A pretty quiet week for US grain markets, while other markets have been bubbling higher.
Corn prices, indeed, dropped around 2% this week.
Soybeans were down 0,28% for the week.
Soymeal was weaker again with a 2.5% drop.
Soyoil, meantime, shot up 4.6%, spurred by a surge in Malaysian palm oil and by crude oil.
Wheat contracts were mixed but mostly lower, with KC gave back 2.9% this week as weather forecasts put more rain into the Plains for next week.
CBT SRW was down 2.8% for the week.
MPLS, in contrast, advanced this week by 1.9%.
On macro marktes, oil rose on Friday, gaining about 4% on the week as a global energy crunch boosted U.S. prices to their highest in almost seven years as big power users struggle to meet demand.
The price run-up has been partially spurred by soaring European gas prices, which have encouraged a switch to oil for power generation.
Thus on Friday Brent crude futures rose 59 cents, or 0.72%, to settle at $82.54 a barrel.
Earlier in the week, the global benchmark hit a three-year high of $83.47.
West Texas Intermediate (WTI) crude rose $1.28, or 1.63%, to end at $79.58. That was the highest close for the U.S. benchmark since Oct. 31, 2014.
For the week, Brent futures were up around 4,3% and WTI crude was up 5,09%.
U.S. gasoline futures also closed at their highest since October 2014 on Friday.
Energy markets have tightened in the face of improved fuel demand, but many also fear that a cold winter could further strain natural gas supplies.
Demand, indeed, rose sharply as utilities attempted to raise stockpiles ahead of the winter season in the northern hemisphere, which is forecasted to bring colder than usual temperatures in the coming weeks.
At the same time, eolic electricity production is expected to drop, further tightening energy supplies.
The US, which has become a major LNG exporter, has seen domestic storage remain below five-year average levels.
Consequentially, benchmark European gas prices at the Dutch TTF hub on Friday stood at a crude oil equivalent of about $200 a barrel, based on the relative value of the same quantity of energy from each source, and US natural gas futures closed the week at $5.6, below the 7-year high of $6.5 early hit on October 6th, following Russia’s announcement to export more gas to Europe via Ukraine.
China, meantime, ordered miners in Inner Mongolia to ramp up coal production to alleviate its energy crunch.
In this context, also the Baltic Dry Index (BDI), an assessment of the average cost to ship raw materials such as grains, coal, and iron ore, increased 6% on the week to end at 5,526.
World is experiencing also the most significant food inflation spike in more than a decade.
According to the Food and Agricultural Organization of the UN (FAO), their Food Price Index moved up 1.5 points last month to 130.0.
This index is now 32% higher than the same month a year ago and at the highest level now in a decade.
The Cereal Price Index was up 2.6 points to 132.5, which is 27.3% above last year, and the vegetable Oil Price Index climbed 2.9 points to 168.6, which is 60% above last year.
The Dairy Index is 15.2% higher than last year, the Meat Price Index up 26.3%, and the Sugar Price Index up a whopping 53.5%.
On the financial side, the S&P 500 ended lower on Friday after data showed weaker jobs growth than expected in September, yet investors still expected the Federal Reserve to begin tapering asset purchases this year.
Thus Wall Street’s three main indexes were mixed for much of the session before losing ground toward the end but all three indexes posted weekly gains.
Indeed, the Dow Jones Industrial Average dipped 0.03% to end at 34,746.25 points, the S&P 500 lost 0.19% to 4,391.35, while the Nasdaq Composite dropped 0.51% to 14,579.54.
For the week, however, the S&P 500 rose 0.8%, the Dow added 1.2% and the Nasdaq gained 0.1%.
Meantime, the U.S. Dollar Index increased from last week’s 94.04 to close at 94.50.
Coming back on grains market, temperatures across the northern Plains and throughout the Midwest were above average, while cooler than average temperatures prevailed in the west.
In the Plains states and PNW, rain events brought much-needed moisture.
In South Dakota, extreme and severe drought conditions improved in the northern and southern parts of the state.
The western portion of Nebraska stretching into neighboring Wyoming saw dry conditions worsen.
Neighboring Colorado also saw moderate drought conditions expand.
Following rain and cooler temperatures, northeast Washington had exceptional drought conditions improved, as did neighboring Idaho.
