Good morning Farmer Family …
US farm markets were mostly quiet yesterday, as traders are holding out for fresh signals from USDA’s next World Agricultural Supply and Demand Estimates (WASDE) report comes out this afternoon.
The USDA will also issue a Crop Production report, a Grain Stocks report for December 1 and its annual report of Winter Wheat Seedings.
It is expected that the USDA will lower its estimates for 2022-23 Argentinian maize, soybean and wheat production and increase Russian and potentially Australian wheat production.
Polls suggest that traders are expecting US wheat, maize and soybean ending stocks to be revised higher based on lacklustre US exports and US winter wheat plantings are expected to increase to a seven-year high.
Any surprises that come out of these reports are likely to result in price moves depending on the sentiment of the revisions.
Meantime, corn price shifted 0.15% higher.
Pre-report adjusting had beans trading higher most of the day, but then prices slipped into the close, though were still 0.54% higher at the bell.
Soybean meal prices settled the day 1.22% in the black.
Bean oil prices ended with 0.74% losses.
Gains in wheat were variable.
Chicago SRW ended the session 1.23% higher.
Kansas City HRW closed with 1.29% gains.
Minneapolis spring wheat went home 0.53% higher.
Wheat prices firmed after dropping to 15-month lows in the previous session, sparking technical buying and short covering.
Corn was mixed.
Ethanol production rebounded by 99k bpd increase from last week, but remained relatively disappointing for the week ending January 6, with a daily average production of 943,000 barrels.
It was also the third consecutive week that the daily average failed to meet the 1-million-barrel benchmark.
Ethanol stocks were down an additional 644k barrels, or 3% to 23.8 million.
However, corn and soybeans edged higher, underpinned by concerns about weather-reduced crops in South America.
Rains got by Argentina were as advertised, however, still not enough to fix the problem, while the mid-term forecast still looks concerning.
Sluggish U.S. export demand continued to weigh on grain prices.
Demand for U.S. soybeans is also winding down seasonally as a bumper Brazilian harvest is due to flood the market in the coming weeks.
However, on Wednesday private exporters reported to the USDA having sold 124,000 tonnes of old-crop U.S. soybean, to undisclosed buyers.
It was the third daily soybean sales announcement in four trading days.
Also, grain traveling the US railways reached 22,089 carloads last week.
That was a 1.1% improvement over 2022 so far.
In this context, Weekly FAS Export Sales data is expected to show between 300,000 MT and 1 MMT of old crop corn was sold during the week that ended 1/05.
New crop corn bookings are estimated below 75k MT.
Weekly soy export sales are estimated between 500k and 1.2m MT for the beans, 75k to 300k MT for the meal and below 12k MT for soy oil.
New crop soybean bookings are estimated below 150k MT.
As for wheat, analyst estimates range between 75k MT and 450k MT.
New crop wheat bookings are estimated below 150k MT.
Meantime, corn basis bids tracked 4 cents lower at an Illinois ethanol plant while holding steady elsewhere across the central U.S. on Wednesday.
Soybean basis bids were mostly steady across the central U.S., but did trend 2 cents lower at an Indiana processor while firming a penny at an Illinois river terminal.
Commodity funds were net buyers of CBOT wheat, corn, soybean and soymeal futures contracts, and net sellers of soyoil futures.
On this morning, Chicago soybean prices gained more ground, rising to their highest in more than a week, after a grains exchange sharply reduced its forecast for Argentina’s crops, raising concerns over global supplies.
Wheat slid, falling for four in five sessions, while corn dropped for the first time in three sessions.
Notably, the most-active soybean contract on the Chicago Board of Trade was up 0.7% at $15.03-1/4 a bushel, as of 03:49 GMT, after climbing to its highest since Jan. 3 at $15.07-1/4 a bushel, earlier in the session.
Wheat lost 0.2% to $7.38-1/4 a bushel and corn gave up 0.1% to $6.55-1/2 a bushel.
In energy markets, oil prices rose 3% to a one-week high on Wednesday.
Brent futures, indeed, rose $2.57, or 3.2%, to settle at $82.67 a barrel.
U.S. West Texas Intermediate (WTI) crude rose $2.29, or 3.1%, to settle at $77.41.
Both benchmarks settled at their highest since Dec. 30, with WTI up for a fifth day in a row for the first time since October and Brent up for a third day in a row for the first time since December.
Global equities rose on hopes that U.S. inflation and earnings figures due on Thursday will indicate a resilient economy and result in a slower pace of interest rate hikes.
However, much of the market’s optimism was pinned on China’s reopening.
China’s overall passenger vehicle sales are estimated to rise 5% in 2023.
