Good morning Farmer Family …
US farm markets were decidedly mixed on Thursday.
July corn prices ended the day with 0.94% losses.
The board was down double digits early in the session before rising into midday.
However that rally ultimately failed and the market closed mostly mid-range.
After overnight weakness the soy complex took off largely due to worries over planting delays in Minnesota and the Dakotas amid unfavorable weather conditions for much of the spring.
July contract was up +50 cents by midday, but going into the close the rally sligtly cooled off and soybeans went home 2.71% higher.
Soymeal prices also cooled off, and held only 0.9% strongher.
Soybean oil prices ended the day with 2.03% gains on the wake of Crude Oil prices.
The wheat complex followed soybeans higher through midday, but ultimately winter wheat prices faded back in to the red by the close with Chicago SRW wheat prices 0.44% weaker and Kansas City wheat which closed with 0.39% losses.
Spring wheat prices, in contrast, were able to hold their double digit gains to the close, going home 0.92% higher.
In energy markets, oil prices dipped on Friday but stayed near a two-month high, with Brent crude on track for its biggest weekly jump in 1-1/2 months, supported by the prospect of an EU ban on Russian oil and the upcoming U.S. summer driving season.
Also, OPEC+ is set to stick to last year’s oil production deal at its June 2 meeting and raise July output targets by 432,000 barrels per day, analysts said.
Meantime, the United States has confiscated an Iranian oil cargo held onboard a Russian-operated ship near Greece and will send the cargo to the United States aboard another vessel, three sources familiar with the matter said.
Thus, Brent crude futures for July were down 21 cents, or 0.2%, at $117.19 a barrel at 06:42 GMT after rising as high as $118.17 earlier in the session.
The benchmark was still on track for a gain of about 4% this week.
U.S. West Texas Intermediate (WTI) crude futures were down 24 cents, or 0.2%, at $113.85 a barrel.
WTI is set for a weekly gain of about 0.5%.
On Thuersday WTI gained 3.41%, while Brent closed the session 2.96% higher.
In freight markets, the Baltic Exchange’s main sea freight index extended its decline for the third session in a row on Thursday, dragged by lower rates across all vessel segments.
The overall index, indeed, lost 194 points, or 6.2%, to 2,933.
The capesize index dipped 509 points, or around 12.8%, to 3,478 points.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were down $4,229 at $28,840.
The panamax index fell 78 points, or 2.4%, to 3,140 points.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, decreased $706 to $28,259.
The supramax index fell 10 points to 2,823 points.
On week 21, freight rates in the Azov and Black Sea region dropped again.
Thus, the rates for a 3K parcel of wheat from Azov to Marmara Sea ports is $36 pmt.
There are very few goods in the market right now due to several factors at once.
High export fees on grains and the strengthening of the ruble as well as a weak demand in the Turkish market do not allow the charterers to conclude contracts, Sea Lines shipbrokers explain.
At the same time, the export of Ukrainian grain via the Danube ports is actively underway.
The rates are very high there, because the unprecedented cargo traffic has created huge queues at the entrance to the Danube.
However there is no sharp decline in the Sea of Azov, since most shipowners are still fulfilling previously signed contracts, or are working cargoes from Ukraine.
According to Sea Lines, on week 21, freight rates for shipping wheat by 3,000 dwt bulkers from Azov make $34 to the Black Sea, $36 to Marmara, $51 to Mersin and $61 to Egypt.
Freight rates from Rostov AB (after bridge) are $1 above, from Rostov BB (before bridge) the same, from Yeisk and Taganrog $1 below, and from Temryuk $3 below those from the port of Azov.
In the Caspian, freight rates are on the previous week’s level.
On week 21, freight rates for shipping corn by 3,000 dwt bulkers to Iran make $22 from Aktau, $28 from Makhachkala, and $35 from Astrakhan.
In equity markets, U.S. stock indexes rallied moderately on Thursday, after seven straight weeks of declines, the longest such stretch since 2001.
