Good morning, Farmer Family …
US farm markets were mixed, but mostly higher on Tuesday.
Corn prices saw the most upside, rising 1.76%, after USDA cut quality ratings more than expected.
In this context, crop consultant Michael Cordonnier has lowered his US corn yield by 1 bushel per acre (bu/ac) to 179 bu/ac, citing a drier bias across the Corn Belt and now forecasts corn production at 14.94 billion bushels.
Thus, investors unwound bearish bets especially ahead of the key government supply and demand report at the end of the week.
However, variable rains are coming to the central U.S. between Wednesday and Saturday, with most fields likely to get somewhere between trace amounts and 0.75” during this time, per the latest 72-hour cumulative precipitation map from NOAA.
The agency’s new 8-to-14-day outlook predicts seasonally wet weather for some of the Plains between June 13 and June 19, with warmer-than-normal conditions likely for most of the central U.S.
As for soybean, prices made modest inroads, up 0.24%, after trading in both positive and negative territory during the session.
Dr Cordonnier left his soybean yield and production forecasts at 52 bu/ac and 4.53 billion bu., respectively, noting dry conditions in early June do not necessarily translate to lower yields if weather turns more favourable later in the growing season.
Private exporters reported the sale of 165,000 tonnes of soybeans for shipment to Spain in the 2022/23 marketing year, the U.S. Agriculture Department said on Tuesday morning.
Then, prices peaked at their highest in nearly three weeks, after that, traders began squaring their positions ahead of the next WASDE report from USDA.
The rest of the soy complex was mixed, with soymeal down 1.12%, while soyoil prices jumped 3.37% higher.
Wheat prices also were mixed but mostly lower, as Chicago SRW added 0.60%, meanwhile, Kansas City HRW dropped 0.24%, and MGEX HRS fell 0.46%.
Chicago wheat prices were underpinned by concerns over Black Sea supplies and lower output in Australia.
Wheat markets initially had surged after Ukraine’s Nova Kakhovka dam was damaged in a blast, causing significant flooding along the Dnipro River.
The dam provides water for the cooling towers of the Zaporizhzhia nuclear plant and water for areas south of the dam, including Crimea.
Ukraine has accused Russia, while Russia said it was caused by Ukrainian troops.
This came after a part of an ammonia pipeline, that Russia sees as one of the key issues in talks on the Black Sea corridor was damaged by an explosion.
However, it was not clear at this stage what would be the implications of this escalation.
Thus, Chicago wheat prices ended the day in the black, meanwhile the hard red prices faded.
Kansas City hard red winter wheat and MGEX spring wheat contracts, indeed, sank as export demand for U.S. supplies remained slim despite concerns about escalations in the Ukraine-Russia war.
Meanwhile, on the international trade scene, the lowest offer presented at the Egyptian state purchasing tender for wheat on Tuesday was $229 per tonne for 55,000 tonnes of Russian wheat on a free-on-board basis, with no U.S. wheat offered in the tender.
In this context, corn basis bids were steady to mixed across the central U.S., after trending as much as 5 cents higher at an Iowa processor and as much as 5 cents lower at an Illinois river terminal.
Soybean basis bids were steady to firm across the central U.S. after improving 2 cents at an Ohio elevator and 10 cents at an Illinois processor.
Commodity funds were net buyers of CBOT corn, soybean, wheat and soyoil futures contracts, and net sellers of CBOT soymeal.
On this morning, Chicago wheat prices ticked higher.
Soybeans and corn were also firmer.
Notably, the most-active wheat contract on the Chicago Board of Trade (CBOT) rose 0.2% to $6.28-3/4 a bushel, as of 02:09 GMT.
Soybeans added 0.3% at $13.57-1/4 a bushel and corn gained 0.1% at $6.08-3/4 a bushel.
From Canada, canola prices are rebounding, as a result of a risk of water deficit for the next few weeks.
From Central America, Mexican farmers on Tuesday called on the president to set guaranteed prices for corn, wheat and sorghum, saying government intervention is vital to counter a steep drop in international grains prices and avoid “irreversible” economic damage.
Farmers are crippled by the rising costs of production, driven up by the war in Ukraine.
That, coupled with a steep drop in international grains markets, put producers in a desperate need of help.
Notably, in a direct plea to President Andres Manuel Lopez Obrador, the producers called for immediate intervention to set the price of corn at 7,000 pesos ($402.90) per ton, wheat at 8,000 pesos ($460.45) per ton and sorghum at 6,500 pesos ($374.12) per ton.
They also called for the restoration of credit programs and more sector investments, like hydraulic infrastructure projects for irrigation.
