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Daily International Grain Market View

Good morning Farmer Family … 

US farm markets were mixed on Wednesday.

Corn price settled with modest gains, as was up 0.18% on the session.

Soybean prices took a double-digit tumble, closing 1.15% lower.

Soymeal found afternoon strength and closed in the black with modest gains of 0.1%.

Bean oil, meantime, was the weak link of the soy complex, giving back 2.47% at the bell.

Wheat prices were also mixed.

After trading through midday with losses markets went home mostly in the black. 

Notably, Chicago SRW contract was 0.2% lower at the bell. 

Kansas City HRW closed with 0.63% gains. 

Minneapolis spring wheat ended the day 0.41% higher. 

Corn prices managed to erase moderate overnight losses, closing with modest gains, after EIA weekly data showed an increase in ethanol production, meanwhile stocks were trimmed.

Soybeans turned lower on expectations of a bumper harvest in Brazil. 

Also, the monthly Fats and Oils report confirmed a reduction in Dec crushing data and more than expected soybean oil stocks level.

That overshadowed concerns about the size of Argentina’s drought-hit harvest .

Meantime, traders were also positioned for the Federal Reserve’s decision on interest rates.

Wheat prices, on their part, ended mixed, with the Chicago most-active March contract down on profit-taking, while Kansas City HRW and MGEX spring wheat contracts stayed in the green, on weather concerns.

Notably, most of the Midwest and Plains will fail to gather additional moisture between Thursday and Sunday, according to the NOAA. 

Southern states continue to be severely impacted by an ongoing ice storm that has stunted travel and left thousands without power. 

NOAA’s new 8-to-14-day outlook predicts a return to seasonally wet weather for the Corn Belt between February 8 and February 14, with warmer-than-normal conditions likely for the eastern half of the United States during that time.

According to the latest data from the U.S. Energy Information Administration, ethanol production increased for the fourth consecutive week, with a daily average of 1.028 million barrels through January 27.

That was a 16k barrel per day increase from the week prior and marked the 3rd consecutive +1m bpd production week. 

Producers were averaging 1.042 million barrels per day during the same week last year.

Meantime, ethanol stocks were 635k barrels lighter at 24.442 million. 

That was a 3% reduction.

However, monthly NASS data showed 425.283 mbu of corn was used for ethanol production during December. 

That was a 5.5% drop from November’s draw and was 11% below Dec ’21. 

The four month pull was 1.708 bbu, or 32.4% of USDA’s forecast. 

As for soybean, the monthly Fats and Oils report confirmed the Dec crush as 187.4 mbu. 

That was down 2 mbu from November and was 5.5% below Dec ’21. 

Estimates were looking for 188 mbu on average. 

Soybean oil stocks were shown at 2.306 billion lbs, which was slightly above estimates. 

Prior to Thursday afternoon’s USDA export report, analysts expect the agency to show corn sales ranging between 600k MT and 1.2 MMT. 

New crop sales are estimated to be below 150k MT. 

As for soybean, traders expect soybean bookings were between 700k MT and 1.3 MMT. 

New crop bean sales are estimated to be below 300k MT. 

Analysts also expect to see soymeal sales come in between 200,000 and 475,000 metric tons, plus up to 20,000 MT of soyoil sales last week.

As for wheat, traders expect between 300k and 600k MT of old crop wheat was sold. 

New crop bookings are anticipated to be below 275k MT. 

In this context, corn basis bids were steady to firm after trending 2 to 5 cents higher across three Midwestern locations on Wednesday.

Soybean basis bids were steady to mixed across the central U.S., moving as much as 4 cents lower at an Ohio elevator and as much as 10 cents higher at a Nebraska processor.

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

On this morning, corn and soybean prices inched higher, while wheat was largely unchanged.

Notably, the most-active soybean contract on the Chicago Board of Trade gained 0.6% to $15.29-3/4 a bushel, as of 05:02 GMT.

Wheat was largely unchanged at $7.59-3/4 a bushel and corn inched 0.1% higher to $6.81-3/4 a bushel.

Recent rains in Argentina have not been substantial enough to alleviate concerns over drought-induced crop stress.

