Good morning, Farmer Family …

US farm markets ended mixed as May close.

Corn prices were mostly weaker, though July rallied back from early losses to end unchanged on the day.

Beans firmed up by the close, gaining 0.25%, with soymeal up 0.20%.

Soybean oil, meantime, closed unchanged, having rallied back from intra-day losses.

Wheat prices also were mixed but mostly higher, with Chicago SRW up 0.55%, Kansas City HRW was up 0.86%, while Minneapolis HRS closd down by -1.64%.

Soybeans and corn prices rose with dryness forecast for the newly planted crops in the U.S. Midwest.

Most areas west of the Mississippi River are likely to receive at least some measurable moisture between Thursday and Sunday, while the eastern Corn Belt will remain relatively dry through the rest of the week, per the latest 72-hour cumulative precipitation map from NOAA. 

Also, the agency’s new 8-to-14-day outlook predicts drier-than-normal conditions will settle into the Great Lakes region between June 7 and June 13, with some warmer-than-normal weather returning to the Great Plains.

EIA’s weekly ethanol production data will be released later in the afternoon because of Memorial Day. 

Ahead of the next monthly soybean crushing report from USDA, which will be released later in the day, analysts expect the agency to show April’s crush reaching 184.8 million bushels. 

If realized, that would be moderately below March’s tally of 197.9 million bushels but would still be the largest April crush on record. 

However, soyoil stocks are expected to climb to a 14-month high of 2.497 billion pounds through April 30, vs. 2.424 billion pounds a year ago.

Wheat prices rose, meantime, as the market continued to recover from last session’s lowest in more than two years, with bargain buying and concerns over rains damaging China’s wheat crop.

Meantime, grain traveling the USA railways added another 19,798 carloads last week. 

That brings cumulative totals for 2023 to 422,364 carloads, which is a year-over-year decline of 7.0% so far.

In this context, corn basis bids were mixed at several interior river terminals, but held steady across other Midwestern locations.

Soybean basis bids were largely steady across the central U.S., but did trend 6 cents lower at an Illinois river terminal.

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

On this morning, Chicago wheat prices gained more ground.

Soybeans and corn prices also rose.

Notably, the most-active wheat contract on the Chicago Board of Trade (CBOT) added 1.1% to $6.00-3/4 a bushel, as of 03:15 GMT, after dropping to its lowest since December 2020 on Wednesday.

Soybeans added 1% to $13.12-1/2 a bushel and corn gained 0.7% at $5.98 a bushel.

From South America, Brazil is exporting 178,800 tonnes of soybeans to buyers in the United States, as the price of the oilseed in the South American country, not including freight in Brazil is $1.09 per bushel cheaper than U.S. beans for near-term shipment.

Thus, according to May 30 data from a shipping agency, three vessels loaded with Brazilian soybeans will leave ports in the northern part of the South American nation between June 4 and June 11. 

Two others departed Brazilian ports last week.

The data identifies the buyers as chicken producer Perdue Farms and global grains merchant Archer-Daniels-Midland. 

The Floriana, to be loaded with 32,000 tonnes of Brazilian soybeans, will be loaded at a Cargill terminal at the port of Santarem.

The 178,800 tonnes of Brazilian soybeans being shipped to the United States would be the largest since 2014, when imports hit a record 1.048 million tonnes, according to U.S. Census Bureau trade data.

In Europe, grain prices were mixed but mostly weaker, with wheat losing ground again, and hitting a new 22-month low.

Notably, September wheat, the most active contract on Paris-based Euronext, settled down 0.9% at 218.25 euros ($240.25) a tonne.

It earlier fell to 215.25 euros, the contract’s lowest front-month price since late July 2021 and below a previous 22-month low struck last week.

There was a combination of low demand, good crop conditions in Europe and the U.S. plus falling Black Sea prices.

The anticyclone which rages over the northern half of France and over a large part of Europe is considered positive for winter crops.

