Good morning, Farmer Family …
US farm markets were mixed but mostly higher on Wednesday.
Corn prices were up 1.47%, soybeans were up 0.48%, soybean oil was also up about 1.6%, while soybean meal was reduced by 0.7%.
Wheat prices made substantial inroads, with Chicago SRW ending up 5.01%, Kansas City HRW was up 6.05%, MGEX HRS was up 3.88%.
Wheat prices rebounded from a 25-month low, edging up on fresh tensions between Russia and Ukraine that cast doubt on the future of the Black Sea grains corridor.
Talks were due to be held in Moscow on May 5, but it was unclear whether all parties were in agreement.
Meantime, Russia accused Ukraine of attacking the Kremlin with drones overnight in a failed attempt to kill President Vladimir Putin.
Later, Ukraine President Volodymyr Zelenskiy said that Russia did not appear to be interested in extending the Black Sea grain deal, but that Kyiv was focused on looking for partners to fulfil the deal and was not looking for Russian interest.
However, Russia said it will keep talking to the United Nations about the future of the deal, but would not do anything to harm its own interests.
Access to SWIFT for the Russian Agricultural Bank, known as Rosselkhozbank, is a key Russian demand in talks over the future of the Black Sea deal.
A senior State Department official said last week that Washington had broad exemptions in place for Russian food and fertiliser trade and that Rosselkhozbank was not blocked by sanctions.
In this context, it’s believed JPMorgan had been asked to help by the U.S. government.
Notably, the U.N. is working with the Rosselkhozbank to prepare about 40 additional payments to be processed by JPMorgan.
The document also said the U.N. was also discussing Russian fertiliser exports with JPMorgan.
On the weather side, most of the Corn Belt will receive at least some measurable moisture between Thursday and Sunday.
A few fields could gather as much as 1” or more during this time, per the latest 72-hour cumulative precipitation map from NOAA.
The agency’s new 8-to-14-day outlook predicts seasonally wet weather is likely for most of the central U.S. between May 10 and May 16, with warmer-than-normal conditions likely for the Midwest and Plains during this time.
However, some operators said the rains that happened in the US Plains may not have helped winter wheat, as the damage was done.
An Oklahoma State University crop tour projected the OK wheat crop will reach 54.3 mbu on an average yield of 24.6 bpa according to an Oklahoma Wheat Commission announcement, meanwhile the Kansas Wheat Tour will begin May 15th through May 18.
In this context, only the ensuing spillover strength from wheat also helped both corn and soybean prices move higher yesterday, with soybeans mouving higher after touching a 7-month low in the session.
Ethanol production for the week ending April 28 improved modestly, with a daily average of 976,000 barrels, per the latest data from the U.S. Energy Information Administration.
That was a 9k bpd increase from the week prior.
However, it was the second consecutive week that failed to meet the 1-million-barrel-per-day benchmark.
Ethanol stocks, meantime, were down by 943k barrels to 23.363 million.
That represents a 4% decline from last week.
Ahead of today’s weekly export sales report, grain traveling the US railways moved another 21,181 carloads last week.
That brings cumulative totals for 2023 to 367,742 carloads, which is trending 6.2% below last year’s pace so far.
Meantime, pre report estimates for corn export bookings ranged from 450k MT of net cancelations to 600k MT of net new sales for 22/23 business.
Analysts are looking for below 200k MT of new crop bookings ahead of the FAS data.
As for soybean, analysts are expecting between 100k and 400k MT of old crop soybean sales.
New crop sales are expected to be below 100k MT.
For the products, analysts expect 75k to 300k MT old crop meal bookings and 0-20k MT of old crop oil sales.
As for wheat, analysts expect USDA to report less than 250k MT of old crop wheat sales for the week that ended 4/27.
New crop export sales are anticipated to be between 50k MT and 300k MT.
In this context, corn basis bids were steady to mixed after trending 6 cents lower at an Ohio river terminal while firming 5 to 7 cents higher at two other Midwestern locations.
Soybean basis bids improved 4 cents at an Ohio elevator and 5 cents at an Indiana processor while holding steady elsewhere across the central U.S..
