U.S. grain prices off this week, even if tight supplies buoy market.
In deed, corn futures were down 1.6% for the week after a 5% gain the previous week.
Soybean futures were down 3.7% from the previous Friday.
Soy Meal was down 2.7% for the week.
Soybean oil which previously has supported the complex, was down 3.9% this week.
Surplisly, also wheat futures were lower in all three markets this week.
MPLS which had been the bull leader, was down 3.68% this week after posting new life of contract highs.
Chicago SRW wheat was down 1.2% this week after gaining 12.6% the previous week.
The KC HRW dropped 0.8%.
On macro markets, oil prices edged higher on Friday and for the week after a strong recovery from Monday’s steep slide, underpinned by expectations that supply will remain tight through the year.
In fact, Brent crude ended the session up 41 cents, or 0.4%, at $74.20 a barrel after jumping 2.2% on Thursday.
U.S. West Texas Intermediate (WTI) crude settled up 26 cents, or 0.2%, at $72.17, after gaining 2.3% on Thursday.
For the week, Brent gained 0.7% after declining for three consecutive weeks, while WTI rose 0.4% after falling for two weeks.
The price of oil and other riskier assets had tumbled at the start of the week on concern over the impact on the economy and crude demand from surging cases of the COVID-19 Delta variant in the United States, Britain, Japan and elsewhere consequentially both benchmarks had slumped about 7%.
Meantime, those losses were pared, as investors expect that demand will stay strong and the market to receive support from falling oil stockpiles and rising vaccination rates.
On the financial side, Wall Street gained ground for the fourth straight session on Friday, extending a rally that pushed all three major U.S. stock indexes to record closing highs as upbeat earnings and signs of economic revival fueled investor risk appetite.
The S&P 500, the Nasdaq and the Dow all notched weekly gains.
In fact, the Dow Jones Industrial Average rose 374 points, or 1.07%, to 35,061, the S&P 500 gained 84 points, or 1.9%, to 4,411 and the Nasdaq Composite added 410 points, or 2.83%, to 14,836.99.
Growth and value stocks seesawed for much of the week as market participants weighed spiking infections of the COVID-19 Delta variant against strong corporate results and signs of economic revival.
Market participants now look toward next week with the Federal Reserve’s two-day monetary policy meeting and a series of high-profile earnings.
The Fed’s statement will be parsed for clues regarding the timeframe for tightening its accommodative policies, although Chairman Jerome Powell has repeatedly said the economy still needs the central bank’s full support.
The U.S. Dollar Index increased slightly from last week’s 92.71 to close at 92.87, meantime.
Coming back on grains market, this week, hot dry weather continued to scorch parts of the Pacific Northwest (PNW), Montana, and many Plains states.
Smoke from wildfires lowered temperature in parts of the PNW slowing crop maturity slightly.
Still, drought conditions prevailed and soil moisture in Washington was reported 98% short or very short.
Minnesota, too, saw conditions degrade and soil moisture there was rated 78% short to very short.
Soil moisture levels in the South, Midwest and East, where soft red winter will be seeded in September remain adequate.
Meantime, Monday’s Crop Progress report showed the US corn crop was 56% silking, 4% faster than normal, with 8% in the dough stage.
Condition ratings were mostly unchanged at 65% gd/ex, with the Brugler500 at 369.
NASS Crop Progress data indicated 63% of the US soybean crop was blooming, with now 23% setting pods, both ahead of the normal pace.
Conditions rating as of July 18 were up 1% at 60% gd/ex and 2 points higher on the Brugler500 index to 357.
USDA’s Crop Progress report showed the winter wheat harvest moving along 73% cut, now just 1% behind normal.
Positive harvest momentum and strong yields in the Southern Plains has made HRW the most affordable wheat class in the U.S. causing basis prices from Gulf origins to go down while ongoing drought in Montana has strengthened basis from the PNW as exporters there will need to bring grain from further away.
However, for the sixth week in a row, no offers were made for HRW 12.5% protein exported from the Gulf as protein content for HRW, has averaged 11.4% for the last two weeks, slightly below the 5-year average of 11.6% protein.