Further east, Montana saw drought conditions expanded.
Over the weekend, some more rains will emerge in parts of the western Corn Belt and Northern Plains, with a few areas set to receive another 1.5” or more between Saturday and Tuesday, per the latest 72-hour cumulative precipitation map from NOAA.
The agency’s 8-to-14-day outlook predicts seasonally average precipitation for much of the Midwest and Plains between October 15 and October 21, with warmer-than-normal weather likely for the central U.S. during that time.
Meantime, field corn yield reports continue to be generally positive.
Early yield ideas for next week’s USDA reports are right around the 176 bushels per acre level for corn, nearly unchanged, and around the 51 bushels per acre level for beans, up half a bushel.
On the other hand, according to USDA, U.S. farmers have planted 47% of the total intended winter wheat area for harvest in 2022, 1 point ahead of the 5-year average.
In this context, traders are squarring their positions, meanwhile USDA’s next World Agricultural Supply and Demand Estimates (WASDE) report rapidly approaching next Tuesday morning.
On the other hand, weekly corn export sales improved to over 1.265 MMT for the week ending September 30.
However, accumulated shipments YTD are 32% smaller than year ago and outstanding sales have dwindled to 9% above year ago.
Total commitments are now 42% of the USDA full year projection, still 10% above the 5-year average buying pace.
Part of this is due to the Gulf hurricane damage, from which most facilities have finally recovered.
About soybean, export sales through September 30 were tallied at 1.042 MMT according to Export Sales data.
That was just slightly below the previous week.
China continues to underbuy their projected needs of 1.9 MMT per week, booking only 671,300 MT in this report week.
Total export commitments are now 25.328 MMT, 38% smaller than year ago.
US Exporters have now booked 45% of the USDA estimate vs. the average 48% pace for this date.
About wheat, export sales of 333,200 metric tons (MT) as of September 30 for delivery in 2021/22 were up 15% from last week’s 290,100 (MT) and within trade expectations of 200,000 MT to 500,000 MT.
Total commitments for wheat exports are now 11.544 MMT, which is 48% of the USDA forecast vs. the 55% average pace for this date and 21% 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.
One bullish note this week was corn use for ethanol, which was a multi-week high at the same time ethanol stocks were being drawn down further.
EIA data, indeed, reported ethanol producers averaged 978k barrels per day through the week that ended 10/1.
That was up 64k bpd from the previous week, and was the most production since the week of 8/6.
While ethanol stocks drew down 289,000 barrels through the week, to a 19 week low of 19.931 million barrels.
The weekly Commitment of Traders report indicated that managed money spec funds increased their net long in corn futures and options by 5,855 during the week ending October 5.
That took them to a net long 250,596 contracts by Tuesday.
About soybeans, spec fund traders trimming 9,858 contracts from their soybean net long positions in the week ending 10/5.
That dropped it to 49,453 as of Tuesday.
They had added 9,610 contracts just the week before.
About wheat, report showed spec funds in CBT wheat swinging their net position to 5,212 net long from net short.
In KC HRW, they added a total of 3,819 contracts to their net long for the week, to 49,946 contracts.
In this context, CBOT soft red winter (SRW) futures were down 21 cents to close at $7.34/bu.
KCBT hard red winter (HRW) futures were down 22 cents to end at $7.38/bu.
MGE hard red spring (HRS) futures gained 17 cents to close at $9.46/bu.
CBOT corn futures were down 11 cents to $5.31/bu.
CBOT soybean futures were down 3 cents to close at $12.43/bu.
Some wheat basis bids were down both in the Gulf and Pacific Northwest (PNW) this week.
Indeed, as of October 8, FOB Gulf HRW 11/12.5 pro is valued at $342.63/mt (down $20.94/mt from last week).
While, US HRS for Oct. ’21 is valued at $417.58/ mt FOB PNW (up $6.43/mt from last week).
Softer rail rates and sluggish demand coupled with high futures prices led to the reductions in basis.
Corn basis bids were steady to mixed on Friday, moving as much as 15 cents lower at an Indiana ethanol plant while rising as much as 12 cents higher at an Iowa river terminal.
Soybean basis bids firmed 7 to 13 cents at three interior river terminals and tilted 5 to 10 cents higher at three other Midwestern locations.
