Good morning, Farmer Family …

US farm markets were mixed, but mostly higher on Monday.

Corn prices backed off from multi week highs, down 1.89%.

Soybeans also closed in the red, down 0.18%, with soymeal trending 0.85% higher, while soyoil prices faded 0.48% lower.

The wheat complex posted moderate gains, as Chicago SRW added 0.81%, Kansas City HRW gained 1.23%, and MGEX HRS rose 1.55%.

Corn and soybean fell, retreating from gains made during the overnight trading session on signs that already light export demand for U.S. supplies had weakened further.

The US has requested dispute settlement consultations with Mexico under the United States-Mexico-Canada Agreement, regarding the ban on use of GM maize in tortillas or dough, and the instruction to government agencies to gradually substitute GM maize in all products for human consumption and for animal feed. 

The weekly Export Inspections report indeed showed 1.181 MMT of corn was shipped during the week that ended 6/1. 

That was down from 1.346 MMT last week and was 278k MT lighter than the same week last year. 

The season’s total shipment was shown as 29.91 MMT through 6/1 and remains 32% behind last year’s pace. 

As for soybean, data had 214,247 MT of soybean shipments for the week that ended 6/1. 

That was down 28.8k MT from last week and was below the 370k MT shipped during the same week last year. 

The accumulated export program reached 48.67 MMT, or 1.25 MMT behind last year’s pace. 

Wheat export inspections were pedestrian after only reaching 291.599t last week. 

That was also toward the lower end of trade estimates. 

USDA has now begun tracking data for the 2023/24 marketing year, which began June 1, noting sales of 57.691t so far.

Wheat prices, however, were firm, with the biggest gains being notched by Kansas City hard red winter wheat and MGEX spring wheat contracts, due to tight global stocks of high protein offerings and concerns about dry weather limiting the size of the crop in key growing areas of Europe and the Black Sea region.

In this context, corn basis bids were mostly steady to soft after dropping 2 to 10 cents across five Midwestern locations. An Illinois river terminal bucked the overall trend after firming 8 cents.

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

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

After the sessions close, USDA said that 64% of the U.S. corn crop was rated good to excellent as of June 4, down 5 percentage points from a week earlier.

The soybean crop was rated 62% good to excellent, the winter wheat crop 36% good to excellent and the spring wheat crop 64% good to excellent.

Dry conditions in the Midwest have been a worry for the grain trade, with 34% of the U.S. corn production belt experiencing drought as of May 30, the USDA said last week in a separate report.

And “dryness remains widespread across the northeastern Plains, Midwest, and the Delta” space technology company Maxar said Monday in a daily weather note.

Meantime, U.S. farmers had planted 96% of their intended acres for corn and 91% of their soybean acres by Sunday, ahead of the respective five-year averages for each crop but slightly behind average trade expectations.

Spring wheat planting was 93% complete by Sunday, the USDA said, behind trade expectations but matching the five-year average.

Meanwhile, the harvest of the drought-hit U.S. winter wheat crop is under way. 

The USDA said the crop was 4% harvested, in line with trade expectations and the five-year average. 

On this morning, Chicago corn rose 1.4%.

Wheat rose for a fifth consecutive session, climbing 2.7% on support from tightening world milling wheat supplies, with Australia estimating lower output in 2023/24 and excessive rains hitting the crop in China.

Notably, the most-active corn contract on the Chicago Board of Trade (CBOT) was up 1.4% at $6.05-3/4 a bushel, as of 04:55 GMT. 

Wheat added 2.7% to $6.41 a bushel and soybeans gained 0.7% to $13.60 a bushel.

“The market is building some weather premium”, analysts said, as corn and soybean prices are rising on dryness in the U.S..

Most of the Corn Belt will receive a bit of measurable moisture between Tuesday and Friday, per the latest 72-hour cumulative precipitation map from NOAA, but very few fields will see more than 0.25” during this time. 

Further out, NOAA’s new 8-to-14-day outlook predicts seasonally dry weather building across the upper Midwest between June 12 and June 18, with warmer-than-normal conditions also likely in that area next week.

However, it is bit early as the crop has just been planted. 

From South America, Brazilian farmers have harvested through last Thursday 1.4%of the area planted for their second corn crop in the center-south region, agribusiness consultancy AgRural said on Monday, up 0.6 percentage point from the previous week.

