Good morning, Farmer Family …
US farm markets rose sharply on Friday, on increasing concerns that Russia may not renew the Black Sea grain deal, set to expire on May 18, after a fist fight broke out during latest negotiations.
These worries sparked another round of buying, which saw wheat prices capturing double digit gains.
Chicago SRW, indeed, added 2.36%, Kansas City HRW climbed 4.35%, and MGEX HRS rose 2.96%.
Corn prices also continued to shift higher, up 1.27%, as tensions between Russia and Ukraine.
Soybeans fared even better, up 1.32%, with soymeal finding modest gains of around 0.35%, while soyoil jumped 3.53% higher.
Spillover support from other commodities and stock markets, indeed, lent additional support.
Russia has said it will not extend the Black Sea pact beyond May 18 unless its list of demands over its food and fertilizer exports is met.
Ukraine, Russia, Turkey and the United Nations failed to reach an agreement to authorize any new vessels to carry out Black Sea grain exports on Friday, deputy U.N. spokesperson Farhan Haq said.
Thus, hopes for the renewal of Ukraine Grain Deal were dimmed, with the pace of grain shipments from Ukraine under the being initiative has slowed, as concerns grow over potential ships getting stuck if the deal would not renewed.
As a result, the most-active wheat contract on the Chicago Board of Trade (CBOT) gained 15-1/4 cents to settle at $6.60-1/4 a bushel durin g the end week session, after dipping this week to the lowest since April 2021.
Corn ended 7-1/2 cents higher at $5.96-1/2 a bushel, after sinking to its lowest since July 25, 2022, on Wednesday.
Soybeans settled up 18-3/4 cents at $14.36-1/2 a bushel, after touching a low not seen since October earlier in the week.
For the week, wheat and corn prices made their first weekly gains in three weeks.
Notably, the wheat complex saw a nice rally, with Kansas City the bull leader this time, up 7.31% taking out all of last week’s losses.
Chicago was up 4.18% since the prior Friday.
MPLS ended their slide, up 4.01%.
Corn prices clawed back a portion of last week’s collapse, with July up 1.97%.
Soybeans joined the bull crowd, with July up 1.22% since the prior Friday.
July soy meal was the weak spot of the complex, down 1.46% for the week, while July bean oil was up 5.15%., from Friday to Friday.
Crop Progress report showed on Monday the US corn crop was 26% planted in the week of 4/30, in line with the average pace.
Meanwhile, data showed a continued speedy soybean planting pace, at 19% complete vs the 9% average.
Spring wheat crop planting pace, in contrast, continued to be delayed, with just 12% planted by 4/30, compared to the 22% average.
Crop Progress report also had the winter wheat crop at 25% headed, vs. the 23% average pace.
Crop ratings were up 2% at 28% gd/ex.
Monday’s Grain Crush monthly report pegged March corn grind for ethanol at 437.9 mbu, a 3.38% reduction from last year.
NASS showed March bean crush at 197.9 mbu, a record for the month and the second largest all time.
On Wednesday, the weekly EIA report showed ethanol production up slightly in the week of April 28 to 976,000 barrels per day.
Stocks dropped another sharp 943,000 barrels to 23.363 million, taking the 2-week draw to 1.93 million barrels.
Thursday’s Export Sales report indicated old crop corn bookings falling to a net reduction of 315,600 MT, most of which was known via daily sales announcements to China.
Old crop corn export commitments slipped back to 81% of the current USDA forecast.
The normal 5-year average pace is to be 94% sold by this date.
As for soybean, the report showed bean bookings slipping back to 279,700 MT in the week that ended on April 27.
Commitments are now 92% of USDA’s forecast total, still within reaching distance of the 5-year average pace at 97%.
As for wheat, the report showed bookings at 211,100 MT for old crop, with new crop sales at 279,700 MT.
That put total wheat 22/23 export commitments at 18.997 MMT as of 4/27.
That is still 3% below a year ago and 90% of the USDA full year export projection, vs. the 105% average pace.
Also on Thursday, we got monthly Census data showed 4.921 MMT of corn was shipped in March.
That was a 50% increase from Feb exports though down 34% from the same month last year.
The season’s total 22.19 MMT was at 42.1% of the April WASDE forecast.