China’s industrial output is expected to have grown 3.6% in 2022 from the previous year, the Ministry of Industry and Information Technology (MIIT) said.
Also, EIA said the upcoming EU ban on seaborne imports of petroleum products from Russia on Feb. 5 could be more disruptive than the EU ban on seaborne imports of crude oil from Russia implemented in December 2022, although Russian Deputy Prime Minister Alexander Novak said, country’s oil producers have had no difficulties in securing export deals, so far.
On the bearish side, meantime, the U.S. Energy Information Administration (EIA) said crude inventories jumped by 19.0 million barrels last week, the third biggest weekly gain ever and the most since stocks rose by a record 21.6 million barrels in Feb 2021.
Last week’s increase came as refiners were slow to restore production after a cold freeze shut operations in late 2022.
Analysts had forecast a 2.2 million-barrel decline in crude stocks, and industry data from the American Petroleum Institute (API) showing a 14.9 million-barrel build.
Also, EIA this week forecast U.S. crude production will reach all-time highs in 2023 and 2024.
In ocean freight markets, the Baltic Exchange’s main sea freight index dropped to a more than four-month low on Wednesday, pressured by weaker demand across vessel segments.
The overall index, indeed, was down 53 points, or 4.8%, to 1,043, its lowest level since Sept. 1.
Notably, the capesize index lost 66 points, or 4.3%, to 1,470.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were down $553 at $12,188.
The panamax index, which has not seen a single day of gains since mid-December, dropped by 63 points, or 5.3%, to 1,126.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, fell by $568 to $10,137.
Among smaller vessels, the supramax index fell for the 14th consecutive session by 41 points to 762.
In equity markets, US stocks on Wednesday extended Tuesday’s gains.
As we said, stocks rallied on expectations that U.S. Dec CPI report will show a further softening in price pressures.
The market consensus is for Thursday’s U.S. Dec CPI to ease to 6.5% y/y from 7.1% y/y in Nov and for Dec CPI ex-food and energy to ease to 5.7% y/y from 6.0% y/y in Nov.
An easing of inflation would bolster the case for less-aggressive Fed rate hikes.
As a results, the yield on the two-year Treasury, which tends to track expectations for Fed action, dipped to 4.22% from 4.24% late Tuesday.
The 10-year Treasury yield, which helps set rates for mortgages and other important loans, fell to 3.52% from 3.61%.
That, sparked a rally in technology stocks that lifted the overall market.
Global bond yields were also lower, as the 10-year UK gilt yield Wednesday dropped to a 3-week low of 3.366%, and the 10-year German bund yield dropped -10.3 bp at 2.204%.
In this context, on Wall Street, the S&P 500 climbed 1.3% to 3,969.61 for its second straight gain.
The Dow Jones Industrial Average rose 0.8% to 33,973.01, while the Nasdaq composite gained 1.8% to 10,931.67.
On this morning, Asian shares were mixed.
Notably, Japan’s benchmark Nikkei 225 wobbled in early trading and was up less than 0.1% at 26,448.13 in afternoon trading.
Australia’s S&P/ASX 200 jumped 1.2% to 7,280.40.
South Korea’s Kospi gained 0.5% to 2,370.58.
Hong Kong’s Hang Seng lost 0.1% to 21,406.02, while the Shanghai Composite shed nearly 0.2% to 3,156.48.
On the wire, Japan’s Finance Ministry reported the country’s current account returned to the black in November for the first time in two months, reflecting a slimming of the trade deficit as the yen regained value against the U.S. dollar and other currencies.
Later this week, companies will begin reporting how much profit they made during the last three months of 2022.
Bank of America, Delta Air Lines, JPMorgan Chase and UnitedHealth are among those reporting results on Friday.
In currency trading, the U.S. dollar slipped to 131.46 Japanese yen from 132.44 yen.
The euro cost $1.0770, up from $1.0757.
Going back to analyzing the other agricultural markets …
From South America, “Argentina’s weather outlook turned negative…” commodity analyst said.
“Light rains favour Cordoba and Buenos Aires today and Thursday before dry weather sets in Friday through Sunday, and through next week.”
Hot and mostly dry weather is expected across two-thirds of Argentina’s crop belt over the next 10 days, heaping further stress on the drought-hit region, according to the Commodity Weather Group.
As a result, Argentina’s Rosario Grains exchange sharply cut its forecast for the country’s 2022/23 soybean harvest to 37 million tonnes from a previous forecast of 49 million.
The exchange also slashed its 2022/23 corn harvest estimate to around 45 million tonnes, down from 55 million tonnes previously.
