Good morning Farmer Family …
US farm markets were mixed yesterday, but mostly higher.
Ethanol production declined slightly to a daily average of 1.021 million barrels for the week ending July 22.
It was also marked the tenth consecutive week that the daily average stayed above the 1-million-barrel benchmark.
Ethanol stocks, eased 1% lower this past week.
Recent rainfall across parts of the U.S. Midwest aided corn crops during pollination, but a lack of moisture in upcoming forecasts could hurt soybean plants as they develop pods, reducing yeald.
In this context, corn prices traded near even, closing up 0.54%.
Soybeans prices hit a two-week high gaining 3% on the day.
Soymeal rallied 3.49% and soy oil 1.26%.
The wheat complex meantime, eased as the agreement to reopen Ukrainian maritime grain exports moved forward.
Also, after the first day of the spring wheat Crop Tour in North Dakota, wheat prices dropped by double digits.
As we have anticipated yesterday, the Wheat Quality Council is touring in North Dakota assessing spring wheat.
So far, through day one, the scouts saw above average yields for the state – calling ~48.9 bpa on ample to surplus soil moisture following last season’s drought.
Their final yield figure is set for Thursday release.
Meantime, spring wheat prices led the way down, with 2.02% losses.
Chicago SRW closed with 1.68% losses.
Kansas City HRW ended 1.74% in the red.
Meantime corn basis bids were mixed after sinking 5 to 10 cents lower at three Midwestern ethanol plants while firming as much as 3 cents higher at an Illinois river terminal.
Soybean basis bids fell 10 to 20 cents lower at three Midwestern processors while holding steady elsewhere across the central U.S..
Commodity funds yesterday were net buyers of CBOT soybeans, soyoil, soymeal and corn futures contracts, and net sellers of CBOT wheat futures contracts.
On the weather side, more rain is on its way across the lower Midwest between today and Sunday, with a band stretching from southern Kansas through Kentucky and Tennessee likely to gather the largest totals (more than 4” in some spots), per NOAA’s latest 72-hour cumulative precipitation map.
However, NOAA’s 8-to-14-day outlook predicts a return to seasonally hot, dry weather for most of the Corn Belt between August 3 and August 9.
Consequentially, on this morning, Chicago soybean prices rose 1.4%, posting gains for a fifth consecutive session.
Wheat gained 1.3% while corn rose 0.9%.
In energy markets, oil rose more than $1 a barrel on Thursday, extending gains from the previous session.
Brent crude futures for September, indeed, rose $1.13, or 1.1%, to $107.75 a barrel by 06:19 GMT, after gaining $2.22 on Wednesday.
U.S. West Texas Intermediate crude (WTI) was at $98.53 a barrel, up $1.27, or 1.3%, after rising $2.28 in the previous session.
Lower crude inventories and a rebound in gasoline demand in the United States supported prices.
U.S. crude oil stockpiles, indeed, fell by 4.5 million barrels last week, against expectations of a 1 million-barrel drop, while U.S. gasoline demand rebounded by 8.5% week on week, data from the Energy Information Administration showed.
US combined gross exports of crude oil and refined products stood at a record 10.9 million barrels a day, while U.S. crude exports reached a record 4.5 million bpd as WTI traded at a steep discount to Brent, making purchases of U.S. crude grades more attractive to foreign buyers.
Also, a weaker dollar makes oil, priced in dollars, cheaper for buyers in other countries to purchase.
Prices also found support as the Group of Seven richest economies aims to have a price-capping mechanism on Russian oil exports in place by Dec. 5, a senior G7 official said on Wednesday.
Meantime, Russia has cut gas supply via Nord Stream 1, its main gas link to Europe, to just 20% of capacity and that could lead an additional demand by 700,000 bpd from October 2022 through March 2023, propping up oil prices in the short term.
On the other hand, US Government is exerting pressure on miners to increase coal production, as trade flows from US to EU ports are expected to increase within 2022.
In freight markets, the Baltic Exchange’s main sea freight index fell for the third straight session on Wednesday, hitting a two-week low as rates across vessel segments declined.
The overall index, which factors in rates for capesize, panamax and supramax shipping vessels, indeed, shed 54 points, or 2.6%, to 2,007 points, its lowest since July 13.
Particularly, the capesize index fell for the third straight session, losing 122 points, or nearly 5%, to 2,333 points, a 15-day low.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were down by $1,007 at $19,352.
The panamax index was down 12 points, or 0.57%, at 2,076 points.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, decreased by $110 to $18,680.
The supramax index fell by 33 points to a nine-day low of 2,038 points.
In equity markets, U.S. stock indexes on Wednesday rallied sharply.
Stock indexes opened higher on better-than-expected quarterly earnings results from mega-cap technology companies.
Spotify Technology vaulted 12.2%.
