US farm markets

USDA’s May World Agricultural Supply and Demand Estimates Report is due out this afternoon.

Therefore, traders squarred some theirs position yesterday, as this report is expected to offer some key insights such as initial estimates for corn and soybean production for 2022.

While crops are either being made or being planted, this year we get a huge war-affected supply chain skew. 

Thus, Today’s numbers are super important, not least of which is the HRW production number. 

The USDA will have its first crack at new crop by class wheat estimates and the range of pre-report predictions is massive; 600mbu is the line with more and more estimates dropping south of this line. 

All corn ending stocks for new crop range from 988mbu vs a high of 1.65bbu – i.e feast or famine.

As a result, yesterday prices for all grains performed well, with corn prices increasing by more than 1.7% and soybean prices rising by 0.91%.

Meal prices were the laggard on the day, closing 0.9% in the red. 

Soybean oil prices ended the day with 2.97% gains.

Wheat futures fared even better, as Chicago wheat prices were 1.85% higher, KC wheat prices went home with 2.17% gains and spring wheat prices closed with 3.5% gains. 

July wheats closed at a new LoC high of $12.58 per bushel. 

Energy markets

Oil prices jumped 5% on Wednesday, after Russia sanctioned 31 companies based in countries that imposed sanctions on Moscow. 

That created unease in the market at the same time that Russian natural gas flows to Europe via Ukraine fell by a quarter. 

It was the first time exports via Ukraine have been disrupted since the invasion. 

Price gains have been limited by worries about demand destruction in China, as it attempts to curb the spread of the coronavirus.

Also, the EU is still haggling over the details of the Russian embargo. 

The vote needs unanimous support, but it has been delayed as Hungary opposes the ban because it would be too disruptive to its economy.

Meantime, in the United States, commercial crude inventories rose last week because of a record release of oil from the U.S. strategic reserves, but gasoline stockpiles declined ahead of the peak summer driving demand season, the Energy Information Administration said on Wednesday.

In this context, oil prices dropped more than 1% on Thursday.

Brent crude futures slipped $1.32, or 1.2%, to $106.19 a barrel by 06:46 GMT. 

WTI crude futures fell $1.52, or 1.4%, to $104.19 a barrel.

Also, oil prices are under pressure this week, along with global financial markets, on jitters over rising interest rates, the strongest U.S. dollar in two decades, concerns over inflation and possible recession. 

However, it should to note oil prices are rising over 35% so far this year. 

Freight markets

The Baltic Exchange’s main sea freight index, gained for the eighth consecutive session on Wednesday and it lifted by higher rates for all vessel segments.

The overall index, which factors in rates for capesize, panamax, supramax and handysize shipping vessels, indeed, was up 113 points, or 3.8%, at 3,052 points. 

The index is at its highest since December 13.

Particularly, the capesize index gained 295 points, or 8.5%, at 3,756 points.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were up $2,448 to $31,151.

The panamax index was up 39 points, or 1.2%, at 3,316 points.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, increased $357 to $29,848.

Among smaller vessels, the supramax index rose 13 points to 2,759 points.

Equity markets

U.S. stock indexes Wednesday closed sharply lower.  

The S&P 500 dropped to a 13-1/2 month low.

The Dow Jones Industrials fell to a 14-month low.

The Nasdaq 100 plunged to a 17-1/2 month low.

A sell-off in technology stocks led the overall market lower after U.S. CPI data for April signaled that inflation pressures remain stubbornly high.  

U.S. Apr CPI, indeed, rose +0.3% m/m and +8.3% y/y, stronger than expectations of +0.2% m/m and +8.1% y/y.  

Apr CPI ex-food & energy rose +0.6% m/m and +6.2% y/y, stronger than expectations of +0.4% m/m and +6.0% y/y.  

On the brighter side, both the headline and core CPIs at least fell back from March’s 40-year highs of +8.5% y/y and +6.5% y/y, respectively.

Producer prices are due later Thursday.

Meantime, Atlanta Fed President Bostic said he is open to “moving more” on interest rates if price growth continues at the current high pace.

Fed moves’ designed to slow the economy and help quash inflation, however, risks causing a recession if Fed raises rates too high or too quickly. 

Higher rates tend to pull prices for stocks and all kinds of investments lower, while, higher-yielding, safe Treasury bonds, for example, become more attractive to investors.

