Grain Market View- Daily Update

Good morning, Farmer Family …

US farm markets slumped, on Tuesday.

Corn prices tumbled 2.24%.

Soybeans were down 1.71%.

The rest of the soy complex was mixed as soymeal fell 1.76%, while soyoil shot up 1.75%.

The wheat complex crumbled, with Chicago SRW tumbling by 5.42%, Kansas City HRW lost 3.32%, and MGEX HRS fell 3.36%.

Corn and soybean fell pressured by forecasts for much-needed rains in the Midwest later this week and next week, that tempered concerns about dry weather.

Nearly all the central US is forecast to receive some rainfall between Wednesday and Saturday but it is the longer term 8- to 14-day outlook that is anticipating wetter than normal conditions likely for the entire central US.

Meantime, traders are expecting little change on Friday in USDA update of corn and soybean acreage estimates, with March estimates at 91.996 million acres for corn and 87.505 million acres for soybeans, although crop consultant Michael Cordonnier cut his US corn yield forecast by 2 bu/ac to 175 bu/ac and soybean yield projection by 0.5 bu/ac to 50.5 bu/ac.

Dr Cordonnier indeed now estimates US production at 14.61 billion bu. for corn and 4.39 billion bu. for soybeans.

However, the real question is, if the weather pattern changed, or it is just an interlude, as crops still need regular rains.

Meantime, U.S. grains continue to face stiff global competition in the export market, with Brazil’s harvest is going to be coming soon on the market.

As for wheat, prices tumbled as worries subsided about political instability in Russia, and the Northern Hemisphere winter wheat harvest progressed.

Russian wheat is the cheapest in the world.

Meantime, the European Union’s crop monitoring service MARS on Monday forecast Russia’s wheat production this year at 86.7 million metric tons, underlining expectations for an above-average crop.

Day 5 of the Kansas Wheat Harvest reflected again the variance in yields with more farmers reporting ranges from 10 bpa to 70+ on their own farms. 

The deciding factor in a number of casts is the portion of wheat that was not too far developed nor too far destroyed to recover with the late May rainfall. 

In this context, corn basis bids were steady to weak across the central U.S. after dropping 3 to 5 cents lower at three Midwestern locations.

Soybean basis bids were mostly steady across the central U.S., but did tilt 10 cents lower at an Indiana processor.

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

On this morning, corn lost more ground.

Soybeans also slid for a second session, and wheat dropped to a one-week low.

Notably, the most-active corn contract on the Chicago Board of Trade (CBOT) fell 0.1% to $5.60-1/2 a bushel, as of 02:57 GMT, not far from the previous session’s lowest since May 22 at $5.55 a bushel.

Soybeans fell 0.3% to $12.91 a bushel and wheat gave up 0.1% to $6.98-1/2 a bushel, after dropping earlier in the session to $6.90-1/4 a bushel, the weakest since June 20.

From Canada, Statcan will today publish its canola acreage estimate, which is expected to be slightly up compared with the last year’s results at 21.4 million hectares.

Meantime, Statistics Canada reported May canola crush at 769,942 metric tons (mt) the smallest volume crushed since August or in nine months. 

This is no surprise due to the time of year when producers are in the field and crushers take on routine maintenance projects.

This volume is up 30.1% from the same month in 2022, while 1.9% higher than the three-year average for the month of May. 

It is also more than 100,000 mt above the volume needed this month to stay on the steady pace needed to reach the AAFC crush forecast of 9.5 million metric tons (mmt).

The cumulative crush from August to May, or over the first 10 months of the crop year, is 8.283 mmt. 

This volume is up 16.3% from the same period in 2021-22, while is 2.1% higher than the three-year average for this period.

The oil content for the month rounds to 42%, up from 41.9% in the previous month and the highest percentage reported in 21 months. 

The cumulative oil content for 2022-23 is 41.6%, which compares to the 2021-22 final average of 41.8% and the five-year average of 43.3%.

Also, during the month of May, the Canadian soybean crush totaled 144,992 mt, the lowest volume crushed in three months. 

Over the first nine months of the row-crop crop-year, 1.388 mmt of soybeans have been crushed, down 2.2% from the same period in 2021-22 and 2.4% below the five-year average. 

The current crush is behind the steady pace needed to reach the current 1.9 mmt crush forecast. 

The oil content for the month is calculated at 19% based on Statistics Canada data, which is up from the 2021-22 final average of 18.7% and compares to the five-year average of 18.6%.

From South America, Brazil’s Abiove modestly raised its estimates for the country’s 2022/23 soybean production, which is expected to carve out a new record of 156 MMT. 

Brazilian soybean exports are also likely to reach record levels this season, with Abiove currently estimating that total will reach 97 MMT.

In Europe, we saw another highly volatile session, with all three markets falling thanks better weather conditions, Russian wheat competitiveness, and harvest pressure begun in France too.

The first cuts of winter barley showing satisfactory results, both in terms of quality and quantity, though unfavourable weather conditions forecasted over much of France in the coming days could halt harvesting operations.