However, as harvest advances and more protein content is known, offers for higher protein HRW may change.
The spring wheat crop advanced to 92% headed, even with the average pace.
Condition ratings continue to deteriorate for HRS, down another 5% to at 11% gd/ex.
That dropped the Brugler500 index score to 220, down 21 points from the previous week.
New crop PNW SW protein average is expected to be higher, but crop quality data is just starting to come in, making grain traders reluctant to guarantee maximum proteins.
For the sixth week in a row, offers for total U.S. SW 9.5% max protein remain limited.
US durum conditions worsened last week as ratings in North Dakota and Montana fell to 45% Gd/Ex (-2% wk/wk) and 30% Gd/Ex (-10% wk/wk) respectively.
The North Dakota crop is 69% headed while the Montana crop is 48% headed.
USDA put US durum production down to 37.2 million bu (1.0 million mt), down 46% from last year.
Most of the decline in production is from North Dakota and Montana where yields are expected to fall from 39 bu/ac last year to 22 bu/ac this year.
Average yields are expected to fall 15.6 bu/ac from last year to 25.8 bu/ac..
Meantime, US weekly export sales data showed for corn a net reduction on old crop bookings by 88,500 MT for the week of July 15.
That is not out of the ordinary for this time of year, but does not make it any easier to hit the USDA export projection.
Total commitment of shipped and unshipped sales are 96% of that SUDA forecast vs. the 102% average.
New crop sales were just 47,700 MT for the week.
US total soybean export commitments are now 100% of the USDA projection, vs. 103% average for this date.
Old crop sales still to be shipped are down 60% from year ago at 3.13 MMT.
For wheat weekly export sales data showed wheat export sales through July 15 the largest so far in the short MY at 473,200 MT, besting last week by ~50,000 MT.
Year-to-date commercial sales for delivery in 2021/22 total 7.5 million metric tons (MMT), 12% lower than last year at the same time.
USDA expects total 2021/22 U.S. wheat exports will reach 23.8 MMT, 12% lower than last year, if realized.
Commitments of shipped and unshipped sales are now 32% of USDA’s projected number, 3% below the normal pace.
On the other hand, EIA data showed a 13,000 barrel per day reduction in ethanol production for the week ending 7/16.
That left production still above the 1 million bdp mark at 1.028 million bpd.
Stocks rose a considerable amount by 1.384 million barrels to 22.518 million.
Meantime, Friday’s Commitment of Traders data showed managed money spec funds increasing their net long position by 13,101 contracts on soybean for the week ending July 20.
That took them to a net long of 95,874 contracts of futures and options on Tuesday afternoon.
CFTC’s Commitment of Traders report also showed spec funds adding back another 14,503 contracts to their net long in corn futures and options as of 7/20.
That took them to a net long 223,302 contracts on Tuesday.
On wheat, the weekly Commitment of Traders report indicated that spec funds in Chicago slashed 19,866 contracts from their net short position in the week ending July 20.
That trimmed the net short 3,770 contracts.
In KC HRW, they added just another 6,078 contracts to their net long position for the week, to 27,745 contracts.
Going inside the numbers, CBOT soft red winter (SRW) futures fell 8 cents to close at $6.84/bu.
KCBT hard red winter (HRW) futures were down 5 cents to end at $6.46/bu.
MGE hard red spring (HRS) futures lost $0.34 to close at $8.83/bu.
CBOT corn futures fell 9 cents to end at $5.47/bu.
CBOT soybean futures were down 53 cents to close at $14.01/bu.
In this context, wheat basis was mixed in the Gulf and up in the PNW as dry conditions continued to stress both the HRS and soft white (SW) crops.
Basis prices for October and November delivery are higher due to tighter export capacity as wheat shipments compete for space with other commodities.
Farmers in the PNW are busy with harvest and slow to sell grain forcing traders to raise their offer prices.
Corn basis bids on Friday, were mixed at two Midwestern ethanol plants and firmed 4 to 10 cents higher at two interior river terminals while holding steady elsewhere across the central U.S..
