GRAIN MARKET VIEW
Daily Update – July 20, 2023
Good morning, Farmer Family …
Main Markets
USA
US farm markets continued to push higher on Wednesday.
Corn prices grabbed double-digit gains, closing 3.17% higher.
August soybean eased 0.03%, but Sep contract rose about 1%.
The rest of the soy complex was firm, with soymeal picking up by 0.25%, while soyoil prices jumped 3.12% higher.
Wheat prices climbed across all the board.
Chicago SRW skyrocketed closing 8.50% higher.
Kansas City HRW jumped 4.77%, and Minneapolis spring wheat rose 2.25%.
Wheat prices had the biggest daily gain since the day after Russia-Ukraine war started, as intensification of the conflict threatened to slow grain export shipments from the Black Sea region.
Russian President Vladimir Putin on Wednesday said Moscow would immediately return to the agreement if all its conditions were met.
However, Russia warned that from Thursday any ships sailing to Ukraine’s Black Sea ports would be seen as potentially carrying military cargoes, without a change.
Meanwhile, a considerable part of the grain export infrastructure at Chornomorsk port southwest of Odesa was damaged, Ukrainian Agriculture Minister Mykola Solsky said, adding that 60,000 metric tons of grain had been destroyed.
Corn and soybean prices also were strong, with soybeans posting their fifth straight day of gains and hitting their highest level in more than a month.
Forecasts for hot and dry weather raised concerns for both crops in the U.S. Midwest.
However, Corn Belt should receive at least some measurable moisture between Thursday and Sunday, though the Northern Plains are unlikely to gather any more rain for the rest of the week.
The 8-to-14-day outlook indeed predicts a return to seasonally wet conditions for the Great Lakes region not before this time.
But nearly all of the U.S. should experience warmer-than-normal conditions between July 26 and August 1.
Soybean oil got help from the increased black sea tensions, as Ukraine is a large supplier of the world’s sunflower and sunflower oil.
Meantime, ethanol production found moderate increases for the week ending July 14 after reaching a new daily average of 1.070 million barrels, per the latest data from the U.S. Energy Information Administration.
That’s also the best weekly total since early December 2022.
However, ethanol stocks also increased by 2% last week to 23.166 million barrels.
Thursday’s Export Sales report is expected to show 200,000-500,000 MT of old crop bookings in the week that ended on July 13.
New crop sales are seen at 50,000-500,000 MT.
As for soybean the trade is expecting to see 0-300,000 MT of old crop soybean sales.
New crop booking during the week of 7/13 are expected to be 150,000-700,000 MT.
Soy Meal sales are estimated for be in a range of 125,000-500,000 MT for both marketing years, with bean oil 0-20,000 MT.
As for wheat the trade estimates ranged 200,000-500,000 of wheat export bookings in the week that ended on July 13.
However, grain traveling the US railways totaled another 16,032 carloads last week.
That brings cumulative totals for 2023 to 529,654 carloads, a year-over-year decline of 10.7%.
In this context, corn basis bids were steady to mixed across the central U.S. after trending as much as 7 cents higher at an Ohio elevator and as much as 10 cents lower at a Nebraska processor.
Soybean basis bids were steady to weak after eroding 5 to 30 cents lower across eight Midwestern locations.
Commodity funds were net buyers of CBOT wheat, corn, soyoil and soybean futures contracts, and net sellers of soymeal futures.
On this morning, Chicago wheat prices rose 1.6% to hit a three-week high.
Corn gained more than 1%, while soybeans were little changed.
Notably, the most-active wheat contract on the Chicago Board of Trade (CBOT) added 1.6% to $7.39-1/4 a bushel, as of 02:03 GMT.
The market hit its highest since June 27 at $7.39-3/4 a bushel.
Corn rose 1.1% to $5.59-1/4 a bushel and soybeans were unmoved at $14.08-3/4 a bushel.