At the same time last year, 3% of the Brazilian corn fields had been reaped, AgRural said in a statement, noting fieldwork remains concentrated in top grain producing state Mato Grosso.

AgRural expects Brazil’s total corn crop to hit 127.4 million tonnes this season. 

The so-called “safrinha” accounts for most of the country’s output in a given year and is estimated to reach 97.9 million tonnes in 2022/23.

In Europe, grain prices rose on Black Sea tension, and supply worry.

Rapeseed also rose sharply.

European wheat rose, extending a rebound from recent 22-month lows.

Adverse weather conditions, including excessive rainfall in China, which is damaging grain quality, and a lack of rain in the U.S. Corn Belt, supported prices.

In Europe too, the hydric deficit is increasing, with likely consequences for the potential of spring crops.  

In Germany, traders were monitoring dryness in northern and eastern regions, but with rain in the south.

In addition, Russia’s foreign ministry said on Monday that it saw no prospects for extending Ukraine’s Black Sea grain export deal, which is set to expire in mid-July.

Poland’s agriculture minister said he had received a draft regulation from the European Commission extending a ban on imports of Ukrainian grains within five countries – Bulgaria, Hungary, Poland, Romania and Slovakia – until Sept. 15.

These restrictions were due to expire on Monday and while the five countries have been seeking an extension, complaining cheaper Ukrainian grain makes domestic production unprofitable, Ukraine has been lobbying for them to be lifted.

Transit through these countries remains authorised, nevertheless.

Meantime, Stratégie Grains revised up its 2023-24 rapeseed production forecast by 0.4Mt, to 20.4Mt (19.4Mt prior year) citing beneficial spring conditions in Germany, Poland, France and Romania. 

Sunflowerseed crop estimate was also revised up by 0.1Mt, to a record 11.3Mt (9.2Mt), as good prospects in Romania and Hungary offset drought problems in Spain and planting setbacks in France due to cool, wet weather. 

From the Middle East, Syrian will import half as much wheat in 2023 as the previous year due to an expected boost in the domestic harvest, Minister of Agriculture Mohammad Hassaan Qatna said on Monday.

“This year, the rainfall at the beginning of the season was a bit delayed, but all the planned areas were cultivated and the rainfall distribution was good,” Qatna said.

As a result, Qatna said, winter wheat production was “very good” and anticipated imports will be about “50% of what Syria used to import in past years”, describing it as “a good achievement”.

Last year, Syria imported around 1.5 million tonnes of wheat.

Qatna said Syria mainly imports wheat from Russia, which has backed the Syrian government militarily and financially.

Russian authorities have not disclosed grain supplies to Syria for a number of years. 

Last year, Reuters reported that wheat sent to Syria from the Black Sea port of Sevastopol in Crimea increased 17-fold to just over 500,000 tonnes.

From the Black Sea basin, TASS news agency quoted Russia’s foreign ministry as saying that it was continuing consultations with the UN over the Black Sea grain deal, and that ship inspections had resumed but said it saw no prospects for extending the deal. 

RIA news agency said a new round of Russia-U.N. talks would take place in Geneva on June 9.

According to the Ukraine Ag Minister, if the Black Sea Grain Initiative stops functioning in its current form, Ukraine would be ready to continue exporting agricultural products without Russian backing. 

The government had already created a special insurance fund of around $547m for companies whose ships would come to Ukrainian Black Sea ports under a future new arrangement.

Ukrainian Danube River ports exported a record 3 million tonnes of food in May amid a significant slowdown in exports through its key Black Sea ports, the Ukrainian seaport authority said. 

Meantime, a hole in the Russian-controlled Nova Kakhovka dam, in southern Ukraine, heightened worries about an escalation in the war, after millions of litres of water burst through , threatening scores of villages and cutting off water supplies.

From Ukraine, most of Ukraine’s winter grain crops are in good condition but grain yields could fall by 20% if current dry and hot weather persists, agricultural scientists said on Monday.

“In general, weather conditions for most of the spring period were sufficiently favourable for growth and development of winter cereal crops,” Ukraine’s national academy of agricultural science said in a report.

“However, in case of continuation of dry weather in the period of grain filling, especially on the background of high air temperatures… the share of lost yields can be from 15% to 20%,” it said, giving no exact forecast of the harvest.

Scientists noted that crops which were sown very late were particularly at risks.

