Good morning Farmer Family …
US farm markets saw a new sharp decline both in wheat and corn prices last night.
The USDA report on Thursday, could see corn acreage progress at the expense of soybean, while harvest pressure is being felt on wheat, combined with the closing of many positions for the half-yearly balance sheets.
Thus, July corn prices held relatively firm on Monday, giving back 0.8% on the day.
Meanwhile, new crop prices slid more aggressively with 3% losses, that left the board nearly 15% below the contract high from May 16th.
The wheat complex closed the first trade day of the week with double digit losses led by spring wheat.
Minneapolis HRS wheat prices were 2.1% to 2.73% weaker on the day.
Chicago wheat prices gave back 1.8% to 2.14%.
July stayed 1/2 cent above the $9/bu mark at the day’s low.
Front month Kansas City wheat prices closed down by 1.99%.
In contrast, soybean prices rose ending with 1.23% gains.
Soymeal prices were 2.33% higher.
Soy oil prices closed 1.53% stronger.
On the weather side, outside of Minnesota, Wisconsin and Michigan, almost no measurable moisture is expected to land on the central U.S. between today and Friday, per the latest 72-hour cumulative precipitation map from NOAA.
The agency’s 8-to-14-day outlook predicts a return to seasonally wet weather for parts of the Corn Belt between July 4 and July 10, with plenty of warmer-than-normal conditions likely next week.
Meantime, the Crop Progress report showed a good to excellent state for corn at 67% against 70% last week and for soybeans at 65% against 68%.
These figures are below traders’ expectations and therefore support pre-open Chicago prices.
Meanwhile, the crop rating for spring wheat was unchanged at 59% good to excellent.
Winter wheat harvests was estimated to have been 41% completed in the USA.
On the demand side, wheat export inspections came in at 352,404 tonnes, within the range of expectations.
Corn export inspections came in at 1,246,014 tonnes, above expectations, and those for soybeans at 468,309 tonnes, within the range of expectations.
In this context, corn basis bids were mostly steady to firm on Monday, jumping as much as 20 cents higher at an Indiana ethanol plant.
An Illinois river terminal bucked the overall trend after fading 3 cents lower.
Soybean basis bids were largely steady across the central U.S., but did tilt 3 cents lower at an Illinois river terminal and 5 cents lower at an Indiana processor.
The funds were net buyers yesterday for 90,000 lots of soybeans, but net sellers for 17,000 lots of corn and 6,500 lots of wheat.
In energy markets, oil prices rallied for a third day on Tuesday.
Indeed, major producers Saudi Arabia and the United Arab Emirates look unlikely to be able to boost output significantly, while political unrest in Libya and Ecuador added to supply concerns.
Thus, U.S. West Texas Intermediate (WTI) crude futures rose $1.8, or 1.6%, to $111.36 a barrel by 0644 GMT, extending a 1.8% gain in the previous session.
Brent crude futures climbed $1.9, or 1.7%, to $116.99, adding to a 1.7% rise in the previous session.
UAE Energy Minister Suhail al-Mazrouei said on Monday UAE was producing near maximum capacity based on its quota of 3.168 million barrels per day (bpd) under the agreement with OPEC+.
According to French President Emmanuel Macron the UAE was producing at maximum capacity while Saudi Arabia could increase output by only 150,000 bpd, well below its nameplate spare capacity of around 2 million bpd.
Analysts also warned political unrest in Ecuador and Libya could tighten supply further.
Those factors underscore shortages in the market, which have led to a rebound this week, countering recession jitters that weighed on prices over the previous two weeks.
On this wake, a French presidential official called on global powers to explore all options to alleviate the squeeze on energy supplies, including talks with producing nations like Iran and Venezuela.
In freight markets, the Baltic Exchange’s main sea freight index hit a near two-week low on Monday, hurt by lower rates across vessel segments.
The overall index, indeed, was down 36 points, or 1.5%, at 2,295 points, its lowest since June 14.
Particularly, the capesize index lost 64 points, or 2.7%, at 2,332 points.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were down $539 to $19,336.
The panamax index was down 43 points, or 1.6%, at 2,652 points.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, decreased $384 to $23,870.
The supramax index lost 10 points, to 2,439 points.
In equity markets, stocks index Monday closed moderately lower.
Higher T-note yields weighed on technology stocks Monday.
The yield on the 10-year Treasury note, indeed,rose to 3.20% from 3.12% late Friday.
However it slipped to 3.18% early Tuesday.
Stocks yesterday initially opened higher on carry-over support from a rally in China’s Shanghai Composite.
Also, better-than-expected U.S. economic data were supportive for stocks.
Indeed, U.S. May capital goods new orders nondefense ex-aircraft & parts, a proxy for capital spending, rose +0.5% m/m, stronger than expectations of +0.2% m/m.
U.S. May pending home sales unexpectedly rose +0.7% m/m, stronger than expectations of -4.9% m/m and the first increase in seven months.
U.S. Jun Dallas Fed manufacturing outlook general business activity unexpectedly fell -10.4 to a 2-year low of -17.7, weaker than expectations of an increase to -6.5.H.
Meantime, according to the Bank for International Settlements, “the risk of stagflation looms over the global economy as the threat of a new inflation era coincides with a weaker outlook for growth and elevated financial vulnerabilities.”
Thus, the S&P 500 slipped 0.3% to 3,900.11.
The Dow dropped 0.2% to 31,438.26, and the Nasdaq slid 0.7% to 11,524.55.
Smaller company stocks bucked the broader market’s decline.
The Russell 2000 rose 0.3% to 1,771.74.
Wall Street will have a few more reports this week that could provide more insight into inflation, economic growth and the Fed’s path ahead.