From Canada, (Omissis …).
In this context, as of October 04, Canadian wheat prices for FOB delivery were (Cdn$/mt):
– for the N1 class CWRS 13.5% – $498.86, up $3.22 per tonne;
– for the N2 class CWRS 13.0% – $489.61, up $3.25/t;
– for the N3 CWRS – $428.58, up $13.22 ;
– for the N1 CWAD – $742.05, down $2.81 per tonne.
(1USD=Cnd$1.256).
From South America (Omissis ..).
The Rosario Grain Exchange (BCR) reported that maritime freight tariffs in Argentina’s main export destinations doubled in 2021.
The costs were attributed primarily to COVID-19challenges, have added an extra $2.5 billion in additional costs for grain traders.
Shipping costs to Asia, where 40% of Argentina’s agricultural products move, have risen $40.00/MT in September 2021 compared to September 2020.
Omissis …
In this context, as of October 07, Argentina Wheat Grade 2 export price, (Up River) was at $307, up $7 from last week.
Argentina corn feed was down $2 for the week, closing at $245.
Brazilian corn feed (Paranagua) was at $265, down $1 from past week.
Argentina barley feed, was unchanged at $265.
Argentina soybean shedded $2 to close at $542.
Brazilian soybean tumbled $9 finishing the week at $526.
On European market, mourning in the world of Parma entrepreneurship: Silvio Grassi, president of the Molino Grassi company and, since 6 July, the national president of Italmopa, the association of Italian milling companies, has died.
Grassi was 65 years old.
Grassi was known for “his acknowledged entrepreneurial skills and his great human skills”.
At Italmopa Grassi he was vice president of the durum wheat mills section from 2017 to 2021; in the past he was Head of the Milling sector of the UPI.
We wish to express our closeness to the family, to whom we extend our condolences.
Meantime, grain prices ended in dispersed order on Friday evening, but ended the week mostly higher, spurred by the international demand, a weaker in dollar and by delays in corn harvest.
Corn harvest are confirmed in France with only 7% of work completed on October 4, according to FranceAgriMer, against 47% last year!
Winter wheat sowing is starting at a good pace with 4% of the areas sown on October 4, compared to 5% last year.
(Omissis …).
In this context, Matif December wheat futures gained 4.75 euros from last week, closing at €269/t.
Matif corn November futures jumped 13 euros to close the week at €250/t.
Matif rapeseed November futures, bounced again by 23,25 euros, ending the week at €667.50/t.
Nov-21 UK feed wheat futures rosed £1, closing at £203.75/t.
Meantime, as of September 30, FOB prices in US dollar for French wheat with 11.5% protein and Oct. delivery, were at $ 312.36/mt, up $9.6/mt from last week.
French durum wheat, closed at $509.03 per tonne, up $27.63 from last week.
Corn delivered Bordeaux Spot – July 2021 basis was at $291.53 per tonne, up $16.61 from last week.
FOB Rhin Spot – July 2021 basis was at $293.85 per tonne, up $15.45 week on week.
Feed barley delivered Rouen – July 2021 basis was at 279.96$/t, up $3.88.
Malting barley FOB Creil Spot – July 2021 basis was at $358.63 per tonne, up 12.95$ from past week.
Rapessed FOB Moselle Spot – Flat – 2021 harvest was at 782.06$/ton, up $40.82 compared to prior week.
Standard sunseed delivered St Nazaire Spot – Flat – 2021 harvest was up $32.95 from last week at $688.35 per tonne.
As of October 04, German wheat with 12.5% protein for Oct. delivery, closed at $316, up $0.20/mt.
Baltic wheat with 12.5% protein was at $315.40/mt, up $0.80/mt.
(EUR/USD=> US$1.1569).
From the Black Sea basin, the Russian Agriculture Ministry will impose a wheat-export limit beginning in mid-February.
Eduard Zernin, head of the Russian Union of Grain Exporters, said wheat shipments would be confined to a quota based on 2021 exports and next year’s domestic demand.
The previous export quota was 17.5 MMT of grain, which expired at the end of June and was replaced with the floating tax on overseas wheat sales.
Meantime, the ministry has amended the export tax for the week October 13–19.
For the wheat the export tax will be at $58.70, up $0.9 from the previus week, for barley at $49.40, up $6.30 and for corn at $47.20, up $2.
