Good morning Farmer Family …
US farm markets were mostly higher on Thursday.
The soybean complex regained height, driven in particular by near-record US crushing last April, at 4.93 Mt, against 4.63 Mt a year earlier and, after a flash sale for Pakistan, soybean prices closed the session anchored to solid gains of more than 2.3%.
Wheat prices also made moderate inroads yesterday.
Chicago SRW wheat ended the session with 1.63% gains.
Kansas City wheats closed 1.35% higher.
Minneapolis spring wheat contracts rose 0.21%.
Corn has been bucked with the overall trend, closing with modest losses, down 0.14%.
In energy markets, oil prices edged higher on Friday.
Markets substantially shrugged off the decision of OPEC+ to increase production by 648,000 barrels per day (bpd) in July and August, instead of by 432,000 bpd as previously agreed, and questioned whether the incremental output could make up for lost supply from Russia and meet China’s growing demand.
Russian output has already dropped by 1 million bpd since the war started, and is likely to fall even further as the European Union’s ban on Russian oil kicks in.
Thus, U.S. West Texas Intermediate (WTI) crude futures gained 7 cents to $116.94 a barrel at 06:40 GMT, while Brent crude futures were up 18 cents at $117.79 a barrel..
Yesterday, oil rose more than 1% after U.S. crude inventories fell by 5.1 million barrels, more than expected 1.3 million-barrel drop, gasoline inventories also fell, amid high demand for fuel.
Particularly, Brent futures on Thursday settled $1.32, or 1.1%, higher at $117.61 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.61, or 1.4%, to $116.87.
In this context, although Brent is on track to fall for the week, WTI is on course for its sixth weekly gain.
In freight markets, the Baltic Exchange’s main sea freight index which factors in rates for capesize, panamax and supramax shipping vessels, not quoted as the London Exchange was closed due the Queen Elizabeth II’s Platinum Jubilee celebrations begin.
In freight markets, the Baltic Exchange’s main index, which takes into account rates for capesize, panamax, and supramax vessels, was not listed yesterday, as the London Stock Exchange is closed due to the long weekend for the start of Queen Elizabeth II Platinum Jubilee celebrations.
We wish our best wishes to Her Majesty the Queen Elizabeth II.
In equity markets, U.S. stock indexes shook off early losses and rallied moderately.
The Nasdaq 100 posted a 3-1/2 week high.
Stock indexes early the morning moved lower after Microsoft cut its quarterly forecast due to unfavorable foreign exchange rates.
However, Fed-friendly U.S. economic data on May ADP employment and April factory orders pushed stocks higher on speculation the weaker-than-expected economic data may ease inflation and keep the Fed from being too aggressive in tightening monetary policy.
Particularly, the U.S. May ADP employment change rose +128,000, weaker than expectations of +300,000 and the smallest increase in 2 years.
U.S. weekly initial unemployment claims unexpectedly fell -11,000 to 200,000, showing a stronger labor market than expectations of no change at 210,000.
U.S. Q1 nonfarm productivity was revised upward to -7.3% from the originally reported -7.5%.
However, Q1 unit labor costs were revised upward to +12.6% (q/q annualized) from 11.6%.
U.S. Apr factory orders rose +0.3% m/m, weaker than expectations of +0.7% m/m.
Also, stocks had carry-over support from the rally in the Shanghai Composite on optimism China’s economy will soon fully reopen.
In this context, the S&P 500 rose 1.8% to 4,176.82, with more than 85% of the stocks in the benchmark index notching gains.
The Dow Jones Industrial Average rose 1.3% to 33,248.28, while the Nasdaq climbed 2.7% to 12,316.90.
Technology stocks, whose lofty values tend to give the broader market a harder push higher or lower, accounted for a big share of Thursday’s rally.
Small company stocks rose, signaling confidence about economic growth.
The Russell 2000 gained 2.3%, to 1,897.67.
Wall Street will get another glimpse into the health of the broader U.S. economy on Friday when the Labor Department releases its employment report for May.
Bond yields were relatively stable.
The yield on the 10-year Treasury, which helps set interest rates on mortgages and other loans, fell to 2.91% from 2.93% from late Wednesday.
Meantime, Asian shares rose on Friday.
Japan’s benchmark Nikkei 225 jumped 1.2% in afternoon trading to 27,742.70.
Australia’s S&P/ASX 200 added 0.9% to 7,237.40, while South Korea’s Kospi gained 0.4% to 2,668.52.
Trading was closed in China for the Dragon Boat Festival, a national holiday.
