Good afternoon Farmer Family …

US farm markets were mostly lower yesterday.

A continuation of the Monday drops left the Tuesday corn board another double digits weaker with prices dropping by 2.59% under the $6 mark. 

The Tuesday soy complex traded mostly red again after the sharp drops to start the month. 

Beans went home with 1.13% losses. 

Soy oil prices were 2.75% weaker at the bell. 

Soymeal prices closed with a outlier 1.05% gain. 

Rising soymeal prices were the lone silver lining in the grain and oilseed markets yesterday, as the meal/oil price spread shifted in favor of soymeal. 

The wheat complex was double digits weaker on all three markets. 

Chicago SRW ended the day 3.19% lower. 

Kansas City HRW prices closed with 2.8% losses. 

Minneapolis HRS prices closed with 2.7% weakness. 

Corn and soy futures sagged on improving U.S. production prospects. 

Falling palm oil prices also had a bearish impact on the soy complex, as top exporter Indonesia raised its export volume prospects.

Soybean and corn markets are likely to be especially sensitive to any potential outcomes of Speaker Pelosi’s visit to Taiwan over the next couple days. 

Based on the recent agreement China has made with Brazil to allow soymeal imports from the South American country, it seems likely that measures on soybean trade are likely on the table.

But U.S. soybean exports to China have been a cornerstone for the U.S. trade deficit.

In 2020 and 2021, U.S. soybean exports to China accounted for 8%-9% of all total U.S. ag export revenue volumes.

While the first ship to carry Ukrainian grain through the Black Sea, was on track to arrive safely in Istanbul on Tuesday night raising hopes of further shipments that could help ease a burgeoning global food shortage, wheat and corn prices declined. 

The Razoni ship, carrying 26,527 tonnes of corn to Lebanon, indeed, anchored near the Bosphorus entrance from the Black Sea at around 18:00 GMT, some 36 hours after departing from Ukraine’s Odesa port.

In North Dakota about a third of wheat has started to turn color, well behind the average of 75%, and 4% is mature, compared to 21% on average.  

In South Dakota, harvest of the spring wheat crop is underway with about a fourth of the acreage harvested according to the most recent USDA Crop Progress report.

Condition ratings remain highest in North Dakota and Minnesota where growing conditions and moisture have been good throughout the growing season.  

80-82% of the spring wheat in those two states is rated in good to excellent condition.  

Much of the North Dakota crop is two to six weeks away from harvest.

The North Dakota durum crop also remains in good condition, although disease pressures have been a concern in recent weeks.  

The most recent USDA Crop Progress report shows 84% of the state’s durum rated in good to excellent condition, slightly lower than a week ago.  

Development remains behind average.  

About 93% of the crop has now headed out and 17% is turning color, well behind the average of 61%.  

Harvest is still some weeks away and producers are hopeful for good weather the remainder of the growing season. 

The dollar strength, making U.S. grains less competitive globally, also weighed on grain prices yesterday.

Meantime, commodity funds were net sellers of CBOT corn, wheat, soybean and soyoil futures contracts and net buyers of soymeal futures.

After the sessions close, StoneX projected U.S. 2022 corn production at 14.417 billion bushels, with an average yield of 176.0 bushels per acre (bpa). 

The company also estimated this year’s U.S. soybean harvest at 4.490 billion bushels, with an average yield of 51.3 bpa.

The figures for both crops fell just below the current projections from the USDA, which is scheduled to release updated estimates on Aug. 12.

On this morning, Chicago wheat lost more ground, with prices dropping to their lowest in more than a week.

Corn and soybeans rose for the first time in three sessions.

Particularly, Chicago wheat contract was down 0.3% at $7.72 a bushel, as of 02:57 GMT. 

Earlier in the session, the contract dropped to its lowest since July 25 at $7.68 a bushel.

Corn added 0.3% to $5.96 a bushel and soybeans rose 0.5% to $13.92-3/4 a bushel.

Meantime, the resumption of Ukraine shipments is being offset by an uptick in global demand, as there have been several tenders issued this week.

Global wheat prices have trended lower, and we could see more demand requests in the coming days if prices continue on this downward trend.

In energy markets, oil prices were flat to weaker on this morning ahead of a meeting of OPEC+ producers.

Brent crude futures, indeed, were last down 3 cents, or 0.03%, at $100.51 a barrel at 06:03 GMT. 

West Texas Intermediate (WTI) crude futures were flat at $94.42 a barrel.

Early in teh session, prices had dropped by 1%, because has mounted fears about fuel demand.

Rising fears of an economic slump in the United States and Europe, debt distress in emerging market economies, and China’s COVID-zero policy curbing activity, are indeed weighing on the demand outlook.

