Good morning, Farmer Family …
US farm markets were mixed but mostly higher on Tuesday.
Wheat prices gathered double-digit gains, with Chicago SRW rising 2.64%, Kansas City HRW gained 1.91%, and MGEX HRS added +1.39%.
Corn prices also trended higher, up 1.14%.
Soybean prices, in contrast, failed to follow suit, drifting 1.4% lower, with soymeal slumping 1.41%, while soyoil tumbled by 2.07%.
Chicago wheat prices bounced from their lowest in more than two years, on concerns that Ukraine’s exports were being restricted despite the extension of the Black Sea export deal, after a Ukrainian official accused Russia to block Ukraine Black Sea grain exports as Ukrainian port of Pivdennyi has halted operations because Russia is not allowing ships to enter it.
Also, prices have bottomed out at $5.94-1/4 a bushel overnight, with the contract substantially oversold,
That prompted another round of technical buying, as that was the lowest prices on a continuous basis for the most active contract since March 31, 2021.
The USDA rated 31% of the U.S. winter wheat crop in good to excellent condition, up 2 percentage points from a week earlier and above analysts’ expectations.
However, overall ratings are still quite dismal.
In this context, some buyers in the United States have recently purchased about 210,000 tonnes of European Union origin wheat expected to be sourced from Poland and Germany.
The grain is for shipment primarily between May and August and is for milling wheat with protein content ranging between 12.5% and 13%.
The gains in wheat lent support to corn prices, in spite the U.S. Department of Agriculture’s weekly crop progress report showed that corn and soybean planting was running ahead of the average pace of the last five years.
Also, forecasted dryness issues for Iowa and northern Illinois may be enough to spark more buying and provide some short-covering support, according to a note from commodities research firm Hightower.
Meanwhile soybeans retreated on profit-taking, following their biggest rally in 8-1/2 months on Monday.
The 2023 crop looks to be off to a strong start so far.
Drier weather is expected for the eastern half of the country between Wednesday and Saturday, but a few scattered fields could get another drink later this week, per the latest 72-hour cumulative precipitation map from NOAA.
Some areas of the Plains will gather another 0.5” or more during this time.
Further out, NOAA’s new 8-to-14-day outlook predicts drier-than-normal conditions emerging in the Great Lakes region between May 30 and June 5, with seasonally warm weather likely for most of the Corn Belt.
In this context, corn basis bids inched a penny higher at an Ohio elevator and dropped 3 cents at an Iowa river terminal while holding steady elsewhere across the central U.S..
Soybean basis bids held steady across the central U.S..
Commodity funds were net buyers of Chicago Board of Trade wheat and corn futures contracts, and net sellers of soybeans, soymeal and soyoil futures.
On this morning, Chicago wheat prices inched lower as traders locked in profits after a strong market performance in the previous session.
Meanwhile, soybean and corn prices edged higher.
Notably, the most-active soybean contract on the Chicago Board of Trade was up 0.3% at $13.26-1/2 a bushel, as of 04:23 GMT.
Wheat lost 0.1% to $6.21-3/4 a bushel, while corn gained 0.3% to $5.79-1/2 a bushel.
The benchmark corn contract is headed for a three-day winning streak.
From South America, Brazil has declared a state of animal health emergency for 180 days in response to the country’s first ever cases of avian influenza (HPAI) in wild birds.
The Ag Ministry has created an emergency operations centre to coordinate, plan and evaluate “national actions related to avian influenza.”
Brazil is the world’s largest chicken meat exporter with $9.7 billion in sales last year and has so far confirmed eight cases of the H5N1 strain of HPAI in wild birds since 15 May.
Meantime, crop Consultant Michael Cordonnier maintained his Brazilian soybean crop estimate at 155Mt and corn at 125Mt.
CONAB reported that Brazil’s Safrinha corn crop was 0.2% harvested, with 13.6% mature.
According to Agroconsult, the second maize harvest in Brazil is now estimated at 102.4 million tonnes, against 97.2 posted last month.
Brazil’s Anec only expects the country’s corn exports to reach 386k MT in May.
That’s 32% below the group’s prior projection from a week ago.
Anec also expects the country’s soybean exports to reach 15.9 MMT in May, which is slightly higher than its prior projection from a week ago.
