Good morning Farmer Family …
Dry weather continues to be a prominent issue in the central U.S. this week and could stick around next week as well.
Weather forecasters, indeed, expect a hot and dry spell in the U.S. Midwest that will deplete topsoil moisture in significant segments of that region.
There is no immediate threat to the crops, which was planted in wet weather, but prolonged dryness and record temperatures could curb yields.
U.S. corn is generally in good condition at this early stage, but in July, it typically undergoes pollination, a critical stage for determining yield potential, which can be limited if it remains hot and dry.
Thus, this weather forecasts drew the eye of traders, who engaged in plenty of technical buying uesterday.
The result on US farm markets – corn prices jumped 1.84% higher.
Soybeans were up 0.93%.
Soymeal led the rally with double digit gains of as much as $12.20/ton (2.92%).
Soybeans gains, however, were limited as Indonesia continues to allow more exports palm after a cap earlier in the year.
Thus, soybean oil prices traded lower, ultimately closing 1.71% in the red.
Wheat gains has been variable.
Yesterday was a day when the bullish news lined up for wheat.
Paticularly, the catalyst was rumours that Indonesia has bought Soft Red Winter (SRW) wheat.
This would be significant non-traditional business for a balance sheet that really doesn’t need much to tighten things up.
This returned the focus to the heat in France, the slow and dry planting in Argentina, and the fact we still don’t have any sort of resolution on Ukrainian export pathways.
In addition, wheat prices were supported by a weaker dollar.
The falling U.S. Dollar Index after the U.S. Federal Reserve raised interest rates on Wednesday, indeed, is supporting wheat as a lower dollar makes U.S. exports more competitive globally.
At the bell, the wheat markets were off from their highs, but still were up by double digits during the session.
Indeed, Chicago SRW prices went home with 2.69% gains.
Kansas City wheat prices ended 1.35% higher.
Spring wheats closed the day with 0.65% gains.
On this morning, Chicago corn prices rose, extending sharp gains from the previous session and putting the market on track for a second consecutive weekly rise.
Soybeans also rose, while the wheat complex lost ground.
Russia said on Thursday it was facilitating the export of grain and oilseeds from Ukraine through Russian-held transit points on the Azov Sea, without explaining who was providing the foodstuffs for export.
Elsewhere, Romanian Agriculture Minister Adrian Chesnoiu said weather and higher production costs mean the country’s grain crops will be somewhat lower than last year’s bumper harvest, but still ensure enough surplus for exports.
That, has weighened on wheat markets.
The rise in prices has been limited yesterday by fears of an economic global recession, thereby impacting demand.
On this wake, in energy markets, oil prices edged lower on Friday, although persisting supply tightness limited the downside.
Indeed despite recession risks, the world remains short of crude supply from OPEC+, and global refining capacity, squeezing gasoline and diesel prices higher in a stagflationary embrace.
In this context, Brent crude futures fell 35 cents, or 0.3%, to $119.46 a barrel at 06:20 GMT.
It gained $1.30 the previous session to $119.81.
Meanwhile U.S. West Texas Intermediate (WTI) crude futures fell to $117.16 a barrel, down 43 cents, or 0.4%.
The contract rose $2.27 on Thursday to $117.58.
If losses hold through the day, Brent futures would post their first weekly dip in five weeks, while U.S. crude futures would see their first decline in eight weeks.
New sanctions on Iran limited the down trend.
Washington on Thursday, indeed, imposed sanctions on Chinese and Emirates companies and a network of Iranian firms that help export Iran’s petrochemicals.
In freight markets, the Baltic Exchange’s main sea freight index gained for a third straight session on Thursday, buoyed by rising rates across the board.
The overall index, which factors in rates for capesize, panamax and supramax vessels, indeed, increased by 75 points, or 3.1%, to 2,462.
Particularly, the capesize index gained 151 points, or 5.9%, to 2,702.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, rose $1,254 to $22,411.
The panamax index added 84 points, or 3.1%, to 2,790 points.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000-70,000 tonnes, increased $758 to $25,113.
Global port congestion is set to continue until at least early 2023 and keep spot freight rates elevated, logistics executives said on Wednesday.
The supramax index edged up 6 points to 2,460.
Meantime, on week 24, freight rates have risen again by several dollars in the Azov and Black Sea region.
The rate for a 3K parcel of wheat from Azov to Marmara Sea ports makes $49 per ton, Sea Lines shipbrokers report.
However, there is a lull in the grain market at the moment.
The vast majority of charterers have already spent the quotas allocated to them for the export of wheat, corn and barley.
And the strong ruble exchange rate coupled with the weakened Turkish lira do not allow traders to conclude contracts with Turkish partners.
