Good morning Farmer Family …
Bearish sentiment came on Wall Street Monday, also made its way into grain markets on Tuesday.
Thus, in spite on fundamentals side we are seeing a heatwave to move through the Midwest that threatens corn and soybean quality ratings, US farm markets were down yesterday.
Corn prices, indeed, eased 0.13% lower.
Soybeans slided 0.53% lower.
Soymeal prices were down by 0.99% on the day.
Soybean oil prices were down by 1.55%.
Wheat prices, as we have anticipated, were hit even harder, with losses ranging between 1% and 2%.
Particularly, Chicago wheat prices went home 1.94% lower in the front months.
Kansas City HRW wheat prices ended the day with 1.68% losses.
Minneapolis spring wheats closed with front month down by 1.08%.
On this morning, Chicago soybean prices rose for the first time in four sessions, as the market recovered from a more than one-week low, although growing inflationary concerns kept a lid on prices.
Corn and wheat futures lost more ground, meantime.
World stocks fell for a second day in a row on Tuesday while government bond yields and the U.S. dollar clung to multi-year highs, as surging inflation led investors to brace for what could be the largest U.S. interest rate hike in 28 years this week.
In energy markets, on Wedsneday, benchmark U.S. crude rose 40 cents to $119.33 per barrel, as of 6:44 GMT on the New York Mercantile Exchange .
The contract lost $2 on Tuesday to $118.93.
Brent crude, the price basis for international oil trading, added 43 cents to $121.60 per barrel in London.
It fell $1.10 the previous session to $121.17.
Oil prices made gains on Wednesday, rebounding from losses earlier in the session amid concerns over fuel demand and the broader economy ahead of the expected big hike of 75-basis-point in interest rates by the U.S. Federal Reserve, which would be the largest U.S. interest rate hike in 28 years.
On the demand side, China’s latest COVID outbreak, traced to a 24-hour bar in Beijing, has raised fears of a new phase of lockdowns.
The country’s economy, however, showed signs of recovery in May after slumping in the prior month as industrial production rose unexpectedly.
Also, offering some support to prices is tight supply, which has been aggravated by a drop in exports from Libya amid a political crisis that has hit output and ports.
In freight markets, the Baltic Exchange’s main sea freight index rebounded on Tuesday after touching a near two-month low in the previous day as rates rose for the larger capesize and panamax vessel segments.
The overall index, indeed, increased by 24 points, or 1.1%, to 2,284.
Particularly, the capesize index gained 62 points to 2,308, a rise of about 2.8%.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, rose by $511 to $19,138.
The panamax index added 29 points, or 1.1%, to 2,629 points.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, increased by $254 to $23,657.
The supramax index lost 12 points to 2,451.
In equity markets, US stocks on Tuesday settled mixed.
The S&P 500 fell to a 15-month low and the Dow Jones Industrials dropped to a 16-month low.
The Nasdaq 100 rebounded from a 19-month low and closed slightly higher.
Stocks initially had moved higher yesterday, after U.S. May producer prices rose less than expected and after Oracle rallied more than +10% when it reported better-than-expected quarterly revenue.
Also, FedEx jumped +14% Tuesday after it boosted its dividend.
Stocks also garnered support on a decline in inflation expectations after the 10-year breakeven inflation rate Tuesday dropped to a 2-1/2 week low.
The U.S. May final-demand PPI index rose +10.8% y/y, slightly weaker than expectations of +10.9% y/y.
U.S. May PPI ex-food & energy rose +8.3% y/y, weaker than expectations of +8.6% y/y and the smallest rise in 6 months.
However, T-note yields continue to climb.
The 10-year T-note yield jumped to a new 11-year high at 3.497%.
The markets expect the FOMC will raise rates at least 50 bp.
Expectations are building for a 75 bp after a Wall Street Journal report.
In addition, JPMorgan Chase said that even a full percentage point (100 bp) increase Wednesday is a possibility.