However, it is beginning to arouse fears for so-called spring crops, as the current water deficit could affect crops such as beets, corn or spring barley.

Large end of season supplies in Europe, however, have coincided with a lull in demand, which traders see as partly due to financing pressures on some importing countries, but a new string of sales of European Union wheat to the United States, supported prices.

And with U.S. FOB prices about $60 a tonne more expensive than Baltic C&F prices to the U.S., the window for sales has not yet closed.

Meantime, Hungary requested EU extend import restrictions on Ukrainian grains and oilseed crops for five eastern European states at least until the end of 2023. 

Hungary also asked Brussels to grant financial support to local farmers to facilitate the transport of grain stocks stuck in domestic storage before this year’s harvest. 

As for rapeseed, in contrast, prices rebounded after the sharp decline at the start of the week. 

From the Black Sea basin, the U.N. has proposed that Kyiv, Moscow and Ankara start preparatory work for the transit of Russian ammonia through Ukraine as it tries to salvage a deal allowing safe Black Sea grain exports.

Meantime, the U.N. wants parallel talks to be held on widening the Black Sea deal that was agreed last July to include more Ukrainian ports and other cargoes.

Ukraine and Turkey have agreed to the new proposal, intended to improve operations in the Black Sea grain export corridor, but Russia has not yet responded.

From Russia, Russian data claimed 12 MMT of wheat stocks on May 1st, which was double the 5-yr average. 

Traders noted a large sale offer for 50,000 tonnes of Russian 12.5% protein milling wheat for July 5-25 shipment at $230 a tonne FOB and a smaller handy sized shipment of Russian 12.5% wheat at $227 a tonne FOB for second half July shipment.

Meantime, excessive rains raise fears of a deterioration in the quality of wheat in southern of the country.

From the Middle Kingdom, China’s largest wheat-growing province of Henan is expected to be hit by more rain in the coming days, state forecasters said on Thursday, complicating efforts to harvest grain already damaged by wetter than normal weather in late May.

The south of Henan had been struck by higher-than-normal rainfall in the last week of May days ahead of the harvest of wheat planted last winter. 

The rains have caused some grain to sprout or be hit by blight.

China’s winter wheat accounts for the majority of the country’s annual wheat output.

China was expecting a bumper crop this year of 137 million tonnes.

Around 30 million tonnes will be impacted by the precipitation, with between 10 million and 20 million tonnes likely to have sprouted, meaning it is unfit for human consumption.

The agricultural ministry earlier this week urged local authorities to dispatch emergency teams to drain water from fields, speed up access by harvesters and mobilise drying machinery to save as much of the crop as possible.

Meantime, Chinese crushers are expected to slow their third-quarter 2023 demand coverage as soybean meal prices are on a downward trajectory, resulting in deteriorating crush margins and a lower estimate for total open demand.

Platts assessed China’s gross crush margin at minus $12.43/mt at the May 29 Asian close, down $10.67/mt week on week.

According to industry sources, the replacement crush margin stood at Yuan 164/mt on May 29, a 64% slump from a week ago.

Multiple market sources said the main factors driving down soybean meal prices and crush margins are the reduction in soybean meal sales and higher production in the coming month.

In April, the cargo collection of imported soybeans at China’s customs declined. 

Notably, the volume of imported soybeans dropped 10% year on year to 7.26 million mt in April, the General Administration of Customs data showed, which is lower than the 10 million mt the Chinese market expected to arrive last month. 

This led to tighter soybean meal supply in China, pushing soybean meal prices to soar 14% over the whole of April to May 10.

However, for March to May shipments, China bought more than 10 million mt of soybeans on average each month. 

Though with stricter customs inspections in April and May, the total volume of imported soybeans over May-July was estimated to leap to 33 million mt, according to several industry sources, up 28% from a year ago. 

The highest estimate stood at 36.5 million mt, equivalent to a 42% year-on-year jump.

As a result, the supply of soybean meal would increase rapidly as the weekly crushing volume has already increased from 1.2 million mt in April to 2 million mt in the week ended May 26.