As we know, higher rates make big technology companies, other high-growth stocks and even cryptocurrencies relatively less appealing. 

On this wake, the Nasdaq’s loss of more than 27% so far this year is considerably worse than the roughly 17% drop for the S&P 500.

Stocks were also weighed down Wednesday after Morgan Stanley said the rout in stocks isn’t over yet, and “we continue to believe that the U.S. equity market is not priced for this slowdown in growth from current levels.” 

Energy stocks, meantime, were a bright spot for the market as they moved higher on the heels of a +5% jump in crude oil prices.  

In this context, the S&P 500 fell 1.6% lower at 3,935.18. 

That wiped out gains from a day before, when the benchmark index snapped a three-day losing streak.

The Dow Jones Industrial Average dropped 1% to 31,834.11. 

The Nasdaq fell 3.2% to 11,364.24. 

Smaller company stocks also lost ground. 

The Russell 2000 fell 2.5% to 1,718.14.

Treasury yields initially jumped but pared their gains as the morning progressed. 

The 10-year Treasury yield climbed as high as 3.08% overnight but fell back to 2.90% early Thursday.

Meantime, shares fell in Asia on Thursday morning after the release of worse inflation data than expected sparked heavy selling of technology stocks on Wall Street yesterday.

Thus, Hong Kong’s benchmark fell 2.2% to 19385.47.

The benchmark was burdened also by the arrests of Cardinal Joseph Zen, singer Denise Ho and others, following the choice last weekend of a hard-line chief executive for the semi-autonomous Chinese territory, where Beijing has been tightening controls.

In other Asian trading, Tokyo’s Nikkei 225 gave up 1.8% to 25,748.72.

The Shanghai Composite index shed 0.5% to 3,043.59. 

Australia’s S&P/ASX 200 lost 1.6% to 6,936.90. 

South Korea’s Kospi slipped 1.5% to 2,552.45.

Currency trading

The dollar slipped to 129.62 Japanese yen from 129.95 yen. 

The euro fell to $1.0506 from $1.0517.

The dollar index on Wednesday fell by -0.057 (-0.05%).

US weather forecast

On the weather side, more wet weather is rolling through the Midwest and Plains between today and Sunday, with some areas set to gather another 1” or more during this time, per the latest 72-hour cumulative precipitation map from NOAA. 

The agency’s new 8-to-14-day outlook predicts more seasonally wet weather for the Northern Plains and upper Midwest between May 18 and May 24, with warmer-than-normal conditions likely for the southern half of the country.

US weekly ethanol report

EIA data showed that ethanol producers averaged 991k barrels per day during the week that ended 5/6. 

That was up another 22k bpd wk/wk as the most since 4/8. 

Ethanol stocks were back up by 253k barrels to 24.14 million, though the Midwest stockpile shrank by 276k barrels. 

Midwestern ethanol supplies are back under 10m since peaking at an all time regional high of 10.79 million in Feb.  

Weekly Export Sales expectations

Going into the weekly Export Sales report, the trade expects between 350k and 700k MT of old crop corn was sold during the week that ended 5/5. 

New crop bookings are expected to be reported between 150k and 650k MT. 

As for soybean, analysts surveyed anticipate USDA will show between 100k and 600k MT of old crop soybeans were sold during the week that ended 5/5. 

New crop sales are also estimated between 100k and 600k MT. 

For soymeal, the trade has a wide range of expectations from 20k to 450k MT, with no more than 150k MT booked for 22/23 delivery. 

Bean oil bookings are estimated between 0 and 40k MT. 

As for wheat, trader estimates for wheat export sales range from 25k to 125k MT for old crop delivery and from 0 to 350k MT for new crop delivery. 

Corn & Soybean basis bis

Corn basis bids were steady to firm after rising 1 to 7 cents higher across a half-dozen Midwestern locations on Wednesday.

Soybean basis bids were steady to firm after rising 10 cents higher at an Iowa processor and 1 to 5 cents higher across three interior river terminals.

Money managers’ activity

The funds were net buyers yesterday for 10,000 lots of corn, 8,000 lots of soybeans and 15,000 lots of wheat.

South American markets

Argentina‘s wheat harvest for the 2022/23 season is expected to be around 19 million tonnes, down from the 22.1 million tonnes harvested in the previous season, the Rosario Grains Exchange said on Wednesday.

