Daily Update – July 12, 2023

Good morning, Farmer Family …

Main Markets

United States of America
US farm markets were mostly higher on Tuesday. Corn prices faded their initial strength, but held onto 0.46% gains. Soybeans extended their gains by 1.10%. Soymeal took the lead and closed with 2.56% gains. Soybean oil cooled off from the sharp gains out of the weekend, giving back 1.07%. The wheat markets faded from early gains, but were still higher on the day. Chicago SRW indeed rose 2.21%, Kansas City HRW added 0.71%, and MGEX HRS climbed 1.62%. Traders spent Tuesday squaring positions ahead of this morning’s WASDE report. The market is expecting corn yields with a 176/77bu/ac type yield, down from 181.5bu/ac. Wire sources had private analyst Dr. Michael Cordonnier’s U.S. soybean yield estimate at 50.5 bpa – UNCH from his prior figure. The result was a lot of technical buying that pushed corn, soybeans and wheat higher. A lower dollar and stronger crude oil lent further support both corn and soybeans. Wheat gains were even more robust due ongoing geopolitical issues in the Black Sea region. Russia launched drone attacks on Kyiv, the port of Odesa and the southern region of Kherson yesterday. An administrative building at Odesa port was damaged, and a fire was extinguished at a grain terminal near the port. There were no casualties and only minor infrastructure damage reported. However, the attack came as the Black Sea Grain Corridor deal is set to expire next week, and vessel inspections volume has already dried up. In this context, corn basis bids were steady to firm after rising 2 to 11 cents across five Midwestern locations. Soybean basis bids were steady to weak after trending 5 to 22 cents lower across five Midwestern locations. Commodity funds were net buyers of CBOT soybean, wheat, soymeal and corn futures contracts, and net sellers of soyoil futures. On this morning, Chicago soybeans rose for a third consecutive session to a one-week high. Corn was little changed while wheat eased after a day-earlier rally. Notably, the most-active soybean contract on the Chicago Board of Trade (CBOT) rose 0.9% to $13.72-1/2 a bushel at 08:52 GMT, after earlier climbing to its highest since July 5. CBOT corn added 0.2% to $5.02-1/4 a bushel and wheat fell 1.0% to $6.53-3/4 a bushel.
South America
The Brazilian national agricultural agency Conab reported that as at 8 Jul, the 2022-23 first (full-season) corn harvest was 96pc complete (95pc week ago, 97pc year ago). Second (safrinha) crop harvest was 29pc complete (20pc, 40pc), with good progress noted in Mato Grosso. In contrast, fieldwork was slow in Paraná, and remained in its early stages. 2023-24 wheat plantings were 92pc complete (80pc, 71pc). In Rio Grande do Sul, dry weather, paired with good soil moisture levels, aided fieldwork, and crops were reported to be in good condition. In Argentina, the Buenos Aires Grain Exchange reported that for the week ending 5 July, Argentina’s maize harvest was 52pc complete (64pc 5-year avg), with conditions rated at 53pc fair/excellent (73pc previous year). Recent fieldwork was concentrated in the central and northern parts of the country, while heavy rainfall delayed threshing in the southern producing regions, where excess moisture raised worries about potential crop damage. Sorghum harvest was 65pc complete (62pc year ago). 2023-24 wheat planting was 81pc complete (87pc five-year avg), with conditions rated 86pc fair/excellent (59pc previous week, 81pc previous year). Fieldwork is completed in the north, while precipitation hampered progress in the south.
In Europe, grain prices rose on geopolitical fears and some disappointing crop results. Meanwhile rapeseed jumped on the wake of crude oil strength, the rise in soybeans and especially in Canadian canola, which reached a 4-month high in Winnipeg. Yesterday the Agreste report animated the debates. The soft wheat yield estimated at 7.34 t/ha by Agreste notably came out lower than that of Arvalis-Intercéreales published last week at 7.5 t/ha. However, this remains higher than last year’s 7.17 t/ha. Notably, durum wheat is displayed at 1.297 Mt against 1.346 Mt last year. On this morning, FranceAgriMer incorporated farm ministry production forecasts for soft wheat and barley. Meantime, per the latest data from the European Commission, the 2023/24 soft wheat marketing year has begun slower so far, after reached 360.867t through July 9. That was a 46% year on year decline. Corn imports, which