GRAIN MARKET VIEW
Daily Update – July 19, 2023
Good morning, Farmer Family …
Main Markets
USA
US farm markets closed mostly higher on Tuesday.
Corn prices jumped 5.91%.
Soybeans picked up 0.54%.
The rest of the soy complex was mixed, as soymeal tracked 1.91% higher, while soyoil faded 1.1% lower.
Winter wheats closed up, with Chicago SRW climbing 2.60%, and Kansas City HRW rising 1.47%.
Minneapolis spring wheat, in contrast, failed to follow suit, easing 0.09%.
Wheat and corn prices advanced after Russian air strikes damaged infrastructure at the Black Sea port of Odesa.
Corn and soybean prices rose also on forecasts for a hotter-than-normal second half of July, while corn actually is in the critical pollination phase, and August is the critical month for soybean development.
Rains will be variable across the central U.S. between Wednesday and Saturday.
Parts of eastern Iowa and central Illinois won’t find any measurable moisture, while parts of Kansas and Nebraska could see another 1” to 2” later this week.
But the 8-to-14-day outlook predicts seasonally dry weather returning to the Plains and western Corn Belt between July 25 and July 31, with warmer-than-normal conditions likely for the entire U.S. next week.
Several overseas corn tenders issued by some importer countries made an additional support.
Algeria is on the market for 240k MT of corn, to be sourced from South America.
Iran is tendering for 180k MT of corn.
Meantime, money flowing into the markets, helped boost prices.
Soybean gains however, were capped by USDA’s better-than-expected quality ratings, while prices had already touched a one-month high.
An unexpected jump in spring wheat crop ratings, kept prices in the red.
In this context, corn basis bids were steady to firm after rising 2 to 8 cents higher across three Midwestern locations.
Soybean basis bids were mostly steady across the central U.S., but did tilt 10 cents lower at an Illinois river terminal.
Commodity funds were net buyers of CBOT corn, wheat, soybean and soymeal futures contracts, and net sellers of soyoil futures.
On this morning, Chicago soybean and corn prices gained more ground.
Wheat rose for a second session.
Notably, the most-active soybean contract on the Chicago Board of Trade (CBOT) added 0.3% to $13.99-1/4 a bushel, as of 04:56 GMT, and corn gained 1.4% at $5.41-3/4 a bushel.
Wheat rose 1.2% to $6.78-1/2 a bushel.
South America
From South America, Brazil is poised to export a record 18.3 million metric tons of soybeans, soymeal, corn and wheat in July, revised data from exporters association Anec showed on Tuesday, even though soybean shipment projections fell from last week.
The previous record for July was set in 2020 for the four commodities, when 14.8 million metric tons were exported, Anec said.
The estimate puts Brazil on track to ship 106.1 million metric tons of the four commodities during the seven months of the year, which is also unprecedented.
That is in spite of Anec lowering its estimated July export volume for soybeans to 8.8 million metric tons from 10.4 million metric tons last week.
The previous export volume record for the first seven months of the year was 89 million tons, reached in 2022, Anec data show.
Thanks to Brazil’s massive grain output, soy shipments from the country should also grow in relation to July of 2022, when they totaled 7 million metric tons, according to Anec data.
China is the main buyer of Brazil’s soy.
This year, however, Argentina also imported significant volumes.
Already, corn exports from Brazil are projected at 6.8 million metric tons in July, virtually stable from last week’s estimate and above the 5.6 million in the same month in 2022.
Brazil’s corn shipments traditionally gain pace in the second half of the year, after the second-corn is harvested.
In 2023, Brazil is expected to unseat the U.S. as the world’s biggest corn supplier.
Europe
In Europe, grain and oilseed prices rose after a Russian airstrike hit a terminal in Odessa port.
Meantime, the European Union is seeking to transport more Ukrainian grains via road and rail to help make up for Russia’s withdrawal from a U.N.-backed Black Sea exports deal.
Irish Prime Minister Leo Varadkar said the bloc would also respond by expanding land export routes for Ukrainian grains via the solidarity lanes, or road and rail links through Ukraine’s EU neighbours, as well as Moldova.