Benchmarks in the rest of the region edged higher, cheered by the rally overnight on Wall Street.
Japan and the U.S. signed a revision on the “beef safeguard” mechanism under the U.S.-Japan Trade Agreement, which will help American beef producers meet Japan’s growing demand for high-quality beef.
The deal will reduce the chances Japan’s safeguard duties would be imposed on U.S. beef, both sides said.
In currency trading, the U.S. dollar inched down to 129.83 Japanese yen from 129.87 yen.
The euro cost $1.0758, up from $1.0752.
The dollar index on Thursday fell by -0.668 (-0.65%) as the rally in stocks curbed the liquidity demand for the dollar.
The dollar also fell back after Thursday’s U.S. economic data showed April factory orders rose less than expected, and the May ADP employment change posted its smallest increase in 2 years.
On the weather side, Some additional rains are expected to land on parts of the Midwest and Plains between today and Monday, but very few areas will receive more than 0.5” during this time, per the latest 72-hour cumulative precipitation map from NOAA.
The agency’s 8-to-14-day outlook predicts seasonally wet conditions for most areas east of the Mississippi River between June 9 and July 15, with cooler-than-normal temperatures for most of the Corn Belt.
On the demand side, Weekly EIA data showed ethanol producers averaged 1.071m barrels per day through the week that ended 5/27.
That was 57k bpd more wk/wk and was a new average daily high for the year.
Despite the increased production, stocks dwindled 751k barrels for the 3rd straight week – a total of 1.179m barrels, and for the 8th time of the past 9 weeks – for a combined 3.568m barrels.
That left stocks at a 21-week low of 22.96 million barrels.
Going into the delayed Export Sales report, the trade expects between 125k and 400k MT of old crop corn was sold during the week that ended 5/26.
New crop bookings are expected to be between 100k and 300k MT.
As for soybean, trade estimates seek USDA to confirm between 100k and 400k MT of old crop beans were sold during the week of 5/26.
New crop sales are estimated between 100k and 600k MT.
Meantime, USDA announced a large soybean export sale to Pakistan yesterday.
55k MT of the 352k MT total sale is for 21/22 delivery, with the remainder to be delivered in 22/23.
The pre-report survey also showed analysts expect to see between 100k and 320k MT of soymeal sales.
Soy oil bookings are estimated to be below 40k MT with less than 10k MT 22/23 specifically.
As for wheat, analysts surveyed expect old crop wheat bookings to be between 50k MT of net cancelations and 100k MT of net sales.
New crop business is expected to be between 200,000 and 350,000 MT from the week that ended 5/26.
In this context, corn basis bids were steady to mixed across the central U.S. on Thursday after rising as much as 10 cents higher at an Illinois ethanol plant and falling as much as 5 cents lower at a Nebraska processor.
Soybean basis bids were steady to mixed, after rising 10 cents higher at two Midwestern processors while falling as much as 7 cents lower at an Illinois river terminal.
The funds were net buyers yesterday for 7,000 lots of wheat and 14,500 lots of soybeans.
They were neutral in corn.
From South America, Argentina’s Buenos Aires Grains Exchange estimates that the country’s 2022/23 wheat plantings will come in around 6.5 million hectares.
That’s slightly lower than the group’s prior estimate of 6.6 million hectares , based on low soil moisture and scant rains in the near-term forecasts.
Before Wednesday, farmers had sown 13.9% of the estimated area.
“If this scenario extends throughout the month of June, it could cause further reductions in the projected area,” BdeC warned.
On the soybean front, the exchange said it sees an uptick production at 43.3 million tonnes for the 2021/22 season, up from the 42 million tonnes previously estimated.
“Better than expected yields in the center and north of the agricultural area allow us to increase” the production estimate, BdeC said, adding in its weekly crop report that 94.3% of land planted with soybeans had been harvested.
Regarding corn, the exchange said the country’s corn harvest was 32% complete and estimated the 2021/22 harvest at 49 million tonnes.
In Europe, grain prices finally halted their downward movement on Thursday evening, without recording very substantial gains compared to the losses recorded at the start of the week.
The scale of the recovery remains limited by the discussions surrounding the establishment of a secure corridor that would allow the resumption of maritime exports from Ukraine .
The imminent start of the first winter cereal harvests in the northern hemisphere is also putting additional pressure on grain prices at present.
Rapeseed prices on their parts, was changed little yesterday, shared between the firmness of the palm and precautionary sales in an uncertain context in terms of biofuel policy, particularly in Germany.
