Daily International Grain Market View

Good morning Farmer Family …

US farm markets were mixed but mostly higher to start the week. 

Soybeans were back in the spotlight, tracking 1.71% higher.

Soymeal led the way with 3.21% gains and new contract highs. 

Soybean oil prices also traded up by 1.15%. 

Corn prices attempted to follow soybeans higher, but failed to gather much positive forward momentum, inching only 0.11% higher on the day. 

Wheat prices, meantime, were split between winter wheat gains and modest movements for spring wheat prices.

Notably, Chicago SRW wheat ended the day with 0.33% gains. 

Kansas City HRW prices were up by 0.52%, while Minneapolis spring wheat prices closed unchanhged. 

Soybeans climbed, underpinned by concern that drought-damaged crops in Argentina could face more dry weather.

They also found short-lived support, early in the session, from optimism that China could increase purchases following the Lunar New Year holiday.

Wheat inched higher after climbing to four-week highs earlier in the session on fears a cold snap in U.S. grain belts could lead to crop damage, while potential escalations in the Russia-Ukraine war also underpinned prices.

According to World Weather Inc., snow fell ahead of the bitterly cold temps that have moved into the central US, which provided insulation for the US winter wheat crop. 

However, winterkill or wheat damage cannot be ruled out, though the impact is not likely to be very great. 

Condition ratings for winter wheat, indeed, improved modestly during January in Kansas, though fell sharply in Oklahoma, the USDA said on Monday. 

Some 59% of U.S. winter wheat is produced in an area currently experiencing drought, the USDA said last week, compared with 69% a month ago. 

The USDA on Monday rated 21% of the Kansas winter wheat crop in good-to-excellent condition as of Jan. 29, up from 19% at the end of December. 

Monthly wheat ratings also improved in Nebraska and South Dakota. 

However, in Oklahoma, 17% of the state’s wheat was rated good-to-excellent, a drop from 38% at the end of December. 

Ratings declined in Colorado and Montana as well. 

Ratings improved marginally in Illinois, where farmers grow soft red winter wheat used to make cookies and snack foods. 

The USDA on Monday said 69% of the Illinois crop was good-to-excellent, up from 68% a month ago.

Solid export inspection data from USDA, meantime, made an additional support both for soybean and wheat.

Notably, USDA reported 1.855 MMT of soybeans were exported during the week that ended 1/26. 

That was a 16.6k MT increase from last week and was up by 437k MT from the same week last year. 

China was the top destination with 76% of the total. 

The weekly update had the season’s accumulated export at 35.989 MMT through 1/26 – trailing last year by just 461,035 MT. 

As for wheat, the report had 445,433 MT of wheat shipments for the week that ended 1/26. 

That was a weekly increase of 96,040 MT and was up by 67k MT from the same week last year. 

USDA showed nearly half of the total was spring wheat followed by 117k MT of HRW. 

Japan was the top destination. 

The weekly report had 13.222 MMT of wheat shipments for the season through 1/26, compared to 13.616 MMT last year. 

As for corn, meantime, data showed 527,932 MT of corn was shipped during the week that ended 1/26. 

That was a 201k MT decline from last week and was down by 508k MT from the same week last year. 

USDA had the season’s export at 12.038 MMT as of 1/26, compared to 17.55 MMT last year. 

Separately, USDA announced a private export sale of 112k MT of corn sold to Japan under the daily reporting system. 

In this context, corn basis bids eased 2 cents lower at an Iowa processor and 3 cents lower at an Indiana ethanol plant on Monday while holding steady elsewhere across the central U.S..

Soybean basis bids rose 5 to 10 cents higher at three Midwestern processors, while holding steady elsewhere across the central U.S.

Commodity funds were net buyers of CBOT corn, soybean, wheat, soymeal and soyoil futures contracts.

On this morning, U.S. wheat, soybean and corn price were little changed in Asian trading, as caution prevailed across markets ahead of a slew of central bank policy meetings this week, including the U.S. Federal Reserve.

Prices, however, remained supported amid worries about supply, with the drought in Argentina and the weather condition in southern Brazil as well as production prospects in Ukraine still in focus.

Notably, the most-active soybean contract on the Chicago Board of Trade was virtually flat at $15.34-3/4 a bushel, as of 06:06 GMT. 

Wheat was almost steady at $7.52-3/4 a bushel, while corn slipped 0.1% to $6.83 a bushel.

In energy markets, oil prices fell on Tuesday.

Notably, March Brent crude futures declined 25 cents to $84.65 per barrel by 07:15 GMT. 