Soybean basis bids sank 5 to 10 cents lower across five Midwestern processors on Friday while firming 5 cents higher at an Illinois river terminal.
Other locations across the central U.S. held steady.
From Canada, dry conditions continue to dominate western wheat growing provinces.
Continuous warm weather has also depleted soil moisture with more heat in the 10-day forecast.
Some areas are expected to see temperatures get above 40° C (100°+ F).
In Saskatchewan, spring wheat was rated 25% good or excellent on July 12, a 33-point drop from June 28.
Thirty-seven percent of the crop is rated as poor to very poor.
In Alberta, 39% of the crop is Gd/Ex, down 32% from two weeks ago.
Canadian Durum wheat conditions in Saskatchewan fell 33 points from two weeks ago.
Now, just 12% of the crop is in “good” condition.
In Alberta, the durum crop’s lost 15 points over the past two weeks and is now 33% Gd/Ex.
In this context, USDA expects Canadian (all) wheat exports to fall 18% from record ’20/21 exports to 23 million mt in ’21/22.
Meantime, Canadian wheat exports for week 49 were 166.9k mt.
This makes for a season total of 18.83 million mt, 2.09 million mt (12%) more than last year.
Canadian Durum exports for week 49 were 154.5k mt (to note the most part of the export in the week) for a season total of 5.77 million mt, 19% (921k mt) more than last year.
However, its expect that durum exports will be down next year from low supply.
Additionally, Transport Canada ceased all train movement to Vancouver, the busiest grain export port, earlier this month following a wildfire that decimated the city of Lytton, British Columbia, and delayed railcar movement.
In this context, CANADA WHEAT FOB PRICE IN CDN$/MT were last week :
N1 CWRS 13.5 % PRO 477,60 WEST COAST PORTS
N2 CWRS LOW PRO 474.80 WCP
N3 CWRS LOW PRO 361.33 WCP
N1 CWA DURUM 463.24 GREAT LAKES PORTS
1.256 CAD$ = 1 USD
Also Canadian canola are suffering from the persistent drought and heatwave in the west of the country.
In deed, Canadian canola was heading into the stratosphere first of the decline recorded on Monday in the wake of the fall in oil prices and palm oil.
However, Winnipeg canola November contract closed the week at US$ 881,3 recovering part of the losses.
Current high prices in Canada reflect the tight carry-in and the lower expected production.
From South America, as the weather gradually improves in the center south of Brazil, farmers in that region managed to harvest 30% of their second corn crop through July 15 against the 43% of a year ago.
Farmers are behind this year because they planted corn later than usual.
Still, the 30% level represents an improvement from last week, when only 20% of the second corn area had been harvested.
AgRural forecasts Brazil’s second corn crop will be 59.1 million tonnes this year, 16 million tonnes lower than in the previous season.
Meantime, Argentine farmers have sold 25.1 million tonnes of soybeans from the current 2020/21 crop year, after transactions were recorded over the last week for 660,400 tonnes, the Agriculture Ministry said on Tuesday in a report with data updated through July 14.
The pace of soy crop sales is behind that of the previous season.
The soy harvest in Argentina ended last month at 43.5 million tonnes, according to the Buenos Aires Grains Exchange.
With regard to corn, the ministry said sales of the 2020/21 crop, which is currently being harvested, have totaled 33.6 million tonnes, about 2.7 million tonnes more than those registered at this point in the last season.
The exchange expects a 2020/21 corn crop of 48 million tonnes.
As of last week harvesting was 62.4% complete, according to the exchange.
According to Rosario Grains, Argentine wheat production in ‘21/22 is expected to be 20.5 million mt.
This is the same as USDA’s number.
Last year the country produced 17.6 million mt.
Wheat planting is 90% complete.
Meantime, fresh weekly wheat sales edged lower for both crops in the week to July 14 with new crop down by 48% on the week to 48,700 mt and old crop 34% lower to 106,200 mt.
Total new crop forward sales lifted to 4.1 million mt, 22% higher on the year, representing 21.8% of the estimated crop, 1.9 points higher on the year.
