Daily Update – July 14, 2023

Good morning, Farmer Family …

Main Markets

US farm markets after Wednesday’s steep cuts, rebounded on Thursday. Corn prices jumped 3.62%. Soybean prices rose 2.80%. The rest of the soy complex was also firmer, with soymeal gaining 2.77%, while soyoil closing up 2.1%. Wheat prices closed with moderate gains in a choppy session, as Chicago SRW gained 1.11%, Kansas City HRW rose 0.37%, and Minneapolis HRS went home with 0.97% gains. Corn prices bounced on bargain buying after hitting a 2-1/2-year low early in the session. Soybeans rose as traders shifted their focus back to uncertain crop weather and worries about supplies. Rainfall in the Midwest will be variable heading into the weekend, with some areas likely to gather 1” or more while others may just see trace amounts between Friday and Monday. Furthermore, NOAA’s latest 8-to-14-day outlook predicts a return to seasonally dry conditions for the Northern Plains and upper Midwest between July 20 and July 26, with warmer-than-normal conditions also likely in the central U.S. during this time. Wheat traders too, continued to monitor dry conditions for spring wheat in North America. There is a more than 90% chance that El Niño conditions will continue through the Northern Hemisphere through the autumn, peaking this winter with moderate-to-strong intensity, the National Weather Service’s Climate Prediction Center (CPC) said on Thursday. Meantime, are coming results from winter wheat harvesting across the Northern Hemisphere. A slump in the dollar, lifted both wheat as well as corn and soybeans, making U.S. grains more competitive globally. However, weekly FAS data showed 395,713 MT of wheat bookings for the week that ended 7/6. That was down 2.5% from last week and by 61% from the same week last year. The total 23/24 wheat commitment was at 5.02 MMT as of 7/6. As for soybean, USDA announced a 315,704 MT sale of new crop soybeans yesterday via mandatory announcement. However, weekly FAS data showed only 80,587 MT of old crop beans were sold for export during the week that ended 7/6. Traders were expecting less than 300k MT going in. New crop sales were reported at 209k MT for the week, and were within estimates. The forward book was set at 4.153 MMT ahead of the 23/24 season – compared to 13.85 MMT at the same time last year. However, increasing hoping for US product, China imported 10.27 million metric tons of soybeans in June, up 24.5% from a year earlier, customs data showed on Thursday, though most were large purchases of cheap Brazilian beans. As for the products data showed soymeal business was 54,540 MT for old crop and 118,134 MT for NMY. Soybean oil saw net cancelations of 6k MT for the week that ended 7/6. As for corn, USDA reported 468k MT of old crop corn was sold for export during the week that ended 7/6. That was above the range of estimates going in. New crop bookings were also 470,807 MT for the week and were also above estimates. That, however, left the total forward book still at 4.04 MMT, or 40% behind last season’s pace. On the geopolitical side, there are talks to salvage the Black Sea export corridor from Ukraine that Russia is threatening to abandon next week. Notably, the European Commission is helping the United Nations and Turkey try to extend a deal allowing the Black Sea export of Ukraine grain and is open to “explore all solutions,” a European Union spokesperson said on Thursday, ahead of the deal’s possible expiration on Monday. In this context, corn basis bids were mostly steady across the central U.S. but did trend as much as 5 cents higher at an Indiana ethanol plant and as much as 10 cents lower at an Illinois river terminal. Soybean basis bids were mostly steady to weak after dropping 5 to 25 cents lower across five Midwestern locations. One noticeable exception was a Nebraska processor that jumped 30 cents higher. Commodity funds were net buyers of CBOT soybean, corn, soymeal, soyoil and wheat futures contracts. On this morning, Chicago soybean prices gained more ground with the market poised for its biggest weekly gain in a month on concerns over U.S. weather and strong Chinese demand. Wheat rose amid concerns over the Black Sea grain export deal, which is due to expire next week, while corn edged higher. Notably, wheat added 0.6% to $6.43-3/4 a bushel and corn rose 0.4 to $5.02-1/4 a bushel. For the week, wheat is down 1%, while corn added 1.6%.