Roughly 90% of the stocks in the S&P 500 rose, with technology companies, banks and retailers driving much of the rally.
While trading has remained choppy this week, the market has mostly pushed higher, unlike the past five weeks, when the S&P 500 had a pullback of 2% or more at least one day each week.
Strong outlooks from two retailers eased concerns about consumer spending and lifted the overall market.
Dollar General vaulted 13.7% and Dollar Tree jumped 21.9% for the biggest gain in the S&P 500 after the discount retailers reported solid earnings and gave investors encouraging forecasts.
Macy’s surged 19.3% after reporting better-than-expected Q1 sales.
Technology stocks also rose.
TurboTax maker Intuit rose 4.6%. Companies in the sector, with their lofty stock values, tend to push the market harder up or down.
Airline stocks rallied on encouraging summer travel forecasts. Southwest Airlines rose 6% and JetBlue rose 3.4%.
Stocks on Thursday also had carry-over support from Wednesday afternoon when the minutes of the May 3-4 FOMC meeting suggested the Fed will not tighten monetary policy more aggressively than already expected.
Meantime, bond yields rose.
The yield on the 10-year Treasury, which helps set interest rates on mortgages , rose to 2.75% from 2.74% late Wednesday.
Thursday’s U.S economic data was mixed for stocks, meantime.
U.S. weekly initial unemployment claims fell -8,000 to 210,000, showing a stronger labor market than expectations of a decline to 215,000.
U.S. Q1 GDP was unexpectedly revised downward to -1.5% (q/q annualized) from -1.4%, weaker than expectations of an upward revision to -1.3%.
U.S. Apr pending home sales fell -3.9% m/m, weaker than expectations of -2.1% m/m.
In this context, the S&P 500 rose 79.11 points, or 2%, to 4,057.84.
The Dow added 516.91 points, or 1.6%, to 32,637.19, and the Nasdaq rose 305.91 points, or 2.7%, to 11,740.65.
The Russell 2000 index of smaller companies climbed 39.07 points, or 2.2%, to 1,838.24.
Meantime, Asian shares gained on Friday.
Shares of Alibaba and Baidu surged after they reported better than expected results.
Japan’s economic path is on investors’ minds.
Japanes data on manufacturing, housing and employment for April are set to be released next week.
Some analysts expect the numbers to be dim, but some optimism is also in the air, with Tokyo’s restrictions on tourists easing and the daily cap raising from 10,000 incoming people to 20,000 starting June 10.
Also, the Japanese government, is set to push ahead in parliamentary discussions with a supplementary budget.
Thus, Japan’s benchmark Nikkei 225 added 0.6% in afternoon trading to 26,757.27.
Australia’s S&P/ASX 200 surged 1.1% to 7,185.00.
South Korea’s Kospi jumped 1.0% to 2,637.55.
Hong Kong’s Hang Seng surged 2.1% to 20,545.93, while the Shanghai Composite edged up 0.2% to 3,128.59.
Meantime, Moody’s Investors Service lowered the 2022 growth projections for G-20 economies to 3.1% in 2022, down from 5.9% growth in 2021.
The latest forecast is half a percentage point lower than the 3.6% growth estimated in March.
Slowing economic activity in China from the nation’s “zero COVID” policy is dampening growth, Moody’s said.
In currency trading, the U.S. dollar inched down to 126.75 Japanese yen from 127.10 yen.
The euro cost $1.0760, up from $1.0733.
The dollar index on Thursday fell by -0.211 (-0.21%) after a sharp rally in stocks curbed liquidity demand for the dollar.
Also, strength in EUR/USD and the yen weighed on the dollar.
Thursday’s U.S. economic data on weekly jobless claims, Q1 GDP revision, and Apr pending home sales were mixed for the dollar.
On the weather side, scattered rains are possible across parts of the Midwest and Plains between today and Monday, per the latest 72-hour cumulative precipitation map from NOAA.
The upper Midwest and far eastern Corn Belt are likely to see the highest totals during this time.
