Good morning Farmer Family …
Global stocks and government bonds plunged again on Monday.
The dollar hit two-decade highs.
Red-hot U.S. inflation fuelled worries about even more aggressive policy tightening in a big week for central banks.
Wall Street hit a confirmed bear market milestone and bond yields struck a two-decade high.
In US farm markets, only some wheat prices tested marginal gains in overnight trading, as SRW prices closed just 0.02% higher; Kansas City wheat prices stayed 0.06% lower; spring wheat prices were 0.02% higher, by the closing bell.
But everything rest was in the red by the close after the broad sell-off which led the equities into a bear market territory.
Soybeans suffered the biggest setback, with prices slumped 2.18% lower.
Meal was the drag of the market, closing 3.26% down.
Soy oil prices closed 1.61% lower.
Corn losses were more manageable as July contract trended 0.52% lower.
In energy markets, oil prices rose about $1 in volatile trade on Tuesday.
U.S. West Texas Intermediate (WTI) crude, indeed, rose 96 cents, or 0.8% to $121.89 a barrel at 06:34 GMT, while Brent crude futures rose $1.05, or 0.9%, to $123.32 a barrel.
On Monday Brent crude rose 26 cents to settle at $122.27 a barrel.
U.S. West Texas Intermediate crude rose 26 cents to settle at $120.93 a barrel.
However the trade was volatile, as prices down about $3 a barrel earlier in the session.
Tight global supplies, indeed, outweighed worries that fuel demand would be hit by a possible recession and fresh COVID-19 curbs in China where the capital’s most populous district, Chaoyang, kicked off a three-day mass testing campaign among its roughly 3.5 million residents on Monday, and where about 10,000 close contacts of the bar’s patrons have been identified, and their residential buildings put under lockdown.
However, a drop in exports from Libya due a political crisis that has hit output and ports, has dropped production in the country to 100,000 barrels per day from 1.2 million bpd last year.
Analysts expect U.S. crude inventories fell by 1.2 million barrels in the week to June 3, while forecasting that gasoline stockpiles rose by about 800,000 barrels and distillate inventories, which include diesel and heating oil, were unchanged.
The market will be awaiting weekly data from the American Petroleum Institute on Tuesday and the U.S. Energy Information Administration on Wednesday for a better view of how tight crude and fuel supply remain.
But oil prices could face pressure if the U.S. Federal Reserve surprises the markets with a higher-than-expected interest rate hike.
In freight markets, the Baltic Exchange’s main sea freight index extended its retreat into a sixth straight session on Monday, falling 2.6% to a near two-month low of 2,260 points, as both activity and demand remain subdued.
The capesize index, which tracks iron ore and coal cargos of 150,000-tonnes, slumped about 5% to 2,246 points; and the panamax index, which tracks about 60,000 to 70,000 tonnes of coal and grains cargoes, declined 1% to 2,600 points.
Among smaller vessels, the supramax index lost 32 points to 2,463 points.
In equity markets, stocks on Monday fell sharply for a second session in a row.
The S&P 500 slumping to a 15-month low, the Dow Jones Industrials falling to a 16-month low, and the Nasdaq 100 dropping to a 19-month low.
The S&P 500 index sank 3.9% to 3,749.63.
It’s now 21.8% below its record set early this year and so it is now in a bear market.
The Dow lost 876.05, or 2.8%, to 30,516.74, after falling more than 1,000 points.
The Nasdaq composite dropped 4.7% to 10,809.23.
Global equity markets plummeted on concern that soaring inflation will prompt the Fed to be more aggressive in tightening monetary policy.
That will slow economic growth and possibly spark a recession.
The two-year Treasury yield shot to 3.36% from 3.06% late Friday in its second straight major move.
It earlier touched its highest level since 2007, according to Tradeweb.
The 10-year yield jumped to 3.37% from 3.15%, and the higher level will make mortgages and many other kinds of loans more expensive. It touched its highest level since 2011.
The higher yields mean prices are tumbling for bonds.
That happens rarely and is a painful hit for older and more conservative investors who depend on them as the safer parts of their nest eggs.
Meantime, Asian shares fell across the board Tuesday.
Benchmarks fell in Japan, Australia, South Korea and China.
Japan’s Nikkei 225 shed 1.8% to 26,496.91.