Hot and dry weather is expected for another week, though the second week is likely to see heavy rainfalls in many areas, which could relieve stress on crops.

The month of February will be decisive in the choice of rotations of American farmers who are scrutinizing the ratio of soybean prices to corn prices. 

At this stage, this ratio is favorable to an increase in corn areas to the detriment of soybeans.

In early February, also the wheat market will have a firmer grasp of likely weather conditions for Northern winter crops emerging from semi-dormancy.

Meantime, grain markets are searching for evidence of a pick-up in Chinese demand following the week-long Lunar New Year holiday.

While Ukraine’s grain harvest may decrease again in 2023.

In energy markets, oil prices rebounded on Thursday.

Brent crude futures, indeed, rose 53 cents, or 0.6%, at $83.37 a barrel as of 07:09 GMT, while West Texas Intermediate (WTI) U.S. crude futures advanced 56 cents, or 0.7%, to $76.97 a barrel.

Both benchmarks plunged more than 3% overnight after U.S. government data showed big builds in crude and oil products inventory.

However, as expected, the Federal Reserve raised its target interest rate by a quarter of a percentage point on Wednesday, yet continued to promise “ongoing increases”.

As a result, the U.S. dollar index dived to a fresh nine-month low on Thursday in reaction to the softer rate hike bets. 

A weaker greenback makes dollar-priced oil less expensive for holders of other currencies, boosting demand.

Also, an OPEC+ panel endorsed the oil producer group’s current output policy at a meeting on Wednesday, leaving production cuts agreed last year in place amid hopes of higher Chinese demand and uncertain prospects for Russian supply.

Prices are also rising in the backdrop of a Feb 5. ban on Russian refined products by the European Union.

The European Commission proposed last week that from Feb. 5 the EU apply a price cap of $100 per barrel on premium Russian oil products such as diesel and a $45 cap per barrel on discounted products such as fuel oil.

In ocean freight markets, the Baltic Exchange’s dry bulk sea freight index fell to its lowest since June 2020, weighed by weaker demand for capesize and panamax vessels.

The overall index, indeed, fell 13 points, or 1.9%, to 668 on Wednesday.

Notably, the capesize index dropped 33 points, or about 6.2%, to its lowest in five months at 499.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes of coal and steel-making ingredient iron ore, decreased $274 to $4,137.

The panamax index lost 23 points, or 2.2%, to 1,029, its lowest since June 17, 2020.

Average daily earnings for panamax vessels, which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, increased by $202 to $9,262.

Among smaller vessels, the supramax index rose 10 points, or about 1.5%, to 680.

In equity markets, US stock indexes Wednesday recovered from early losses and settled moderately higher in the afternoon when Fed Chair Powell said the Fed had made progress on inflation.  

Stocks then extended their gains after Powell said the Fed’s focus is “not on short-term moves but on sustained changes.”

Wednesday’s U.S. economic news showed the U.S. Jan ADP employment change rose +106,000, weaker than expectations of +180,000 and the smallest increase in 2 years.

The U.S. Jan ISM manufacturing index fell -1.0 to 47.4, weaker than expectations of 48.0 and the steepest pace of contraction in more than 2-1/2 years.

U.S. Dec construction spending unexpectedly fell -0.4% m/m weaker than expectations of no change and the biggest decline in 4 months.

U.S. Dec JOLTS job openings unexpectedly rose +572,000 to a 5-month high of 11.012 million, showing a stronger labor market than expectations of a decline to 10.3 million.

Wednesday’s weak U.S. economic news, along with the dovish tilt to Fed Chair Powell’s post-FOMC comments, sent bond yields tumbling and was supportive for stock.  

The 10-year T-note yield, indeed, dropped to a 1-1/2 week low of 3.382%.  

A rally in semiconductor stocks led the technology sector and the overall market higher.

In this context, the S&P recovered Wednesday from an early loss to rise to 4,119.21, its highest close since August.

The Dow Jones Industrial Average gained less than 0.1% to 34,092.96. 

The Nasdaq composite jumped 2% to 11,816.32.

On this morning, Asian stock markets gained.

The Shanghai Composite Index gained 0.3% to 3,284.50 and the Nikkei 225 in Tokyo added 0.1% to 27,374.60. 