South America
Brazilian wheat farmers are expected to produce 3% more of the commodity than in the previous season, StoneX said on Wednesday, driven by a larger planted area and in spite of an expected fall in production in top supplier Rio Grande do Sul.
In the 2023/2024 cycle, wheat farmers will harvest an estimated 11.457 million metric tons as the area sowed grew by almost 7% nationwide from the previous cycle, StoneX said in a revised forecast.
On the other hand, Brazilian farmers could plant 44.47 MHa of soybeans in the 2023/24 season, according to the Patria Agronegocios consultancy.
That would be an increase of around 0.5% above the prior season’s plantings.
The group’s initial production estimate is for 155.8 MMT, a yearly increase of around 1.6%.
Meantime, Brazil’s Anec estimates that the country’s corn exports will reach 6.8 MMT in July, which would be a year-over-year increase of nearly 21%, if realized.
As for soybean, Anec estimates that the country’s soybean exports will reach 8.8 MMT in July, which would be a monthly increase of nearly 26%, if realized.
Anec also expects to see Brazilian soymeal exports reach 2.584 million metric tons this month.
Europe
In Europe, wheat, corn and rapeseed soared after Moscow said it would consider Ukraine-bound ships as potential carriers of military cargo.
The Russian ministry comments, indeed, set markets on fire as corn accounted for more than half of the grain and oilseeds exported through the Black Sea export corridor.
Thus, Sep milling wheat closed 7.8% higher at 252.75 euros ($282.57) a tonne after hitting 256.50 euros in earlier trade, a price unseen since April 19.
August corn was up 5.7% at 250.50 euros per tonne after hitting a more than three-month high of 251.00 earlier, while rapseed was up 5.6% at 500.50 euros per tonne after hitting a four-month high of 505.75 euros.
Traders also referred to the joint request of Bulgaria, Hungary, Poland, Romania and Slovakia to the European Union to extend a ban on Ukrainian grain imports beyond a Sept. 15 deadline to avoid major market disruptions as supportive.
The central European states fear that the collapse of the grain corridor could lead to increased grain flows and bottlenecks in their countries.
North Africa
Egypt’s strategic reserves of wheat are sufficient for five months, Supply Minister Ali Moselhy said on Wednesday.
Egypt has procured 3.8 million tonnes of wheat in the local harvest so far, Moselhy said.
The supply minister added that Egypt has strategic reserves of vegetable oils for at least four months.
Meantime, Egypt is to sign a $100 million renewable loan facility with the Abu Dhabi Fund for Development (ADFD) to fund its grains purchases, Supply Minister Ali Moselhy said.
Abu Dhabi-based agribusiness firm Al Dahra will be one of the first suppliers of the grain through the deal, but Moselhy said that the funding could be used for other purchases.
The loan will be facilitated through ADFD’s Abu Dhabi Exports Office (ADEX).
Many recent wheat purchases have been made with loans from the International Islamic Trade Finance Corporation (ITFC), which last year doubled a credit facility extended to Egypt to $6 billion, and from the World Bank, which funded wheat imports earlier this year.
Meantime, the finance ministry said funding for subsidies on food, mostly bread, will rise 41.9% to 127.7 billion Egyptian pounds ($4.1 billion) in the fiscal year from July 2023 to June 2024.
In Tunisia, African development bank AFDB has lent Tunisia 87 million euros to finance grain supply and support grain storage infrastructure, the economy ministry said on Wednesday.
Tunisia has suffered successive dry seasons, which affected its grain crop.
The country’s agriculture union said that this season’s harvest will be “disastrous” and Tunisia needs to buy 90% of its wheat needs because of the drought.
Turkey
Wheat yield fell far short of expectations due to the severe drought that had badly affected agriculture throughout Türkiye.
The average wheat crop this year could dip by about 20 percent.