reached 225.008 t over the first nine days of July are 35% below last year’s pace so far. Soybean imports, which have reached 141.542 t during the first nine days of July, were 67% below last year’s pace so far. EU soymeal imports reached 206,060 metric tons during the same period, which was 54% below last year’s pace so far. On this wake, Farm office FranceAgriMer forecast that French soft wheat exports outside the European Union in the 2023/24 season that began this month would reach 9.6 million metric tons, down from 10.1 million in 2022/23. In contrast, French soft wheat exports within the 27-country EU were projected to rise in 2023/24 to 7.79 million metric tons from 6.38 million last season, as demand within the EU is expected to be bolstered by weather damage to crops in Spain and Italy. The estimate of non-EU soft wheat exports in the 2022/23 season had been revised down from 10.2 million expected a month ago. In its first supply and demand outlook for 2023/24, FranceAgriMer projected French soft wheat stocks at the end of the season at 2.67 million metric tons, down from 2.79 million in 2022/23. For barley, FranceAgriMer forecast 2023/24 exports outside the EU at 2.5 million metric tons, down from 3.2 million in 2022/23, and shipments within the bloc at 3.75 million metric tons, up from 3.18 million last season. Barley stocks at the end of 2023/24 barley stocks were seen rising to 1.53 million metric tons from 1.18 million in 2022/23. For 2022/23, it cut its maize ending stocks estimate to 2.00 million metric tons from 2.11 million last month, mainly reflecting a reduced supply estimate.
According to the State Statistics Service, in 2023/24 MY, as of July 12, Ukraine exported 894 thsd tonnes of grains and pulses, reported the press service of the Ministry of Agrarian Policy. That is compared with 598 thsd tonnes last year.
In particular, in the current MY Ukraine shipped:
– wheat – 283 thsd tonnes (119 thsd tonnes on 2022/23 MY);
– barley – 81 thsd tonnes (40 thsd tonnes);
– rye – 0.1 thsd tonnes (0)
– corn – 525 thsd tonnes (431 thsd tonnes).
The total export of flour from Ukraine, in 2023/24 MY, as of July 12, amounted to 3.5 thsd tonnes (1.7 thsd tonnes a year earlier), including wheat flour – 3.4 (1.4) thsd tonnes.
As of July 10, Russian farmers harvested 11.1 million tons of grains. Cereals and legumes have been threshed from an area of ​​2.9 million hectares, according to the Ministry of Agriculture of the Russian Federation. That included wheat for 6.3 million tons, barley for 2.6 million tons, and rapeseed for 262.8 thousand tons. The current harvesting rates and yields for a number of crops exceed the level of the previous year. Meantime, SovEcon expects Russia’s July wheat exports to total between 3.7Mt and 4.1Mt, compared to an average of 2.8Mt. The high export pace is facilitated by favourable market conditions and record-high stock levels. According to Interfax, Russian Railways report that during the first six months of 2023, railway transportation of grain cargo, including grain, feed, cereals, flour and other products of milled grain is estimated at 18.5Mt, 39pc more than over the same period last year.
According to the latest data from the Australian Bureau of Statistics, the country exported 447,776 tonnes of canola in May, up 56 percent from the 287,086t shipped in April. The largest markets for May-shipped canola were Pakistan on 166,529t, the United Arab Emirates on 148,856t and Japan on 120,694t. May shipments to Europe comprise only 64t to Belgium, in contrast to May 2022, when 416,352t was exported to European nations to form 77pc of the monthly total shipped of 542,396t. According to some analysts, monthly shipping rates this year are expected to drop to around 400,000t in June and July. Currently estimate has the Australian canola crop now in the ground is pegged at 5.72 million tonnes (Mt), 29pc smaller than the record 2022-23 crop. However, new-crop estimates from private analysts is well above ABARES initial figure released last month of 4.91Mt. Meantime, local values firmed on all fronts yesterday as some of the offshore moves were passed on. Growers are still somewhat cautious of the long-range forecast so we continue to see low selling appetite. The forecast is looking relatively dry for the east which is a welcome reprieve for crops in the south. The 8-day forecast has less than 5mm pencilled in for cropping regions of Qld, NSW, Vic and SA. Southern WA has 5-15mm on the forecast.


