Good morning, Farmer Family …

US farm markets were mixed again on Wednesday, but mostly lower.

Corn prices continued to trend higher, up 1.69% for the session.

The soybean complex was narrowly mixed, with beans up 0.15%, meal slumping by 1.03%, while soyoil lifted +0.50%.

Wheat prices, meantime, suffered a severe setback, with Chicago SRW dropping 2.57% lower, Kansas City HRW tumbled 3.48%, and MGEX HRS falling 2.65%.

Wheat fell on profit-taking as the market lacked fundamental inputs, after a rally in the previus day driven by renewed concerns over a Black Sea deal.

Soft Red Winter (SRW) wheat yields in Illinois are estimated at 97.12 bu/acre, exceeding USDA’s forecast of 78 bu/ac, according to Tuesday’s tour by the Illinois Wheat Association, based on 57 samples. 

That’s above last year’s average of 68.5 bu/acre and the state record of 79 bu/ac. 

SRW wheat accounts for about 15pc of total US wheat production. 

Meantime, worries about competitiveness of U.S. grain in some key overseas markets continues to keep bearish sentiment in high supply. 

Ample supplies in Russia – underscored by falling prices, a planned revision of its export tax, and favourable harvest prospects – also capped wheat prices.

A firm dollar and financial market weakness, as investors fretted about stalled talks to raise a U.S. government debt ceiling, further weighed on sentiment.

As for corn, prices were firm for the second day in a row, with old-crop contracts leading the way on signs of strength in the cash market. 

Deferred corn contracts ended higher but closed below session peaks after updated weather forecasts called for rain in Iowa within the next week.

Notably, the Plains should catch some additional rains between Thursday and Sunday, but not much of the Corn Belt will find any measurable moisture for the rest of this week, per the latest 72-hour cumulative precipitation map from NOAA. 

The agency’s new 8-to-14-day outlook predicts seasonally dry weather building across the upper Midwest and Great Lakes region between May 31 and June 6. 

Most of the central U.S. will also be warmer than normal during this time.

Weekly EIA data showed ethanol producers averaged 983k barrels per day output through the week that ended 5/19. 

That was a 4,000 barrel per day decrease from the week prior and was the 5th consecutive sub-1 million bpd week. 

However, ethanol stocks were 1.15 million barrels lighter at 22.041 million, shifting 5% lower last week.

Meantime, in China, a surplus of cheap wheat is curbing consumption of both corn and soymeal, according to feed makers and analysts.

On the other hand, the soybean market was mixed as old-crop contracts edged higher on technical buying while deferred contracts eased on demand concerns.

Grain traveling the USA railways totaled another 17,807 carloads. 

That brings 2023’s total up to 402,566 carloads, which is 7.1% below last year’s pace so far.

In this context, export Sales estimates for old crop corn range 500k MT of net cancelations to 400k MT of net new sales. 

New crop business is expected to be under 300k MT for the week that ended 5/18. 

As for soybean, analysts are looking for USDA to report between 50k MT of net cancelations and 300k MT of net new sales for old crop beans. 

New crop sales are expected to come in between 100k MT and 675k MT for the week that ended 5/18. 

Estimates for soymeal export sales range 150k MT to 550k MT for the week, with less than 150k of it for 23/24 delivery. 

Traders expect less than 10k MT of soybean oil was sold during the week for both 22/23 and for 23/24. 

As for wheat, analysts are looking for USDA to report between 75k MT of old crop wheat cancelations and 100k MT of net new old crop sales. New crop export sales are estimated between 200k MT and 500k MT for the week that ended 5/18. 

As a result, corn basis bids were steady to mixed across the central U.S., after moving as much as 10 cents higher at an Iowa river terminal and as much as 5 cents lower ta a Nebraska processor.

Soybean basis bids held steady across the central U.S. again.

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

On this morning, Chicago soybean slid, while corn was largely unchanged, as a lack of demand for both commodities amid bumper global supplies weighed on prices. 

Wheat lost more ground, falling for a second straight session.

Notably, the most-active soybean contract on the Chicago Board of Trade lost 0.2% to $13.22 a bushel, as of 02:26 GMT, while corn was unmoved at $5.87-1/4 a bushel.

Wheat gave up 0.1% to $6.05-1/2 a bushel.

From Canada, Agriculture and Agri-Food Canada revised down its 2023-24 canola production forecast by 0.1Mt, to 18.4Mt (18.2Mt previous year). 

However, canola prices are still losing ground, and that, also despite a delay in plantings posted at 62% in Manitoba on Monday, against 81% on average 5 years to date. 

On the other hand, all-wheat production forecast was increased by 1.5Mt, to 35.8Mt (33.8Mt previous year) and the barley production forecast was cut by 0.5Mt, to 9.5Mt (10.0Mt). 

From South America, Brazilian consultancy Agroconsult raised its estimates for the country’s second corn crop production for the 2022/23 season, with a new tally of 102.39 MMT. 