The Hang Seng in Hong Kong advanced 0.5% to 22,188.20.

The Kospi in Seoul was 0.7% higher at 2,466.03 and Sydney’s S&P-ASX 200 rose 0.2% to 7,514.20.

India’s Sensex opened down 0.3% at 59,544.52. New Zealand, Bangkok and Jakarta advanced while Singapore and Kuala Lumpur declined.

In currency trading, the dollar fell to 128.57 yen from Wednesday’s 128.77 yen. 

The euro rose to $1.1018 from $1.0979.

Going back to analyzing the other agricultural markets …

From South America, brokerage StoneX raised its forecast of the Brazilian soy crop to a record-high 154.2 million tonnes, from 153.79 million last month. 

The harvest is under way and about 5% complete despite rain delays in some areas, consultancy AgRural said on Monday.

Meantime, according to the USDA attaché, Brazil is set for another record-breaking grain harvest. 

The attaché, indeed, maintained its corn planted area forecast at 22.5 million hectares for MY 2022/2023 and corn production is forecast at 125.5 MMT for MY 2022/2023, up 8 percent from the estimated 116 MMT for MY 2021/2022. 

The attaché maintained its forecast for corn exports for MY 2022/2023 at 47 MMT, based on the continued interest in international markets. 

Brazil is expected to reach record also in wheat production. 

The attaché forecasted wheat production for MY 2022/2023 at 9.6 MMT and raises its forecast for wheat export in MY 2022/2023 to 3.5 MMT on a wheat grain equivalent basis (WGE), up 6 percent from its previous estimate.

According to the USDA attaché, dry weather and high temperatures in the last months of 2022 have damaged the Marketing Year (MY) 2022/23 Argentine soybean crop, particularly affecting first crop soybeans within a 125 kilometer radius of Rosario, Santa Fe Province. 

Recent rains will buy time for second crop soybeans, but better-than-average weather through February is needed for a substantial recovery. 

The attaché lowered its MY 2022/23 estimated production to 36 million metric tons (MMT), 9.5 MMT below the official USDA estimate. 

The drought is also affecting sunflowerseed and peanut production to a lesser extent. 

The attaché estimated sunflowerseed production at 4 MMT on lower-than-expected yields in northern production areas.

Meantime, Argentina’s revenue from exports of grain, oilseeds and their derivatives plummeted 61% in January from a year ago, exporters and crushers chamber CIARA-CEC said on Wednesday.

In Europe grain and oilseed markets declined on Wednesday, still in a context of rising euro.

As we said before, the Fed made a moderate increase in rates yesterday evening with + 25 basis points.

The ECB should today increase its rates by 50 points.

Thus on this morning the euro traded at 1.1020 against the dollar. 

On the export side, the EU has exported to January 29 18.78 million tonnes of wheat since the start of the campaign, against 17.43 million last year to date. 

Morocco and Algeria are the main destinations representing respectively 14.7 and 13.3% of exports. 

Egypt, Nigeria and Saudi Arabia completed the top five buyers list.

However, this EU competitiveness on an international scale is undermined by the rise in the euro, compared to other origins generally denominated in dollars. 

Russia is exporting aggressively.

Competition not only come from Russia and Ukraine, but low prices are also being offered from Romanian and Bulgaria, with Hungary, Poland, Czech Republic, Slovakia, Romania and Bulgaria have made a joint request to the EU Agriculture and Fisheries Council for immediate measures to help mitigate the impact of elevated grains and oilseeds imports from Ukraine, stating that the surge in imports has reduced demand for local grain resulting in lower prices. 

Also, generally mild weather continued in Europe this week, with traders saying they are not currently concerned about frost damage to crops. 

As a result, yesterday European wheat prices fell, pressured by cheap prices offered by Black Sea exporters in North Africa and the Middle East.

Thus, benchmark March milling wheat on Paris-based Euronext closed 0.7% down at 285.75 euros ($311.72) a tonne.

Standard 12% protein wheat for February delivery in Hamburg was offered for sale at a premium of about 11 euros over the Euronext March contract but with little purchase interest seen.

Rapeseed prices, meantime, lost ground also in the wake of palm oil and canola weaker.