Commodity funds were net buyers of CBOT corn, soybeans, wheat and soyoil futures contracts.
Funds were net sellers of soymeal.
On this morning, Chicago wheat prices climbed to a one-week high, continuing to recover from multi-month lows.
Soybeans inched lower and corn was almost flat, with both markets facing pressure from U.S. planting.
Notably, the most-active wheat contract on the Chicago Board of Trade was up 0.4% at $6.42-1/2 a bushel, as of 04:01 GMT, after climbing earlier in the session to its highest since April 26.
The market hit its lowest since April 2021 at $6.04 a bushel on Wednesday.
Corn was unchanged at $5.88-1/2 a bushel and soybeans lost 0.1% to $14.16 a bushel.
In energy markets, oil prices fell 4%, extending steep losses from the previous session.
Brent futures, indeed, settled $2.99 lower, or 4%, to $72.33 a barrel, the global benchmark’s lowest close since December 2021.
Brent hit a session low of $71.70 a barrel, its lowest since March 20.
U.S. West Texas Intermediate crude (WTI) fell $3.06, or 4.3%, to $68.60.
WTI’s session low was $67.95 a barrel, lowest since March 24.
A day earlier, both benchmarks fell 5%, their biggest daily percentage declines since early January.
In China, data over the weekend showed April manufacturing activity fell unexpectedly.
Banking sector concerns returned to the spotlight.
The Fed raised interest rates by a quarter of a percentage point.
But the Fed also signaled it may pause further increases.
The European Central Bank is also expected to raise rates at its policy meeting on Thursday.
Also pressuring oil prices, government data showed U.S. gasoline inventories unexpectedly rose by 1.7 million barrels last week.
However, U.S. crude inventories fell by 1.3 million barrels in the week, compared with forecasts for a 1.1 million-barrel drop.
Meantime, Morgan Stanley lowered its forecast for Brent prices to $75 a barrel by year-end, as “downside risk to Russia’s supply and upside risk to China’s demand have largely played out and prospects for 2H tightness have weakened”, noting to buoyant exports from Russia despite Western sanctions.
In ocean freight markets, the Baltic Exchange’s main sea freight index, which tracks rates for ships carrying dry bulk commodities, edged up on Wednesday, supported by stronger capesize vessel rates.
The overall index, indeed, was up 6 points, or 0.39%, to 1,558.
Notably, the capesize index gained 57 points, or 2.51%, at 2,325 – its highest level since Dec. 22.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes carrying commodities such as iron ore and coal, increased by $474 to $19,283.
The panamax index was down 23 points, or 1.47%, at its lowest since March 1 at 1,540 points.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, declined by $204 to $13,862.
Among smaller vessels, the supramax index fell 21 points to $1,123.
In equity markets, US stock indexes gave up early gains and closed moderately lower after Fed Chair Powell said the Fed wouldn’t cut interest rates with inflation remaining high.
Stocks initially moved higher into the early afternoon after economic reports on ADP employment and ISM services were better than expected, which bolstered optimism in the U.S. economic outlook.
Notably, U.S. Apr ADP employment rose +296,000, stronger than expectations of +150,000 and the biggest increase in 9 months.
The Apr ISM services index rose +0.7 to 51.9, slightly stronger than expectations of 51.8.
Meantime, the FOMC, as expected, voted unanimously to raise the federal funds rate target by 25 bp to 5.00%-5.25%.
The FOMC also maintained plans to shrink the balance sheet each month by as much as $60 billion for Treasuries and $35 billion for mortgage-backed securities.
Fed Chair Powell said banking conditions have “broadly improved” since March.
He also said his forecast is for modest growth, not a recession, although it’s possible we’ll have what would be a mild recession.
He added that the FOMC views inflation as coming down but “not so quickly.”
And “in that world,” it “would not be appropriate” to cut rates, and the Fed would not cut rates.
“That’s not our forecast.”
The lack of clarity regarding the U.S. debt ceiling was a bearish factor for stocks.
