Good morning Farmer Family …
US farm markets sold off yesterday.
Mounting concerns about a global economic slowdown pressured commodity markets.
Wall Street stocks slid early in the session, before recovering and posting modest gains by the close.
Thursday’s economic data showed that U.S. manufacturing grew steadily in August.
That, has worried some investors, as a strong economy strengthens the case for the Federal Reserve to keep raising interest rates.
Consequentially, the U.S. dollar index sured at +20 year highs, making U.S. grains less competitive globally.
In this context, wheat prices tumbled more then 4% lower, in the firts new month session.
Corn and soybean prices were down around 2%.
Particularly, Chicago SRW wheat fell by 4.48%, bringing Dec contract below the $8 mark by the close.
Kansas City HRW wheat contract pulled under the $9 mark posting 4.88% losses.
Minneapolis spring wheat went home 4.63% weaker, with the board below the $9 mark.
Corn prices ended the Thursday session with 1.86% losses.
Soybean prices closed the session with 1.95% losses.
Soybean oil prices weakened by 5.27%.
Meal prices were firmer and ended the day up 0.45%.
Spring wheat harvest in North Dakota was still well behind average at 34% complete as of Sunday, according to the most recent USDA Crop Progress report.
However, the current week’s weather contitions have been warm and dry for most of the state which should have allow for decent harvest progress.
Yield reports so far have been variable.
Test weights have been strong with most in the 60-62 pound per bushel range.
Protein levels have been overall reported range is 12.5 to 16% protein.
No major quality issues or concerns have been reported.
Other states’ harvests have progressed more rapidly with South Dakota now 92% complete, followed by Montana at 75% and Minnesota at 44%.
The North Dakota durum harvest was picking up pace as well with 31% of the crop harvested.
An additional two-thirds of the crop has reached maturity.
The warmer, drier conditions this week should have provided good harvest conditions for the crop that is ready.
No major quality issues have been reported.
Harvest in Montana has progressed a bit more rapidly with 61% harvested.
Corn and soybean crops are always closely monitored.
The announced early start of harvests will available more supplies soon.
Is expected a decline, thus yields will be watched with the greatest interest.
Some light rains are returning to parts of the Corn Belt between today and Monday, but few places will gather much more than 0.25” during that time, per the latest precipitation map from NOAA.
The agency’s 8-to-14-day outlook predicts that seasonally wet conditions will return to a large portion of the central U.S. between September 8 and September 14, with warmer-than-normal weather likely for most of the U.S.
Meantime, StoneX estimates the US average corn yield at 173.2 bpa, while soybean yield at 51.8 bpa.
On the other hand, NASS reported the July corn grind was 445.723 mbu.
That was up 1.6 mbu mo/mo.
However, that is compared to 450.321 mbu during July ’21.
The NASS Fats and Oils report showed 181.3 mbu of soybeans were processed in July.
That was up 9% from July ’21 and compares to 174.06 mbu crushed in June.
The report had soy oil stocks listed at 2.228b lbs, down from 2.315b in June.
The U.S. Department of Agriculture’s weekly export sales report, normally released on Thursdays, was delayed until at least Sept. 15 due to problems with the launch of a new reporting system.
Meantime, private exporters reported to the USDA having sold 396,000 metric tons of soybeans for delivery to unknown destinations during the 2022/2023 marketing year.
In this context, corn basis bids were mostly steady to weak after tumbling 60 cents lower at a Nebraska elevator and fading 5 to 13 cents lower at four other Midwestern locations.
An Iowa ethanol plant bucked the overall trend after climbing 25 cents higher.
Soybean basis bids were steady at most Midwestern locations but did tilt 33 cents lower at an Ohio elevator.
Commodity funds were net sellers of Chicago Board of Trade corn, wheat, soyoil and soybean futures contracts and were net even in soymeal futures.
On this morning, Chicago corn, wheat and soybean futures edged higher.
The most-active wheat contract on the Chicago Board of Trade, indeed, rose 0.8% to $8.01 a bushel as of 03:42 GMT, but was down 0.5% for the week.
Soybeans gained 0.6% to $14.03 a bushel, but were down nearly 4% for the week.
Meanwhile, corn was up 0.4% at $6.60-3/4 a bushel, and was down 0.5% on a weekly basis.
Trading volumes have been slow this week as grains grind lower.
Technically the ag markets look exhausted and are due for a correction as we get into the thick of North Hemisphere harvest, some analysts said.
In energy markets, oil prices slid around 3% yesterday to two-week lows, although on this morning, both benchmarks climbed on bets that OPEC+ will discuss output cuts at the meeting on next Sept. 5.
Brent crude futures, indeed, rose $1.23, or 1.3%, to $93.59 a barrel at 06:30 GMT, while U.S. West Texas Intermediate (WTI) crude futures advanced $1.25, or 1.4%, to $87.86 a barrel.
