It is finally closed a week full of events.
Here, then, are the most important topics.
Much of the market talk this week was about inflation, and its potential for disruption of financial markets.
A massive injection of money from the Federal Reserve and COVID-relief legislation all around the world, has fueled concerns inflation may be ready for a restart after more than 30 years of mostly falling prices.
Nonetheless, the Fed maintains any inflation for now is temporary.
It is mainly caused by short-term supply chain disruptions from an economy roaring back to life after the pandemic.
Infact, even if the stock market “took a licking” kept on ticking.
However, inflation seem is in the eye of all the beholder really.
Coming back on grains market, corn, wheat, cotton and oats were down more than 7% apiece.
Some of this is routine profit taking, while in other cases the selling may be reflective of broader trends.
Corn prices sold off sharply this week, with lead month July shedding 12% of its value in a single week.
Also wheat prices dropped sharply in all three markets this week.
Chicago SRW was down 7.2%.
KC HRW down 10.7% to take the title of biggest bear.
Minneapolis spring wheat was down 7.1% after rising 4.4% the previous week.
Soybean prices, in contrast, did fine, when all the world around them was collapsing.
Indeed, they were down anly 3 ½ cents for the week, meaning a 0.2% dip.
Meantime, soymeal was down 5.3% for the week, with all of the loss occurring on Thursday.
Soybean oil, on the other hand, was up 4.8% providing the product value that the meal was taking away from the soybeans.
Canola saw some selling pressure this week, while palm oil was in high demand.
Going inside the facts, rumors of additional Chinese US new corn crop buying proved correct, with USDA confirming 1.36 MMT sold to China on Friday for new crop delivery.
Cumulative corn purchases for the week were 3.74 MMT (147 million bushels!).
However, the market has ignored all that and corn was sold off anyway.
U.S. wheat weekly commercial sales of 30,300 metric tons (MT) were below trade expectations of 49,700 MT to 53,783 MT.
Year-to-date commercial sales for elivery in 2020/21 total 25.5 million metric tons (MMT), 7% lower than last year.
USDA expects total 2020/21 U.S. wheat exports will reach 26.2 MMT even with last year if realized.
This week’s commercial sales for delivery in 2021/22 totaled 268,000 MT.
About soybean, export sales during the week of 5/6 were only 94,300 MT for old crop soybeans.
New crop sales were also weak at 102,500 MT.
Total old crop export commitments for the MY are now 109% of the USDA full-year forecast, compared to the 5-year average pace of 95% for this date.
Shipments have progressed to 100% of that projection vs. the 79% average pace.
Unshipped sales on the books are 16% smaller than last year, due to price rationing.
USDA also reported U.S. winter wheat conditions did not change much this week.
Winter wheat reported as good or excellent was 48%, 1% behind last week’s rating.
USDA reported that the southern plains HRW crop was over 67% headed as of May 9.
U.S. spring wheat for harvest in fall 2021 is 70% planted, well ahead of the 51% five-year average.
Spring wheat emergence is 29%, 9 points ahead of the five-year average.
Highlights of the May WASDE included:
Corn: Greater production and US use, lower exports, and increased ending stocks.
The corn crop is projected at 15 billion bushels, up from last year on higher area and a return to trend yield.
The US yield projection is 179.5 bu. per acre, and the projected farm price is $5.70 per bushel, which is up significantly from the $3.30 per bushel projected in May 2020.
Soybeans: Lower supplies, lower exports, higher crush and higher ending stocks compared with 2020/21.
The soybean crop is projected at 4.4 billion bushels, up 270 million from last year on increased harvested area and trend yields.
With lower beginning stocks, soybean supplies are projected down 3% from 2020/21.
The US yield projection is 50.8 bu. per acre, and the projected farm price is $13.85 per bushel, compared with $8.20 in the same report last year.
So, USDA sees US soybean ending stocks rising marginally to 140 million bushels by August 2022.
Meantime USDA projected wheat old crop ending stocks of 872 million bushels, cutting projected exports by 20 million bushels from the previous runs.
Indeed, they see them tightening to 774 million in 2022.
But so, what really turned corn so bearish and so, wheat too?
One can argue:
1) Rapid US corn planting progress (67% vs. 52% average) and fairly widespread rains across the newly planted Corn Belt fields;
2) A temporary shut down of Mississippi River barge traffic at Memphis (ended on Friday) due to a broken joint on the I-40 bridge over the river;
3) Net negative weekly old crop corn export sales as cancellations were larger than new buying;
4) USDA’s larger than expected new crop ending stocks estimate of 1.507 billion bushels;
5) the bull just died of old age, indeed, by May 7, December corn futures had rallied for 37 days and had 17 new highs for the move since the March 31 USDA reports.
The average duration for spring/summer rallies from the spring low since 1973 is 37.5 days.
Really, everyone knows there is more corn planted than forecast by USDA.