Treasury Secretary Yellen said the Treasury Department may run out of cash as soon as June 1 unless the debt ceiling is raised.
In this context, global bond yields Wednesday were mixed.
The 10-year T-note yield fell to a 3-week low of 3.351% and finished down -1.5 bp at 3.409%.
The 10-year German bund yield dropped to a 3-1/2 week low of 2.218% and finished down -1.1 bp at 2.247%, and the UK 10-year gilt rose +2.6 bp at 3.699%.
As a result, on Wall Street, the S&P 500 fell to 4,090.75.
The Dow Jones Industrial Average lost 0.8% to 33,414.24 and the Nasdaq composite slipped 0.5% to 12,025.33.
On this morning, Asian stock markets were mostly higher.
Shanghai and Hong Kong advanced while Seoul and Sydney declined. Japanese markets were closed for a holiday.
Notably, the Shanghai Composite Index rose 0.6% to 3,341.73 and the Hang Seng in Hong Kong surged 1% to 19,899.02.
The Kospi in Seoul lost 0.2% to 2,495.40 and Sydney’s S&P-ASX 200 fell 0.1% to 7,187.20.
India’s Sensex opened up 0.2% at 61,300.29. New Zealand and Southeast Asian markets advanced.
In currency trading, the dollar index fell by -0.6%, with the dollar undercut by lower T-note yields.
Also, the lack of clarity regarding the U.S. debt ceiling weighed on the dollar.
It should to note the dollar maintained moderate losses despite the Fed raising interest rates by 25 bp.
In this context, the EUR/USD rose by +0.45%.
Also, signs of economic strength in the Eurozone were bullish for the euro after Wednesday’s news showed the Eurozone Mar unemployment rate unexpectedly fell to a record low.
Notably, the Eurozone Mar unemployment rate unexpectedly fell -0.1 to a record low of 6.5%, showing a stronger labor market than expectations of no change at 6.6%.
As for the USD/JPY, on Wednesday it fell by -0.67%, as the yen posted moderate gains on a decline in US T-note yields.
Also, the ongoing banking turmoil in the U.S. is fueling safe-haven demand for the yen.
In addition, the sell-off in crude prices Wednesday to a 5-week low is supportive of Japan’s energy-dependent economy and the yen.
On this morning, the dollar fell to 134.51 yen from Wednesday’s 135.46 yen.
The euro rose to $1.1081 from $1.1058.
Going back to analyze other ag markets …
In Europe, after the strong sell-off in recent days, news from Moscow triggered a rebound in wheat prices.
Both corn and rapeseed, by contrast, retreated under the bearish influence of crude oil and strength of the euro.
The video of the drone attack on the Kremlin in Moscow, although controversial, was the trigger for the rebound in wheat prices.
However it is above all a sudden rise in the geopolitical risk premium in this week of final negotiations around the “Grain Deal”, pushing up prices.
Meantime, the euro/dollar continued to rise and returned to its highest level for 13 months.
A rebound in Romania’s grain output this year may limit room for Ukrainian shipments through the Black Sea port of Constanta, port operator Comvex said.
Constanta has handled nearly a third of Ukrainian grain exports since the war started, shipping 8.6 million tonnes in 2022 and 3.3 million in the first quarter of this year.
However, “new Romanian crops look set to be bigger than last year, which means there might be less room for Ukrainians” Comvex manager Viorel Panait said.
“Operators will not prejudice their traditional clients.”
Panait, who is also president of the Constanta Port Business Association, said better handling of truck traffic and port congestion could help in the absence of new capacity.
Constanta port handled 24.01 million tonnes of grain exports overall last year.
Romania is expected to harvest 10.35 million tonnes of wheat this year.
Cezar Gheorghe, a grain market analyst at AGRIColumn said he expected Romania’s production of fall crops, including wheat, to top the five-year average, and that Constanta needed investment and a unified IT system to handle congestion.
From UK, spring planting delays have been reported across all regions, considering unsettled weather conditions continued through April, as well as March.
On average, plantings have been delayed about one month, with delays also noted to fertiliser and crop protection applications.
