Good morning Farmer Family …
U.S. soybean, corn and wheat prices weakened in choppy trading on Thursday as the market waited for definitive news on the size of South American crops.
Corn prices trended 1.14% lower.
Soybean prices ended the day with a fractional loss of 0.03%.
Soy oil prices gave back 2.82% on a triple digit loss day.
Meal prices however, were 2.82% higher at the bell.
Wheat prices ended Thursday all with losses, led by HRW.
The Kansas City wheat market indeed settled 1.9% in the red posting double digit losses.
Chicago SRW closed down by 0.98%.
Minneapolis spring wheat prices were down 0.97%.
All three main commodities fluctuated between positive and negative territory during the session.
Traders kept an eye on delays to Brazil’s soybean harvest from rains, which may also hold up corn planting.
Argentine soybean production teeters on the verge of a decade-plus low.
However, EU & Brazil predict current crops bigger y-o-y, thus soybean prices eased on expectations that overseas demand will shift to Brazil as farmers there expand harvest.
Strength in soymeal and concerns about crop shortfalls in Argentina limited the decline in soybeans.
Wheat prices, meantime, fell lending lower by a sharp decline in Kansas City hard red winter wheat contracts, after some rain in the U.S. Plains provided a much-needed boost to soil moisture in that key growing area.
Forecasts for rain in Kansas, the top production state for hard red winter wheat, added further pressure.
The current export progress of old crops in the United States is still significantly slow.
USDA reported 1.16 MMT of old crop corn was sold for export during the week that ended 2/02.
That was at the top end of estimates, led by sales to Japan and unknown destinations.
However, that was down 27% from the prior week though 19% above the prior four-week average.
Also, accumulated commitments were at 1.05 bbu from the weekly data, which is 55% of the USDA forecast.
New crop commitments sat at 1.44 MMT as of 2/02, which is even with last year’s forward sale pace.
Weekly soybean export sales were 459,443 MT according to USDA’s FAS.
That was down 38% from last week and was just 35% of the same week last year coming in just over the low range of expectations.
Old crop commitments were 1.754 bbu, or 88% of USDA’s forecast.
New crop commitments were at 903k MT, or 80% behind last year’s forward sale pace.
As for wheat, USDA reported 131,389 MT of wheat was sold for export during the week that ended 2/02.
That was down 4 percent from the previous week and 56
percent from the prior 4-week average.
For all wheat, USDA’s weekly update had commitments at 77.3% of the forecast.
The weekly report also had new crop sales totaling 310,477 MT, which is 15% behind last year’s pace.
In this context, corn basis bids were mixed across the central U.S. after spilling 5 cents lower at two Midwestern processors while improving as much as 7 cents at an Illinois river terminal.
Soybean basis bids were steady to weak after trending 10 cents lower at two Midwestern processors and 2 to 5 cents lower at two interior river terminals.
Commodity funds were net sellers of CBOT corn, soybean, wheat, and soyoil futures contracts, and were net buyers of soymeal.
On this morning, soybean edged higher while corn and wheat slipped, following uninspiring export data and with traders monitoring production prospects in drought-hit Argentina.
Thus, the most-active soybean contract on the Chicago Board of Trade turned 0.2% higher at $15.22-1/2 a bushel, as of 06:09 GMT, after early losses.
CBOT corn dipped 0.1% to $6.70 a bushel, while wheat edged 0.2% lower to $7.55-1/2 a bushel.
In energy markets, cCrude prices eased on Thursday as oil infrastructure appeared to have escaped serious damage from the earthquake that devastated parts of Turkey and Syria, while U.S. inventories swelled and investors worried about Federal Reserve rate hikes.
Thus, Brent crude settled at $84.50 a barrel, losing 59 cents, or 0.7%. U.S. West Texas Intermediate (WTI) crude futures settled at $78.06 a barrel, down 41 cents, or 0.5%.
However, oil prices jumped more than 2% on Friday.
