Good morning Farmer Family …
US farm markets spent Thursday’s session placing a final round of bets ahead of June World Agricultural Supply and Demand Estimates (WASDE) report from USDA, will out this afternoon, closing with mixed results, however.
The soybean complex was the winner, with soybean price which rose 1.67% higher and reached the highest levels since September 2012.
Soymeal led the complex with 2.86% gains on the day.
Soy oil prices closed with 0.37% losses on the day.
Nearby corn prices also firmed more then 1%, with a round of hot, dry weather expected to descend upon the central U.S. next week.
But new crop prices pulled back from their highs, and turned red for fractional to 1 1/2 cent losses.
The wheat complex, on its part, posted mixed results.
Prices continued to stall, with improved weather conditions, while the market remains focused on the evolution of discussions on the Black Sea basin between Russia and Turkey.
Thus, Chicago SRW went home 0.33% lower on the day.
July printed a near 40 cent range.
Kansas City wheat prices closed with 0.11% losses, with July trading in a 33 cent range.
Minneapolis spring wheat ended the session with 0.85% losses.
In energy markets, oil prices slipped on Friday but remained within touching distance of three-month highs.
Fears over new COVID-19 lockdown measures in Shanghai, indeed, outweighed solid demand for fuels in the United States.
Thus, Brent crude futures for August were down 33 cents, or 0.3%, at $122.74 a barrel at 06:47 GMT, after dropping to as low as $121.60 earlier in the session and declining 0.4% on the previous day.
U.S. West Texas Intermediate crude for July fell 29 cents, or 0.2%, to $121.22 a barrel, having dropped 0.5% on Thursday.
Still, with prices overall rallying in the last two months, Brent was on track for a fourth consecutive weekly gain and WTI was set for a seventh straight weekly increase.
Both benchmarks on Wednesday marked their highest closes since March 8, the highest settlements in 14 years.
The United States and other nations have engaged in a series of releases of strategic reserves, but these have had limited effect, with global crude supply rising very slowly.
Peak summer fuel demand in the United States continued to boost crude prices.
China’s crude oil imports rose nearly 12% in May from a low base in a year earlier.
However, if China continues to use restrictions to limit the spread in Covid19, economic activity may be impacted.
In freight markets, the Baltic Exchange Dry Index fell 68 points, or 2.8% to 2,342 points on Thursday, the lowest since April 22, extending losses for the fourth straight session, as both activity and demand remain subdued due to lower grain shipments led by the Russian blockade of the Black Sea ports, and China’s strict zero-COVID policy.
Particularly, the capesize index, which tracks iron ore and coal cargos of 150,000-tonnes, slumped 3.6% to 2,369 points; and the panamax index which tracks cargoes of about 60,000 to 70,000 tonnes of coal and grains, declined 2.7% to 2,674 points.
Among smaller vessels, the supramax index lost 58 points to 2,527 points.
In contrast, on week 23, a sharp increase in freight rates is recorded in the Azov-Black Sea region.
Thus, the rate for a 3K wheat parcel from Azov to Marmara Sea ports is $46 per ton.
According to Sea Lines shipbrokers, despite the end of the grain season, more and more cargo is appearing in the market every day.
Some farmers offer lower prices on the eve of the new harvest in order to sell the remains of their crops, although this can hardly be called massive.
In addition, shipments from the Russian river ports are being actively discussed, and are expected to start at the end of this month.
Ukrainian grain still continues to be actively exported at prices lower than those for Russian grain, but the difference in cost is leveled by freight.
Indeed, due to the military risks and long queues for loading, the difference in freight rates can be as much as $50.
According to Sea Lines, on week 23, freight rates for shipping wheat by 3,000 dwt bulkers from Azov make $44to the Black Sea, $46 to Marmara, $60 to Mersin and $66 to Egypt.
Freight rates from Rostov AB (after bridge) are $1 above, from Rostov BB (before bridge) the same, from Yeisk and Taganrog $1 below, and from Temryuk $3 below those from the port of Azov.
In the Caspian, freight rates remain on the previous week’s level.