Brazil’s safrinha crop accounts for around 75% of the country’s total corn production.

Brazil’s ANEC estimates May corn exports will total 387k MT, which is down from 571k MT in their prior forecast.

ANEC also reported Brazil’s May soymeal exports were on pace to reach 2.5 MMT for May. 

The soybean export is estimated to be 15.9 MMT. 

In Argentina, the Buenos Aires grains exchange said on Wednesday that intense rains in recent days in Argentina’s key agricultural farmland has improved expectations for the 2023/2024 wheat crop.

Notably, the total crop is estimated at 18 million tonnes, up from the 12.4 million tonnes harvested in the previous season.

However, the recent rainfall has also caused delays in the harvesting of soybeans in the current 2022/2023 harvesting season, estimated at just 21 million tonnes. 

Soybean farmers have reaped 78% of the planted area so far.

For the 2022/2023 corn harvest, farmers have harvested nearly 27% of the planted area, with production estimated at 36 million tonnes.

In Europe, wheat prices gave up most gains of the previous day, while rapeseed rose in the wake of palm oil.

That confirmed the fragility of the wheat market and an underlying downward trend that is still undeniable. 

The climatic conditions on the European continent remain favourable, except for what happened and what is happening in Spain and part of Italy.

From Ukraine, Ukraine’s Ag Ministry reported the season’s grain export was 4.6% behind last year’s pace with 44.6 MMT shipped – including 26.4 MMT of corn, with a 19% increase yr/yr, and 15.3 MMT of wheat, that was an 18% decrease yr/yr. 

From Russia, Russian Prime Minister Mikhail Mishustin has signed a number of Memoranda of Understanding on his official visit to Beijing, including an agreement to deepen investment cooperation in trade services, an agreement on export of agricultural products to China, and another on sports cooperation. 

The agreements come amid pressure from the West to isolate Russia and after G7 leaders singled out both countries on a number of issues, including the war in Ukraine. 

Mishustin told Chinese President Xi Jinping in China on Wednesday Moscow and Beijing would push back against attempts by countries to use sanctions to “impose their will”. 

Meantime, Russian spring crops were sown on 42.6 MHA, which is 77% of the forecast and 4.1 MHA more than last year.

Climatic conditions are also favorable, making it possible to anticipate another abundant wheat harvest in the country.

On this wake, estimates from Agritel/Argus analysts were at around 86 million tonnes. 

From the Middle Kingdom, a surplus of cheap wheat in China is replacing significant volumes of corn in its huge animal feed market.

Total wheat imports of 6 million tonnes in the first four months – up 61% on a year ago – and the looming domestic harvest have pushed Chinese prices down 15% in the last two months, making the grain a cheaper option than corn in many areas.

More wheat cargoes are on the way from Australia, with total arrivals from all origins set to surpass 10 million tonnes for the first time this year.

Buyers paid an average $374 a tonne for Australian wheat last month, Chinese customs data showed, about $30 less than Chinese wheat.

Meantime, prices in top wheat growing province Henan fell to 2,820 yuan per tonne in early April, cheaper than corn in the same area, and have continued to fall.

That is curbing consumption of both corn and soymeal and potentially is reducing demand for imports.

As a result, Chinese corn futures have plunged 11% in the same period, pressured by mounting stocks of grain.

In this context, China has cancelled more than 1.1Mt of US corn purchases in recent weeks as buyers wait for cheaper options (Brazil) later in the year.

From Australia, Southern markets have firmed this week as dry conditions hamper the end of new-crop planting and start to trouble production outlooks in parts of New South Wales and Victoria.

In the north, sorghum prices have fallen to a level sufficient to spark buying interest from the pig and poultry sectors as Chinese demand backs off.

Dry conditions, and preoccupation with seeding, have reduced grower selling to minimal levels, and seen consumers get serious about booking some new-crop tonnage.

Meantime, local current crop markets yesterday firmed again slightly. 

Wheat bids were up another buck or two, up country domestic homes were a touch stronger and more July-August demand was sniffing around for sellers. 

Canola bids on current and new crop lifted by $10/t but liquidity was still very small. 

However, there is more rainfall building on the forecast, with southern WA, SA, Vic and southern NSW now expecting 5-25mm. 

The BOM’s latest Climate Driver Update has maintained the projection that there is a 50 per cent chance of an El Niño developing this winter or spring and that they are still at “watch.” 

They noted that despite all international climate models indicating it is very likely that tropical Pacific Ocean temperatures will reach El Niño thresholds during the southern hemisphere winter, an atmospheric response is also required for an El Niño to be declared. 

Thus far, little shift has been observed in atmospheric ENSO indicators with trade winds and cloudiness patterns in the Pacific remaining indicative of ENSO-neutral conditions.

In energy markets, oil prices rose 2%. 

Notably, Brent crude futures rose $1.52, or 2%, to settle at $78.36 a barrel. 