Indicative prices are respectively $283.9 for wheat, $255.6 for barley and $252.5 for corn.
In this context, the newspaper Kommersant said the agriculture ministry expects wheat exports to total 31.5 MMT, including 14.0 MMT between January and June 2022.
(Omissis …).
From India, India’s wheat exports in 2021 could quadruple from a year ago to the highest level in eight years.
In the first eight months of 2021, indeed, India ‘s exports surged 887% from a year ago to 3.07 million tonnes on good demand from Bangladesh, Sri Lanka, Indonesia, Nepal and the United Arab Emirates, according to data compiled by the trade ministry.
Rally in global prices and higher freight costs make Indian wheat lucrative for Asian buyers.
On C&F (cost and freight) basis Indian wheat is competitive in the Asian market as Asian buyers save $10 to $15 on freight when they buy from India rather than Russia or Ukraine.
India harvested a record 109.52 million tonnes of wheat in 2021 and state-run agencies are holding a record 51.8 million tonnes, more than double the required buffer norm.
Thus, India’s wheat exports could rise to 4.2 – 4,4 million tonnes this year, the highest since 2013.
However, a surge in exports has lifted Indian prices to $305 per tonne on a free-on-board (FOB) basis, compared to $260 three months back.
In any case, also after the ricing in price, Indian wheat continue to be the cheaper.
From Australia, nearby markets for wheat and barley have risen this week in response to limited selling from growers in the delivered-consumer market.
Accumulation for export continues to dictate values, and up-country and eastern seaboard consumers are lifting their bids prior to the arrival of previously booked new-crop barley and SFW wheat.
Global demand for Australian wheat has blown out the spread between it and barley in the domestic market, and increased barley’s attractiveness for consumers who are expecting to switch to low-protein wheat in coming weeks if the price is right and the volume is there.
(Omissis …).
Indicative delivered prices in Australian dollars per tonne were:
Barley Downs: (Nearby) $288 up $3 – (New crop) $303 up $8;
Wheat Downs: (Nearby) $375 up $25 – (New crop) $350 up $18;
Sorghum Downs: (Nearby) $308 up $3 – (New crop) $280 down $5;
Barley Melbourne: (Nearby) $295 up $13 – (New crop) $315 up $15;
Wheat Melbourne: (Nearby) $370 up $20 – (New crop) $365 up $25.
(AUD/USD=> US$0.731).
Internationally, (Omissis …).
Tunisia ‘s state grains agency purchased about 100.000 tonnes of durum wheat to be sourced from optional origins.
It was bought in four consignments of about 25,000 tonnes.
One consignment was said to have been bought from trading house Casillo at an estimated $680.67 a tonne c&f, another from Casillo at $685.89 a tonne c&f, one from Amber at $677.29 a tonne c&f.
The last one from Viterra at $683.09 a tonne c&f.
Shipment was between Nov. 1 and Dec. 20, depending on origins supplied.
The Egyptian GASC bought 60,000 t of Romanian wheat at 350.5 $ / t CIF and 180,000 t of Russian wheat at 352 $ / t CIF.
Prices have increased by $ 7 / t compared to the last tender and it is also symbolically the first purchase of wheat from Egypt at more than $ 350 / t CIF for many years.
Most other offers were in the mid $350s to $360s levels.
A government agency in Pakistan has issued an international tender to purchase and import 90,000 tonnes of wheat.
Pakistan had bougth than 1.1 million tonnes in past weeks.
The deadline for submission of offers in the tender from the Trading Corporation of Pakistan (TCP) is Oct. 13.
Watching next week market, week starts with Columbus Day, a government observed holiday, so weekly USDA reports will be pushed back a day.
The markets will be open, however, for their normal schedule.
On Tuesday USDA will publish the weekly Export Inspections report in the morning, with the Crop Progress report released that afternoon.
We will also receive monthly Crop Production and WASDE data at 11:00 am CDT on Tuesday.
Skip ahead to Thursday, EIA will release ethanol production and stocks data.
Also, Thursday is the last trade day for October Soybean Meal and Soybean Oil futures, as well as lean hog futures and options expiration.
Friday rounds out the week with the Export Sales report and NOPA crush data for September.
Author: Sandro F. Puglisi
