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LAST WEEK MARKET COMMENT

Good morning Farmer Family …

US farm markets ended mixed on Friday.

Corn market was mostly flat during the end week session.

However, corn prices managed to edge higher, at the bell, on hopes for stepped-up demand on the export market.

Thus, the March corn contract ended with a fractional gain of 0.07%. 

The soybean complex fell, on expectations that beneficial rains arrived in Argentina boosted crop potential there.

Weakness in the crude oil market made an additional pressure.

As a result, soybeans were 0.92% weaker at the close, for the products, meantime, meal ended 0.75% in the red, and bean oil prices went home with 0.33% losses. 

The wheat complex, was mixed.

Chicago soft red winter wheat contract sagged on profit taking, after notching its biggest weekly gain in four weeks.

Kansas City HRW, and Minneapolis spring wheat, were firmer meantime.

Snow and rain in Kansas, eastern Colorado, and Nebraska benefited the dormant wheat crop.

However, the amount could be still insufficient to alleviate the persisting long-term drought conditions. 

Moisture in the Pacific Northwest helped alleviate some dryness in Washington, Oregon, and Idaho.

Looking ahead, plenty of wet weather is on its way to the Mid-South and Southeast until Tuesday, and much of the Midwest and Plains will see at least some measurable rain and/or snow during this time, according to the NOAA. 

The agency’s 8-to-14-day outlook predicts more seasonally wet weather in store for the central U.S. between February 3 and February 9. 

However, cooler-than-normal conditions are also likely during this week.

Thus, this cold snap could damaging the dormant crop, and worried some operators especially about wheat contracts tracking high-protein supplies.

Worries that escalations in the Russia-Ukraine war could lead to supply disruptions from Black Sea ports, also supported markets.

In this context, SRW wheat prices closed with 0.33% losses, the hard red wheats rallied 0.52% and Minneapolis gained 0.38%. 

The funds were neutral on Friday in corn and net sellers for 4,500 lots of soybeans and 1,500 lots of wheat.

For the week, all main three commodities posted weekly gains.

Notably, corn prices was 0.99% higher since the prior Friday.

Soybeans took back a couple cents of previus week’s drop, as March was up 0.2%. 

Soy Meal was again the leader of the complex, this time with gains of 2.11%. 

Soy oil prices, meantime, were down another 2.18 %, their fifth straight weekly loss.

The wheat complex, on its part, was stronger during the week.

Kansas City led the way, up 2.51%, Chicago was 1.15% higher, and Minneapolis up 0.96%. 

KC wheat has posted gains in three straight weeks and six of the last seven.

Meantime, corn basis bids were steady to weak after trending 2 to 5 cents lower at three Midwestern locations on Friday.

Soybean basis bids were mostly steady across the central U.S., but did move 5 cents higher at an Indiana processor and 3 cents lower at an Iowa river terminal.

Basis levels for wheats, were mixed across export locations during the week. 

As Lunar New Year celebrations continued around Asia, demand from the PNW was light during the week. 

PNW HRS basis remained unchanged, while Gulf HRS was down with few new inquiries.

Traders noted the impact of softer interior freight as railroad performance normalizes. 

Likewise, PNW HRW basis decreased, drawn down slightly by the cheaper freight, though demand from the domestic milling industry continues to prop up basis values. 

Gulf HRW was also steady, supported by the domestic market and the tighter corn-wheat spreads. 

Gulf SRW basis and PNW SW prices were up for the week, bouncing back after several weeks of price decline, indicating that prices may have hit their lower limit.

After the sessions close, the weekly Commitment of Traders report tallied spec funds adding another 9,660 contracts to their net long position in corn during the week ending Jan 24. 

That put them net long 201,797 contracts as of Tuesday night.  

As for soybean, data showed money managers trimming their net long position by 22,037 contracts in soybean futures and options during the week ending 1/24. 

That took them to a net long position of 146,261 contracts.

As for wheat, CFTC’s weekly Commitment of Traders data indicated managed money spec traders adding another 8,844 contracts to their net short position in Chicago wheat futures and options in the week ending January 24. 

That took the net short position to 73,933 contracts, the largest since May 2019. 

In KC wheat, they pared back 459 contracts from their new net short position to 6,832 contracts as of Tuesday.

On this morning, soybean prices were firmer.

Wheat prices rose and corn also advanced.

Notably, the most-active soybean contract on the Chicago Board of Trade (CBOT) was up 1% at $15.24-1/2 a bushel, as of 05:22 GMT.

Wheat rose 0.5% to $7.53-3/4 a bushel, while corn gained 0.4% to $6.85-1/2 a bushel.