From Russia, Russian consultancy Sovecon estimates that the country’s wheat exports reached 4.1 MMT in May. 

That’s a month-over-month decline of 4.7%, if realized. 

As a result, SovEcon raised its 2023-24 Russian wheat export forecast by 2.7 MMT to a record 45.7 MMT, citing an increased production outlook and comments from Russia’s ag ministry that it plans no purchases for intervention stockpiles. 

The consulting firm expects an “active start” to the new-crop shipping season given “high profitability of export operations.” 

SovEcon does not expect the stoppage of Russian operations by some large multinational traders to have a “noticeable impact on export volumes.” 

Plus, the launch of the new deep-water terminal in Vysotsk (Leningrad Oblast) with a capacity of 4 MMT per year could boost Russian grain exports.

From South East Asia, India’s palm oil imports sank to a 27-month low in May as buyers cancelled expensive cargoes of the edible oil and replaced them with cheaper soyoil and sunflower oil.

Notably, palm oil imports by India fell to 441,000 tonnes last month, down 14% from 510,094 tonnes in April, according to average estimates from the dealers. 

May imports were the lowest since February 2021, the dealers added.

The drop in purchases by the world’s biggest importer of vegetable oils could weigh on palm oil prices, which are already trading near their lowest level in 30 months.

In April, buyers opted to cancel large amounts of palm oil purchases for May shipments for the first time in many years.

India’s average monthly palm oil imports in the first six months of the 2022/23 marketing year that started on Nov. 1 were 818,203 tonnes, according to the Solvent Extractors’ Association of India, up 52% from a year earlier. 

The trade body is likely to publish its May import data by mid-June.

Meantime, India’s sunflower oil imports in May jumped 28% from a month ago to 319,00 tonnes, while soyoil imports rose 10% to 290,000 tonnes, according to an average estimate from the dealers.

From Australia, production of winter crops is set to fall from record highs, with wheat output seen declining more than 30%, the country’s agricultural department said, as forecasters predict dryness due to the El Nino weather pattern.

Notably, total Australian winter crop production is forecast to fall by 34% to 44.9 million tonnes in 2023–24, around 3% below the 10-year average to 2022–23 of 46.4 million tonnes, according to the June crop report from the Department of Agriculture, Fisheries and Forestry.

Wheat and barley production will drop by 34% and 30% to 26.2 million tonnes and 9.9 million tonnes, respectively. 

Both figures are below the 10-year average. 

Canola is forecast to fall 41% to 4.9 million tonnes but remain 15% above the decade average.

However, area planted to winter crops will fall but remain historically high at 23.3 million hectares, with wheat and canola plantings down by 2% and 11%, respectively. 

Barley plantings are set to rise 4% to 4.3 million hectares because it can better handle drier conditions.

Lower yields will pressure the total value of agricultural production, which is forecast to fall by 14% to A$79 billion ($52 billion) in 2023-24, still the third highest on record, according to the June agricultural commodities report put out by the same department.

Agricultural exports are also forecast to tumble from record levels, falling 17% to A$65 billion in 2023-24 due to lower production and easing global prices for grains and oilseeds.

Summer crop production, which includes sorghum and cotton, is estimated to fall 8% to 5.1 million tonnes over the same period, but remain well above the decade average.

Meantime, local markets had a quiet start to the week with a nice positive forecast lining up for a large part of Aussie cropping regions, although it is still dry on the forecast for northern NSW and Queensland. 

The forecast has resulted in both old crop and new crop markets treading water for now until we see what eventuates, with values largely unchanged across the board.

($1 = 1.5168 Australian dollars)

On the international trade scene, Egypt’s GASC is seeking to buy wheat on FOB basis, for shipment between July 21-31 from all origins in a tender today. 

In outside markets …

Energy markets saw oil prices rising after the world’s top exporter Saudi Arabia pledged to cut production by a further 1 million barrels per day (bpd) from July to counter macroeconomic headwinds that have depressed markets.

Notably, Brent crude futures settled up 58 cents at $76.71 a barrel, after touching a session high of $78.73.

U.S. West Texas Intermediate crude gained by 41 cents to $72.15 after hitting an intraday high of $75.06.

Fatih Birol, head of the International Energy Agency (IEA), said that the chance of higher oil prices had increased sharply after the new OPEC+ deal.

Howver, the market is still trying to assess the impact of what the Saudi production cut actually means.

