Good morning Farmer Family …
US farm markets, were mixed but mostly higher yesterday.
Both corn and soybeans crops saw an unexpected three-point quality ratings decline.
Thus, nearby corn and soybean contracts firmed more than 2%.
Soymeal prices ended the day with 2.8% gains.
Bean oil prices extended the bounce by another triple digits at the close as was up 1.79%.
Wheat complex was mixed – Chicago and Kansas City contracts each made solid inroads as closed 1.91% and 1.13% higer.
Meanwhile spring wheat prices suffered a modest setback, closing down 0.65%.
That is a clear rebound in prices for most products, after the funds largely reduced their exposure before tomorrow’s USDA report.
Operators are expecting an increase in corn acreage to the detriment of soybean acreage, compared to the estimates posted on March 31 during the planting intentions.
On the weather side, scattered showers should fall across portions of the Midwest and Plains between today and Saturday, especially north of I-80, but few areas are likely to see significant amounts, per the latest 72-hour cumulative precipitation map from NOAA.
The agency’s 8-to-14-day outlook predicts some seasonally wet weather returning to the central U.S. between July 5 and July 11, with widespread warmer-than-normal temperatures likely.
Thus, forecast is looking promising for the Corn Belt but no rain has fallen yet.
Given the poor rainfall recorded in June and the historically high temperatures this relief is desperately needed for the US corn crop to yield 177bu/ac.
Meantime, corn basis bids tilted 5 cents higher at an Iowa river terminal while holding steady across other Midwestern locations on Tuesday.
Soybean basis bids slid 4 cents lower at an Ohio elevator, but held steady elsewhere across the central U.S..
The funds were net buyers yesterday for 11,000 lots of corn, 13,000 lots of soybeans and 10,500 lots of wheat.
In energy markets, oil prices fell on Wednesday, after gaining for three sessions in a row.
Brent crude futures for August dropped 98 cents, or 0.8%, to $117.00 a barrel by 06:47 GMT.
The August contract will expire on Thursday and the more-active September contract was at $113.03, down 77 cents, or 0.7%.
U.S. West Texas Intermediate (WTI) crude futures slid 62 cents, or 0.6%, to $111.14 a barrel.
Both contracts rose more than 2% on Tuesday as concerns over tight supplies due to Western sanctions on Russia outweighed fears of that demand may slow in a potential future recession.
In the United States, crude inventories are forecast to have fallen for the last two weeks.
The U.S. government’s weekly petroleum status report last week was delayed due to a hardware issue.
The data for both weeks will published together on Wednesday.
Data from American Petroleum Institute showed gasoline and distillates stocks rose while crude inventories fell for the week ending June 24, according to market sources citing API figures on Tuesday.
Meantime, the G7 economic powers agreed on Tuesday to explore ways to cap the price of Russian oil, allowing more supplies into the market while curbing Moscow’s revenue.
However, traders and analysts are sceptical about how it would work and noted such an agreement would require cooperation from China and India.
Also, Saudi Arabia and the United Arab Emirates have been seen as the only two members of the Organization of the Petroleum Exporting Countries (OPEC) with spare capacity to make up for lost Russian supply.
However, comments from UAE Energy Minister Suhail al-Mazrouei and French President Emmanuel Macron this week indicated little room for these producers to increase output further.
Analysts also warned that political unrest in Ecuador and Libya could tighten supply further.
In freight markets, the Baltic Dry Index, fell 91 points, or almost 4%, to 2,204 points, its lowest since April 20.
The capesize index lost 180 points, or about 7.7%, to 2,152 points, its lowest since May 3.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, lost $1,487 to $17,849.
The panamax index was down 86 points, or over 3.2%, at 2,566 points, its lowest in over four months.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, decreased $778 to $23,092.
The supramax index fell 23 points to 2,416 points.
In equity markets, the S&P 500 ended 2% lower at 3,821.55, while the Dow dropped 1.6% to 30,946.99.
The tech-heavy Nasdaq slid 3% to 11,181.54.
The Russell 2000 gave up 1.9% to 1,738.84.
The indexes are all on pace to for losses of 6% or more in June.
The Conference Board U.S. Jun consumer confidence index fell -4.5 to a 16-month low of 98.7, weaker than expectations of 100.0.
The U.S. Jun Richmond Fed manufacturing survey unexpectedly fell -10 to a 2-year low of -19, weaker than expectations of an increase to -7.
U.S. Apr S&P CoreLogic composite-20 home price index unexpected rose at a record +21.23% y/y, stronger than expectations of a decline to +21.05% y/y.
In this context, technology stocks sold off.
Energy stocks made solid gains as U.S. crude oil prices rose 2%.
The yield on the 10-year Treasury note, which helps set mortgage rates, slipped to 3.15% from 3.19%.
Markets remained gripped by uncertainty over inflation, rising interest rates and the potential for a recession.
Supply chain problems that have been at the root of rising inflation were made worse over the last several months by increased restrictions in China related to COVID-19.
Businesses have been raising prices on everything from food to clothing.
Russia – Ukraine war, is putting even more pressure on consumers by raising energy prices and pumping gasoline prices to record highs.
Investors are awaiting remarks expected for midweek by central bank leaders including Fed Chair Jerome Powell and European Central Bank chief Christine Lagarde.