The Rosario Grains Exchange maintained its 2021/22 season forecast for soy and corn production, both currently in harvest. 

The exchange estimates a soy harvest of 41.2 million tonnes and a corn harvest of 49.2 million tonnes.

The exchange added that its expects a total of 6.35 million hectares to be planted with 22/23 wheat, 550,000 hectares less than in the previous season, a consequence of the active La Nina weather phenomenon, which reduces rainfall in the center of Argentina, the country’s main agricultural region.

Brazil‘s 2022/2023 soybean harvest has been estimated at 146 million tonnes, up 19.5% from the previous season, when a drought damaged part of the crop, Patria Agronegocios said on Wednesday.

Brazil’s area planted with soybeans in the next season will be expanded by 2.8% to 42.17 million hectares (104.204 million acres), Patria said in its first forecast for the season starting in September. 

European market

In Europe, new sharp bull session in wheat yesterday, still in a context of climate fears.

Rapeseed prices continue to consolidate meantime, pending better visibility on the areas that would be sown in Canada, with a delay already noted in sowing given the current rainfall.

France’s farm ministry and crop institute Arvalis have in the past week warned a current warm, dry spell will cause some damage to cereal yields.

FranceAgriMer said dry conditions since winter were threatening to damage wheat and other cereal crops, adding negative impact so far was limited to the southeast and certain shallow soils.

“If it rains in the next 10 to 15 days that can alleviate the situation for the bulk of crops,” Benoit Pietrement, a farmer and head of FranceAgriMer’s crop committee, said.

“We are very concerned but we’re not yet in an emergency.”

Meantime, farm office FranceAgriMer on Wednesday lowered its forecast of French soft wheat exports this season, citing ebbing international demand.

Particularly, in its May supply and demand outlook for cereal crops, the office cut its projection of soft wheat exports outside the European Union in the 2021/22 season that ends in June to 9.25 million tonnes from 9.5 million estimated in April.

It also trimmed its forecast of 2021/22 French soft wheat exports within the 27-member EU, to 8.0 million tonnes from 8.1 million.

The reduced export outlook led FranceAgriMer to increase its projection of French soft wheat stocks by the end of the season to 3.2 million tonnes, up from 3.0 million estimated last month and now a five-year high.

The office also raised its forecast for maize stocks at the end of 2021/22, to 2.2 million tonnes from 2.0 million in April.

That reflected a 100,000 tonne increase to projected harvest supply and a similar-sized cut to expected maize use in animal feed as a bird flu crisis continued to weigh on the poultry sector.

With higher fertilizer prices, the France Ag Ministry expects a 13% increase to oilseed planted area at 2.12m HA. 

Also, France’s Ag Ministry reports an expected 5.9% lighter corn area for 22/23 – citing higher fertilizer prices, at 1.46m HA. 

Meantime, per latest data from the European Union, exports of soft wheat are displayed on May 08 at 22.77 million tonnes against 23.46 last year to date. 

That is a year-over-year decline of 2.94%.

In barley, exports stand at 6.69 million tonnes against 6.87 million.

Meanwhile, corn imports were at 13.88 million tonnes against 13.25 million last year to date.

European Union soybean imports in the 2021/22 season reached 12.07 million tonnes, compared with 12.97 million tonnes by the same week in 2020/21.

EU rapeseed imports so far in 2021/22 had reached 4.55 million tonnes, compared with 5.73 million tonnes a year earlier.

Soymeal imports so far in 2021/22 were at 13.93 million tonnes against 14.87 million a year ago, while palm oil imports stood at 4.15 million tonnes versus 4.60 million.

EU sunflower oil imports, most of which usually come from Ukraine, were at 1.68 million tonnes, against 1.52 million a year ago, the data showed.

Meantime, non-commercial market participants cut their net long position in Euronext’s milling wheat futures and options in the week to May 6, data published by Euronext on Wednesday showed.

Non-commercial participants, which include investment funds and financial institutions, lowered their net long position to 188,722 contracts from 189,412 a week earlier, the data showed.

Commercial participants lifted their net short position to 210,766 contracts from 209,259 a week earlier.

Commercials’ short positions accounted for 71.3% of the total short position, while commercial long positions accounted for 32.1% of total long positions.

