Good morning, Farmer Family …

US farm markets were mixed on Thursday.

Corn prices worked mostly lower save for the July contract which was up 0.6% for the day.

Beans and meal closed red, down 0.04% and 1.24% respectively, while soybean oil was 1.08% higher at the bell.

Wheats were mixed, as the hard red classes ended in the black, with KC HRW up 0.71%, and MGEX HRS up 0.81%, while Chicago SRW ended with 0.33% losses. 

Market participants were awaiting weekly U.S. export data.

USDA reported another 75k MT of net cancelations for old crop corn export sales. 

The week that ended 5/18 saw a 216k MT sale to Mexico fully offset by 316k MT of cancelations by China – of those, USDA had previously announced 272k MT. 

That left the old crop commitments at 37.98 MMT, as of 5/18. 

New crop sales were 52k MT for the week for a total forward sale of 2.753 MMT. 

As for soybean, the report showed 115k MT of old crop beans were booked during the week that ended 5/18. 

That was a 3-week high led by sales to Germany and Japan. 

The total commitments were marked at 50.84 MMT, as of 5/18. 

The new crop business was limited to just 1.1k MT. 

For the products, FAS data showed 22/23 soymeal sales were 341,272 MT. 

That was in line with the expected range. 

Forward sales for 23/24 were 50,625 MT, also as expected, for a 455k MT total forward book. 

Soybean oil bookings were 6,202 MT for the week, all for 22/23 delivery.  

Meantime, in China, a surplus of cheap wheat is replacing significant volumes of corn in animal feed and may curb corn and soy imports, according to feed makers and analysts.

Thus, soybean and corn prices were little changed, as traders assessed a mixed weather outlook and tepid export demand.

As for wheat, USDA weekly export data had old crop wheat bookings at a net 45k MT cancelation for the week that ended 5/18. 

Pre-report estimates ranged -75k to +100k MT. 

Nigeria had net new purchases, but Japan and Philippines lightened their commitments. 

Total 22/23 commitments were 18.841 MMT, with 2 weeks left in the season. 

Of that, 17.29 MMT had been shipped through 5/18. 

By class, old crop HRW shipments reached 4.76 MMT of the 5.99 expected, SRW shipments were 2.64 MMT of the 2.99 MMT expected, HRS sat at 5.18 MMT of USDA’s 5.99, and white wheat exports were marked at 4.32 MMT of the 5.44 forecast. 

New crop wheat sales were 245k MT and near the low end of estimates. 

As a result, Chicago wheat prices wobbled between gains and losses, as a stronger dollar weakened prospects for U.S. wheat in the global market, especially in the wake of what looks to be a record-setting season for soft red winter wheat production.

A two-month high for the dollar index, supported by investor fears of a possible U.S. debt default, indeed, added to negative U.S. export sentiment.

But showers in the Northern Plains that delayed spring wheat planting and ongoing drought worries for the hard red winter wheat crop in the Southern Plains kept Minneapolis and Kansas City prices trading higher.

Hard red winter wheat may be struggling in Kansas, but soft red winter wheat fields in the Midwest are flourishing amid more favorable weather. 

Meanwhile traders also adjusted their positions in the run-up to a U.S. holiday weekend.

In this context, commodity funds were net sellers of CBOT corn, soybean and soymeal futures contracts. 

Meanwhile, funds also were net buyers of soyoil contracts, and net even in wheat contracts at the CBOT.

On this morning, Chicago wheat prices bounced back, rising almost 1% and set for a weekly gain, although expectations of ample production in other key exporting countries limited gains.

Corn and soybeans inched higher.

Notably, the most-active wheat contract on the Chicago Board of Trade was up 0.9% at $6.09-1/2 a bushel, as of 03:36 GMT. 

Corn rose 0.2% to $5.91-3/4 a bushel and soybeans gained 0.3% at $13.27-1/4 a bushel.