The monthly data also showed exports of ethanol and DDGS were 132.27m gallons and 898k MT respectively in March.
The monthly release from Census confirmed 3.14 MMT of soybeans were shipped during March which brought the full year total to 46.95 MMT.
That was 86% of the USDA forecast.
March meal export shipments were 1.336 MMT, a 44% increase from Feb and a 23% increase from March ’22.
Census confirmed 5,087 MT of bean oil exports in March.
The full year total reached 61.4k MT, or just 27% of the April WASDE forecast.
As for wheat, monthly data from Census showed for wheat a flat 0.136 MMT March export.
That was down 0.51 MMT from February and was 0.35 MMT lower yr/yr.
That set the YTD exports at 17.99 MMT, or 85.2% of the April WASDE’s forecast with April and May remaining.
Finally, always on Thursday, the 2023 Oklahoma Wheat Crop Tour estimated the Oklahoma harvested area at 2.2 million acres (0.89 hectares) and total production at 54.3 million bushels (1.5 MMT), down 21% from last year.
Meanwhile, Oklahoma Grain and Feed Association members pegged wheat production at 40.7 million bushels (1.1 MMT).
Oklahoma is one of the HRW-producing states in the U.S. Southern Plains impacted by severe drought, though these estimates are not final.
The Kansas Wheat Tour will be May 15th through May 18.
In this context, corn basis bids were steady to mixed across the central U.S. after trending as much as 15 cents lower at an Illinois ethanol plant and as much as 3 cents higher at a Nebraska processor on Friday.
Soybean basis bids held steady across the central U.S..
As for wheat, basis ended the week mixed across wheat classes.
HRS basis was steady in the Gulf and the Pacific Northwest (PNW).
Meanwhile, HRW in the Gulf and PNW were drawn down by continued slow demand.
SRW basis remained steady, supported by domestic demand, while soft white prices increased as it repositioned to fall in line with the market.
As a result, as for May 4, 2023, FOB prices for US wheat No 2 Hard Red Winter (HRW) were at $356/mt.
US wheat No 2 Soft Red Winter (SRW) was valued at $263/mt.
Northern Durum offers from the Great Lakes, for June 2023 delivery were at $10.34/bu ($380.00/MT).
As for corn, US corn 3YC (Gulf) was at $276/mt.
As for soybean, US soybean 2Y (Gulf) quoted at $558/mt.
USDA’s National Weekly Ethanol report had ethanol prices from $2.21 to $2.46/gal regionally, mostly 6 cents lower for the week.
USDA showed corn oil prices ranged 53 to 57 cents/lb regionally which was mostly higher for the week, but within a penny of UNCH.
DDGS were quoted from $230 to $265/ton, mostly $5-$20/ton weaker on the week.
USDA quoted the B100 cash price for MN at $4.02/gal, up by 3 cents for the week.
After the sessions close, Weekly Commitment of Traders data showed managed money speculators adding 102,849 contracts to their net short position in corn futures and options, taking it to 118,146 contracts as of Tuesday’s close.
Commercial corn ownership is the lowest in nearly six years, as commercial shorts backed off to just 551,955 contracts.
As for soybean, the report indicated soybean spec funds bailing out of another 30,835 contracts to a net long of just 56,373 contracts as of May 2nd.
That is a near 18 month low for their net long position.
Commercial soybean hedgers were closing short hedges during the week.
That reduced the group’s net position 24.4k contracts to 140.2k net short.
As for wheat, data showed net new selling from the SRW speculative traders.
The 13.9k new shorts left the managed money at 126,324 contracts net short as of 5/2.
Net new selling through the week pushed the funds back into net short territory for KC wheat.
The group flipped 12.8k contracts to 5,464 net short.
Spec traders were closing existing longs and adding new shorts for MPLS wheat during the week that ended 5/2.
CFTC had the managed money at an 8,206 contract net short.
However, in the USA there are a lot of issues with lack of selling by the producers because it’s planting season; there is the debt ceiling concern, and there is a crop report that’s going to come out next Friday, expected to be negative.
Thus, markets are looking forward to the U.S. crop condition report on Monday, deficit negotiations in Washington on Tuesday, and the monthly WASDE report due on May 12.
In enegy markets, oil prices rose on Friday but fell for the third straight week after a sharp fall earlier the week.