NOAA’s new 8-to-14-day outlook predicts near-normal precipitation for most of the central U.S. between June 2 and June 8, with seasonally cool weather likely for the Northern Plains and upper Midwest.
Meantime, per latest data from the U.S. Drought Monitor, Iowa’s drought saw no change this week.
Only three counties are classified as severe drought.
Overall, 32% of Iowa reported abnormally dry conditions or worse.
Illinois reported an increase in drought acreage this week.
Abnormally dry conditions span the top two tiers of northern counties, and have expanded to two counties in the south.
Overall, 9% of Illinois reported abnormally dry conditions or worse.
Indiana also reported abnormally dry conditions in seven southern counties.
Most of the state received about an inch of precipitation.
Indiana reported four days suitable for fieldwork.
In Kansas, drought intensity for the state decreased this week.
The severe conditions on the eastern side of the state reduced, accounting for 18% of Kansas.
About 21% of Kansas reports extreme conditions.
Just over 71% have abnormally dry conditions or worse.
Minnesota saw no change in drought conditions last week.
Six counties in the south reported abnormally dry conditions, accounting for just 3% of the state.
Compared to last year, Minnesota is in a good place in terms of soil moisture.
Most of Minnesota reported an average of half an inch of precipitation.
Producers in Minnesota could get into their fields for three days this week.
Missouri saw no dry conditions this week.
No counties currently report any drought conditions.
Nebraska reported a slight decrease in drought intensity.
Severe conditions reduced by about 1%, now accounting for 39% of counties in the middle of the state.
Twelve counties are experiencing extreme conditions, for 7.5% of the state.
Just over 98% of Nebraska still has abnormally dry conditions or worse.
There were five days this past week suitable for fieldwork, and about 85% of corn has been planted, according to the latest Crop Progress Report.
The state remains 3% behind the 5-year average.
Ohio has not reported any drought conditions since the beginning of 2022, and conditions remain unchanged.
More than three days were suitable for fieldwork last week.
USDA reported that 52% of corn had been planted in the state, 21% more than last week.
The state saw an average of one and three-quarters inches of precipitation last week.
On the northern edge, Richland County reported more than five inches, the highest in the state.
South Dakota reported no change in drought conditions last week.
Twenty-three counties reported severe conditions, which is 19% of South Dakota.
4% of the state is experiencing extreme conditions.
Overall, 73% is abnormally dry or worse.
Most of the state received little to no precipitation this past week.
No counties reported more than an inch of rain.
USDA noted that the state had five days suitable for fieldwork last week.
Those days allowed producers to double their corn planted, with 62% total in the ground.
On the demand side, the Weekly Export Sales report from USDA reported 151,646 MT of old crop corn was sold for export during the week that ended 5/19.
Analysts were looking for at least 150k MT going into the report.
New crop bookings were just 58,293 MT compared to 588k last week and 200k to 800k MT expected.
The week’s shipment was confirmed at 1.821 MMT, which took the MYTD total to 44.7 MMT.
That trails last year’s pace by 9% matching USDA’s 9.2% yr/yr drop in shipments.
As for soybeans, the report showed 276,839 MT of old crop soybeans were booked during the week that ended 5/19.
The trade was looking for between 200k and 800k MT in the report.
Old crop exports were tallied at 539,504 MT for a MYTD total of 49.26 MMT.
For new crop, the week’s 443k MT of sales – mainly to unknown destinations and Mexico, were within the range of estimates.
USDA data has 11.818 MMT of soybeans on the books for 22/23 delivery, a 4% increase from the same time last year.
For the products, USDA reported 159,610 MT of soymeal was sold for 21/22 delivery, compared to the 100-400k MT expected range, and 24,237 MT for NMY.
Soy oil sales came in at 6,163 MT for the week all for 21/22 delivery.
Accumulated soy oil commitments exceed last year by 0.9% through 5/19.
As for wheat the report showed a net 2,317 MT of old crop wheat cancelations.
That came as Italy, Nigeria, Philippines, and Canada while Mexico and unknown reduced their book.
