Good morning Farmer Family …
US farm markets closed mostly lower yesterday.
Corn prices settled 0.58% down on the day.
Soy market dropped 0.99%.
Meal prices closed 0.64% in the red.
Soybean oil prices closed 0.44% higher.
The wheat complex pulled Tuesday’s gains back off the table, as Chicago SRW finished the session down by 1.23%.
Kansas City HRW prices closed 1.67% weaker.
Minneapolis spring wheat gave back 1.64%.
Corn and soybean prices turned lower on Wednesday as traders booked profits after both markets set multi-month highs.
Markets drew underlying support recently from optimism about an economic upturn in China with the easing of COVID-19 restrictions.
Dry conditions in Argentina remained a focus of the soybean market.
However, expectations of bumper crops in Brazil, continued to temper supply concerns.
Meanwhile, Argentina weather forecasts were a little bit wetter relative to Tuesday and that prompted some profit-taking.
Wheat followed the weaker trend, although prices were underpinned by remarks by Russian President Vladimir Putin that his country, should maintain stocks and not export all its agricultural supplies.
These comments drew attention to geopolitical risks in the Black Sea export zone.
However, wheats continued to be penalized by last week’s USDA report, especially after the newest weather reports.
A good moisture in the Plains is expected into the weekend.
The Corn Belt and the mid-South may continue to be affected by the mild weather through next week.
The central part of the U.S. is expected to turn colder early next week, and temperatures are likely to stay normal to cold for 7 to 10 days.
However, more rain and snow are expected to affect parts of the Corn Belt and mid-South over the next two weeks, producing 1.25” to 2.50” precipitation.
HRW wheat areas of the Plains may also receive rain and snow over the next 14 days, which is likely to continue to ease the drought.
Heavy snow is expected in the NE today and in parts of IA and MN, affecting logistics in the areas.
Moderate rain and snow may occur in the driest feedlots areas of KS, OK over the weekend.
Meantime, US wheat has contined to a lack of competitiveness internationally.
To all that, yesterday has also added U.S. economic data darkened the demand outlook, monting recession fears again.
As a result, risk-off sentiment has sent all growth-sensitive commodities down.
In this context, spot basis bids for soybeans fell at elevators, processors and river terminals in the eastern half of the U.S. Midwest early on Wednesday.
The soy basis was flat at facilities west of the Mississippi River.
Cash bids for corn also were weak at eastern elevators and river terminals.
At processors, corn bids were steady to weak in the western half of the region, falling by 5 cents bushel in Cedar Rapids, Iowa.
The corn basis was steady to firm at the region’s ethanol plants, rising by 5 cents a bushel in Linden, Indiana.
Commodity funds were net sellers of CBOT wheat, soybean, corn and soymeal futures contracts on Wednesday and net buyers of soyoil futures.
On this morning, Chicago soybean and corn prices slid for a second session in a row.
Wheat also lost more ground.
Notably, the most-active soybean contract on the Chicago Board of Trade fell 0.2% to $15.21-1/4 a bushel, as of 01:54 GMT, and corn lost 0.4% to $6.78-1/2 a bushel.
Wheat fell 0.7% to $7.37-1/2 a bushel.
A combination of a wetter forecast for Argentina and a drier forecast for central Brazil helped spark more aggressive selling both for corn and soybean.
Traders, indeed, are counting on good rains over the next 10 days for Argentina, and drier weather for Brazil which could ease excess moisture concerns and could support more harvest.
Wheat, meantime, found some support by a slow pace of exports from the Black Sea region, limiting losses.
The United Nations on Wednesday called out inefficiencies in the operation of the Black Sea grain deal, but did not lay blame for a backlog of more than 100 ships in Turkish waters waiting on travel approval and inspections.
In energy markets, oil futures fell by nearly $1 on Thursday, extending losses from the previous day.
Brent crude futures, indeed, were last down 84 cents, or 1%, to $84.14 a barrel at 0710 GMT, after earlier easing to $83.76.
U.S. West Texas Intermediate (WTI) crude futures also declined 91 cents, or 1.1%, to $78.57 a barrel.
It earlier fell to a low of $78.13.
A surprise jump in U.S. crude stocks weighed on the market.
