US farm markets trended higher after USDA released its latest World Agricultural Supply and Demand Estimates report. 

Corn prices closed double digits higher on Thursday. 

July was the weak link on the day, only gaining 0.38% remaining under the $8 mark. 

September contract gained +1.56% closing at $7.636.

New crop December led the board rally jumping by +2.34%.

Soybeans closed the report day 0.44% higher.

Soymeal prices on the board were 0.48% weaker after trading higher through midday.

Soybean oil prices closed the trading session with 1.11% losses. 

Wheat prices, meantime, earned a huge bounce after the agency reported lower-than-expected production estimates, while poor crop quality continues to lend plenty of support. 

Spring wheat prices went home at their limited 60 cent gains through March ’23.

That has meant a 4.7 – 4.8% ranged gain. 

Chicago wheat closed up 5.91%, taking between 62 1/2 to 65 3/4 cent gains on the day. 

Kansas City wheat went home 5.79% stronger as was between 63 1/2 to 69 1/2 cents higher. 

In energy markets, oil prices rose around 1.5% on Friday but were headed for their first weekly loss in three weeks as worries about inflation and China’s COVID lockdowns slowing global growth offset concerns about dwindling fuel supplies from Russia.

Brent crude futures, indeed, were up $1.68, or 1.6%, at $109.13 a barrel at 0602 GMT after fell 6 cents on Thursday.

While U.S. West Texas Intermediate (WTI) crude futures this morning climbed $1.40, or 1.3%, to $107.53 a barrel, extending Thursday’s gains of 42 cents.

Both benchmark contracts were, however, on track to post declines for the week, with Brent set to drop nearly 3% and WTI 2%.

Inflation and aggressive rate rises have driven the U.S. dollar to 20-year highs, which has capped oil price gains as a stronger dollar makes oil more expensive when purchased in other currencies.

Analysts, however, continue to focus on the prospect of a European Union ban on Russian oil, after Moscow imposed sanctions this week on European units of state-owned Gazprom and after Ukraine halted a key gas transit route.

With European natural gas prices soaring, it is inevitable that some spillover into oil will occur.

On the other hand, an International Energy Agency report on Thursday highlighted taht rising oil production in the Middle East and the United States and a slowdown in demand growth are “expected to fend off an acute supply deficit amid a worsening Russian supply disruption”.

In freight markets, the Baltic Exchange’s main sea freight index rose for the ninth session in a row on Thursday, propelled by higher rates for capesize segment.

The overall index, indeed, was up 65 points, or 2.1%, at 3,117 points.

Particularly, the capesize index gained 209 points, or 5.6%, at 3,965 points, the highest since Dec. 13.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were up $1,734 to $32,885.

Capesize rates are rising on increased activity out of Brazil, with expectations of a further improvement in activity on that route analysts said.

The panamax index was down 6 points, or about 0.2%, at 3,310 points.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, decreased $58 to $29,790.

The supramax index fell 9 points to 2,750 points.

On week 19, there is a tendency for lower freight rates in the Azov and Black Sea region. Thus, deals for 3K parcels of wheat from Azov to Marmara Sea ports are concluded for $35 per ton, Sea Lines shipbrokers report.

After the holidays, the grain market has become somewhat more active, but there are much fewer transactions than in mid- and late April. However, the collapse of the freight market is likely to stop, and the rates will not be changing as drastically as it was the case during the last few weeks, Sea Lines expect.

Many shipments of Russian wheat and wheat pellet bran are expected in the coming weeks, primarily to Turkey.

In the Black Sea, there are a lot of shipments of Ukrainian grain from the ports of Reni and Izmail, as well as from Romanian and Bulgarian ports to a variety of destinations, which results in the high level of rates in the region being maintained.

According to Sea Lines, on week 19, freight rates for wheat parcels from Azov made $33 to the Black Sea, $35 to Marmara, $50 to Mersin and $53 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 went updown.

On week 19, freight rates for shipping corn by 3,000 dwt bulkers to Iran make $21 from Aktau, $27 from Makhachkala, and $34 from Astrakhan.

In equity markets, U.S. stock indexes Thursday again posted losses.

Another dire readout on inflation sparked a wave of selling early Thursday, with technology stocks weighed down the S&P 500 index the most.