The rates are rising primarily due to active shipments of coal, the export of which to European countries will be limited in less than two months, Sea Lines explain.
In addition, there are few spot vessels in the market, so most shipowners are already considering cargoes for week 26, when grain shipments could resume.
According to Sea Lines, on week 24, freight rates for shipping wheat by 3,000 dwt bulkers from Azov make $47 to the Black Sea, $49 to Marmara, $65 to Mersin and $73 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 lost a dollar.
On week 24, freight rates for shipping corn by 3,000 dwt bulkers to Iran make $19 from Aktau, $26 from Makhachkala, and $31 from Astrakhan.
In equity markets, US stocks on Thursday sold off sharply.
The S&P 500 and Dow Jones Industrials fell to 1-1/2 year lows and the Nasdaq 100 dropped to a 19-month low.
Central banks across Europe raised interest rates on Thursday, some by amounts that shocked markets, and hinted at even higher borrowing costs to come to tame soaring inflation that is eroding savings and squeezing corporate profits.
The Swiss central bank unexpectedly raised its policy rate by 50 bp to -0.25%, its first increase since 2007, and after the Bank of England (BOE) raised its benchmark rate by 25 bp for the fifth consecutive meeting.
The 10-year German bund yield Thursday jumped to a new 8-year high of 1.928%, and the 10-year UK gilt yield climbed to a 7-3/4 year high of 2.742%.
In South America, Argentina’s central bank raised its benchmark rate by the most in three years on Thursday, as it fights inflation running at over 60%.
Those moves came on the heels of Wednesday’s 75 basis point rate hike by the U.S. Federal Reserve, the highest since 1994.
In addition, stock indexes retreated on Thursday’s weaker-than-expected U.S. economic data.
U.S. weekly initial unemployment claims, indeed, fell -3,000 to 229,000, showing a weaker labor market than expectations of a decline to 217,000.
The U.S. Jun Philadelphia Fed business outlook survey unexpectedly fell -5.9 to a 2-year low of -3.3, weaker than expectations of an increase to 5.0.
U.S. May housing starts fell -14.4% m/m to a 13-month low of 1.549 million, weaker than expectations of 1.693 million.
U.S. May building permits, a proxy for future construction, fell -7.0% m/m to an 8-month low of 1.695 million, weaker than expectations of 1.778 million.
In this context, the S&P 500 tumbled 3.3% to 3,666.77 for its sixth decline in the past seven trading sessions.
All but 3% of stocks in the index fell.
The S&P 500 is 23.6% below its Jan. 3 record.
That erases gains from 2021, one of Wall Street’s best years this century.
The Dow Jones Industrial Average lost 2.4% to 3,666.77.
The Nasdaq dropped 4.1% to 10,646.10.
Meantime, Asian stock markets followed Wall Street lower on Friday.
Shanghai, Tokyo and Sydney fell while Hong Kong advanced.
Japan’s central bank wrapped up a two-day meeting Friday with no major changes to its ultra-low interest rate policy, imposed years ago to try to fend of deflation, or sinking prices.
So far, it has avoided raising its benchmark rate of minus 0.1%.
Taiwan, in contrast, raised rates in the wake of the other central banks.
Investors worry the moves to control inflation that is running at four-decade highs might tip the U.S. and other major economies into recession.
Markets were not assuaged by comments by President Joe Biden to The Associated Press on Thursday that he saw reasons for optimism about the economy.
A recession is “not inevitable,” Biden said.
Thus, the Shanghai Composite Index lost 0.4% to 3,270.52 and the Nikkei 225 in Tokyo fell 2.2% to 25,858.50.
The Hang Seng in Hong Kong gained 0.4% to 20,924.49.
The Kospi in Seoul retreated 1.1% to 2,425.30 and Sydney’s S&P-ASX 200 tumbled 2.2% to 6,447.30.
India’s Sensex opened down 0.4% at 3,086.74.
New Zealand and Southeast Asian markets declined.
In currency trading, the dollar gained to 133.85 yen from Thursday’s 132.00 yen.
The euro declined to $1.0522 from $1.0573.
The dollar index on Thursday fell sharply by -1.530 (-1.45%), under pressure from strength in EUR/USD and GBP/USD after the Swiss and UK central banks raised interest rates.
Losses in the dollar accelerated on Thursday’s weaker-than-expected U.S. economic data.
On the weather side, large portions of the central U.S. won’t see any additional rainfall until Sunday, although a few places could gather up to 0.25” or more during this time, per the latest 72-hour cumulative precipitation map from NOAA.
The agency’s 8-to-14-day outlook predicts plenty of hot, dry conditions for the Corn Belt between June 23 and June 29, although some seasonally wet weather could creep back into portions of the Northern Plains.
