Grain markets were mixed yesterday, but mostly higher, after the surprising data released by USDA in its World Agricultural Supply and Demand Estimates monthly report.
Wheat closed with the biggest gains, with most contracts climbing more than 3% higher.
Corn prices spiked as much as 6% higher, but faded later, during the session, to finish with gains of around 2%.
Soybeans didn’t fare so well, with nearby contracts easing 0.25% lower while September contracts picked up only fractional gains.
On macro markets, oil prices fell for a second day this morning after the International Energy Agency warned that demand growth for crude and its products had slowed sharply as surging COVID-19 cases worldwide forced governments to revive movement restrictions.
Consequentially, Brent crude was down 58 cents, or 0.8%, at $70.73 a barrel by 06:30 GMT, after dropping 13 cents in the previous session.
U.S. crude was off by 65 cents, or 0.9%, at $68.44 a barrel, having fallen 0.2% on Thursday.
In this context, the benchmarks are little changed this week.
Overnight, MSCI’s gauge of stocks across the globe hit another record high and the Dow Jones Industrial Average too.
DJI and S&P 500 closed at record highs for the third consecutive day.
European stocks had equalled their longest winning streak since 2017, closing up 0.1% and extending gains for a ninth consecutive session.
However, Asian shares again ignored record highs hit elsewhere in the world to fall on this morning, with declines in chip manufacturers weighing on several markets, though Australia bucked the trend.
Indeed, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.87%, and was down 1.09% for the week.
Japan’s Nikkei was broadly flat, with declines among chip makers neutralising gains elsewhere.
The yen-based MSCI Japan semiconductor index fell 1.73%.
South Korea’s KOSPI dropped 1.4% and was set for its sharpest weekly decline since January, with Samsung Electronics falling 3.5%.
Chinese blue chips fell 0.76%. dragged down by its local semiconductor sub-index, which fell 3.4%.
Meantime the dollar held firm this morning, staying near its highest level in four months against a basket of currencies, as investors looked for more hints from the U.S. Federal Reserve on its plans to reduce monetary stimulus.
Coming back on grains market, yesterday USDA released its August estimates with a few twists and turns.
USDA, indeed, cut a massive 12.5 million tonnes (Mt) off the Russia wheat crop which is beyond aggressive and is now probably under the trade estimate.
Secondly the USDA took the axe to corn production, cutting yield from 179.5bu/ac to 174.6bu/ac.
After a few demand-side adjustments, that put ending stocks at 1.2bbu.
Here are the numbers:
Wheat
US 21/22 total wheat ending stocks were down 38mbu, to 627mbu (644mbu expected).
HRW 369mbu, HRS 119mbu, SRW 105mbu, SWW 51mbu, Durum 20mbu.
US 21/22 Production is now seen to 1.697bbu (1.723bbu expected).
HRW 777mbu (806), HRS 305mbu (325), SRW 366mbu (363), SWW 214mbu (194), Durum 35mbu (35).
Global 21/22 wheat ending stocks were cut by 12.6Mt to 279.06Mt (288Mt expected).
Global 21/22 wheat production was down 15.5Mt to 776.91Mt.
Argentina 20.5Mt (unch), Aust 30.0Mt (+1.5), Canada 24.00Mt (-7.5), EU 138.6Mt (+0.4), Russia 72.5Mt (-12.5), USA -4.134Mt to 46.18Mt & Ukraine 33Mt (+3.0).
Corn
US 21/22 Corn ending stocks are seen now to 1.242bbu (1.297bbu expected).
US 21/22 Production is indicated to 14.750bbu (15.004bbu expected).
US 21/22 Yield are now to 174.6bu/ac (177.6bu/ac expected).
Brazil’s 20/21 production was cut by 6.0 to 87Mt (88.72Mt expected). Brazil exports were down 5Mt to 23Mt.
Soybeans
US 21/22 ending stocks are seen to 155mbu (159mbu expected).
US 21/22 Area is unchanged.
Production is seen to 4.399bbu (4.375bbu expected), Yield to 50.0bu/ac (50.4bu/ac expected).