So, we could be looking at 93-94 million acres of corn.
With that, US could be near 2-million-bushel carryout again.
With good peace also of wheat.
Meantime, in Friday’s CFTC commitment of Traders report, spec funds in corn futures andoptions trimmed their net long position by 56,212 contracts as of 5/11 to 316,336.
The net short commercial position stood at 673,963 contracts, a drop of 48,677 on the week.
The large spec traders in CBT wheat futures and options added 2,310 to their CFTC net long position as of Tuesday, bumping it to 13,033 contracts.
In KC wheat, they cut a new 2,001 contracts in the week ending 5/11 to bring the net long position to 31,999 contracts.
After being net short for more than two years in MPLS wheat, the managed money spec funds have now been net long that market for more than 7 months.
September Minneapolis futures sold off after being the highest during May since 2014.
About soybean, Commitment of Traders report showed managed money spec funds in soybean futures and options adding 3,023 contracts to their net long position, taking it to 177,822 contracts on May 11.
In this context, CBOT soft red winter (SRW) futures shed 46 cents to close at $7.27/bu.
KCBT hard red winter (HRW) futures were down 76 cents to end at $6.51/bu.
MGE hard red spring (HRS) futures dropped 44 cents to close at $7.45/bu.
CBOT corn futures dropped 87 cents to end at $6.85/bu.
CBOT soybean futures shed 18 cents to close at $16.03/bu.
From South America, dryness in Brazil hasn’t changed much, with private estimates of the crop (and export potential) still shrinking.
USDA acknowledged that things weren’t good, cutting their estimate to 102 MMT from 109 MMT in the Wednesday WASDE report.
Argentine farmers have brought in 70.6% of their 2020/21 soy crop with an average yield of 2.8 tonnes per hectare, the Buenos Aires Grains Exchange said on Thursday, with harvesting propelled over recent weeks by ideal weather conditions.
It left its 2020/21 soybean crop forecast unchanged at 43 million tonnes.
Argentine growers have meanwhile brought in 24.6% of their 2020/21 corn crop.
The total corn harvest this year is expected at 46 million tonnes.
Corn harvesting has yet to gain momentum because farmers are prioritizing the collection of soy.
Meantime, argentine farmers have sold 17.3 million tonnes of soybeans from the 2020/21 season, after transactions were registered for 886,100 tonnes in the week ending on May 15, the Agriculture Ministry said in a report on Wednesday.
Ministry data showed the pace of soy sales lagged that of the previous season.
Growers said that they had been hoarding crops as a hedge against the weakening local peso.
Last year they had sold 21.4 million tonnes by this date.
Meantime the ministry also said 26.3 million tonnes of corn had been sold by Argentine farmers through May 5, 3.4 million tonnes more than had been sold at the same point last year.
The Rosario Grain Exchange (BCR) said this week that Argentina’s wheat crop will be a record 20.0 MMT following a 3% increase in planted area.
However, many growing regions need between 50 mm to 80 mm (2 inches to -3 inches) of rain to improve soil moisture
levels.
On European market, soft wheat exports from the European Union in the 2020/21 season that started last July had reached 22.84 million tonnes by May 9, data published by the European Commission showed on Monday.
That was down from 30.59 million tonnes cleared by the same week last season, the data showed.
Since Jan. 1, the European Commission’s data has covered the EU’s 27 countries only, whereas previous figures up to Dec. 31 covered both the EU-27 and Britain.
EU 2020/21 barley exports had reached 6.68 million tonnes, against 6.75 million a year ago, while EU 2020/21 maize imports stood at 12.72 million tonnes, down from 17.89 million.
Stratégie Grains, a French grain consultancy, left its monthly European Union soft (non-durum) wheat production forecast unchanged.
Despite a 0.5 MMT reduction in French production, good field conditions in Romania led the firm to raise the wheat forecast there, offsetting the French reduction.
Stratégie Grains forecast a 129.6 MMT soft wheat crop in 2021/22, up 8.5% compared to 2020/21.
Meantime, crop ratings for French wheat and winter barley were stable in the week to May 10 while spring barley conditions improved, data from farm office FranceAgriMer showed on Friday, suggesting rain has helped cereals after a dry, cold April.
An estimated 79% of French soft wheat was in good or excellent condition, unchanged from the previous week, FranceAgriMer said in a cereal crop report.
That ended four weeks of declining ratings for France’s main cereal crop, having endured low rainfall and severe frosts.
FranceAgriMer does not give reasons for rating trends in its weekly updates, but officials this week said that the return of rain had stabilised growing conditions.
The good/excellent scores for winter barley and durum wheat were also unchanged on the week, at 76% and 69% respectively.
For spring barley, the corresponding rating rose to 85% from 82% after holding steady the previous week, FranceAgriMer’s report showed.
Widespread rain this week and more showers forecast for next week could further boost soil moisture, though the grain market is also monitoring cool temperatures for any potential delay to crop development.