Fears of China’s COVID-19 curbs and weak global growth continued to limit gains.
Consequentially, Brent was headed for a weekly drop of nearly 7%, and WTI was on track to fall about 5% for the week.
Meantime, operators are keeping a lookout for a potential price cap on Russian oil exports, as G7 finance ministers are expected to firm up their plans today just about this theme.
In freight markets, the Baltic Exchange’s main sea freight index, rose yesterday after rates for bigger vessel segments snapped their losing streaks, with capesize seeing its best day in over two years.
Thus, the overall index, which factors in rates for capesize, panamax, supramax shipping vessels, was up 37 points, or 3.8%, at 1,002 points.
It was the index’s best day in 1-1/2 months.
The capesize index, which tracks iron ore and coal cargos of 150,000 tonnes, ended a five-session decline, jumping 167 points, or 55.3% to 469 points, on its best day since June of 2020.
Average daily earnings for capesizes, rose$1,382 to $3,887.
The panamax index, which tracks about 60,000 to 70,000 tonnes of coal and grains cargoes, snapped an over a month-long losing streak, increasing 13 points, or about 1.1% to 1,230 points.
Average daily earnings for panamaxes, rose $113 to $11,069.
The supramax index was down for the fifth day, falling 67 points to 1,559 points, its lowest in over 18 months.
In equity markets, as we said, US stocks on Thursday recovered from early losses and posted modest gains.
Stocks initially retreated as the stronger-than-expected U.S. jobless claims and Aug ISM manufacturing index reports bolstered the case for the Fed to raise interest rates by 75 bp later this month.
U.S. weekly initial unemployment claims, indeed, unexpectedly fell -5,000 to a 2-month low of 232,000, showing a stronger labor market than expectations of an increase to 248,000.
U.S. Q2 nonfarm productivity was revised upward to -4.1% from the previously reported -4.6%, stronger than expectations of -4.3%.
Q2 unit labor costs were revised downward to +10.2% from +10.8%, weaker than expectations of +10.5%.
The U.S. ISM manufacturing index was unchanged at 52.8, stronger than expectations of a decline to 51.9.
The Aug ISM prices paid sub-index fell -7.5 to a 2-year low of 52.5, weaker than expectations of 55.3.
Consequentially, the 10-year T-note yield climbed to a 2-1/4 month high of 3.293%.
Global government bond yields also climbed on the outlook for central banks to continue to aggressively raise interest rates to combat inflation.
The 10-year UK gilt yield, indeed, soared to an 8-1/2 year high Thursday of 2.910%, and the 10-year German bund yield climbed to a 2-month high of 1.634%.
However, health care stocks, companies that rely on direct consumer spending and communications services providers gained, ledding the overall market higher.
Johnson & Johnson rose 2.5%.
Target gained 2.8% and Netflix added 2.9%.
Also, short covering ahead of today’s monthly U.S. payroll report helped stocks recover from early losses.
Thus, the benchmark S&P 500 index rose 0.3% to 3,966.85, rebounding from a four-day string of declines.
The Dow Jones Industrial Average finished up 0.5% at 31,656.42.
Technology stocks, in contrast, declined.
Particularly, Nvidia dropped 7.7% after the chip designer said the U.S. government imposed licensing requirements that might disrupt sales to China.
Thus, the Nasdaq slid 0.3% to 11,785.13 for its fifth daily drop.
Meantime, Asian stock markets were mixed on this morning.
China ordered most residents of Chengdu, a city of 21 million people, to stay home following new virus outbreaks.
Investors, however, looked ahead to U.S. data on August.
If the figures show more than 300,000 jobs were added, it could likely reinforce further lean towards a rate hike as big as 0.75 percentage points at this month’s Fed meeting.
That would be three times the Fed’s usual margin of change.
Thus, the Shanghai Composite Index added 0.1% to 3,187,78 while the Nikkei 225 in Tokyo lost less than 0.1% to 26,644.80.
The Hang Seng in Hong Kong sank 0.8% to 19,433.68.
The Kospi in Seoul advanced 0.4% to 2,406.54 and Sydney’s S&P-ASX 200 declined less than 0.1% to 6,839.60.
India’s Sensex opened down 0.1% at 58,741.42.
New Zealand and Jakarta gained while Singapore and Bangkok declined.
In currency trading, the Dollar Index, was up 0.9% to $109.68 yesterday, sitting at +20 year highs.
On this morning, the dollar rose to 140.34 yen from Thursday’s 140.23 yen, to a 24-year high.
The euro gained to 99.72 cents from 99.45 cents.
From Canada, Canada and China agreed to suspend proceedings against Chinese measures affecting import of Canadian canola seed, according to a World Trade Organisation complaint on Thursday.
