It was a mostly quiet day in the US farm markets yesterday.
Indeed, despite Planting Progress report on Monday showed continuing planting delays in corn, forecasts predict clear skies during this weekend and through the next week, which will likely help boost planting progress.
Meantime, potential corn planting delays led more operators to believe that even more then expected soybeans could be planted this spring.
As for wheat, there were very little new news about potential demand prospects to keep rallies going.
Thus, potential yield shortfalls for the U.S. whinter wheat crop, as well as planting delays for spring wheat crops, only capped losses.
So, as we can see, we are in a weather market, stacked on a war market, stacked on an inflation market.
In this context, corn prices faded after an initial Turnaround Tuesday rally attempt.
Despite the 1.5% drop, May prices still went home above the $8 mark.
July contract also ended the session in the red by 1.31%, but behind the $8 mark to $7.93.
The soybean complex was mixed, as beans retreated 0.9% on the day.
Soymeal also closed red, with 1.62% losses.
Soyben oil prices were off their highs at the closing bell, but prices were still up by 0.24% on the day.
Wheat prices were weaker in all three classes.
CBOT SRW futures closed 0.95% lower on the day.
Kansas City wheat ended down by 0.48%.
Spring wheat went home 1.05% lower at the bell.
In energy markets, oil prices fell more than 2% on Tuesday on demand worries stemming from China’s prolonged COVID-19 lockdowns that have curtailed travel plans during the Labour Day holiday season.
However, oil prices jumped on Wednesday as the European Union, spelled out plans to phase out imports of Russian oil, offsetting demand worries from China.
Thus, Brent crude futures rose $2.94, or 2.8%, to $107.91 a barrel by 07:46 GMT amid thin trading volume, with China and Japan closed for holidays.
West Texas Intermediate crude futures rose $3.02, or 3%, to $105.43 a barrel.
European Commission President Ursula von der Leyen proposed a phased oil embargo on Russia, as well as sanctioning Russia’s top bank.
The Commission’s measures include phasing out supplies of Russian crude within six months and refined products by end-2022, von der Leyen said.
She also pledged to minimise the impact on European economies.
Meantime, in the United States, crude and fuel stocks fell last week, according to market sources citing American Petroleum Institute figures.
Crude stocks, indeed, fell by 3.5 million barrels for the week ended April 29, they said.
This was more than an expected 800,000-barrel drop estimated.
U.S. government data on stocks is due on Wednesday.
The Organization of the Petroleum Exporting Countries and their allies on Thursday are expected to stick to their policy for another monthly production increase.
In freigth markets, the Baltic Exchange’s main sea freight index, rose on Tuesday as both capesize and panamax segments strengthened.
The overall index, indeed, rose 8 points, or 0.3%, to 2,412 points.
Particularly, the capesize index rose 11 points, or 0.5%, to 2,147 points.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, increased $91 to $17,804.
The panamax index gained 17 points, or about 0.6%, to 2,955 points.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, rose $148 to $26,591.
The supramax index was down 1 point to 2,733 points.
In equity markets, U.S. stock indexes Tuesday posted moderate gains, on hopes that the Fed won’t shock the markets with more aggressive monetary tightening plans than expected.
Central bank actions this week could impact the near-term direction of stocks.
The Reserve Bank of Australia on Tuesday raised its cash rate by 25 bp to 0.35%, a larger increase than expectations of +15 bp to 0.25%.
The FOMC began a 2-day policy meeting Tuesday and is expected to raise its federal funds target range by 50 bp on Wednesday.
On Thursday, the BOE is expected to raise its bank rate by 25 bp.
Meantime, the US 10-year T-note yield fell -1.6 bp to 2.965%, moving lower from Monday’s 3-1/4 year high of 3.008%.
Stock indexes were also helped by stronger-than-expected U.S. economic data for March factory orders and March JOLTS job openings.
Particularly, U.S. Mar factory orders rose +2.2% m/m, stronger than expectations of +1.2% m/m and the largest increase in 10 months.
U.S. Mar JOLTS job openings unexpectedly rose +205,000 to a record 11.549 million, showing a stronger labor market than expectations of a decline to 11.200 million.
On Friday, the Labor Department is expected to report that the economy generated another 396,000 new jobs in April, according FactSet.
That would mark an unprecedented 12th straight month that hiring has come in at roughly 400,000 or more.
In this context, the S&P 500 ended 0.5% higher at 4,175.48.
The Dow Jones Industrial Average rose 0.5% to 33,128.79 and the Nasdaq inched up 0.2% to 12,563.76.
Smaller company stocks outpaced the broader market.
The Russell 2000 added 0.9% to 1,898.86.