U.S. West Texas Intermediate crude (WTI) gained $1.43, or 2%, to $74.34.

U.S. crude inventories posted a massive surprise weekly drawdown of 12.5 million barrels to 455.2 million barrels, the Energy Information Administration said, as imports declined. 

Analysts had expected an 800,000-barrel rise.

U.S. gasoline stocks dropped by 2.1 million barrels in the week to 216.3 million barrels, the EIA said, while distillate stockpiles fell by 600,000 barrels to 105.7 million barrels.

The U.S. Memorial Day holiday on May 29 marks the beginning of the peak summer travel season and higher fuel demand.

Meanwhile, Saudi Arabia’s energy minister said short-sellers betting oil prices will fall should “watch out” for pain.

Weighing on broader markets, there were no signs of progress in U.S. debt ceiling talks as the deadline ticked closer to raise the federal government’s borrowing limit or risk default.

Oil price gains were also limited by news that Britain’s stubbornly high inflation rate fell by less than expected last month, according to official data that raised the chances of more interest rate hikes.

In ocean freight markets, the Baltic Exchange’s main sea freight index of shipping rates for dry bulk commodities logged its 10th consecutive decline on Wednesday, hitting its lowest in two-and-a-half months as rates fell across all vessel segments.

The overall index, indeed, dropped 53 points, or 3.9%, to 1,295 points, its biggest drop since February.

Notably, the capesize index was down 110 points, or 5.4%, at a one-month low of 1,930 points, marking its biggest drop since April 18.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, fell $912 to $16,010.

The panamax index lost 28 points, or 2.3%, to a three-month trough at 1,184 points, its 21st session without any gains.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, decreased $258 to $10,653.

Among smaller vessels, the supramax index dropped 29 points or 2.8% to 1,014 points, its lowest in three months.

In equity markets, US stock indexes closed moderately lower, under pressure as talks to lift the U.S. debt ceiling are at an impasse.  

U.S. stocks were also weighed down by negative carryover from a slide in the Euro Stoxx 50. 

European shares fell, as the government reported that inflation in the United Kingdom remains worse than expected, raising worries that the Bank of England may keep hiking interest rates and squeezing its economy. 

In Germany, business confidence fell.

Global bond yields Wednesday were higher.  

The 10-year T-note yield rose +3.1 bp to 3.723%.  

The yield on the two-year Treasury, which moves more on expectations for Fed action, rose to 4.37% from 4.33%.

The 10-year German bund yield climbed to a 3-week high of 2.504% and finished up +0.3 bp at 2.472%.  

The UK 10-year gilt jumped to a 7-1/4 month high of 4.368% and finished up +5.5 bp at 4.214%.

In this context, the S&P 500 fell 30.34 to 4,115.24. 

The Dow Jones Industrial Average dropped 0.8% to 32,799.92, while the Nasdaq composite lost 0.6% to 12,484.16.

Helping to limit Wall Street’s losses were several companies that reported stronger results for the start of the year than analyst expected.

On this morning, shares were mostly lower in Asia.

Japan’s benchmark Nikkei 225 index advanced 0.4% to 30,801.13, extending recent gains as investors bet on higher returns from Japanese companies.

Hong Kong’s Hang Seng sank 2% to 18,739.03 as investors fretted over the trajectory for China’s economic recovery after the government relaxed pandemic restrictions late last year. 

The Shanghai Composite index also fell, by 0.5% to 3,188.34.

Simmering tensions between China and the United States over technology and security have added to uncertainties.

In Seoul, the Kospi shed 0.5% to 2,554.69, while Australia’s S&P/ASX 200 gave up 1.1% to 7,138.20. 

India’s Sensex declined 0.2%.

Taiwan’s benchmark Taiex jumped 0.8% on gains for major computer chip makers. 

Taiwan Semiconductor Manufacturing Co., the world’s largest, surged 3.4%.

In currency trading, the dollar index rose by +0.4% and posted a 2-month high. 

Hawkish comments Wednesday from Fed Governor Waller were supportive of the dollar.

Also, weakness in the British pound Wednesday was positive for the dollar after GBP/USD dropped to a 5-week low.

Notably, the EUR/USD fell by -0.13% and posted a 1-3/4 month low.  

Wednesday’s economic news weighed on the dollar after the German May IFO business climate index fell more than expected. 

However, losses in EUR/USD were limited on hawkish comments from ECB Governing Council member and Bundesbank President Nagel, who said, “Several rate hikes will still be necessary to reach a sufficiently restrictive level.”

As for the USD/JPY it rose by +0.46% with the yen tumbling to a 5-3/4 month low against the dollar.  

Losses in the yen were limited as the ongoing U.S. debt ceiling impasse has boosted some safe-haven demand for the yen. 

On this morning, the U.S. dollar rose to 139.65 Japanese yen from 139.41 yen. 

The euro fell to $1.0743 from $1.0754.

That’s all, thank you.

We wish you a nice day.

 Author: Sandro F. Puglisi

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