Without government support, food prices in Mexico could skyrocket.
($1 = 17.3742 Mexican pesos).
From South America, as a consequence of a record harvest, soybean exports to Brazil are expected at 13.11 million tonnes in June, against 9.946 last year for the same month.
Those of corn are estimated at 1.66 million tonnes, against 1.503 according to Anec.
In Europe, grain prices were mixed, with wheat easing slightly, while corn and rapeseed extended their gains on dry weather forecasts.
Wheat prices gave up earlier sharp gains as competitive offers of Russian wheat in an Egyptian tender eased supply concerns caused by a dam breach in Ukraine.
Apart from a single offer of $229 a tonne that was the cheapest, other Russian offers were at $240 a tonne, free on board, while the lowest French offer was almost $20 higher the Russian floor price.
Traders were also monitoring dry conditions in some key northern hemisphere wheat belts, including northern Europe where some rain relief is forecast from the end of the week.
As a result, September wheat settled 0.1% down at 230.25 euros ($246.05) a tonne.
It earlier climbed to 236.50 euros, its highest since May 17, on the news of the breach to the Russian-controlled Nova Kakhovka dam in southern Ukraine.
In rapeseed, August contract ended 1.4% higher at 429.50 euros a tonne.
They earlier struck a three-week high, adding to a 4.2% jump on Monday when weather worries helped the market rebound from last week’s 2-1/2 year low.
Meantime, European Union soft wheat exports during the 2022/23 marketing year are up 11% from year-ago totals after reaching at 28.9Mt through June 4.
Morocco, Algeria, Nigeria, Egypt and Saudi Arabia were the top five destinations.
EU barley exports are down 13% year-over-year, meantime, with 6Mt.
As for corn, imports during the 2022/23 marketing year are still trending 60% above last year’s pace after reaching 24.6Mt through June 4.
Ukraine, Brazil, Canada, Serbia and Russia were the top five suppliers.
On th imports side, European Union soybean imports during the 2022/23 marketing year are down 11.5% from year-ago totals after reaching 12.03 Mt through June 4.
EU soymeal imports are also down year-over-year, with 14.64 million metric tons over the same period.
Rapeseed imports into the EU on June 4 were 7.15 million tonnes, up sharply on last year at 5.14 million.
From Ukraine, Ukraine’s total grain exports during the 2022/23 marketing year are approximately 3.4% below last year’s pace so far.
Sales include corn exports totaling 27.1 Mt, plus another 15.6 Mt of wheat exporters.
From Russia, the spring wheat seeding campaign is mostly over.
As of June 1, farmers seeded 28.2 million hectares of grains compared to 26.4 million hectares in 2022, including 13.2 million hectares in the Urals and Siberia, in which seeded 7.5 million hectares of spring wheat.
However, the Urals and Siberia were mostly dry again this week, and this is becoming a bigger problem week over week.
Thus, “we could revise the spring wheat forecast lower in the next crop update” Sovecon said.
Meantime, Russia exported 730,000 tonnes of grain last week compared to 1.07 million tonnes a week earlier, including 650,000 tonnes of wheat compared to 970,000 tonnes a week earlier, according to port data.
Sovecon estimated total Russian wheat exports in May at 4.1 million tonnes, compared to 1.2 million tonnes in May 2022 and 1.5 million tonnes on average.
The consultancy added that total grain exports were expected to reach a record high of 57.2 million tonnes.
Also, SovEcon estimated that Russian wheat exports may reach 45.7Mt in 2023-24, surpassing this year’s record by 3pc.
The wheat export forecast for the new season has been revised due to increased harvest estimates and statements by the Ministry of Agriculture that it has no plans for intervention purchases implying bigger market supply.
In addition, there was the launch of operations at a new deep-water terminal.
In this context, export prices of Russian wheat continued to decline last week.
Notably, according to the IKAR, the price of Russia’s new wheat crop with 12.5% protein content, delivered free on board (FOB) from the Black Sea, was assessed at $225 a tonne compared to $230 a tonne the previous week for the old crop.
As for the other products, price for domestic 3rd class wheat European part of Russia was at 11,100 rbls/t, UNCH, (Sovecon).
Price for sunflower seeds was at 21,375 rbls/t, -125 rbls/t (Sovecon).
Price for domestic sunflower oil was at 66,325 rbls/t, -2,350 rbls/t (Sovecon).
Price for domestic soybeans was at 30,400 rbls/t, UNCH, (Sovecon).
Export price for sunflower oil was at $710/t, -$30/t (IKAR).