Meantime, data from the American Petroleum Institute, showed U.S. crude stocks rose by about 2.2 million barrels for the week ended July 29, against analysts’ expectations for a decline of around 600,000 barrels.

Gasoline inventories fell by 200,000 barrels, which was a smaller drawdown than analysts had expected, although distillate stocks fell by about 350,000 barrels against analysts’ forecasts for a build.

In freight markets, the Baltic Exchange’s main sea freight index posted a loss on Tuesday for the seventh straight session, its longest losing streak in about four months, pressured by lower rates across vessel segments.

The overall index, indeed, lost 55 points, or 2.9%, to 1,817 points.

Particularly, the capesize index dropped 91 points, or 4.4%, to 1,971 points.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were down $753 to $16,374.

The panamax index was down 18 points to 2,026 points.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, decreased $157 to $18,235.

Among smaller vessels, the supramax index fell 62 points to 1,866 points.

In equity markets, U.S. stock indexes on Tuesday were undercut by Taiwan tensions.

The U.S. stock market stabilized only after the news of China’s response to Ms. Pelosi’s visit to Taiwan and relief that there were no direct military incidents.

There were also hawkish comments by Fed officials on Tuesday that dashed hopes raised by last week’s negative U.S. GDP news that the Fed might be close to halting its rate-hike regime.

That pushed to a sharp +18 bp rise in the 10-year T-note yield.

Meantime, Tuesday’s July U.S. JOLTS job openings fell by -605,000 to 10.698 million, which was weaker than expectations for a decline to 11.0 million and down from 11.3 million the previous month but still a relatively high figure.

The JOLTS index is down from the record high of 11.855 million seen in March, but is still far above the pre-pandemic level of about 7 million.

Job openings, which never exceeded 8 million in a month before last year, had topped 11 million every month from December through May before dipping in June.

In this context, the S&P 500 fell 0.7% to 4,091.19. 

It is down nearly 1% this week.

The The Dow Jones Industrial Average lost 1.2% to 32,396.17, largely because of a tumble of 5.8% for Caterpillar. 

The Nasdaq composite slipped 0.2% to 12,348.76.

Global stocks closed mostly lower too.  

The Euro Stoxx 50 closed down -0.59%, the Nikkei index closed down -1.42%, and China’s Shanghai Composite Index closed down -2.26%.

The Taiwan Stock Exchange Weighted Index on Tuesday closed down -1.56%, which was not a large enough decline to suggest that Taiwan’s investors are panicking about Ms. Pelosi’s visit and China’s response.

Meantime, Asian stock markets were mostly higher Wednesday.

Traders watched for signs trade might be disrupted by U.S.-Chinese tensions, as Beijing announced a ban on imports of some Taiwanese goods like citrus and some fish.

However with no immediate major penalties which might punish industries such as Taiwanese producers of processor chips needed by Chinese factories that assemble the world’s smartphones.

Thus, the Shanghai Composite Index gained 0.4% to 3,199.91 and the Nikkei 225 in Tokyo rose 0.5% to 27,731.52. 

The Hang Seng in Hong Kong added 0.5% to 19,789.98.

Taiwan’s Taiex shed 0.3% to 14,705.52. 

The Kospi in Seoul advanced 0.7% to 2,456.60 while Sydney’s S&P-ASX 200 shed 0.4% to 6,968.70.

New Zealand and Southeast Asian markets rose.

In currency trading, the dollar declined to 132.89 yen from Tuesday’s 133 yen. 

The euro gained to $1.0179 from $1.0174.

From Canada, the government has added C$52 million (US40m) to a United Nations Food and Agriculture Organisation program to further address grain storage shortages in Ukraine. 

The initiative will allow storage of an additional 2.4 million tonnes (Mt) grain between 2022-2023 along with related technical support and equipment and complements $17m recently provided by Japan to cover 1Mt grain storage.

It will include polyethylene grain sleeves, loading and unloading machinery and storage units. 

FAO plans to target small and medium-sized farms in 15 regions and aims to support Ukraine’s agriculture ministry to cover a quarter of the total storage deficit in 2022-23.

The Canadian wheat crop looks pretty good and better than average yields can be expected. 

In Alberta, Alberta Ag assessed 80% of their spring wheat acres in good to excellent condition. 

Last Friday, Alberta Ag projected Alberta spring wheat yields at 52.3 bu/acre, compared to a 45.4 bu/ac 5-year average and a 45.2 bu/ac 10-year average yield. 

Also, plant development for most crops in AB is right in line with long-term averages. 

As for durum, there are a lot of very good durum fields in Saskatchewan and barring an early frost, analysts expects above-average yields this year. 