Benchmark interest rates rose and with these, also concerns that the U.S. banking crisis will slow the economy and sap fuel demand.
In China, factory activity contracted unexpectedly in April as orders fell and poor domestic demand dragged on the sprawling manufacturing sector.
Thus, the Brent benchmark finished the week with a decline of about 5.3%, while WTI plunged 7.1%.
Both benchmarks were down for three weeks in a row for the first time since November.
However, Brent crude closed $2.80, or 3.9% higher on Friday, at $75.30 a barrel.
U.S. West Texas Intermediate settled up $2.78, or 4.1%, at $71.34 after four days of declines that sent the contract to lows last seen in late 2021.
Commerzbank analysts noted oil demand concerns were overblown and expect a price correction upward in coming weeks.
A better-than-expected jobs report helped ease some fears of an imminent economic downturn, spurred in part by renewed banking fears.
Investors also broadly expect the Fed to pause rate hikes at its June policy meeting.
Additionally, expectations of potential supply cuts at the next meeting of the OPEC+ in June have provided some price support.
Finally, U.S. oil rig count, an indicator of future output, fell by 3 to 588 this week, data from oil services firm Baker Hughes showed.
In ocean freight markets, the Baltic Exchange’s main sea freight index, tracking rates for ships carrying dry bulk commodities, edged up on Friday on stronger demand in the capesize segment, but marked its first weekly decline in three.
The overall index, indeed, added 13 points, or 0.8%, to 1,558, but was down 1.1% for the week.
Notably, the capesize index rose 59 points, or 2.5%, to 2,384.
The index gained 3.6% for the week, its third straight weekly rise.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes carrying commodities such as iron ore and coal, increased $485 to $19,768.
The panamax index dropped 13 points, or 0.9%, to 1,501.
The index was headed for its fourth straight weekly decline and was down 5.4% during the week.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, decreased $118 to $13,512.
Among smaller vessels, the supramax index fell 9 points to 1,096.
In equity markets, US stock indexes rallied sharply, as a sharp rebound in regional bank stocks, eased concerns about the banking sector.
PacWest Bancorp rallied 81.7% and Western Alliance Bancorp jumped 49.2%, while the KBW regional bank index advanced 4.7%.
Also, strong quarterly earnings results from Apple boosted market sentiment and gave the overall market a lift.
The iPhone maker’s shares hit their highest level in about nine months, and the stock ended up 4.7% in its biggest daily percentage gain since November.
U.S. Apr nonfarm payrolls rose +253,000, stronger than expectations of +185,000.
Also, the Apr unemployment rate unexpectedly fell -0.1 to a 54-year low of 3.4%, showing a stronger labor market than expectations of an increase to 3.6%.
U.S. Apr average hourly earnings rose +0.5% m/m and +4.4% y/y, stronger than expectations of +0.3% m/m and +4.2% y/y.
U.S. Mar consumer credit rose +$26.514 billion, stronger than expectations of +$17.000 billion and the largest increase in 4 months.
These reports were hawkish for Fed policy, surely.
However, the strength in the U.S. labor market is bolstering optimism that tighter Fed policy may achieve a soft landing and not push the U.S. economy into recession.
U.S. stocks, indeed, rallied Friday despite a jump in bond yields from the stronger-than-expected U.S. Apr payroll report.
Notably, benchmark 10-year notes were up 7.9 basis points to 3.431%, from 3.352% late on Thursday.
The 30-year bond was last up 2.4 basis points to yield 3.7464%.
The 2-year note was last was up 18.7 basis points to yield 3.9139%.
The U.S. debt ceiling impasse has been a bearish factor for stocks.
Bipartisan Congressional leaders are scheduled to meet with President Biden on Tuesday, May 9, to discuss whether there is a way to move forward on the debt ceiling.
In this context, the Dow Jones Industrial Average rose 546.64 points, or 1.65%, to 33,674.38, the S&P 500 gained 75.03 points, or 1.85%, to 4,136.25 and the Nasdaq Composite added 269.02 points, or 2.25%, to 12,235.41.
The Dow and S&P 500 still registered losses for the week, however, while the Nasdaq ended with a slight gain for the week.
In currencies, the dollar index fell 0.059%, with the euro up 0.05% to $1.1016.
