly difficult for Russian ships to send oil to customers, prompting Exxon Mobil Corp to declare force majeure for its Sakhalin-1 operations and curtail output.
Concerns about disruptions of Russian oil exports, especially diesel, have pushed Asian refiners’ margins to record levels.
Diesel futures, indeed, closed at a record high of $5.14 per gallon on Thursday while New York Harbor diesel traded at a record premium to futures prices on what traders are describing as a short squeeze against the May diesel contract.
In freight markets, the Baltic Exchange’s main sea freight index, which tracks rates of ships carrying dry bulk commodities, slipped for the first time in seven sessions on Thursday on softer rates in the capesize segment.
The overall index, indeed, fell 22 points, or 0.9%, to 2,403 points, after hitting a one-month peak on Wednesday.
Particularly, the capesize index fell 77 points, or 3.5%, to 2,149 points.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, decreased $639 to $17,821.
The panamax index gained 10 points, or 0.3%, to 2,914 points.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, rose $89 to $26,228.
The supramax index was unchanged at 2,736 points.
On week 17, there is a sharp decrease in freight rates in the Azov and Black Sea region.
The freight level for shipment of a 3K parcel of wheat from Azov to Marmara sea ports has reached the level of $63 pmt.
Many charterers and shipowners expect that the Russian May holidays will be marked by a further reduction in freight to the level of the average 50ies, Sea Lines shipbrokers report.
The number of cargoes in the market is small, as the demand for grain from Turkey remains low.
More requests appear for the Italian direction.
Despite the opening of navigation on the Russian river a few weeks ago, this direction still remains unpopular.
So far, major players in the grain market, traditionally actively buying grain from the Volga region, do not express interest in buying goods from this region.
At the same time, the remnants of last year’s harvest are still not exported, and some companies plan to start shipping them in late May and early June, primarily to the Marmara Sea ports and Mersin.
According to Sea Lines, on week 17, freight rates for wheat parcels from Azov made $61 to the Black Sea, $63 to Marmara, $77 to Mersin and $78 to Egypt.
Freight rates from Rostov AB (after bridge) are $1 above, from Rostov BB (before bridge) the same, from Yeisk and Taganrog $1 below, and from Temryuk $3 below those from the port of Azov.
In the Caspian, freight rates remain on the previous week’s level.
On week 17, freight rates for shipping corn by 3,000 dwt bulkers to Iran make $21 from Aktau, $26 from Makhachkala, and $31 from Astrakhan.
In equity markets, U.S. stock indexes Thursday closed sharply higher.
Strong quarterly earnings results from tech megacap stocks propelled the overall market higher.
Meta Platforms surged more than +17.6%, and PayPal Holdings jumped more than +11% after reporting better than expected earnings results.
Apple rose 4.5% in regular trading.
It rose another 2.3% in after-hours trading after reporting stronger-than-expected results and increasing its dividend and stock repurchase program.
Also, chip stocks rallied Thursday after chipmaker Qualcomm jumped 9.7% as easily beating Wall Street’s profit estimates.
McDonald’s rose 2.9% following a strong earnings update. Southwest Airlines rose 2.1%.
Amazon rose 4.7% in regular trading, but slumped 10.5% in after-hours trading after the online retail giant reported its first quarterly loss since 2015.
The company reported a decline in sales and huge write-down of its investment in an electric vehicle startup.
After hours, on Thursday, SEC filings showed Elon Musk sold 4.4 million shares of Tesla stock worth roughly $4 billion, most likely to help fund his purchase of Twitter.
Tesla shares closed Thursday down slightly at $877.51.
They are down 17% so far this year.
Meantime, higher T-note yields were negative for stocks as inflation concerns weighed on German bund prices and undercut T-notes after German consumer prices in April rose more than expected at a record pace (read below).
Another bearish factor for stocks is U.S. growth concerns after Thursday’s data showed U.S. Q1 GDP unexpectedly contracted.
U.S. weekly initial unemployment claims fell -5,000 to 180,000, right on expectations.
U.S. Q1 GDP unexpectedly contracted -1.4% (q/q annualized), weaker than expectations of +1.0%.
The Q1 core PCE deflator rose +5.2% q/q, a slower pace of increase than expectations of +5.5% q/q.
In this context, major stock indexes on Wall Street notched their biggest gains in more than six weeks.