On week 23, freight rates for shipping corn by 3,000 dwt bulkers to Iran make $20 from Aktau, $27 from Makhachkala, and $32 from Astrakhan.
In equity markets, U.S. stock indexes yesterday were down.
The S&P 500, Dow Jones Industrials, and the Nasdaq 100 dropped to 2-week lows.
The hawkish ECB pushed global bond yields higher Thursday and weighed on stocks.
The ECB said it would end asset purchases and begin to raise interest rates.
Thus, the 10-year German bund yield jumped to an 8-year high of 1.465%, causing the 10-year T-note yield to climb to a 4-week high of 3.07%.
U.S. stock indexes were also under pressure yesterday after U.S. weekly jobless claims rose +27,000 to a 4-1/2 month high of 229,000, showing a weaker labor market than expectations of an increase to 206,000.
In contrast, U.S. stock indexes had support from a +4% jump in NXP Semiconductors after the company said it isn’t seeing signs of weaker consumer demand.
Also, Thursday’s better-than-expected Chinese trade data for May was supportive of global growth prospects.
China’s May exports, indeed, rose +16.9% y/y, stronger than expectations of +8.0% y/y.
Also, China May imports rose +4.1% y/y, stronger than expectations of +2.8% y/y.
In this context, the S&P 500 dropped 2.4% or 97.95 points to close at 4,017.82, while the Dow Jones Industrial Average sank 1.9% to 32,272.79.
The Nasdaq composite tumbled 2.8% to 11,754.23.
European stocks sank immediately following the European Central Bank’s announcement on rates, which came before U.S. markets opened.
The CAC 40 index in Paris lost 1.4% and Germany’s DAX lost 1.7%.
Meantime, shares were mostly lower in Asia on Friday, with only Shanghai gaining after the government reported inflation stayed steady at just over 2% in May, allowing more leeway for policies to boost sluggish growth.
Tokyo’s Nikkei 225 index lost 1.5% to 27,824.29 while the Kospi in Seoul shed 1.1% to 2,595.87.
In Australia, the S&P/ASX 200 declined 1.3% to 6,932.00.
Hong Kong’s Hang Seng slipped 0.3%, shedding early gains, to 21,801.16.
The Shanghai Composite index added 1.4% to 3,284.83.
In another market-related move, the China Security Regulatory Commission issued a statement saying it has not yet evaluated and researched reviving a plan by fintech company Ant’s Group’s to conduct an initial public offering.
That countered a report saying approval of the IPO was pending, but the commission said it did support share listings of “qualified platform companies” on domestic and overseas markets.
The government’s quashing of Ant’s earlier effort to launch an IPO came amid a broad crackdown on big technology companies that has buffeted markets, especially in Hong Kong where many such companies are traded.
In currency dealings, the dollar weakened to 134.13 Japanese yen from 134.35 yen.
The euro rose to $1.0634 from $1.0619.
On the weather side, most of the central U.S. will see at least some measurable moisture between today and Monday, with a few spots set to gather up to 0.75” during that time, per the latest 72-hour cumulative precipitation map from NOAA.
The agency’s 8-to-14-day outlook predicts bountiful hot, dry weather for the Midwest and Plains between June 16 and June 22.
On the demand side, the Weekly Exports Sales report released by USDA, showed 280,416 MT of old crop corn was sold for export during the week that ended 6/2.
That was up 51% wk/wk, up 48% yr/yr, and matched expectations.
New crop bookings were reported as only 73,548 MT.
Shipments of 1,381,600 MT were down 13% from the previous week and 12% from the prior 4-week average.
The destinations were primarily to Mexico (344,900MT), China (266,600MT).
For sorghum, the USDA reported 10,177 MT were sold during the week that ended 6/2.
That was down from 32k MT the week prior.
Milo exports were a 4-wk high of 217k MT, setting the MYTD total at 5.889 MMT.
As for soybean, data from the FAS Export Sales report confirmed 429,945 MT of old crop beans were sold during the week of 6/2.
That was sharply above both last week and the same week last year and near the top of the expected range, but included 121k MT of previously announced business.