Anec also anticipates Brazilian soymeal exports will reach 2.49 million metric tons this month.
In Europe wheat prices rebounded, in an uncertain geopolitical context, while rapeseed slightly rose, in the wake of oil prices higher.
As of May 21, the EU would have exported 28 million tonnes of soft wheat against 24.86 million last year.
Barley exports, on the other hand, fell to 5.82 million tonnes against 6.82.
For corn, imports were up sharply at 23.99 million tonnes against 14.70 last year to date.
Rapeseed imports into the EU on May 21st stood at 6.94 million tonnes against 4.97 last year to date.
Soybean imports, in contrast, have reached 11.36 MMT, which is around 12% below last year’s pace so far.
EU soymeal imports are also trending lower year-over-year, reaching 14.09 million metric tons over the same period.
According to the industrial association Fediol estimates, in April the processing volume of the main oilseeds (soybean, sunflower, and rapeseed) in the EU countries amounted to 3.33 mln tonnes, which is 0.04 mln tonnes lower compared to the previous month, but higher y-o-y (3.17 mln tonnes).
In particular, soybean processing last month totaled 1.23 mln tonnes, which is 4% higher month-on-month (1.19 mln tonnes), but 7% lower y-o-y (1.32 mln tonnes).
At the same time, the EU reduced the volume of rapeseed processing in April by 2% to 1.63 mln tonnes (+20% y-o-y).
As for sunflower seeds, in April, the processing amounted to 477 thsd tonnes (-8% m-o-m, -2% y-o-y).
In general, since the beginning of 2023, oilseeds processing in the EU has reached 13.16 mln tonnes (13 mln tonnes in January-April 2022), including soybeans – 4.66 mln tonnes, rapeseed – 6.55 mln tonnes, sunflower seeds – 1.96 mln tonnes.
Meantime, Georgia expressed its readiness to provide practical assistance to Uzbekistan in the delivery of products to the European market through ports and transport corridors on its territory, as well as to consider using the port of Anaklia, which is planned to be built in the country.
This became known during the meeting between the Minister of Economy and Finance of Uzbekistan Sherzod Kudbiev and the Minister of Finance of Georgia Lasha Khutsishvili at the 32nd annual meeting of the Board of Governors of the European Bank for Reconstruction and Development (EBRD) in Samarkand.
According to the press service of the Ministry of Economy and Finance of the Republic of Uzbekistan, these projects will contribute to Uzbekistan’s entry into the international market.
In other news, the European Union and French Development Agency (AFD) have agreed to provide a 60 million euro ($66 million) facility to expand silo capacity for grain storage in Egypt, the European Commission delegation in Cairo said.
The funding aims to add at least 420,000 tonnes of storage capacity, mostly for wheat but potentially other cereals, a delegation official said in an email.
That would correspond to an increase of about 12% to Egypt’s current wheat storage capacity of around 3.5 million tonnes.
The funding is part of a previously announced 225 million euro ($240.71 million) food security support package to Middle Eastern and North African nations impacted by Russia-Ukraine war, of which Egypt stood to receive 100 million euro.
The Italian Agency for Development Cooperation (AICS) and the EU had signed an agreement in March for 40 million euros to be spent on projects to produce grains and seeds, set up silos, and control wheat transport within Egypt.
From Kazakhstan, in the current season, Kazakhstan has increased wheat export to the EU countries.
According to APK-Inform with reference to official statistics, for 7 months of 2022/23 MY, Kazakhstan exported 283.09 thsd tonnes of wheat to the EU.
This is almost 6% higher year-on-year (267.84 thsd tonnes).
Italy remains the leader in purchases of Kazakh wheat.
232.81 thsd tonnes were exported there for 7 months of the current season.
In March 2023, of the total wheat exports (52.6 thsd tonnes), 41.7 thsd tonnes were shipped to Italy, which exceeds the figures for the same period last year (39.6 thsd tonnes and 36.8 thsd tonnes, respectively).
Latvia is in second place in terms of purchases of Kazakh wheat. In September-March 2022/23 MY, Kazakhstan exported 31.9 thsd tonnes of this grain to this country.
Interestingly, Latvia sharply increased the import of Kazakh wheat in March, having purchased 10.8 thsd tonnes.