Non-commercial short positions represented 28.8% of total short positions, while non-commercial net long positions accounted for 67.9% of the total longs.

In Euronext’s rapeseed futures and options, non-commercial market participants lowered their net short position to 5,903 contracts from 6,854 a week earlier.

Commercial participants cut their net long position in rapeseed to 6,482 contracts from 11,851 a week earlier.

North African market

From North Africa, Tunisia’s grain harvest is expected to increase 30-40% this year from last year, Mohamed Rjaibia, a senior farmers union official said.

The agriculture ministry said the harvest would be “good”, without giving figures. Last year’s harvest was about 1.6 million tonnes.

Agriculture Minister Mhamoud Elyess Hamza said last month Tunisia was aiming to achieve self-sufficiency in durum wheat production from this year.

The country, which is suffering a deep financial crisis, was badly affected by the rise in global wheat prices resulting from the war in Ukraine.

The anticipated production growth will enable Tunisia to reduce its imports of grains.

The country, which in the last decade has an average grain harvest of about 1.5 million tonnes, consumes around 3.4 million tonnes per year.

Meantime, Tunisia last month raised the purchase price of wheat and barley from local farmers to encourage production and boost food security.

Tunisia’s grain purchases in the coming period of 2022 will be 1.185 million tonnes, bringing its total required grain imports for the year to 2.680 million tonnes.

The value of Tunisia’s 2022 grain imports is estimated at nearly $1 billion.

Meantime, Tunisia will raise the prices of some foods including milk, eggs and poultry this week, the agriculture minister said, following protests by farmers against the jump in animal feed barley prices and an increase in energy costs.

Unions warn that the wave of repeated price increases and a fall in purchasing power amid a severe economic crisis could lead to protests the authorities may not be able to control.

Last month, the government also raised the price of fuel by 5%, the third hike this year.

The impact of wheat and oil price rises on Tunisia’s budget will be slightly less than about $1.7 billion this year, Economy Minister Samir Saied said in March.

Black Sea markets

Refinitiv Research estimates the new crop rapeseed production in the Ukraine as 2.6 MMT, which is down from 3.015 MMT last year. 

The Refinitiv Commodities Research team also forecasted the Ukrainian wheat output as 23.4 MMT for the 22/23 season. If realized it would be their lightest output since 13/14 and down from 33 MMT this year. 

In Russia, Russian wheat export prices rose slightly last week, Sovecon agriculture consultancy said on Wednesday. 

Indeed, prices for wheat with 12.5% protein content for supply in May from Black Sea ports were up by $5 to $385-395 free on board (FOB) at the end of last week. 

Meantime, Sovecon also said Russia exported 440,000 tonnes of grains last week, citing data from ports, compared with 780,000 tonnes a week earlier. 

The consultancy expects the pace of wheat exports from Russia to slow down significantly in May and June from 2.7 million tonnes in April as the state export quota is being depleted. 

In the domestic market, demand from exporters is close to zero, Sovecon said, adding that farmers are increasing supply as they need to finance the current sowing campaign and to clean up their storage before they harvest the new crop in summer. 

Spring grains were planted on 7.3 million hectares as of May 5 vs 6.1 million hectares a year ago. 

The weather in Russia’s main grain producing regions was mostly dry last week, but a large part of the southern region – the country’s breadbasket – got good rains, Sovecon said, adding that light rains were expected this week. 

Meantime, others Russian data provided by Sovecon and IKAR saw Domestic 3rd class wheat, European part of Russia, exluded delivery, quoted at 16,050 rbls/t ($252.76) down 25 rbls from prior week (Sovecon);

Sunflower seeds were at 40,900 rbls/t -350 rbls (Sovecon);

Price for domestic sunflower oil was at 114,350 rbls/t -4,000 rbls (Sovecon);

Export price for sunflower oil was at $1,900-2,000/t unchanged (Sovecon);

Price for domestic soybeans was at 50,950 rbls/t -750 rbls (Sovecon);

White sugar, Russia’s south, was at $963.2/t +$78 (IKAR);

($1 = 63.5000 roubles).

Chinese market

China’s 2022/23 corn planting acreage was seen down 1.8% from the previous year, at 42.52 million hectares, the country’s agriculture ministry said on Thursday. 

