Good morning Farmer Family …
“The roots of all goodness lie in the soil of appreciation for goodness” -Dalai Lama
Happy Thanksgiving to our US clients and colleagues.
US farm markets closed on a high note yesterday, in spite volumes have been thin, and that mainly thanks a broad financial strength and Ukrainian worries.
Notabily, following a weaker start to the week, corn prices wrapped up Wednesday with gains around 1%.
Soybean prices closed 0.44% higher.
The products closed 0.27% higher in meal, and 1.45% higher in the soy oil.
Wheat prices were firmer and all three exchange closed with gains.
Notabily, Chicago SRW wheat prices bounced over a dime off their lows to close 0.25% higher on the day.
Kansas City wheat prices closed with 0.51% gains.
Minneapolis spring wheat were 1.24% higher by the close.
Traders looked to even up their positions before the market closes for the U.S. Thanksgiving holiday and ahead of a short trading day on Friday.
The weekly ethanol report from EIA found that for the week ending November 17, U.S. daily ethanol output averaged 1.041 million barrels of production per day, which marked a 30k bpd or 3% increase from the previous week.
It was the second-highest average output recorded since early August 2022, which helps justify the growing cash premiums offered at U.S. ethanol plants across the Midwest over the past couple weeks.
However, ethanol stocks increased by 1.53m barrels to 22.829 million – a 5-wk high.
News from Mexico showed President Obrador mentioning the country is considering loosening the GMO restrictions as it pertains to livestock feed but not for human consumption.
Also, corn prices strengthened, as the market eyed dry weather forecasts in South America that may cause more stress on Argentinian crops.
Soybeans, on their part, were firmer after trading lower earlier in the day amid ongoing concern about a rise in COVID-19 cases in China, but at midday private exporters reported to the USDA having sold 110,000 metric tons of soybeans for delivery to China during the 2022/2023 marketing year.
The basis levels remained strong too, meantime, as domestic demand was robust.
Wheat prices also ended higher, even as traders considered reports that U.S. buyers imported European wheat due to high domestic prices and attractive ocean shipping rates into the United States.
The recent deal to keep the Black Sea export corridor open for Ukraine grain shipments also capped any run-up on prices.
However, reports from the Black Sea showed over 100 vessels remain in Istanbul Turkey awaiting inspection with an average 2 1/2 ships cleared/day.
That is down from 4.9 ships/day during October.
Russia’s President Putin seeks cooperation from the UN to get sanctioned fertilizer out of European ports, and would wishes to continue fertilizer exports via a pipeline traversing through Ukraine.
In this context, commodity funds were net buyers yesterday for 4,000 lots of corn, 3,000 lots of soybeans and 2,000 lots of wheat.
Meantime, cash offerings for corn were mixed.
Basis rose at an Ohio elevator and Indiana ethanol plant though it eased slightly at an Eastern Iowa processor.
Corn cash trends have not changed significantly during the week.
If anything, basis has slightly strengthened at Midwestern ethanol plants this week as new farmer sales remain slow.
For soybean, farmer sales of soybeans on the cash market were slow despite the futures price uptick.
Cash offerings for soybeans were largely unchanged as a result.
Cash soymeal prices were largely unchanged across U.S. rail and truck terminals.
As for wheat, cash offerings for soft red winter wheat in the Midwest was unchanged and continues to be offered at a $0.30/bushel discount to nearby Chicago futures contracts.
Basis for hard red winter wheat in the Southern Plains largely held steady, though a Goodland, Kansas facility weakened its cash offering slightly.
In energy markets, oil declined on Thursday, hovering around two-month lows.
Brent crude futures, indeed, dipped 50 cents, or 0.6%, to $84.91 a barrel by 07:02 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell by 46 cents, or 0.6%, to $77.48 a barrel.
Both benchmarks plunged more than 3% on Wednesday on news the planned price cap on Russian oil could be above the current market level.
The G7, indeed, is looking at a cap on Russian seaborne oil at $65-$70 a barrel, according to a European official, though European Union governments have not yet agreed on a price.
A higher price cap could make it attractive for Russia to continue to sell its oil, reducing the risk of a supply shortage in global oil markets.
A greater-than-expected build in U.S. gasoline inventories and widening COVID-19 controls in China added to downward pressure.
Notabily, EIA said on Wednesday that U.S. gasoline and distillate inventories had both risen substantially last week.
The increase alleviated some concern about market tightness.