Wheat production is almost halved compared to last year, at only 11.5 million tonnes.
Meantime, sales for two of Argentina’s top grains crops, soybeans and corn, stand slightly behind the previous cycle’s pace, according to agriculture ministry data published Wednesday.
Notably, soybean sales as of last week from the 2021/2022 harvest covered 80.4% of the crop, just below the 81% sold from the previous season at the same time, the data showed.
But it was one of the lowest weekly figures in recent months, farmers sold only 142,500 tonnes of soybeans between Dec. 29 and Jan. 4.
Meanwhile, Argentina’s corn farmers have sold 75.9% of the 59 million-tonne 2021/2022 crop as of last week, according to the ministry, down from 78.1% during the same period of the previous cycle.
Wheat sales for the 2022/23 cycle reached 6.7 million tonnes last week, amounting around a half of the expected production.
Meantime, Brazilian farmers are poised to reap a much larger soybean crop than last season in spite of dryness in southern parts of the South American country and a slow start to the harvest in the center-west region due to rains.
Agroconsult expects Brazil to produce record corn and soybean crops in 2022-23, despite dry weather in the far southern state of Rio Grande do Sul.
The firm expect Brazilian soybean production to reach 153.4 MMT, which is just below Conab’s official forecast of 153.5 MMT it forecast in December.
Agroconsult projects total corn production at 130.9 MMT, including the first crop at 29.6 MMT and the safrinha crop at 101.3 MMT.
In December, Conab pegged Brazil’s corn crop at 125.8 MMT, though that was based off an estimate of the first corn crop and projections for safrinha acreage and yield.
Conab will update its Brazilian production forecasts Thursday morning but it’s first official estimate of safrinha corn production won’t be incorporated until February.
Soil moisture in Brazil’s Mato Grosso and MGDS has been improving, with USDA’s Crop Explorer maps showing insufficient areas shrinking and pockets of excessive soil moisture expanding, though Southern Brazil remains dry.
If realized, Brazil’s grains output dramatically will outpaces storage capacity.
The 2022/23 crop season, indeed, could post two records in Brazil.
First, it could produce a record 313 million tons of soybeans, corn, cotton, rice and wheat.
Second, that record production would cause a record storage deficit of more than 100 million tons.
Storage capacity growth since 2010, indeed, has not been proportional to increases in crop production in the same period.
Only 15% of Brazilian farms have warehouses or silos.
In 2021, Brazil’s storage capacity could only contain 67% of its total grain production. In 2010, the ratio was 90%.
The grain storage deficit in Brazil is concentrated in the central-west states (Mato Grosso, Goiás, and Mato Grosso do Sul), which account for almost half of the national grain production.
Meantime, Brazil’s Safras and Mercado reported 43.7MMT (or ~36.5% of the expected output) of soybeans were sold by farmers through 1/06, compared to the average 41%.
In Europe, there was a slight rebound in prices on Euronext after the sharp decline at the start of the week.
However, this rebound remains limited by the competitiveness of the Black Sea sources.
But it is above all the rebound of the euro against the dollar weighing on the markets.
Meantime, feed barley bases are progressing in France, thanks to probable new sales to China.
Per latest data published by Euronext on Wednesday, non-commercial market participants flipped to a net short position in Euronext’s milling wheat futures and options in the week to Jan. 6.
Notably, non-commercial participants, switched to a net short position of 14,821 contracts from a net long position of 4,772 a week earlier.
Commercial participants reduced their net short position to 2,203 contracts from 20,109 a week earlier.
In Euronext’s rapeseed futures and options, non-commercial market participants reduced their net short position to 28,898 contracts from 32,384 a week earlier.
Commercial participants similarly lowered their net long position in rapeseed to 27,096 contracts from 30,878 a week earlier.
From the Black Sea basin, due to unfavorable weather conditions, ships with food cannot leave Ukrainian ports for the third day.
On January 11, not a single ship left Ukrainian ports and was unable to pass through the maritime humanitarian corridor under the Black Sea grain initiative.
On January 9 and 10 ships were also unable to leave Ukrainian ports due to bad weather.
The JCC noted that “74 applications for participation in the initiative were submitted”.
According to official statistics, in July-November 2022, the export of Kazakh barley to China amounted to 121.26 thsd tonnes, up by 9.3 times y/y.
Thus, in the current season, China is the second largest buyer of Kazakh barley.
Only Iran bought a larger volume at 237.5 thsd tonnes.
According to the Bureau of National Statistics of the Republic of Kazakhstan, as of December 1, stocks of barley amounted to 1.98 mln tonnes.