In this context, as for July 22, Argentina Wheat Grade 2 export price, (Up River) was at $277, up 1$ from prior week.
Argentina corn feed gained 8$ for the week, closing at $246.
Brazil corn feed (Paranagua) was at $272, up 3$ during the week.
Argentina barley feed, was unchanged at $255.
Argentina soybean fell 11$ to close at $533.
Brazil soybean lost 11$ finishing the week at $551.
On European market, warm, dry conditions in Germany quickly gave way to damage and quality issues after heavy rains caused flash flooding last week.
Germany’s Raiffeisen Association (DRV) cut its overall grain production forecast and pegged wheat at 22.82 MMT.
Harvest was also delayed in Germany’s southern region where disease pressure concern increased.
German traders said the rain’s impact on river grain transportationhas been minimal so far.
More rain is forecast at the end of the week.
According to farm office FranceAgriMer, the condition of French soft wheat worsened again last week, while wet weather prevented any acceleration of the harvest, keeping it well behind the same stage of last season.
FranceAgriMer’s crop report said that 75% of soft wheat rated good or excellent by July 19, against 76% a week earlier.
That remained well above the same time last year, when only 57% of the soft wheat crop was in good condition.
France, the European Union’s largest grain grower, is widely expected to register a rebound in wheat production. The farm ministry last week forecast a 27% jump in soft wheat output compared with the 2020 crop, 11% above the average of the past five years.
However, heavy rainfall earlier this summer has raised concern about late losses to yields and a deterioration in grain quality, which determines wheat’s suitability for milling.
FranceAgriMer’s crop ratings give an assessment of yield potential and not grain quality, which is hard to assess until the crop is harvested.
Soft wheat harvesting made little progress last week, with 14% of the crop area cut compared with 4% a week earlier and 67% a year ago, the office said.
Winter barley harvesting, which traditionally starts before soft wheat, reached 75%, up from 44% a week earlier.
It was virtually complete by the same stage last year.
The proportion of winter barley in good or excellent conditions improved to 74% from 73% the previous week.
Durum in good/excellent condition remained stable at 66% while the harvest reached 63%, from 40% a week earlier.
Spring barley harvesting was 12% complete, compared with 1% the previous week.
Meantime, also Stratégie Grains cut its estimate for France’s 2021 soft wheat harvest after a crop tour showed lower than expected yields inthe northeastern part of the country.
The crop tour also unveiled overall disappointment in wheat quality.
Stratégie Grain now expects the soft (non-durum) wheat harvest to be between 37.0 MMT and 37.5 MMT, down from last week’s 38.0 MMT forecast but still well above last year’s 29.0 MMT harvest.
On the hother hand, Non-commercial market participants added to their net long position in Euronext’s milling wheat futures and options in the week to July 16, data published by Euronext on Wednesday showed.
Non-commercial participants, which include investment funds and financial institutions, increased their net long position to 115,392 contracts from 89,805 a week earlier, the data showed.
Commercial participants similarly increased their net short position to 141,880 contracts from 137,531 a week earlier.
Commercials’ short positions accounted for 63.3% of the total short position, while commercial long positions accounted for 39.6% of total long positions.
Non-commercial short positions represented 36.7% of total short positions, while non-commercial net long positions accounted for 60.4% of the total longs.
The report covered all the open short positions and 99.9% of the open long positions in wheat derivatives.
In Euronext’s rapeseed futures and options, non-commercial market participants increased their net long position to 3,048 contracts from 2,357 a week earlier.
Commercial participants extended their net short position in rapeseed to 5,968 contracts from 2,752 a week earlier.
In this context, Matif September wheat futures was 2,25 euros down from last week, closing to €212/t.
Matif corn August futures gained 13 euros to closing the week at €259,00/t.
Matif rapeseed August futures, sheded other 15,25 euros ending the week at €532/t.
Nov-21 UK feed wheat futures made small gains yesterday, closing down £1.5/t at £175.50/t.
From the Black Sea basin, Romanian wheat is harvested on 70% of the surface, some analysts estimated a total production of 11.5 million tons, the best of all time.