However, crude inventories fell by 3.7 million barrels in the week to Nov. 18 to 431.7 million barrels, compared with analysts’ expectations for a 1.1 million-barrel drop.
China on Wednesday reported the highest number of daily COVID-19 cases since the start of the pandemic began nearly three years ago.
Local authorities tightened controls to stamp out the outbreaks, adding to investor worries about the economy and fuel demand.
Meanwhile, Chevron Corp could soon win U.S. approval to expand operations in Venezuela and resume trading its oil.
Both Venezuelan parties and U.S. officials are pushing to hold talks in Mexico City this weekend.
In ocean freight markets, the Baltic Exchange’s dry bulk sea freight index rose on Wednesday for the first time in ten sessions, helped by an uptick in capesize rates.
The overall index, indeed, added 35 points, or about 3%, to 1,184.
Particularly, the capesize index added 127 points, or 11.6%, to hit its highest in a week at 1,219.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes of coal and steel-making ingredient iron ore, increased $1,049 to $10,106.
The panamax index dropped 32 points, or 2.1%, to an 11-week low at 1,464.
Average daily earnings for panamax vessels, which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, decreased by $283 to $13,180.
The supramax index ended its 22-session losing streak and edged up 3 points to 1,163.
In equity markets, US stocks closed broadly higher on Wall Street after minutes from the Federal Reserve’s most recent policy meeting showed central bank officials agreed that smaller rate hikes would likely be appropriate “soon.”
Thus, the S&P 500 rose 0.6% to 4,027.26, while the Dow Jones Industrial Average gained 0.3% to 34,194.06.
The Nasdaq composite closed 1% higher to 11,285.32.
The Russell 2000 index of smaller companies also edged higher, adding 0.2% to close at 1,863.52.
Long-term Treasury yields fell.
The yield on the 10-year Treasury, which influences mortgage rates, slipped to 3.69% from 3.76%.
U.S. economic news Wednesday was mixed for stocks.
On the positive side, Oct capital goods new orders nondefense ex-aircraft, a proxy for capital goods spending, rose +0.7% m/m, stronger than expectations of unchanged. Also, Oct new home sales unexpectedly rose +7.5% m/m to 632,000, stronger than expectations of a decline to 570,000.
In addition, the University of Michigan U.S. Nov consumer sentiment index rose +2.1 to 56.8, stronger than expectations of 55.0.
On the bearish side, weekly initial unemployment claims rose +17,000 to a 3-1/4 month high of 240,000, showing a weaker labor market than expectations of 225,000.
Also, the Nov S&P Global U.S. manufacturing PMI fell -2.8 to a 2-1/2 year low of 47.6, weaker than expectations of 50.0.
In addition, the Nov S&P Global U.S. services PMI unexpectedly fell -1.7 to 46.1, weaker than expectations fan increase to 48.0.
In this context, technology stocks and some big retailers helped drive a big share of the gains in the benchmark S&P 500 index Wednesday.
A gain of more than +7% in Tesla on Wednesday led gainers in the S&P 500 and Nasdaq 100 after Citigroup upgraded the stock to neutral from sell.
Chipmaker Nvidia rose 3% and Target rose 3.5%.
Homebuilders rose broadly following the government report.
Lennar gained 1.6% and D.R. Horton rose 2.2%.
Deere & Co rose more than +5% after reporting stronger-than-expected Q4 net income and raising its 2023 net income forecast.
On the bearish side, Autodesk fell more than -5%.
Also, Nordstrom fell more than -4%.
In addition, energy producers were under pressure Wednesday, with crude prices down more than -3% as the EU discusses a price cap on Russian oil of between $65 and $70 a barrel.
An other negative factor for global stocks, China reported 28,183 new Covid infections on Tuesday, the most in nearly seven months and just below April’s record of 28,793.
Covid control restrictions now cover 20% of China’s economy, up from 15.6% last Monday, according to Nomura.
Meantime, Asian shares gained on Thursday, although optimism about the Federal Reserve holding back on aggressive interest rate raises was countered by some uncertainty about coronavirus restrictions in China.
Trading was relatively muted in Asia.
Benchmarks rose in Japan, Australia and South Korea.
They rose in Hong Kong but fell in Shanghai.
Notabily, Japan’s benchmark Nikkei 225 jumped 1.0% to finish at 28,383.09.
Australia’s S&P/ASX 200 added 0.1% to 7,241.80.
South Korea’s Kospi gained nearly 1.0% to 2,441.33.