Meantime, Matines, the egg business of French agri-food group Avril supplying 16% of eggs sold in French supermarkets, is winding down its loss-making activities after failing to find a buyer, potentially resulting in 114 job cuts.
A surge in grain prices – the main cost for feeding laying hens – strong competition and difficulty in passing on rising costs to clients were among the main reasons for the company’s recurrent losses over the past years, a Matines spokesperson said.
Avril, a group created by oilseed farmers to develop their market, said last year it wanted to sell its animal processing units to focus on its plant-based businesses, which also include biodiesel, edible oil brand Lesieur and animal nutrition.
It sold its majority stakes in two pork firms to meat group Bigard in January but could not find a buyer for Matines able to ensure sustainable activities and jobs, it said.
The full stoppage of the company could happen in September, either by a sale or the closure of its units.
The company used to sell about 900 million eggs per year out of the 5.5 billion sold in French supermarkets, the spokesperson said.
Matines has already received a commitment to take over its packaging center through its animal nutrition branch Sanders, it said.
On the weather side, stormy rains are expected this weekend in France, while the first cuts of feed barley begin.
Meantime, farm office FranceAgriMer showed on Friday growing conditions for wheat and barley crops in France continued to decline for a fourthee straight week.
An estimated 67% of French soft wheat was in good or excellent condition by May 30, against 69% the previous week and 80% a year ago, the office’s data showed.
Durum conditions also moved down to 64% from 67% a week ago.
French barley conditions also dropped, as in the previous week.
The good to excellent rating for winter barley fell 1 percentage points to 65%, while the corresponding score for spring barley dropped 7 percentage points to 54%, FranceAgriMer’s report showed.
Farmers rounded off maize planting, with 100% of the expected area sown.
Rating for emerged maize plants, was unchanged at 91% of the crop in good or excellent conditions FranceAgriMer said.
From North Africa, Egypt stands to access more than $600 million from the World Bank and the European Union to improve its wheat silo system and support government wheat purchases as it struggles with the fallout from Ukraine disruptions.
Under a food security programme pending approval by the World Bank board, Egypt would receive $380 million to help its state grains buyer import up to 700,000 tonnes of wheat for its bread subsidy programme, a World Bank document showed.
An additional $117.5 million would be allocated for increasing silo capacity, financing development of high-yield wheat varieties and improving climate resilience.
Separately, the European Commission has mobilised 75 million euros ($80.24 million) for the expansion of Egypt’s wheat storage capacity, and 25 million euros ($26.75 million) for small and medium enterprises in the agriculture sector, EU Commissioner for Neighbourhood and Enlargement Olivér Várhelyi said late on Wednesday, following a visit to Cairo.
That funding is part of a previously announced 225 million ($240.71 million) euro food security support package to Middle Eastern and North African nations impacted by Russia’s invasion of Ukraine.
Last week, Egypt’s supply ministry said the Saudi Arabia-based International Islamic Trade Finance Corporation (ITFC) had doubled its credit limit to Egypt to $6 billion to help it import wheat.
($1 = 0.9348 euros).
From the Black Sea basin, Russia would have delivered around 100,000 t of wheat to Syria, wheat that Ukraine considers to belong to it, coming from Dombass.
Meantime, according to APK-Inform, the export prices of Russian new-crop wheat keep on growing this week.
As of June 2, the offer prices of 12.5% new-crop wheat totaled 395-410 USD/t FOB Black Sea (July-August), up by 10-15 USD/t compared to the last week.
Some exporters offer wheat at the price up to 420 USD/t.
The year ago, the corresponding prices varies at 258-263 USD/t FOB.
Russian exporters are waiting for strong demand amid expected lower production of wheat in the world and particularly in Ukraine.
They suppose for widening of export geography of Russian wheat due to stronger presence on the markets that are traditional buyers of Ukrainian wheat.
Moreover, the prices were supported by Egyptian tender.
GASC booked a large volume of wheat that showed the readiness of importers to buy the grain at current high prices even before the start of the new season.
Some support came from the president of Russian Grain Union, who questioned planted area under winter grain and forecasts of record grain production in Russia in 2022.
Meantime, the ongoing discussion about unblocking of Ukrainian seaports does not reveal any real actions from the Russian part.
Thus, it was not able to pressure the prices sizably to now.
Russia’s defence ministry said on Thursday that vessels carrying grain can leave Ukraine’s ports in the Black Sea via “humanitarian corridors” and Russia is ready to guarantee their safety, Interfax news agency said.