A senior EU official said separately the bloc was supporting Turkey and the United Nations in efforts to bring Russia back to the agreement.
The Brussels-based European Commission said that some 60% of Ukraine’s grain exports now pass through the EU’s solidarity lanes.
However, expanding grain transit through the EU is sensitive for Poland and some other EU countries bordering Ukraine where local farmers have come under pressure from increased Ukrainian imports.
On this wake, five Central European EU members will ask to extend a ban on Ukrainian wheat, corn, rapeseed and sfs imports beyond 15 Sep, Hungary said adding they would also discuss an option where countries could individually ask to add products to the ban list.
Add to this new geopolitical uncertainty a resurgence of climate risk premium.
A heat wave is affecting the Mediterranean basin, which is gradually approaching major corn production areas ranging from northern Italy to Romania via Hungary and Serbia.
These are all bullish elements which, for the time being, make it possible to counter European harvest pressure and the sharp rise in the euro dollar.
This week of good weather allows a very large progress of the harvest in France.
But each additional day of harvest confirms the heterogeneity of wheat yield and the disappointment in rapeseed.
Meantime, French port activity is essentially concentrated on numerous barley shipments destined for China.
Ukraine
Ukrainian farmers have so far harvested over 2 million tons of the 2023 grain harvest, Prime Minister Denys Shmyhal said on Tuesday.
The harvesting campaign was underway in 22 regions across the country, with the southern regions of Mykolaiv and Odesa leading the pace.
Meantime, the Black Sea deal remains off, and the market rebounded.
Russia overnight carried out airstrikes on Ukraine’s Odesa port for the second night in a row.
It was reported that the attacks failed to disrupt the operation of the Odesa port, however damage to a nearby fuel storage and a plant making seaborne drones was reported.
The Prime Minister reiterated Ukraine’s position, which that Black Sea grain shipment deal should continue and could operate also without Russian participation.
However, according to insurance broker Marsh, the facility to provide insurance cover for the grain and food cargoes traveling through Ukraine’s grain corridors was suspended.
Thus, the market is starting to digest what life without the corridor might look like, bearing in mind that close to 9 million tonnes (Mt) wheat and 17Mt corn has been shipped via the corridor.
However, the Prime Minister also said Ukraine was focused on developing alternative export routes via its Western borders to the European Union, as over 60% of Ukrainian exports were now targeted to European markets.
Australia
Aussie canola markets remained strong on the back of the offshore markets.
WA markets increased to $795/t for new crop yesterday, the higher bid prompting an increase in farmer selling.
Wheat and barley bids remained relatively unchanged.
ASX Jan wheat futures settled slightly down at $290/t (-$2/t).
On the weather side, the 8-day forecast is still calling for a relatively dry week. most cropping areas in the east are calling for less than 10mm with slightly higher falls expected in Victoria’s Western Districts and the South East of South Australia.
Similar falls are expected for most of WA with higher falls on the cards for southwestern WA and the Great Southern with falls of up to 50mm expected.
On the international trade scene, Japan is seeking 106,366t milling wheat in its weekly tender, and it is reported that Iran is tendering for up to 180,000t corn sourced from origins including Brazil, Europe or the Black Sea.
Auctions
Milling wheat
Japan is seeking 106,366t milling wheat in its weekly tender, and it is reported that Iran is tendering for up to 180,000t corn sourced from origins including Brazil, Europe or the Black Sea.
Macroeconomics
Energy markets
Oil prices climbed about 1.5% after China said it will act to support economic growth.
Boosting prices also expectations the U.S. Federal Reserve will stop raising interest rates soon and a forecast decline in U.S. output.
Analysts indeed forecast a 2.4-million barrel draw from U.S. crude stocks during the week ended July 14.
If correct, that would be the fourth crude stock decline in five weeks, and compares with a decrease of 0.4 million barrels in the same week last year and a five-year (2018-2022) average increase of 1.9 million barrels.
Heat waves intensified across southern and eastern Europe, Asia, and much of the U.S., boosting oils demand due to the extreme weather.
Thus, Brent futures rose $1.13, or 1.4%, to settle at $79.63 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.60, or 2.2%, to settle at $75.75.