New crop soybean sales were 595,306 MT during the week.
That was the most since April 14, led by 297k MT to Pakistan (previously known) and 261k MT to China (66k MT previously known).
That left forward sales at 12.697 MMT for the 22/23 season, a 68% lead over forward sales for this season at the same time last year.
FAS data had soymeal bookings at 134,376 MT from the week of 6/2. That was down 29% wk/wk and below estimates.
Meal exports from the week were a 4-wk high of 229k MT and set the MYTD total at 8.238 MMT – matching last year’s pace.
For soybean oil, the weekly report had 1,258 MT sold and 7,714 MT shipped.
Those were each 3-wk lows.
For wheat, the report showed export sales for the period May 27-June 2, 2022 and delivery in 2022/23 season, which began June 1, were at 451,000 MT.
Sales were primarily for unknown destinations (117,600MT) and Mexico (73,200MT).
A total of 740,300 MT in sales were carried over from the 2021/22 marketing year, which ended May 31.
Export shipments for the period ending May 31, of 138,800 MT brought accumulated exports to 18,668,900 MT, down 25% from the prior year’s total of 24,806,600 MT.
The destinations were primarily to South Korea (50,700MT) and Guatemala (25,100MT).
Export shipments for June 1- 2 of 212,000 MT were primarily to Mexico (62,700MT) and the Philippines (57,900MT).
As we can see, US wheat exports ended the 2021-22 marketing year at their lowest in 50 years, as the product remained uncompetitive with all key origins throughout the season.
Meantime, USDA announced a large private export sale of soybean, as unknown destinations booked 500 MT of old crop and 142,500 MT of new crop soybeans.
In this context, corn basis bids were steady to firm after rising 1 to 10 cents higher across half a dozen Midwestern locations on Thursday.
Soybean basis bids were mostly steady to soft after dropping 1 to 5 cents across three Midwestern locations.
An Indiana processor bucked the overall trend after firming 10 cents higher.
The funds were net sellers yesterday for 3,500 lots of wheat but net buyers for 4,500 lots of corn and 10,500 lots of soybeans.
From Canada, Canadian Nutrien, the world’s largest fertilizer producer, said on Thursday it plans to increase potash production to an annual 18 million tonnes by 2025 to mitigate supply uncertainty from Eastern Europe.
Prices of potash, a key input used in nitrogen fertilizers, have soared since Western sanctions were imposed against Russia, exacerbating an already tight market.
The increase in potash production represents a rise of more than 5 million tonnes, or 40% compared to production in 2020, Nutrien said.
The company also said its annual nitrogen sales volumes could increase to about 13.5 million tonnes by 2027.
The company said in March it would raise potash output by 1 million tonnes to 15 million tonnes this year.
On the other hand, Canadian canola seedings have progressed markedly, posted at 91%, which nevertheless remains slightly below the 97% sown on average to date.
From South America, Argentina’s 2022/23 wheat crop will likely come in at 18.5 million tonnes, down from 19 million tonnes previously estimated, the Rosario grains exchange said early on Thursday, citing reduced planting by farmers due to dry weather.
The exchange cut its forecast for the planting area of the crop to 6.2 million hectares from a 6.35 million-hectare estimate previously.
That was the lowest in 12 years.
Planting of the crop is ongoing.
Argentina produced a record 23 million tonnes of wheat last season, however, dry weather linked to the La Nina climate phenomenon, is putting the brakes on farmers planting wheat in key farming regions.
Some 80% of the key Pampas region was in dry to very dry conditions.
Farmers have planted 17% of the estimated area for wheat, some 13 percentage points behind the same stage last season.
Rains will be key to help complete planting by early July, but weather forecasts are not encouraging.
Meantime, the exchange said that the 2021/22 soybean harvest had ended with some 42.2 million tonnes, above the 41.2 million that it had previously estimated, due to yields higher than expected.
Argentina is the world’s top exporter of processed soy.
In Europe, grain prices took advantage of a contraction in the eurodollar parity and the good firmness of American corn to find their way back up on Thursday evening.