Many of the OPEC+ reductions indeed will have little real impact as lower targets for Russia, Nigeria and Angola bring them into line with their actual production levels. 

Also, the United Arab Emirates (UAE) was allowed to raise output targets by 200,000 bpd to 3.22 million bpd to reflect its larger production capacity.

On this morning, oil prices edged lower, coming off gains made the previous day as concerns about the global economic backdrop outweighed supply worries raised when Saudi Arabia announced its biggest output cut in years.

Notably, Brent crude futures slipped 51 cents to $76.20 a barrel by 05:06 GMT. 

The U.S. West Texas Intermediate crude fell 54 cents to $71.61 a barrel.

In ocean freight markets, the Baltic Exchange’s main sea freight index, which measures the cost of shipping goods worldwide, rose for the first time in 17 sessions on Monday, advancing 2.2% to 939 points, supported by larger vessel segments. 

Notably, the capesize index, which tracks vessels typically transporting 150,000-tonne cargoes such as iron ore and coal, surged 5.6% to 1,178 points; and the panamax index, which tracks ships that usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, rose about 1.8% to 1,048 points. 

Meanwhile, the supramax index shed 16 points, or about 2%, to hit its lowest since late February at 803 points.

“Potential stimulus in China added to the positive sentiment for capesizes as they would perhaps see the most benefit”, said Alexis Ellender, dry bulk analyst at Kpler. 

Uncertainty around the Black Sea grain export corridor and the end of the peak soybean export season from Brazil could have weighed on smaller vessels,” Ellender added. 

In equity markets, US stock indexes settled mixed, but mostly lower.  

Monday’s weaker-than-expected U.S. economic reports on May ISM services and Apr factory orders raised economic concerns and pressured the broader market.  

Notably, U.S. Apr factory orders rose +0.4% m/m, weaker than expectations of +0.8% m/m.

U.S. May ISM services index unexpectedly fell -1.6 to a 5-month low of 50.3, weaker than expectations of an increase to 52.4. 

Also, the May ISM services prices paid sub-index fell -3.4 to 56.2, the slowest pace of increase in 3 years.

On the positive side, the weaker reports knocked T-note yields lower.

The 10-year T-note yield indeed fell -0.6 bp to 3.685%.  

In this context, on Wall Street, the S&P 500 declined to 4,273.79.

The Dow Jones Industrial Average fell 0.6% to 33,562.86. 

The Nasdaq composite slipped 11.34, or 0.1%, to 13,229.43.

On this morning, Asian stock markets were mixed.

Tokyo and Hong Kong rose while Shanghai and Sydney declined.

Notably, the S&P ASX 200 in Sydney shed 0.9% to 7,149.00.

The Shanghai Composite Index lost 0.3% to 3,222.35 while the Hang Seng in Hong Kong advanced 0.6% to 19,220.23.

The Nikkei 225 in Tokyo gained 0.7% to 32,454.78 after government data showed Japanese wages rose 1% over a year earlier in April but growth slowed from the previous month’s 1.3%.

India’s Sensex opened down 0.3% at 62,599.57.

New Zealand and Singapore declined while Bangkok and Jakarta advanced. South Korean markets were closed for a holiday.

Australia’s central bank lifted its benchmark interest rate Tuesday for a 12th consecutive time to 4.1% and warned further rises could follow. 

The Reserve Bank of Australia boosted the cash rate by a quarter of a percentage point following a higher-than-expected 6.8% annual inflation rate for the January-March quarter.

In currency trading, the DXY was little changed, with the dollar falling on news that the U.S. services sector barely grew in May as new orders slowed, ending an initial rally sparked by strong jobs growth.

Notably, the dollar index fell to 104.00, down 0.13% on the day, after climbing as high as 104.40. 

It is holding just below a 11-week high of 104.70 reached on May 31.

The euro was last up 0.07% at $1.0712, just above $1.0635 on May 31, which was the lowest since March 20.

The greenback fell 0.27% to 139.63 yen . 

It reached 140.93 on May 30, the highest since Nov. 23.

Meantime, the Aussie dollar edged higher before the Reserve Bank of Australia (RBA) is due to announce its interest rate decision on Tuesday.

On this morning, the dollar fell to 139.49 yen. 

The euro was little-changed at $1.0716.

That’s all, thank you.

We wish you a nice day.

Author: Sandro F. Puglisi

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