Price for white sugar, Russia’s south, was at $750.90/t, -$5.54 (IKAR).
From the Middle Kingdom, after two weeks of continuous heavy rains, in China’s Henan province it’s surveied bent stalks of saturated wheat in sodden fields that will take days to dry out before harvesting can start.
The rains are also causing the kernels of wheat crop to begin sprouting early, which, more crucially, means the grain will produce lower quality flour unsuitable for noodles or bread.
That could mean a large chunk of the crop will end up being sold as less valuable animal feed, or even abandoned.
About one-third of China’s wheat is grown in Henan province.
With roughly 30 million metric tons expected to be affected nationally by the rains, out of a forecast bumper crop for all of China of 137 million metric tons.
The rains have also impacted neighbouring provinces like Anhui, Shanxi and Shandong, though it’s too early to say how extensive the damage is, but it could increase the need for more overseas grain.
Only three-quarters of Henan’s crop had been harvested as of Tuesday, compared with 90% this time last year, according to state media.
Farmers are digging trenches or using pumps to drain water off their fields so harvesting can start.
Losses may mean rising grain imports, though China’s large grain stocks should protect against any impact on food prices.
In this context, China’s Agriculture Ministerhas urged “extraordinary measures” to harvest the wheat, according to a ministry statement on Monday.
The Henan government is urging insurance providers to cover early sprouting damage and quickly settle claims, the ministry said.
It has also ordered state grain buyers to purchase lower quality wheat at above-market prices.
A Xiping-based grain dealer, is paying growers 2,100 yuan ($295) per metric ton of germinated wheat, about 75% of the market price for food-grade wheat.
But for damp wheat still unharvested, the price could be even lower, unless it dries up soon.
Meantime, China imported a record 12.02 million tonnes of soybeans in May, up 24% on a year ago, as cargoes delayed during last month’s strict inspections were finally unloaded at ports.
Imports were also up from April’s 7.26 million tonnes, which were far short of expected arrivals.
The total for the first five months of the year reached 42.31 million tonnes, up 11.2% year-on-year, the General Administration of Customs said on Wednesday.
The previous record for a month was 11.2 million tonnes in June 2020.
Last month’s large arrivals of beans have, however, brought down prices, with spot soymeal sold in crushing hub Rizhao down almost 20% during May to 3,670 yuan ($515.53)a tonne.
Arrivals in June could be even larger at around 13 million tonnes, based on the large shipments in April.
Also, low hog prices in China in recent months are however hurting demand for soymeal, as well as large volumes of cheap wheat that are increasingly available for feedmakers.
Thus, swapping wheat for corn in animal feed can lower demand for soymeal.
($1 = 7.1177 Chinese yuan renminbi).
From South East Asia, Malaysian palm oil futures closed lower on Tuesday after a survey forecast higher stockpiles as production swelled to a five-month high, while a softer ringgit lent some support to the market.
Notably, the benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange slid 61 ringgit, or 1.8%, to 3,320 ringgit ($720.96) a tonne, after two consecutive sessions of gains.
Malaysia’s palm oil inventories at the end of May are expected to reverse a three-month decline as production expanded to its highest so far this year amid flattish exports.
Notably, May stockpiles are seen rising 6.8% to 1.6 million tonnes month-on-month.
Production in the world’s second-largest producer is expected to surge 21% to 1.45 million tonnes.
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.
The ringgit, palm’s currency of trade, fell 0.66% against the dollar, making the commodity cheaper for holders of foreign currency.
From Australia, the Reserve Bank lifted interest rates for the 12th time in just over a year, with the 25 basis point increase bringing the cash rate to 4.1pc, its highest level in 11 years.
On the weatjer side, the Bureau of Meteorology, now reporting El Niño alert, indicating a 70pc chance of El Niño forming this year, in its Climate Driver Update yesterday.
Central and eastern Pacific sea surface temperatures have warmed to El Niño thresholds but the atmosphere has not yet responded for an event to be declared.
All models surveyed by the Bureau are forecasting the likelihood of further warming and that these temps will remain above El Niño thresholds at least into the southern hemisphere spring.
Meantime, ABARES has forecasted production of Australia’s major winter pulse crops to 2.684 million tonnes, down 32 percent from the 3.95Mt grown in 2022-23.
In figures released yesterday in its Australian Crop Report, the national forecaster is predicting a 1pc increase in chickpea production to 544,000t, but has forecast big drops for Australia’s other major winter pulses, namely faba beans, field peas, lentils, and lupins.
Notably, in South Australia, the area planted to faba beans is estimated at 83,400ha, down from 120,000ha last season, and production is expected to more than halve to 144,000t from last year’s record 300,000t.