However, many ship-owners are not ready to work with Russian market that limited the growth of the prices.
Kazakhstan isconsidering Russian preposition to ban grain export from the EAEU member states, Bakhyt Sultanov Minister of Trade and Integration of Kazakhstan said.
“The negotiations is ongoing. We understand the situation in Russia and its ban on export of grain and sugar. We are strongly against this preposition, as we support the free trade”, – he said.
B. Sultanov added that the officials of both countries were carrying out all necessary calculations to make a decision on this issue.
From the Middle Kingdom, China plans to release another 500k MT of its imported soybean reserves in an auction set for June 10, according to the country’s National Grain Trade Center.
The sale is meant to boost local supplies, and similar sales have routinely been conducted throughout 2022.
From South East Asia, Indonesia as of Friday has issued export permits for a total of 275,454 tonnes of palm oil products since allowing exports to resume, senior Trade Ministry official Oke Nurwan said.
The permits were granted to 21 companies mostly for refined, bleached and deodorised (RBD) palm oil and olein, he said. The export allocation rose from the accumulated 179,464 tonnes a day earlier.
The Philippines recently announced a decision to lower restrictive corn import tariffs on non-ASEAN corn from 35% to five percent.
Executive Order 171 cited the economics of the current world situation driven by the conflict between Russia and Ukraine and corn’s pivotal role in more than 50% of the total production cost of large-scale broiler and swine rations for the decision to lower import tariffs on corn.
The Philippines feed industry relies heavily on feed wheat imports due to its history of high import tariffs on corn outside ASEAN.
The recent global wheat supply chain disruptions have had a disproportionally negative impact on Philippine input prices.
From Australia, local markets still remain on the quiet side to round out the week.
In wheat and barley markets, the bids are trying to drift lower while the offer side is doing its best to hold on the current crop.
New-crop markets were unchanged to down $5/t while the January 2023 ASX East Coast wheat contract traded for smalls at A$460/t, then by the close it traded down to $456/t to settle the day.
Parts of central and northern New South Wales and southern Queensland have only been able to plant around half of intended winter crop area because of excessive rain.
Parts of central and southern NSW have had up to 35mm of rain in the past week, which is slowing up movements of grain off farm, and may prompt the need for resowing.
Most other winter crop areas across Australia have finished sowing and are benefiting from the rain.
The eight-day forecast has another 15-25 millimetres pencilled in for most of southern Queensland and north-east NSW – certainly not what they are looking for at the moment.
South-east NSW, most of Victoria and coastal South Australia are also looking at some good totals.
Western Australia looks set for less than 10mm for most areas.
The FAO Food Price Index fell for the second consecutive month in May
The drop in May was led by declines in the vegetable oil and dairy price indices, while the sugar price index also fell to a lesser extent.
Meanwhile, cereal and meat price indices increased.
Particularly, the FAO Cereal Price Index averaged 173.4 points in May, up 3.7 points (2.2 percent) from April and as much as 39.7 points (29.7 percent) above its May 2021 value.
The FAO Food Price Index averaged 157.4 points in May 2022, down 0.9 points (0.6 percent) from April, marking the second consecutive monthly decline, though still 29.2 points (22.8 percent) above its value in the corresponding month last year.
International wheat prices rose for a fourth consecutive month, up 5.6 percent in May, to average 56.2 percent above their value last year and only 11 percent below the record high reached in March 2008.
The steep increase in wheat prices was in response to an export ban announced by India, as well as reduced production prospects in Ukraine because of the war.
By contrast, international coarse grain prices declined by 2.1 percent in May but remained 18.1 percent above their value a year ago.
Slightly improved crop conditions in the United States of America, seasonal supplies in Argentina and the imminent start of Brazil’s main maize harvest led maize prices to decline by 3.0 percent.
However, they remained 12.9 percent above their level of May 2021.
Similarly, international sorghum prices also fell in May, declining by 3.1 percent, while spillover from the strength in wheat markets and concerns over crop conditions in the European Union boosted barley prices by 1.9 percent.
The FAO Vegetable Oil Price Index averaged 229.3 points in May, down 8.3 points (3.5 percent) month-on-month, yet remaining markedly above its year-earlier level.
The monthly decline mainly reflects lower prices across palm, sunflower, soy, and rapeseed oils.
International palm oil prices weakened moderately in May.
Meanwhile, world price quotations for sunflower oil fell from recent record highs, with stocks continuing to accumulate in Ukraine owing to logistical bottlenecks.
