Daily Update – July 18, 2023

Good morning, Farmer Family …

Main Markets

United States of America
US farm markets closed mostly lower on Monday. Corn prices dropped 1.43%. Soybeans picked up 0.25% thanks strength in soymeal which closed 2.50% higher, while soyoil faded 0.45% into the red. The wheat complex dropped through all the three markets, settling near their lows for the day. Chicago SRW indeed was down 1.17%, after Sep seeing a 38 cent range on the day. Kansas City HRW went home with 1.66% losses. Minneapolis HRS held relatively firm, closing with 0.68% losses. Ukraine Black Sea grain deal has officially expired, after Russia withdrew from it. That should have been bullish news both for corn and wheat prices, but markets’ reaction suggest that it may have already been priced in. Russia quit and warned it could not guarantee the safety of ships, after the failure to meet its demands to implement a parallel agreement easing rules for its own food and fertilizer exports. Some analysts said there are still expectations the deal may be renewed. Moscow said it would consider rejoining the pact if it saw “concrete results” on its demands. But the markets are well aware of the risk for its expire definetively. Thus, wheat and corn markets shrugged off news on the Black Sea grain deal. Meantime, lackluster US weekly export inspection data, weighed even more on the markets. USDA indeed reported 363,818 MT of corn shipments for the week that ended 7/13. That was slightly above last week, but down from 1.09 MMT during the same week last year. The weekly report had the season’s total at 33.87 MMT as of 7/13, compared to 50.3 MMT from last year. As for soybean, data showed 155,556 MT of soybean shipments. That was down from 300k MT last week and 440k MT during the same week last year. The season’s total was 49.889 MMT as of 7/13, that is down from 52.68 MMT last year. As for wheat, data had 253,409 MT of wheat exports. That was down from 419k MT last week, but up 60k MT from the same week last year. USDA had 1.77 MMT for the season’s total, compared to 2.12 MMT during last year. In other news, adding more pressure, U.S. soybean processors crushed fewer beans than expected in June as the monthly crush slumped to a nine-month low, the National Oilseed Processors Association (NOPA) said. NOPA indeed reported 165.02 mbu of soybeans crushed by members during June. That was under trade estimates, and was 7.25% below last month though up 0.21% from last year but shy of 2020’s record. However, soy oil stocks came in at 1.69 billion lbs, well below expectations. In this context, corn basis bids were steady to mixed after moving as much as 5 cents higher at two Indiana ethanol plants and as much as 20 cents lower at an Ohio elevator. Soybean basis bids were steady to week after eroding 5 to 10 cents lower across three Midwestern locations. Commodity funds were net sellers of CBOT corn, wheat and soyoil futures contracts, and net buyers of soybean and soymeal futures. After the sessions close, weekly condition ratings for the U.S. soybean and spring wheat crops improved more than expected in the past week following rains in portions of the Midwest and Plains, U.S. government data showed, while corn ratings rose in line with trade expectations. Notably, the USDA rated 55% of the soybean crop as “good to excellent”, up 4 percentage points from a week ago and above a range of trade expectations. The agency rated 57% of the corn crop as “good to excellent”, matching the average analysts’ estimate and up from 55% the previous week. For spring wheat, the USDA rated 51% of the Northern Plains crop as “good to excellent”, up from 47% the previous week and above a range of trade expectations. The report showed 56% of the winter wheat crop was harvested as of 7/16. That was a 10ppt increase for the week, but is still 7% points behind the average pace. On this morning, Chicago corn and wheat prices inched higher, recouping some losses from the previous session. Soybeans rose, although gains were limited by a better-than-expected condition of the U.S. crop. Notably, the most-active wheat contract on the Chicago Board of Trade (CBOT) was up 0.3% at $6.56 a bushel, as of 03:43 GMT, and soybeans added 0.3% to $13.82-3/4 a bushel. Corn gained 0.6% at $5.09-1/4 a bushel. Global grain prices will continue to be volatile until the market is able to decipher the impact of Russia withdrawing from the Black Sea grain deal. Ukraine has been building alternative avenues for exports, but they are not yet sufficient enough to entirely compensate for the loss of the Black Sea grain initiative.
South America
Brazilian farmers had harvested 36% of the area planted for their second corn crop in the center-south region by the end of last Thursday, consultancy AgRural said on Monday, up 9 percentage points from the previous week. At the same time last year, 53% of Brazilian corn fields had been reaped, the consultancy’s statement said. Second corn represents about 75% of Brazil’s national corn output in a given year. AgRural expects the 2023 crop to reach 102.9 million metric tons. Safras and Mercado released their initial estimates for Brazil’s 23/24 soybean production, showing 45m HA (+2.5%) of area producing 163.2 MMT.