The FAS report had 298,245 MT of wheat exports through the week, with Japan as the top destination.
New crop sales were 246,263 MT during the week of 5/19.
That left the forward book as 3 MMT going into the season – down 14% from last year’s pace.
In this context, corn basis bids were steady to firm across the central U.S. again on Thursday after rising 5 to 10 cents higher at three Midwestern locations.
Soybean basis bids were narrowly mixed at two Midwestern processors, while holding steady elsewhere across the central U.S..
The funds were net buyers yesterday for 17,500 lots of soybeans but net sellers for 25,000 lots of corn and 3,500 lots of wheat.
Note that US markets will be closed on Monday for Memorial Day.
In Europe, volatility remains very high in a market currently dominated by geopolitic factors.
Wheat was up yesterday on Euronext after Egypt announced that it would accept wheat with 14% humidity against 13.5 previously authorized, which allows France origin in particular more flexible access to this market (read below).
Rapeseed prices, on their part, also were on the rise again after the decline of recent days, in the wake of all other vegetable oils and oil.
Alarmed by the prospect of global food shortages due to the conflict in Ukraine, the EU wants to get as much land in Europe as possible turned over to grains, even at the cost of biodiversity.
However, Berlin’s new greener government is pushing back.
Environmental groups have criticised the move, saying they feared agribusiness lobbyists could seize on the current crisis to push for the bloc to lower ecological standards coming into force in 2023 under the new Common Agricultural Policy (CAP).
Germany’s Greens-led agricultural ministry decided to push back against the EU easing, allowing the land to be used only for livestock fodder, which is less detrimental to local flora and fauna as it does not require fertiliser.
An EU spokesperson said Germany had notified the Commission that it will not make use of the exemption granted in March for this year.
Bender said the extra area that Germany could turn to crops under the new EU rules would not make an impact globally.
Germany produced around 42 million tonnes of grains last year.
Using the 170,000 hectares of fallow land would have increased annual production by 600,000 tonnes, less than 1% of Ukraine’s annual grain production of around 86 million tonnes.
Farmers in Germany have already expanded the area of grains sown for this year’s summer harvest anyway, incentivised by rising prices, official data showed last week.
Land for spring wheat sewing is expected to increase by 73.5% while barley areas were seen rising 20.3% compared to last year as farmers shift to the more profitable crops.
On the other hand, a case of African swine fever was detected on a farm containing around 35 animals in the state of Baden-Wuerttemberg, Germany, the food and agriculture ministry said on Thursday.
All the animals on the farm were killed and disposed of in order to contain the spread of the pathogen, and an investigation has begun on how it entered the population, the ministry said.
In France, farm office FranceAgriMer showed on Friday growing conditions for wheat and barley crops in France fell sharply for a thirth straight week.
An estimated 69% of French soft wheat was in good or excellent condition by May 23, against 73% the previous week and 80% a year ago, the office’s data showed.
Durum conditions also moved down to 67% from 74% a week ago.
Regional data in FranceAgriMer’s cereal report suggested contrasts in growing conditions.
French barley conditions also dropped, as in the previous week.
The good to excellent rating for winter barley fell 5 percentage points to 66%, while the corresponding score for spring barley dropped 8 percentage points to 61%, FranceAgriMer’s report showed.
Farmers were rounding off maize planting, with 99% of the expected area sown.
Rating for emerged maize plants, was at 91% of the crop was in good or excellent conditions FranceAgriMer said, against 93% a week earlier.
In spite that, grain trade association Coceral raised on Friday its forecast of this year’s soft wheat production in the European Union and Britain, to 143.0 million tonnes from 141.3 million estimated in March, notably due to beneficial rainfall in Spain.
The raised forecast compared with 2021 production of 143.9 million tonnes, Coceral said.
However, Coceral raised slightly its projection for the French soft wheat crop, to 34.8 million tonnes from 34.5 million in March, as it revised up the crop area while leaving unchanged its yield forecast.