International soy and rapeseed oil prices also declined somewhat in May, chiefly weighed by sluggish import demand in view of elevated costs in recent months.
The FAO Dairy Price Index averaged 141.6 points in May, down 5.1 points (3.5 percent) from April, marking the first decline after eight consecutive monthly increases, but still 20.5 points (16.9 percent) higher than its level in May of last year.
World prices of all milk products fell, with milk powders declining the most, underpinned by lower buying interests on market uncertainties stemming from the continued lockdown in China, despite the persistent global supply tightness.
Butter prices also dropped significantly due to weaker import demand in tandem with some improvements to supplies from Oceania and limited internal sales in Europe.
Meanwhile, robust retail sales and high demand from restaurants ahead of the summer holidays in the Northern Hemisphere prevented cheese prices from falling significantly, despite weakened global import demand.
The FAO Meat Price Index averaged 122.0 points in May, up 0.6 points (0.5 percent) from April, setting a new all-time high, driven by a steep rise in world poultry meat prices, more than offsetting declines in pig and ovine meat values.
In May, poultry meat prices rose, reflecting the continued supply chain disruptions in Ukraine and recent cases of avian influenza amid a surge in demand in Europe and the Middle East.
Meanwhile, international bovine meat prices remained stable, as increased supplies from Brazil and Oceania were adequate to meet persistently high global demand.
By contrast, world pig meat prices fell on high export availabilities, especially in Western Europe, amid lacklustre internal demand and expectations for releasing pig meat from the EU Commission’s Private Storage Aid scheme.
International prices of ovine meat also dropped, reflecting the impact of currency movements.
FAO Cereal Supply and Demand -June 2022
Separately, FAO’s latest estimates indicate a year-on-year 0.9 percent increase in global cereal production in 2021, largely attributed to a higher maize output.
Cereal utilization is also estimated to increase in 2021/22, by 1.1 percent, driven by (in order of magnitude) expansions in food consumption (especially of wheat and rice), other uses (largely of maize), and feed use (mostly of maize).
Based on world cereal production and utilization estimates, cereal stocks at the end of seasons in 2022 are seen rising above their opening levels, but remaining below the record levels reached in 2018/19.
Global trade in cereals in 2021/22 is estimated below the 2020/21 record level, mostly owing to an expected fall in global maize trade and reflecting the impact of disruptions caused by the war in Ukraine.
Looking forward to the 2022/23 season, early prospects for cereal production in 2022 point to a likely decrease, which would mark the first decline in four years.
Based on the conditions of crops already in the ground and planting intentions for those yet to be sown, world cereal output is forecast to fall to 2 784 million tonnes (including rice in milled equivalent), which is down 16 million tonnes from the record output estimated for 2021. Among the major cereals, the largest decline is foreseen for maize, followed by wheat and rice.
By contrast, global outturns of barley and sorghum will likely increase in 2022, to represent a partial rebound from the reduced level for barley in 2021 and the highest production level of sorghum since 2016.
World cereal utilization is also forecast to decline in 2022/23 by 0.1 percent from the estimated 2021/22 level, to 2 788 million tonnes.
The predicted contraction, the first in twenty years, would mainly stem from expected declines in the feed use of wheat, coarse grains and rice, along with a smaller foreseen decrease in industrial uses, mainly of wheat and rice.
By contrast, global food consumption of cereals is expected to increase, keeping pace with the continued rise in world population.
Based on FAO’s initial forecasts for global cereal production in 2022 and utilization in 2022/23, cereal output would not be sufficient to meet the expected utilization requirements, leading to a 0.4 percent contraction in global cereal stocks from their opening levels, to 847 million tonnes.
At the current levels of utilization and stock forecasts, the world cereal stocks-to-use ratio would drop from 30.5 percent in 2021/22 to 29.6 percent in 2022/23, the lowest level since 2013/14 but still well above the record low of 21.4 percent registered in 2007/08.
Among the major cereals, the drawdown in maize inventories is expected to be the largest.
Stocks of barley and rice are also forecast to decline, while those of wheat and sorghum will likely increase.
World trade in cereals is expected to fall to a three-year low estimated at 463 million tonnes, 2.6 percent below the 2021/22 level.
This anticipated decline reflects a likely contraction in global trade of coarse grains and wheat, while prospects for rice remain positive.
Tighter supplies and market uncertainty, especially for wheat, maize and barley, as well as rising energy and input prices, will likely keep world cereal prices elevated, at least through the first half of the 2022/23 season.
That’s all.
To all of you, we wish you a good day.
Author: Sandro F. Puglisi
