Good morning Farmer Family …

US farm markets heated up, yesterday.

Global wheat and corn prices skyroketed after news broke that the Kremlin is moving to stage votes on annexing the regions of Ukraine its forces still control.

The so-called Donetsk and Luhansk People’s Republics, as well as the Kherson and Zaporizhzhia regions, indeed, announced they’ll hold their votes between Sept. 23-27. 

Ukraine and its allies have denounced the referendums as illegal. 

Ukrainian Foreign Minister, denounced the referendum as a sham.

US National Security Adviser said Washington rejected any such referendums “unequivocally”.

European Union and Canada condemned the plan. 

EU foreign policy chief said the bloc and its member states would not recognise the outcome of the referendums and would consider further measures against Russia if the votes went ahead

In his speech to world leaders in New York, the head of the UN António Guterres has said “We are in rough seas. A winter of global discontent is on the horizon, a cost-of-living crisis is raging, trust is crumbling, inequalities are exploding and our planet is burning”.

“We have a duty to act and yet we are gridlocked in colossal global dysfunction. The international community is not ready or willing to tackle the big dramatic challenges of our age”, he added.

Putin was meant to give a major speech to the country on Tuesday — only to later postpone it until Wednesday without explanation.

Margarita Simonyan, editor-in-chief of the pro-Kremlin RT TV station, wrote: “Today a referendum, tomorrow recognition as part of the Russian Federation, the day after tomorrow strikes on Russian territory become a full-fledged war between Ukraine and NATO and Russia, untying Russia’s hands in every respect.”

Thus, the move threatens to escalate the conflict even further.

The grain export corridor is looking more fragile by the day and if the war escalates it is hard to see how it will be extended beyond November.

Meantime, Idaho wheat farmers, have been big winners in an agreement with Taiwan, as signed a $576M wheat deal.

Corn and soybeans prices, on their parts, were also supported by hot and dry conditions in the central U.S., along with a slower-than-expected start to harvest.

Some additional rains, indeed, will be making their way through the Northern and Central Plains between today and Saturday, while areas farther east may not see any measurable moisture during this time, according to NOAA. 

Widespread seasonally dry, warm conditions are likely between September 27 and October 3, per NOAA’s new 8-to-14-day outlook.

In this context, CBOT SRW wheat prices went home 7.62% higher on the day. 

Kansas City wheat prices closed with gains of 5.85%. 

Minneapolis spring wheat prices went home 4.47% higher. 

Corn prices followed the suit, and despite December stayed below het $7 mark, got a 2.03% gain.

Soybean prices went home with double digit gains too. 

Beans faded some for the close, but ended the day 1.20% higher. 

Meal prices closed with 2.88% gains. 

Bean oil went home with a 0.87% stronger.

Corn basis bids were largely steady across the central U.S., but did tilt as much as 20 cents lower at an Indiana ethanol plant and as much as 5 cents higher at an Illinois river terminal.

Soybean basis bids were steady to mixed, plummeting as much as 110 cents at an Indiana processor while firming 10 cents higher at two other Midwestern locations.

The funds were net buyers yesterday for 10,000 lots of corn, 6,000 lots of soybeans and 20,000 lots of wheat.

On this morning, U.S. wheat and corn prices initially retreated, but losses were capped by lingering concerns over Black Sea shipments.

The most-traded wheat contract on the Chicago Board of Trade (CBOT), indeed, was down 0.8% at $8.86-1/4 a bushel, as of 0457 GMT.

CBOT corn shed 0.3% to $6.90 a bushel

CBOT soybeans slipped 0.1% to $14.77-1/2 a bushel.

However, it is very difficult to anticipate what will happen in a context where geopolitics dominates. 

Russian President Vladimir Putin, indeed, announced a partial mobilization in Russia on this morning. 

He also warned the West that “it’s not a bluff” and that Russia would use all the means at its disposal to protect its territory.

The total number of reservists to be called up is 300,000, officials said.

Thus, in spite the large harvests in Russia this year, the problem remains in its real export potential. 

Soybeans, on their part, slipped on pressure from Argentina exports, meantime.