That contrasts with reduced estimates from some analysts and traders who have pointed to stress on plants from very dry conditions.
Forecast for EU soft wheat production, not including Britain, was seen at 127.4 million tonnes compared with 126.9 million in March, Coceral’s data showed.
For barley, Coceral raised its harvest outlook for the EU plus Britain to 60.0 million tonnes from 59.2 million in March, now slightly above a 2021 crop of 59.4 million.
Projected corn production for the EU’s 27 countries and Britain was lowered to 66.0 million tonnes from 67.3 million in March, now below a 2021 crop of 67.2 million, Cocereal said.
For rapeseed, Europe’s main oilseed crop, forecast output in the EU and Britain this year was increased to 19.5 million tonnes from 19.3 million and well above a 2021 crop of 18.5 million.
From North Africa, after a slow start, farmers and officials say the harvest is going well, but both the farmers and the government are still under an unusual amount of pressure.
Egypt’s food subsidy programme requires around nine million tonnes of wheat per year.
Last year the government imported 4.7 million tonnes, much of it from Russia and Ukraine, and it has purchased about 1.9 million tonnes of foreign wheat for shipment in 2022 so far.
Some 300,000 tonnes are stranded in Ukraine, with future prices and supplies uncertain.
As it seeks to shore up wheat reserves, the government says farmers must supply at least 60% of their crop to the state, up from the 40% it bought last year.
It is imposing fines and even jail on those who don’t comply.
The rules are meant to prevent farmers from holding back more of their crop for animal feed, and traders from selling the wheat on the open market.
The government has also raised its procurement price by 22% from last year, to $311.23-$318.40 per tonne, though that is still well below international prices and some farmers say it is not enough given rising input and labour costs.
Despite the dissatisfaction, farmers say selling to the government is convenient, and guarantees payment for those who are in debt or in need of quick money.
As of Thursday, the government had procured 3 million tonnes from the local harvest, which runs till July.
According to two private sector traders, some private mills have been offering 7,000 Egyptian pounds ($377) per tonne for local wheat, around 1,100 Egyptian pounds ($59) more than what the government is offering but still well below the international price.
News reports of the government seizing hundreds of tonnes of illegally-traded wheat from private mills have dominated local headlines in recent weeks.
Farmers’ struggles with rising costs of inputs including fertilizer and labour also raise questions over a long-standing push to use scarce arable land and water to expand wheat production and increase self-sufficiency.
($1 = 18.5300 Egyptian pounds)
In this context, as we said, Egypt will allow wheat shipments with a moisture level of up to 14% for a year, up from 13.5%, due to current global supply conditions.
The Egyptian government has been working on diversifying its sources of wheat, recently adding India as an accepted wheat import origin.
Increasing the accepted moisture level could potentially encourage more offers in its state grains buyer’s tenders, traders said.
Most of the EU, especially Poland and Baltic wheat, have 14% moisture level in their contracts.
That’s why they were not usually offered in tenders.
In Egypt’s last wheat purchasing tender in April, German wheat was offered cheapest on a free-on-board basis but was not purchased due to its moisture level.
Egypt’s state grains buyer, the General Authority for Supply Commodities (GASC), typically purchases wheat through international tenders, but the country’s supply minister recently said the cabinet had approved direct purchases from countries or companies.
Egypt was in talks with Australia, Kazakhstan and France for such deals, he said, adding that Cairo had agreed to buy 500,000 tonnes of wheat from India.
From South Africa, South African farmers are expected to harvest 9.8% less maize in the 2021/2022 season compared with the previous season, the government’s Crop Estimates Committee (CEC) said on Thursday, showing no change from the previous forecast.
The CEC’s fourth summer crop forecast estimates the 2022 harvest at 14.723 million tonnes, down from the 16.315 million tonnes harvested last season.
The harvest is expected to consist of 7.553 million tonnes of white maize, used for human consumption, and 7.170 million tonnes of yellowmaize, used mainly in animal feed.