Brent crude futures, indeed, rose $2.17, or 2.57%, to $86.67 a barrel by 09:00 GMT.
U.S. West Texas Intermediate (WTI) crude futures were up $2.01, or 2.57%, at $80.07.
Both contracts were on course for weekly gains above 8%.
Russia plans to reduce its crude oil production in March by 500,000 barrels per day (bpd), or about 5% of output, Deputy Prime Minister Alexander Novak said on Friday.
The G7 economies, the European Union and Australia agreed to ban the use of Western-supplied maritime insurance, finance and brokering for seaborne Russian oil priced above $60 a barrel from Dec. 5 as part of Western sanctions over Russia’s actions in Ukraine.
The EU also banned purchases of Russian oil products and set price caps from Feb. 5.
Thus, the Russian announcement marked a turnaround for bearish sentiment that characterised trade on Thursday and Friday morning against a backdrop of recession fears in the United States and weak demand data from China.
The latest U.S. oil inventory data this week raised fears of a slowdown in the world’s biggest economy, with crude stocks having climbed to their highest since June 2021.
This was followed by a rise in weekly U.S. jobless claims.
China’s consumer price index (CPI) in January increased from December, with inflation approaching the target of about 3% set by the government last year.
In ocean freight markets, the Baltic Exchange’s main sea freight index, tracking rates for ships carrying dry bulk commodities, fell on Thursday, as gains in the panamax segment were countered by a decline in capesize rates.
The overall index, indeed, fell 11 points, or 1.8%, to 592.
Notably, the capesize index lost 22 points, or 4.6%, to mark its worst day in a week at 452.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, decreased $175 to $3,752.
The panamax index climbed 5 points, or 0.6%, to 861, snapping its seven-session losing streak.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, increased $41 to $7,745.
The supramax index fell 15 points to 636.
In equity markets, Wall Street share prices dropped Thursday following another mixed set of profit reports from companies, amid rising expectations for interest rates.
Notably, the S&P 500 fell 0.9% to 4,081.50, while the Dow Jones Industrial Average lost 0.7% to 33,699.88.
The Nasdaq composite sank 1% to 11,789.58.
Overall, the job market has remained resilient.
Last week, 196,000 U.S. workers filed for unemployment benefits.
That was slightly more than the prior week, but it remained below the 200,000 level for a fourth straight week.
A still-strong jobs market has investors buying more into the Federal Reserve’s forecast that it will hike rates a couple more times before holding them at a high level through this year.
High rates can drive down inflation but also raise the risk of a recession and hurt investment prices.
Most of the high-profile companies that have announced layoffs have been in the technology industry, where companies acknowledged misreading the boom coming out of the pandemic and hiring too many people.
But job cuts have also spread to other industries.
The Walt Disney Co. despite reported stronger profit for the latest quarter than analysts expected, it also said it will cut about 7,000 jobs as part of a plan to reduce its costs by $5.5 billion.
Thus its shares fell 1.3% after being up more than 5% earlier in the morning.
Another drop for Google’s parent company, Alphabet, also weighed heavily on the market, falling 4.4%.
Meantime, Asian shares were mostly lower on Friday.
Japan’s benchmark Nikkei 225 added 0.3% to 27,650.80.
Australia’s S&P/ASX 200 slipped 0.7% to 7,438.50.
South Korea’s Kospi dropped 1.0% to 2,456.39.
Hong Kong’s Hang Seng shed 1.8% to 21,238.81, while the Shanghai Composite was down 0.6% at 3,250.85.
Shares in Mumbai, Taiwan and Singapore also declined.
China reported that its consumer inflation rate ticked up last month as demand revived due to the lifting of pandemic restrictions and travel and spending connected with the Lunar New Year, the country’s biggest holiday.
Producer prices fell 0.8% in January after a 0.7% decline the month before.
Consumer price inflation rose to 2.1% from a 1.8% climb in December.
In currencies, the U.S. dollar inched up to 131.70 Japanese yen from 131.44 yen.
The euro cost $1.0721, down from $1.0729.