Particularly, the S&P 500 rose 2.5% to 4,287.50 and the Dow Jones Industrial Average gained 1.8% to 33,916.39.
The Nasdaq picked up 3.1% to 12,871.53.
Smaller company stocks also rallied.
The Russell 2000 rose 1.8% to 1,917.94.
This week has been turbulent as investors review a heavy batch of corporate earnings from major tech companies, industrial firms and retailers.
Investors will get another update this morning on spending, a barometer for the economy as everything from food to clothing and gas becomes more expensive, when the Commerce Department releases its personal income and spending report for March.
Meantime, Asian stocks advanced Friday after Chinese leaders pledged to step up efforts to support the economy as the country weathers its worst outbreaks of COVID-19 since the pandemic began.
Investors, indeed, awaited signals on Chinese economic policy from a meeting of the ruling Communist Party’s powerful Politburo.
The party’s COVID-zero policies have put pressure on President Xi Jinping and other leaders to counter the blow to the economy from shutdowns aimed at vanquishing COVID-19.
The report indicated no change in the leaders’ strategy for fighting outbreaks.
But it said the meeting agreed on adjusting policies to keep the economy, which was slowing even before the latest waves of coronavirus infections, “operating in a reasonable range” and to speed up implementation of tax rebates and reductions, ensure enough energy supplies and help industries, small businesses and families severely affected by the pandemic.
Thus, the Shanghai Composite index gained 2.4% to 3,047.77 while Hong Kong’s Hang Seng index surged 3.3% to 20,941.61.
Tokyo was closed for a holiday, the first of several in Japan’s coming “Golden Week.”
In Seoul, the Kospi added 1% to 2,693.26, while Australia’s S&P/ASX 200 advanced 0.7% to 7,407.70.
In currencies trading, the EUR/USD on Thursday fell by -0.0061 (-0.58%) to 1.0494.
That was a 5-1/4 year low.
The euro was under pressure after ECB Vice President Guindos warned of slower economic growth on worsening supply-chain bottlenecks.
Geopolitical risks in Europe are undercutting EUR/USD.
Also, record-high consumer prices in Germany are bearish for EUR/USD as German Apr CPI (EU harmonized) rose a record +7.8% y/y (data from 1997), stronger than expectations of +7.6% y/y.
USD/JPY rose by +2.48 (+1.93%) to 130.85 after hitting a 20-year high of 131.25 yen/USD.
The BOJ said it would maintain unlimited purchases at a fixed rate every business day to protect the ceiling of its 0.25% yield target.
Japanese economic data was mixed for the yen.
On the bearish side, Japan Mar industrial production rose +0.3% m/m, weaker than expectations of +0.5% m/m.
Conversely, Japan Mar retail sales rose +2.0% m/m, stronger than expectations of +1.0% m/m and the largest increase in 1-3/4 years.
The dollar index on Thursday rose by +0.696 (+0.68%) to 103.659.
The dollar Thursday rallied for the sixth consecutive session and posted a new 5-1/4 year high.
On the weather side, ample wet weather is likely for large swaths of the Midwest and Plains between today and Monday, per the latest 72-hour cumulative precipitation map from NOAA.
Significant portions of Nebraska and the Dakotas could see 2” to 3” fall during this time.
NOAA’s latest 8-to-14-day forecast predicts near-normal precipitation for much of the Corn Belt between May 5 and May 11, with seasonally cool weather returning to the Great Lakes region and Ohio River Valley.
On the supply side, the overflow of this low pressure system on the HRW wheat growing area slightly relieves recent concerns and weighs on wheat prices in Chicago and Kansas City.
Meantime, the Biden administration is asking Congress to approve $500 million for the farm sector, in a bid to woo U.S. wheat producers to double-crop their fields, and boost how much the federal government will spend on short-term loans to farmers who grow certain food crops.
On the demand side, Weekly FAS data showed 866,755 MT of old crop corn was booked during the week that ended 4/21.
That was just below the range of expectations.
China was the top buyer from the week with 729k MT, though 735k MT were previously announced.
For new crop sales, the weekly report showed 843,440 MT were booked.
That included 802k MT of previously known business to China and Mexico.
The total 22/23 forward book was 4.2 MMT as of 4/21, up 56% yr/yr.
Corn export shipments were at 1,562,100 MT.