For the week, wheat has gained 0.7%, corn is up 6.7% and soybeans have added 1.5%.

In Europe, grain markets were mixed, but mostly flat yesterday.

There is demand for old crop from Spain as the drought there continues.”

Port data in France showed a cargo of 8,000 tonnes of wheat was due to load at Rouen for shipment to Spain.

However, the EU’s Copa-Cogeca estimates 2023 grain production at 277 MMT, up 4.6% yr/yr. 

Their soft wheat outlook is expected to increase 2.8%. 

Meantime, the European Union agreed on Thursday to suspend restrictions on imports from Ukraine for a further year after warding off an import ban imposed by some EU nations amid farmer protests over low prices.

Ukrainian President Volodymyr Zelenskiy thanked the EU for the extension and pledged to work towards meeting the union’s standards required to secure membership of the 27-nation bloc.

The suspension of all duties, however, has led to complaints from farming groups.

Thus, five neighbouring countries – Hungary, Poland, Bulgaria, Romania and Slovakia – will bar domestic sales of certain grains from Ukraine, allowing only their transit for export elsewhere.

The European Parliament has already backed the tariff suspension proposal.

On the other hand, rapeseed bounced back in the wake of palm oil. 

The market also found support from EU’s possible reaction over the recent months massive imports of biodiesel, which are destabilising our markets. 

EU vegetable oil and protein meal industry association FEDIOL has released a statement saying “imports of biofuels, classified as waste based, for example identified as HVO (hydro-treated vegetable oil) or FAME (fatty acid methyl esters) are taking place at such scale, that it has led to important disturbances in the EU markets for rapeseed methyl ester, and as a consequence also in the rapeseed and rapeseed oil markets. 

Over the last 5 months, prices for rapeseed oil have dropped significantly by over 30pc. 

This will not only impact rapeseed farmers’ revenue, but also future planting decisions. 

These trends cannot be explained by other market developments and are a signal that there is abnormal market behaviour. 

The magnitude of biodiesel imports’ growth is such that it raises question as to the authenticity of their classification as originating from waste streams and that there is urgent need to investigate the legitimacy of these imports”.

On this morning, data from farm office FranceAgriMer showed the conditions of French soft wheat were stable in the week to May 22, holding at its best level in at least a decade.

An estimated 93% of soft wheat was in good or excellent condition.

The good/excellent ratings for winter and spring barley were also unchanged from the prior week, at 90% and 95% respectively.

In a first rating for this year’s grain maize crop, FranceAgriMer estimated that 94% of the crop was in good or excellent condition against 90% a year earlier.

Farmers were nearing the end of maize planting, with 95% of the expected area drilled. 

Planting progress, which was hampered by rainy, cool weather, remained behind an average level of the past five years at 97%.

Meantime, according to the country’s association of farm cooperatives, Germany’s 2023 wheat crop of all types will fall 0.9% on the year to 22.31 million tonnes.

The association forecast Germany’s 2023 winter rapeseed crop will be about the same size as the crop last year at 4.28 million tonnes.

However, this compares to its April forecast of a German 2023 wheat crop of 22.15 million tonnes and a winter rapeseed crop of 4.25 million tonnes.

From North Africa, Egypt has strategic reserves of wheat sufficient for 5.9 months, its supply minister told a news conference on Thursday, adding that vegetable oil reserves are sufficient for 5 months.

Meantime, Egypt has deferred payments for its large wheat purchases, in some cases by months, according to a government official and traders, as the country grapples with a shortage of hard currency.

Most deferred payment cargoes have been shipped and unloaded without interruption so far and Egypt’s state wheat reserves used to make subsidized bread have not been impacted.

However, Egypt’s supply minister said the country’s state grains buyer has deferred opening letters of credit to pay for wheat imports to alleviate financial pressures caused by a foreign currency shortage.