The latest Saskatchewan Crop Report for the week ending 10 July noted that the trend in the crop condition has continued lower for almost all the crops, although this week’s data showed the lentil crop stabilizing. Overall, the province rated all crops as good to fair. The report showed the largest drops for flax, canola, and soybeans. Despite the drop in the condition for soybeans, it remains to the highest rating for this crop. The spring wheat rating fell for a third week, and the canola has fallen too. The durum rating has slumped from its initial rating, and was the biggest reduction seen for any of the crops monitored. The winter wheat rating was the only crop with condition above average. The current crop conditions for soybean and canola were slightly below average. The spring wheat rating and durum were below average. The province noted that precipitation is desperately needed to slow crops from the current rapid pace of development experienced. Crops continued to progress this week with warm temperatures across the province. Canola was beginning to pod and wheat beginning to flower in many areas. Dry conditions were impacting parts of the province and many producers were hoping for rain immediately. A large decrease in soil moisture accompanied the warm weather this past week. Crop land topsoil moisture is currently 21pc adequate, 55pc short and 24pc very short and 48pc of canola crops are in good/excellent condition down from 66pc the previous fortnight. In this context, Canadian Canola Prices nearly set new highs for the year on Thursday with a 2% rally to $814.40 CAD/MT.
South America
Brazil CONAB reported the corn figure at 127.8 MMT, just a 2.05 MMT increase. They had 2nd crop specifically as 98.04 MMT. Conversely, CONAB unexpectedly trimmed their soybean output – mainly with a 1.5 MMT loss in RGDS, for a 154.566 MMT figure. In Argentina, recent rains boosted planting in areas of La Pampa and Buenos Aires and improved crop conditions. Almost 80pc of the wheat crop has been planted.
In Europe, grain and oilseed markets edged higher, with wheat recovering from a one-week low. Traders weighed up a rising euro, mixed harvest prospects and uncertainty over the Black Sea safe corridor. Parched conditions for U.S. and Canadian spring wheat, as well as some disappointing yields in Europe were helping underpin prices. Stratégie Grains revised EU production estimates downward in its July update, reflecting reduced yield prospects from the advancing harvests across Europe. It cut 2023-24 common wheat forecast by 2.5Mt to 126.2Mt (125.1Mt previous year). A larger than anticipated proportion of the crop was expected to be downgraded to feed due to wet conditions. Barley production was cut by 0.8Mt, to 47.1Mt (51.2Mt), mainly on reductions for Scandinavia and Germany where dry conditions adversely affected crops. Low yields were confirmed in Spain, tied to severe drought. Maize production forecast was cut by 0.4Mt, to 60.8Mt (52.2Mt), predominantly due to unfavourably dry weather across many growing regions. Yields potentially could decline even further, unless significant precipitation was received during July. In France, French farm office FranceAgriMer slightly lowered its ratings for the current soft wheat crop, which is now 80% in good-to-excellent condition through July 10. Harvest moved from 10% completion a week ago up to 33% as of Monday. In Germany, the association of farm cooperatives trimmed its wheat forecast, confirming its expectation of a smaller crop this year. President Vladimir Putin on Thursday reiterated Russia’s position Thursday that it will quit the deal unless its demands are met, and the impact of a non-extension is still being debated. However, a 16-month high for the euro against the dollar capped gains, underscoring weak export prospects for the new season. On this wake, the import tender held by Algeria on Thursday showed once again that Russian wheat remained cheaper than western European supplies, with purchases reported were around $269 to $269.50 a metric ton cost and freight (c&f). Thus, if Ukrainian feed wheat would blocked, is not sure north European feed wheat will regain competitiveness, especially in Spain, which is expected to be such a big buyer in coming months. However, September wheat on Paris-based Euronext yesterday settled 0.7% up at 229.25 euros ($256.78) a metric ton, though it earlier had slipped to a new one-week low at 225.75 euros.