Adding to worries about the fragile Japanese economy is the sliding yen, recently has touched 135, the lowest level against the U.S. dollar since 1998.
Australia’s S&P/ASX 200 dipped 4.3% to 6,634.00 after reopening from a holiday on Monday.
South Korea’s Kospi lost 1.0% to 2,479.83.
Hong Kong’s Hang Seng slipped 0.4% to 20,990.98, while the Shanghai Composite edged down 1.2% to 3,217.72.
In currency trading, the U.S. dollar rose to 134.62 Japanese yen from 134.46 yen, as the yen’s weakness was mitigated somewhat by Bank of Japan Gov. Haruhiko Kuroda’s comments expressing concern about its decline.
The euro cost $1.0426, up from yesterday’s $1.0409.
On the weather side, rainfall will be variable later this week – Iowa, Wisconsin and North Dakota have the best chance for the biggest amounts (around 0.75”) between today and Friday, per the latest 72-hour cumulative precipitation map from NOAA.
Meantime, the weather is definitely hotter than it has been in quite some time.
Heat advisories have been issued for large swaths of the Midwest, including areas as far north as Minnesota and the Dakotas.
In fact, the heat index for Minneapolis on Tuesday is expected to reach 99 degrees!
Meantime, after the session close, NASS reported yesterday corn Planting progress at 97% finished nationally, up from 94% a week ago.
That matches the 5-yr average as both Nebraska and North Carolina were done.
Corn emergence was at 88% as of 6/12, that is up 10% points from the week prior and just 1ppt behind the average emergence.
Corn quality ratings took a slight step back, with 72% of the crop now rated in good-to-excellent condition.
Another 23% is rated fair (unchanged from last week), with the remaining 5% rated poor or very poor (up a point from last week).
Also from the report, milo was 66% planted nationally, up 10% points wk/wk and still 5% points behind their average pace.
Sorghum conditions were 47% good/ex, compared to 46% last week.
Barley condition were at 49pc g/e, vs. 46pc last week & 45pc last year.
For soybean, Crop Progress data as of 6/12 showed that soybean planting advanced 10% points wk/wk to 88% finished.
KY had completed their planting as of 6/12.
That’s identical to the prior five-year average but five points behind 2021’s pace of 93%.
NASS reported the national emergence at 70%, compared to 56% last week and 74% on average.
The first look at soybean conditions yielded a 70% good/ex, with 69% landing in those top two categories.
Another 25% is rated fair, with the remaining 5% rated poor or very poor.
For wheat, NASS reported the spring wheat planting at 94% nationally with just MN (92%), MT (99%), and ND (91%) left, up from 82% a week ago.
In 2021, all of the crop had been planted by this time of year, with a prior five-year average of 99%.
National emergence was 72%, up from 55% last week but 21% points behind the average.
Initial spring wheat conditions came in at 54% good/ex with was well above last year’s initial mark of 37%, and only 9% poor/vp.
As for winter wheat, the Crop Progress report showed conditions were mixed.
Top-end ratings improved a point, as expected, with 31% of the crop now rated in good-to-excellent condition.
Another 27% is rated fair (down three points from last week), with the remaining 42% rated poor or very poor (up two points from last week).
Physiologically, 86% of the crop is now headed, up from 79% last week.
NASS marked the national harvest at 10% complete, which was up from the prior week’s progress of 5% but two points behind the prior five-year average of 12%.
TX was more than half cut and KS began harvesting with 2% finished.
On the demand side, USDA’s weekly Export Inspections data showed 2 MMT of corn was shipped during the week of 6/9.
That was above the 1.458 MMT last week and the 1.61 MMT from the same week last year.
China was shipped 413k MT alone with each Mexico, Japan, and South Korea getting +150k MT.
The weekly data had the MYTD total at 44.96 MMT, an 8.8 MMT (16%) lag from last year’s pace.
For soybean data showed 605,129 MT of soybeans were exported during the week of 6/9. That was nearly double the 365k MT last week and compares to just 141k MT shipped during the same week last year. USDA’s FAS had the MYTD soybean export at 50.47 MMT through 6/9. That compares to 57.05 MMT during the same week last year – an 11.5% drop.
For wheat, weekly export inspections were 388,847 MT.
That was up from last week’s 355k MT but under the 500k MT shipped during the same week last year.
MYTD exports were set as 615,556 MT compared to last year’s.