Recent rains in Argentina had brought badly needed relief to parched lands.

However, months of drought have delayed planting and prompted a reduction in projected harvests in the South American country.

Strong U.S. soybean exports this month and technical buying have also provided support to prices.

Corn prices also advanced as traders watched for signs of fresh demand from China.

As for wheat, a cold snap in the U.S. Plains fanned concerns about supply along with potential escalations in the Russia-Ukraine conflict.

The USDA has confirmed a flurry of private sales of U.S. corn and soybeans in recent days.

The grains markets also received additional support from concerns that Ukrainian crops would be smaller due to the war, and Russia’s crop also would fall below expectations.

In energy markets, oil prices settled lower on Friday.

Notably, Brent futures settled down 81 cents, or 0.9%, at $86.66 per barrel, up just 3 cents from last week’s settlement. 

U.S. crude fell $1.33, or 1.6 %, to settle at $79.68, 2% lower on the week.

Oil loadings from Russia’s Baltic ports are set to rise by 50% this month from December.

Urals and KEBCO crude oil loadings from Ust-Luga over Feb. 1-10 may rise to 1.0 million tonnes from 0.9 million in the plan for the same period of January.

If Russian supply remains strong heading into next month, oil is probably going to continue to trend lower.

U.S. energy firms during the week kept oil and natural gas rigs steady at 771, energy services firm Baker Hughes Co BKR.O said in its closely followed report on Friday.

A 4.2 million barrel build during the week, in stocks at Cushing, the pricing hub for NYMEX oil futures, also weighed on the market.

On this morning, oil prices fell.

Brent crude futures, indeed, fell 74 cents, or 0.8%, to $85.92 a barrel by 07:10 GMT while U.S. West Texas Intermediate crude was at $79.07 a barrel, down 61 cents, or 0.8%.

OPEC+ delegates meet this week to review crude production levels, with analysts expecting no change to current output policy.

Also, this week, the Fed’s decision on interest rates will be made at meeting over Jan. 31 and Feb. 1.

Oil prices rose earlier in the session amid tensions in the Middle East following a drone attack in oil producer Iran.

Also, China pledged over the weekend to promote a consumption recovery which would support fuel demand.

In ocean freight markets, the Baltic Exchange’s main sea freight index, tracking rates for ships carrying dry bulk commodities, marked its fourth consecutive weekly fall on Friday as capesize demand remained numb.

The overall index, indeed, was down one point to 676, levels last seen during June 2020. 

The index was down 11.4% for the week.

Notably, the capesize index lost 15 points, or about 2.7%, at 534, a near five-month low. 

It was down 32% for the week, also a fourth consecutive weekly fall.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were down $118 to $4,433.

The panamax index was up nine points, or about 0.9%, at 1,054. However, it edged down 0.6% on its second consecutive weekly drop.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, rose by $78 to $9,487.

Among smaller vessels, the supramax index rose five points to 650.

In equity markets, Wall Street advanced on Friday, marking the end of an rocky week in which economic data and corporate earnings guidance hinted at softening demand but also a economic resiliency.

All three major U.S. stock indexes, indeed, ended the session green, with the Nasdaq, powered by megacap momentum stocks, enjoying the biggest gain.

Notably, the Dow Jones Industrial Average rose 28.67 points, or 0.08%, to 33,978.08, the S&P 500 gained 10.13 points, or 0.25%, to 4,070.56 and the Nasdaq Composite added 109.30 points, or 0.95%, to 11,621.71.

American Express, jumped 10.5% despite reporting weaker profit and revenue for the latest quarter than expected. 

It gave a forecast for earnings through 2023 that topped Wall Street’s expectations and announced a planned increase to its dividend.

Another big gain was for Tesla’s stock also supporting the market. 

It rose 11% following its stronger-than-expected profit report for the end of 2022 released earlier in the week.

On the other hand Intell fell 6.4%, following a jarring warning from the chipmaker. 

Not only did its revenue and earnings fall short of expectations last quarter, it also gave a forecast for revenue this quarter more than $2 billion below analysts’ expectations.

Hasbro fell 8.1% after saying it “underperformed” in this past holiday shopping season and will likely report a 17% drop in revenue for the fourth quarter. 

The company will cut about 1,000 jobs to reduce costs.

There are two competing big ideas on the market. 

On one hand are worries about a steep drop-off in profits and a severe recession for the economy. 

On the other are hopes that cooling inflation may allow the Fed to take it easier on rates.

So far, the job market has remained remarkably resilient despite a slowing overall economy. 

Almost all of the high-profile layoff announcements have been within the tech industry, which raced to expand after the pandemic sent demand for technology soaring.