Going back to analyzing the other agricultural markets …
In South America, traders were focused on the impact of a drought in Argentina that withered crops, leading to a sharp reduction in the harvest outlook in that key global supplier.
Analysts said the U.S. Agriculture Department’s outlook of an Argentine soybean harvest of 41 million tonnes, issued on Wednesday, was optimistic.
Argentina’s Rosario Grain Exchange reports that although recent rains were helpful, a return to dry conditions during the next two weeks lowers the forecast for 2022-23 soybean production by a further 2.5Mt, to 34.5Mt, which would represent a 14-year low.
Similarly, expectations for maize output are downgraded by 2.5Mt, to 42.5Mt.
According to the Buenos Aires grains exchange Argentina’s soybean production for the 2022/2023 harvesting season is estimated at 38 million tonnes, down from 41 million tonnes previously estimated.
Drought will curb yields by up to 40pc in key areas if high temperatures and dryness persist.
Rain delays to Brazil’s soybean harvest, which may also hold up corn planting, were also being monitored.
Brazil’s national agricultural agency Conab reported a downgraded figure for harvested area would more than be offset by a higher figure for average yields.
Its 2022-23 soybean production forecast was marginally higher, at 152.9Mt, than before and greatly exceeds the 125.5Mt crop in the previous year.
Against the backdrop of increased processing, total soymeal output seen at 40.4Mt (37.9Mt).
Reflecting a downgraded secondary (safrinha) crop figure amid seeding delays, 2022-23 total maize production forecast was 1.3Mt lower m/m, at 123.7Mt (113.1Mt previous year).
In preliminary projections for 2023-24, wheat production was seen steady y/y, at 10.6Mt.
In Europe, Euronext wheat futures fell on Thursday from a one-month high.
March milling wheat on Paris-based Euronext settled 1% lower at 291.75 euros ($313.43) a tonne.
A sharp rise in the euro against the dollar, amid results reported from an import tender held by Algeria this week dented export hopes in western Europe.
In Germany, indeed, standard 12% protein wheat for February delivery in Hamburg still was offered for sale at a premium of about 10 euros over the Euronext March contract.
Meantime, export competition this season could leave the EU with relatively large stocks before the next harvest comes in.
Indeed, consultancy Strategie Grains for a second month in a row raised its forecast of European Union soft wheat production this year, citing good growing conditions so far.
Notably, the French firm now expects EU soft wheat output of 129.7 million tonnes in the 2023/24 season, up from a forecast of 129.3 million in January and an initial outlook of 128.7 million in December, it said in a cereal report.
That would be more than 3% higher than 2022/23 production it estimated at 125.6 million tonnes.
The anticipated rise in harvest production could contribute to a sharp increase in EU wheat supplies next season.
In the mean time, the consultancy cut its forecast of EU soft wheat exports in 2022/23 by 1.7 million tonnes to 30.1 million, though it increased its outlook for 2023/24 exports by 0.4 million tonnes to 30.6 million.
For maize, it trimmed its 2023/24 production outlook to 63.4 million from 63.8 million tonnes, reiterating that yields should recover from last year’s drought-hit levels but that the planted area should stay relatively low.
For barley, it kept its forecast unchanged for the next harvest at 52.3 million tonnes, nearly 2% above 2022/23 production.
From Russia, the Ministry of Agriculture is considering imposing a ban on the export of rapeseed from March 1 to August 31, 2023.
The current ban expires February 28.
The government has several times established and then extended the duration of such a ban.
Initially, it was installed from April 1 to August 31 last year, then extended until the end of February 2023.
And now there are plans to extend the ban again, until the end of August this year.
The main reason why such a ban is needed is the fact that Russian processing enterprises are not fully loaded with work.
The harvest of rapeseed in 2022 amounted to 4.6 million tons, which is a huge increase of 63% compared to the previous year.
Local plants could process up to 3 million tons of rapeseed per year, but if exports are not limited, a significant part of it will go abroad “in its pure form”.