Milling wheat
Algeria’s state grains agency OAIC has issued an international tender to buy soft milling wheat for shipment to two ports only. The tender sought a nominal 50,000 tonnes but the shipment to two ports generally indicates a small purchase is planned. The deadline for submission of price offers in the tender is Thursday, July 13, with offers having to remain valid until Friday, July 14. The wheat is sought for shipment in several periods from the main supply regions including Europe: Aug. 1-15, Aug. 16-31, Sept. 1-15 and Sept. 16-30. If sourced from South America or Australia, shipment is one month earlier. The wheat should be unloaded in the ports of Mostaganem and/or Tenes.


Energy markets
Oil prices jumped about 2%, boosted by a falling U.S. dollar, hopes for higher demand in the developing world and supply cuts by the world’s biggest oil exporters. The U.S. Energy Information Administration (EIA) projected global oil output would rise from 99.9 million barrels per day (bpd) in 2022 to 101.1 million bpd in 2023 and 102.6 million bpd in 2024, while world demand will rise from 99.4 million bpd in 2022 to 101.2 million bpd in 2023 and 102.8 million bpd in 2024. That compares with a record 100.5 million bpd of global oil production in 2018 and a record 100.8 million bpd of world liquids consumption in 2019. EIA also projected U.S. crude output would rise from 11.9 million bpd in 2022 to 12.6 million bpd in 2023 and 12.9 million bpd in 2024, while U.S. liquids consumption would rise from 20.3 million bpd in 2022 to 20.4 million bpd in 2023 and 20.8 million bpd in 2024. That compares with a record 12.3 million bpd of U.S. crude production in 2019 and a record 20.8 million bpd of liquids consumption in 2005. Thus, Brent futures rose $1.71, or 2.2%, to settle at $79.40 a barrel. U.S. West Texas Intermediate (WTI) crude rose $1.84, or 2.5%, to settle at $74.83. Brent’s settlement was its highest since April 28 and WTI’s since May 1. Brent was in technically overbought territory for the second time in three days. On this morning, oil crept higher, but the market was caught between expectations supply cuts by the world’s biggest fuel exporters will drive prices higher and concerns global economic weakness will sap demand. U.S. crude inventories rose about 3 million barrels in the week to July 7, according to the American Petroleum Institute industry figures. While analysts expected a 500,000-barrel rise in crude stocks. Thus, Brent futures gained 26 cents to $79.66 a barrel by 08:55 GMT, and U.S. West Texas Intermediate (WTI) crude rose 28 cents to $75.11 a barrel.
Ocean freight markets
The Baltic Exchange’s main sea freight index, tracking rates for ships carrying dry bulk commodities, edged higher on Tuesday, aided by gains in the panamax and supramax vessel segments. The overall index, indeed, gained 8 points, or 0.8%, to 1,032. Notably, the capesize index eased 5 points, or 0.3%, to 1,550. Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes carrying commodities such as iron ore and coal, decreased $36 to $12,858. The panamax index was up 31 points, or 3.1%, at 1,027 – posting its best day in five weeks. Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, increased $277 to $9,243. Among smaller vessels, the supramax index snapped a six-session losing streak, rose 4 points, or 0.6%, to 728.
Equity markets
US stock indexes closed moderately higher, on hopes that U.S. inflation news, will show a continued easing of price pressures. The markets are discounting the odds at 89% for a +25 bp rate hike at the next FOMC meeting on July 25-26. The markets are anticipating a peak funds rate of 5.42% by November, which is +35 bp higher than the current effective federal funds rate of 5.07%. Thus, the 10-year T-note yield fell -0.8 bp to 3.986%. Also, U.S. stocks have carryover support from a rally in Chinese stocks after authorities in China stepped up relief measures for property developers. In this context, the S&P 500 rose 0.7% to 4,439.26. The Dow Jones Industrial Average gained 0.9% to 34,261.42, and the Nasdaq composite added 0.5% to 13,760.70. On this morning, Asian shares were mostly higher. Investors are awaiting the update on U.S. inflation that will hopefully show a smaller increase in pain for everyone. Thus, Hong Kong’s Hang Seng index jumped 1.3% to 18,907.36 and the S&P/ASX 200 in Australia added 0.3% to 7,131.40. In Seoul, the Kospi rose 0.2% to 2,566.57. Tokyo’s Nikkei 225 dropped 0.8% to 31,957.86 after North Korea launched another missile into the sea. The Shanghai Composite index edged 0.1% lower to 3,219.30. Shares rose in Taiwan and Bangkok’s SET index was nearly unchanged.
Currency trading
The dollar index fell by -0.24% and posted a 2-month low, on lower US T-note yields, strength in stocks, and more Chinese economic support measures strengthened the yuan. Strength in stocks reduced the liquidity demand for the dollar. Comments from New York Fed President Williams were neutral for the dollar. Thus, the EUR/USD rose by +0.02% with the euro climbing to a 2-month high. The USD/JPY fell -0.63%, with the yen moving higher for the fourth consecutive session and posting a 3-week high against the dollar. The increase in Japan 10-year breakeven inflation rate to an 8-1/2 year high of 1.16% on Monday may prompt the BOJ as soon as this month’s policy meeting to signal it could soon curb its highly stimulative policies. However, Tuesday’s Japanese economic news was bearish for the yen after Japan Jun machine tool orders fell -21.7% y/y, the sixth consecutive month that orders have declined. On this morning, the dollar fell to 139.61 Japanese yen from 140.44 yen. The euro rose to $1.1030 from $1.1011.

That’s all, thank you.
We wish you a nice day.

Author: Sandro F. Puglisi

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