Rapeseed widened its recent losses, penalized by the rapid drop in oil prices, and in a context of lack of competitiveness of rapeseed oils compared to other vegetable oils.
The partial re-containment of the city of Shanghai and a relaxation of export restrictions in Indonesia are indeed weighing heavily on the market.
Meantime, Farm office FranceAgriMer on Thursday lowered its forecast for French soft wheat exports outside the European Union this season for a third month in a row, saying high prices due to the war in Ukraine had curbed international demand.
French soft wheat exports to non-EU destinations in the 2021/22 season that ends on June 30 are now expected at 9.1 million tonnes, down from 9.25 million projected in May, FranceAgriMer said in a cereal supply and demand update.
Morocco, whose harvest was hit by drought, was proving an exception with steady demand for French wheat.
FranceAgriMer kept its forecast of French soft wheat exports within the 27-country EU unchanged at 8.0 million tonnes.
It also held its projection for French soft wheat stocks at the end of the season steady at 3.2 million tonnes, with the reduced outlook for non-EU exports offset by a downward revision to harvest supply.
Meantime, analyst firm Strategie Grains reduced its forecast for EU soft wheat exports by nearly 2 million tonnes, also citing a drag on demand from elevated prices.
The French firm expects the 27-member bloc to export 28.0 million tonnes of soft wheat during the 2021/22 season ending on June 30, down from 29.9 million projected in May and 31.4 million seen in April.
Strategie Grains also reduced its EU wheat export outlook for 2022/23, to 30.3 million tonnes from 30.8 million forecast last month, due to weak global demand and rising competition from North American and Russian grains.
Sluggish exports in the final part of the campaign also prompted Strategie Grains to cut estimated EU barley exports in 2021/22 by 0.5 million tonnes to 7 million tonnes.
Traders nonetheless expect EU wheat to be in strong demand in the upcoming 2022/23 season, with availability of Ukrainian supplies uncertain despite talks to re-open the country’s ports.
For this summer’s harvest, showers and cooler temperatures in recent days have brought relief for spring crops, and damage from storms last weekend was thought to be very localised, Catherine Cauchard, head of FranceAgriMer’s crop monitoring service, said.
However, Strategie Grains cut its forecasts for the EU’s 2022 wheat and barley harvest this month, citing overly dry conditions during the first half of the growing season in many countries, notably France.
The EU wheat crop, indeed, was expected at 124.4 million tonnes, down from 126.2 million projected in May and 130.5 million harvested last year but close to the five-year average.
The barley harvest was seen at 50.3 million tonnes, down from 51.7 million last month and 52.0 million in 2021 with the fall mainly due to a lower spring barley output, it said.
In contrast, the corn crop outlook had improved slightly, with the EU 2022 seen harvesting 66.8 million tonnes, up from 66.7 million last month but still well below the 69.5 million harvested last year
As for ending stocks, FranceAgriMer forecasted corn stocks in 2021/22 were increased to 2.6 million tonnes from 2.2 million as the office revised up supply and lowered projected demand for livestock feed.
France’s worst-ever bird flu outbreak and wider difficulties in the livestock sector have reduced feed demand.
Projected barley stocks also were raised to 1.4 million tonnes from 1.3 million last month, reflecting cuts to expected exports and feed demand, FranceAgriMer’s data showed.
Meantime, farm office FranceAgriMer showed on Friday growing conditions for wheat and barley crops in France continued to decline for a sixth straight week.
An estimated 66% of French soft wheat was in good or excellent condition by June 6, against 67% the previous week and 81% a year ago, the office’s data showed.
The rating has dropped by 25 percentage points since the start of May
Durum conditions also moved down to 62% from 64% a week ago and down from 70% a year ago.
French barley conditions also dropped, as in the previous week.
The good to excellent rating for winter barley fell 1 percentage points to 64%.
Ditto the corresponding score for spring barley dropped 1 percentage points to 53%, FranceAgriMer’s report showed.
Rating for emerged maize plants, was at 88%, down from 90% of the crop valued in good or excellent conditions last week.