The fall came after China set increasing planting acreage of soybeans and other oilseeds as a policy priority, the Ministry of Agriculture and Rural Affairs said in its monthly crop report. 

Meantime, China’s 2022/23 soybean planting acreage was seen up 18.3% from a year ago, at 9.93 million hectares, driving output of the oilseed in the new crop year at 19.48 million tonnes, up 18.8% from 2021/22, according to the report. 

Corn output in the 2022/23 year was seen at 272.56 million tonnes, slightly higher from a year earlier, however, thanks to better yields of the crop, the ministry said. 

China was expected to bring in 18 million tonnes of corn in the 2022/23 year, down 10% from 20 million tonnes a year earlier, as high international prices curbed imports. 

In the meanwhile, consumption of the yellow grain in the new marketing year was seen up 1%, at 290.51 million tonnes, causing a sharp drop of corn ending stocks to only 40,000 tonnes, according to the Chinese Agricultural Supply and Demand Estimates (CASDE). 

China’s soybean imports in 2022/23 was seen at 95.2 million tonnes, up 2.4% from the previous year, as hog production and margins in the country recover to reasonable levels, according to the report.

Meantime, China will auction off 500,000 tonnes of imported soybeans from its state reserve on May 13, the National Grain Trade Center said in a statement on Thursday.

The statement was an update to an earlier announcement which said the centre planned to sell only 314,000 tonnes on May 13.

Australian market

A shortage of grain in the Port Adelaide zone is lifting prices for wheat and barley stored up-country in the southern half of New South Wales and throughout Victoria, and pushing domestic values to premiums well above export bids.

The Adelaide-driven rally is a function of competition from traders filling mostly bulk export orders, and consumers who have had to lift bids to more than $20/t above the comparable port price to keep their mills fed.

Rain now falling across many parts of the Australian grainbelt is mostly ideal for winter crops now being planted, but has been excessive and could cause damage to emerging seedlings.

Rain over much of NSW and Queensland is hampering the movement of grain in many parts of eastern Australia by preventing outturn from up-country storages.

Meantime, current crop markets continued to strengthen yesterday. 

The latest rainfall event in the north continues to pressure on deliveries into domestic and export pathways and the flow-on effect is also impacting markets in the south where wheat and barley prices were all up another $5-10/t. 

Eastern Australian barley is hard to get. 

Growers remain focused on finishing seeding programs.

The local depot liquidity finds demand with buyers stepping in with approx 31,000t trading on the Clear Grain Exchange platform, however the question remains when the trade can get access to those depot stocks and truck availability to move into destinations. 

Thus, new crop wheat markets were $5-10/t firmer while basis remains at minus $130-140/mt level. 

Canola markets were relatively unchanged.

There are increasing reports of high mouse numbers across the eastern states as well as significant numbers being reported in WA. 

Although numbers are expected to plateau as we head into winter, growers are being urged to monitor for mice and bait to try to prevent a population boom in spring.

The current rainfall event is compounding problems with the already soggy start to the season and is starting to cause some real headaches for winter crop planting in southern Queensland and central and northern NSW. 

Reports of burst seed are common and there is a real likelihood that some area will not get in with the preference to wait until summer crop plant. 

Although there is still time to get a winter crop in, it is going to take a couple of weeks for paddocks to dry out for some.

International trade scene

Algeria’s state grains agency OAIC has started buying optional-origin milling wheat in an international tender which closed on Wednesday with initial purchases reported around $466 a tonne c&f.

Traders expected negotiations to continue on Thursday. 

Estimates of the initial purchase on Wednesday were around the relatively small volume of 180,000 tonnes to 300,000 tonnes.

More detailed assessments of prices and tonnage bought are expected later.

The wheat was sought for shipment in two periods from the main supply regions including Europe: July 1-15 and July 16-31. 

If sourced from South America or Australia, shipment is one month earlier.

Jordan’s state grains buyer purchased about 60,000 tonnes of milling wheat to be sourced from optional origins in a tender which closed on Wednesday.

Japan hopes to purchase 71.000 t of feed wheat and 39.000 t of feed barley in a simultaneous buy-and-sell auction that will be held on May 18. 

The grain is for shipment by the end of August for a late October arrival.

That’s all.

To all of you, we wish you a good day.

Author: Sandro F. Puglisi  

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