As for the other export data from the European Commission, yesterday the weekly report showed EU barley export reached 3.13 MMT as of January 29, against 5.28 MMT last year to date.

EU corn imports were at 16.46 MMT through January 29. 

That’s a year-over-year jump of 73% so far. 

Ukraine, Brazil, Canada, Serbia and Russia have been the top five suppliers.

Also in rapeseed, imports are still progressing with 4.47 million tonnes on 29 January against 3.12 last year.

EU soybean imports, in contrast, are moderately below last year’s pace so far after reaching 6.24 MMT through January 29. 

EU soymeal imports are also below year-ago totals, with 9.19 million metric tons during the same period.

Meantime, per latest data published by Euronext on Wednesday,

non-commercial market participants raised their net short position on Euronext’s milling wheat futures and options in the week to Jan. 27.

Notably, non-commercial participants, which include investment funds and financial institutions, lifted their net short position to 46,354 contracts from 42,753 a week earlier, the data showed.

Commercial participants increased their net long position to 28,947 contracts from 25,466 a week earlier.

In Euronext’s rapeseed futures and options, non-commercial market participants reduced their net short position to 33,476 contracts from 34,522 a week earlier.

Commercial participants similarly decreased their net long position in rapeseed to 31,885 contracts from 32,613 a week earlier.

From North Africa, Egypt intends to expand purchases of wheat from Russia, according to the Egyptian Foreign Ministry. 

It is developing mechanisms to enable trade in local currencies, including roubles.

From Ukraine, divergence in the grain production estimates to come in Ukraine for the 2023 harvest, with the Minister of the Economy showing an estimate of 49.5 million tonnes while the association of producers, UGA, is much more pessimistic showing a production range of only between 35 and 40 million tonnes.

Meantime, the indicative FOB prices of Ukrainian wheat remained unchanged in the deep-sea ports of the Black Sea, while the price on CPT-port basis began to decline.

Ukrainian grain remains one of the cheapest in the world. 

At the same time, there was a further decrease in freight rates as well as costs of rail and road logistics.

A prolonged time of the inspections by the JCC, is also pressuring the market. 

Also, as expected, traders began to force purchases willing to sell as much agricultural products as possible by sea before the next prolongation of the “grain agreement”. 

Thus, by the end of the last week, traders’ purchasing prices of food and feed wheat decreased by 5-10 USD/t to 200-225 and 180-205 USD/t CPT-port in the deep-sea ports.

The bid prices of Ukrainian rapeseed, in contrast, have been growing at the western borders since early January.

The prices are supported by stronger demand from export-oriented companies as well as importers, mainly European countries. 

Moreover, the supply of rapeseed was limited. 

Sometimes there were offers of mid- or large-tonnage batches.

In this context, the bid prices of GM-free rapeseed increase by 20-40 USD/t to 490-535 USD/t DAP-border as of February 2.

Meantime, another five ships with corn, wheat and soybean left the ports of Ukraine on February 1, Interfax-Ukraine reports with reference to the Joint Coordination Center (JCC).

The vessels are transporting a total of 216.719 thsd tonnes of Ukrainian food under the Black Sea Grain Initiative. 

Particularly, Manna (51.405 thsd tonnes of corn) is heading to Portugal, Donna Judi (33 thsd tonnes of wheat) is heading to Spain. Barra left for Turkey with 41 thsd tonnes of wheat.

The Ruler will deliver 65.114 thsd tonnes of corn to China, and Lolo Gate will bring 16.500 thsd tonnes of wheat and 9.700 thsd tonnes of soybean to Egypt.

Four ships, which passed through the sea humanitarian corridor on February 1, are heading to Ukrainian ports.

“As of February 1, the total tonnage of grain and other agricultural products exported from three Ukrainian ports is more than 19.288 mln tonnes. In total, the movement of 1,390 ships was allowed: 696 for arrival at Ukrainian ports and 694 for departure from them”, – the JCC summarized.

From Australia, prices for feedgrain in the northern region are under some supply-side pressure as the sorghum harvest gets off to a slow start, while the southern market is trading mostly sideways.

Some bearish news has hit the market with Viterra Australia forecasting the national wheat crop now in the final stages of harvest will weigh in at 41 million tonnes.