Alberta’s July 26 report, the Agency assessed 48% of Alberta durum in good to excellent condition, (46.1% in the South and 60.0% in Central Alberta).

That was substantially in line with five year average both in the South and in the Central.  

Alberta has ~ 958k acres of durum this year on a total of Canadian 6 million acres.

That, account for roughly 16% of total durum acres. 

From South America, Brazil will not start planting its next soybean crop until later next month, but the world’s top producer and supplier seems well-positioned to chip into U.S. export share over the next year based on staggering harvest pegs.

USDA officially pegs Brazil’s 2022-23 soybean harvest at 149 million tonnes, up from 126 million a year earlier.

154.5 million tonnes was pegged by consultancy Safras & Mercado, and 152.6 million by StoneX.

That compares with Brazil’s two largest crops of 128.5 million and 139.5 million tonnes in 2019-20 and 2020-21, respectively.

Recent market predictions for Brazil’s next soy crop imply little to no concern with farmers’ ability to obtain necessary fertilizers, as Brazil had negotiated with Russia to secure fertilizer shipments amid supply uncertainty earlier this year despite pressure from Western sanctions. 

As of this week, fertilizer supplies from Russia, outside of ammonia, have returned to near-normal levels.

If Brazil harvests the record 42 million hectares of soybeans USDA has slated for 2022-23, area will have risen nearly 20% in just five years. 

That 6.9 million-hectare expansion is equivalent to the combined area of soybeans planted in the U.S. states of Illinois and Indiana in 2022.

In Europe, all three markets rebounded.

The wheat market remained tense, particularly for the French source, with the purchase of wheat by Algeria of an estimated volume of 660 000 t, admittedly optional sources, but with good French competitiveness. 

OAIC was thought to have paid about US$384/t cost and freight.

The water deficit in France will strongly penalize corn production.

Rapeseed price progressed yesterday after a very sharp drop the day before.

On the other hand, Romania’s wheat harvest is large enough to cover its domestic needs and ensure a surplus for exports, Agriculture Minister Petre Daea said on Wednesday, with 96% of the crop reaped so far.

Preliminary ministry data on Wednesday showed damage to 205,257 hectares out of roughly 7 million hectares of grain and oil-producing crops.

Romania reaped a record grain crop in 2021, including 11.3 million tonnes of wheat. 

Its grain crop is generally two to three times the size of its domestic needs. 

Meantime, the EU exported 1.77 million tonnes of wheat in July, compared to 1.57 million tonnes last year in the same month. 

Corn imports stood at 1.62 million tonnes in July against 1.23 last year.

Soybean imports were pegged at 1.265 million tonnes in line with 1,267 a year ago.

Soymeal imports were at 1,28 MMT vs 1,14 MMT last year in the same month.

Rapeseed imports were around 491.443t compared with 286.826t a year ago.

From the Black Sea Basin, Russia’s Ag Ministry reported 51 MMT of grain was reaped through 8/2. 

Cereals and leguminous crop harvested from 11.9 MHA area, including 43.9 MMT of wheat harvested from 9.9 MHA.

However, recent rains in several regions of Russia have hit the quality of winter wheat, although improved the set-up for spring wheat.

More rains are expected this week.

Winter wheat, sown in autumn for harvesting in summer, typically accounts for 70% of Russia’s crop. 

It brings a higher yield than the spring planted crop and is less vulnerable to adverse weather.

Consequentially, in the Russian domestic market, prices for low-quality 5th grade wheat fell by 375 roubles to 11,200 roubles ($179.5) per tonne last week.

The deal between Moscow and Kyiv to unblock Ukrainian grain exports may offer a way forward to a possible ceasefire in the five-month conflict, said former German chancellor Gerhard Schroeder, a friend of Russian President Vladimir Putin.

Turkey expects roughly one grain ship to leave Ukrainian ports each day as long as the agreement that ensures safe passage holds, a senior Turkish official said on Tuesday. 

“The good news is that the Kremlin wants a negotiated solution,” Schroeder told Stern weekly and broadcasters RTL/ntv on Wednesday, adding he had met Putin in Moscow last week.

Germany’s Schroeder said the future of Donbas was complicated. The traditional industrial heartland in Ukraine’s east has seen some of the war’s heaviest fighting.

“A solution based on the Swiss cantonal model will have to be found,” he said, adding it would have to be seen if Putin would go back to a pre-war “contact line” in a ceasefire.

Solutions to crucial problems such as Crimea, could be found over time, “maybe not over 99 years, like Hong Kong, but in the next generation”, he said.

From South East Asia, India’s soyoil imports in July more than doubled from a month ago to a record high as refiners ramped up purchases to take advantage of New Delhi’s move to allow duty free imports of the vegetable oil to calm all-time high prices.