The market is partly trying to reconcile that weak earnings and a drop in demand may be necessary for inflation to keep cooling.

Economic reports on Friday backed up recent data points suggesting inflation continues to moderate. 

U.S. Dec personal spending fell -0.2% m/m, right on expectations and the biggest decline in a year.  

Dec personal income rose +0.2% m/m, right on expectations.

U.S. Dec PCE core deflator rose +0.3% m/m and +4.4% y/y, right on expectations, with the +4.4% y/y gain the slowest annual pace of increase in 14 months.

U.S. Dec pending home sales unexpectedly rose +2.5% m/m, stronger than expectations of -1.0% m/m and the biggest increase in 14 months.

The University of Michigan U.S Jan consumer sentiment was revised up by +0.3 to a 9-month high of 64.9. 

The University of Michigan U.S. Jan 1-year inflation expectations fell -0.1 to 3.9%, the lowest in 1-3/4 years.  

Also, the University of Michigan Jan 5-10-year inflation expectations fell -0.1 to 2.9%. 

In this context, the yield on the 10-year Treasury, which sets rates for mortgages and other important loans, held steady at 3.51%. 

The two-year yield, which moves more on expectations for Fed actions, held at 4.19%.

From prior Friday’s close, the S&P and the Dow posted their third weekly gains in four, while the tech-laden Nasdaq notched its fourth straight weekly advance.

So far in the early weeks of 2023, the Nasdaq has jumped 11%, while the S&P 500 and the Dow have gained 6% and 2.5%, respectively.

On this morning, shares were trading mixed in Asia.

In the first trading session after a weeklong break, the Shanghai Composite index gained 0.2% to 3,270.32. 

However, Hong Kong’s Hang Seng lost 2.3% on heavy selling of technology shares. 

Taiwan’s benchmark jumped 3.8%.

Tokyo’s Nikkei 225 rose 0.2% to 27,433.40. 

South Korea’s Kospi lost 1.3% to 2,450.65 and the S&P/ASX 200 in Sydney shed 0.2% to 7,481.70.

India’s Sensex was unchanged and Bangkok’s SET edged less than 0.1% lower.

Reports that holiday travel during last week’s Lunar New Year festivities was nearly back to normal raised market expectations.

However, e-commerce giant Alibaba sank 7.1% following reports it is building a facility in Singapore that some speculated could become its global headquarters.

Taiwan’s benchmark was lifted by gains in TSMC, the world’s biggest maker of computer chips, which jumped 8%.

Shares in some companies in the Adani Group recovered some lost ground after recent massive losses after U.S. short-selling firm Hindenburg Research published a report alleging major problems within India’s second-largest conglomerate, which has holdings in energy, data transmission, construction and other major industries.

Thus, Adani Enterprises, gained 5.4% and the Adani Ports & Special Economic Zone Ltd. added 2.1%. 

But shares in other Adani listed companies fell between 5% to 20%.

The Adani Group said it was considering legal action against Hindenburg following its allegations of stock market manipulation and accounting fraud.

In currency trading, the dollar clung to modest gains against the euro on Friday after data showed falling U.S. consumer spending and cooling inflation, and as investors awaited a slew of central bank meetings this week.

The euro was 0.17% lower at $1.08725, but not far from the nine-month high of $1.09295 touched on Monday. 

For the week, the common currency was up about 0.2%.

Against the yen , the dollar was 0.25% lower at 129.89 yen as hot Tokyo inflation readings spurred bets that a hawkish pivot from the Bank of Japan (BOJ) could be in the offing.

Sterling slipped 0.12% to $1.2397 , amid investor worries that the British economy’s slowdown may prompt the BoE to end its tightening cycle soon, a move which might weaken the pound in the short term.

The U.S. Dollar Index decreased slightly from last week’s 102.21 to 101.9.

On this morning, the dollar slipped to 129.54 Japanese yen from 129.89 yen. 

The euro rose to $1.0886 from $1.0871.

Going back to analyzing the other agricultural markets …

In Canada, the Grain Statistics weekly report, had producers’ deliveries of common wheat at 503,1k mt for week 25 of this shipping season.

That was down from 533,7k mt posted prior week. 

Deliveries of durum wheat, were at 192,4k mt, slightly down from 195,6k mt showed in prior week.

Meantime, Canada exported 443,9k mt of common wheat in week 25.

That was down from 499,0k mt of a week earlier.

Durum wheat exports, meantime, were sharply higher moving up from 167,3k mt to 220,0k mt. 

Total Commercial Stocks of common wheat stood at 2.805,7k mt.

That was down from 2.840,8k mt posted in week 23.