Britain’s central bank also has raised rates, and the European Central Bank says it will do so next month.
Japan’s central bank has kept rates near record lows.
That has caused the yen to fall to two-decade lows around 135 to the dollar as traders shifted capital in search of higher returns (particularly dollars).
A “hawkish surprise” from the Fed could be a “further shock to risk assets,” analysts said.
And “money markets are already pricing around 90% possibility of such action” they added.
In this context, the S&P 500 declined 0.4% to 3,735.48, putting it 21.8% below its Jan. 3 peak.
That puts it in a bear market , or a drop of 20% from the last market top.
The Dow Jones Industrial Average fell 0.5% to 30,364.83 and the Nasdaq composite rose 0.2% to 10,828.35.
Meantime, Asian stock markets were mixed Wednesday.
The Shanghai Composite Index gained 1.8% to 3,348.58 after Chinese factory activity rebounded in May.
Hong Kong’s Hang Seng gained 1.6% to 21,396.83 while the Nikkei 225 in Tokyo lost 1.1% to 26,326.16.
The Kospi in Seoul shed 1.8% to 2,447.52 after the government reported South Korea’s unemployment rate ticked up 0.1 percentage point to 2.8% in May.
Sydney’s S&P-ASX 200 sank 1.3% to 6,599.20.
India’s Sensex opened down less than 0.1% at 52,683.77.
New Zealand, Indonesia and Bangkok declined while Singapore advanced.
In currency trading, the dollar declined to 135.13 yen from Tuesday’s 135.30 yen.
The euro gained to $1.0446 from $1.0411.
The ruble remains very firm at 56.45 against the USD.
On the weather side, there may not be a tremendous amount of rainfall across the Corn Belt between today and Saturday, but parts of Iowa, Wisconsin and southern Minnesota could gather another 1” during this time, per the latest 72-hour cumulative precipitation map from NOAA.
The agency’s 8-to-14-day outlook predicts widespread hot, dry conditions for almost the entire central U.S. between June 21 and June 27.
Meantime, according to the Kansas Wheat Harvest Reports, brought by the Kansas Wheat Commission, Kansas Association of Wheat Growers and the Kansas Grain and Feed Association, growers across the southern tier of Kansas are off and cutting.
Early indications continue to show lower than average yields, as expected.
Spots of good quality, however, are a welcome surprise following last-minute rains that filled smaller and fewer wheat berries.
Producers started cutting on Saturday in Ford County.
Results are variable, with moisture ranging from 10 to 14 percent and test weights running from 55 to 62 pounds per bushel.
The wheat is dry, and combines are ready to roll in Pratt and Stafford counties, but some operations are waiting for harvest crews delayed in Oklahoma.
Harvest did start in the area on Monday.
Growers expects yields to be down substantially.
Protein levels will likely be adequate due to the drought stress.
With lots of green wheat still out there, he expects producers to be cutting until the Fourth of July.
In North Dakota, while the majority of producers have finished planting the 2022 spring wheat crop, some are still working to get in a few more acres.
Producers that may still be planting indicate they will cease planting after June 15 as the growing season is too short to plant much later.
This week’s USDA Crop Progress report showed that 91% of the North Dakota spring wheat had been planted.
The emergence remains furthest behind in North Dakota with 56% emerged.
Some producers are reporting emergence issues due to crusting of the soil after heavy rains, while others report great emergence and stands.
Temperatures this week are expected to be above normal which may push along crop development.
Weekly condition ratings started this week.
USDA reported in North Dakota, nearly two-thirds of the crop is rated good to excellent.
This week’s Crop Progress report shows that 83% of the North Dakota durum crop had been planted, up about 20 percentage points from last week, but still well behind normal.
Similar to spring wheat, durum producers won’t plant much more durum now that we’re getting quite late into the growing season.
Some producers in northern areas have indicated some fields are simply too wet to plant this year and some intended durum acres will not get planted.
About 43% of the planted durum has emerged, compared to 87% on average.