The S&P 500 fell to a 13-1/2 month low, the Dow Jones Industrials dropped to a 14-month low and the Nasdaq 100 sank to a 1-1/2 year low.  

U.S. producer prices rose more than expected in April. 

Particularly, the U.S. Apr final-demand PPI index rose +11.0% y/y, stronger than expectations of +10.7% y/y.  

The Apr core PPI rose +8.8% y/y, slightly weaker than expectations of +8.9% y/y.  

However, both the headline and core PPIs fell back from March’s record highs of +11.5% y/y and +9.6% y/y, respectively.

In this context, investors dumped risk assets on fears of an economic slowdown from inflation and rising interest rates.  

Extended pandemic lockdowns in China likely will increase supply-chain turmoil, curbing global growth, and boosting inflation. 

The Institute of International Finance (IIF) projects global 2022 GDP growth at +2.2%, below the +3.6% estimated by the IMF last month, and said the world economy would essentially flatline this year as Europe falls into recession, China slows sharply, and U.S. financial conditions tighten significantly.

Britain said its economy grew at the slowest pace in a year during the first quarter. 

That is raising fears that the country may be headed for a recession.

However, inflation expectations eased after the 10-year breakeven inflation rate dropped to a 2-1/2 month low Thursday.

U.S. stock indexes recovered most of their losses in the last hour of trading after comments from San Francisco Fed President Daly, which said a strong U.S. economy could tolerate 50 bp rate hikes and she backs raising interest rates by 50 bp at each of the next two FOMC meetings. 

She added that a 75 bp rate increase is “not a primary consideration.”

Another positive for stocks was a decline in the 10-year yield to a 2-week low of 2.812%. 

The lower T-note yield boosted homebuilding stocks on hopes that some stabilization of mortgage rates will support housing demand.  

Also, U.S. weekly initial unemployment claims unexpectedly rose +1,000 to 203,000, showing a weaker labor market than expectations of a decline to 193,000.

In this context, the S&P 500 closed 0.1% lower, at 3,930.08, having been down 1.9% earlier in the day. 

The Dow Jones Industrial Average fell 0.3% to 31,730.30, while the Nasdaq rose 0.1% to 11,370.96.

Smaller company stocks held up far better than the rest of the market. 

The Russell 2000 rose 1.2% to 1,739.38.

The indexes are on pace for sharp weekly declines. 

The benchmark S&P 500 is now down 17.5% this year, while the Nasdaq is down 27.3%.

Meantime, Asian shares bounced back on Friday.

Hong Kong’s Hang Seng index gained 2.5% to 19,862.99 and the Nikkei 225 in Tokyo jumped 2.6% to 26,427.65. 

South Korea’s Kospi added 2.1% to 2,604.24 and in Sydney, the S&P/ASX 200 advanced 1.9% to 7,075.10.

The Shanghai Composite index gained 0.9% to 3,081.89 and India’s Sensex climbed 1.2%.

In currency trading, US central bank moves to fight back against price increases by raising interest rates are pulling some currencies lower while the dollar rises. 

The Japanese yen has weakened sharply in the past several months, while the Chinese yuan, whose value against other currencies is regulated, has also weakened.

The euro, likewise, has weakened and was trading at $1.0397 early Friday, falling below the $1.0500 level it had hovered near for most of the week.

“European risk sentiment is getting mangled by news of Russia cutting gas supply in retaliation for sanctions”.

On this morning the dollar was at 128.96 yen, up from 128.42. 

Against the Chinese yuan, it was at 6.79 per dollar, up from about 6.41 yuan a month ago.

On the weather side, the U.S. Drought Monitor was updated yesterday, covering the week through May 10. 

Nationwide, 61.2% is experiencing some level of drought – primarily relegated to the western half of the country. 

Regionally, 82.6% of the High Plains is affected, while only 8.8% of the Midwest is drought-stressed at this time.

Meantime, severe thunderstorms with damaging wind gusts, large hail, and a few tornadoes are possible tonight over parts of the eastern Dakotas, eastern Nebraska, western Iowa, and Minnesota. 

Heavy rain will lead to a threat of isolated flash, urban, and small stream flooding across the Northern Plains.