In this context, soybean meal prices were in a downward trajectory since the week ended May 26. 

According to market sources, the soybean meal spot price continued to fall below Yuan 3,800/mt, and reached Yuan 3,780/mt on May 29, down 8% week on week and 12.5% month on month.

The market’s expectations of an increase in soybean meal volumes in the coming months will drive prices even lower.

On this wake, there was an unwillingness to purchase soybean meal for nearby months. 

China’s soybean meal sales for July delivery indeed reached 35%, approximately 7% lower compared with the 5-year average.

The bid and offer prices for soybean meal basis July delivery were Yuan 100/mt away as of May 29, and buyers were expecting the basis to fall from Yuan 150/mt to minus Yuan 50/mt in June.

On the other hand, a decline in soybean meal prices would continue to put pressure on crush margins and discourage crushers from purchasing more forward shipments.

In Q1, the market’s initial estimates for total open demand for Q3 shipments stood at 19.5 million mt — 7.5 million mt for July, 6.5 million mt for August and 5.5 million mt for September.

However, little recovery in the hog breeding industry and downstream meat consumption failed to support a healthy crush margin. 

According to industry sources, the hog breeding margin was at minus Yuan 164 per head as of May 26.

From Australia, Rabobank has tipped Australia’s 2023-24 winter crop area to be up slightly year on year at 23.48 million hectares, with area for wheat, barley and pulses all up for the season, but with canola planting down. 

Despite the higher area planted, production is forecast to be lower, with expectations of drier growing conditions due to the likely transition to an El Niño climate cycle. 

Assuming normal seasonal rainfall, Rabobank said wheat production for 2023-24 could be expected to reach 29.9Mt, barley 10.8Mt and canola 5.4Mt. 

With climate models indicating a transition to weak El Nino conditions, it said production could drop lower, potentially to the lowest total crop in four years. 

Meantime, barley from southern New South Wales is pricing into the delivered Downs market this week in a move which is already narrowing the spread between the northern and southern markets considerably ahead of new crop.

The sorghum market has bounced as supplies out of northern NSW and southern Queensland shrink with the end of harvest, while in the southern market, barley and wheat values have drifted lower based on unappealing elevation margins in the face of Northern Hemisphere competition.

Dry conditions centred in northern NSW have some chance of improvement with 10-50mm forecast for all of NSW next week.

However, the best of the past week’s falls have run across southern Australia, with most paddocks in Victoria and South Australia getting a perfectly timed 10-40mm.

As a result, local markets finished the yesterday down across the board, with the new crop Jan 24 ASX Eastern Wheat contract down $18-19/t, with grower bids for new crop following suit. 

With rain on the forecast and softer international values the market had every reason to move lower. 

Current crop wheat and barley markets remained largely unchanged to a buck or two softer in some zones, while canola values also felt the brunt of the international downturn and peeled off $20-25/t.

On the international trade scene, leading South Korean feedmaker Nonghyup Feed Inc. has issued an international tender to purchase up to 130,000 tonnes of animal feed wheat.

The deadline for submission of price offers in the tender is today, Thursday, June 1.

The wheat is sought in two consignments of up to 65,000 from worldwide optional origins but Russia, Argentina, Pakistan, Denmark and China are excluded as sources. 

The wheat cannot be loaded in ports in Russia and Ukraine.

The first consignment is sought for arrival in South Korea around Oct. 15. 

If sourced from the U.S. Pacific Northwest coast, Australia or Canada, shipment is sought for Sept. 11-Sept. 30, if from the U.S. Gulf or Europe for Aug. 22-Sept. 10, from South America for Aug. 17-Sept. 5 or from South Africa between Aug. 27 and Sept. 15.

The second consignment is sought for arrival around Nov. 5. 

If sourced from the U.S. Pacific Northwest coast, Australia or Canada, shipment is sought for Oct. 2-Oct. 21, if from the U.S. Gulf or Europe for Sept. 12-Oct. 1, from South America for Sept. 7-Sept. 26 or from South Africa between Sept. 17 and Oct. 6.