Investors were also cautious ahead of a widely expected interest rate hike from the U.S. Federal Reserve.

In energy markets, oil jumped more than 2% on this morning after Russian President Vladimir Putin announcement.

The escalation in conflict will lead to increased uncertainty over Russian energy supplies.

Meanwhile, the United States said that it did not expect a breakthrough on reviving the 2015 Iran nuclear deal, reducing the prospects of a return of Iranian barrels to the international market. 

The OPEC+ is now falling to a record 3.58 million barrels per day short of its production targets, or about 3.5% of global demand. 

The shortfall highlights the underlying tightness of supply in the market.

Meantime, the head of Saudi state oil giant Aramco warned that the world’s spare oil production capacity may be quickly used up when the global economy recovers.

In this context, Brent crude futures rose $2.28, or 2.5%, to $92.90 a barrel by 07:07 GMT after falling $1.38 the previous day.

U.S. West Texas Intermediate crude was at $86.16 a barrel, up $2.22, or 2.6%.

Investors this week were bracing for another aggressive interest rate hike from the U.S. Federal Reserve that they fear could lead to recession and plunging fuel demand.

On this wake, U.S. crude and fuel stocks rose by about 1 million barrels for the week ended Sept. 16, according to market sources citing American Petroleum Institute figures on Tuesday.

In ocean freight markets, the Baltic Exchange’s main sea freight index, rose to more than one-and-a-half-month high on Tuesday as demand firmed across vessel segments.

The overall index, indeed, was up 176 points, or 11.3%, at 1,729 points, its highest since Aug. 3.

Particularly, the capesize index gained 475 points, or 31.3%, to a seven-week high of 1,994 points.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, gained $3,941 to $16,540.

The panamax index was up 33 points, or 1.7%, at 2,023 points, after two sessions of declines.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, gained $293 at $18,206.

Among smaller vessels, the supramax index rose for a fifth consecutive session, adding 29 points to 1,580 points.

In equity markets, US stocks on Tuesday closed moderately lower.

A jump in T-note yields weighed on the overall market.  

The 10-year T-note and 10-year UK gilt yields rose to 11-year highs, and the 10-year German bund yield climbed to an 8-3/4 year high. 

Particularly, the yield on the 10-year Treasury in the USA, rose to 3.56% from 3.52% from late Monday.

The yield on the 2-year Treasury, held steady at 3.95%, hovering around its highest levels since 2007.

Global bond yields saw upward pressure after Sweden’s Riksbank raised interest rates by a more than expected 100 bp.  

That fueled fears that the Fed on Wednesday might boost rates by 100 bp as well.  

A slump of more than -12% in Ford Motor also weighed on the overall market after Ford warned that its Q3 Ebitda would be below expectations.

Tuesday’s U.S. housing news was mixed for stocks.  

Aug housing starts jumped +12.2% m/m to 1.575 million, stronger than expectations of 1.450 million, due mostly to a surge in multifamily housing.  

However, Aug building permits, a proxy for future construction, fell -10.0% m/m to a 2-year low of 1.517 million, weaker than expectations of 1.604 million.

In this context, on Wall Street, the S&P 500 index fell 1.1% to 3,855.93. 

The Dow Jones Industrial Average lost 1% to 30,706.23. 

The Nasdaq composite also fell 1%, to 11,425.05.

Smaller company stocks fell more than the broader market. 

The Russell 2000 index gave up 1.4% to 1,787.50.

Meantime, Asian shares mostly declined Wednesday.

The Bank of Japan began a two-day monetary policy meeting Wednesday, although analysts expect the central bank to stick to its easy monetary policy. Rate decisions from Norway, Switzerland and the Bank of England are next.

Global tensions from Black Sea regions, are adding to uncertainties.

In this context, Japan’s benchmark Nikkei 225 dipped 1.4% to finish at 27,313.13. 

Australia’s S&P/ASX 200 dropped 1.6% to 6,700.20. 

South Korea’s Kospi lost 0.9% to 2,347.21. 

Hong Kong’s Hang Seng shed 1.7% to 18,460.71, while the Shanghai Composite slipped 0.2% to 3,117.18.