That was up 31% from the previous week, but unchanged from the prior 4-week average and down 19% from the same week last year.
With 19 weeks remaining, accumulated exports reached 38.132 MMT or 1.501 bbu.
To match USDA’s expected 2.85 bbu pace, exports need to average 1.8 MMT or 70.9 mbu per week.
There were 19.4 MMT or 763 mbu of corn sales on the books as of 4/21.
As for soybean, USDA reported 481,317 MT of old crop soybeans were sold during the week that ended 4/21.
That was up 5% from the previous week, but down 37% from the prior 4-week average.
However, it is still up 64% from the same week last year.
For new crop, the USDA reported 580k MT of sales.
That left total forward business at 10.74 MMT or 62% above forward sales for the current season at the same time last year.
Of that, China holds 7 MMT on the books for 22/23.
Exports of 710,900 MT were down 20% from the previous week and 10% from the prior 4-week average.
For the products, the weekly FAS data release had soymeal sales at 202,985 MT for 21/22 delivery and none for NMY.
Soymeal exports were tallied at 251.8k MT through the week, taking the MYTD total to 6987 MMT.
In soy oil, exporters sold 3,480 MT during the week of 4/21.
9,953 MT of soy oil was shipped through the week leaving the season’s total at 515,867 MT as of 4/21.
That trails last year’s pace by 7.4%.
As for wheat, USDA reported 32,324 MT of wheat was sold for export during the week that ended 4/21.
That was up 23% from the previous week, but down 65% from the prior 4-week average.
However, it was within the max 175k MT expected.
Exports of 246,000 MT were down 51% from the previous week, 35% from the prior 4-week average and 55% below the same week last year.
That left the MYTD wheat export pace at 16.896 MMT (621 mbu), or 164 mbu under USDA’s forecast (discounting wheat products) with 5+ weeks left.
For new crop wheat export business, the Export Sales report showed 124,320 MT were sold during the week that ended 4/21.
USDA has 2.265 MMT of 22/23 wheat sales on the books, which is 14% below last year’s forward sales pace.
Meantime, private exporters reported to the USDA, having sold 1,088,000 metric tons of corn for delivery to China.
Of the total, 476,000 metric tons is for delivery during the 2021/2022 marketing year and 612,000 metric tons is for delivery during the 2022/2023 marketing year.
In this context, corn basis bids were mostly steady across the central U.S. on Thursday but did tilt 6 cents higher at an Ohio elevator and 5 cents higher at an Iowa processor.
Soybean basis bids were mostly steady across the central U.S. but did shift 6 cents lower at an Ohio elevator while jumping 44 cents higher at an Illinois river terminal.
Commodity funds were net buyers of CBOT soyoil and corn contracts on Thursday.
The funds were net sellers of CBOT soybeans, wheat and soymeal.
From South America, Argentina’s soybean harvest for the 2021/22 cycle gained momentum in the last week of April, the Buenos Aires Grains exchange (BdeC) said on Thursday, keeping unchanged its production estimate of 42 million tonnes for the oilseed.
In its weekly crop report, the BdeC said that favorable weather conditions for fieldwork in central Argentina over the last week “provided fluidity to the harvesting work on the center of the country’s agricultural area.”
Until Wednesday Argentine farmers had harvested 46.4% of the area sown, marking a week-on-week advance of 15.2 percentage points.
The country’s corn harvest registered little progress in the last seven days as farmers prioritize soybean threshing, the exchange said, noting that the cereal harvest only advanced 1.4 percentage points in recent days, to 24.6% of the planted area.
The exchange’s corn estimate for the cereal’s harvest is of 49 million tonnes.
In Europe, grain prices accumulated new substantial gains yesterday, still driven by a rapid weakening of the eurodollar parity and geopolitical tensions.
According to the USDA attaché, EU’s total grain production for MY 2022/23 is anticipated to amount to 286 MMT, down from the 293 MMT registered the previous season.
The favorable growing conditions across the EU are not anticipated to counter the reduction expected in area planted to grains.
Indeed, despite the overall good conditions, spring rains are particularly critical to avoid a tight grain balance.
War in Ukraine has stressed the EU grains market, which has responded with increases in price, demand contraction, and a surge of intra EU trade.
Increased grain exports, indeed, are forecast for MY2021/22, while the EU seeks alternative corn sources to replace Ukraine’s supply.