Data from the American Petroleum Institute, indeed, showed U.S. crude oil inventories rose by about 7.6 million barrels in the week ended Jan. 13.
The mean average forecast had been for a fall of about 600,000 barrels.
That was the second consecutive week of large inventory increases.
However, distillate stockpiles, which include diesel and heating oil, fell by about 1.8 million barrels against analysts’ expectations for a 120,000-barrel increase.
Meantime, the deterioration in U.S. economic data darkened the oil demand outlook as recession fears mount again.
(Read more below).
In ocean freight markets, the Baltic Exchange’s main sea freight index, tracking rates for ships carrying dry bulk commodities, extended losses on Wednesday, pulled lower by weaker demand across vessel segments.
The overall index, indeed, was down 47 points, or 5.1%, at 874, its lowest level since June 2020.
Notably, the capesize index lost 133 points, or about 10.7%, to 1,107, a two-month low.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were down $1,105 at $9,182.
The panamax index was down 3 points, or about 0.3%, at 1,075.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, fell by $27 to $9,672.
Among smaller vessels, the supramax index which has not seen a single day of gains in over a month, fell by 4 points to 657.
In equity markets, yesterday the S&P 500 fell 1.6% to 3,928.86 after having been up as much as 0.6% in the early going.
The Dow Jones Industrial Average lost 1.8% to 33,296.96 and the Nasdaq composite slid 1.2%, ending a seven-day winning streak, to 10,957.86.
The Russell 2000 index fell 1.6% to 1,854.36.
The losses are reversal for the market.
A plunge in global bond yields Wednesday was supportive for stocks.
The 10-year T-note yield sank to a 4-month low of 3.368%, and the 10-year German bund yield tumbled to a 1-month low of 1.968%.
Also, the 10-year Japan JGB bond yield fell to a 3-week low of 0.361%.
However, the selling came as new economic data showed that as inflation cools, the economy is slowing, heightening worries about the possibility of a recession.
Notably, U.S. Dec retail sales fell -1.1% m/m, weaker than expectations of -0.9% m/m and the biggest decline in a year.
Also, Dec retail sales ex-autos fell -1.1% m/m, weaker than expectations of -0.5% m/m and the biggest decline in 22 months.
U.S. Dec PPI final demand rose +6.2% y/y, weaker than expectations of +6.8% y/y and the smallest gain in 1-3/4 years.
Also, Dec PPI ex-food and energy rose +5.5% y/y, weaker than expectations of +5.6% y/y and the smallest gain in 19 months.
U.S. Dec manufacturing production fell -1.3% m/m, weaker than expectations of -0.2% m/m and the biggest decline in 1-3/4 years.
The U.S. Jan NAHB housing market index rose +4 to 35, stronger than expectations of no change at 31.
Investors have been hoping that easing inflation and a slowdown in economic growth might influence the Federal Reserve’s position on interest rates, while a key Federal Reserve policymaker said interest rates need to go higher than the central bank signaled earlier.
However, that has already hurt prices of stocks and bonds, and risks going too far and bringing on a recession.
Technology stocks were among the biggest drags on the market, including a 1.9% drop in Microsoft.
The software giant is cutting 10,000 workers or almost 5% of its workforce.
IBM fell after being downgraded.
PNC Financial Services Group fell 6% after reporting weak earnings.
On this morning, Asian shares were trading mixed, as investors grew cautious after Wall Street’s biggest pullback of the year.
Notably, Japan’s benchmark Nikkei 225 slipped 1.4% to 26,405.23. Australia’s S&P/ASX 200 gained 0.6% to 7,435.30.
South Korea’s Kospi added 0.5% to 2,380.34.
Hong Kong’s Hang Seng shed nearly 0.2% to 21,642.46, while the Shanghai Composite rose 0.5% to 3,240.28.
India’s Sensex slipped 0.3%.
Japan reported its trade deficit more than doubled in December from a year earlier, to 1.4 trillion yen ($11.3 billion), while the total deficit for all of 2022 ballooned to nearly 20 trillion yen ($156 billion) as the yen weakened and soaring costs for oil and other imports far outpaced an 18% increase in exports.
In currency trading, the U.S. dollar declined to 128.12 Japanese yen from 128.87 yen.
The euro cost $1.0804, up from $1.0796.