Meantime, as of 25 June, the EU had exported 30.79 million tonnes of wheat, compared with 27.66 million tonnes last year. 

Barley exports were down sharply at 6.34 million tonnes compared with 7.02 million tonnes last year. 

Corn imports, in contrast, rose sharply to 25.52 million tonnes from 16.28 last year.

Rapeseed imports also rose at 7.24 MMT, vs 5.26 MMT a year ago.

Soybean imports fell to 12.52 MMT from 14.17 MMT a year ago.

Soymeal imports also were lower at 15.38 MMT, compared with 16.06 a year erlier.

From South Africa, the country’s Crop Estimates Committee reported that the 2022/23 harvest should come in 5.7% higher from a year ago, with an estimated total of 16.35 MMT. 

A little over half of that total is white corn for human consumption, with the remainder in yellow corn for animal feed.

From Levant, the National Grain Council (UHT) has revised its wheat production estimate for 2023 from a previous 20.75 million tons to 21.5 million tons amid better-than-expected precipitation.

The size of wheat cultivation areas will be around 7.3 million hectares during the 2022-2023 production year.

It is estimated that the wheat production in the Marmara region will remain the same compared with the long-year’s average, while the output will be 3 percent higher in the Aegean and the Mediterranean regions and 20 percent and 12 percent higher in the Black Sea and Eastern Anatolian regions.

The average annual wheat production in the past years was 20 million tons, said the report.

In May, Turkish Statistical Institute (TÜİK) said that wheat production was forecast to increase by 3.8 percent in 2023 compared with 2022 to 20.5 million tons. 

It estimated that the country’s grain production will be around 39.5 million tons this year, rising by 2.1 percent from 2022.

Vegetable production will increase 1.9 percent to 2.6 million tons, while fruit output is expected to rise by 0.3 percent to 26.9 million tons, according to TÜİK.

From Ukraine, the UCAB club has estimated grain production for 2023 at 42.5 million tonnes, including 16.3 million tonnes of wheat, 21.1 million tonnes of corn and 4.2 million tonnes of barley.

On the other hand, according to a farmers’ survey, Ukraine’s 2023 wheat harvest may far exceed official expectations of 17 million metric tons and reach at least 24 million metric tons.

UGA and UkrAgroConsult, indeed said, “this year’s wheat yield could be high, ranging from 3 to 8 metric tons per hectare”, adding that the average yield could reach 5.46 metric tons per hectare.

Thus, taking into account the agriculture ministry data on winter and spring sowing, this year’s gross harvest could total 24.4 million metric tons in bunker weight or 23.5 to 24 million metric tons in clean weight.

“This is significantly higher than the current market expectations, which we see at 15.6 to 18 million metric tons,” UGA and analysts said.

From Russia, according to the Russian AgMin, farmers harvested 1.5 MMT of grain as of June 26.

That was compared with 875k mt, at the same date last year, and rapresents a growing of 1.7 times. 

Of that, wheat harvested was 83.4k mt from 18.7k ha, with a 4.45 MT/HA averagege yield. 

Meanwhile barley was 845.8k mt.

All grain and leguminous crops harvested so far, comes from 352.4K ha. 

From the Middle Kingdom, Chinese Premier Li Qiang said China will take steps to boost demand, invigorate markets and promote development, while accelerating the green transition and opening “high level” parts of its economy to the rest of the world. 

However, Mr Li didn’t provide any specific details, leaving markets wondering about the stimulus measures. 

He said the country was on track to achieve its 5pc growth target and anticipates an acceleration in economic growth during the second quarter compared to the previous quarter. 

From Australia, local markets were quiet yesterday. 

Wheat and barley current crop values were largely unchanged. 

New crop bids and offers remained wide. 

Canola saw liquidity as higher bids encouraged sellers.  

The forecast looks more promising each day for NSW and Qld with the BOM 8-day forecast now showing all of NSW and southeast Qld looking set to receive 15-25mm while southwest Qld has 15-50mm on the radar. 

On the international trade scene, Iran issued an international tender to purchase 120,000 metric tons of soymeal, sourced from Argentina, that closes on Wednesday. 

The grain is for shipment in July and August.

A group of importers in Thailand is believed to have rejected all offers and made no purchase in an international tender for a nominal 55,000 metric tons of animal feed wheat which closed on Wednesday.

Prices were regarded as too high.

Lowest price offer was believed to be around $275 a metric ton c&f for September shipment and around $285 a metric ton for November/December shipment.

But with wheat futures continuing to fall, importers are expecting to buy more cheaply if they delay purchases. 

The group had asked for offers for consignments of around 55,000 tonnes for shipment monthly between September and December but had not been expected to buy the full volume sought.

In outside markets …

Energy markets saw oil prices slumping over 2%, on signals that central banks may not be done with interest rate hikes, while industry data showed lower U.S. crude and gasoline inventories during the peak summer driving season.

Thus, Brent crude futures settled down $1.92, or 2.6%, at $72.26 a barrel. 