The country’s soyoil imports in July jumped 113% from a month ago to a record 493,000 tonnes.

India in late May allowed duty-free imports of 2 million tonnes each of soyoil and sunflower oil for the current and next fiscal years ending March 31, as part of efforts to keep a lid on local edible oil prices.

Through the end of June, soy oil’s premium over palm oil was less than $150 per tonne, but since palm oil attracts a 5.5% import tax, palm oil was effectively more expensive for Indian buyers.

Soyoil imports look set to remain robust in the coming months and India could import a record 4.5 million tonnes of soyoil in 2021/22 marketing year ending on October 31, compared to 2.87 million tonnes a year ago.

From Australia, local new crop markets continued to soften. 

Wheat bids were off $3-5/t, barley a touch softer and canola dropped all the gains it made late last week. 

Grower bids in both eastern and Western Australia were off $55/t.

The Bureau of Meteorology (BOM) has officially declared a negative Indian Ocean Dipole, increasing the chances of above-average rainfall over much of Australia during the rest of winter and spring. 

Persistently warm seas to the north-west of Western Australia have swung the IOD into a “negative” phase for the second year in a row. 

BOM head of long-range forecasting Andrew Watkins said there was also the chance La Niña could re-form for a third time during spring. 

“Certainly, we are in an unusual time to have so many climate drivers pushing Australia’s climate toward wetter conditions for the past two to three years,” he said.

On international trade scene, Taiwan’s MFIG purchasing group bought about 55,000 tonnes of animal feed corn expected to be sourced from South Africa in an international tender that closed on Wednesday.

It was believed to have been sold by trading house Viterra.

The corn was purchased at an estimated premium of 254.82 U.S. cents a bushel c&f over the Chicago December 2022 corn contract.

The tender had sought shipment from South Africa between Oct. 16 and Nov. 4.

Offers had been sought for corn sourced from the United States, Brazil, Argentina and South Africa.

No offers of U.S. corn were reported and the winner was the only offer reported from South Africa.

Six offers of Brazilian corn each of 65,000 tonnes were reported, with the lowest at 259.50 cents over the Chicago December contract from trading house Amaggi.

Two offers of Argentine corn each of 65,000 tonnes were reported, one at 252.96 cents over Chicago December from trading house Pan Ocean and so cheaper than the South African corn.

But Argentine corn was not favoured because of quality concerns and the group was seeking premiums from Argentina around 6 cents below other origins.

Jordan wheat tender no. 50.2022.45 closing on August 2, 2022 got 4 participants.

MIT bought 60000 tonnes from Ameropa at 404 usd cfr to be shipped fh Jan 2023.

Other offers were: Viterra at 414 usd, CHS at 415,25 usd, Cargill at 418,65 usd.

World Wheat Consumption

Global wheat consumption is headed for its biggest annual decline in decades.

Record inflation is forcing consumers and companies to use less and replace the grain with cheaper alternatives, amid growing food insecurity.

Global wheat consumption in July-December could drop by 5%-8% from a year ago, much faster than USDA’s forecast 1% contraction.

Its expect a drop in wheat demand for animal feed both in Europe and China. 

Wheat demand for human consumption has slowed in key importing countries around the world.

As rising costs strain household budgets, protests have erupted across the world with people taking to the streets from China and Malaysia to Italy, South Africa and Argentina.

In Indonesia, the world’s second-largest wheat buyer, consumption already fell in the first five months of 2022 and a bigger decline is expected as higher costs feed through the supply chain.

In Jakarta, bakerys is paying around 10,000 rupiah ($0.6720) per kilogram for wheat flour, up from around 8,200 rupiah earlier this year.

As consumers cut purchases, bakers and noodle manufacturers are replacing wheat with rice.

Last time wheat flour prices rose significantly, Indonesia’s consumption dropped by 4.5%.

Brazil, the biggest market for U.S. wheat, saw purchases decline more than 3% in January-June period, even though the country paid 20% more for the staple, data showed.

“In the northeast of Brazil, maybe consumers will replace wheat products with regional ones, like tapioca,” 

Red-hot wheat prices are also changing ingredients livestock farmers use for animal feed.

The French Farm Office FranceAgriMer forecasts demand for wheat feed is likely to drop 13% to 3.9 million tonnes in 2022/23 from 2021/22.

In response to changing feed use, the USDA in July cut its global wheat consumption forecast for the 2022/23 marketing year to 784.22 million, down 1.77 million tonnes from its June estimate and 6.29 million tonnes below the prior year.

($1 = 14,880.0000 rupiah).

That’s all, thank you.

To all of you, we wish you a good day and … Good Harvest 2022!

Author: Sandro F. Puglisi  

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