The two South Korean importers Major Feedmill Group and Feed Leaders Committee also bought feed wheat on Wednesday.

GFSA Saudi issued a tender to import 480,000 tons of wheat for September-October 2023 arrivals in 8 shipments:

(2) shipments to Jeddah Islamic Port; 

(3) shipments to Yanbu Commercial Port; 

(3) shipments to King Abdulaziz Port in Dammam.

Closing date is for June 2.

In outside markets …

Energy markets saw oil prices settled lower on Wednesday, pressured by a stronger U.S. dollar and weak data from China that fed demand fears.

Brent crude futures for August delivery indeed settled down $1.11 to $72.60 a barrel. 

U.S. West Texas Intermediate crude (WTI) settled down $1.37, or 2%, to $68.09.

At their session lows, both benchmarks were down more than $2 to multi-week lows. 

On Tuesday, both fell more than 4%.

Traders will watch the upcoming June 4 meeting of OPEC+ . 

Mixed signals by major producers on further production cuts have sparked volatility in oil prices, yet banks HSBC and Goldman Sachs and analysts do not expect OPEC+ to announce further cuts at this meeting.

In the U.S., field production of crude oil rose in March to 12.696 million barrels per day, the highest since March 2020, Energy Information Administration data showed.

U.S. crude oil inventories rose by about 5.2 million barrels last week, according to market sources citing American Petroleum Institute (API) figures on Wednesday.

Gasoline inventories also posted a build of about 1.9 million barrels last week, while distillate fuel inventories gained by 1.8 million barrels, according to the API data.

On this morning, oil prices rose, reversing earlier losses, as a potential pause in U.S. interest rate hikes and the debt ceiling bill passing a crucial vote renewed optimism about further fuel demand growth in the USA.

Notably, Brent crude futures for August rose 32 cents, or 0.44% to $72.92 a barrel by 0518 GMT, while U.S. West Texas Intermediate crude (WTI) rose 25 cents, or 0.37%, to $68.34 a barrel.

Market participants are awaiting government data on U.S. crude stocks due later on Thursday. 

In ocean freight markets, the Baltic exchange’s main sea freight index recorded its first monthly decline in four on Wednesday, on weakness in shipping rates across all segments, with lower coal demand dragging the capesize segment down in particular.

The overall index, indeed, fell 146 points, or 13.0%, to its lowest since Feb. 27 at 977.

The main index was down 38% for the month, its biggest drop since January.

Notably, the capesize index lost 376 points or 24% at 1,218, registering its biggest percentage fall since Feb. 14.

The index lost 47.1% for the month – its first monthly fall in four.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, decreased $3,122 at $10,099.

The panamax index shed 45 points to 1,045. The index fell 34.1% for the month, its worst monthly drop since August.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, decreased $406 at $9,405.

Among smaller vessels, the supramax index lost 29 points, or about 3.2%, at 881, to hit its lowest since late February.

In equity markets, US stock indexes posted moderate losses, with global economic concerns weighed on stocks after Chinese reports showed manufacturing and service sector activity slowed more than expected. 

The China May manufacturing PMI indeed unexpectedly fell -0.4 to 48.8, weaker than expectations of 49.5 and the weakest report in 5 months. 

Also, the May non-manufacturing PMI fell -1.9 to 54.5, weaker than expectations of 55.2.

Losses in stocks accelerated after U.S. Apr JOLTS job openings unexpectedly rose, which increases the chances of a Fed rate hike in June.  

Notably, U.S. Apr JOLTS job openings unexpectedly rose +358,000 to 10.103 million, showing a stronger labor market than expectations of a decline to 9.400 million.

The U.S. May MNI Chicago PMI fell -8.2 to 40.4, weaker than expectations of 47.3 and the weakest level in 6 months.

However, stocks recovered from their worst levels on dovish comments from Fed Governor Jefferson and Philadelphia Fed President Harker, who signaled their support for pausing Fed rate hikes.