Crop condition ratings have not been released, but the moisture situation is much improved compared to a year ago.
On the demand side, private exporters reported to the USDA having sold 148,000 metric tons of corn for delivery to Mexico.
Of the total, 103,000 metric tons is for delivery during the 2021/2022 marketing year and 45,000 metric tons is for delivery during the 2022/2023 marketing year.
Meantime, ahead of the next National Oilseed Processors Association (NOPA) monthly report, analysts expect the group to show the U.S. May soybean crush at 171.55 mbu in May.
If realized, that would be 1% above April’s crush and nearly 5% higher year-over-year, making it the largest May crush on record.
Soyoil stocks are expected to drop to an eight-month low of 1.765 billion pounds.
NOPA will release its report this afternoon.
In this context, corn basis bids were steady to mixed on Tuesday after rising 3 to 5 cents higher at two Midwestern processors while falling as much as 5 cents at an Indiana ethanol plant.
Soybean basis bids showed some big variability, after jumping 30 cents higher at a Nebraska processor while sliding 5 to 6 cents lower at four other Midwestern locations.
The funds were net sellers yesterday for 2,000 lots of corn, 4,000 lots of soybeans and 4,500 lots of wheat.
From South America, Anec expects Brazilian corn exports to reach 1.79 MMT in June.
That’s 23.4% above the group’s previous forecast issued a week ago.
Anec also predicts the country’s soybean exports will reach 10.84 MMT this month.
That’s 15.2% above the forecast Anec made a week ago.
The group also predicts Brazil will export 2.19 million metric tons of soymeal in June.
In Europe, markets have entered in a phase of hesitation.
Harvests started in Western Europe.
Thanks to dry weather and very high temperatures the ripening of the grains accelerated.
Thus, the usual harvest pressure comes up against the lack of availability linked to the conflict in the Black Sea basin.
In spite strained fundamentals in terms of balance sheets, indeed, comes the risk of a global economic recession.
That is prompting operators to be extremely cautious, and to take profits by funds in particular.
European grain prices, has been also penalized by a rebound in the eurodollar parity.
Meantime, Asian flour millers, indeed, are likely to increase wheat purchases from France and Romania in the new crop year starting July as supplies from key global exporter Ukraine remain cut off.
French wheat was quoted around $495 a tonne, including cost and freight (C&F) to Indonesia for August shipment as compared with $470-$480 a tonne, C&F, for Romanian wheat.
Asian wheat importers have been operating hand-to-month, booking cargoes just one or two months in advance, hoping from supplies from the Black Sea region to resume.
Rapeseed prices, in contrast, recovered somewhat yesterday but the rebound remains fragile, in the wake of palm and Canadian canola prices.
From Levant, Turkey has allowed the TMO to negotiate government to government wheat imports, as opposed to their traditional tender process.
The decision comes after India banned wheat exports while allowing government to government sales as an exception.
From Middle East, the United Arab Emirates (UAE) has ordered a four-month suspension in exports and re-exports of wheat and wheat flour originating from India, state news agency WAM said on Wednesday.
The Gulf nation’s economy ministry cited interruptions to global trade flows as the reason for its move, but added that India had approved exports of wheat to the UAE for domestic consumption.
India banned wheat exports on May 14, except for those backed by already issued letters of credit (LCs) and to countries seeking to ensure food security.
Since then, it has allowed shipments of 469,202 tonnes of wheat.
Companies wishing to export or re-export Indian wheat brought into the UAE before May 13, when India’s suspension began, must first make an application to the economy ministry, it said in a statement.
The UAE and India signed a broad trade and investment pact in February that seeks to cut all tariffs on each other’s goods and aims to increase their annual trade to $100 billion within five years.
The pact, known as the Comprehensive Economic Partnership Trade Agreement (CEPA), took effect on May 1.
From the Black Sea basin, in Ukraine harvests are starting in the south of the country, and storage problems will quickly resurface.