On Tuesday, business group The Conference Board will release its consumer confidence report for June.
Group of Seven leaders have been finalizing a deal to seek a price cap on Russian oil, raise tariffs on Russian goods and impose other new sanctions.
This comes while a Russian airstrike hit a shopping mall in the city of Kremenchuk, in central Ukraine.
There are rumors that Russia defaulted on its foreign debt.
Moscow would failed to pay around US$100m interest on two bonds after the 30-day grace period expired on Sunday.
However Russia is claiming that it has paid, the cheque is in the mail, saying it made payment on 27 May, but the cash is stuck in Euroclear, a settlement house in Belgium.
The US is claiming this a victory facilitated by their sanctions.
Meantime, Asian shares were mixed Tuesday.
Tokyo’s Nikkei 225 index gained 0.3% to 26,959.17 while the Kospi in Seoul also rose 0.3%, to 2,408.57.
Australia’s S&P/ASX 200 climbed 0.6% to 6,743.20.
Hong Kong’s Hang Seng index lost 0.9% to 22,033.62 and the Shanghai Composite index was nearly unchanged at 3,379.94.
Shares fell in Taiwan and India but rose in Bangkok.
Rising energy prices and Treasury bond yields were weighing on sentiment.
Investors will get another update on U.S. economic growth on Wednesday when the Commerce Department releases a report on first-quarter gross domestic product.
In other trading, the U.S. dollar fell to 135.32 Japanese yen from 135.45 yen late Monday.
The euro weakened to $1.0579 from $1.0687.
From Canada, as of June 21st, 91 percent of Manitoba’s crop had been planted.
Spring wheat crops that were seeded are in good condition, albeit three or so weeks later than normal.
Spring wheat conditions in Alberta improved 4 percent from last week and are now 84 percent Gd/Ex.
Soil moisture conditions improved with just 3.3 percent of the province experiencing poor soil moisture.
Sask Ag is not releasing crop condition statistics yet, but soil maps show that most of the province is experiencing favourable moisture conditions.
There were only minor changes in the AAFC June balance sheet update.
They are still expecting that Canadian wheat area to increase by six percent from last year to 19 million acres.
The Stats Canada’s seeded area report is out on July 5th.
There is a good chance that Stats Canada’s number will not reflect acres that were switched from to late seeding as farmers were supposed to have completed the questionnaire by May 27th.
As for durum, the AAFC made no changes in their updated June balance sheet for durum.
Stats Canada will release their acreage numbers on July 5th also for durum.
Stats Canada is currently estimating that the seeded area will be 6.22 million acres – a 13percent (+694k acre) increase from last year.
Meantime, the durum crop in Alberta is rated as 61percent Gd/Ex (unchanged from last week) compared to 77percent Gd/Ex this time last year.
There are no condition ratings for the Saskatchewan crop yet.
From Mexico, wheat production for marketing year (MY) 2022/23 is forecast slightly lower than the USDA official forecast based on updated industry and Mexican government data that reflect adverse weather conditions.
Total MY 2021/22 corn production is revised upward from the USDA official figure to 27.8 million metric tons (MMT) due to more complete official data indicating a higher yield estimate.
The sorghum production estimate for MY 2021/22 is revised downward from the USDA estimate to 4.6 MMT, driven by lower than expected harvested area and inadequate precipitation.
From South America, Brazil’s AgRural consultancy slightly lowered its estimates for the country’s second corn crop, sliding to 80.3 MMT.
However, the group slightly raised its estimates for total 2021/22 Brazilian corn production to 113.8 MMT, up by 1.5 from their prior estimate.
In Europe, markets continued their sharply decline across all products.
Wheat harvest in France was marked at 2% complete, starting just a bit sooner than last year.
Harvesting sites should resume quickly, thanks to the return of milder weather, except Thursday when a disturbance could again stop work before the return of an anticyclone.
Rapeseed prices, on their part, are losing ground again.
Operators are expecting a rapeseed harvest at European level showing a sharp rebound compared to last year, around 18.5 million tonnes.
From the Black Sea basin, according to the European organization MARS, wheat production in Russia could reach a record 88.8 million tonnes this year, divided between 66.6 million winter wheat and 22.2 million spring wheat.
The same organization anticipates a barley harvest of 19.7 million tonnes, up 7% compared to last year.
Corn production is expected at 16.7 million tonnes, up +8% compared to last year.
Meantime, Russian wheat exports were marked at 36 MMT according to Interfax.
That trails last year by 5.5%.
As for Ukraine, SovEcon raised their production outlook for Ukraine’s 22/23 corn crop by 1.1 MMT to 28.1.
That would still be a third of last year if realized.
Also, SovEcon reduced their Ukrainian wheat forecast by 1.4 MMT to 20.7.
If realized that would be down 11.5 MMT yr/yr.
From the Middle Kingdom, there was a report Chinese censors scrubbed the internet of a speech by a senior party official indicating that the zero covid policy may last “the next 5 years”.
From Australia, local wheat and barley were a touch weaker yesterday to start the week.
New crop canola recovered some ground. Bids were up $40/mt.
New crop liquidity remains quiet and the old crop markets continues to eke out sufficient supply.
The forecast for showers starting this Friday across NSW and Qld will be closely watched.
The heavier totals are now pushing towards the coast.
On international trade scene, Taiwan’s MFIG is tendering for 65k MT of feed corn to be sourced from US, Brazil, Argentina, or South Africa.
Egypt’s GASC issued an international wheat tender.
Bids must be submitted no later than tomorrow, Wednesday.
Saudi Arabia, for its part, bought 495,000 t of wheat during its call for tenders.
That’s all, thank you.
To all of you, we wish you a good day and …
Good Harvest 2022!
Author: Sandro F. Puglisi