In this context, corn basis bids were steady to mixed to start the week, moving as much as 5 cents higher at a Nebraska elevator and as much as 5 cents lower at an Illinois processor on Monday.
Soybean basis bids were steady to mixed, after spilling 10 to 30 cents lower at two Midwestern processors while trending 2 cents higher at an Iowa river terminal.
The funds were net sellers yesterday for 1,000 lots of corn, 15,500 lots of soybeans and 1,000 lots of wheat.
In Canada, other than in some areas of Manitoba, spring wheat seeding is essentially finished in Western Canada.
Canadian durum seeding is essentially finished too.
Meantime, at 234k mt, Canadian wheat exports improved last week (wk. 44), advancing year-to-date wheat exports to 9.7 million mt, 43% smaller than last year-to-date.
Per StatsCan, Canada exported 806k mt of wheat (excluding durum) in April 2021, compared to 1.8 million mt in April 2022.
Durum exports for week 44 were at an improved 73k mt, for a year-to-date total of 2.2 million mt, compared to 5.4 million mt last year-to-date.
This is now 59% behind last year’s pace.
Per StatsCan, Canada exported 244k mt of durum in April 2021, compared to 661k mt in April 2022.
From South America, official export data from the Brazilian Trade Ministry showed corn shipments were 1.166 MMT in May.
That was up sharply from the low 14k MT during May ’21.
The Ag Rural reported Brazil’s 2nd crop harvest reached 7% completion.
The harvest of the second 2021/22 corn crop in Mato Grosso reached 16.22%, according to the Mato Grosso Institute of Agricultural Economics (IMEA), with a number obtained until June 10.
In the previous week, the rate was 5.98%.
In the previous year, the percentage was 1.94%.
For soybean, Brail’s Trade Ministry reported the official May soybean export as 10.633 MMT.
That was down 29% or by 4.3 MMT yr/yr marking the lowest May shipment in 5 years.
In Europe, a heat wave is still expected for the end of the week in Spain, Portugal and France mainly risking causing scalding on the eve of harvest.
In Italy, according to the Coldiretti group, wheat production could fall by 15% this year due to the water deficit and the high temperatures that have plagued the country.
Coldiretti estimated that this year’s wheat harvest would be around 6.5 billion kilogrammes at a national level on a total surface area of 1.71 million hectares cultivated for both durum and soft wheat.
In this context, markets were undecided yesterday with grain prices remained firm, while rapeseed, and more broadly all vegetable oils, fell back significantly.
From North Africa, elevated wheat prices to a record-high, coupled with pressures on the Egyptian pound, is expected to cost Egypt $3 billion in additional burdens, Minister of Finance Mohamed Maait said in an interview with CNBC on June 12th.
The anticipated additional cost will include $1.5 billion in burdens to the general budget, while $1.5 billion will be shouldered by the private sector, Maait said.
On June 2nd, Minister of Supply and Internal Trade Ali Moselhi revealed that the Egyptian government is in talks with India over a potential swap deal, upon which it could import wheat from the south Asian country in exchange for fertilizers exports.
From the Black Sea basin, according to the office of the Ukrainian Minister of Agriculture, in 2022, Ukraine will harvest about 48-50 mln tonnes of grain crops.
In particular, wheat production will reach 18-20 mln tonnes, barley – about 5 mln tonnes, corn – 24 mln tonnes.
The rapeseed crop is projected at 2.5 mln tonnes, soybeans – 2.5-2.8 mln tonnes, sunflower seed – about 10 mln tonnes.
Ukraine’s total wheat crop acre footprint is down 25% this year, and 2022 exportable surplus could reach 30 million metric tons.
Meantime, according to APK-Inform, the export prices of Ukrainian wheat continued growing last week.
The indicative offer prices of old-crop 12.5%, 11.5% and feed wheat increased by 5-10 USD/t to 420-440, 415-435 and 370-39 USD/t FOB (June).
The indicative offer prices of new-crop 12.5%, 11.5% and feed wheat increased by 5-10 USD/t to 415-435, 410-430 and 380-400 USD/t FOB (July-August).
The export prices of Ukrainian new-crop rapeseed have been decreasing since the beginning of June.
As of June 13, the prices of new-crop rapeseed totaled 725-750 USD/t DAP Izov (July) compared to 820-850 USD/t DAP Izov at the beginning of June.
Ditto for the export prices of Ukrainian corn which continued decreasing last week.