Meantime, Shares were mostly lower in Asia on Wednesday, with Fitch Ratings cut its 2022 China GDP estimate to 4.3% from 4.8%, citing Covid lockdowns.
Hong Kong, Seoul, Mumbai and Sydney declined while many other markets were closed for holidays.
Hong Kong’s Hang Seng dropped 1.2% to 20,860.09 while the Kospi in Seoul lost 0.4% to 2,669.40.
Australia’s S&P/ASX 200 gave up 0.1% to 7,306.70.
India’s Sensex lost 0.7% to 56,563.68.
Taiwan’s benchmark rose and most other regional markets were closed.
In currency trading, the U.S. dollar rose to 130.14 Japanese yen from 130.11 yen late Tuesday.
The euro fell to $1.0514 from $1.0522.
The dollar index (DXY00 ) on Tuesday fell by -0.265 (-0.26%). A decline in T-note yields Tuesday weighed on the dollar. Also, long liquidation pressures undercut the dollar ahead of the results of the Tue/Wed FOMC meeting.
The dollar recovered some of its losses on stronger-than-expected U.S. economic data on Mar factory orders and May JOLTS job openings.
The Russian rouble jumped on Wednesday to around a two-year high against both the dollar and the euro, retaining the support of hefty capital controls.
By 08:43 GMT, the rouble was 2% stronger against the dollar at 69.53 , after touching 68.6250 in early trade, its strongest since June 2020.
It had gained 2.1% to trade at 73.19 versus the euro , earlier hitting 72.00, its strongest point since February 2020.
On the weather side, beneficial rains in the Southern and Central Plains shifted into the Corn Belt and will likely linger in the region through the rest of the day, according to NOAA’s short-range forecasts.
Another rain system developing in the Central Rockies could push more showers into the Central and Southern Plains today.
On Wednesday and Thursday, indeed, heavy rain and severe thunderstorms will develop over portions of the Central/Southern Plains and Middle/Lower Mississippi Valley.
The combination of the two precipitation systems are likely to keep planters out of fields until the weekend.
Meantime, there is a Critical Risk of fire weather over parts of the Southern Rockies.
Rainfall through the Hard Red Winter wheat belt has been good no doubt, but the question remains how many points can you increase a 27pc good-to-excellent crop rating.
The double-edged weather sword of good-for-HRW vs bad-for-HRS (and beans… and corn) planting will keep the weather trade here for a little longer.
Exceptional ‘prevent plant’ payments vs high flat price has created a large range on Prevent Plant acres estimates.
The planting window is still open for corn and beans but is getting tight for HRS.
The WASDE will be released on 12 May and USDA will be adding an amazing set of fundamentals into the blender.
One of the key figures will be corn yield, given the slow start to planting.
From Canada, Canadian week 38 wheat exports were at 219k mt up from 174k mt prior week.
The total export volume is now at 8.3 million mt, compared to 14.6 million mt last year-to-date.
As for durum, exports were at 131k mt, up from 34k mt prior week.
Total export volume is now at 1.86 million mt, compared to 4.6 million mt last year-to-date.
Meantime, Canada’s Nutrien , the world’s largest fertilizer company, is weighing further increases to potash production as sanctions continue to limit shipments from Russia and Belarus, interim Chief Executive Ken Seitz said.
From South America, StoneX estimates Brazil’s second corn crop at 88.14 MMT, down by nearly 3 MMT on dryness into the dry season.
Dr. Michael Cordonnier cut his Brazilian corn crop (all three crops) estimate to 107 MMT.
Stone X also estimated the Brazilian soy output at 123.4 MMT, up 1.4 MMT from their prior estimate as harvest wraps up.
Meantime, Brazilian exports to the 22 countries in the League of Arab Nations rose in the first quarter amid a spike in agricultural commodities prices and a drive to stock up on food.
Brazil’s total exports to the group, indeed, reached $3.86 billion in the period, an almost 34% increase from the same time a year ago, the statement from the Arab-Brazil Chamber of Commerce said.
Chicken meat sales rose by almost 11%, to $591 million, while sugar sales jumped almost 20% to $588.8 million in the first three months of the year.
Soy products sales soared 122.8% to $318 million, while wheat exports stood at $285.86 million, marking a 438.06% jump.
Brazil also boosted corn and frozen beef sales by 27.21% and 165.73%, respectively, to the Arab nations, according to the data.
A boost in sales to the Arabs nations reflects Russia’s and Ukraine’s reduced participation in the global grains and fertilizer trade.
The Brazil-Arab Chamber, indeed, said also nations outside the Arab world are keen to guarantee food supplies.
However, the Chamber expressed concern that a potential drop in fertilizer imports from Russia and Belarus, hit by Western sanctions, could negatively impact Brazil’s 2022/2023 grain crop.