Alphabet rose more than +7%.
Microsoft rose more than +6% .
Also, Texas Instruments rose more than +6%.
Q2 corporate earnings results have been mostly bullish for stocks.
Wednesday in the afternoon Fed Chair Powell, said that labor market job creation is “still robust” and “I do not think the U.S. is currently in a recession.”
On this wake, the FOMC unanimously voted to raise its federal funds target range by +75 bp to 2.25%-2.50% as expected.
Bond yields turned broadly lower following the Fed’s announcement.
The two-year Treasury yield, which tends to move with expectations for the Fed, fell to 2.98% from 3.06% late Tuesday.
The 10-year yield, which influences mortgage rates, fell to 2.78% from 2.79%.
Wednesday’s U.S. economic data was mixed.
On the positive side, June capital goods new orders nondefense ex-aircraft, a proxy for capital spending, rose +0.5% m/m, stronger than expectations of +0.2% m/m.
Conversely, June pending home sales tumbled -8.6% m/m, weaker than expectations of -1.0% m/m and the biggest decline in more than 2 years.
Also, June wholesale inventories rose +1.9% m/m, higher than expectations of +1.5% m/m.
An update on the economy will come later Thursday with second quarter U.S. GDP data.
In this context, on Wall Street investors welcomed the Fed’s widely expected move, with a broad rally.
Thus, the S&P 500 climbed 2.6% to 4,023.61 and the tech-heavy Nasdaq surged 4.1%, its biggest gain in over two years, to 12,032.42.
The Dow Jones Industrial Average rose 1.4% to 32,197.59. Smaller company stocks also gained, lifting the Russell 2000 2.4% higher, to 1,848.34.
The indexes are now all on pace for a weekly gain, extending Wall Street’s strong July rally.
The S&P 500 is up 6.3% so far this month.
Risk sentiment has recovered from recession fears due to the ongoing U.S. earnings optimism and less aggressive Fed rhetoric on rate hikes.
That, supported the rally both in equities and in the crude market.
Meantime, shares were mostly higher in Asia on Thursday.
Hong Kong’s benchmark Hang Seng index slipped 0.1% to 20,642.80 after the territory’s Monetary Authority matched the Fed’s 0.75 percentage point rate hike with one of its own.
The HKMA, indeed, aligned its policies with U.S. monetary moves to keep the Hong Kong dollar at a stable rate against the U.S. dollar.
Elsewhere in Asia shares advanced, tracking gains on Wall Street.
Tokyo’s Nikkei 225 picked up 0.4% to 27,815.48, while the Shanghai Composite index added 0.3% to 3,284.32.
In Seoul, the Kospi advanced 0.8% to 2,435.27.
Australia’s S&P/ASX 200 jumped 1% to 6,889.70 after the government reported that retail sales rose in June for the sixth consecutive month, while the government forecasts that inflation will remain unacceptably high for some time to come and the economy will slow but not fall into recession.
Markets in Thailand were closed for a holiday.
Investors are awaiting today’s update on U.S. economic growth and a call between U.S. President Joe Biden and Chinese leader Xi Jinping.
In currency trading, the U.S. dollar cost 135.44 Japanese yen, down from 136.55 yen.
The euro rose to $1.0208 from $1.0197.
A weakened U.S. dollar lifts commodities prices.
From Canada, per latest report from the USDA attaché, significant rainfall has alleviated severe drought conditions in large regions of Alberta and Saskatchewan but more is required to support wheat growth.
Large regions of Manitoba that were waterlogged in June, now have adequate conditions after a heat wave dried up excess water.
Wheat prices began to fall in June on improved North American drought conditions and optimism that Ukrainian grain exports may be able to resume via the Black Sea.
Year-to-date wheat grain imports (excluding wheat products) are up 34 percent after the 2021 drought reduced domestic supplies.
From South America, according to the USDA attaché, Argentina wheat exports for marketing year (MY) 2022-2023 are forecast at 12.35 million tons, 1.15 million tons lower than USDA’s official number as a result of lower production.
The wheat and barley crops are suffering very dry weather.
Barley exports in MY 2022-2023 are forecast at 3.7 million tons, the same as in MY 2021-2022.
Corn exports in MY 2022-2023 are forecast at 38.8 million tons, 2.2 million tons lower than USDA as Post forecasts a lower production at 53 million tons.
Sorghum exports for MY 2022-2023 are forecast at 1.65 million tons, 850,000 tons lower than USDA as China’s demand has recently cooled down.
Meantime, Argentina hopes to raise $2.5 billion dollars with incentives for rural producers, to sell their harvest and ease tensions in the domestic exchange market, the central bank said Wednesday.
Central Bank President Miguel Angel Pesce ordered a series of temporary incentives on Tuesday night that include a differential exchange rate to encourage the sale of grains.
