Traders are squaring positions ahead of next Tuesday’s World Agricultural Supply and Demand Estimates (WASDE) report, with a technical sellings set, that has pressured all prices grains futures, week over week.
In add, we must note that increased elevation capacity, reduced export demand and lower secondary rail rates also pressured Gulf and Pacific Northwest (PNW) HRW export basis for March and April deliveries, pressuring prices too.
In fact, CBOT soft red winter (SRW) futures fell 22 cents to end at $6.41/bu compared to last week.
KCBT hard red winter (HRW) futures lost 13 cents to close at $6.25/bu.
MGE hard red spring (HRS) futures fell 7 cents to end at $6.26/bu.
CBOT corn futures gained only 1 cent to close at $5.48/bu.
CBOT soybean futures lost 3 cents to end at $13.67/bu.
However, the Food and Agriculture Organization (FAO) Food Price Index, which tracks changes in the global prices of commonly traded foods, increased 4% from December 2020 to January 2021 to 113, the highest since July 2014.
Higher corn prices on substantial Chinese demand and reduced U.S. supplies and strong global demand for wheat led the jump in prices.
The UN FAO’s new forecast for world cereal stocks stands at 802 MMT, down as much as 64.3 MMT from December and 17.8 MMT (2.2%) from their opening levels, marking the smallest level in five years.
The world stocks-to-use ratio of cereals would decline to a seven-year low of 28.3% in 2020-21.
Just for exemple, this trend data is also confirmed by StatCan, seen data released this week, with the country’s total wheat stocks that have fallen 3.8% year-over-year, with 911.2 million bushels through December 31 even if analysts were expecting a bigger decline, with an average trade guess of 903.9 million bushels.
However, global ending stocks and usage rates are both on track to notch new highs in the 2020/21 marketing year.
In fact, the global stocks-to-use ratio of 33.01% for wheat in 2020/21 is the second largest margin for wheat stocks since 1960.
Looking at numbers indeed, despite this week’s US wheat commercial sales of 643,000 metric tons (MT) for delivery in 2020/21 were up 69% from last week’s 380,000 MT and were on the high end of trade expectations (250,000 MT to 700,000 MT) year-to-date commercial sales now total 22.4 million metric tons (MMT) so, only 5% ahead of last year’s pace.
US Ag, indeed, forecasts total U.S. wheat exports will reach 26.8 MMT in 2020/21.
It’s only 2% ahead of last year, if realized.
European Commission (EC) data confirmed the European Union (EU) has now exported 15.0 MMT of wheat outside the block so far in 2020/21, down 17% on the year due to lower production.
US Ag, forecasts the EU will export 26.5 MMT of wheat in 2020/21, down 31% on the year and 10% less than the 5-year average.
Ukraine’s grain exports for 2020/21 are down 20.5% year-over-year so far after it failed to match 2019’s record-breaking harvest.
That includes wheat exports totaling 481 million bushels since last July, plus another 464.5 million bushels of corn and 181.4 million bushels of barley, per data from the country’s economy ministry.
With China’s buying spree waning, export prices for Ukrainian corn slide to ~$260 per tonne FOB with low foreign demand.
On the other hand, according to AgriCensus, Argentina’s monthly grain exports in January 2021 were up 33% from the same period in 2020 after labor strikes were lifted and global prices surged.
A total of $2.14 billion of farm products were exported in January, up 27% from December 2020.
Grain exports by Russia in the current agricultural year, from last July to June 2021, have already hit 34.3 million tons, 25 percent more than during the same period last season.
Russia wheat exports, have amounted to 29,7 million tons this current year, also a record amount.
Russia wheat exports in January alone have totaled a record 3.2 million tons.
Australia shipped 2.5 million mt of wheat in December 2020, up 173% from December 2019, according to data obtained by S&P Global Platts from a market source Feb. 5.
Obviusly lower domestic stocks in export countries, are supportive of higher prices, however traders remain still very skittish.