In Europe, grain and oilseed prices rose, on concern about tighter supplies after Russia withdrew from Black Sea agreement. Voices of the world’s political leaders were raised in condemnation of the decision. At the same time the Ukrainian President announced that he was working on continuing exports, even without the consent of the Russians. Ukraine can also export a lot over land, perhaps around 1 million (metric) tons a month or more. Only around one ship a day was sailing from Ukraine anyway in past weeks. Thus the shipping channel was not really working anyway already a time. In this context, there had been widespread market expectations that the Ukrainian agreement would not be extended. However, gains were mainly capped by strength in euro and large Russian supplies. There are large volumes of cheap Russian wheat available to importers. Russia and the EU have large supplies of wheat which can meet world demand in the coming months, also beacause new harvests is arriving. Operators stressed import demand remains weak. While major importing countries in the Middle East and North Africa likely to use their new harvests instead of immediately importing. Thus, while the world has enough wheat, the real question is whether or not new export business will be transferred to the EU. And the modest market reaction showed that Russian wheat will be able to meet major import demand. While EU Black Sea countries like Romania and Bulgaria are also seen with large export supplies. Meanwhile, transport problems on Germany’s Rhine river were easing as recent rain raised water levels. Thus, September wheat on the Paris-based Euronext rose 0.2% to 232.25 euros ($260.79) a metric tonne. Conversely, European durum wheat jumped more than 6% higher, as Canada still suffering from a marked water deficit especially in Saskatchewan. The Canadian weather is also a key issue on the oilseed market, raising concerns about a deterioration in canola yield potential.
In Russia, the harvest is lagging amid persistent rains. Wheat harvest totalled 7.3 million tonnes (12.6 million tonnes а year before) from 1.9 million hectares (3.0 million hectares). This accounts for 6% of the total area, the lowest number since 2016. Russia has suspended its participation in the Black Sea grain export deal, the Kremlin said on Monday. Meantime, Russia exported 960,000 tonnes of grains last week compared to 940,000 tonnes a week earlier, including 780,000 tonnes of wheat compared to 750,000 tonnes a week earlier, according to port data. Russian grain exporting union Rusgrain said on Monday its members planned to continue supplying customers with Russian grain at competitive prices, despite Moscow pulling out of the Black Sea grain export deal. On this wake, Sovecon estimates for total Russian wheat exports in July at 4.2 million tonnes, up compared to 2.5 million tonnes in June 2022 and 2.8 million tonnes on average. UkrAgroConsult also increased its estimate for Russia’s 2023-24 exports by 2Mt to 47Mt, citing a weaker ruble making Russian wheat more competitive and high opening stocks. The 2023-24 corn export estimate was increased by 0.7Mt to 4Mt, and the barley estimate remained steady at 6.5Mt. The 2023-24 wheat production estimate was increased by 0.4Mt to 85.2Mt. In this this context, export prices for Russian wheat declined slightly last week. According to the IKAR, indeed, the price of 12.5% protein Russian wheat scheduled for free-on-board (FOB) delivery in August was $228 a tonne at the end of last week, down from $231 a tonne the week before. Meantime, Russia’s wheat export tax for July 19-25 will be 3,022.6 rubles ($33.53) per metric ton based on an indicative price of $233.30. That’s up from a rate of 2,989.6 rubles per metric ton the previous week.
China is likely to buy a larger volume of the oilseed from Brazil than usual for September to December, as prices of new-crop U.S. shipments are rising on expectations of lower supply. Brazilian soybeans for October shipment are being offered at $576 a metric ton, including cost and freight, to China, while U.S. cargoes are being quoted above $580 a ton. Usually, buyers are willing to pay premiums of $12-$15 a ton for Brazilian beans, which have a higher protein content compared with the oilseed from the U.S. China imported 10.27 million metric tons of soybeans in June, up 24.5% from a year earlier, customs data showed, as large purchases of cheap Brazilian beans reached the market. Meantime, China has had another bumper summer grain harvest despite the impact of adverse weather, official data showed Saturday. The summer grain output came to a total of 146.13 million metric tons this year, down 0.9 percent or 1.27 million tons year-on-year, according to the National Bureau of Statistics. The area of summer grain under cultivation has grown for three consecutive years, rising to 26.61 million hectares this year. Over 23 million hectares of wheat were sown, up 0.4 percent year-on-year. To encourage farmers to grow grain, the central government continued to raise the minimum purchase price of wheat and provided one-time subsidies. However, the grain yield per unit area recorded a mild decline, falling 1.2 percent year-on-year to 5,491.8 kilograms per hectare this year. China will stabilize its annual grains output at over 650 MMT and strive to beat a target of 700 MMT by 2025 to ensure grain security, according to a five-year plan for farming released by the Ministry of Agriculture and Rural Affairs last year.
Local new crop markets started the week with a firmer tone on the back of the strong offshore markets on Friday night, with ASX Jan 24 wheat settling at A$392/t. Vic new crop barley traded $3-4/t dollars higher at AUD$321/t. It was a quieter start for current crop markets, with the nominal delivered values a few dollars higher on the offer side. On the weather side, the 8-day forecast is still looking relatively dry. Southern WA has 5-25mm on the forecast, SA has 1-15mm, most of Vic has 1-10mm and NSW less than 5mm. Eastern Qld has 1-10mm with higher totals expected closer to the coast. While southern regions will certainly welcome a drier week, parts of central and northern WA, northern NSW and Qld are in need of some decent rain in the coming weeks to keep things ticking along.