However, local exporters estimate the export potential of Kazakh barley as low at about 800 thsd tonnes in 2022/23 MY.
In 2022, indeed, Kazakh agricultural producers planted with barley a record lower area since 2014 of 2.15 mln ha.
The average crop yield was 1.5 t/ha, the harvest was 3.23 mln tonnes, which was the lowest since 2016 (excluding the previous dry season).
The peak of Kazakh barley exports was in 2018/19 MY, when 1.79 mln tonnes were shipped from a harvest of 3.82 mln tonnes.
From January 1 to December 25, 2022, Russia exported 881 thsd tonnes of wheat and wheat-rye flour, up 3.5 times y/y, the Agroexport Federal Center reported.
“The value of supplies increased by 3.9 times in 2022. Since April, monthly shipments of Russian flour have consistently exceeded 60 thsd tonnes, and in June they surpassed 100 thsd tonnes”, – the report says.
In 2022, Georgia became the largest importer of Russian flour.
As of December 25, the country increased purchases by 4.7 times in physical terms (up to 202 thsd tonnes) and by 6 times in monetary terms. Iraq increased purchases by 12 times in the physical volume of exports (up to 158 thsd tonnes), by 13 times the value terms. Afghanistan imported 131 thsd tonnes of Russian flour (up by 4.9 times).
The TOP-5 importers also included Turkey, which usually prefers to buy wheat and process it.
Over the reporting period, 78 thsd tonnes of flour were shipped to Turkey, while for the entire last year this figure was less than 1 thsd tonnes.
Turkmenistan increased imports by 4.5 times up to 43 thsd tonnes.
For the first time, Russian flour was delivered to Egypt, Uganda, Senegal, and Sri Lanka in 2022.
From the Middle Kingdom, China’s Commerce Ministry said on Wednesday it will continue to impose anti-dumping and anti-subsidy tariffs on the animal feed ingredient distillers dried grains (DDGS) imported from the United States for another five years.
The anti-dumping tariffs are between 42.2% and 53.7% while anti-subsidy tariffs range from 11.2% to 12%.
The move, was widely expected by the industry.
The ethanol branch of the China Alcohol Industry Association welcomed the ministry’s announcement.
“Over the past five years, the double duties have achieved remarkable results, effectively curbing the unfair trade of distiller’s grains from the United States, and ensuring the healthy development of the domestic distiller’s grains industry,” it said in a statement on the association’s official Wechat account.
“If the anti-subsidy and anti-dumping measures are terminated, it is very likely that the U.S. will again export large quantities of DDGS to China at a low price, and may continue or cause damage to the domestic industry again,” it added.
However, continued tariffs are not expected to have a significant impact on U.S. exporters who have shifted sales to other markets such as South Korea and Mexico since China implemented the duties in 2016.
In other news, hog prices in China will fluctuate across a smaller range in 2023, Wan Jinsong, the director of the price department at the National Development and Reform Commission (NDRC), said at a press briefing in Beijing on Thursday.
The Commission will continue to keep a close eye on the market’s dynamics and will take timely regulatory measures in accordance with its predetermined plan to ensure the hog market’s stable operation, he added.
From South East Asia, Malaysian palm oil futures were little changed on Thursday, hovering around three-week lows hit in the previous session due to weak demand.
The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange slipped 1 ringgit, or 0.03%, to 3,910 ringgit ($895.97) a tonne by the midday break.
Exports of Malaysian palm oil products for Jan. 1-10 fell 44.6% to 262,201 tonnes from Dec. 1-10, cargo surveyor Societe Generale de Surveillance said on Wednesday.
However, palm oil stocks in the world’s second-largest producer are expected to decline to around 2 million tonnes this year, compared with 2.19 million tonnes in 2022, the Malaysian Palm Oil Board (MPOB) said on Thursday.
MPOB forecast crude palm oil prices to trade in a range of between 4,000-4,200 ringgit per tonne this year.
Meantime, Malaysia called on countries producing palm oil to strengthen cooperation following new European Union (EU) legislation aimed at curbing the imports for commodities linked to deforestation, including palm oil.
Deputy Prime Minister Fadillah Yusof said Malaysia, which sees EU measures as “trade barriers”, plans to engage with EU counterparts and will consider halting exports to the bloc as an option.
Meantime, Indonesia planned to set its crude palm oil reference price at $920.57 per tonne for Jan. 16-31, up from $858.96 per tonne in Jan. 1-15, deputy coordinating minister of economic affairs Musdhalifah Machmud said on Wednesday.
The pricing would place Indonesia’s palm oil export tax at $74 per tonne and levy at $95 per tonne for the period.