Indeed, despite dry conditions that still affect much of Argentina’s production areas and the Buenos Aires Stock Exchange has lowered its estimate of Argentine production by one million tonnes, to 46 Mt (51.5 Mt last year), Brazilian consultancy Datagro, for exemple, is still offering very bullish projections for the country’s 2020/21 soybean crop, with a new estimate of 4.992 billion bushels, representing a fractional gain from January.
Has predicting also a record-breaking corn harvest for 2020/21, with a new estimate of 4.333 billion bushels.
If realized, that would be a 3.5% increase over last season’s production.
The truth is that Chinese demand will continue to lead the destiny of the world markets, whether we like it or not.
U.S. soybean sales to China last year were valued at $14.16 billion, moving well above 2019’s tally of $8 billion but failing to match 2012’s record-breaking haul of $14.88 billion.
The CNOIC (Chinese National Grains & Oils Information Center) has raised its corn import target for the current campaign from 5 Mt to 20 Mt, compared to 7.5 Mt last year!
However, last year, China purchased $28.75 billion worth of U.S. agricultural goods, per the latest US Ag data, felling below phase-one trade targets of $36.5 billion.
It remains to be seen how the US administration is going to handle trade policy with China, however, they konw very well that American farmer needs Chinese markets.
The Chinese are a significant force or influence on world demand obviously, and also on prices.
And meanwhile, while the U.S. Senate is looking into ways to fix the often-maligned Renewable Fuels Standard, pressuring corn’s market, China’s ag ministry confirmed it has detected H5N8 bird flu within its wild bird population.
Australia has also reported cases as India reports bird flu has now spread across 14 of its states and regions.
In this mixed context, US corn prices ended the week virtually unchanged, inching fractionally lower compared to Monday’s open.
US Soybean prices came into Friday’s session with moderate gains, but a late round of technical selling pushed prices into the red in the close losting 3 cents against last week.
US wheat that seem was yesterday’s clear winner, with some contracts moving 1% higher on a round of bargain buying, however, fell average 14 cents since last week.
Also Euronext ended the week with slight variations.
Wheat prices remain particularly under pressure from rushed sales in Russia, in anticipation of export taxes which will come into force in ten days.
In fact, shipments in Russian ports remained strong last week, and, as we have just said, now amount to 29.7 Mt from the 1 st July, a jump of 26% in one year!
Meanwhile, Russian domestic market wheat prices down 200 rub/mt ($2.7) this week.
The Baltic Dry Index (BDI), an assessment of the average cost to ship raw materials like grains, coal and iron ore, fell 8% to close at 1,327.
The U.S Dollar Index increased from last week’s 90.58 to end at 91.02.
Looking ahead, extremely cold temperatures and minimal precipitation are expected across the US Southern Plains.
More favorable weather on the American plains with more rains and humidity, which will help spring wheat seed in these areas, may put pressure on the market.
According to MétéoNews, a major or even exceptional winter episode will occur this weekend also over northern Europe, in particular over a strip stretching from the Czech Republic, Berlin, Dortmund and the Netherlands and Amsterdam.
Snowfall amounts of 20 to 40 cm are expected between the Netherlands and western Germany, heavy snow which will be accompanied by strong gusts of wind but also freezing rain further south.
This new snowy disturbance will arrive from Northern Europe via Hauts-de-France before extending to Normandy, Champagne-Ardenne, Grand-Est and Bourgogne-Franche-Comté.
The first flakes should appear during the night of February 6 to 7 before redoubling their efforts during the day on Sunday to calm down during the day of Monday, February 8.
It is expected a harvest abbondane in Europe, although some analysts fear winter-kills on fields.
A cold snap could hit a big part of the Black Sea around mid-Feb.
Doesn’t look necessarily like a big deal but it’s worth watching as plants are getting weaker closer to the end of winter.
We look forward then the next week, certamnete will be marked by the data released by the WASDE.