On the demand side, per latest data from the US Department of Agriculture, corn export sales for the period April 29-May 5, 2022 and delivery in 2021-22 season were at 192,700 MT.

That was a marketing-year low–were down 75% from the previous week and 80% from the prior 4-week average.

Also were reported net sales of 46,600 MT for 2022/23.

Exports of 1,504,300 MT were down 21% from the previous week and 3% from the prior 4-week average.

As for soybeans, net sales of 143,700 MT for 2021/22–a marketing-year low–were down 80% from the previous week and 74% from the prior 4-week average.

Net sales of 77,300 MT were reported for 2022/23 delivery. 

As for wheat export sales were at 14,100 metric tons (MT).

That was a marketing-year low.

That was down 88% from the previous week and 79% from the prior 4-week average.

Net sales of 124,300 MT were reported for delivery in 2022/23 season.

Exports of 240,300 MT were down 36% from the previous week and 35% from the prior 4-week average.

Meantime, private exporters reported to the USDA having sold 612,000 metric tons of corn for delivery to China.  

Of the total, 68,000 metric tons is for delivery during the 2021/2022 marketing year and 544,000 metric tons is for delivery during the 2022/2023 marketing year.

In this contextcorn basis bids were steady at most Midwestern locations on Thursday but did trend as much as 18 cents lower at an Illinois processor and as much as 4 cents lower rat an Ohio elevator. 

Soybean basis bids were steady to firm after rising 2 to 3 cents higher at three Midwestern locations.

The funds were net buyers yesterday for 8,500 lots of corn, 3,500 lots of soybeans and 25,000 lots of wheat.

From South America, Argentina announced the authorization on Thursday of the commercialization within the country of the HB4 GMO wheat variety developed by Bioceres.

Argentine farmers are about to start planting wheat for the 2022/23 season.

The move will make Argentina the first country where farmers can plant GMO wheat, which in the case of Bioeceres’ HB4 is more tolerant to water scarcity and resistant to the herbicide glufosinate-ammonium.

The country’s 2022/23 upcoming wheat harvest is expected to yield 19 million tonnes, according to the Rosario Grains Exchange.

However, the release of GMO wheat in Argentina is generating concern among grain exporters, who fear that many customers will stop importing the Argentine grain, as the vast majority of countries in the world have not yet authorized GMO wheat or its derivatives.

Meantime, Argentina’s wheat harvest for the 2022/23 season is seen at 20.5 million tonnes, down from the 22.4 million harvested the previous cycle, the Buenos Aires Grains Exchange (BdeC) said on Thursday.

Argentine farmers have already started planting the first hectares of wheat for the new season.

According to BdeC, the area planted with wheat in 2022/23 is expected to fall by 1.5% year-on-year to 6.6 million hectares, due to an increase in the area of other crops that will register higher profit margins in the new season, such as soybeans and sunflowers.

Also due to the high cost of inputs there may be a drop in the use of technology.

Consequently what analysts are projecting are yields below the trends of recent years.

On Wednesday, the Rosario Grains Exchange (BCR) also gave its first estimate for the production of the new wheat season, although it was lower, at 19 million tonnes.

The BdeC also estimates a 2022/23 barley crop of 5.4 million tonnes, up from the 5.2 million harvested in the previous season.

In Brazil, Brazil’s CONAB new 21/22 corn production forecast is for 114.588 MMT, not the 116.2 MMT reported earlier. 

CONAB now expects their 2nd crop at 87.7 MMT, from 88.535 MMT reported in April.

They, in contrast, raised their forecast for 21/22 soy output by 1.4 MMT to 123.83 MMT, but well below last year at 138.15 million tonnes.

In Europe, markets are racing in an increasingly tense context linked to the double effect of climatic hazards and tensions on the Black Sea. 

German import prices for grain surged in March as the war in Ukraine hit global agriculture supplies, the German statistics office reported on Friday.

Import prices for grain were up 53.6% year-on-year during the first full month of the conflict, which began on Feb. 24, with the cost of wheat imports jumping by 65.3%, the Federal Statistical Office said.

Producer prices for grain in March were 70.2% higher than in the same month last year, the highest increase since June 2011, driven by low supply and high demand at home and abroad, the office added.