U.S. West Texas Intermediate (WTI) futures dropped $1.67, or 2.4%, to $67.70.

Meantime, U.S. inventory data from the American Petroleum Institute industry group showed on Tuesday that U.S. crude oil and gasoline inventories fell last week.

Crude stocks indeed fell by about 2.4 million barrels in the week ended June 23. 

Gasoline inventories fell by about 2.9 million barrels.

U.S. government data on stockpiles is due on Wednesday.

As a result, oil prices rallied this morning.

Notably, Brent crude was up 48 cents, or 0.7%, to $72.74 a barrel at 09:28 GMT, while West Texas Intermediate (WTI) U.S. crude gained 31 cents, or 0.5%, to $68.01.

In ocean freight markets, the Baltic Exchange’s main sea freight index recorded its biggest daily percentage decline in nearly a month on Tuesday as demand for larger vessels weakened.

The overall index, indeed, fell 50 points, or 4.1%, to 1,183 — its biggest dip since June 1.

Notably, the capesize index dipped 138 points, or 6.7%, to 1,937.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, decreased $1,141 to $16,068.

The panamax index was down 24 points, or 2.2%, at 1,089, declining for the sixth straight session.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, slid $216 to $9,797.

Among smaller vessels, the supramax index fell 5 points to 746.

In equity markets, US stocks rose on tech-stock leadership.  

Stock investors were impressed by Tuesday’s strong U.S. economic reports, which highlighted the resiliency of the U.S. economy.  

Tuesday’s May U.S. durable goods orders report of +1.7% m/m indeed was stronger than expectations of -0.9%.  

Also, capital goods orders ex-defense and ex-aircraft, a proxy for corporate capital investment, rose +0.7% m/m, stronger than expectations of +0.1% m/m.

The Conference Board’s June U.S. consumer confidence index rose by +5.7 points to a 1-1/2 year high of 109.7, much stronger than expectations for an increase to 104.0. 

The May U.S. new home sales report of +12.2% to a 1-1/4 year high of 763,000 was much stronger than market expectations for a small decline to 675,000.

The Richmond Fed manufacturing index rose by 8 points to -7 from May’s -15, which was stronger than expectations for an increase to -12.

The April S&P CoreLogic home price report of +0.9% m/m and -1.7% y/y was stronger than market expectations of +0.4% m/m and -2.4% y/y. 

The report highlighted that strong demand for tight home supply continues to put upward pressure on home prices.

As a result, the bond market, the yield on the 10-year U.S. Treasury rose to 3.76% from 3.72% late Monday. 

The two-year Treasury yield rose to 4.76% from 4.74%.

The markets indeed are discounting the odds at 74% for a +25 bp rate hike at the next FOMC meeting on July 25-26 and are fully anticipating that +25 bp rate hike by November, with those expectations unchanged from Monday.

In this context, on Wall Street the S&P 500 gained 1.1% to 4,378.41. 

The Dow Jones Industrial Average rose 0.6% to 33,926.74, while the Nasdaq composite gained 1.6% to 13,555.67.

On this morning, Asian shares were mixed despite the rally on Wall Street.

Notably, Australia’s benchmark S&P/ASX 200 jumped 1.1% to 7,194.00 after the government reported that the consumer price index rose 5.6% in the twelve months to May. 

The most significant price rises included housing and food. 

The Reserve Bank of Australia made a surprise move of raising interest rate earlier this month to counter persisted price pressures.

Japan’s benchmark Nikkei 225 gained 1.5% in afternoon trading to 33,029.73. 

South Korea’s Kospi lost 0.7% to 2,562.72. 

Hong Kong’s Hang Seng fell 0.3% to 19,083.80, while the Shanghai Composite dipped 0.7% to 3,167.36.

In currency trading, the dollar index fell -0.2%, with euro seeing support from hawkish Lagarde comments.

Notably, the EUR/USD rose +0.43%, while the USD/JPY rose +0.37%.

At the ECB’s retreat in Portugal, ECB President Lagarde Tuesday said, “It is unlikely that in the near future the central bank will be able to state with full confidence that peak rates have been reached.”  

In this context, the consensus is that the ECB will raise its deposit rate by +25 bp to 3.75% at its next meeting on July 27 and that one final +25 bp rate hike to a terminal rate of 4.0% is likely by late this year.

Meantime, investors were impressed by Tuesday’s strong U.S. economic reports, which highlighted the resiliency of the U.S. economy and boosted the chances for a soft landing even though the reports were hawkish for Fed policy.  

The 10-year T-note yield indeed rose +4 bp.

The two-year Treasury yield, which moves more on expectations for the Fed, rose to 4.76% from 4.74%.

On this morning, the U.S. dollar edged down to 143.99 Japanese yen from 144.02 yen.

But the recent rise of the dollar against the yen is raising speculation about how that could affect policy makers, as well as what it could mean for the economy at a time when inflationary pressures have picked up after years of deflation.

The euro cost $1.0949, down from $1.0959.

That’s all, thank you.

We wish you a nice day.

Author: Sandro F. Puglisi

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