From the Middle East, Iraq passed on Wednesday an emergency finance bill to pay debts to Iran to ensure gas supplies and forestall worsening power cuts, as well as to buy grain for “food security”.
Parliament, which has still not adopted its budget for 2022, approved the law relating to “food security and development” totalling IQD25 trillion, or just over USD17 billion.
Of that, USD2.6 billion will be allocated to settling Iraq’s gas and electricity debts, as well as for buying further energy supplies from abroad.
About USD3.4 billion will be used to buy cereals, including large volumes of wheat supplies from both the domestic market and abroad.
Iraq’s agricultural sector contracted by 17.5 per cent last year “following severe droughts, energy outages, and the rising global price of inputs”, according to the World Bank.
Despite its immense oil and gas reserves, Iraq remains dependent on imports to meet energy needs.
Neighbouring Iran currently provides a third of Iraq’s gas and electricity needs, but supplies are regularly cut or reduced, aggravating shortages caused by daily load shedding.
Iran had demanded Iraq pay USD1.6 billion it owes for gas imports by the start of June to guarantee further supplies.
From the Black Sea basin, the Kremlin said on Thursday that no agreement had been reached to sell grain from Ukraine to Turkey – which Ukraine says Russia has stolen from it – but that work on a deal was continuing.
Moscow denies stealing the grain but the United States says there are credible reports that Russia is “pilfering” it.
Yevgeny Balitsky, a Russian-installed official in charge of Russian-occupied areas of Ukraine’s Zaporizhzhia region, said this week that grain had been transported from there to Crimea, en route to the Middle East.
Asked if any deal had been reached to sell this grain to Turkey or a Middle Eastern country, Kremlin spokesperson Dmitry Peskov said: “So far no agreements have been reached, work is continuing.”
Thus, the export corridor is not closed but seems a little further away this morning.
While they said that they are still in discussion with Turkey the fact an agreement wasn’t made is significant.
Meanwhile, according to the Russian Grain Union, Russia exported 1.26Mt of wheat during May – more than double the same time the previous year.
On the flipside, Ukraine exported 43,500t of wheat in May, down 95pc from the previous year.
They did manage to get 959,000t of corn compared to 2.2Mt in May 2021.
Ukraine has sent some 601,115 tonnes of grains to the Romanian Black Sea port of Constanta since started war, with an additional 120,294 tonnes en route.
The grains it has sent by barge, train and truck to the Romanian port amount to roughly 3% of the 20 million tonnes it needs to move before the new harvest starting at the end of July to avoid bottlenecks.
In Constanta, more than 262,000 tonnes of Ukrainian grains have already left aboard 15 ships, with more than 339,000 tonnes in silos.
Last year, Constanta’s port shipped a record high 25.2 million tonnes of grain from Romania and its neighbours.
In May, Comvex estimated that operators could handle an additional 20% on top of last year’s volumes, or roughly 5 million tonnes.
In China, the cities of Shanghai and Beijing went back on a fresh COVID-19 alert after parts of the nation’s largest economic hub started imposing new lockdown restrictions while the most populous district in the Chinese capital shut entertainment venues.
Meantime, China’s corn supplies in the market are quite ample, the agriculture ministry said on Friday.
Supplies were boosted as farmers sold their inventories and logistics improved with effective control of COVID outbreaks, the Ministry of Agriculture and Rural Affairs said in its monthly crop report.
Feed demand was edging up thanks to stable pig production capacity and a decline in wheat feeding, while industrial consumption of the grain was seen as stable, according to the Chinese Agricultural Supply and Demand Estimates (CASDE) report.
The ministry’s estimates for 2022/23 corn output, consumption and imports were unchanged from last month.
Its forecasts for China’s soybean imports and consumption in the year 2022/23 were also the same as May.
Meantime, local market yesterday saw Dalian’s most-active soyoil contract fell 2.6%, while its palm oil contract dropped 5.5%.
From South East Asia, Pakistan will import 3 million tonnes of wheat from different countries this year, including Russia, for local consumption and to shore up its reserves, the country’s finance minister said on Thursday.
The imports would be on a government to government basis, Minister Miftah Ismail told journalists at the launching ceremony of the country’s annual economic survey report.