In Europe, past Friday, German paper Augsburger Allgemeine Zeitung (AAZ) had reported that Environment Minister Steffi Lemke was working with the Agriculture Ministry on such a limit as “agricultural land is needed for food.”
Using less grain and vegetable oil in biofuels is not the only option for Germany to cut CO2 emissions, its environment ministry said on Tuesday.
The European Union has agreed on a 7% cap for food-based biofuels.
Germany, which is the European Union’s biggest rapeseed producer, has set out to reduce that figure further – most recently to 4.4% – and now looks to go even lower, with the agriculture ministry saying it is working on new legislation to achieve this.
“Corn, rapeseed or soy are not the only way. Fuel makers can use synthetic and waste-based biofuels, electricity and green hydrogen,” a ministry spokesperson said.
The AAZ report has had a major impact on several markets, including leading to a sharp decline in EU rapeseed futures and driving down the share price of German bioenergy company Verbio.
The move comes after Germany decided to stop subsidies for palm oil as a fuel component from 2023, though the European Union will continue to permit the additive until 2030.
Meantime, the euro/dollar parity has been relatively stable for a few days around 1.05 after the decline that began last week.
Such a level of parity, at its lowest since 2017, is obviously an important element to monitor with a direct impact on import or export activity in the European Union, particularly over the coming months.
However, with the end of the campaign approaching, the latest figures from the European Commission still show less export activity in wheat and barley compared to last year over the past 10 months.
At the same time, corn import activity increased slightly, as the conflict in Ukraine and the paralysis of the ports are depriving many European importers of this origin.
Particularly, per latest data from the European Union, exports of soft wheat are displayed on May 01 at 21.95 million tonnes against 22.96 last year to date.
That is a year-over-year decline of 4.4%.
In barley, exports stand at 6.44 million tonnes against 6.75 million and corn imports at 13.43 million tonnes against 12.99 million last year to date.
That is tracking 3.5% above last year’s pace so far.
European Union soybean imports during the 2021/22 marketing year reached 11,74 MMT through May 01, which is a year-over-year decrease of 6.89%.
EU soymeal imports are also down from year-ago results, with 13.64 million metric tons over the same period.
With regard to prices in the old harvest, wheat marked a sharp decline in the Euronext May 2022 contract in particular.
This deadline is aproaching to expire and will lead to strong adjustment movements.
On the other hand, in new harvest, yesterday’s session was relatively stable for wheat.
The dry conditions in many production basins in France indeed provide an element of support, especially since the forecasts raise fears of a heat wave from next week.
This element also provides support to other products including rapeseed which stabilized after the strong downward correction the day before.
From Africa, Nigeria had to buy emergency supplies of Canadian potash in April after the country was unable to import the key fertilizer from Russia due to the impact of Western sanctions, the head of Nigeria’s sovereign investment authority NSIA said, declining to comment on prices.
Spot prices today are up more than 250% for deliveries to west Africa compared to last year, according to commodities pricing agency Argus Media, dealing a further blow to the country’s finances.
The price skyrocketed in early March, hitting a record $1,125 per tonne at the end of April for product on a delivered basis to South Africa.
Nigeria imported about 200,000 tonnes of potash last year.
Nigeria’s raw material imports meet just under 40% of Nigeria’s needs, the rest is sourced domestically, and local blended output was 1.5 million tonnes last year, nearly equal to domestic consumption.
Nigeria has for years been battling double-digit inflation, which quickened to 15.92% last month, and its population of 200 million will face even higher food costs this year and the next as the agricultural sector passes on the higher costs of imported wheat, diesel and fertilizer.
NSIA negotiates imports of raw fertilizer materials like potash as part of the Nigerian government’s programme to develop its capacity to produce blended fertilizer.
Nigeria has enough potash inventories to cover 40% of blending demand and bought three cargoes of Canadian potash, which should arrive within the next month.
Normally, the country takes five Russian cargoes a year.
Russia’s Uralkali, a major global producer of the crop nutrient, has been Nigeria’s exclusive supplier since 2019.
Uralkali declined comment.
From the Black Sea basin, Ukraine’s grain exports fall to around 923,000 tonnes in April from 2.8 million tonnes in the same month in 2021, analyst APK-Inform said on Wednesday.
The consultancy said in a report the country’s exports included 768,486 tonnes of corn and 127,130 tonnes of wheat.
Ukraine also exported 151,529 tonnes of sunflower oil and 169,681 tonnes of oilseeds, mostly sunseed.
Meantime, Ukraine on Wednesday called on Danube ports’ grain transshipment companies to reduce prices or else the state will be forced to restrict them administratively, the agriculture ministry quoted deputy minister Taras Vysotskiy as saying.