The March contract expires on Tuesday and the more heavily traded April contract fell by 38 cents, or 0.45%, to $84.12.

Likewise, U.S. West Texas Intermediate (WTI) crude futures dropped by 44 cents, or 0.56%, to $77.46 a barrel.

Russia continues to supply the global market with its oil despite a European Union ban and G7 price cap.

Decreases were cushioned by signs of potentially healthy demand coming from China, following growth in the country’s economic activity.

China’s official purchasing managers’ index (PMI), which measures manufacturing activity, rose to 50.1 in January from 47.0 in December, the National Bureau of Statistics (NBS) said on Tuesday.

The International Monetary Fund (IMF) has raised its 2023 global growth outlook slightly due to “surprisingly resilient” demand in the United States and Europe.

However, the threat of further interest rate increases, weighed on the market.

In ocean freight markets, the Baltic Exchange’s main sea freight index snapped its nine-session losing streak on Monday, as rates for panamax and supramax vessels edged up.

The overall index, indeed, rose 4 points, or about 0.6%, to 680.

The capesize index lost 1 point to 533, its lowest level in nearly five months.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were down $15 to $4,418.

The panamax index was up 6 points at 1,060, a 10-day high.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, rose by $56 to $9,543.

Among smaller vessels, the supramax index rose 8 points to 658.

In equity markets, shares fell on Wall Street. 

The S&P 500 dropped 1.3% to 4,017.77, giving back some of the gains that had carried it last week to its highest level since early December. 

The Dow Jones Industrial Average fell 0.8% to 33,717.09, while the Nasdaq composite sank 2% to 1,393.81.

Worries that the economy and corporate profits may be set for a steep drop-off, weighed on the market.

Meantime, some big tech companies have announced high-profile layoffs after acknowledging they misread their boom coming out of the pandemic. 

But job cuts may be starting to spread to other areas of the economy. 

Later this week, the U.S. government will also give its latest monthly update on the job market.

Economists expect Friday’s report to show that U.S. employers added 187,500 more jobs than they cut during January. 

That would be a slowdown from December’s hiring of 223,000.

Meantime, Asian shares mostly fell in muted trading Tuesday as investors awaited decisions on interest rates and earnings reports from around the world.

The Fed’s next decision on rates is coming Wednesday, and most investors expect it to announce an increase of just 0.25 percentage points. 

Central banks for Europe and for the United Kingdom are also set to announce their latest increases for rates this week.

Trader were also watching for indicators on the Chinese economy.

Chinese factory activity rebounded in January, adding to signs the world’s second-largest economy might be recovering from a painful slump.

But despite these shifts, U.S. recession risk remains a major worry and may be the most significant risk to the global cyclical picture.

In this context, Japan’s benchmark Nikkei 225 fell 0.4% to finish at 27,327.11. 

Australia’s S&P/ASX 200 edged down nearly 0.1% to 7,476.70. 

South Korea’s Kospi declined nearly 1.0% to 2,426.51. 

Hong Kong’s Hang Seng lost 1.6% to 21,718.24, while the Shanghai Composite shed 0.4% to 3,257.15.

In currency trading, the U.S. dollar inched down to 130.26 Japanese yen from 130.43 yen. 

The euro cost $1.0841, down from $1.0852.

Going back to analyzing the other agricultural markets …

In South America, Brazilian farmers have harvested 5% of the planted soybean area in the 2022/23 cycle through last Thursday, agribusiness consultancy AgRural said on Monday, up 3 percentage points from the previous week but still below last year’s levels.

At the same time in 2022, indeed, 10% of the Brazilian soy fields had been reaped, said AgRural.

However, the volume harvested so far reached nearly 8 million tonnes, down from 13 million tonnes a year ago, though with an half of harvest area.

For this season is expect a record output of 152.9 million tonnes of the oilseed. 

The group however noted “irregular rainfall” in Rio Grande do Sul which could lead to “new productivity cuts” in future crop reviews.

With the soybean harvest delay, planting of Brazil’s second corn crop was also below last year’s levels, reaching 5% of the expected area as of Thursday, AgRural said, down from 14% at the same time in 2022.

“The delay still does not threaten the corn planting window, but it is important that from early February it advances more quickly,” the consultancy said.

Farmers in Brazil normally sow their second corn crop, which represents 70-75% of national production in a given year, after soybeans are reaped.

Brazil’s Safras and Mercado reduced their 1st crop corn estimate to 23.7 MMT citing the drought in the South – specifically RGdS and Parana. 