In the previous months of the current MY, the volume of deliveries in this direction did not exceed 5.6 thsd tonnes.
From Australia, old and new-crop wheat and barley markets were A$1-$2/t firmer yesterday by the day’s end.
Liquidity continued to trickle out on old crop-wheat front.
Grower engagement on new crop remains low.
Given this, forecasts for the next 10-15 days are highly watched, which still looks positive for South Australia and Victoria.
Meantime, planting pace is estimated to be around 75pc complete in northern Western Australia and 60-70pc in southern regions.
SA is around 75pc complete with growers waiting on the next rainfall event to keep going.
Vic is estimated to be at the 90pc mark, although some regions remain very wet with more rain on the way.
New South Wales is around 75-80pc complete in most regions, and dry conditions for some have meant that progress is still only around the 30pc mark in the north and north-west, although the planting window for cereals will be open well into June.
On the international trade scene, Taiwan’s MFIG purchasing group bought about 65,000 tonnes of animal feed corn to expected to be sourced from Brazil in an international tender on Wednesday.
It was believed to have been sold by trading house Amaggi.
The corn was purchased at an estimated premium of 139.00 U.S. cents a bushel c&f over the Chicago September 2023 corn contract.
The tender sought shipment between Aug. 5 and Aug. 24 if the corn is sourced from the U.S. Gulf, Brazil or Argentina.
Brazilian corn dominated the tender, with six other trading houses also each offering 65,000 tonnes from Brazil.
No offers of U.S. corn were reported.
One offer for 65,000 tonnes of Argentine corn was said to have been made by trading house Pan Ocean at a premium of 147.88 cents a bushel c&f over the Chicago September contract.
Because of concern over quality, Argentine corn would be accepted only if it was the lowest offer and at least 4 cents per bushel below the second cheapest from other origins.
Two offers each of 52,000 tonnes South African corn were made, with the lowest from trading house Posco at 141.58 cents a bushel over the Chicago September contract.
The US has reportedly purchased about 210kmt of EU milling wheat with 12.5pc to 13pc protein from Poland (150kmt) and Germany (60kmt) for shipment between May and August.
A group of South Korean flour mills bought an estimated 135,000 tonnes of milling wheat to be sourced from the United States, Australia and Canada in an international tender on Tuesday.
Some 50,000 tonnes was bought from the United States for shipment between Aug. 1-Aug. 31, 50,000 tonnes from Australia for shipment between Sept. 16 and Sept. 30 and 35,000 tonnes from Canada for shipment between Aug. 1-Aug. 31.
The deal involved several different wheat types and was all bought on an FOB basis.
The U.S. purchase involved soft white wheat of about 9.5% to 11% protein content bought in the mid $260s a tonne, soft white wheat of 8.5% protein bought in the mid $270s a tonne, hard red winter wheat of 11.5% protein bought in the low $330s s tonne and northern spring/dark northern spring wheat of 14% protein bought in the mid $320s a tonne.
The U.S. wheat was said to have been bought from trading house United Grain Corporation.
The Australian purchase involved Australian hard wheat bought around $340 a tonne and Australian standard white bought at around $275 and $280 a tonne.
The Australian wheat was believed to have been bought from trading house Mitsui.
The Canadian purchase all involved Canadian western red spring wheat (CWRS) of 13.5% protein bought in the low $320s a tonne, they said.
The Canadian wheat was all said to have been sold by trading house GrainCorp.
An importer group in the Philippines is believed to have bought around 40,000 tonnes of animal feed wheat in an international tender issued last week.
Iran purchased 260,000 metric tons of soymeal, likely sourced from Argentina or Brazil, in an international tender that closed on Monday.
The grain is for shipment in June and July.
In energy markets, oil prices rose about 1%.
Notably, Brent crude futures rose 85 cents, or 1.1%, to settle at $76.84 a barrel, while the U.S. West Texas Intermediate crude (WTI) ended at $72.91 a barrel, up 86 cents, or 1.2%.
Both benchmarks extended gains to about 2% in post-settlement trade, after figures from the American Petroleum Institute (API) showed a large draw in crude and gasoline last week, according to market sources.
If official inventories data from the Energy Information Administration, due on Wednesday, confirm the industry body’s figures, U.S. gasoline inventories would have declined for the third straight week to their lowest pre-Memorial Day levels since 2014.