Going back to analyzing the other agricultural markets …
From South America, weather condition continues to be the prime focus for markets.
Normal to above-normal temperatures and t-storms are expected to affect Argentina over the next two weeks.
Southern parts of the growing belt may receive moderate to heavy rain between Friday and Saturday, with total precipitation varying from 0.75” to 1.50”, but only 0.30” to 0.80” elsewhere.
Dry weather and warmer temperatures are likely to follow until heavy thunderstorms are expected to occur next Wednesday-Friday.
Cooler temperatures and rainfall of 1.00” to 2.00” are expected during the period, with the central and northern regions receiving the best totals. 1.75” to 2.50” precipitation is expected over the next two weeks (around 2.25 is normal).
Buenos Aires-Córdoba regions had the 9th driest Jan 1-16 period over the last 38 years.
Central parts of Brazil are expected to receive near to above-normal rainfall of 4.00” to 6.00” over the next two weeks.
Limited t-storms may occur in the far southern parts of the country over the next few days and early next week, but better-organized rains are expected next Friday through Sunday.
Temperatures are likely to stay normal to cool from Paraná north, while heat may affect Rio Grande do Sul over the next 10 days. 16% of the soybean areas had under half of the normal precipitation over the 30 days ending Monday (27% in the south).
In this context, Brazil’s Ag Rural reported the soy harvest was 0.6% finished through 1/12.
That is under the 1.2% harvest pace seen last season.
Meantime, Brazilian grain exporting association ANEC has revised up January corn exports again to 5.18Mt, up from 5.02Mt last week.
This is 82% or 750 K above the corresponding 2022 figure.
Shipments the 2nd week of January eased from 1.9 to 1.6 MMT and were well above the 911 K exported in the year-ago week.
The country’s corn line-up fell 28 mbu, a 16% drop, to 147 or about 3 times as large as a year ago.
ANEC is also estimating January Brazil soybean exports at 2.0 MMT, up from 1.7 previously.
Soybean exports the second week of January did improve from 262 K to 353 but were barely 40% of the year ago total as harvest continues to drag.
Soybean Meal shipments slipped from 501 K to 486 during the same period and were down only slightly from the 499 implied total of last year.
Brazil reported a 60 mbu increase in its soybean vessel lineup to 150 million.
This is nearly 87 smaller than a year ago.
The soybean meal line-up was steady week-to-week at 1.35 MMT.
This figure is 300 K or 18% smaller than in 2022.
Meantime, global grain traders Cargill and Viterra appear as charterers of two vessels to be loaded with Brazilian soybeans for delivery in Argentina over coming weeks, according to shipping data.
Cargill’s Interlink Fortuity vessel is expected to arrive on Jan. 25 at the port of Santarem in northern Brazil and set sail on Feb. 5, loaded with a 27,000-tonne cargo for Argentina, shipping data show.
Viterra’s Indigo Garland is due to arrive in three days at the same port. It will set sail on Feb. 8 with a 44,000-tonne soy cargo also to be delivered in Argentina, according to shipping schedules.
Brazilian soy shipments to Argentina usually come later in the year and serve the purpose of supplying Argentina’s soy processors at the peak of the inter-harvest period.
However, the timing of the shipments and the port of departure are both atypical, according to analysts and traders.
Normally, Brazilian soy is sent via river on barges from Murtinho port in Mato Grosso do Sul, and arrive at Argentina’s Rosario hub directly.
Last week, Anec said that Brazilian supplies are needed after a spate of Argentine soy sales in the final quarter of the year, which lowered local stocks and could leave Argentina’s soybean processors uncovered at a time of high crushing margins.
However, also the expectation that drought will reduce Argentina’s domestic soy production in 2023 is driving Brazilian soy sales to its neighbor, Anec said.
In Europe, yesterday FranceAgriMer has revised up its forecast for French soft wheat exports by 300,000t from their December number to 10.6Mt (up 21pc from previous year), citing strong demand from North Africa.
The competitiveness of French wheat in North African markets had been helped by rising insurance costs for exports from Russia.
Intra-community exports are estimated at 6.64 million tonnes against 6.73 estimated last month.
That would lead to an ending stock of 2.33 million tonnes against 2.55 still estimated last month.