From Levant, the Turkish runoff election will take place on Sunday 28 May between President Recep Tayyip Erdogan and his main challenger, Kemal Kiliçdaroglu, with Erdogan tipped to win. 

From Ukraine, Ukrainian 2023 spring grain sowing was 97% complete at almost 5.3 million hectares on May 25, agriculture ministry data showed on Thursday.

The total sown area at May 25 included 261,900 hectares of spring wheat, 763,300 hectares of barley, 135,600 hectares of peas, 145,500 hectares of oats and 3.7 million hectares of corn.

The ministry said farmers had also sown 240,900 hectares of sugar beet, 4.62 million hectares of sunflowers and 1.6 million hectares of soy beans.

The ministry has said the overall spring grain sowing area could shrink to 5.5 million hectares in 2023 from 5.9 million in 2022.

Ukraine’s grain sowing area – for both winter and spring – could decrease by 1.4 million hectares to 10.2 million hectares this year while the area sown to oilseeds could rise, the ministry said last month.

From Russia, Russian Foreign Ministry signaled on Thursday that if demands to improve its grain and fertilizer exports are not met, the Ukrainian export deal will not extend beyond July 17.

Since March Russia appears to have prioritized two specific demands: restarting a pipeline to transport Russian ammonia to the Ukrainian Black Sea port of Pivdennyi for export to global markets; and reconnecting Russia’s agricultural bank, known as Rosselkhozbank, to the SWIFT international payment network.

Dozens of ships are unable to reach Ukraine port of Pivdennyi, and the pace of shipments is unlikely to pick up because of slow inspections and other uncertainties.

In this context, the United Nations is working with the African Export-Import Bank (Afreximbank) to create a platform to help process transactions for Russian exports of grain and fertilizer to Africa, a top U.N. trade official said on Wednesday.

A Ukrainian government source said last Friday that Kyiv would consider allowing Russian ammonia to transit its territory for export if the Black Sea grain deal was expanded to include more Ukrainian ports and a wider range of commodities, as the Black Sea export deal does not cover the transit of Russian ammonia across Ukraine.

From the Middle East, figures by the United States Department of Agriculture (USDA) show that wheat output in Iran is going to increase by 10% this year.

USDA figures cited in a Wednesday report by Iran’s official IRNA news agency showed that total wheat output in Iran could reach 14.5 million metric tons (mt) this year, up from 13.2 million mt reported in 2022.

The figures mean Iran will be the 12th largest wheat supplier in the world in 2023, said the USDA.

The USDA said Iran’s wheat imports will drop by 0.5 million mt to 4 million mt this year, adding that wheat inventories in the country will remain at levels seen at the end of 2022 which were reported to be 4.44 million mt.

The figures showed that Iran’s barley output is also expected to increase by 7% to 3.2 million mt in 2023 while imports will reach 2.3 million mt over the same period, up slightly from 2.2 million mt of imports reported last year.

From the Middle Kingdom, Refinitiv Commodities Research reported beneficial rainfall and temperatures in China’s key wheat producing areas in the north indicate that wheat yields will likely be record high, including in Hebei and Shandong provinces. 

Vegetation densities extracted from satellite imagery also show good or excellent crop conditions. 

With forecasts for favourable weather over the next two weeks, 2023-24 wheat production is seen fractionally higher than before, at 139.9Mt (137.7Mt previous year). 

Meantime, China hopes the Black Sea grain deal can be implemented in a balanced and comprehensive manner, and wants to cooperate on global food security, foreign ministry spokesperson Mao Ning said on Friday.

From South East Asia, according to a statement from the Indian Farm Ministry, 2022-23 wheat production is seen at a record 112.7Mt (107.7Mt previous year). 

Despite the increase the government has ruled out lifting a ban on wheat exports but said exports through diplomatic channels will be considered on a case-by-case basis and that all supplies were needed for domestic procurement. 