The Fed Beige Book said economic activity was little changed overall in April and early May and that employment increased at a slower pace and price increases slowed in many Fed districts.

As a result, the 10-year T-note yield fell to a 1-1/2 week low of 3.612% and finished down -5.4 bp at 3.633%.  

The two-year yield, which moves more on expectations for Fed action, fell to 4.39% from 4.46%.

In this context, Wall Street slipped, with the S&P 500 falling 25.69, or 0.6%, to 4,179.83. 

The Dow Jones Industrial Average dropped 134.51, or 0.4%, to 32,908.27, and the Nasdaq composite lost 82.14, or 0.6%, to 12,935.29.

On this morning, Asian benchmarks were mostly higher Thursday after the United States House of Representatives approved a debt ceiling and budget cuts package, avoiding a default crisis.

If the debt deal also passes in the Senate, government checks will continue to go out to Social Security recipients, veterans and others and would prevent financial upheaval at home and abroad, ahead of the Monday deadline when the Treasury has said the U.S. would run out of money to pay its debts.

But the enthusiasm was muted by worries about the Chinese economy after disappointing recent data.

Notably, Japan’s benchmark Nikkei 225 rose 0.8% to finish at 31,148.01. 

Australia’s S&P/ASX 200 gained 0.3% to 7,110.80. 

South Korea’s Kospi quickly lost early gains to dip 0.3% to 2,569.17. 

Hong Kong’s Hang Seng declined 0.1% to 18,216.91, while the Shanghai Composite was little changed at 3,204.63.

If economic data from China continues to miss expectations, more participants could start to forecast a lower China GDP for the quarters ahead.

In currency trading, the dollar index rose +0.14% and posted a 2-1/2 month high, with the dollar supported as weakness in stocks boosted the liquidity demand for the dollar.  

Also, the Chinese yuan on Wednesday fell to a 6-month low against the dollar on weaker-than-expected Chinese economic news.

However, dovish comments from Fed Governor Jefferson and Philadelphia Fed President Harker tempered the dollar’s rally when they signaled support for pausing Fed rate hikes.  

Notably, the EUR/USD fell by -0.56% and posted a 2-1/4 month low.  

The euro retreated Wednesday due to weaker-than-expected French and German May CPI reports, which were dovish for ECB policy.  

Notably, German May CPI (EU harmonized) eased to +6.3% y/y from +7.6% y/y in Apr, better than expectations of +6.7% y/y and the weakest level in 15 months.

The German Apr import price index fell -7.0% y/y, the most in 3 years, and a larger decline than expectations of -5.8% y/y.

France May CPI (EU harmonized) eased to +6.0% y/y from +6.9% y/y in Apr, better than expectations of +6.4% y/y and the smallest increase in a year.

France Apr consumer spending unexpectedly fell -1.0% m/m, the third straight decline and weaker than expectations of a +0.3% m/m increase.

Also, a decline in the 10-year German bund yield to a 2-1/2 week low Wednesday weakened the euro’s interest rate differentials.

As for the USD/JPY it fell by -0.35%, with the yen recovering from early losses.  

A jump in the Japan May consumer confidence index Wednesday to a 16-month high was supportive of the yen.  

The yen Wednesday initially moved lower on the weaker-than-expected Japanese industrial production and retail sales reports.

Japan Apr industrial production unexpectedly fell -0.4% m/m, weaker than expectations of a +1.4% m/m increase.

Japan Apr retail sales unexpectedly fell -1.2% m/m, the biggest decline in 16 months and weaker than expectations of a +0.5% m/m increase.

However, the Japan May consumer confidence index rose +0.6 to a 16-month high of 36.0, right on expectations.

On this morning, the U.S. dollar edged up to 139.89 Japanese yen from 139.29 yen. 

The euro fell to $1.0683 from $1.0692.

That’s all, thank you.

We wish you a nice day.

 Author: Sandro F. Puglisi

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