In this context, a new all-time high was traded yesterday on Euronext’s May 2022 maturity at €427.75/t, thus exceeding the previous record dated March 7th.
However, it closed with a decline of -1.75 €/t to 416.5 €/t.
The movements are as sudden as they are erratic and reflects the position closings, before May expiry for next May 10.
May rapeseed contract will expiry this Friday evening and this maturity will go down in history as the first to have crossed the 1,000 €/t mark, on 23 March and another historic high of €1,094/t on 22 April.
The market is trying to give a fair value to the current risks, which translates into new highs traded yesterday on Euronext new harvest maturities with September 2022 wheat at €388/t, November 2022 corn at €333.75/t and the rapeseed, that reached the day before a new high at €891/ for August 2022 delivery.
Meantime, the European Commission lowered its forecast for the 2022/23 European Union wheat harvest on Friday, but maintained its projection for record EU exports as war disrupts supply from Ukraine.
In monthly cereal supply and demand estimates, indeed, the Commission cut its outlook for usable production of common wheat, or soft wheat, in the 2022/23 season to 130.1 million tonnes from 131.3 million tonnes previously.
It kept its forecast for EU soft wheat exports in 2022/23 at 40 million tonnes, which would be an all-time high for the bloc.
However, the Commission increased its projection of EU soft wheat stocks by the end of 2022/23, to 12.6 million tonnes from 12.2 million a month ago, reflecting an upward revision to expected supply this season.
For 2021/22, soft wheat ending stocks were raised to 14.8 million tonnes from 13.2 million previously as forecast exports were cut by 1 million tonnes and expected imports increased by 0.5 million tonnes.
Meantime, an estimated 91% of the French soft wheat crop was in good or excellent condition in the week to April 25, unchanged from 91% the previous week and above a year-earlier score of 81%, farm office FranceAgriMer said on Friday.
Ditto for durum wheat, rated to 83% in good or excellent condition.
Winter barley and spring barley were at 87% and 91% in good or excellent condition respectively, substantially unchenged from prior week.
Meantime, some 60% of the expected grain maize area had been planted, compared with 32% progress the previous week and 69% seen a year ago, the office said in a weekly cereal crop report.
From the Black Sea basin, a cargo carrying over 71,000 tonnes of Ukrainian corn finished loading in the Romanian Black Sea port of Constanta on Thursday, the first since Russia-Ukraine war on Feb. 24 started.
The ship taking the cargo is the Unity N.
Loading operator was Comvex, which operates Europe’s fastest-loading grain terminal, which can process up to 70,000 tonnes per day, as well as a mineral handling terminal.
Earlier in the week, the operator also finished loading around 35,000 tonnes of Ukrainian iron ore, with a second ship expected to be loaded around May 15.
Around 80,000 tonnes of Ukrainian grains have been sent to Constanta so far, with another 80,000 approved and en route, Constanta Port’s manager said on Tuesday.
Meantime, Ukraine accused Russia on Thursday of stealing grain, increasing the threat to global food security posed by disruptions to spring sowing and the blocking of Ukrainian ports during the war, the Ukrainian Foreign Ministry said in a statement.
Asked about the allegations, the Kremlin said it had no information on the matter.
Kremlin spokesperson Dmitry Peskov, indeed, said via the Telegram messaging app: “No. We do not know where this information comes from”.
The Ukrainian Prosecutor General’s office said in a separate statement that it had opened a criminal case into allegations that Russian soldiers, threatening violence, had on April 26 taken away 61 tonnes of wheat from an agricultural enterprise in the Zaporizhzhia region of southern Ukraine.
Meantime, Ukraine’s Ag Minister reported spring planting progress from April 21-25 at 570,000t.
This pegs the total spring plant at 3.6mha or 25pc of the anticipated footprint prior to the war.
Interestingly he also suggested that they could get 75pc in the ground assuming a status quo.
Meantime, good moisture reserves in soil, an important factor in the healthy development of crops, will benefit the harvest in Russia’s main wheat-producing regions this year, state weather forecaster Hydrometcentre said on Thursday.
From South East Asia, for the first season in over a decade, Indian farmers are selling their new wheat crop to private traders instead of the state stockpiler, as a global wheat price rally gives India’s suppliers a rare profitable export window.