In barley, the ending stock is revised slightly up to 1.97 million tonnes against 1.85 last month.
Finally, in corn, the ending stock is now estimated at 2.30 million tonnes against 2.23 posted last month.
In this context, we saw an upside correction in grain prices yesterday, while rapeseed once again sank.
Rapeseed, in contrast, fell in a context of massive imports within the EU and rumors of questioning of biofuels by Germany.
It seems quite incomprehensible at this stage to question this sector in the face of an energy crisis and the reopening of many coal-fired power stations across the Rhine.
However, that risks discouraging producers from cultivating this crop and leaving room for imports.
Meantime, per latest data published by Euronext on Wednesday, non-commercial market participants expanded their net short position in Euronext’s milling wheat futures and options in the week to Jan. 13.
Notably, non-commercial participants, which include investment funds and financial institutions, raised their net short position to 37,135 contracts from 14,821 a week earlier, the data showed.
Commercial participants switched to a net long position of 22,172 contracts from a net short position of 2,203 contracts a week earlier.
In Euronext’s rapeseed futures and options, non-commercial market participants extended their net short position to 32,364 contracts from 28,898 a week earlier.
Commercial participants similarly lifted their net long position in rapeseed to 31,018 contracts from 27,096 a week earlier.
From North Africa, Egypt has set its wheat procurement price at 1,250 Egyptian pounds (US$42.23) per ardeb (150 kilograms) for the 2023 local procurement season, Prime Minister Mostafa Madbouly said on state TV on Wednesday.
The new price is more than 40pc higher than last season’s procurement price and 25pc above the initial price it set in August.
Egypt’s government provides heavily subsidised bread to more than 70 million of its 104 million citizens.
Meantime, the country expects to import 5% less wheat in 2023 according to its Supply and Internal Trade Ministry.
From Levant, Turkey has completed the necessary preparations to start processing Russian grain and send it to countries in need, RIA Novosti reports citing the Turkish Ministry of Agriculture.
Earlier, the head of the ministry Vakhit Kirishdzhi said that idle enterprises that produce pasta, flour and cereals would be involved in the processing of Russian grain.
From the Black Sea basin , the United Nations on Wednesday called out inefficiencies in the operation of a deal allowing Ukraine Black Sea grain exports, but did not lay blame for a backlog of more than 100 ships in Turkish waters waiting on travel approval and inspections.
Some 3.7 million metric tonnes in Ukrainian exports moved under the deal in December, up from 2.6 million in November, while during the past two weeks nearly 1.2 million metric tonnes of exports shipped.
The United Nations urged all parties to work to remove obstacles for the reduction of the backlog and improve operational efficiencies.
From Russia, Russia’s Agriculture Ministry said on Thursday that it expected Russia to export 55-60 million tonnes of grains in the 2022/23 season, and that it had no plans to lower the grain export quota, according to the Interfax news agency.
IKAR estimates 45.5 MMT of Russian wheat exports, up from 44 MMT in their prior forecast and compared to 33 MMT last year and USDA’s 45 MMT estimate.
President Vladimir Putin said on Tuesday that Russia needed to maintain stable food reserves, if necessary by restricting some exports, but did not provide specific details.
It was not clear whether Putin was suggesting that Russia might limit exports of major food commodities such as grain, which much of the world depends on.
Meantime, Russia’s agriculture ministry is proposing to raise export tariffs on soybeans from 20% to 50% to stimulate domestic processing capacity in the country’s Far East, the head of its oil and fat producers’ union said on Thursday.
Russian business newspaper Vedomosti reported the move earlier on Thursday, citing comments by deputy agriculture minister Oksana Lut at a meeting with representatives of major agribusiness firms on Tuesday.
According to Vedomosti, the tariff hike is aimed at fostering the construction of processing facilities in the Far East, which in 2022 accounted for 2.3 million of Russia’s 6 million tonnes of total soybean production.
Vedomosti reported that the tariff will make raw soy exports, predominantly to neighbouring China, unprofitable, and will incentivise the firms to invest in processing capacities to produce soybean oil and meal.
From Ukraine, during the first 15 days of January, Ukraine exported 2.3 mln tonnes of agricultural products, down from 3.6 mln tonnes for the first 18 days of December, the Ministry of Agrarian Policy of Ukraine informed.