Hong Kong’s Hang Seng rose 0.6% to 17,626.00, while the Shanghai Composite fell 0.3% to 3,089.31.
In currency trading, the U.S. dollar fell to 138.87 Japanese yen from 139.57 yen.
The euro cost $1.0435, up from $1.0399.
Going back to analyzing the other agricultural markets …
From Central America, as we said, Mexican President Andres Manuel Lopez Obrador has said that he’s considering allowing imports of genetically modified yellow corn for livestock feed, signalling he may be softening his stance on a planned ban of GM corn by early 2024 amid pressure from the US government.
From South America, reports on the wire suggest a renewed election protest in Brazil has major highways under blockade as demonstrators seek to disrupt grain transport in demonstration of Bolsonaro’s defeat.
Meantime, China’s Cofco received shipment of the first load, 68k MT, of Brazilian corn for the season.
Four to six vessels are, indeed, expected to carry Brazilian corn to China this month, the first shipments since a new bilateral trade protocol entered force, according to maritime shipping data.
It’s projected that Brazilian corn shipments to China will total as much as 368,000 tonnes in November based on information from market sources.
China’s Cofco is the buyer of most cargos, the data showed.
It is believed that 15 cargoes or 1 million tonnes have been booked.
Brazilian grain exporting association Anec yesterday estimated that calendar 2023 corn exports could reach the 40-50Mt range, compared to 41Mt this year, with as much as 5Mt of that going to China.
On the other hand, Brazil’s National Energy Policy Council decided to keep the mandatory 10% biodiesel blend through March 31 – with an anticipated increase to a 15% blend beginning in April.
That increase in consumption had been rumored to begin in January.
Farmers in Argentina, have so far sold 72.6% of the 2021/22 soybean harvest, the agriculture ministry said on Wednesday, lagging the 75.6% sold at the same point a year ago.
Notabily, producers in Argentina sold 165,500 tonnes of the season’s soybeans in the week of Nov. 10-16, down from the 641,700 tonnes sold during the same period a year earlier.
The 2021/22 soybean harvest was 44 million tonnes.
The ministry also said that Argentina had sold 5.7 million tonnes of its 2022/23 wheat harvest, or 42.4% of total production.
Last week, the government estimated that the 2022/23 wheat crop would be only 13.4 million tonnes due to the dry weather.
In Europe, wheat prices eased after a flurry of sales over the past week.
Corn prices were still under pressure due to the recent renewal of the secure corridor in the Black Sea and diminished consumption prospects on the Community market and internationally.
The fall in the dollar, pressured down European grain prices mechanically.
Volatility was accentuated by precautionary sales by funds and all financial players on the eve of Thanksgiving in the USA, with markets closed on Thursday, and Friday for half a day.
Falling oil dragged down vegetable oil prices.
Thus, some spillover weakness was also present after Euronext rapeseed futures fell 3.2% following lower energy prices, which resulted, yesterday, in the breakout of the €600/t rapeseed support on Euronext.
However, Dec22 wheat contract prices are likely to hold firm as market chatter continues of a large Chinese purchase of French wheat.
Also, rumors continue to swirl that European wheat has been imported by a Florida mill, though the belief that it will be sourced by a German or Polish seller is wavering.
“Currently the consensus seems to be that Baltic wheat is believed to have been sold to one U.S. flour mill only, suspected to be in Florida,” a German trader said.
“The attention will now be on whether this low price/cheap shipping window will be used by other U.S. mills or feed makers.”
There is also market talk about more recent sales of Russian wheat to Mexico, although details are unavailable.”
U.S. wheat is currently very expensive on the world market and European supplies are being offered at a discount to domestic prices.
However, this particular deal is likely to involve European wheat supplies harvested next summer (2023), so it could shake up new crop pricing substantially in the coming weeks.
Meantime, per latest data published by Euronext on Wednesday, non-commercial market participants expanded their net long position in Euronext’s milling wheat futures and options in the week to Nov. 18.
Notabily, non-commercial participants, which include investment funds and financial institutions, raised their net long position to 55,632 contracts from 48,054 a week earlier, the data showed.
Commercial participants decreased their net short position to 63,295 contracts from 70,887 a week earlier.
In Euronext’s rapeseed futures and options, non-commercial market participants raised their net short position to 19,219 contracts from 7,626 a week earlier.
Commercial participants similarly lifted their net long position in rapeseed to 19,965 contracts from 13,700 a week earlier.