The Malaysian Palm Oil Board has said Malaysia’s crude palm oil production could drop between 1-3Mt next year due to the El Niño weather pattern. 

However, the weather event is unlikely to have a major impact on this year’s crop as it typically takes 15 to 18 months for effects to show.

From Australia, markets starting to move yesterday with the AUD softening, while seeing a more bid side interest step into the market. 

Current crop wheat and barley indeed started to flow in both the east and the west and new crop bids were active in SA. 

Canola bids also firmed on new and current crop by $5-10/t with a little more liquidity and interest. 

On the weather side, some nice showers of rain through SA and Vic which will keep seeding programs on track and are perfectly timed for recently sown crops, although parts of Vic are now too wet. 

The mood is generally positive at this early stage, but the dry forecast is certainly on growers’ minds. 

On the international trade scene …

  • The Taiwan Flour Millers’ Association purchased an estimated 56,000 tonnes of milling wheat to be sourced from the United States in a tender on Friday.

The purchase involved various wheat types for shipment from the U.S. Pacific Northwest coast between July 12 and July 26.

Notably, the purchase involved 37,610 tonnes of U.S. dark northern spring wheat of a minimum 14.5% protein content bought at an estimated $339.14 a tonne FOB U.S. Pacific Northwest coast with a total price of $365.69 c&f including ocean shipping to Taiwan.

It also involved 11,720 tonnes of hard red winter wheat of a minimum 12.5% protein content bought at $334.00 a tonne FOB/$360.55 a tonne c&f and 6,670 tonnes of soft white wheat of a minimum 8.5% and maximum 10% protein bought at $265.65 a tonne FOB/$292.2 a tonne c&f.

Seller of all the grains was said to be trading house CHS.

  • Global grain trader Viterra is in talks to merge with U.S. rival Bunge Ltd BG.N, according to a person familiar with the matter, in a potential mega deal that would reshape the top tier of global grains merchants.

As for external markets…

In energy markets, oil prices settled lower, with Brent crude futures settling down $2.10, or 2.7%, to $76.25 a barrel and U.S. West Texas Intermediate crude (WTI) settled down $2.51, or 3.4%, to $71.83. 

At their session low, both benchmarks were down by more than $3.

Russian President Vladimir Putin said on Wednesday that energy prices were approaching “economically justified” levels, also indicating there could be no immediate change to the OPEC+ production policy.

Thus, oil prices began falling after Novak was quoted saying he did not think additional OPEC+ cuts were likely.

Losses were curbed later in the session by optimism that U.S. President Joe Biden and top congressional Republican Kevin McCarthy appeared near a deal to cut spending and raise the government’s $31.4 trillion debt ceiling.

On this morning, oil prices softened in early trade, weighed on by conflicting messages from Russia and Saudi Arabia ahead of the next OPEC+ policy meeting and a stronger dollar.

Brent crude indeed fell 30 cents to $75.96 a barrel at 03:15 GMT, while U.S. West Texas Intermediate was down by 14 cents at $71.69 a barrel.

Both prices however were still poised to post a second week of gains of slightly less than 1%.

In ocean freight markets, the Baltic Exchange’s main sea freight index declined the most since mid-February on Thursday as shipping rates continued to slump across all vessel segments.

The overall index, indeed, dipped 80 points, or 6.2%, to 1,215 points, its lowest since early March.

Notably, the capesize index was down 172 points, or 8.9%, at 1,758 points, a low since April 19.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, fell $1,433 to $14,577.

The panamax index lost 43 points, or 3.6% at 1,141 points, its 22nd session without any gains, also its lowest in over three months.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, dropped $381 to $10,272.

Among smaller vessels, the supramax index down 34 points or 3.4% at 980 points, its weakest in three months.

In equity markets, US stock indexes settled mixed.

A resolution to the U.S. debt ceiling remains elusive.  

US credit agency Fitch Ratings has placed the US AAA credit rating on rating watch negative, as concern grows over the potential debt default. 