From South America, Brazilian export data showed 7.554 MMT of corn was shipped during August, compared to 4.336 MMT during August ’21.
As for soybean, Brazilian data showed 6.16 MMT of beans were shipped in August.
That was down from 6.48 MMT during the same month last year.
Meantime, StoneX raised its forecast of Brazil’s 2022/23 soybean crop to 153.6 million tonnes, from 152.7 million previously.
Refinitiv Commodities Research report that lingering dryness in Argentina has led it to cut 2022/23 wheat production forecast by 1pc from previous estimate, to 18.0Mt (22.1Mt previous year).
Weather outlooks point to dry conditions over the coming week, which may further hurt yield potential.
However, according to the Buenos Aires grains exchange, Argentina’s wheat harvest would benefit from rains expected in a large swath of its planted area in the first half of September during key growth stages.
Meantime, Argentina grains exports brought in some $3.4 billion in August, a 5% increase from July.
The value of dollars from farm exports rose 11% year-on-year in the month to what it called a “historic record”, hitting $25.7 billion for the year.
Meantime, Argentina’s central bank requires grains exporters to convert earnings in dollars to the local peso currency.
On this wake, the economy ministry is evaluating a specific exchange mechanism for the farm sector to encourage the liquidation of dollars.
In Europe, grain and oilseed prices eased again yesterday, still influenced by the macro-economic situation, the geopolitical environment and the evolution of the situation in the Black Sea.
Russia has had a bumper harvest and is now being aggressive with offers.
Algeria bought 105,000 tonnes of wheat in a tender on Tuesday that was expected to be sourced from Russia at prices well below western European levels.
The new sales made by Russia to Egypt confirm the return of this source and the acceleration of export activity in the coming weeks.
Also, rain forecast in the coming days was tempering worries about upcoming wheat planting after this summer’s severe drought.
In Sweden, an origin sometimes used by exporters to top up ships loading in other EU countries, harvest progress was generally good in August despite some rain and work is finishing.
Traders expect a 5% increase in Sweden’s wheat crop this summer to about 3.18 million tonnes.
Overall qualities have been satisfying, as protein levels in the wheat crop were about 0.5% to 1% lower than last year with an average around 11.5%.
Sweden’s export pace has been high during August and milling wheat has been dominating the programme.
Premiums for 11.5 protein milling wheat in large south Swedish ports are around 5 to 10 euros a tonne over Euronext December but without attracting much buying interest this week.
December milling wheat on the Paris-based Euronext exchange, thus closed 0.9% lower at 321.50 euros ($319.99) a tonne.
However, the most noticeable downward movement yesterday was in the oilseed market.
The return of palm oil in Kuala Lumpur below the level of 4,000 ringgits/t thus generated a new pressure factor, as does the decline in canola seed prices in Canada.
Consequentially, on Euronext, the rapeseed market erased most of the rebound from the previous day to close at €605/t.
The emergence conditions of recent sowings are still to be monitored for the 2023 harvest.
From Africa, Nigeria expects to produce 23 million metric tonnes of maize this year, a 12% rise from last year, thanks to cheaper credit from the central bank, which has helped blunt the high costs of fertiliser and diesel, the maize growers association said.
The 23 million tonnes, however, will fall short of Nigeria’s annual requirement of 30 million tonnes and the gap will be filled with imports.
Production costs have increased for Nigerian farmers.
A bag of fertiliser now costs up to 22,000 naira ($52) from 15,000 naira in 2021.
The cost of cultivating one hectare of maize farm has gone up by 43%.
From Levant, yesterday a cargo vessel carrying more than 3,000 tonnes of corn from Ukraine drifted aground in Istanbul, halting shipping on Turkey’s Bosphorus strait.
From the Black Sea basin, Ukrainian farms have started the 2022 sunflower and soy beans harvest, the agriculture ministry said on Friday.
Farmers had threshed the first 81,700 tonnes of sunseed from 1% of the sowing area, and 1,300 tonnes of soy beans from 0.1% of the area, the ministry said in a report.
Meantime, Ukraine’s grain and oilseed exports reached 4.5 million tonnes in August, increasing by half compared with July thanks the re-opening of Black Sea ports under the diplomatic grain deal.
The total volume included 3 million tonnes shipped via the Danube river and through Black Sea ports, and one million tonnes exported by rail and 600,000 tonnes by truck.
Since the beginning of August, more than 60 ships carrying more than 1 million metric tons of agricultural exports have sailed from Ukrainian Black Sea ports.
Ukraine’s farm ministry said agricultural exports could reach 5 million tonnes in September.
However, wheat remains a small part of current Ukrainian exports while the country is also facing a sharp fall in sowing for next year’s crop.
The rapeseed area for next year’s harvest, indeed, is expected to remain stable compared with this year’s crop, reflecting a shift towards oilseeds, which are more profitable and easier to manage logistically compared with cereals.