A more realistic wheat crop in Romania would be 9,5 mmt.
However, farmers face a shortage of drivers to carry good crops to ports, which considerably increases the cost of transport.
In Ukraina, Ukrainian farms have harvested 14.1 million tonnes of grain from 21.8% of its sowing area with the yield averaging 4.18 tonne per hectare, the agriculture ministry said on Friday.
The volume includes 4.97 million tonnes of barley, harvested from 48.1% of the area with a yield of 4.18 tonne per hectare, and 8.86 million tonnes of wheat from 30% of the sown area with a yield of 4.28 tonnes, the ministry said.
Favourable weather could help Ukraine to harvest about 76 million tonnes of grain this year.
Meantime, Ukraine’s grain export has jumped to 1.66 million tonnes in the new 2021/22 July-June season, up 49% from the same point a year earlier.
That included 399,000 tonnes of wheat, 426,000 tonnes of barley and 824,000 tonnes of corn.
The government has said grain exports could rise to 56 million tonnes including 20.7 million tonnes of wheat, 30.7 million tonnes of corn and 4.1 million tonnes of barley.
Ukraine’s grain stocks totalled 5.4 million tonnes as of July 1, which was 142,000 tonnes less than at the same point in 2020, data from the State Statistics Service showed on Thursday.
Stocks at large and medium-sized agricultural companies included 1.7 million tonnes of wheat.
The data does not include grain stored at hundreds of small Ukrainian farms.
Grain harvest in the Russian Federation as of July 21 amounted to 34.5 million tons, the Ministry of Agriculture.
This figure came close to the data for the same date last year – 35.3 million tons.
The yield this year is higher than last year – 33.7 c / ha versus 33.4 c / ha.
At the same time, the report says, unfavorable weather conditions are observed in a number of regions – atmospheric and soil drought, dry winds, floods.
Emergency situations of a regional nature have been introduced on the territory of 9 subjects.
According to the forecast of the Ministry of Agriculture, grain harvest this year may amount to 127.4 million tons, including 81 million tons of wheat.
Last year, 133.5 million tons were harvested, including 85.9 million tons of wheat.
Meantime, Russia’s wheat export tax, which Moscow introduced on June 2 and is changing each week, will drop from $35.2/mt to $31.4/mt per tonne from July 28- August 03, according to data from the agriculture ministry.
For barley will increase from $37.5 of past week to $38,50, while for corn will decrease to $49,90 from 51.6 of prior week.
Indicative prices are $244,90 for wheat, $240 for barley and $256,4 for corn respectvely.
This, coupled with higher FOB, could boost exports that have been lagging badly so far, according to some analysts.
Meantime, Russian bakers say they plan to raise bread prices in August as much as 12% due to higher production costs that are not offset by state subsidies, reported the Russian daily newspaper Kommersant.
Russia’s agriculture ministry was quoted saying no significant increase for bread prices was needed because domestic prices of wheat are down 7.2% so far this year.
Even so, Russian bread prices are up 4.6% since the start of 2021, said the agriculture ministry.
Bread producers receive state subsidies if they do not raise consumer prices.
Kazakhstan’s government says it will ban the export of barley and wheat used for animal feed and completely ban the export of rye for six months as drought in the Central Asian nation has caused a shortage of animal feed.
The restrictions will go into effect Aug.15 but are subject to change.
The Kazakh Grain Union opposed the move and said the grain industry should be notified of any plans to regulate the market.
The USDA lowered its forecast for Kazak spring crops by 1.0 MMT to 13.0 MMT, down 8.8% from 2020.
From the Middle Kingdom, China’s soybean imports from Brazil edged down in June from a year earlier, as poor crushing margins weighed on demand.
China, the world’s top buyer of soybeans, brought in 10.48 million tonnes of the oilseed from top supplier Brazil, slightly down from 10.51 million tonnes the previous year, a record high, according to customs data.
However, the figures were still up by 14% from 9.23 million tonnes imported in May.
Meanwhile, China shipped in 54,806 tonnes of soybeans from the United States in June, its second largest soybean supplier, down 80% from 267,553 tonnes in the same month last year.
