All markets stabilized yesterday, with a strength in grains prices that outstripped even that of oilseeds.
Some frost events this past weekend, some forecasts of hotter for the next weekend, drier weather ahead in Brazil and lower-than-expected safrinha corn yields, kicked off a round of technical buying that significantly lifted grain prices.
This is the “Weather market”.
In fact, some wheat contracts soared nearly 7% higher.
Corn contracts jumped another 4.5% higher.
Soybean gains were more muted but still did firm more than 1% higher.
On macro markets, as soaring summer demand begins to outstrip still-muted supply from major oil suppliers such as the US and OPEC, US benchmark oil prices closed 2.1 percent higher at $67.72 a barrel, the highest closing price since Oct. 22, 2018.
Gasoline and diesel each gained around 1.7%.
In add, an oil-producers group that includes OPEC and Russia agreed, as expected, to maintain a slow pace of production increases that may be insufficient to meet rapidly rebounding global demand, especially given that US oil production has remained unchanged for the past year, hovering around 11 million barrels per day.
Meantime, the weekly API data on US oil stocks will be released tomorrow, followed by official EIA data on Thursday.
Consequently, investors continue to try and balance the recovering economy with fears of potential inflation and rising interest rates.
So, the Dow, on Wall St., moved another 46 points higher to reach 34,575.
The U.S. Dollar softened moderately.
Meantime, the latest reading for the Ag Economy Barometer from Purdue University / CME Group fell 20 points to 158.
That number still shows plenty of farmer optimism (the barometer ranges from 0 to 200 points), but respondents showed plenty of concern over tax policy changes that could negatively affect their operations.
Farmers remain bullish on farmland values and cash rent rates, meantime.
The Biden administration has released its $6 trillion budget request to Congress, which is not binding but gives direction as to the President’s spending priorities.
The proposal includes a 16.7% increase to USDA funding and maintains current farm bill and crop insurance spending.
Coming back on grains market, wheat prices gathered big gains, as hot, dry weather forecasted for some already problematic production areas – particularly the Northern Plains give some more concerns, especially for spring wheat which have seen September MGEX futures jumped 48 cents to $7.8150.
Spillover strength from corn lent additional support.
Corn prices jumped largely spurred by a reduction to Brazil’s corn production potential, along with hotter and drier forecasts in the U.S.
Soybean prices firmed, on a round of technical buying largely triggered by spillover strength from corn and wheat, although traders haven’t forgotten about historically tight supplies either.
Spillover strength from crude oil lent additional support.
Meantime, as it often is, USDA’s latest batch of export inspection data, out yesterday morning and covering the week through May 27, held a mixed bag of data for traders to digest.
Indeed, eere posted 80.7 million bushels of corn, 9.43 million of wheat and 7.06 million of soybeans.
Consequently, wheat export inspections slumped 57% lower week over week.
Mexico led all destinations.
However, cumulative totals for the 2020/21 marketing year still have a slim lead over last year’s pace.
Corn export inspections moved 17% higher.
China accounted for just over half of the total.
Cumulative totals for the 2020/21 marketing year are close to doubling last year’s pace.
Soybean export inspections saw modest week-over-week reductions.
Mexico was the No. 1 destination.
Cumulative totals for the 2020/21 marketing year remain well ahead of last year’s pace.
Meantime, USDA’s report crop progress, released Tuesday afternoon and covering the week through May 30, showed more planting progress for corn and soybeans, plus a first look at corn crop quality, which came in six points above the average trade guess. Winter wheat quality ratings also improved this past week.
Going inside tthe numbers, corn plantings are now 95% complete through Sunday, up from 90% a week ago.
That’s a bit faster than 2020’s pace of 92% and moderately ahead of the prior five-year average of 87%.
And 81% of the crop is now emerged, up from 64% last week and well above the prior five-year average of 70%.
USDA also issued its first set of corn quality ratings for the 2021 corn crop this week, showing 76% rated in good-to-excellent conditions.
That was much higher than trade estimates, which averaged 70%.
Another 20% of the crop is rated fair, with the remaining 4% rated poor or very poor.
Nebraska leads the way among the top 18 production states, where an impressive 88% of the crop is rated good or excellent.
Soybean planting progress improved from 75% a week ago up to 84%.
That was three points below the average trade guess but still far ahead of 2020’s pace of 74% and the prior five-year average of 67%.
And 62% of the crop is now emerged, up from 41% a week ago and much faster than the prior five-year average of 42%.
Spring wheat plantings took another small step toward completion, moving from 94% a week ago up to 97% through Sunday.
That’s a faster than 2020’s pace of 90% and the prior five-year average of 93%. USDA has marked four of the top six production states as 100% complete, and 80% of the crop is now emerged.
Spring wheat quality ratings spilled two points lower, with 43% of the crop now rated in good-to-excellent condition. Thirty-seven percent is rated fair (down four points from a week ago), with the remaining 20% rated poor or very poor (up six points from last week).
Winter wheat quality ratings improved a point, in contrast, moving to 48% rated in good-to-excellent condition and mirroring analyst expectations.
Another 33% of the crop is rated fair (down two points from last week), with the remaining 19% rated poor or very poor (up a point from last week).
Physiologically, 79% of the winter wheat crop is now headed, up from 67% last week and slightly above the prior five-year average of 78%.
Will be interesting to see what the market makes of this and a dryer forecast.
Meantime, spec founds still hold large net long positions for corn and soybean contracts, but those numbers have slimmed down in recent sessions.