From the Black Sea basin, Russia’s Ag Ministry reports that 2023-24 winter grains and rapeseed plantings are complete on 17.6Mha (-4pc y/y), including winter wheat on 15.6Mha, barley on 679,300ha and rapeseed on 588,221ha.
Meantime, President Vladimir Putin said on Wednesday Russian officials would work to unblock Russian fertilisers stuck in European ports and to resume ammonia exports via a pipeline through Ukraine.
There are 262,000 tonnes of Uralchem’s fertiliser frozen in ports of Estonia, Latvia, Belgium and the Netherlands.
Other producers, Acron and Eurochem, have 52,000 tonnes and almost 100,000 tonnes of their fertiliser stuck in Europe, respectively.
The cargoes are stranded because of the EU sanctions on the companies’ former owners, including Mazepin.
Uralchem said on Nov. 12 it had agreed with the Netherlands, Estonia and Belgium to ship the fertiliser to African countries for free.
Putin said, however, that even these proposed donations were being blocked.
Thus, he agreed to ask Russian officials to help, saying he had been contacted by several African leaders on the issue.
Mazepin also asked for Putin’s further help with resumption of Russian ammonia exports via a pipeline running from Russia through Ukraine to the Black Sea.
The export of ammonia, used in fertiliser, was not part of last week’s renewal of the Black Sea deal allowing Ukraine’s grain shipments, though the United Nations has been optimistic Russia and Ukraine could agree on terms for the pipeline.
Ukrainian President Volodymyr Zelenskiy said in September he would only back the resumption of ammonia exports via Ukraine if Moscow handed back prisoners of war, an idea the Kremlin rejected.
From Ukraine, according to the country Agriculture Ministry, as at 22 Nov, 2023-24 winter crop sowing was complete on 4.4Mha (94pc of intended area), incl. wheat on 3.8Mha (94pc) and barley on 613,000ha (91pc).
The country’s grain output could fall sharply to 51 million tonnes in 2022.
Ukraine is able to export 13 million tonnes of wheat and 20 million tonnes of corn in the 2022/23 July-June season, Ukrainian grain traders union UGA said on Wednesday.
However, “the export of grain and oilseeds in the 2022/2023 season can be expected at the specified level, if the work of Ukrainian Black Sea ports for export remains until the end of the season,” UGA said in a note.
The agriculture ministry said Ukraine had exported 6.3 million tonnes of wheat so far the 2022/23 season which runs from July to June.
The exports totalled 14 million tonnes in the same period in 2021/22.
From Australia, southern feed wheat and barley prices have dropped around $10-$15 per tonne in the past week to reflect an improving outlook for harvest and deliveries.
The welcome arrival of dry weather over central and northern New South Wales has allowed growers to get moving, mostly on canola and barley, while in Queensland, harvest is over, or close to it, on many farms.
The quality picture is further developing, with low test weight an issue in many barley samples in eastern states, and low protein rife in wheat.
However, consumers have ramped up coverage into January, and with a week of fine weather forecast across southern Australia, rapid progress in harvest and deliveries is expected.
Meantime, yesterday local markets continued to feel the harvest pressure.
The weather forecast is remaining clear and is providing confidence for growers and traders for a good solid run at harvest for the next 8-10 days.
Thus, wheat was softer over the day by a few bucks.
Canola saw some further weakness with WA putting further pressure on prices with a bumper harvest.
Barley was a touch softer also but malt spreads have now pushed out to A$150/t-plus for Planet malt in SA and the eastern states.
On the international trade scene, Thailand bought 60,000 t of feed wheat for shipment between January and March 2023.
The deal was priced around $9.39/bushel C&F while the shipment would originate in Australia.
Algeria’s state grains agency OAIC is believed to have purchased durum wheat in an international tender which closed on Wednesday.
The volume bought was unclear.
Trader estimates of the purchase on Thursday ranged between 300,000 and 450,000 tonnes.
Traders estimated prices at around $495 per tonne c&f for consignments in large panamax-sized bulk carriers and between $502 and $503 a tonne c&f for smaller handysize ships.
More detailed assessments of prices and tonnes bought are possible later.
Shipment was sought in three periods: Dec. 16-31, 2022, Jan. 1-15 and Jan. 16-31.
Algeria does not disclose the results of its tenders and purchase reports are based on trade assessments.
There will be no news on the US market tomorrow, as markets are closed due to the holidays.
However, we will return to these topics on Saturday with all the latest insights and analysis from Friday’s session.
That’s all, thank you.
We wish you a good day.
Author: Sandro F. Puglisi