Crop ratings in France, the European Union’s biggest grain producer and exporter, remain much higher than a year ago, when crops suffered from torrential rain.
The soft wheat good/excellent score compared with 55% at the same point last season.
Grain corn sowing was nearly complete, with 95% of the expected area seeded by May 10, up from 89% the previous week and 88% a year ago, FranceAgriMer said.
Meantime, non-commercial market participants extended their net long position in Euronext’s milling wheat futures and options in the week to May 7, data published by Euronext on Wednesday showed.
Non-commercial participants, which include investment funds and financial institutions, raised their net long position to 145,178 contracts from 133,450 a week earlier, the data showed.
Commercial participants similarly increased their net short position to 169,572 contracts from 150,465 a week earlier.
Commercials’ short positions accounted for 62.7% of the total short position, while commercial long positions accounted for 32.9% of total long positions.
Non-commercial short positions represented 37.3% of total short positions, while non-commercial net long positions accounted for 67.1% of the total longs.
The report covered nearly all of the open short positions and all of the open long positions in the wheat derivatives.
In Euronext’s rapeseed futures and options, non-commercial market participants flipped to a net short position, going to a net short of 3,161 contracts from a net long of 448 a week earlier.
Commercial participants changed to a net long position, going to a net long of 634 contracts from a net short of 3,730 contracts a week earlier.
In this context, Matif September wheat futures was 14,00 euros lower from last week, tumbled at €218,00/t.
Matif corn June futures fell 12,00 euros to closing the week at €251,00/t.
Matif rapeseed August futures, tumbled drammatically of 93,00 euros ending the week at €547,75/t.
From Black Sea basin, russian wheat export prices rose in the first 10 days of May, supported by higher prices in Chicago Wv1 and Paris BL2U1 on corn supply concerns and despite low market activity during Russia’s May 1-10 official holiday.
Russian wheat with 12.5% protein loading from Black Sea ports for supply in June was at $278 a tonne free on board (FOB) at the end of last week, up $13 from late April, the IKAR agriculture consultancy said.
Sovecon, another consultancy, said that wheat prices rose by $4 to $274 a tonne, while barley was up $2 at $247 a tonne.
However, trading activity at export terminals was close to zero.
Many traders were on vacation while farmers were busy in fields.
In any case, bids continued to rise on stronger demand.
Weather remains favourable for Russia’s coming wheat crop with healthy rains in Russia’s central and Volga regions the previous week.
The southern regions were a bit dry but more rains are expected this week, Sovecon said.
There is discrepancy in forecasts of Russia’s 2021 wheat crop.
SovEcon, raised its forecast by 1.0 MMT to 81.7 MMT due to a larger than expected harvest area.
The May USDA World Agricultural Supply and Demand Estimates (WASDE) report pegged Russian wheat production at 85.0 MMT.
In addition, a GAIN report from USDA’s Foreign Agriculture Service
Attachè forecasts Russian wheat production to be 77.5 MMT.
Meantime, IKAR said that it reduced its forecast for Russia’s 2021 wheat crop by 500,000 tonnes to 79 million tonnes.
It expects Russia’s carry-over stocks at June 30, when the current 2020/21 marketing season ends, to be 12 million tonnes.
Belarus has almost completed the 2021 spring grain sowing, seeding around 1.1 million hectares of various grains, agriculture ministry data showed on Friday.
Belarus has said it plans to increase the grain harvest to 8.5 million tonnes in 2021, from 8 million tonnes last year.
Ukraine’s grain exports down 24.1% so far in 2020/21 season.
The exports included 15.30 million tonnes of wheat, 19.60 million tonnes of corn and 4.13 million tonnes of barley.
Export prices for Ukrainian rapeseed has added up to $20 a tonne so far this month and reached $640-$650 per tonne CPT Black Sea as of Friday, analyst APK-Inform said.
The consultancy said in a report the prices had decreased at the beginning of this week following the global downward trend, while recovered by Friday.
The main support for prices is provided by the continuing rise in oilseed prices in the European Union, the prospects for a decrease in the production potential of rapeseed in Ukraine and the rise in global vegetable oils prices.
Ukraine harvested 2.6 million tonnes of rapeseed in 2020 and has already exported most of the harvest.
Ukraine has said the 2021 rapeseed sowing area could total 1 million hectares, 10% less than a year earlier.
Meantime, the Baltic Dry Index (BDI), an assessment of the average cost to ship raw materials such as grains, coal and iron ore, dropped 3% on the week to end at 3,077.
The U.S. Dollar Index decreased from last week’s 90.56 to close at 90.31.
Watching next week market, the weekly Export Inspections and Crop Progress reports from USDA and European Commission, will be out on Monday, as well as the monthly NOPA crush report.
On Wednesday, EIA will show weekly ethanol production and stocks data.
Fast forward to Thursday and we get the weekly Export Sales report.
Have a good weekend