North Africa
Tunisia’s new urgent measures aimed at improving the supply of grains and grain derivatives to the market were announced at a working session at the Kasbah chaired by Prime Minister Najla Bouden. Decisions taken at the end of the meeting Monday included an increase in the monthly quantities distributed by the Cereals Office to 70,000 quintals of soft wheat and 50,000 tonnes of durum wheat, and an increase in the rate of distribution of grains to flour mills, as well as flour and semolina. Additional quantities will be allocated to priority regions, according to the same source. It was also decided to set up a digital system to monitor the distribution of grains and cereal by-products and to connect the various stakeholders in the distribution circuit, as well as to launch a specific monitoring programme aimed at combating monopoly practices and the diversion of these foodstuffs.
As of July 13, in Ukraine, early grains and pulses were harvested through 643.76 thsd ha (6%), with the yield at 3.35 t/ha and production – 2.157 mln tonnes, reported the press service of the Ministry of Agrarian Policy of Ukraine. In particular, harvest pace includes: barley – through 352.36 thsd ha (25%), with the yield at 3.72 t/ha and production at 1.311 mln tonnes; wheat – 211.82 thsd ha (5%), with the yield at 3.68 t/ha and production at 778.65 thsd tonnes; peas – 44.99 thsd ha (31%), with the yield at 2.08 t/ha and production at 93.74 thsd tonnes. The harvesting campaign is being conducted in all regions of Ukraine, except Luhansk. According to indicators of the harvested area and the total gross collection, as of July 13, the agricultural producers of the Odesa region are in the lead – 241.6 thsd ha (25%) and 746 thsd tonnes, respectively. The highest average grain yield is currently recorded in the Chernivtsi region – 6.8 t/ha, but the harvesting campaign in the region was only 2% completed. As of the reporting date, winter rapeseed in Ukraine was harvested from 158.13 thsd ha (11%), and production reached 329.48 thsd tonnes with an average yield of 2.08 t/ha.
Russian origin wheat remains the cheapest in the world with the price spread to the next cheapest origin – EU Black Sea 12% – at least around $15/mt. The CPT Novorossiysk price index for 12.5% was seen at RUB16,100/mt. Domestic prices have picked up since late June by around RUB1,240/mt. The government incouraged to sell not below a minum price of $240/mt for August, but to now it is a challenge to sell at $230/mt FOB even. Indeed, there has been a lack of firm demand in recent days and, as such, 12.5% wheat offers were placed at $230-235/mt FOB NTTK officially – close to the price floor indicated. Russia harvested its biggest-ever wheat crop in 2022/23, weighing in at 104.5 million mt. Even though the export levels have also set new records, the country’s wheat stocks are also huge. Furthermore, the forecast for the just-started marketing year has also come in at a high level – with ideas of crop indicated at up to 87 million mt by local analysts. This means that Russia need to show record exports in the 2023/24 marketing year too.
South East Asia
Indonesia is exploring the purchase of 50,000 heads of cattle and 300,000 metric tonnes of soybean from South Africa as the two emerging economies explore ways to strengthen bilateral trade, according to an Indonesian minister. Indonesia currently imports more than $1 billion worth of cattle and over $2 billion worth of soybean annually.
Aussie wheat and barley prices have firmed by up to $15 per tonne in the past week in the northern market based on a lack of grower selling, and dropped $5-$10/t in the south as growers factor in what for most are good to ideal new-crop conditions. While much of southern Australia had another week of showery weather, crops in northern New South Wales missed out on anything more than a few millimetres of rain. Meantime, on Thursday ASX eastern wheat relaxed $4/t to $381/t while eastern canola values rallied $15-20/t on both current and new crop. With the firmer values, analysts see selling liquidity pick up on canola and it’s expect to see this flow into today as the offshore rally continues. The 8-day forecast is looking relatively dry for all winter cropping regions which will be welcome in southern growing areas but will be starting to pinch in central and northern WA where they have not had decent rain for an extended period now.