In currency trading, the U.S. dollar inched down to 143.53 Japanese yen from 143.74 yen. 

The euro fell to 99.64 cents from 99.73 cents.

From South America, Brazil’s Anec expects the country’s corn exports to reach 7.62 MMT in September, which is slightly below its prior forecast from a week ago.

Anec also predicts that the country will export 4.15 MMT of soybeans in September, which is moderately below its prior forecast from a week ago. 

Anec anticipates Brazilian soymeal exports will reach 2.225 million metric tons this month.

Argentine farmers continued to offload soy stockpiles last week.

Sales surged after Sept. 5, when the government launched a more preferable exchange rate for soybean producers and now 61.8% of the 2021/2022 harvest, was sold by the end of the past week, the agriculture ministry said on Tuesday.

Particularly, between Sept. 8 and 14, producers sold 2.3 million tonnes of the 2021/2022 harvest, up from 2.1 million tonnes the prior week, per official data.

However, yesterday, Argentina’s central bank tightened access to foreign currency for producers selling with the special exchange rate, a move likely to lower sale volumes this week.

Meantime, according to the agriculture ministry, 66.3% of Argentina’s 59 million tonnes of corn harvested during the 2021/2022 season has been sold.

That is an increase from the 61.7% sold by the same time last year.

The coming 2022/2023 cycle for Argentina’s corn and soy crops is expected to begin between September and October.

Argentina’s wheat harvest begins in November, but producers have already, as of last week, sold 5.3 million tonnes, or 29.8% of the 17.7 million tonnes that the Rosario Grains Exchange forecasts for the 2022/23 harvest.

The grains exchange expects wheat sales abroad to fall to 12 million tonnes from 15 last year.

In Europe, wheat on Euronext returned to test its resistance zone around €340/t.

The European Commission showed soft wheat exports at 8.06 million tonnes on September 18, which is fractionally below last year’s pace so far.

France is the first exporting country within the EU with 3.15 million tonnes. 

The main importing countries for the EU remain Algeria and Morocco. 

Meantime, EU barley exports were down nearly 36% versus year-ago results, with 1.96 MMT.

Corn imports were up sharply compared to last year, at 5.90 million tonnes against 3.29 million. 

That represents a 79% increase above last year’s pace so far. 

Forecasters have upped their projections for EU corn imports following a drought-stressed production that fell to a 15-year low this season.

Brazil is the leading country for these origins, followed by Ukraine. 

Spain is the leading importing country within the EU.

European Union soybean imports during the 2022/23 marketing year are trending moderately below last year’s pace so far after reaching 2.5 MMT through September 18. 

EU soymeal imports are down slightly from year-ago totals, with 3.45 million metric tons.

Rapeseed imports into the EU have been at 1.30 million tonnes since the start of the campaign, compared to 1.03 last year to date.

On the other hand, Norway’s Yara, said on Tuesday it will halt output at its Belgian unit “in the next few days”, as part of a wider European reduction plan linked to soaring gas prices.

Yara said in August it intends to cut ammonia production by 65% and ammonium nitrate, used in agriculture as a fertiliser, by 35%. 

It had not given details per site.

Annual production capacity at its Belgian site of Tertre, located near the French border, is of 400,000 tonnes of ammonia, 950,000 tonnes of AN fertilisers and 800,000 tonnes of nitric acid, the company said.

The halting of the factory will entail a drop of 10% in AN supply on the French market, which will be mostly compensated by its Montoir-de-Bretagne unit in western France, Yara France chairman Nicolas Broutin told reporters.

From the Middle East, climate change, a faltering economy and residual security issues have decimated Syria’s 2022 grain crop, leaving the majority of its farmers in a precarious position, the United Nations Food and Agriculture Organization (FAO) said.

Syria’s 2022 wheat harvest amounted to around 1 million tonnes, down some 75% from pre-crisis volumes, while barley was almost non-existent.

The meagre harvest adds strain on Syria’s sanctions-hit government as it struggles to source wheat from the international market. 

Food is not restricted by Western sanctions but banking restrictions and asset freezes have made it difficult for most trading houses to do business with Damascus.