In Victoria, the outlook for production at 150,000t is unchanged from last year’s estimate, but ABARES has forecast planted area at 100,000ha, down 10,000ha on last year.
As for lentil, at 320,000ha, no change is seen in SA lentil area, but production is forecast to fall to 528,000t from a record 900,000t last year.
Victorian lentil area is forecast to be up 5000ha to 305,000ha to produce a much smaller crop of 350,000t, down from a record 475,000t in 2022-23.
As for lupin, the area of Australian farmland planted to lupins is seen at 425,000ha, with only the 2013-14 area of 387,000ha being below it in the past 30 years.
The vast majority of Australia’s lupins are grown in Western Australia, and ABARES is forecasting the WA lupin now in the ground at 300,000ha to produce 470,000t, down from 925,000t from 400,000ha last year.
Commercial quantities of lupins are grown in other states, but are mostly consumed by the domestic stockfeed sector.
In this context, local markets again were steady yesterday, with wheat and barley values largely unchanged to a few bucks softer on current crop but hard to strike a bid or offer along the East Coast.
Current crop ASW1 in WA traded $5/t lower.
Current crop canola kicked and saw liquidity as sellers let some more go.
Eastern Australian track was bid around $635-640/t levels and a touch higher for good sites.
On the international trade scene, Japan issued a regular tender to purchase 86,922 tonnes of food-quality wheat from Australia and Canada that closes on Thursday.
Nearly two-thirds of that total is expected to be sourced from Canada, with the remainder coming from Australia.
It’s also worth noting that the United States is typically a top source of these regular tenders but is absent in this particular one.
The grain is for shipment in August.
Iran issued an international tender to purchase 120,000 metric tons of soymeal, sourced from Brazil, that closes on Wednesday.
The grain is for shipment in July and August.
The Taiwan Flour Millers’ Association has issued an international tender to purchase an estimated 56,000 tonnes of grade 1 milling wheat to be sourced from the United States.
The deadline for submission of price offers in the tender is June 14.
The tender seeks a range of different wheat types in one consignment for shipment from the U.S. Pacific Northwest coast between July 31 and Aug. 14.
Wheat types sought include dark northern spring, hard red winter and white wheat.
Algerian state agency ONAB has issued an international tender to purchase up to 140,000 tonnes of animal feed corn to be sourced from optional origins.
The deadline for submission of price offers in the tender is Thursday, June 8.
Corn shipment is sought in four 35,000 tonne consignments one for immediate shipment by June 30 at the latest and the others for shipment between July 1-15, July 15-31 and Aug. 1-15.
Egypt’s General Authority for Supply Commodities (GASC) is believed to have bought around 55,000 tonnes of Russian wheat in an international tender.
Notably, the tradin house it’s believed to be AGRIC SA.
The offer price was at $229 FOB + $15.50 freight, for a total $244.50.
GASC did not make an official announcement of the purchase.
GASC was seeking wheat for shipment July 21-31, 2023.
It asked suppliers to submit offers on a free-on-board basis, with payment to be made at sight using funding from the International Islamic Trade Finance Corporation (ITFC).
In outside markets …
Energy markets saw oil prices easing about 1%, as worries on sluggish global economic growth could reduce energy demand.
Notably, Brent futures fell 42 cents, or 0.6%, to settle at $76.29 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 41 cents, or 0.6%, to settle at $71.74.
Saudi Arabia, unexpectedly increased the official selling price of its crude to Asian buyers.
However, the Saudi supply cut is unlikely to achieve a “sustainable price increase” due to weaker demand, stronger non-OPEC supply, slower economic growth in China and potential recessions in the U.S. and Europe, analysts said.
Also, the U.S. dollar rose to its highest level against a basket of currencies since hitting a 10-week high on May 31 as investors waited on fresh signals on whether the U.S. Federal Reserve will raise or hold interest rates in June.
A stronger dollar can weigh on oil demand by making the fuel more expensive for holders of other currencies.
The World Bank, however, raised its 2023 global growth outlook as the U.S., China and other major economies have proven more resilient than forecast, but said higher interest rates and tighter credit will take a bigger toll on next year’s results.
Higher interest rates boost borrowing costs, which can slow the economy and reduce oil demand.
Meantime, the Energy Information Administration (EIA) projected U.S. crude output will rise from 11.9 million bpd in 2022 to 12.6 million bpd in 2023 and 12.8 million bpd in 2024, That compares with a record 12.3 million bpd in 2019.