To this, we must add a sharp rise in the dollar which is now showing below 1.0407 against the euro. 

The climatic situation in France remains a major concern given the commitments already made by many producers associated with yields whose potential is already reduced. 

Crop conditions for French wheat and barley crops, indeed, declined sharply last week as dry weather persisted in the EU’s biggest grain-growing country, data from farm office FranceAgriMer showed on Friday.

An estimated 82% of French soft wheat crops were in good or excellent condition in the week to May 9, down from 89% the previous week, FranceAgriMer said in a cereal report.

That marked a second straight weekly decline in the rating after a two-point drop the previous week. 

The latest score was nonetheless above a 79% rating a year earlier.

Crop observers have warned that cereals may start losing yield potential, with a hot, dry spell this week expected to increase pressure on plants, before the possible return of rain next week.

French barley and durum wheat ratings also fell sharply last week, with spring barley sown at the end of winter showing the steepest decline, FranceAgriMer’s data showed.

For spring barley, the good/excellent score shed 12 points to 76%, now below a year-earlier level of 85%.

The winter barley rating fell by 7 points to 79%, while the durum score lost six points to 77%, although both remained above year-earlier levels.

Weather forecasts are projecting some showers in the week ahead as storms break the hot spell, but traders are concerned that precipitation may be erratic.

Farmers are also rounding off maize planting, with 92% of the expected area sown by Monday, FranceAgriMer said.

Rapeseed prices, on theirs part changed little yesterday in the wake of a decline in oils overall.

However, this decline could be short-lived, given the rebound in palm prices this morning in Kuala Lumpur and the firmness of crude oil.

From the Black Sea basinUkraine‘s farmers have sown 8.7 million hectares for the 2022 spring crops sowing, 22% less than at the same date in 2021, Ukrainian grain traders union UGA said on Thursday, citing official data.

The union said Ukraine planned to sow 11.45 million hectares of spring grains this year, 3.5 to 4 million hectares less than in 2021 due to the conflict.

The official data shows that farmers had sown 188,000 hectares of spring wheat, 918,000 hectares of spring barley, 3.239 million hectares of corn and some other commodities.

It shows the area under spring wheat could total 190,000 hectares, 900,000 hectares of spring barley and 3.9 million hectares of corn.

Ukraine’s agriculture ministry gave no 2022 grain crop outlook. 

It has said the sowing area could fall 20% this year due to fighting with Russian troops in many regions.

In Russia, meantime, the country may harvest a record wheat harvest this year.

According to preliminary estimates, farmers can harvest 87 million tons of wheat. 

The grain harvest in Russia in 2022, according to preliminary estimates, could reach a record 130 million tons, Russian President Vladimir Putin said at a meeting with the government on Thursday.

“If this happens, and we will count on it, it will be a record in the history of Russia,” he said.

Such a harvest will allow not only to meet domestic needs with a margin, but also to increase supplies to the global market for partners of the Russian Federation, which is very important for world food markets, the president stressed.

According to Rosstat, the harvest of grain and leguminous crops in Russia in 2021 amounted to 121.4 million tons, which is 9% lower than the previous year. 

Including wheat, the main crop, 76.06 million tons were harvested, which is 11.4% less than the level of 2020. 

Putin noted that Russia is confidently coping with external challenges thanks to both the responsible macroeconomic policy of recent years and systemic solutions to strengthen economic sovereignty, technological and food security. 

“Our manufacturing companies are gradually occupying the niches vacated after the departure of unscrupulous partners in the domestic market, including consumer goods, industrial, service equipment, construction and agricultural machinery,” noted the president.

Meantime, the Russian Ag. Min has amended the export tax for wheat, barley and corn for the week of May 18-24, 2022.

Particularly, the export duty will be $111.9 on wheat, $76.5 on barley and $77.3 on corn.

Indicative prices will be $359.9 for wheat, $294.3 for barley and $295.5 for corn.

That is compared, with prior week (May 13-17) when the tax was $114.3 for wheat, $74.1 for barley and $77.0 for corn, while indicative price were $363.4 for wheat, $290.9 for barley and $268.4 for corn.