On the demand side, the EPA announced that the United States generated 1.23 billion ethanol blending credits in May, up from April’s tally of 1.14 billion.
Biodiesel blending credits also rose modestly higher, trending from 499 million in April up to 513 million in May.
Meantime, weekly corn bookings were at 140,935 MT for old crop and 138,866 MT for new crop as per the Export Sales report.
For old crop that was down 50% wk/wk, a MY low, and at the low end of expectations.
For new crop, it brough total forward sales to 5.889 MMT going into the 22/23 season (+2.4% yr/yr).
Old crop commitments were up to 59.663 MMT.
That marks 96% of the USDA forecast for the year.
Weekly data had the MYTD shipments at 78.9% of the June WASDE forecast.
Sorghum export sales tumbled noticeably below the prior four-week average, with just 2,100 MT.
Increases to China were largely offset by reductions to unknown destinations.
Cumulative totals for the 2021/22 marketing year are slightly trailing last year’s pace, with 237.1 million bushels.
As for soybean, the report showed 317,157 MT of old crop beans were sold during the week that ended 6/9.
That was down 27% wk/wk but still nearly 5x the same week last year.
Estimates were to see between 100k and 500k MT.
Old crop commitments were 60.278 MMT.
That is 2.1% above the June WASDE export forecast.
Accumulated exports reached 86% of the forecast as of 6/9.
For new crop, the FAS data showed 407,995 MT were booked during the week, near the top end of estimates and up from just 6.5k MT during the same week last year.
The forward book sits at 13.105 MMT, a 73% increase from last year’s pace.
Soybean cake and meal had net sales of 256,300 MT for 2021/2022 were up 91 percent from the previous week and 32 percent from the prior 4-week average.
There were net sales of 35,600 MT for 2022/2023.
Exports of 224,500 MT were down 2 percent from the previous week, but up 15 percent from the prior 4-week average.
Soybean oil had net sales of 6,200 MT for 2021/2022.
That was up noticeably from the previous week and from the prior 4-week average.
Exports of 16,300 MT were up noticeably from the previous week and from the prior 4-week average.
As for wheat, USDA reported weekly wheat export sales total at 236,857 MT.
That was near the low end of estimates going into the report and down 18% yr/yr.
Half of the sale was HRW, followed by white wheat with 23%.
SRW and spring wheat mostly split the remainder.
Brazil was listed as the week’s top buyer, though 50k of their 28k purchase was previously reported as Switzerland.
Mexico was the largest buyer with 58k MT of the total.
USDA reported the week’s export at 370,137 MT – with HRW again marking ~ half the total.
Accumulated shipments through the first full week and 2 days reached 582,159 MT, a 33% lead yr/yr.
In this context, corn basis bids showed some variability on Thursday after rising as much as 13 cents higher at an Iowa processor while falling as much as 10 cents at an Indiana ethanol plant.
Soybean basis bids were steady to weak again, after sliding 2 to 10 cents lower across four Midwestern locations.
The funds were net buyers yesterday for 10,500 lots of corn, 8,500 lots of soybeans and 10,500 lots of wheat.
From South America, President Alberto Fernández recently pledged that Argentina would seize the opportunity to help meet global wheat demand while taking advantage of the high prices following Russia’s invasion of Ukraine.
Poor harvest, however, could change the picture.
According to the Buenos Aires stock exchange, wheat surfaces in Argentina could be in sharp decline this year, a consequence of the water deficit that is being lost in the country.
At this stage, the stock market is showing areas of 6.4 million hectares against 6.6 estimated last month.
Thus, appears that Argentina’s opportunity to fill the gap left by Ukraine is slipping away as the export quota has been reduced by 31% and the 2022/23 wheat harvest is likely to be the worst in 12 years.
Argentina was the 6th largest exporter of wheat in 2021, accounting for 7.2% of global export volumes.
In the first four months of 2022, the country exported 9.5 million tonnes of wheat from the record 2021/22 harvest.
In March 2022, the government of Argentina set a wheat export quota at 10 million tonnes for the marketing year of 2022/23 to stabilize domestic prices and combat double-digit inflation.
In this context, Argentina’s exports for the 2022/23 marketing season are forecast to drop to 6.4 million tonnes.
But, delays in wheat planting due to drought, particularly in the northeast, are casting doubt on whether the full export quota will be filled.
Also, with those risks, in the midst of high fertilizer prices and the inability to export their wheat to markets where prices are higher, farmers in Argentina are shifting towards other crops.
In other news, as we said in prior days, Argentina’s Economy Ministry will allow increased levels of biodiesel in fuel to address shortages of diesel fuel.