This will become critical at corn harvest time if a quick solution is not found to end this conflict.
On this wake, U.S. President Joe Biden said on Tuesday that temporary silos would be built along the border with Ukraine, including in Poland, in bid to help export more grain from the war-torn country and address a growing global food crisis.
“The Russia-Ukraine war will create a global wheat shortage for at least three seasons by keeping much of the Ukrainian crop from markets, pushing prices to record levels”, Ukraine’s agriculture minister said.
Ukraine’s Ag Minister suggested 15 MMT of grain storage capacity is lost, destroyed, or inaccessible for the 22/23 harvest.
That is on top of the unshipped/unsold grain still present from 21/22’s crop.
USDA’s estimates showed 21/22 wheat carryout in Ukraine was up 4.1 MMT yr/yr, and an additional bump to stocks would take the 22/23 pile to a 30-yr high – second only to 1992/93 as the largest pile since the Ukraine broke from the Soviet Union.
The Minister called on Eurpoean allies for temporary storage. Separately, government officials in Ukraine estimate total grain area for 22/23 is down 25% from 21/22.
A senior government official said on Monday Ukraine’s grain harvest was likely to drop to around 48.5 million tonnes this year from 86 million tonnes last year.
In Russian Federation, barley and corn production will be above the average annual level for 5 years!
Forecast of the total grain production in 2022 is 133.4 million tons.
Analytical center “Rusagrotrans” has improved the forecast for the harvest of barley and lowered the assessment of the harvest of corn, while the production of both crops is expected to be above the average annual level for 5 years, follows from the materials of the center.
Despite a slight decrease in the forecast for the gross wheat harvest, presented last week – by 0.3 million tons, to 85.7 million tons, Rusagrotrans analysts maintain their estimate of grain production at 133.4 million tons.
The assessment for barley was increased by 0.2 million tons to 19.7 million tons due to higher yields in the Center and on the Volga against the backdrop of high soil moisture reserves, and for corn it was slightly reduced by 0.1 million tons to 15 million tons due to the lower area than expected.
Other grains can be harvested 13.1 million tons (0.3 million tons compared to the May forecast).
“The production of barley and corn will be above the average annual level for 5 years (18.3 and 14.7 million tons, respectively),” the review notes.
In the South (Southern Federal District and North Caucasus Federal District), a grain crop of 50.6 million tons can be harvested, mainly due to wheat, which will break the record of 2017 – 49.1 million tons.
The Center may be harvesting the second harvest after the abnormally high figure of 2020 – 35 million tons against 38.5 million tons.
According to Rusagrotrans analysts, production in the Volga District will amount to about 26.2 million tons – the third result after 2017 and 2020.
Siberia is expected to see its lowest harvest since 2015 at 15.5 million tonnes due to continued relatively low moisture levels in all major grain-producing regions, with the exception of Omsk, despite past rains.
However, the situation can be corrected by a significant decrease in temperatures and moderate rains in the coming days.
Extremely high temperatures in the region were periodically recorded from the second decade of May and reached 30-35 degrees Celsius in places.
According to IKAR, Russia’s 2022 wheat crop is seen at 87 million tonnes, up from the 85 million tonnes it forecast on May 18.
IKAR placed Russia’s export potential at 41 million tonnes, compared to 39 million tonnes previously.
Meantime, Russia exported 340,000 tonnes of grains last week compared with 620,000 tonnes a week earlier, Sovecon, said, citing data from ports.
Spring grains were planted on 28.5 million hectares as of June 9 vs 29.2 million hectares a year ago, the consultancy added.
In this context, Russian wheat export prices were broadly flat last week.
Prices for wheat with 12.5% protein content and for supply from Black Sea ports, indeed, were stable around $425 free on board (FOB) at the end of last week, IKAR said.
Price for domestic 3rd class wheat, European part of Russia, excludes delivery was at 14,975 rbls/t ($262.72), according to Sovecon.
That was down -100 rbls from prior week.