From the Middle Kingdom, Chinese grain traders and brokers are struggling to make forecasts for this year’s closely watched Chinese corn crop, as COVID restrictions prevent travel to major growing areas for assessment.

China’s corn crop is one of the world’s most closely watched, after bad weather and tight supplies sent prices soaring last year.

Imports of corn in 2021 tripled on the previous year, and buyers also stocked up on wheat and other grains from abroad to replace pricy domestic corn, lifting global prices.

Spring planting has been “smooth in general”, according to state media, which said this week producers had finished 90% of spring corn and 50% of soybean planting – faster than last year by 1.8 percentage points.

The agriculture ministry said on Thursday it expected corn acreage to drop by 1.8% in the 2022/23 crop year, as some farmers switched to soybeans, though output would be slightly higher than a year ago based on good yields.

Worries linger, however. 

Even as the ministry reassures the market of a good start to the season, government leaders have called for “great efforts” to ensure stable corn output.

Meantime, influential grains consultancy Shanghai JC Intelligence Co said in April it expected a 3% decline in corn acreage, and slightly lower output.

From Australia, the forecast certainly delivered with many areas in Queensland picking up at least 100mm with road closures now in effect in some parts due to another round of localised flooding. 

Queensland’s Southern Downs region was inundated by floodwaters overnight, as more flood warnings and five emergency alerts were issued across the state. 

The Bureau of Meteorology has warned six-hour rainfall totals of up 160mm on Friday could lead to life-threatening flash floods, and potential landslides, between Gladstone, Coolangatta and the Darling Downs. 

Moderate to major flooding is underway on the Cape, Condamine, Balonne, Thomson, Barcoo, Georgina, Kolan and Flinders rivers.

Meantime, the wild ride continues, locally. 

It’s the same old story and themes that drive the wheat and barley markets with bids up another $10/t yesterday through delivered and depot site. 

APW1 delivered Melbourne/Geelong cracked $500/t while H2 in Queensland rallied again pushing to $525-530 levels all for June deliveries. 

Malt barley picked up a bid in Victoria late with trades going through around the $445 track level.

Meantime, Australia exported 738,559 tonnes of barley and 136,816t of sorghum in March, according to the latest figures from the Australian Bureau of Statistics (ABS).

Despite a lift in malting barley exports to 121,862t in March, the overall barley figure is down 11 per cent from 831,135t shipped in February due to reduced feed exports.

Cargoes to Vietnam, Mexico, Peru and Japan made up the bulk of the March malting figure, while on feed barley, Saudi Arabia on 412,175t accounted for almost half the reported tonnage.

Based on trade information, February shipments of barley to Canada and The Netherlands reported by ABS as feed have been transferred to malting.

On sorghum, China accounted for 97pc of March exports, which were up 110pc on February.

On the international scene, Algeria’s state grains agency OAIC is believed to have purchased a total of around 450,000 tonnes of optional-origin milling wheat in an international tender this week.

The purchase was all said to have been made at around $466 a tonne c&f, the same price as reported in initial volumes bought on Wednesday evening. 

Some traders said they expect some wheat from France to supplied for the purchase. 

Others said they expected exporting countries in the Black Sea region to be sources.

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.

USDA’s May WASDE Report in pills

The USDA cut wheat harder than the market was expecting, especially in the US. 

USDA, indeed, posted an end-of-season stock for 2022/2023 at 267 million tonnes, down nearly 15% compared to the stock at the end of 2021/2022, i.e. a stock-to-consumption ratio returning to the lowest of 2006/2007. 

HRW at 590mbu was well below of 685 million expectations.

They were also aggressive on US corn, cutting yield to 177bu/ac, against 181 estimated previously, as a result of delays in sowing linked to excessive rainfall in the Corn Belt. 

Decreasing corn feeding versus last year was an odd one given the changes in relative prices and less sorghum around. 

No changes to Argentina and Brazil production and they found 8Mt of old crop production across minor countries. 

It is a mixed report, but bullish nonetheless. 

Beans was also mixed. 

The US report pretty neutral to bearish. 

Globally, the old crop stocks being lower is supportive. 

US soyoil tightening continues in 22/23. 

That’s all.

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

Author: Sandro F. Puglisi  

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