From the Black Sea basin, Russian President Vladimir Putin told Italy’s Prime Minister Mario Draghi by phone on Thursday that Russia was ready to help ease the international food crisis through the export of grain and fertilizers, provided that politically motivated restrictions from the West are lifted.
Separately, Russia’s defence ministry said civilian vessels may now safely use the Azov Sea port of Mariupol in Ukraine, where its forces took full control last week after Ukrainian fighters surrendered at the besieged Azovstal steelworks.
It said the danger from mines around Mariupol port had now been eliminated.
The ministry said six foreign dry cargo vessels in the port were now free to leave.
It said they were from Bulgaria, Dominica, Liberia, Panama, Turkey and Jamaica, and urged those governments to get the owners of the vessels to remove them.
Meantime, Russia may start building more vessels for grain exports, the country’s agriculture minister Dmitry Patrushev told a conference on Friday.
Russia continues to export despite difficulties with logistics and payments caused by Western sanctions on Moscow.
In this context, export prices for the Russian wheat have risen sharply.
Indicative export prices for Russian wheat with 12.5% protein for delivery in May-June continued to grow, reaching levels of $410-415/t FOB (+$25/t compared to the previous week).
The cost of wheat of the 4th class in deep-water ports was in a downward trend, adjusted to 15.5 thousand rubles/ton without VAT.
This is 400 rubles cheaper than the previous week.
The ruble continued to strengthen, the export quota of 8 million tons was selected by more than two-thirds, a number of large exporters have either exhausted their volume or are close to it.
Purchase prices at low water remained at the level of 14.9 thousand rubles/ton without VAT.
Export prices are approximately $400-405 per ton.
The index of exporters’ purchase prices for wheat in the deep-sea ports of the Black Sea decreased by 3.8% over the week (from 16.1 thousand rubles to 15.5 thousand rubles per ton) against the background of declining demand on the eve of the end of the season and the strengthening of the ruble.
The duty on wheat exports from Russia from May 25 to May 31, 2022 will decrease to $110.5 per ton against $111.9 per ton this week, according to the materials of the Ministry of Agriculture.
The duty on barley exports remains at the same level of $76.5 per ton, the duty on corn will decrease to $76.5 against $77.3 per ton.
The wheat rate is calculated based on the indicative price of $357.9 per ton, for barley — $294.3 per ton, for corn — also $294.3 per ton.
From the Middle East, Iran expects Russia to supply it with 5 million tonnes of grain, including some wheat, Iranian Oil Minister Javad Owji told the semi-official Iranian news agency the Young Journalists Club on Thursday.
Iran will need to import at least 7 million tonnes of wheat in the year to March 2023, marking a second year of high imports as drought continues to affect domestic production, the chairman of Iran’s Grain Union said earlier in May.
Iran and Russia finalised an agreement for the supply as part of several deals signed during a visit by a Russian economic and commercial delegation this week, YJC news agency said.
It did not specify the timeline for delivery, the amount of wheat supply or the proposed payment.
Russian Deputy Prime Minister Alexander Novak said on Wednesday Russia and Iran discussed swapping supplies for oil and gas as well as setting up a logistics hub this week.
From the Middle Kingdom, China’s National Grain Trade Center announced it will auction off another 500.000t of its imported soybean reserves on June 1 to boost local supplies.
The country has offered a series of similarly sized soybean auctions throughout 2022 so far.
Only 34% of the last 500K auction was bought meanwhile South American soybeans will continue to arrive sufficiently through May and June.
From Australia, the market rounds out the week as a mixed bag.
Values in South Australia still remain hot and we have not seen any downside there this week.
A little more weakness was seen through the Victorian market and northern markets round the week out relatively unchanged.
New-crop wheat bids softened again yesterday, and canola bids were off A$20-$30/t, but we saw gains in offshore rapeseed markets overnight which should see some strength follow back into local new-crop bids today.
On the international scene, Turkey bought 175,000 t of corn.
To all of you, we wish you a good day.
Author: Sandro F. Puglisi