However, EIA also projected U.S. petroleum demand would rise from 20.3 million bpd in 2022 to 20.4 million bpd in 2023 and 20.7 million bpd in 2024.
That compares with a record 20.8 million bpd in 2005, according to EIA data going back to 1973.
On this morning, oil prices extended losses.
U.S. gasoline inventories rose by about 2.4 million barrels and distillates inventories were up by about 4.5 million barrels in the week ended June 2, market sources said on Tuesday, citing American Petroleum Institute figures.
The unexpected buildup of stockpiles raised concerns over fuel consumption by the world’s top oil consumer, especially as travel demand grew during the Memorial Day weekend.
China’s official data showed on Wednesday that its exports shrank much faster than expected in May and imports fell, albeit at a slower pace, as manufacturers struggled to find demand abroad and domestic consumption remained sluggish.
In ocean freight markets, the Baltic Exchange’s main sea freight index posted its biggest single-day gain since mid-March on Tuesday, supported by higher rates for capesize and panamax vessels.
The overall index, indeed, rose 77 points, or 8.2%, to 1,016, its biggest daily percentage gain since March 14.
Notably, the capesize index jumped 205 points or 17.4% to 1,383 – its biggest rise in over three months.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, increased $1,704 to $11,470.
The panamax index was up 60 points or 5.7% at 1,108.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, increased $539 to $9,973.
Among smaller vessels, the supramax index lost 22 points, or about 2.7%, at 781, to hit its lowest since late February.
In equity markets, US stock indexes rose modestly as strength in regional bank stocks supported the overall market.
Higher bond yields however limited stock gains after former Fed Vice Chair Clarida said the Fed was unlikely to cut interest rates until 2024.
As we said, the World Bank raised its 2023 global GDP forecast to 2.1% from 1.7% in January but cut its 2024 global GDP forecast to 2.4% from 2.7% and said, “Global growth is projected to slow significantly in the second half of the year, with weakness continuing in 2024.”
The Reserve Bank of Australia unexpectedly raised its cash rate by +25 bp to 4.10% from 3.85% and said recent data indicate upside risks to CPI and “some further tightening of monetary policy may be required.”
In this context, the 10-year T-note yield rose +1.0 bp to 3.693%.
The S&P 500 rose 0.2% to 4,283.85.
The Dow Jones Industrial Average edged up by less than 0.1% to 33,573.28, while the Nasdaq composite rose 0.4%, to 13,276.42.
On this morning, Asian shares were mixed after a day of listless trading on Wall Street in the absence of market-moving data.
China reported its exports fell 7.5% from a year earlier in May and imports were down 4.5%, adding to signs of a slowing of its economic recovery following the lifting in December of anti-virus controls that disrupted travel and commerce.
The decline in exports was the first year-on-year drop in in three months, with export volumes falling below their levels at the start of the year.
“And with the worst yet to come for many developed economies, we think exports will decline further before bottoming out later this year,” some analysts said.
Thus, the Shanghai Composite index lost 0.1% to 3,192.41 while the Hang Seng in Hong Kong gained 0.7% to 19,232.94.
Tokyo’s Nikkei 225 index lost 1.8%, the sharpest decline in 12 weeks, to 31,913.74.
In Seoul, the Kospi was nearly unchanged at 2,615.60, while Australia’s S&P/ASX 200 edged 0.2% lower to 7,118.00.
Shares rose in Taiwan but fell in Bangkok.
In currency trading, the dollar index rose by +0.13%, as higher US T-note yields strengthened the dollar’s interest rate differentials, meanwhile, weaker-than-expected Eurozone economic news, weighed on the euro.
Notably, the EUR/USD fell by -0.18%, with the euro under pressure after
Eurozone Apr retail sales were unchanged m/m, weaker than expectations of +0.2% m/m.
Also, German Apr factory orders unexpectedly fell -0.4% m/m, weaker than expectations of +2.8% m/m.
Meantime, the ECB’s monthly consumer inflation expectations for the next 12 months fell to 4.1% in April from 5.0% in March, and for the next three years ahead fell to 2.5% in April from 2.9% in March.
As for the USD/JPY, it rose by +0.04%, with the yen falling back from weaker-than-expected Japanese economic news.
Apr household spending indeed fell -4.4% y/y, weaker than expectations of -2.4% y/y and the biggest decline in over two years.
Also, Apr labor cash earnings rose +1.0% y/y, weaker than expectations of +1.8% y/y.
In addition, a rally in the Nikkei Stock Index to a 32-year high curbed safe-haven demand for the yen.
That’s all, thank you.
We wish you a nice day.
Author: Sandro F. Puglisi
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