With lower yield prospects in late-sown crops, reduced inputs on these crops have been reported.
Winter grain crops are generally faring well, with good yield potential, despite the wet weather.
Though on heavy soils, establishment has been reportedly impacted.
Recent rainfall is also reported to likely increase pressure from Septoria and other cereal diseases, which remains something to be watched closely, this has been worsened by late fungicide applications.
To week ending 25 April, 88% of the GB winter wheat crop was in good/excellent condition, ahead of 84% at the same point last season.
Crops are establishing well, though some crops in the North West particularly have been impacted by localised flooding.
The management of Septoria will remain an important watchpoint, with high levels observed in most winter wheat crops.
GB winter barley crops were rated 90% good/excellent condition, to week ending 25 April, up from 84% at the same point last year.
The last few weeks have seen good crop growth, and in some advanced crops, the flag leaf has become visible.
To note in Yorkshire, lodging is noted as a concern, considering PGR applications being delayed or missed.
Higher levels of disease have been observed where T0 and T1 spray applications have been delayed or missed.
For oilseed rape (OSR), conditions are very varied.
66% of winter OSR was rated good/excellent to week ending 25 April, down from 70% the same point last year.
Cabbage stem flea beetle remains the biggest issue for winter OSR crops, with pigeon damage also reported in several regions.
Where necessary, some OSR crops have been replaced with spring beans, spring oats or spring barley.
From Levant, Turkish state lender Ziraat Bank could work as an intermediary to process payments for Russia’s grain exports, a senior Turkish official said on Thursday, adding the United States and the United Nations would need to approve each transaction.
Ziraat would not be involved unless all sides sign off on the agreement, the person said, adding talks were ongoing regarding Russian grain exports.
From Ukraine, French consultancy Agritel raised its forecast for this year’s Ukrainian wheat crop to 16.34 million tonnes, from 15.04 million pegged in November, to take account of a higher-than-expected area to be harvested, it said on Wednesday.
The estimate, which only includes regions that are controlled by war-hit Ukraine, compares to 20.5 million tonnes harvested in 2022, Agritel said.
The Ukrainian ministry’s crop forecasted 17 million tonnes, while APK-Inform’s first forecast last week pegging the wheat crop at 16.2 million tonnes.
The rise in this month’s area forecast was primarily based on a higher estimate for winter wheat acreage to about 4.1 million hectares while spring wheat acreage was seen at around 300,000 hectares.
Agritel said it had kept its yield estimate at 3.8 tonnes per hectare.
Meantime, according to the State Statistics Service, as of May 3, in 2022/23 MY Ukraine exported 41.906 mln tonnes of grains and pulses, including 311 thsd tonnes in May, reported the press service of the Ministry of Agrarian Policy of Ukraine.
In particular, in the current season, Ukraine exported:
– wheat – 14.483 mln tonnes (98 thsd tonnes in May);
– barley – 2,469 mln tonnes (8 thsd tonnes);
– rye – 17,9 thsd tonnes (0);
– corn – 24.628 mln tonnes (204 thsd tonnes).
Also, as of May 3, in 2022/23 MY the total export of flour amounted to 128.9 thsd tonnes (1.2 thsd tonnes in May), including wheat flour – 123.9 thsd tonnes (1.2 thsd tonnes).
On the international trade scene, Algerian state agency ONAB has issued an international tender to purchase about 140,000 tonnes of corn to be sourced from Argentina or Brazil.
The deadline for submission of price offers in the tender is today, May 4.
Corn shipment is sought in four 35,000 tonne consignments between May 15-31, June 1-15, July 1-15 and Aug. 1-15.
ODC Tunisia issued a tender to buy 75k feed barley and 100k durum wheat.
Closing date is May 5, 2023.
Jordan’s barley tender results saw, Olam selling one cargo of 60k at $260 CFR with shipmeht in the first half of October.
Other offers were: Viterra $ 269.00, Bunge $ 271.70, Cargill $ 269.90, Ameropa $264.9, and Grain flower $ 270.
That’s all, thank you.
We wish you a nice day.
Author: Sandro F. Puglisi
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