In India, USDA attaché in New Delhi lowered its India market year (MY) 2022/2023 (April-March) wheat production forecast to 99 million metric tons (MMT) compared to the pre-harvest forecast of 110 MMT.
The MY 2022/2023 wheat exports forecast is lowered to 6 MMT and ending stocks to 8.5 MMT due to tightening supplies.
The Indian government has lowered the allocation of wheat, replacing it with additional rice volume, under its various domestic food security programs from May 2022 onwards.
The MY 2021/2022 rice consumption estimate is raised to 109.5 MMT and ending stocks lowered to 36 MMT.
The MY 2021/2022 rice and corn production estimates are raised based on the latest official estimates.
In Malaysia, Malaysian palm oil futures fell 4% on Thursday after top producer Indonesia kicked off a scheme to accelerate exports and key buyer China re-imposed COVID-19 lockdowns in Shanghai.
Marking its worst close in nearly three weeks, the benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange fell 259 ringgit to 6,208 ringgit ($1,413.48) a tonne.
Palm suffered its biggest daily decline in five weeks.
The contract was pressured by easing concerns over Indonesia’s export outlook.
Indonesia launched an export acceleration scheme effective immediately, aimed at shipping at least 1 million tonnes of crude palm oil and derivatives following a recent ban, according to a trade ministry regulation made public on Thursday.
The world’s biggest exporter is also lowering the maximum rate of export tax and levy for crude palm oil to $488 per tonne from $575 per tonne to encourage shipments.
($1 = 4.3920 ringgit).
From Australia, Australia exported 774,340 tonnes of barley and 234,529t of sorghum in April, according to the latest export data from the Australian Bureau of Statistics (ABS).
The malting total of 139,797t is up 15 per cent from the 121,452t shipped in March, while the feed total of 634,553t is up 3pc from the 614,055t shipped in March.
Sorghum exports more than doubled over the month, with China the destination for 94pc of the total.
Reported April malting barley shipments, plus 33,000t classified as feed barley to Canada, but with malt as its likely endpoint, make it the biggest month for malting exports in more than two years.
Shipping continues to all the usual suspects in Saudi, Japan, Jordan and other Middle East destinations, and is not expect a big change in the deck.
Asian feed demand remains subdued and barley shipments relatively low.
That, is expect to continue, given continuing cheap feed wheat availability ex Australia, and the new relaxation of corn import tariffs in multiple demand countries.
Demand as expected to continue straight out to new crop, with Australia already well sold and the global market already transacting in the Sep-Oct period.
The global market is not currently showing an inverse on price between old and new-crop periods, with Sep-Oct shipment into the Middle East recently trading around US$380/t FOB equivalent Australia.
Elevation margins are very strong right through, with lower new-crop grower prices triggering elevation margins of A$50-$90/t vs grower bids.
Meantime, local market have largely remained unchanged over the course of the week.
Liquidity continues to slowly tick over but still remains on the quiet side.
The lead from offshore prices for today is modest.
The Australian grains industry is set to benefit from a $24 million investment in the Australian Export Grains Innovation Centre (AEGIC) to continue its marketing development and research efforts to build long-term industry success.
The WA Government and the GRDC have signed an agreement to contribute $3M each per year from 2022-23 to 2025-26, enabling AEGIC to maintain and build new trade opportunities and industry value.
On international trade scene, Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) bought a total of 146,990 tonnes of food-quality wheat from the United States and Canada in regular tenders that closed on Thursday.
The ministry has also tendered 22,260 tonnes of Standard White wheat from Australia on Tuesday, but no deals were done for the supply, a ministry official said.
“Though it is rare, not all bids are always accepted due to price and other conditions, especially with the recent volatile market conditions amid the Ukraine crisis,” he said.
Japan, the world’s sixth-biggest wheat importer, keeps a tight grip on imports of the country’s second most important staple behind rice and buys the majority of the grain for milling via tenders typically issued three times a month.
That’s all.
To all of you, we wish you a good day.
Author: Sandro F. Puglisi