The one million tonne production figure is far lower than government estimates of around 1.7 million tonnes.

The FAO estimate translates into a need to import around 2 million tonnes from abroad to feed government-controlled areas.

Iraq plans to plant 750,000 hectares with wheat for the 2022-2023 season, an agriculture ministry official said.

The local planting season is expected to begin in mid-October to November.

Iraq harvested 625,000 hectares in the 2021-2022 season, according to the ministry.

The ministry is in the process of putting together an agriculture plan with the ministry of water resources and expects more dependence on underground water.

From the Black Sea basin, the Ukrainian Minister of Agriculture estimates that wheat production in 2023 may not exceed 18/19 million tonnes, given the drop in sown areas.

According to APK-Inform, the bid prices of barley increased in the ports of the Danube and Great Odesa last week.  

Growing exports by sea and lower production along with small carry-over stocks supported the prices. 

Return of Chinese demand pushed the prices up as well.

Particularly, the bid prices of traders increased by 5-10 USD/t to 155-185 USD/t, and by 200-600 UAH/t to 6300-7400 UAH/t in the ports of the Danube and Great Odesa.

Kazakh farmers have harvested 17.9 million tonnes of grains and pulses so far this season, with harvesting 86.3% complete, the grain-exporting Central Asian nation’s Agriculture Ministry said on Tuesday.

The grain yield stood at 1.25 tonnes per hectare, it said in a statement. 

From the Middle Kingdom, China will release 14,400 tonnes of frozen pork from its state reserves on Sept. 23, according to a notice from the reserves management centre on Wednesday.

Beijing has said it will release pork ahead of the upcoming National Day holidays in October to keep prices of the nation’s favourite meat steady during a period of strong demand. 

Meantime, China’s spending on Russian energy products hit a record $8.3 billion last month, as the world’s top importer continues to expand its reliance on Moscow for supplies of crude, oil products, gas and coal.

From South East Asia, India is likely to extend its free food programme for the poor by three to six months, CNBC TV18 reported on Wednesday, a move that could cost the government $10 billion more and make it challenging for it to meet its fiscal deficit target.

India has spent nearly $43 billion since April 2020 on its free food program known as ‘Pradhan Mantri Garib Kalyan Anna Yojana’ where it provides 5 kg of foodgrain to poor families.

A six-month increase could cost the government an additional 800 billion rupees ($10 billion), according to a government official.

Most economists expect the Indian government to miss its fiscal deficit target of 6.4% of GDP for the 2022/23 year that started on April 1 as it has taken a number of measures to fight inflation that could cost the government over $20 billion. 

($1 = 79.9250 Indian rupees)

In Pakistan, severe rains damaged around 1.6 million tonnes of wheat stock, stored in government warehouses in the Larkana division.

Due to damage to the wheat stock, it is feared that flour prices will hit Rs200 per kg in the near future.

It is currently being sold at Rs120 per kg.

Meanwhile, the hoarding of wheat is also underway after the Sindh government fixed the Rs4,000 wheat support price.

From Australia, local markets found a bid late in the day yesterday for in-system grain on old crop, with Clear Grain Exchange trading a bit over 6,000mt for the day. 

New crop markets were a touch softer through the bid side on wheat and barley by $3-4/mt, and canola continued to soften by $5-10/mt, but liquidity remains thin. 

Gains on the US futures overnight are set to see basis here weaken further again as crop outlooks remain positive for another bumper Aussie harvest. 

Although there are concerns around water logging in NSW, it feels like a one-for-one result where we take the cream off the crop in some areas we seem to add a bit in other places around the country

A widespread rainfall event starting today across Southern QLD, NSW and VIC is likely to cause more headaches for saturated area.

On the international trade scene, Jordan’s trade ministry is seeking 120,000 tonnes of wheat in an international tender closing Sept. 27, a government source said on Tuesday.

The wheat is to be shipped in March and April, the source added.

Jordan’s state grains buyer opened the new tender after making no purchase in a Tuesday tender.

CHS, Cargill, Viterra, Ameropa and Biltcom participated in the tender.

That’s all, thank you.

We wish you a good day.

Author: Sandro F. Puglisi  

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