However, Fitch still expects a resolution to the debt limit before the June 1 deadline with negotiations ongoing. 

Thus, stocks received a slight boost on comments from the Republican chairman of the U.S. House Committee on Foreign Affairs, who said they are getting close to a deal and it is down to details now.

Meantime, a +24% surge in Nvidia led technology stocks higher after it reported better-than-expected Q1 revenue and forecast stronger-than-expected Q2 revenue.  

Also, Thursday’s U.S. Q1 GDP, initial unemployment claims, and Chicago Fed reports were all stronger than expected. 

Notably, U.S. weekly initial unemployment claims rose +4,000 to 229,000, showing a stronger labor market than expectations of 245,000. 

U.S. Q1 GDP was revised upward to +1.3% (q/q annualized) from +1.1% as Q1 personal consumption was revised upward to 3.8% from 3.7%. The Q1 core PCE deflator was revised upward to 5.0% from 4.9%. 

The U.S. Apr Chicago Fed national activity index unexpectedly rose +0.44 to 0.07, stronger than expectations of a decline to -0.20.

U.S. Apr pending home sales were unchanged m/m, weaker than expectations of +1.0% m/m.

That, pushed T-note yields higher, with the markets have priced in a 53% chance of a 25 bp rate hike at the June 13-14 FOMC meeting.

Notably, the 10-year T-note yield rose to a 2-1/2 month high of 3.825% and finished up +7.3 bp at 3.815%.  

In this context, the S&P 500 rallied 0.9% to 4,151.28.

The Nasdaq leaped 1.7% to 12,698.09, while the Dow Jones Industrial Average slipped 0.1% to 32,764.65.

On this morning, tech company shares rose in Asia too, where Tokyo’s Nikkei 225 gained 0.7% to 31,019.61. 

In Seoul, the Kospi climbed 0.2% to 2,558.81, helped by a 2.2% rise in the share price for Samsung Electronics, South Korea’s biggest company.

The Shanghai Composite index added 0.4% to 3,212.50, while the S&P/ASX 200 in Sydney also was 0.2% higher, at 7,154.80.

In currency trading, the dollar index rose by +0.35% and posted a 2-1/4 month high. 

Thursday’s better-than-expected U.S. economic reports on weekly jobless claims and Q1 GDP were hawkish for Fed policy and supportive of the dollar.  

Also, the jump in the 10-year T-note yield Thursday to a 2-1/2 month high strengthened the dollar’s interest rate differentials and was bullish for the dollar.  

In addition, concern about a slowdown in China’s recovery knocked the yuan down to a 5-3/4 month low against the dollar.

Thus, the EUR/USD fell by -0.28% and posted a 2-month low.  

European economic concerns weighed on the euro after Germany’s Q1 GDP was revised lower to show a contraction in the German economy.  

Notably, German Q1 GDP was revised downward to -0.3% q/q and -0.2% y/y from unchanged q/q and +0.2% y/y.

The German Jun GfK consumer confidence index rose +1.6 to a 14-month high of -24.2, although weaker than expectations of -24.0.

However, ECB Vice President Guindos said the ECB’s “future decisions will ensure that the policy rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to our 2% medium-term target.”  

Also, ECB Governing Council member Knot said there is no sign that underlying inflation is abating, and the ECB needs to hold interest rates at restrictive levels for a “significant” time.

On the other hand, the USD/JPY rose by +0.47% with the yen dropping to a 6-month low against the dollar. 

Dovish comments Thursday from BOJ Governor Ueda weighed on the yen when he said we “will patiently” continue with monetary easing as there is still some way to go before reaching our 2% inflation goal.  

On this morning, the U.S. dollar fell to 139.81 Japanese yen from 140.07 yen. 

The euro rose to $1.0739 from $1.0726.

That’s all, thank you.

We wish you a nice day.

 Author: Sandro F. Puglisi

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