The decree to set the new reference price is not yet published.
India’s palm oil imports in December fell about 2.8% from the previous month to 1.11 million tonnes, while vegetable oil imports rose about 1.3% to 1.57 million tonnes, a trade body said on Thursday.
Imports of soyoil gained 10.1% to 252,525 tonnes while sunflower oil imports jumped 23% to 194,009 tonnes, a release said.
Meantime, India’s wheat output in 2022-23 is likely to cross 112 million tonnes, a top government source said on Thursday.
“We’ve reviewed the crop situation and the current cold wave condition is quite favourable for the wheat crop,” the source, who didn’t wish to be identified in line with official rules, said.
From Australia, prices for feed barley and wheat have firmed early the week to reflect limited grower selling in the past month which has seen one of the latest ever harvests take place across south-eastern Australia.
Yields have generally been better than expected, and quality has been mixed, with less downgraded grain than was initially forecast hitting the market.
However, combined with healthy export demand, prices have escaped supply-side pressure because growers have offered only modest amounts of feedgrain to the market thus far as they concentrate on selling their higher-value commodities.
However, local markets backed off across the cash boards yesterday, especially for milling wheat, with bids off around $5/t lower.
There still was solid interest for feed wheat in the Geelong zone as the front-end export program is still heavy weighted with feed wheat cargoes.
Harvest from Southern NSW into Vic and around to WA continues to grind away as we approach the middle of January.
It’s been a slow crawl to the finish line for most, but some later regions still have work in front of them over the next couple of weeks.
Another dry weekend is on the cards, but widespread showers are expected to build again next week with southeast NSW and eastern Vic looking to get the higher totals of between 5-25mm.
Despite one of the most challenging canola harvests eastern Australia has ever seen, the national canola crop this year will year deliver another record, potentially exceeding 7.5 million tonnes (Mt).
The estimate was released on December 20 by the Australian Oilseeds Federation and factors in figures from ABARES and the Grain Industry Association of Western Australia.
The AOF national total sits above ABARES most recent estimate of 7.3Mt released in its December 6 Australian Crop Report.
AOF chief executive officer Nick Goddard said WA alone will deliver what would have been regarded as a strong national crop a few years ago, of more than 4.2Mt.
The record Australian crop comes as the USDA forecasts global record oilseed production of 644Mt, up 7pc on last year.
Soybean production is expected to come in just under 400Mt, which is a record, while canola/rapeseed is also expected to reach a record of 84.3Mt, despite a drop in yield for the Canadian crop and ongoing challenges in Ukraine.
The loss of production in sunflower seed, projected to be 12pc, will provide support for alternate oils such as canola.
On the international trade scene, Turkey’s state grain board TMO has started making provisional purchases of wheat in an international import tender which closed on Thursday with about 150,000 tonnes initially bought.
The tender seeks a total 565,000 tonnes and negotiations continue for more.
The first purchases involved 50,000 tonnes for shipment to the port of Iskenderun bought at an estimated $326.70 a tonne c&f and 50,000 tonnes to Mersin bought at an estimated $326.40 a tonne c&f.
Seller of both was said to be trading house Arion.
Another 25,000 tonnes was bought from New Zone at $329.50 ex warehouse for delivery to Izmir and 25,000 tonnes from Yayla at $325.00 a tonne c&f for shipment to Izmir.
The purchases were made for the Feb. 1 to March 15 shipment period, they said. Imports and supplies already in warehouses in Turkey can be offered in the tender.
Leading South Korean feedmaker Nonghyup Feed Inc. (NOFI) has issued an international tender to purchase up to 138,000 tonnes of animal feed corn to be sourced from optional origins.
The deadline for submission of price offers in the tender is today Thursday, Jan. 12.
East European origin is excluded from the tender.
The corn in South Korea is sought in two consignments of up to 69,000 tonnes.
Offers are sought both as a flat/outright price and at a premium over the Chicago May 2023 corn contract.
Corn from east Europe and Paraguay is excluded from the tender.
The first corn consignment is sought for arrival in South Korea around April 15.
If sourced from the US Pacific Northwest coast, shipment of the first consignment is for March 12-March 31, if from the US Gulf for Feb.
20-March 11, from South America for Feb.
15-March 6 or from South Africa between Feb. 25 and March 16.
The second corn consignment is sought for arrival in South Korea around April 25.
If sourced from the US Pacific Northwest coast, shipment is for March 22-April 10, from the US Gulf for March 2-March 21, from South America for Feb.
25-March 16 or from South Africa between March 7 and March 26.
That’s all, thank you.
We wish you a nice day.
Author: Sandro F. Puglisi