The bid prices of Ukrainian corn for delivery in July-August decreased to 220-240 USD/t DAP Poland, 240-255 USD/t DAP Slovakia and 215-230 USD/t Hungary.
High carry-over stocks, coming finish of planting campaign and favorable weather remained the key bearish factors.
In Russia, Russian exports are weak according to Adrey Sizov.
June wheat export could be below 1.0 mmt for the first time since May-2021.
Export quotas are almost over and the ruble is appreciating.
The quota is in place until July.
Meantime, Black Sea crop conditions are deteriorating a bit, Andrey Sizov added.
Eastern half of Ukraine has been dry, and parts of Central and Southern Russia received almost 0 rain.
Temperatures have been 2-5C above normal.
From South East Asia, India may permit export of wheat to meet Indonesia’s food grain demand through an arrangement where the Southeast Asian nation supplies palm oil without any interruption at competitive rate to address India’s concerns over shortage of edible oil
Meantime, Indonesia approved 1.16 MMT of palm oil exports under the permit program.
News on the wire suggested Indonesian exporters who don’t have permits could ship palm oil buy paying an export tax in lieu of a permit.
From Australia, Ausie local markets led into the long weekend sluggish, wheat values were relatively unchanged on old and new crop across the board.
Offer side remained sticky and buyers were not budging
The June Grains Industry of WA (GIWA) report pegged WA’s winter-crop area at 8.963 million hectares, up 55,000ha, or 6 per cent from the 8.908Mha forecast in May.
The report noted that this is an historically large crop, and has been planted on the back of high grain prices leading up to and during seeding.
Recent rain arrived just in time for crops in the drier regions in the central and north of the state, and topping up moisture profiles in the southern regions.
While estimated wheat area was down 60,000ha from May, canola is up 80,000ha to 1.83Mha.
Good weed control, even crop establishment and timely post-emergent nitrogen applications, combined with a large area planted, have set up the state for another potentially big harvest.
A dry long weekend was welcome across the eastern states. WA and southern Vic received some showers but it was dry across most cropping country.
On the international scene, operators are still awaiting the outcome of Jordan’s wheat and barley tender.
Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) is seeking to buy a total of 186,441 tonnes of food-quality wheat from the United States, Canada and Australia in regular tenders that will close on Thursday.
Bangladesh’s state grains buyer has issued another international tender to purchase 50,000 tonnes of milling wheat.
The deadline for submission of price offers is June 22.
Price offers in the wheat tender are sought on CIF liner out terms. These terms include ship unloading costs for the seller.
The wheat can be sourced from any worldwide origins except Israel and is sought for shipment to two ports, Chattogram and Mongla.
Outlook
Macro markets were dominant again than anything and not only in the US.
Federal Reserve could get more aggressive with their rate hikes to combat the worse than expected inflation.
The US annual inflation rate was 8.6pc, the biggest jump in prices faced by consumers since 1981.
Thus, some economists are speculating the Fed on Wednesday may raise its key rate by three-quarters of a percentage point.
That’s triple the usual amount and something the Fed hasn’t done since 1994.
As a consequence, prices fell in a worldwide rout for everything from bonds to bitcoin, from New York to New Zealand.
Some of the sharpest drops hit what had been big winners of the easier low-rate era, such as high-growth technology stocks and other former darlings of investors.
Tesla slumped 7.1%, and Amazon dropped 5.5%.
GameStop tumbled 8.4%.
Bitcoin plunged more than -19% to a 1-1/2 year low, causing panic among some crypto investors.
The economy is still holding up overall, but the danger is that the job market and other factors are so hot that they will feed more into higher inflation.
In grains markets it feels like the calm before the storm.
Wheat has been strangely quiet on the boards.
We have just begun 2022 harvest.
War-led supply chain disruptions continue.
The weather in the US has obviously been pretty horrific in Hard Red Spring wheat regions, crop ratings expected for 63pc good-to-excellent, came in just at 54pc.
France looks like it is heading into summer proper with temperatures at 38°C across the grainbelt while Argentina is not getting the rain it needs.
However, markets are under pressure again this morning.
It seems this time it’s the grain’s turn …
Let’s fasten our seat belts and hold on tight.
That’s all, thank you.
To all of you, we wish you a good day and …
Good harvest 2022!
Author: Sandro F. Puglisi