Before the nearly 50% surge in global wheat prices, India struggled to export the grain due to annual increases in the MSP to placate the politically powerful farm lobby that made Indian wheat more expensive than world prices.
But a rare confluence of high international prices, consecutive record crops, a weaker rupee against the dollar and improved internal logistics have made shipments from India attractive.
“This is a golden opportunity for India to export its surpluses”.
For Indian authorities, brisk demand from private grain handlers at prices above the MSP of 20,150 rupees ($262.88) a tonne means FCI’s wheat purchases are expected to fall drastically for the first time in decades.
Lower state purchases in turn mean big budget savings.
Last year, India spent 856 billion rupees ($11.2 billion) buying a record 43.34 million tonnes of wheat from farmers, filling state granaries to the brim and boosting national debt.
This year’s FCI purchases could fall below 30 million tonnes, trade and government officials said, meaning less government capital will be tied up buying and storing crops.
Indian traders have signed wheat export deals at between $330 and $335 a tonne free on board.
This is nearly $50 a tonne cheaper than rival suppliers as the rally in global prices and large surplus stocks at home have made it easier for Indian suppliers to offer a discount, but still well above local prices.
Following a flurry of export deals signed in February and March, India’s wheat shipments touched a record 7.85 million tonnes in the fiscal year to March – up 275% from the previous year.
Exports could jump to 12 million tonnes in the 2022-23 fiscal year, making it a serious player in global markets.
India’s exports have also been helped by a sharp jump in crop quality.
For the first time, top global wheat importer Egypt has purchased the grain from India, which sources say has helped India establish a reputation as a top tier supplier.
Alongside improved farm practises and greater mechanisation, better seeds have transformed India’s wheat market from mainly low-quality feed varieties to one abundant in superior grades such as Durum, Lokwan and Sharbati used in pizza, pasta and premium bakery products.
Newer varieties have helped farmers get higher yields with better protein content.
Thus, Indian wheat with 12% to 13% protein is pretty common now and that compares favourably with APW’s (Australia Premium White) 11.5% to 12% protein.
The government has forecast this year’s wheat output at a record 111.32 million tonnes, but may revise that estimate if the recent hot spell saps crops still trickling into wholesale grain markets.
($1 = 76.65 rupees).
In the edible oil market, Indonesia’s palm oil export ban has stalled around 290,000 metric tons that was initially bound for India.
“We don’t know when Indonesia will lift the ban and stuck shipments will be delivered,” according to one Indian buyer. India is the world’s No. 1 palm oil importer, with monthly purchases of around 700,000 MT.
Indonesia typically supplies around half of that total.
Indonesia should be able to tackle its cooking oil shortage in the next few weeks and lift an export ban on palm oil and its refined products in May, an industry body said on Thursday.
From Australia, some climate models are predicting a rare third consecutive La Niña event this year.
Although the current event is weakening, it continues to assist in plenty of rainfall developing over Australia which is setting up a third bumper winter cropping season – albeit a little too wet in parts of NSW.
In Victoria, the BOM is expecting to issue flood warnings over the weekend as heavy rain makes its way south.
Parts of Western Australia have enjoyed a near ideal start to the cropping season, with over 100mm for this month at Geraldton and 60mm at Merredin in the Wheatbelt.
SA is the only state where more rain is needed, particularly parts of the Yorke Peninsula and the Lower North.
It appears that initial thoughts about high input costs potentially impacting planted area are being balanced by high prices and good opening rainfall, with plenty of optimism about the season ahead.
Meantime, local markets continued to firm, and liquidity picks up. Wheat in South Australia saw sharp gains across the boards with quality milling wheat prices up $10-15/t.
SFW and lower grade wheat continues to find a home in New South Wales while that market was also up another $5/t.
Barley liquidity stills remains tight as values are stronger over the week.
Canola values were a touch softer yesterday on the bid side liquidity now thin also through the current crop market.
On international trade scene, as expected, Jordan issued a new international tender to purchase 4.4 million bushels of milling wheat from optional origins after passing on all offers in a similar tender that closed early in the week.
Offers for the new tender must be submitted by May 11, and the grain is for shipment in June and/or August.
In Egypt, the country’s vegetable oil reserves are sufficient for the next six months, according to the country’s supply ministry.
Egypt even cancelled an international tender to buy additional vegetable oils earlier yesterday.