Global 21/22 bean ending stocks +1.6Mt to 96.15Mt.
China 21/22 bean imports were cut by 1Mt to 101Mt.
Consequentially, this report has created massive sensitivity to any future problems and highlights that timing is everything.
Separately, yessterday USDA’s Weekly Export Sales Report showed decent demand figures for corn.
Indeed, corn export sales were at 979,400 metric tons (mt.) vs. the trade’s expectation of 200,000 to 900,000 mt.
Corn export shipments slipped 12% below the prior four-week average.
China and Mexico were the top two destinations.
Soybeans export sales were at 1.21 mmt, vs. the trade’s expectation of 100,000 to 900,000 mt.
Soybean export shipments tumbled to a marketing-year low, in contrast.
Mexico was the No. 1 destination,
Wheat export sales were at 416,900 mt, vs. the trade’s expectation of 250,000 to 700,000 mt.
Wheat export shipments moved 62% higher week-over-week to a new marketing-year high.
Japan was the No. 1 destination.
Soybean meal export sales were at 384,600 mt, vs. the trade’s expectation of 50,000 to 200,000 mt.
Meantime, yesterday private exporters reported to the USDA, export sales of 132,000 metric tons of soybeans for delivery to China and 198,000 metric tons for delivery to unknown destinations.
Deliveries are both during the 2021/2022 marketing year.
In this context, corn basis bids were steady to mixed, after tumbling as much as 42 cents at an Ohio river terminal, while firming 5 cents higher at an Indiana ethanol plant and an Ohio elevator.
Soybean basis bids were steady to soft, dropping between 10 and 35 cents across half a dozen Midwestern processors and interior river terminals.
From South America, the Rosario grains exchange is estimating the country’s 2021/22 soybean production will reach 49 million tonnes, which would be a year-over-year increase of 8.9%, if realized.
Even so, soybean planted area is expected to decline 3% this coming season as Argentine farmers are likely to swap some acres out for corn.
On European market, yesterday’s session was also marked by a sharp rise in grain prices.
Strategie Grains on Thursday cut its monthly forecast of the European Union’s soft wheat crop, which it said could contribute to an “explosive” global supply outlook.
Indeed, Strategie Grains reduced its estimate of the French crop to 37 million tonnes, bringing it closer to the farm ministry’s current estimate of 36.7 million tonnes.
French output is still seen well above last year’s poor crop of around 29 million tonnes, but grain quality has emerged as more of a setback this year.
The wet summer has led to weak readings for test weights as well as varied results for Hagberg falling numbers, among key measures of wheat’s suitability for milling.
The share of the French crop of milling standard was now seen at just over two-thirds compared with nearly 90% last year, Strategie Grains estimated.
In Germany, about two-thirds of the crop has been gathered, with much work still to do in northern export-reliant regions.
Quality, especially test weights, has suffered from the rain.
Forecasters have cut German production estimates due to rain.
Some analysts now see the crop between 22 million and 22.5 million tonnes, below the farm cooperatives association’s 22.8 million estimate in mid-July.
In Poland, prospects were also less favourable.
Sparks Polska now estimates wheat production at 11.9 million tonnes, down from the 12.1 million projected in July and 12.0 million harvested in 2020.
Repeated rain has also hampered Britain’s wheat harvest.
Forecasters have been expecting the British crop to rise by about half from last year’s low level to 14.5 million to 14.8 million tonnes, driven by a recovery in planted area.
In this context, prices on Euronext thus rose at the end of the day by + € 9.25 / t on the short term with the prospect of a downward revision of stocks in Europe and in the world of wheat.
Corn prices are also progressing, out of sympathy, in a nonetheless different context.
However, recourse to maize imports will always be necessary to meet European maize demand.
Prices thus progressed in new harvest and approached on Euronext the highest levels negotiated last May.
After a hesitant session, like Canadian canola, rapeseed prices finally closed the session higher.
However, the increase is moderate compared to the movements observed on the cereal markets.
The November 2021 maturity, on Euronext, nevertheless manages to mark a new high of maturity by trading above 555 € / t.