However, there will be an exception to the ban: the export of rapeseed through Zabaikalsk to China will remain allowed, although the authorities plan to increase the duty.
This duty also has a long history:
Until the end of last August, it was huge — 30%, at least 165 euros per ton.
Now it is 6.5%, not less than 11.4 euros per ton.
At what level the fee will be this time has not yet been reported.
On the other hand, Russian wheat stocks are 41% higher than average, SovEcon said.
As of January 1, 2023, Russia’s total wheat stocks were estimated at 36.0 million metric tons (MMT) based on data from Rosstat.
The growth in stocks can be attributed to the slow export pace during the first half of the 2022/23 farming season (July-June).
Wheat exports in July-December 2022 were estimated at 22.7 million metric tons, lower than the five-year average of 23.0 million metric tons.
The total wheat stock figures include data on both on-farm and off-farm enterprises but exclude small ones.
The decrease in exports was due to several factors, including a strong ruble, high freight rates, and the impact of export taxes.
A record-high wheat crop, was another factor contributing to high stocks number.
Russia harvested 104.4 MMT of wheat, as per Rosstat.
SovEcon forecasts a record-high export pace in the coming months, with wheat exports during the first half of 2023 expected to reach 21.3 million metric tons, compared to 10.9 million metric tons during the same period last year.
Meantime, Russia’s ambassador to the United Nations said on Friday that Moscow has not been able to export any grain as part of the Black Sea grain deal struck between Russia and Ukraine last year due to Western obstacles, the RIA Novosti news agency reported.
From the Middle Kingdom, according to Chinese trade data, China was the main destination for Brazilian corn shipments in January, totalling 983,684t.
According to Refinitiv Commodities Research, following earlier cold weather, recent and forecast wet conditions in China are expected to be favourable for winter wheat production prospects.
At 140.0Mt, output is seen 1pc higher than previously.
From Japan, the country’s Ministry of Economy, Trade, and Industry announced their biofuel standards proposal for implementation beginning in April.
In the proposal, Japanese oil refineries will be required to use 500m L of crude equivalent bio ethanol annually through 2027.
From Australia, local markets were firmer yesterday.
ASX eastern Australia wheat March 23 contract closed $5/t higher at $390/t.
However, liquidity is reportedly poor with shorts still getting squeezed.
Meanwhile, freight rates have been softening from recent highs.
For the week ending 9 February rainfall has been hit and miss for sorghum growing regions.
Storms brought patchy rain to northern NSW and southern Qld but the totals were modest.
CQ rainfall was also patchy but saw higher totals.
About 1-5mm rainfall is expected on the 8-day forecast.
On the international trade scene, Algeria’s state grains agency (OAIC) reportedly purchased milling wheat from optional origins for Apr shipment, including 30,000-60,000t at US$330.50/t c&f and a further 60,000 t at $332/t c&f.
Taiwan Flour Millers Association secured an estimated 48,100t milling wheat from the US for Mar/Apr shipment, including 30,650t DNS (min. 14.5pc protein content), at $390.58/t fob, 9,300t HRW (12.5pc) at $397.56/t fob and 8,150t soft white wheat (8.5pc-10.0pc) at $324.44/t fob.
Separately, freight is priced at $34.95/t.
An importer group in Thailand reportedly bought about 60,000t feed wheat from Australia, at $337/t c&f , for Apr shipment and an unspecified amount of feed barley, at an estimated $309.80/t c&f for April-May exports.
South Korea’s Major Feedmill Group (MFG) has purchased animal feed corn to be sourced from South America in an international tender on Thursday.
The precise volume bought was not immediately clear.
The tender had sought 55,000 to 70,000 tonnes.
It was bought at an estimated $343.59 a tonne c&f plus a $1.25 a tonne surcharge for additional port unloading.
The corn was sought for arrival in South Korea around May 30.
Seller was believed to be trading house CJ International.
That’s all, thank you.
We wish you a nice day.
Author: Sandro F. Puglisi