Durum total commercial stocks, were also weaker from 693,2k mt a week earlier, at 667,7k mt. 

Cumulative exports for common wheat were at 9.528,1k mt.

That is compared 5.587,8k mt a year ago.

Durum cumulative exports reached 2.503,3k mt vs 1.253,9 a year ago. 

In this context, cash bids for Canadian durum wheat crumbled week over week. 

Indeed, looking at the average regional price of C$456.3/mt as of Jan 27, that was C$15.3/mt weaker from the prior week, which added to C$22.63/mt drop posted a week earlier, totalling a C$37.93 losse in two weeks.

However, it’s interesting to note, price for the N1 CWAD 13% (durum wheat first class) average street price in Rosetown was at C$503.39, as at Jan 23, virtually unchanged from prior week.

The export basis West Coast & Central SK, was not valued as Great Lakes are closed in this period of shipping season.

In contrast, official daily price data for the Southeast Saskatchewan region, randomly chosen from the southern prairie regions producing durum, shows the bid as of Jan. 25 falling for seven consecutive days, a move that has seen price drop by $39.80/metric ton to $449.75/mt. 

On Jan. 26 price data showed a mixed close across the Prairies, which includes a modest $0.94/mt increase in the southeast Saskatchewan bid.

At the same time, Jan. 26 bids included a sharp $8.43/mt jump in the southern Alberta bid, the first increase in six sessions and the largest daily increase since Nov. 1. 

Thus, cash offers in the export sector appear to be holding steady in Canada, while cash bids to the grower are sliding lower.

Going inside the numbers, it’s should to note, indeed, durum total commercial stocks, contineued to decline week on week, down 29.22% from one year ago and down also from the five-year average for those week.

(1USD=Cnd$1.3309 down from 1.3311 a week earlier).

From South America, Buenos Aires Grains Exchange reported a forecast storm was anticipated to bring much needed rainfall to large parts of the country this week and should aid planting progress. 

While recent rains were providing some relief, rainfall was somewhat patchy and uneven. 

For the week ending 26 January, soybean crop conditions rated 46pc fair/excellent (40pc previous week, 78pc previous year). 

Its soybean production forecast was 41.0Mt. 

Recent rainfall halted a further deterioration of crops. 

However, significant crop losses were expected in early plantings and second soybean lots because of high temperatures and lack of moisture during November, December and most of January.  

Corn crop condition ratings were 61pc fair/excellent (53pc previous week, 71pc previous year). 

Farmers were intensifying work to make the most of the improved conditions following recent rains, despite being in the last weeks of the planting window. 

Rainfall was most beneficial for late-sown crops but was deemed too late to improve conditions for early-planted fields, with production forecast at 44.5Mt.

Consultancy Safras & Mercado predicts record-breaking corn production in Brazil this season.

Despite the Brazilian consultancy trimmed its estimates for the country’s first corn crop to 23.72 MMT, citing drought in the production state of Rio Grande Do Sul, Safras & Mercado is also anticipating a record-breaking second corn crop, with an estimated production of 87.73 MMT.

Analysts from Brazil’s Deral had the southern state of Parana bringing 3.7 MMT of first crop corn and 15.4 MMT of second crop corn. 

Both are consistent with their prior estimate. 

22/23 soybean harvest reached 4.4%, compared to 11% last year when the crop was diminished by drought. 

Brazil’s Deral expects the state of Parana will yield 20.7 MMT of soybeans via their most recent forecast. 

That is down by 3% citing the season’s dryness in the South.

In Europe, markets were still in a consolidation phase on Friday, especially looking the geopolitically situation in the Black Sea and that of currencies. 

Soft (non-durum) wheat exports from the European Union have reached 18.1 MMT as of Jan. 22, up 6% from 2021/22. 

The European Commission estimates 2022/23 wheat production at 133.4 MMT and all wheat exports at 34.9 MMT.

Rumours of renewed demand from Morocco supported the market.

However, the Black Sea origins remain competitive on the international scene, which weighs on prices.

Cheap wheat from Russia and Ukraine in FOB terms, indeed, looks likely to cover the main export demand from the key Middle Eastern and North African importers.

Strength of the euro, meantime, remains a major obstacle to EU competitiveness, in a context of which the European central bank could maintain a rate hike policy.

Thus, Euronext wheat eased on Friday after a three-day rally but still posted its first weekly gain in a month.

March wheat on Paris-based Euronext, indeed, settled 1% lower at 286 euros ($310.74) a tonne, showing a slight 0.4% rise over the week.

Meanwhile, 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.