However, they maintained a 15m HA area for the winter corn crop, unch from their prior estimate and still 200k HA above last year.

Meantime, the expectation of large Brazilian corn exports to China in 2023 is worrying Brazil’s meat companies in a large producing state, according to a statement from Santa Catarina’s meat processors lobby Sindicarne.

Rain in western and southern areas of Argentina this week will be important as the following 10 days will be drier, especially in the central and south, according to World Weather Inc. 

“Rain this week in western and southern Argentina will be sufficient in maintaining a mostly better environment for summer crop development and improvement; however, after Thursday and lasting through mid-week next week there will be a steady rate of drying across the nation raising moisture stress for some areas over time. 

This drier bias fits well with the 2008-09 crop year in which similar extremes in weather were noted. 

If the trend is correct portions of Argentina will be drying down again during February, but conditions may not get back to the same level of stress as that reported earlier in January. Nevertheless, a boost in rainfall will be needed by mid-February.” 

In Europe, we saw a slight increase in prices at the start of the week.

Rapeseeds prices rose in the wake of canola higher.

European wheat prices rose, mainly supported by strength in Chicago.

March wheat on the Paris-based Euronext exchange unofficially closed up 0.5%, or 1.50 euros, at 287.50 euros ($312.1) a tonne.

But the contract remained below a two-week peak of 291.25 euros struck on Thursday, with cheaper Black Sea supplies continuing to cap prices.

Traders said 11.5% protein wheat from Ukraine was offered as low as $290 a tonne FOB Odessa on Monday for a 30,000 tonne shipment between Feb. 10 to March 10. 

Russian 11.5% protein wheat was offered at $306 FOB in the Russian port of Novorossiysk for February shipment.

Black Sea shipments have higher c&f costs (including ocean shipping) but even so, such low FOB prices are likely to cover import demand from the Middle East and North Africa for the time being.

There was some demand from Morocco for EU wheat for February shipment last week but interest declined as Euronext prices rose. 

There are also indications some export houses have been buying Romanian wheat which meets the specifications of OAIC.

Thus, the French origin not only has to face up to the competitiveness of the Black Sea origins, but also of Romania or even the Baltic countries. 

Cheap prices from the Black Sea region, also depressed hopes for new international sales in Germany.

The upside potential therefore remains limited for the moment, pending better visibility on the potential 2023 harvest yield, particularly in Russia and the USA.

Meantime, Romania has reported an outbreak of highly pathogenic H5N1 avian influenza, on a farm in the centre of the country, the World Organisation for Animal Health said on Monday.

The outbreak in the town of Codlea near the city of Brasov infected 42,154 poultry birds, killing 23,472 of them, the Paris-based body said, quoting information from Romania’s health authorities.

It was the first occurrence of the disease since May last year, the report said.

On the other hand, Romania and five other EU states wanted compensation for the damage they suffered due to the fact that cheap wheat from Ukraine, left on European territory, is affecting their own sales. 

They ask the European Commission for a quick solution and the export of Ukrainian wheat to its final destination, namely Africa.

In a document quoted by RFI, six EU states request European assistance in the business of wheat and cheap corn from Ukraine that entered the European market without respecting quality standards and disrupting competition. 

The document was drafted by Polish diplomats. 

It is also signed by Hungary, Romania, Bulgaria, Slovakia and the Czech Republic and is presented at the meeting of EU agriculture ministers in Brussels on January 30.

The current situation is a consequence of the facilitation of imports from Ukraine to the EU, including the abolition of customs duties for one year, the document states. 

Although the mentioned states support the effort to help Ukraine in the war against Russia, they draw attention to the fact that European grain producers are suffering unwanted consequences.

The six states demand not only a new instrument – a safety net – but also the return to EU aid coupled with production (abolished by the new Common Agricultural Policy), the strengthening of solidarity corridors (so that Ukrainian products reach their final destination, transiting only EU) as assistance to Ukraine that does not have an impact on the European internal market.

From Ukraine, the country’s grain harvest is likely to fall to 35 million tonnes to 40 million tonnes in 2023, including 12 million-15 million tonnes of wheat and 15 million-17 million tonnes of corn, a senior analyst and producer said.

Alex Lissitsa, CEO of the IMC agriculture company and the president of the Association “Ukrainian Agribusiness Club”, told a grain conference that Ukraine would be able to export around 15 million tonnes of grain in the 2023/24 season.

The export could include up to 7 million tonnes of wheat and up to 10 million tonnes of corn.