However, the wheat area for next year is expected to decrease.
Earlier on Thursday, indeed, the Ukrainian Agrarian Council – which represents producers – said the wheat area may fall by 30% to 40% due farmers’ lack of funds.
As of September 1, Russia harvested 117.9 mln tonnes of grains and pulses from 32.5 mln ha with the average yield at 3.62 t/ha, the Ministry of Agriculture informed.
Farmers reaped 86.9 mln tonnes of wheat from 21.8 mln ha with the yield at 3.99 t/ha, 20.8 mln tonnes of barley (6.5 mln ha, 3.18 t/ha), 23.2 thsd tonnes of corn (4.5 thsd ha, 5.11 t/ha).
Moreover, agrarians harvested 175.2 thsd tonnes of sunflower seed (76.2 thsd ha, 2.3 t/ha), 2.1 mln tonnes of rapeseed (833.9 thsd ha, 2.53 t/ha), 50.2 thsd tonnes of soybean (24 thsd ha, 2.09 t/ha).
Farmers harvested 3.4 mln tonnes of sugar beet from 72.4 thsd ha with yield at 47.25 t/ha.
Winter crops were planted throughout 2.5 mln ha.
Meanwhile, Russian wheat exports are expected to rise to 4 million tonnes in September.
From Australia, local markets were largely unchanged yesterday across the board, new crop wheat in SA was slightly firmer on the grower boards whilst other markets around the country remained flat and sluggish.
The 8-day forecast shows showers across central, western and eastern Australia with isolated rainfall in the south.
Increased waterlogging is anticipated in low lying areas across northern NSW and southern/central Queensland due to expected rainfall which will further impact soggy and sad crops.
On the international trade scene, the export activity remains very active.
Egypt’s state grains buyer, the General Authority for Supply Commodities, is believed to have bought 120,000 tonnes of Russian wheat via direct talks with suppliers.
The cargoes are believed to have been sold by trading company Solaris at a price of $340 per tonne on a cost and freight basis.
The wheat will be shipped between Nov. 10 and Nov. 30 in either two 60,000-tonne cargoes or four 30,000-tonne cargoes, with payment using 180-day letters of credit.
This is Egypt’s second Russian wheat purchase in a little over a week, with GASC purchasing around 240,000 tonnes at a reported price of $368 per tonne.
Egypt, since mid-July, opted to buy around 1.5 million tonnes of wheat through private direct talks with global companies.
The Sultanate of Oman has received a ship carrying 61,780 tonnes of Australian wheat on Thursday.
That will contribute to enhancing wheat stocks in the Sultanate of Oman, and meet the needs of the local market for more than six months.
Japan, the world’s sixth-largest wheat importer, bought 95,497 tonnes of food-quality wheat from the United States and Canada in regular tenders that closed on Thursday.
South Korea’s Major Feedmill Group (MFG) also purchased about 63,000 tonnes of animal feed wheat expected to be sourced from Australia in a private deal on Wednesday without issuing an international tender.
Indonesian buyers on Wednesday purchased around 65,000 tonnes of food-quality corn expected to be supplied from either the United States or South America.
Three South Korean import groups purchased about 120,000 tonnes of soymeal expected to be sourced from South America, the United States and China in private deals on Thursday without international tenders being issued.
FAO Food Price Index – August 2022
The United Nations food agency’s world price index fell for a fifth month in a row in August.
The FAO said on Friday that its price index, which tracks the most globally traded food commodities, indeed, averaged 138.0 points last month versus a revised 140.7 for July.
The July figure was previously put at 140.9.
The August reading was, however, 7.9% higher than a year earlier.
Particularly, FAO’s cereal price index fell 1.4% month-on-month in August, thanks the re-opening of Ukrainian Black Sea ports under the diplomatic grain deal as well as favourable wheat harvest prospects in North America and Russia.
But the maize price index rose 1.5% last month as hot, dry weather reduced the outlook for production in Europe and the United States.
The vegetable oil, sugar, dairy and meat price indices all fell, partly reflecting improved supplies.
In separate cereal supply and demand estimates, FAO lowered its forecast for global cereal production in 2022 to 2.774 billion tonnes from a previous projection of 2.792 billion in early July.
That is 1.4% below estimated output for 2021.
The cut to its prediction for 2022 cereal production was due to the weather-reduced corn prospects in the northern hemisphere, with European Union yields notably seen falling 16% below their five-year average, FAO said.
World cereal use in 2022/23 is expected to surpass production at 2.792 million tonnes, leading to a projected 2.1% fall in global stocks compared with 2021/22 to 845 million tonnes.
That would represent a stocks-to-use ratio of 29.5%, down from 30.9% in 2021/22 but still relatively high historically, FAO said.
That’s all, thank you.
We wish you a good day.
Author: Sandro F. Puglisi