Milling wheat
Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) bought a total of 123,770t food-quality wheat from the United States, Canada and Australia in a regular tender.
Algeria’s state grains agency OAIC is believed to have bought milling wheat in an international tender on Thursday which sought limited shipment to two ports only. Purchases reported were around $269 to $269.50 a metric ton cost and freight (c&f) included. No estimates of tonnes bought were initially available, with a nominal 50,000 metric tons sought. Russian-origin wheat likely was the cheapest in the tender. The purchases were said to have been concentrated on the August shipment position sought. The requirement in the tender to unload the wheat only in the ports of Mostaganem and/or Tenes in two port tenders from the OAIC generally signals that a relatively small purchase will be made. The wheat was 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.


Energy markets
Energy markets saw oil prices rising about 1.5% to their highest in nearly three months after U.S. inflation data suggested interest rates in the world’s biggest economy were close to their peak. Brent crude futures indeed rose $1.25, or 1.6%, to settle at $81.36 per barrel. The session peak was $81.57, the highest since April 25. U.S. West Texas Intermediate crude futures rose $1.14, or 1.5%, to $76.89. The session high was $77.13, the strongest since April 26. A weaker dollar makes crude cheaper for holders of other currencies, and was supportive for prices. Oil prices have rallied by over 11% in two weeks. A report by the International Energy Agency (IEA) on Thursday predicted oil demand would hit a record high this year, though broader economic headwinds and interest rate hikes meant the increase would be slightly less than previously anticipated. An OPEC report also published on Thursday maintained an upbeat world oil demand outlook despite economic weakness. It raised its growth forecast for 2023 and predicted only a slight slowdown in 2024, with China and India expected to keep driving the expansion in fuel use. Always on Thursday, some oilfields in Libya were shut down amid a protest by a local tribe against the kidnapping of a former minister. Separately, Shell has suspended loadings of Nigeria’s Forcados crude oil due to a potential leak at a terminal. On this morning, both Brent crude futures and U.S. West Texas Intermediate crude futures , were trading slightly lower. Brent indeed was down 20 cents to $81.16, while the WTI was trading 14 cents lower at $76.75 at 0634 GMT. Oil prices, however, were set to post their third straight week of gains for the first time since April despite this morning fall slightly.
Ocean freight markets
The Baltic Exchange’s main sea freight index, tracking rates for ships carrying dry bulk commodities, gained for a fifth straight session on Thursday, supported by an uptick in rates across all vessel segments. The overall index, indeed, gained 15 points, or 1.4%, to 1,103 — its highest in two weeks. Notably, the capesize index rose 26 points, or 1.6%, to 1,691. Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes carrying commodities such as iron ore and coal, increased $218 to $14,028. The panamax index was up 15 points, or 1.4%, at 1,101 — hitting its highest level since June 26. Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, increased $132 to $9,906. Among smaller vessels, the supramax index gained 9 points, or 1.2%, to 743, its best day since mid-June.
Equity markets
US stock indexes moved higher as easing price pressures curbed interest rate concerns. While this week’s CPI and PPI reports are unlikely to dissuade the Fed from raising interest rates by 25 bp later this month, that increased the chances that this month’s rate hike could be the last rate hike in this cycle. On the negative side was an unexpected decline in weekly jobless claims, a sign of a resilient U.S. labor market that is hawkish for Fed policy. U.S. weekly initial unemployment claims indeed unexpectedly fell -12,000 to 237,000, showing a stronger labor market than expectations of an increase to 250,000. However bond yields moved lower. The 10-year US T-note yield fell to a 2-week low of 3.758% and finished down -9.4 bp at 3.763%. Easier interest rates help all kinds of investments. But many investors see big technology and other high-growth stocks among the biggest beneficiaries. As a result, Amazon, Alphabet and Nvidia were among the strongest forces pushing up the S&P 500. Amazon gained 2.7%. Alphabet rose 4.7%. Nvidia, which has been at the center of a frenzy on Wall Street around AI, rose 4.7%. In this context, on Wall Street, the S&P 500 rose 0.8% to 4,510.04, its highest close since April 2022. The Dow Jones Industrial Average rose 0.1% to 34,395.14, and the Nasdaq composite rallied 1.6% to 14,138.57. On this morning, Asian shares mostly surged after Wall Street’s winning streak barreled into a fourth day. Japan’s benchmark Nikkei 225 lost earlier gains, ending down 0.1% at 32,391.26. Australia’s S&P/ASX 200 rose 0.9% to 7,308.50. South Korea’s Kospi jumped 1.3% to 2,623.83. Hong Kong’s Hang Seng edged up 0.4% to 19,433.22, while the Shanghai Composite added 0.1% to 3,240.96. Market watchers, however, are also looking ahead to regional data expected next week, including consumer prices in Japan and China’s GDP.
Currency trading
The dollar index fell by -0.74% and posted a 15-month low, with the dollar under pressure as T-note yields retreated more after the weaker-than-expected U.S. Jun PPI report. Also, the strength in stocks Thursday reduced the liquidity demand for the dollar. Meantime, the EUR/USD rose by +0.86% and posted a 15-month high. EUR/USD also found support on Thursday’s hawkish minutes of the June 15 ECB meeting. However, Thursday’s economic news was bearish for the euro after Eurozone May industrial production rose +0.2% m/m, weaker than expectations of +0.3% m/m. As for the USD/JPY it fell -0.32%, with the yen rallying for the sixth consecutive session and posting a 1-1/2 month high against the dollar. Speculation about a possible change in policy from the BOJ later this month has pushed government bond yields higher and supported the yen after the 10-year JGB bond yield climbed to a 2-1/2 month high Wednesday at 0.478%. On this morning, the U.S. dollar edged up to 138.26 Japanese yen from 138.05 yen. The euro cost $1.1232, up from $1.1228.

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

Author: Sandro F. Puglisi

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