From the Black Sea basin, according to Joint Coordination Center (JCC) data grain exports through Ukrainian Black Sea ports increased 85% to 893,874 MT for the week ending on Jan. 22, and the average cargo size has increased 14% to 47,046 MT. 

Wheat shipments accounted for 32% of last week’s exports. 

As of Jan. 22, 30 ships awaiting inspection by the JCC in Turkey are loaded with agricultural products from the Black Sea and five are headed into port for loading.

SovEcon expects the 2023 wheat crop to be 18.2 MMT out of Ukraine, which is 600k MT above their prior estimate given rainfall.

US Under Secretary of State for Political Affairs, Victoria Nuland, said Washington was working to increase exports of Russian and Ukrainian grains and fertilisers to the countries in dire need under the Black Sea export initiative. 

“We are working at every level with the World Food Program as you know to speed both food and fertiliser to countries that would normally be consumers of Ukraine and, frankly, Russia’s output, to ensure that they can plant this year,” Ms Nuland said at hearings of the United States Senate Committee on Foreign Relations.

From Ukraine, Grain Association (UGA) said, owing to a drop in area linked to the ongoing conflict, it expected total grain and oilseeds production to decline for a second consecutive year, to about 50Mt (67Mt previous year). 

Ukraine 2023-24 wheat production was projected to remain below 16Mt (20Mt previous year), and corn was pegged at 18Mt (22Mt-23Mt). 

Soybean and rapeseed production were expected to be little changed year on year, at around 3Mt each. 

According to the head of UGA, this outlook was highly tentative and represents best case scenarios, with production levels potentially falling more sharply depending on weather and financial circumstances on farms. 

Ukraine Agriculture Ministry said farmers had harvested 3.8Mha of corn which accounted for 90pc of area planted. 

Corn production was estimated at 25.2Mt, up from the 23.5Mt harvested by 12 January 2023.

From Russia, the Russian wheat export pace is on track for record wheat shipments in January, with 3.5 MMT for the month. 

The January forecast is 2.1 MMT above last year’s rate.

Meantime, the Russian agriculture ministry revised the export tax for wheat, corn and barley.

Particularly, as of Feb 1, the export duty on wheat will increase to 4,365.3 from 4,283.2 rubles per ton a week earlier.

Ditto for corn, rised from 886.5 rubles of a week earlier, to 1,186.2 rubles per ton.

Also for barley, the duty will increase to 3,174.3 rubles from 3,083.7 rubles per ton a week earlier.

This new duty rates will be in effect through Feb 7, inclusive.

The duties were calculated based on indicative prices: $308.8 per ton for wheat ($309.5 a week earlier), $267.7 for barley ($267.9), $226.4 for corn ($221.9).

From South East Asia, according to India’s Farm Ministry, wheat planting rose to 34.19Mha as of 27 January, up from 34.06m hectares last year. 

The area planted to winter pulses increased to 16.54Mha (16.45Mha previous year) and oilseeds were at 10.83Mha (10.05Mha previous year). 

Sowing operations are continuing in some parts of the country.

Meantime, the Food Corporation of India’s (FCI) Tamil Nadu regional office will release 85,000 tonnes of wheat in the open market through e-auction to bring down prices. 

This is part of a nation-wide initiative to rein in prices that had gradually risen over the last few months.

From Australia, Friday’s local markets were relatively flat. 

The ASX eastern wheat March contract settled at A$373.50/t. 

Offshore export demand picked up a touch over the week. 

Iraq purchased 150,000t Aussie wheat. 

China and Korea were sniffing around for feed wheat. 

Showers are forecast to continue today and into the week across eastern NSW and southern Qld with totals ranging from 15-50mm over the next 4 days.

On the international trade scene, South Korea’s Major Feedmill Group (MFG) reportedly purchased 68,000t feed wheat thought to be sourced from Australia in a private deal on Friday for an estimated US$344/t c&f including a surcharge for additional port unloading for May-June shipment. 

GASC has announced another corn tender, to be held on Wednesday 1st February 2023 on a FOB basis for delivery 20th Feb. – 10th March 2023. 

Payment by “At sight” L/C issued by ITFC.

Watching this week’s market, Monday starts with the Export Inspections report released in the afternoon. 

On Tuesday, the USDA will release their Cattle Inventory report. 

On Wednesday the EIA will release their weekly report showing ethanol production and stocks. 

Wednesday the Fed will announce their next interest rate decision. 

We will also get the monthly Fats & Oils, Grain Crushing, and Cotton Systems reports. 

Weekly Export Sales will be out on Thursday afternoon. 

Friday is expiration day for February live cattle options.

That’s all, thank you.

We wish you a nice day and a good start to the week.

Author: Sandro F. Puglisi

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