Algerian state agency ONAB has issued an international tender to purchase up to 240,000 metric tons of animal feed corn to be sourced from Argentina or Brazil. The deadline for submission of price offers in the tender is today Tuesday, July 18. The corn is sought in six 40,000 metric ton consignments for shipment in July and August.
Iranian state-owned animal feed importer SLAL has issued an international tender to purchase up to 180,000 metric tons of animal feed corn with Ukrainian supplies still included among grain sources which can be offered. The deadline for submission of price offers in the tenders is Wednesday, July 19. The yellow corn can be sourced from Brazil, Europe, the Black Sea region, Russia or Ukraine and is sought for shipment in August and September.
Milling wheat
Bangladesh’s state grains buyer has issued an international tender to purchase 50,000 metric tons of milling wheat. The deadline for submission of price offers is Aug. 1. Price offers in the latest wheat tender were sought on CIF liner out terms. These terms include ship unloading costs for the seller. Shipment is sought 40 days after the date of contract signing. The wheat can be sourced from any worldwide origins except Israel and is sought for shipment to two ports, Chattogram and Mongla. The last reported wheat tender from Bangladesh was in September 2022.


Energy Markets
Oil prices dropped by more than 1.5% on weaker than expected Chinese economic growth, and the partial restart of halted Libyan output. Notably, Brent crude settled down $1.37 or 1.7%, at $78.50 a barrel and U.S. West Texas Intermediate crude closed $1.27, or 1.7%, lower at $74.15 on a second straight day of losses for both contracts. On this morning, oil prices inched upwards in Asian trade as investors eyed a possible tightening of U.S. crude supplies. Brent crude indeed was up 10 cents at $78.60 a barrel by 06:30 GMT, while U.S. West Texas Intermediate crude rose 14 cents to $74.29 a barrel. Market participants were awaiting industry data later on Tuesday that is expected to show U.S. crude oil stockpiles and product inventories fell last week. Analysts estimated on average that U.S. crude inventories fell by about 2.3 million barrels in the week to July 14.
Ocean freight markets
The Baltic Exchange’s main sea freight index, tracking rates for ships carrying dry bulk commodities, fell on Monday, pressured by lower rates across vessel segments. The overall index, indeed, was down 17 points, or 1.6%, at 1,073 — its lowest since July 3. Notably, the capesize index fell 41 points, or 2.5%, to a two-week low of 1,614. Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes carrying commodities such as iron ore and coal, dropped $336 to $13,386. The panamax index was down 11 points, or 1%, at 1,084. Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, slid $97 to $9,756. Among smaller vessels, the supramax index remained unchanged at 743.
Equity markets
US stocks indexes recovered from early losses and posted moderate gains, on lower bond yields, and positive comments from U.S. Treasury Secretary Yellen which said she sees the U.S. on a “good path” to bringing down inflation without a major weakening in the labor market. That eased recession concerns, boosting equities higher. Stocks were under early pressure from following losses in European and Chinese stocks on global economic concerns after China’s Q2 GDP grew less than expected. Monday’s economic news showed the U.S. Jul Empire manufacturing survey of general business conditions index fell -5.5 to 1.1, stronger than expectations of -3.5. Meantime, the 10-year US T-note yield fell -3.3 bp to 3.799%. In this context, on Wall Street, the S&P 500 rose 0.4% to 4,522.79, its highest closing level in 15 months. The Dow Jones Industrial Average gained 0.2% to 34,585.35, and the Nasdaq composite climbed 0.9%, to 14,244.95. However, the stock market’s big run has critics warning that it is not a certainty the economy will avoid a recession, that inflation will continue to coast lower and that corporate profits will recover. As a result, on this morning, shares were mostly lower in Asia as optimism over the Wall Street rally was countered by worries about the Chinese economy. Notably, Japan’s benchmark Nikkei 225 rose 0.2% to 32,438.27. Markets in Tokyo also were closed Monday, for a holiday. Australia’s S&P/ASX 200 shed 0.3% to 7,276.00. South Korea’s Kospi lost 0.5% to 2,606.19. Hong Kong’s Hang Seng gave up 1.9% to 19,037.07, while the Shanghai Composite dropped 0.3% to 3,200.76.
Currency trading
The dollar index fell by -0.08%, as hawkish comments from ECB Governing Council member Nagel pushed the euro higher, while lower US T-note yields weighed on the dollar. Notably, the EUR/USD rose by +0.15% and posted a 16-1/2 month high. The USD/JPY fell by -0.07%. On this morning, the U.S. dollar fell to 138.36 Japanese yen from 138.71 yen. The euro cost $1.1252, up from $1.1240.

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

Author: Sandro F. Puglisi

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