Since the start of the war, Ukraine has exported 41.3 mln tonnes of agricultural products, including almost 9 mln tonnes of wheat, 16.7 mln tonnes of corn, 3.4 mln tonnes of sunflower oil, – the ministry said.
For the first half of January, corn export amounted to 1.1 mln tonnes, down by 500 thsd tonnes m/m.
Wheat shipments nearly halved at 437 thsd tonnes.
Shipments of soybeans and meals totaled 199 thsd tonnes each. Export of meal increased by 53 thsd tonnes, supplies of soybean decreased by 39 thsd tonnes.
Export of sunflower oil reduced to 148 thsd tonnes, down from 303 thsd tonnes by mid-December.
The volume of shipments of sunflower seed decreased to 93 thsd tonnes (230 thsd tonnes by mid-December).
Export of barley declined by 26 thsd tonnes m/m to 72 thsd tonnes.
Rapeseed deliveries decrease by 4 times, as the export season for this crop is almost completed, to 44 thsd tonnes.
Soybean oil export remained virtually unchanged m/m at 11 thsd tonnes.
For 15 days of January, the export of agricultural products from Ukraine included 48.29% of corn, 18.76% of wheat, 6.36% of sunflower oil, 4% of sunflower seed, 1.89% of rapeseed, 8.56% of meals, 3.11% of barley, 8.54% of soybean, 0.47% of soybean oil.
Ukraine exported 1.7 mln tonnes of products via ports (sea and river), 486 thsd tonnes by rails, 166 thsd tonnes by roads and 18 thsd tonnes by ferries.
From the Middle Kingdom, China brought in 870k MT of corn in December according to their Customs data.
That was down 34.9% from December 2021.
Full year imports ended the year at 20.62 MMT, a 27.3% drop from 2021.
Chinese custom’s data also revealed their December wheat imports were up 14.5% from Dec ’21.
Their 2022 full year wheat imports were a record 9.96 MMT.
Meantime, the government is set to sell 140k MT of wheat from its state reserves.
In other news, as we said yesterday, China increased their 2022 pork production by 4.6%.
This is the largest increase since 2014.
Their beef output was 3% greater and poultry increased 2.6%.
From Australia, price speads for feedgrains have narrowed in the northern market early the week, to reflect buoyant demand for sorghum as dry conditions bring the early crop home at a rapid pace.
In the south, many growers have now finished their wheat and barley harvesting, or are a week or so from completion, and are feeding some tonnage into the market to match steady demand from stockfeed and export buyers.
The firming Australian dollar has tempered export demand for feed wheat and barley, and stockfeed millers continue to use downgraded faba beans at maximum inclusion in their rations to cap nearby demand for white grain.
According to ABARES data the country exported 1.79Mt of wheat in November, down 11pc from October.
China was our biggest market, taking 363,607t, followed closely by Indonesia with 345,637t.
The Philippines took 262,410t to round out the top three.
Meantime, local market showed signs of weakness yesterday on the cash boards, with bids pulling back $5/t.
Some of the short covering has got out the way in the delivered markets. However, we continue to see ASX March eastern Australia wheat around $375/t, while feed grains that are sitting in the port valued around $390-400/t range.
On the weather side, howers of rain have pushed through areas along the east coast mainly through western parts of Victoria where growers are still harvesting.
On the international trade scene, Algeria reportedly purchased 570-600,000t milling wheat in an international tender at $334.50/t C&F for March shipment expected to have been sourced from the Black Sea region.
Thailand bought 117,000 t of fodder wheat from optional sources.
Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) bought a total of 77,763 tonnes of food-quality wheat from the United States and Canada in a regular tender that closed on Thursday.
Importers from the Philippines issued a tender for up to 165,000t feed wheat and 45,000t soybean meal yesterday, for April-May-June shipment.
The Philippines are also on the market for 45k MT of optional origin soymeal.
South Korea is looking for 19k MT of non-GMO food quality soybeans.
Turkey booked 24k MT of sunflower oil via tender.
ODC Tunisia, is tendering today to purchase 125k mt of durum wheat.
The grain is for shipment beginning late in February, until early April 2023.
That’s all, thank you.
We wish you a nice day.
Author: Sandro F. Puglisi