However, the International Monetary Fund’s (IMF) chief Kristalina Georgieva, however, told financial leaders of the Group of 20 nations that medium-term growth prospects remain weak.
On this morning, global oil prices retreated, after opening higher at the start of Asian trade, as markets weighed U.S. demand concerns against China’s pledge to support economic growth, tighter Russian supply and declining U.S. inventories.
Brent futures indeed edged down 1 cent to $79.62 a barrel at 06:15 GMT, while U.S. West Texas Intermediate (WTI) crude fell 15 cents to $75.60 per barrel.
Ocean freight markets
The Baltic Exchange’s main sea freight index in London fell 3.4%, closing for a third straight day with losses.
The overall index, indeed, fell by 36 points, or 3.4%, to 1,037, its lowest in a week.
Notably, the capesize index went down by 85 points, or 5.3%, to its lowest level since July 7, at 1,529.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes carrying commodities such as iron ore and coal, decreased by $710 to $12,676.
The panamax index shed 32 points or 3% – its biggest percentage decline since May 31 – to 1,052.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, slipped by $286 to $9,470.
Among smaller vessels, the supramax index edged up by 3 points to 746.
Equity markets
US stocks posted moderate gains, after strong Q2 earnings results from Morgan Stanley and Bank of America sparked a rally in bank stocks that lifted the overall market.
Stocks in the financial industry saw Charles Schwab jumping 12.6%.
Weaker-than-expected U.S. economic news Tuesday knocked T-note yields lower and gave the broader stock market a boost on speculation the Fed may be close to ending its rate-hike regime.
U.S. June retail sales indeed rose +0.2% m/m, weaker than expectations of +0.5% m/m, and June retail sales ex-autos rose +0.2% m/m, weaker than expectations of +0.3% m/m.
U.S. June manufacturing production unexpectedly fell -0.3% m/m, weaker than expectations of no change.
The U.S. July NAHB housing market index rose +1 to a 13-month high of 56, right on expectations.
In this context, the 10-year US T-note yield dropped to a 2-1/2 week low of 3.729% and finished down -1.2 bp at 3.795%.
Meantime, the S&P 500 rose 0.7% to 4,554.98 and its highest finish since early April 2022.
Microsoft was the biggest single force pushing up the S&P 500, by far. It rose 4%.
The Dow Jones Industrial Average rallied 1.1% to 34,951.93 and the Nasdaq composite climbed 0.8%, to 14,353.64.
On this morning, Asian shares were mixed.
Shanghai and Hong Kong fell on selling of property shares after troubled developer China Evergrande reported its total debts rose in the past two years to about $340 billion.
In Hong Kong, New World Development fell 2.2%, Country Garden declined 0.7% and China Resources Land gave up 0.8%.
Hong Kong’s Hang Seng dropped 1.2% to 18,782.40 while the Shanghai Composite index declined 0.3% to 3,189.81.
The property market, a major driver of growth in China, has languished after regulators reined in lending to try to bring debt in the industry under control.
In Tokyo, the Nikkei 225 gained 0.8% to 32,759.60 while the Kospi in Seoul lost 0.1% to 2,604.12. Australia’s S&P/ASX 200 climbed 0.6% to 7,324.00.
Shares rose in India and Bangkok.
Currency trading
The dollar index rose by +0.1%, with the dollar recovering from early losses on expectations for the Fed to raise interest rates by 25 bp at next week’s FOMC meeting, while the EUR/USD retreated on dovish comments from ECB Governing Council member Knot.
Also, a decline in the 10-year German 10-year bund yield Tuesday to a 2-week low weakened the euro’s interest rate differentials and undercut the euro.
Thus, the EUR/USD fell by -0.09%, and the euro retreated from a 16-1/2 month high.
USD/JPY, meantime, rose by +0.21% on comments from BOJ Governor Ueda that signal the BOJ is not yet ready to end its overly easy monetary policy.
On this morning, the U.S. dollar climbed to 139.39 Japanese yen from 138.83 yen.
The euro slipped to $1.1222 from $1.1230.