From the Black Sea basin, the figures released yesterday by USDA surprised for the extent of the decline for Russian production.
Ukraine should therefore take advantage of this situation.
This country is indeed one of the few global exporters whose production potential the USDA revised up yesterday.
Indeed, the harvest volume is up +3 Mt compared to last month with an estimated production of 33 Mt.
This production record will favor the export activity which also promises to be record for the 2021/2022 campaign.
Corn harvests are also expected to increase with an estimate of 39 Mt by the USDA, a new record, and therefore a record for export activity now announced.
Meantime, Ukrainian farms have harvested 39.5 million tonnes of grain from 56.2% of the sowing area, with the yield averaging 4.41 tonnes per hectare, the agriculture ministry said on Friday.
The volume includes 28.68 million tonnes of wheat, harvested from 87.8% of the area, with a yield of 4.60 tonnes per hectare, the ministry said.
For barley, 9.42 million tonnes have been harvested, from 91.7% of the area, with a yield of 4.16 tonnes per hectare.
From the Middle Kingdom, China has lowered its estimates of soybean imports in the year 2020/21 following a decline in crush margins, the Ministry of Agriculture and Rural Affairs said in its monthly crop report on Thursday.
China’s 2020/21 soybean imports were seen at 98.6 million tonnes, down 1.84 million tonnes from last month’s estimates.
China also cut its estimates of the crushing volume of soybeans in the year 2020/21 on a lower ratio of soymeal used in feed as hog margins have declined since March, and even slipped into negative territory, the report said.
Analysts and traders have said that China’s soybean imports were set to slow sharply in late 2021 as a collapse in hog margins, and a sharp rise in wheat feed use curbed demand for soymeal, the main protein source in the animal recipe.
China’s forecasts of soybean imports and consumption in 2021/22 remain unchanged, the monthly China Agriculture Supply and Demand Estimates (CASDE) report found.
From Australia, weather maps for the next eight days look to be relatively dry across the Aussie cropping belts, with some light scattered showers through southern parts of WA and western Victoria.
This also allows growers to continue getting on crops with the balance of spraying and spreading, also will help some of the water logging country to dry out.
Meantime, local new crop markets continued to firm yesterday across the board.
We saw APWMG WA FIS bids up to A$5-7/t to $360/t FIS KWI, while east coast values were a touch stronger by $2-3/t $340/t track Vic APW.
Canola was up $10/t through the new crop grower bids WA $885/t FIS KWI Zone and $845-850/t east coast.
Barley firmed over the trading day as well by a buck or two.
Aussie grain continues to be very attractive on the export grids for new crop as it is again the cheapest origin.
Maybe, more strength in local markets today there will be, due the moves from global markets overnight that have seen Aussie wheat move up $10-15/t.
However, ocean freight continues to rally, and the ability to fix a vessel for Jan + is the limiting factor.
As stated above the USDA latest report had Australia in for 22Mt of wheat exports up 1.5Mt from the last report.
Internationally, South Korea purchased 8.1 million bushels of corn from optional origins in an international tender that closed Wedsneday.
The grain comprised of three consignments that are all for arrival in November, making shipment dates dependent on final origins of the purchases.
A group of importers in Thailand is believed to have rejected all offers and made no purchase in an international tender for up to 139,500 tonnes of animal feed wheat which closed on Wednesday.
Prices were regarded as too high.
Lowest price offer was believed to be around $337 a tonne c&f.
Other offers of around $339 and $340 a tonne c&f were reported by traders.
The wheat was sought in three consignments.
One of 40,000 tonnes was required for shipment in October, one of 51,000 tonnes in November and one of 48,500 tonnes for shipment in December.
Jordan’s state grain buyer has issued a tender to buy 120,000 tonnes of milling wheat which can be sourced from optional origins.
The deadline for submission of price offers in the tender is Aug. 18.
Shipment in the new tender is sought in a series of possible combinations in 60,000 tonne consignments in 2022.
We wish you a good day.
Author: Sandro F. Puglisi