The Memorial day holiday, this year on May 29, traditionally marks the beginning of U.S. peak summer travel.
Also, production cuts by some OPEC+ members take effect this month.
Fears of a supply squeeze mounted after Saudi Arabia’s energy minister said he would keep short sellers – those betting that prices will fall – “ouching” and told them to “watch out”.
However, oil’s upside was limited by U.S. debt ceiling jitters.
In ocean freight markets, the Baltic Exchange’s main sea freight index slumped to its lowest level in over two-months on Tuesday as rates across all vessel segments declined.
The overall index, indeed, fell for a ninth straight session, dropping 17 points, or 1.3%, to 1,348 points – its lowest level since March 8.
Notably, the capesize index was down 25 points, or 1.2%, at 2,040 points and hovered close to a one-month low.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, fell $204 to $16,922.
The panamax index lost 8 points, or 0.7%, to 1,212 points, falling to its lowest since Feb. 23.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, decreased $71 to $10,911.
Among smaller vessels, the supramax index dropped 20 points or about 1.9% to 1,043 points.
In equity markets, US stock indexes posted moderate losses as U.S. debt ceiling talks drag on.
President Biden and House Speaker McCarthy continued their talks, but McCarthy said the two sides are “not anywhere near close” to a deal.
Apr new home sales unexpectedly rose +4.1% m/m to a 13-month high of 683,000, stronger than expectations of a decline to 665,000.
Conversely, the May S&P U.S. manufacturing PMI fell -1.7 to 48.5, weaker than expectations of 50.0.
Also, the May Richmond Fed manufacturing survey unexpectedly fell -5 to -15, weaker than expectations of an increase to -8.
On this wake, hawkish comments from Minneapolis Fed President Kashkari pushed the 10-year T-note yield up to a 2-1/4 month high.
Notably, the 10-year T-note yield climbed to 3.757% but fell back and finished down -1.5 bp at 3.700%.
The yield on the two-year Treasury widened to 4.34% from 4.32%.
Meantime, stock indexes were also under pressure on negative carryover from a decline in European stocks after the news that manufacturing activity in the Eurozone in May unexpectedly contracted by the most in 3 years.
In this context, on Wall Street, the S&P 500 fell to 4,145.58.
The Dow Jones Industrial Average dropped 0.7% to 33,055.51 and the Nasdaq composite lost 1.3% to to 12,560.25.
On this morning, Asian stock markets slid.
Tokyo’s main market index lost more than 1%. Shanghai, Hong Kong and Seoul also declined.
The Shanghai Composite Index lost 0.5% to 3,230.46 and the Nikkei 225 in Tokyo fell 1.1% to 30,619.21.
The Hang Seng in Hong Kong shed 0.9% to 19,260.11.
The Kospi in Seoul retreated 0.2% to 2,562.60 and Sydney’s S&P-ASX 200 lost 0.5% to 7,222.60.
New Zealand and Bangkok gained while Singapore and Jakarta declined.
In currency trading, the dollar index rose by +0.31% and posted a 2-month high.
Hawkish comments from Minneapolis Fed President pushed the 10-year T-note yield up and strengthened the dollar’s interest rate differentials.
Also, weakness in stocks boosted the liquidity demand for the dollar.
However, the ongoing U.S. debt ceiling impasse contained gains in the dollar.
Thus, the EUR/USD fell by -0.36% and matched last Friday’s 1-3/4 month low.
The USD/JPYY fell by -0.03%, with the yen recovering from a 5-1/2 month low against the dollar.
The yen found support on Tuesday’s positive Japanese economic news.
Strong Japanese economic news Tuesday was bullish for the yen after the Japan May Jibun Bank manufacturing PMI rose +1.3 to 50.8, the strongest pace of expansion in 8 months.
Also, the May Jibun Bank services PMI rose +0.9 to 56.3, the strongest pace of expansion since the data series began in 2019.
Also, a slide in T-note yield Tuesday gave the yen a boost.
On this morning, the dollar edged down to 138.46 yen from Tuesday’s 138.48 yen.
The euro edged up to $1.0778 from $1.0776.
That’s all, thank you.
We wish you a nice day.
Author: Sandro F. Puglisi
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