They will also get another update on U.S. economic growth on Wednesday when the Commerce Department releases a report on first-quarter gross domestic product.
Meantime, shares skidded in Asia on Wednesday.
Tokyo’s Nikkei 225 index lost 0.9% to 26,804.60 while the Kospi in Seoul fell 0.8% to 2,377.99.
The Hang Seng in Hong Kong declined 2.4% to 21,891.43.
The Shanghai Composite index sank 1.4% to 3,361.52.
Australia’s S&P/ASX 200 gave up 0.9% to 6,675.57.
Bangkok’s SET lost 0.5% and India’s Sensex was down 0.3%.
In currency trading, the dollar fell to 136.00 Japanese yen from 136.12 yen late Tuesday.
The euro weakened to $1.0501 from $1.0522.
From South America, AgRural estimates Brazil’s 21/22 corn output at 113.8 MMT, up by 1.5 from their prior estimate.
That did come as 2nd crop specifically was 600k MT lighter to 80.3 MMT.
Meantime, Brazil’s Anec is forecasting that the country’s corn exports will reach 2.21 MMT in June, which is down 2.7% from the group’s prior estimate from last week.
Also, Brazil’s Anec estimates that the country will export 10.15 MMT of soybeans in June.
However, the current estimate is down 5.9% from its projection a week ago.
Anec also reported that the country’s soymeal exports will come in around 1.683 million metric tons this month.
In Europe, grain markets rebounded, thanks the robust international demand.
Additionally, after last week’s sharp pullback, traders are correcting their positions ahead of tomorrow’s USDA report.
Rapeseed on its part, rose in the wake of canola, which posted a third consecutive increase.
Meantime, latest data from the European Commission shows that 2021/22 EU corn imports 16.17 MMT through June 26.
That’s a year-over-year increase of 7.5% so far.
European Union soybean imports during the 2021/22 marketing year have reached 14.39 MMT through June 26, which is slightly below last year’s pace so far.
EU soymeal imports are also down slightly year-over-year, with 16.16 million metric tons over the same period.
Rapeseed imports were at 5.27 million tonnes, compared to 6.51 million last year to date.
European Union soft wheat exports during the 2021/22 marketing year have reached 27.14 MMT through June 26.
That’s a year-over-year increase of 6.0% so far.
EU barley exports are slightly below year-ago totals, meantime, with 6.85 MMT.
From the Black Sea basin, Russia has decided to change its method of calculating export taxes in order to be more competitive on the international scene, and to sell a 2022 harvest which promises to be at record levels.
The country is facing an impressive rise in its currency, to its highest level in 7 years, at 52 rubles to the dollar, a consequence of the obligation to deal in rubles decided by the government for foreign economic actors.
The details of the new formula have not yet been communicated.
To date, the wheat export tax is displayed at 146.10 usd/t for the period covering from June 29 to July 5.
At the same time as this was being announced the CME trading pit was dealing with more rumours of old crop Russian wheat defaults, some suggesting it could be as much as 600,000t that simply has not been shipped.
Meantime, the world market has been seemingly very comfortable with the idea that Russia will be pumping out 40Mt exports.
Were this number to be challenged in any fashion the calculation would get tough.
The situation in Ukraine, indeed, remains tense and grain exports cannot currently exceed 1.5 to 2 million tonnes per month, pending the reopening of the waterways, which does not seem realistic in the short term given the conflict.
A focus for the G7 conference was providing access to Ukrainian grain exports.
The operational side of getting a vessel into a Ukrainian port, getting it loaded and sending it on its way is one thing.
The money flow is another.
Every other day the Ukraine is publicly calling for more weapons or cash so they can buy them.
Russia would have to help in facilitating the physical shipment so it seems impossible that they will allow that to happen if it is not getting the cash.
The fact that two foreign-owned port elevators were bombed seems a little more strategic than collateral damage.
From South East Asia, India which previously was touted as the silver bullet to the world’s wheat woes and now it would seem it is part of the problem with some estimates dropping the Indian production forecast as low 88Mt.
Indonesia is set to increase the biofuel blend to B40 by the end of July.
Currently the country has a B30 blend requirement.
Meantime, the palm lost some ground this morning in Kuala Lumpur, with Indonesia offering new export quotas.
From Australia, local markets were sideways yet again.
Wheat bids were a dollar or two softer by the close, new and old crop, and buying interest remained very quiet.
ASX wheat Jan contract found some interest late in the day trading slightly lower at $440/t.
Indeed, after the recent Saudi wheat tender, seems there is still a large export margin, as the sale price calculated to a track equivalent expressed in Australian dollars is around A$540/t in FOB values.
New crop barley and canola markets were relatively unchanged.
The forecast for showers starting this Friday across NSW and Qld will be closely watched.
The heavier totals forecast are now pushing towards the coast but there is still enough on the forecast to likely put an end to the late winter crop plant.
On the international scene, while awaiting the outcome of Egypt’s call for tenders, Jordan yesterday bought 60,000 t of hard quality wheat. Last week, Algeria finally bought 740,000 t of wheat from optional sources, ie a volume higher than market expectations.
Taiwan’s MFIG is tendering for 65k MT of feed corn to be sourced from US, Brazil, Argentina, or South Africa.
That’s all, thank you.
To all of you, we wish you a good day and …
Good Harvest 2022!
Author: Sandro F. Puglisi