Price for sunflower seeds was at 32,700 rbls/t -1,000 rbls (Sovecon);
Price for domestic sunflower oil was at 93,675 rbls/t -3,825 rbls (Sovecon);
Price for domestic soybeans was at 43,500 rbls/t -900 rbls (Sovecon);
Export price for sunflower oil was at $1,820/t -$40, according to Sovecon; meanwhile according to IKAR was at $1,650/t -$100;
Price for white sugar, Russia’s south, was at $933.4/t -$0.3 (IKAR).
($1 = 57.0000 roubles).
From the Middle Kingdom, Dalian Corn Prices were higher after a pullback that started in mid-May.
Closing on 6/13, the July price was 2,823 yuan/MT (~ $10.55/bu).
Dalian Soybean Prices in China were weaker on 6/13 to 6,243 yuan/MT (~ $25.20/bu).
The import competitive soybeans, the Dalian Soybeans n2, were also sharply lower on 6/13, down by 1.27% to 5,523 yuan/MT (~ $22.29/bu).
China’s Ag Ministry reported 84.1% of their winter wheat crop was harvested by 6/14.
From Australia, Australia exported 681,133 tonnes of canola in April, down 20 per cent from the March total of 854,950t, according to the latest data from the Australian Bureau of Statistics (ABS).
Japan was the biggest customer for the month, taking 156,621t, followed by Belgium on 147,145t and Germany on 126,961t.
April data also shows up 31,339t shipped to the United States in what is believed to be the first full cargo of Australian canola ever to ship to North America.
Japan is a long-term buyer of Australian canola, and its volume purchase of April-shipment seed indicates the rundown of availability from Canada ahead of its new crop to be harvested in coming months.
By comparison, Japan in April last year imported 2791t of Australian canola, and annually imports more than 2 million tonnes, with Canada its major supplier by far.
According to Lachstock Consulting’s latest Australian Export Vessel Lineups report issued June 1, Australia’s May 2022 exports of canola are expected to show little change from the April number.
However, June shipments are expected to drop to around 450,000t as wheat and barley cargoes take precedence at southern Australian ports.
Meantime, Aussie local markets came back after the long weekend, starting sluggishly but wheat bids firmed later in current crop Victorian and Western Australian.
Victorian protein wheat was in demand.
ASW1 and SFW1 delivered Geelong/Melbourne also firmed by $5-6/t for deliveries July plus carry.
The softer AUD assisted with new crop bids with Vic track holding around $470/t while APWMG contracts in WA were bid $500/t KWI port zone.
Barley was relatively unchanged and canola was down $20-30/t in new and old crop.
Australia, which has emerged as the world’s second largest wheat exporter this year following a record harvest, has been boosting sales to meet the global shortfall since the beginning of 2022.
Australia will continue to ship large volumes of wheat, even after July, which is not its peak marketing season.
But there are limits to what Australia can ship.
Shipping slots out of Australia, indeed, are fully booked right up to September.
Australia produced a record crop of more than 36 million tonnes in 2021/22 and the country is poised for another bumper harvest on the back of near-perfect growing conditions.
The 8-day forecast, indeed, has rain pencilled in for all states except Qld.
Totals are expected to be below 5mm for northern NSW and between 5-15mm for southern NSW.
Most of Vic, SA and WA are forecast to receive between 10-25m.
On intenational trade scene, Jordan’s state grain buyer purchased about 60,000 tonnes of wheat to be sourced from optional origins in an international tender which closed on Tuesday.
The wheat was bought from trading firm Ameropa at $489.75 a tonne, cost and freight (c&f) included, for shipment in the first half of September.
One other firm, CHS, participated in the tender, offering to sell at $493.95 a tonne c&f.
Jordan’s state buyer had been seeking to purchase 120,000 tonnes in the tender.
That’s all, thank you.
To all of you, we wish you a good day and …
Good harvest 2022!
Author: Sandro F. Puglisi