Offering incentives is a way to unlock an estimated $13 billion in unpaid soybeans.
Argentina’s agricultural industry, however, did not cheer the move.
“This measure is a mistake that can give some liquidity today, but (…) it will generate even more speculation and more pressure on the dollar market,” Carlos Achetoni, president of the Argentine Agrarian Federation, said in a statement.
Argentina is world’s top soybean oil and meal exporter and the peso has been plummeting while yearly inflation has reached nearly 70%.
The announced measure has yet to be reflected in the market, according to currency traders.
The peso’s official exchange rate depreciated 0.16% to 130.90 per dollar on Wednesday, while the currency fell 0.31% to 324 per dollar 0n the black market.
The gap between both markets reached 147.52%.
In Europe, markets were mixed, but mostly higher.
Increasing hope for the reopening of exports from Ukraine pushed down wheat price in the front month.
The current hot and dry conditions implied renewed firmness in corn prices for the new crop, with the November 2022 maturity marked a new high for a month, posting €322.25/t.
However, the most significant increase was observed in rapeseed yesterday, as the price rose €22/t.
This product, after last week’s decline, are thus readjusting upwards without, however, offsetting the decline observed since the beginning of July.
Export activity remains currently sustained in Europe, particularly in France, in the face of significant demand from importing countries during this summer period for close shipments.
There is talk that China’s recent wheat purchases in Europe involved about 400,000 tonnes of French wheat.
On the the other hand, the European Commission announced on Wednesday (27 July) that derogations from key environmental requirements in the EU’s farming subsidy programme will be extended into 2023 to maximise the EU’s cereal production capacity.
Meantime, per latest data published by Euronext on Wednesday, non-commercial market participants cut their net long position in Euronext’s milling wheat futures and options in the week to July 22.
Particularly, non-commercial participants, which include investment funds and financial institutions, lowered their net long position to 68,327 contracts from 80,188 a week earlier, the data showed.
Commercial participants similarly lowered their net short position to 84,861 contracts from 96,211 a week earlier.
Commercials’ short positions accounted for 63.4% of the total short position, while commercial long positions accounted for 49.8% of total long positions.
Non-commercial short positions represented 36.7% of total short positions, while non-commercial net long positions accounted for 50.2% of the total longs.
In Euronext’s rapeseed futures and options, non-commercial market participants expanded their net short position to 19,349 contracts from 17,852 a week earlier.
Commercial participants similarly increased their net long position in rapeseed to 19,455 contracts from 17,811 a week earlier.
In other news, Germany’s BASF, one of the world largest fertiliser producers, is to implement fresh cuts to its ammonia production in response to soaring natural gas prices, the company announced on Wednesday.
From North Africa, Egypt has cancelled contracts for a total of 240,000 tonnes of Ukrainian wheat that were booked by its state grains buyer for February and March delivery but never loaded.
GASC, indeed, has released the trading companies supplying the four unloaded cargoes, Nibulon and Inerco, from their contractual obligations, despite there not being a force majeure clause in contracts.
The four cancelled cargoes had been bought in December at prices ranging between $346 and $360 per tonne, including shipping costs.
From South Africa, South African farmers are expected to harvest 9.8% less maize in the 2021/2022 season compared with the previous season, the government’s Crop Estimates Committee (CEC) said on Wednesday.
The CEC’s latest summer crop forecast, indeed, estimates the 2022 harvest at 14.713 million tonnes, down from the 16.315 million tonnes harvested last season.
The harvest is expected to consist of 7.470 million tonnes of white maize, used for human consumption, and 7.243 million tonnes of yellow maize, used mainly in animal feed.
From the Black Sea basin, Sovecon raised its forecast for the country’s July-June 2022/2023 wheat exports by 300,000 tonnes to a record high of 42.9 million tonnes.
The wheat crop estimate has been upped by 1.7 million tonnes to 80.9 million tonnes.
Meantime, consumer prices in Russia declined 0.08% in the week to July 22 after sliding 0.17% a week earlier, data showed on Wednesday, vindicating the central bank’s decision to cut interest rates more sharply than expected last week.
The rouble’s strengthening and a drop in consumer demand have helped Russia rein in inflation, which soared to 20-year highs in annual terms.
The economy ministry said annual consumer inflation slowed to 15.30% as of July 22, down from 15.39% a week earlier.
The ministry said food products have continued to make a key contribution into slower inflation.
So far this year, consumer prices have risen 11.32% compared with a 4.51% increase in the same period of 2021, data from the Federal Statistics Service Rosstat showed.
The central bank, which targets annual inflation at 4%, slashed its key interest rate by 1.5 percentage points to 8% last week in a bigger-than-expected cut and said it would study the need for more cuts as inflation slows and an economic contraction continues for longer than previously thought.