This compares with ABARES estimate of 36.6Mt, also a record.

Estimates for the 2021-22 crop sit at 36.3Mt from ABARES and 38Mt from Viterra.

Australia’s three biggest bulk handlers – CBH Group in Western Australia, Viterra based in South Australia, and GrainCorp in eastern states – have now ended their weekly reports from the 2022-23 harvest.

Meantime, yesterday local markets tracked sideways again over the course of the day, trade wheat and barley bid offer spreads were left wide. 

Canola values were a couple of bucks firmer. 

ASW1 wheat volume in WA continued to trade on the exchange platforms online. 

A firmer AUD this morning may see local cash bids slightly softer. 

Agriculture Minister Murray Watt welcomed a meeting scheduled between Trade Minister Don Farrell and his Chinese counterpart Wang Wentao to be held next week. 

The first such meeting in three years, Mr Watt said though plenty of rumours were flying, really nothing was confirmed about changes applying to agricultural products.

On the weather side, the Bureau of Meteorology Climate Driver Update reported La Niña conditions continue in the tropical Pacific. 

While Pacific Ocean temperatures have warmed in recent weeks, atmospheric indicators have yet to respond. 

The Bureau’s ENSO Outlook continued at La Niña. 

All of the seven international climate models surveyed by the Bureau anticipate central Pacific sea-surface temperatures will be ENSO-neutral during February. 

ENSO events typically peak in late summer and decay during the autumn; current outlooks indicate this La Niña may decay slightly earlier than usual.

On the international trade scene, Jordan’s state grains buyer purchased 60,000t milling wheat from optional origins, likely from Romania at an estimated US$336.50/t c&f for June shipment.

Meantime, Jordan’s state grain buyer has issued another international tender to buy up to 120,000 tonnes of milling wheat which can be sourced from optional origins.

The deadline for submission of price offers in the tender is Feb. 7.

Shipment in the new tender is sought in a series of possible combinations in 50,000 to 60,000 tonne consignments.

Possible shipment combinations are May 1-15, May 16-31, June 1-15 and June 16-30.

Algeria’s state grains agency reportedly purchased, for Feb-Mar shipment, around 300,000t durum wheat at an estimated cost-and-freight price of US$448-450/t for consignments in Panamax vessels and $458-459/t for shipments in Handysize vessels, expected to be sourced primarily from Canada.

South Korea’s Major Feedmill Group (MFG) purchased about 60,000 tonnes of animal feed wheat in a private deal on Wednesday without issuing an international tender.

It was purchased at an estimated $339.60 a tonne c&f plus a $1.50 a tonne surcharge for additional port unloading. 

Seller was believed to be trading house ADM.

The wheat can sourced optionally from the United States, Australia, Romania or Bulgaria. 

Russia and Ukraine are excluded as origins.

Shipment from Australia or the U.S. Pacific Northwest coast was sought between June 11 and June 30. Shipment from Romania or Bulgaria was sought between May 20 and June 10.

Leading South Korean animal feed maker NOFI purchased about 80,000 tonnes of animal feed wheat expected to be sourced from Australia and other origins an international tender on Wednesday.

South Korea’s Nonghyup Feed Inc reportedly purchased around 65,000t feed wheat from Australia, at an estimated $340/t c&f.

Egypt’s state grains buyer GASC said it has cancelled a corn purchase tender that closed on Wednesday with no purchase made.

Prices offered were regarded as too high, though offers were lower than GASC’s previous corn tender in January.

The yellow corn was sought for rapid shipment between Feb. 20 and March 10.

U.S.-origin corn had been offered at the lowest price in the tender on Wednesday at $300 a tonne FOB or $332.35 a tonne c&f including ocean shipping costs.

On Jan. 19 GASC bought 50,000 tonnes of Romanian corn at $339 a tonne on a cost, insurance and freight (CIF) basis.

Egyptian Supply Minister Ali Moselhy had said the corn will be sold to the private sector via Egypt’s new commodities exchange in an effort to counter a feed shortage and inflation in the country.

That’s all, thank you.

We wish you a nice day.

Author: Sandro F. Puglisi

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