“The creation of excessive demand from those wishing to transship grain has allowed service providers, and these are private companies, to significantly increase the cost of these services” Vysotskiy said.
Ukrainian authorities have repeatedly stated that they are making efforts to increase exports by rail and through the Danube ports and the volume of exports via these routes may soon increase to more than one million tonnes per month, while traders have said the country could even export 2 million tonnes of grain per month.
Meantime, taking into account the current export pace, domestic processing volumes and losses, the carry-over stocks of grains and oilseeds can amount to 25.1 mln tonnes in Ukraine in 2021/22 MY, up 4.2 times compared to the previous season.
This will not allow to free a significant part of storing capacities for new-harvest crops.
“If we take off the grain stocked at ports and in silos in regions under constant hostiles as well as the grain in damaged storages, the carry-over stocks will total 21.3 mln tonnes”, APK-Inform said.
According to the State Statistics Service of Ukraine, as of January, 1 2022, the overall storing capacity was 75 mln tonnes, including 30.5 mln tonnes owned by processing and storing enterprises and 44.5 mln tonnes owned by farmers.
Ukraine will have an access to 60.9 mln tonnes of storing capacities, as part of them are located in regions with ongoing hostiles.
Thus, carry-over stocks will fill 35% of the total storing capacity in Ukraine.
APK-Inform forecasts the overall production of grains and oilseeds at 55.9 mln tonnes in Ukraine in 2022.
Thus, the deficit of storages for new-harvest crops will be about 16.3 mln tonnes.
The pace of the spring planting as well as weather conditions promote upward revision of the production forecasts in Ukraine that adds extra pressure under the absence of the sufficient storing capacities.
From South East Asia, India will allocate more rice instead of wheat for a food welfare programme that entitles millions of poor to 5 kilograms of free grain per month, according to a federal government order.
The allocation of wheat for the Prime Minister’s Poor Welfare Grain Programme has been cut to 7.1 million tonnes from 18.2 million, the government order said.
The allocation of rice has been raised to 32.7 million tonnes from 21.6 million, it said.
India’s wheat output looks likely to fall in 2022 after five consecutive years of record harvests, as a sharp, sudden rise in temperatures in mid-March cut crop yields in the world’s second-biggest producer of the grain, while exports sharply rose this year.
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, traders said, making it a serious player in global markets.
From far East, North Korea’s office workers and factory labourers have been dispatched to farming areas around the country to join a fight against drought, state media reported on Wednesday, amid concerns over prolonged food shortages.
North Korean leader Kim Jong Un had called for measures to improve a tense food situation caused by the coronavirus pandemic and typhoons, despite slight improvements early last year.
Drought and floods have long posed a seasonal threat to North Korea, which lacks irrigation systems and other infrastructure, and any serious natural hazards could cripple its reclusive economy already reeling from international sanctions and a near halt of trade.
The North’s Rodong Sinmun newspaper said government officials and company and factory workers joined hands with farmers nationwide in distributing pumping equipment and developing water resources in drought-prone regions.
It did not specify any damages so far, but said those efforts are aimed at countering an ongoing dry spell and bracing for an upcoming drought.
North Korea’s weather authorities on Tuesday warned of prolonged dry weather across the country until early next week, according to the official KCNA news agency.
The weather agency said last week that the average temperature for April was 2.3 Celsius (36.1 Fahrenheit) degrees higher than usual, with just 44 percent of its average rainfall nationwide.
From Australia, domestic markets relaxed $5-$10/t yesterday on the back of softer offshore values.
Selling liquidity is still scarce as growers focus their attention on sowing.
The RBA announcement to raise interest rates yesterday was followed by a sharp bounce in the AUD but relaxed towards the end of the session to finish at 0.710.
The current estimate for the Australian 2022-23 wheat crop is around 29.5 million tonnes.
Parts of SA could do with some more rainfall and parts of NSW need to dry out to get through planting programs but all in all it has been a very good autumn break.
Above average sub-soil moisture for many areas, along with optimism about longer-term rainfall models is setting the season up for above average yields.
It is estimated that canola planting is well advanced throughout NSW with between 70pc and 95pc in the ground.
Rainfall totals through central NSW have slowed things down but the moisture profile is there if they can get the crop in the ground.
Wheat and barley planting is also progressing well with over 60pc planted in north/north west NSW.
On international trade scene, Taiwan’s MFIG purchasing group bought about 55,000 tonnes of animal feed corn to expected to be sourced from South Africa in an international tender which closed on Wednesday.
The corn was purchased at an estimated premium of 219.79 U.S. cents a bushel c&f over the Chicago September 2022 corn contract CU2, they said.
Seller was believed to be trading house Viterra.
If sourced from South Africa, the tender had sought shipment between July 21 and Aug. 9.