Meantime, China’s efforts to control African swine fever outbreaks among its pig herd remained complicated, with 11 outbreaks officially reported so far this year and new variants of the virus also present.
The risk of fresh outbreaks persisted even as the overall disease situation is stable.
China’s herd of 439 million pigs at the end of June was 99.4% of the level at the end of 2017, with sow herd at 45.64 million head, 102% of the level at end of 2017.
Recovery of pig production has led to more use of corn, a main ingredient of animal feed, and pushed up prices of the grain.
Meantime, feed producers have turned to cheaper wheat to replace corn in feed recipe.
China’s use of wheat in feed is expected to stay at relatively high level as the grain retains a price advantage over corn.
Indeed, wheat prices in the central province of Henan, a top producer of the grain, were 2,520 yuan ($388.57) per tonne on Monday, outstripping the price of corn at 2,910 yuan.
($1=6.4854 Chinese yuan renminbi)
Meantime, China auctioned 23,488 tonnes of corn imported from Ukraine on July 23.
The imported grain, stored at warehouses in Shandong and Guangdong provinces, was produced in 2020.
China started selling imported corn from state reserves in June, to replenish tightening supplies and cool prices.
Sales during the auctions have fallen, however, amid weak appetite for this corn ahead of a bumper domestic harvest.
From Australia, a weakening Australian dollar and more hot and dry weather for North America’s northern wheat regions have lifted export bids for nearby and new-crop grain this week.
Domestic buyers have no choice but to follow the market up as they book their last parcels before new-crop hits the market.
On the production front, much of southern Australia’s grainbelt has had 10-50 millimetres of rain in the past week.
While some crops are getting waterlogged, most are in excellent stead as the end of winter nears, but boggy conditions have made accessing grain stored on-farm difficult, and delayed the spreading of urea on winter cereals.
In this context barley nearby contract was steady to $295, while new crop for January was upA$5 at $275.
Wheat nearby contract was up by $7 to $332, while new crop for January was up by $5 to $303.
Nearby sorghum was down $10 to $300, while new crop Mar-Apr was up $10, to $270.
Barley Melbourne nearby was down $2 at $268, while new crop for January delivery was up $10 at $265.
Wheat Melbourne nearby was up $13 at $335, while new crop with January delivery was at $315, up $10.
Internationally, South Korea’s state-backed Agro-Fisheries & Food Trade Corp. has bought about 4,000 tonnes of soybeans free of genetically-modified organisms (GMOs) in an international tender for about 7,600 tones which closed on Wednesday.
One 4,000 tonnes consignment was purchased at an estimated $948.72 a tonne c&f from trading house SingSong for arrival between Sept. 10 and Oct. 20.
Other offers for around 3,600 tonnes sought were rejected and no purchase made.
The Baltic Dry Index (BDI), an assessment of the average cost to ship raw materials such as grains, coal, and iron ore, increased 5% on the week to end at 3,199.
Watching next week market, next week is fairly quiet on the report side of things.
USDA will release the Export Inspections report on Monday morning, with the Crop Progress report out that afternoon.
On Tuesday and Wednesday, the FOMC meet.
EIA will release updated ethanol production and stocks data on Wednesday as well.
Export Sales data will be out on Thursday morning per usual, with Friday being first notice day for August bean, meal, and oil futures.
In Sicily wheat harvest and other grains, coming to an end.
The quality of the durum wheat is very good and above average with a percentage of protein unchanged to 12.00%.
The humidity is less than 9%.
The test weight is still very good above 80 kg / hl.
The average yield increased to 2.7 tons per hectare.
The average prices in Italy jumped around by € 20 per tonne this week.
For delivery to Bari prices were from 335 to 345 € / t.
For delivery to Foggia area’s, prices were from 335 to 350 €/t.
For delivery to Altamura prices were from 347 to 360 €/ton.
For delivery to Bologna area’s, prices were from 309 to 330 €/ton.
For delivery to Catania-Palermo-Ragusa-Siracusa area’s, prices were from 330 to 340 €/ton.
Good luck everyone and have a good weekend.