Lissitsa also said that low wheat output could lead to a certain shortage of food grain for local consumption, which could potentially lead to restrictions on food wheat exports from Ukraine.

Meantime, Denys Marchuk, deputy chair of the Ukrainian Agrarian Council, told Ukrainian television earlier on Monday that the area sown to corn in Ukraine could fall by 30% to 35% in 2023 because of a shortage of money for farmers and electricity blackouts.

From Russia, analysts flagged a downgrade in the 2023 crop forecast due to poorer weather conditions. 

Notably, Russian grain transport company Rusagrotrans lowered its wheat harvest estimates for 2023 by 1 million tonnes to 81.5 million tonnes, citing crop damage due to temperature fluctuations. 

Meantime, eExports remained high. 

The Sovecon agriculture consultancy saw Russian wheat exports in January of up to 3.8 million tonnes, compared with an average for the period of 2.7 million tonnes.

In spite that, Russian wheat prices were down slightly last week as supplies remained high. 

Notably, prices for Russian wheat with 12.5% protein content, delivered free on board (FOB) from Black Sea ports, were down $2 last week to $304 per tonne, the IKAR agriculture consultancy said. 

As for the other products, price for domestic 3rd class wheat, European part of Russia, excludes delivery was at 12,425 rbls/t -25 rbls/t (Sovecon).

Price for sunflower seeds was at 26,800 rbls/t +525 rbls/t (Sovecon).

Price for domestic sunflower oil was at 78,500 rbls/t -500 rbls/t (Sovecon).

Price for domestic soybeans was at 32,600 rbls/t unchanged (Sovecon).

Export price for sunflower oil was at $1,130/t -$30 (Sovecon).

Price for white sugar, Russia’s south was at $723.27/t +$11.58 (IKAR).

($1 = 69.90 roubles).

From the Middle Kingdom, China auctioned off 140.000t of its state wheat reserves on January 18, which was 100% of the grain offered for sale. 

China has conducted a series of similarly sized auctions in recent months to boost local supplies and quell high prices.

From South East Asia, wheat prices in India have dropped nearly 13% from record highs since the government offer last week of 3 million tonnes to bulk consumers such as flour millers.

Prime Minister Narendra Modi’s government on Wednesday allowed flour millers to buy up to 3 million tonnes of wheat from state reserves.

On Monday, wheat prices in New Delhi dropped to 28,290 rupees ($347.11) a tonne, down 13% from their record high hit last week because stocks are low.

But domestic prices are still higher than the state-set support or guaranteed price of 21,250 rupees.

Meantime, according to the Indian Ag. Ministry, larger than average plantings and many farmers using high-yielding varieties in Punjab, Haryana and Madhya Pradesh, are expected to result in a bumper wheat crop in 2023-24. 

Assuming favourable conditions over the next two months, especially during the harvest period, production could reach a record 112.0Mt (106.8Mt previous year).

($1 = 81.50 rupees). 

From Australia, Monday’s local grower bids at certain eastern Australian sites started the week a touch firmer. 

SA wheat grower bids were down on the lower grades over the course of the day. 

Canola bids nationally firmed a little.

In its last harvest update for the season, Graincorp reported it received 39,020t last week, taking the total to 10.977Mt. 

Queensland completed harvest and NSW was mostly done, with some southern growers still delivering across the Wyalong, Temora and Cunningar regions. 

Victorian growers were still delivering grain into sites across the Wimmera, Geelong and Western Districts, which were expected to remain active into February. 

It also reported 280,000t grain outloaded last week.

On the international trade scene, Algeria’s state grains agency OAIC has issued an international tender to purchase a nominal 50,000 tonnes of durum wheat.

The deadline for submissions of price offers in the tender is Tuesday, Jan. 31, with offers having to remain valid until Wednesday, Feb. 1.

Shipment is sought in three periods between Feb. 16-28, March 1-15 and March 16-31.

Egypt’s General Authority for Supply Commodities announced a tender on Tuesday for the purchase of wheat within the framework of the Food Security and Resilience Support Program funded by the World Bank under Loan No. EG -9399 with at sight financing.

The tender is for a quantity of 30,000, 40,000, 50,000, 55,000 or 60,000 tonnes, +/- 5% should the seller choose, from the last crop for supply C&F (cost and freight).

Shipment from all origins specified by GASC will be during the period from Feb. 26 to March 10 and/or March 11 to March 20.

The deadline for offers is Feb. 2, GASC said.

That’s all, thank you.

We wish you a nice day.

Author: Sandro F. Puglisi

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