From South East Asia, Indonesia is conducting road tests on two types of biodiesel that contain 40% palm oil and will decide by the end of this year whether they are acceptable for public use.
Indonesia already has the highest biodiesel blending mandates in the world, at 30%.
The move is meant to curb the country’s fuel imports.
On the other hand, per latest data from USDA attaché, Indonesia wheat imports for 2021/22 are revised upward to 11.2 million metric tons (MMT) from the previous estimate of 11.0 MMT, reflecting recovering demand for flour-based foods.
In line with increased imports, food, seed, and industry (FSI) wheat consumption is also revised up 2.2 percent to 9.1 MMT of wheat equivalent.
Corn production for 2021/22 is estimated to increase to 12.8 MMT on higher yield from larger use of hybrid seed and less incident of pest and disease.
The Russian-Ukraine war and India’s ban on wheat exports further aggravated grain market prices in Bangladesh.
Consequentially, the USDA attaché, reduced its wheat and corn import forecasts to 7 million MT and 2.2 million MT, respectively, from its previous projections.
From Australia, according to the USDA attaché, Australia is expected to produce a third consecutive big grain crop in marketing year (MY) 2022/23 after a record setting winter crop and strong summer crop production in MY 2021/22.
Another broadly favorable set of conditions around the time of winter grain planting and the early growth phase across most production regions bodes well for wheat and barley production in MY 2022/23.
Wheat production is forecast at 31 million metric tons (MMT), down from the record-breaking MY 2021/22 crop of 36.3 MMT but still the fourth largest in history.
Similarly, barley production is forecast at 11 MMT, down from the previous year’s 13.7 MMT record.”
Meantime, prices for feed wheat, barley and sorghum have moved little in the past week in northern markets, while southern wheat values have dropped by up to $20 per tonne in thin trade.
The reopening of the Blue Mountains line this week has allowed a backlog of containers carrying agricultural and other commodities to move from central NSW to Port Botany.
The line has been open for 12 hours a day since Monday, and will be open around the clock from Saturday.
With the Hunter line to Newcastle and Gunning on the Melbourne-Sydney line also reopened, services have now resumed on all lines closed by rain-related incidents earlier this month.
On international trade scene, Pakistan is considering offers this week in a tender for 200,000 tonnes of wheat after traders said much of Pakistan’s purchase of 300,000 tonnes last week was expected to be sourced in France.
Pakistani government yesterday approved separate proposals for procuring some 1.30 lakh metric tons of fertilizer and some 50,000 metric tons of wheat.
Following a proposal from the Ministry of Agriculture, the Bangladesh Agricultural Development Corporation (BADC) will procure some 1 lakh metric tons of MOP fertilizer from Living Stone Resources of Belgrade with around Taka 1,039.50 crore.
The price per metric ton of MOP fertilizer would be $1,100.
It was approved another proposal from the Ministry of Industries under which the Bangladesh Chemical Industries Corporation (BCIC) would procure some 30,000 metric tons of bagged granular urea fertilizer from KAFCO, Bangladesh under the first lot for the current fiscal year with around Taka 159.18 crore.
The price per metric ton of urea fertilizer would be $567.50.
The Ministry of Food will also procure some 50,000 metric tons of wheat from M/S Intra Business Pte Ltd, Singapore for the current fiscal year with around Taka 223.78 crore where the per metric ton of wheat would cost $476.31.
Iranian state agency the Government Trading Corporation (GTC) is believed to have made no purchase in an international tender for 110,000 tonnes of milling wheat which closed on Wednesday.
Shipment was sought in September to November.
Iran was seeking much lower prices than offered.
Iran’s harvest appears to be improved this year which could cut its import requirement in coming months.
Taiwan issued an international tender to purchase 52.000t of grade 1 milling wheat from the United States that closes on August 4.
The grain is for shipment between September 21 and October 5.
Jordan purchased 60.000t of hard milling wheat from optional origins in a tender that closed Tuesday.
The grain is for shipment in late December.
Jordan’s state grains buyer has issued a new international tender to buy 120,000 tonnes of animal feed barley.
The deadline for submission of price offers in the tender is Aug. 3.
A new announcement had been expected after Jordan made no purchase in its previous tender for 120,000 tonnes of barley on Wednesday.
Shipment in the new tender is sought in a series of possible combinations in 60,000 tonne consignments.
Possible shipment periods are in 2022 between Dec. 16-31 and in 2023 between Jan. 1-15, Jan. 16-31 and Feb. 1-14.
Jordan has also issued a separate tender to buy 120,000 tonnes of wheat.
Qatar is tendering for 105k MT of barley.
The deadline for bids submission is for 14th of August.
That’s all, thank you.
To all of you, we wish you a good day and… Good Harvest 2022!
Author: Sandro F. Puglisi