For the week ending May 25, money managers moved from a net long position of 291,025 corn contracts down to 268,091.
For soybeans, the net long position tightened from 152,584 contracts down to 139,390.
It should to note that yesterday live cattle futures on the Chicago Mercantile Exchange were down 2.3 percent, owing in part to a cyber-attack on major meat supplier JBS, which has impacted the company’s operations around the world.
However, the dip in futures prices reflects apprehension over the magnitude of the intrusion, as it is unclear how much damage the attack has done to JBS’ operations.
From South America, Brazilian consultancy AgRural has made significant reductions to its estimates for the country’s second corn crop production, sliced another 5Mt off their corn crop, pegging it at 73Mt.
Other analysts, meantime, continue to post a crop estimate of between 90 and 92 million tonnes for Brazil, against 102 million posted by the USDA in its May report.
In any case it is a drop of 11.7 Mt compared to last year!
So, production for Brazil’s safrinha crop will spill to a five-year low if these current estimates hold.
The first cuts are beginning in the country in the State of Parana, a State particularly affected by the water deficit in recent weeks.
It should to note that Parana is the second largest corn producer in Brazil, behind Mato Grosso.
Brazilian governmental data shows the country’s soybean exports for May reached 602.6 million bushels, a year-over-year increase of 16.3%.
Brazilian corn exports only reached 548,000 bushels last month.
Consequntly, one Brazil’s key to success in the future largely hinges on overcoming infrastructure challenges.
About 87% of the country’s products have to be transported via trucks over poorly maintained roads.
Current projects hope to cut that percentage down to 70%.
Also European market recorded a strong rebound on Tuesday evening in the face of the resurgence of climate risks across the Atlantic.
It was enough that the American meteorologists post forecasts of a dry and hot weather for the next 15 days on the Corn Belt, to put fire on the markets.
In western Europe, by contrast, the recent rise in temperatures is seen as welcome.
However, as global balance sheets are tight, the slightest climatic adversity generates precautionary purchases and is a source of extreme volatility.
Conversely, the slightest improvement also generates profit taking.
This should encourage all operators to be cautious and to rely in particular on management frameworks.
Really, european grain prices have started to rise again since Monday afternoon, in a context of sustained demand on physical markets, especially internationally.
Saudi Arabia has in fact bought 562,000 tonnes of common wheat at around $ 300 per tonne, for a delivery period of between August and September.
This wheat could come from Germany and the Baltic countries, according to initial information from operators.
For its part, Algeria bought some 200,000 tonnes of durum wheat around $380 e $ 385 per tonn c & f.
Another factor supporting European prices, prices in the Black Sea production basin were also on the rise, despite “rather favorable weather conditions.
Rapeseed, meantime, again posted a good performance yesterday against a backdrop of a rebound in all vegetable oils, benefiting also from the good momentum of crude oils.
Indeed, the prices of black gold were rising sharply, both in London and New York, under the effect of signs of economic recovery.
The price of rapeseed is often correlated with the price of crude oil, due to its use in the manufacture of biofuels.
Tensions are growing between Europe and Malaysia in a context where palm oil should gradually be withdrawn from biofuels in Europe, to be completely banned in 2030 for ecological reasons.
Meantime, this morning in Kuala Lumpur, the palm shows an increase of + 1.5 to + 2%.
In Black Sea basin, prices are not to be outdone, with good demand for a new harvest on Russian wheat, despite the implementation of export taxes, prices moved higer.
In a seemingly endless parade of Russian crop estimates, crop consultancy IKAR called the Russian crop up 500,000t to 79.5 million tonnes (Mt).
Meantime, Russian wheat exports could decline 2.9% for the 2021/22 marketing year to 36,6 million tonnes, according to the country’s Sovecon consultancy, which cited an uptick in domestic consumption and increased competition from Ukraine and the European Union as reasons for the downgrade.
In add, Sovecon, forecasted that 2021 productin will reach only 80,9 million tonnes against 85,9 million tonnes of 2020.
Meantime, sunflower oil prices fell sharply on a weekly basis in the wake of the losses suffered by the palm.
Market operators are worried about the performance of Asian demand for vegetable oils in a context of proliferation of the Indian variant.
On the FOB Odessa basis, sunflower oil is now traded at the level of 1450 usd / t, against 1570 usd / t ten days ago.
The new harvest oil is now displayed under 1200 usd / t still in FOB Odessa base after having made an incursion beyond 1250 usd / t.
Aussie current crop markets again remained relatively unchanged yesterday.
We saw some more action on wheat and barley, both continuing to trade on the east coast.
New crop bids/offers again remained wide and canola markets were unchanged in eastern and Western Australia yesterday.
Showers of rain were pushing through SA this morning with a front crossing the SA Mallee.
There were reports of growers and agronomists trying to define yield potential in the Victorian Mallee region.
That situation will clarify over the next two weeks and will depend on rain.
Even though freight rates are not easing, logistics feel to be freeing up.
Growers are finishing seeding programs and grower fleets are becoming more available for June/July.
Internationally, Indonesia did not respond to its tender for 240,000 t of feed wheat.
Meantime, Iranian state agency the Government Trading Corporation (GTC) has issued an international tender to purchase about 60,000 tonnes of milling wheat, European traders said on Tuesday.
Shipment is sought in June and July.
The deadline for submission of price offers in the tender is Wednesday, June 2.
The GTC has also issued separate tenders to buy 30,000 tonnes of soyoil and 30,000 tonnes of sunflower oil also closing on Wednesday.
Tonigth we will see how the sessions close.