The use of biodiesel will increase to 12.5pc from the current 5pc for a period of 60 days and remain at 7.5pc after the 60-day period.
In Europe, the leaders of France, Germany and Italy visited Kyiv as part of a high-profile trip to smooth tensions over what Ukrainian officials perceive as lukewarm support in their fight against Russia.
Meantime, we saw firmness on the grain markets yesterday in a context of weather market.
An heat wave is hitting the western Europe.
Traders and analysts are now monitoring the impact of the heatwave that has spread northwards from Spain this week, with temperatures reaching 40 degrees Celsius (104°F) in southern France on Thursday.
While damage may be limited in the south, where wheat and barley crops are already mature, there is concern that temperature peaks in central France could hurt cereals beforethe heat eases from Sunday.
Meantime, the first returns from the winter barley cuts in France confirm very great heterogeneity in terms of yields depending on the region and the nature of the plots.
It can go from simple to double.
The winter barley harvest was under way, with 2% of the crop area cut by Monday, FranceAgriMer said.
FranceAgriMer also showed on Friday growing conditions for wheat and barley crops in France continued to decline for a seventh straight week.
An estimated 65% of French soft wheat was in good or excellent condition by June 13, against 66% the previous week and 81% a year ago, the office’s data showed.
The rating has dropped by 26 percentage points since the start of May
Durum conditions also moved down to 61% from 62% 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 63%.
The corresponding score for spring barley, in contrast, increased by 1 percentage points to 54%, FranceAgriMer’s report showed.
Rating for emerged maize plants, was at 87%, down from 88% of the crop valued in good or excellent conditions last week.
Rapeseed prices, meantime, rose slightly yesterday but the trend remains heavy in the short term due to the decline in palm prices and other oil, a consequence of exports granted by the Indonesian government.
Malaysian Palm Prices, indeed, stayed mostly firm near the 5,417 ringgit mark on Thursday, but futures are well off their +6,100 mark earlier this month.
Canadian Canola Prices were down $10.10 CAD/MT on the day, and are now 12% off their mid-May highs.
In this context, European rapeseed prices firmed up with 3.75 euro/MT gains, but are still down at 757.75 euros vs. the prior 870s.
From the Black Sea basin, Russia said on Thursday it was facilitating the export of grain and oilseeds from Ukraine through Russian-held transit points on the Azov Sea.
Russian Deputy Prime Minister Viktoria Abramchenko rejected the allegation against Russia stole grains, saying: “Russia does not ship grains from Ukraine.”
Also, she continued: “Russia is securing a ‘green corridor’ for grains and any other foodstuff such as oilseeds … so it can be exported from Ukraine without hurdles. Melitopol or Berdiansk.”
Abramchenko restated Russia’s line that it is for Ukraine to open sea-lanes to Odesa that have been mined.
“We cannot provide a green corridor for Odesa as Ukraine has done everything for this port not to work,” Abramchenko said.
Meantime, the deputy premier, Russia’s top official for climate and agriculture, said Russia expected to harvest around 130 million tonnes of grain in 2023, on a par with this year.
Russia has secured seed supplies from 11 countries including Serbia, Turkey, Israel and Egypt, which have not joined the Western sanctions, as it seeks to protect its food security.
She also said the government had no plans to amend its grain export duty, which she said had been set to protect the domestic market.
Meantime, Kyiv has said its grain harvest is likely to drop to around 48.5 million tonnes this year from 86 million tonnes because the war.
From Australia, markets were once again relatively unchanged on old and new crop.
Liquidity picked up through the up-country depots and the delivered markets for Geelong and Melbourne saw some activity on wheat for July.
A dry week for Queensland and northern and central New South Wales has allowed paddocks to dry out, cotton to be picked, sorghum to be harvested and more winter crop get in the ground.
Rainfall totals were less than 5mm for most of southern NSW, but temperatures have been very cold.
Most of Victoria and South Australia received varying totals between 5-25mm.
Weekly totals for Western Australia were higher with most cropping regions receiving 10-50mm.
The eight-day forecast has nothing on the radar for Queensland and northern NSW and 1-10mm for central and southern NSW.
All other states are forecast to receive 5-22mm.
On the international trade scene, as expected Japan bought 186,441 t of milling wheat from the USA, Canada or Australia.
Of the total, 53% was sourced from the U.S. .
The grain is for shipment in August.
Bangladesh cancelled its international tender to purchase 50.000t of wheat from optional origins that would have closed on June 22.
No reason was given for the move.
That’s all, thank you.
To all of you, we wish you a good day and …
Good harvest 2022!
Author: Sandro F. Puglisi