The Japanese yen weakened 0.39% versus the greenback at 134.84 per dollar, while sterling was last trading at $1.2633, up 0.49% on the day.
Other main news
From Canada, agriculture exports rose to 37m mt, up 62% y-o-y.
From South America, Brazil’s Anec only expects the country’s corn exports to reach 325.120t in May, which would be noticeably below year-ago totals of 1.09 MMT, if realized.
Brazil’s Anec anticipates the country’s soybean exports will reach 12.08 MMT in May, which would be moderately higher year-over-year, if realized.
Anec also expects to see Brazilian soymeal exports reach 2.2 million metric tons this month.
Brazil’s Rio Grande do Sul cut soybean production, while corn was unchanged.
However, Brazil’s historical storage deficit and bumper grain crop this season, are pressuring soy and corn premiums, according to some agribusiness consultancy.
Notably, Brazil’s negative corn premiums may result in losses of 11.5 billion reais ($2.30 billion) this year for the sector while losses for the soybean industry are estimated at 19 billion reais ($3.80 billion).
Argentina’s soybean harvest reached 36%, while corn was at 20%, according to BAGE.
In Europe, French farm office FranceAgriMer slightly lowered the country’s soft wheat quality ratings by a point, but 93% of the crop is still in good-to-excellent condition through May 1.
Corn plantings are trending well below the historical trend of 75% over the same period, with just 59% of the crop in the ground as of Monday.
Meantime, Germany wheat, was assessed at €7.50/mt premium to September.
From North Africa, Tunisia’s ODC bought 100kmt of durum in tender for average $384.82/mt.
Tunisia’s ODC also bought 75k mt of barley at average $256.30/mt.
From Ukraine, Ukraine’s grain exports during the 2022/23 marketing year are trending around 8% lower year-over-year so far.
While Ukraine’s weekly grain export pace 23% was down, as only 1.1 m mt were declared.
From Russia, Russian govt lowers wheat, corn tariff, moves up for barley
From Australia, Aussie wheat export hits new record in March, with rare vessel left to Turkey.
FAO Food Price Index – May Update
The United Nations food agency’s world price index rose in April for the first time in a year, but is still some 20% down on a record high hit in March 2022 following the start of the war in Ukraine.
Notably, the FAO price index, which tracks the most globally traded food commodities, averaged 127.2 points last month against 126.5 for March, the agency said on Friday.
The March reading was originally given as 126.9.
The Rome-based agency said the April rise reflected higher prices for sugar, meat and rice, which offset declines in the cereals, dairy and vegetable oil price indices.
Notably, the sugar price index surged 17.6% from March, hitting its highest level since October 2011.
While the meat index rose 1.3% month-on-month, dairy prices dipped 1.7%, vegetable oil prices fell 1.3% and the cereal price index shed 1.7%, with a decline in world prices of all major grains outweighing an increase in rice prices.
FAO S&D – May Update
In a separate report on cereals supply and demand, the FAO forecast world wheat production in 2023 of 785 million tonnes, slightly below 2022 levels but nonetheless the second largest outturn on record, and old crop ending stocks at 309.7.
Notably, the FAO also expects the 2023/24 wheat crop at 139.5 MMT for the EU – citing April rains.
They also expects 22/23 corn carryout will be 288.2 MMT, looser than the 285.4 MMT estimate last month citing better harvests in EU and India than expected.
FAO raised its forecast for world cereal production in 2022 to 2.785 billion tonnes from a previous 2.777 billion, just 1.0% down from the previous year.
World cereal utilisation in the 2022/23 period was seen at 2.780 billion tonnes, FAO said, down 0.7% from 2021/22.
World cereal stocks by the close of the 2022/2023 seasons are expected to ease by 0.2% from their opening levels to 855 million tonnes.
Watching the next week’s market
Monday starts off with the weekly Export Inspections report and the weekly NASS release of the Crop Progress report overnight.
Fast forward to Wednesday and EIA will publish their weekly ethanol production and stocks report, with April CPI data out as well.
The weekly Export Sales report will be released on Thursday afternoon, with PPI data also published on Thursday.
We will get our first look at the US and world balance sheets for 2023/24 in Friday’s WASDE release.
That’s all, thank you.
We wish you a nice day and a good weekend.
Author: Sandro F. Puglisi
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