Farmers planted wheat on nearly 4.5 million hectares of land in the region, mainly in Edirne, Kirklareli and Tekirdag provinces, to meet around 15 percent of domestic wheat needs.
However, the lack of precipitation, water stress, and agricultural drought suppressed the germination, emergence, and tillering of wheat crops.
The irregularity of the precipitation has reduced the average yield this season to around 4t per hectare, compared to last year’s average of 5.5.
Ukraine
Ukraine is setting up a temporary shipping route to maintain grain shipments after Russia quit the Grain deal.
In an official letter letter dated July 18 submitted to UN shipping agency, the International Maritime Organization (IMO), Ukraine on Wednesday said it had “decided to establish on a temporary basis a recommended maritime route”.
“Its goal is to facilitate the unblocking of international shipping in the north-western part of the Black Sea,” Vasyl Shkurakov, Ukraine’s acting minister for communities, territories and infrastructure development, said in the letter.
Ukraine added in the letter that it would establish shipping traffic routes close to the waters around Chornomorsk, Odesa, Pivdennyi, the three Ukrainian ports that were part of the corridor, leading up to the territorial waters and the exclusive maritime economic zone of Romania.
Ukraine added in the letter to the IMO that it had created a “mechanism” to provide “guarantees of compensation for damage” to charterers, ship operators and owners of vessels “caused as a result of the armed aggression of the Russian Federation”.
Nevertheless, since Russia’s move to exit the deal, insurers have been reviewing their appetite to cover ships into Ukraine.
Norwegian shipping insurance group DNK, which provides war risk policies, said it was currently unable to provide cover for Ukraine.
Additional war risk insurance premiums, which are charged when entering the Black Sea area, need to be renewed every seven days.
They already cost thousands of dollars and are expected to go up, while shipowners could prove reluctant to allow their vessels to enter a war zone without Russia’s agreement.
There is also the risk of floating mines.
Russia
Russia said on Wednesday the United Nations had three months to implement the terms of a memorandum that would facilitate Russian agricultural exports if it wanted Moscow to resume talks about allowing Ukrainian grain exports to restart.
Russian Foreign Ministry spokeswoman Maria Zakharova said the onus was now on the United Nations to implement the Russian deal if it wanted Moscow to return to wider talks about it helping revive Ukrainian exports.
“The Russia-United Nations Memorandum itself states, and I’ll quote…that the agreement will be in force for three years, and in case one of the parties intends to terminate it (either Russia or the UN), it must give three months’ notice. We have given notice,” Zakharova told Radio Sputnik on Wednesday.
“Accordingly, the UN still has three months to achieve concrete results. Therefore, people should not run to the microphones at the UN Secretariat, but use these three months to achieve concrete results. If there are concrete results, we will return to the discussion of this (wider) issue.”
Meantime, Russia has already harvested more than 21 MMT of grains.
Harvesting is already underway in 39 regions.
China
China’s soybean imports from Brazil jumped 31.6% in June from a year earlier, data showed on Thursday.
Notably, China imported 9.53 million metric tons of soybeans from Brazil, up from 7.24 million tons a year earlier, data from the General Administration of Customs showed.
Total arrivals last month reached 10.27 million metric tons, and imports are set to stay high through the summer.
Shipments from Brazil in the first half of this year hit 29.7 million metric tons, 2 million metric tons higher than last year’s level.
June arrivals from the United States reached 527,586 tons, down 32% from a year ago.
However, U.S. shipments with 19.7 million metric tons for the first half year, are still higher than last year when reached 17.54 million metric tons.
For corn, arrivals from the United States fell to 1.23 million metric tons, down from 2.07 million metric tons a year ago, while Ukraine was the second supplier with 567,000 metric tons.
Total Chinese corn imports in June came to 1.85 million metric tons, down 16% on the year, data previously showed.
Australia
ASX Jan wheat traded up $10 late in the day to close out at $400.
Victorian new crop barley also settled up $6 to close out at $327.
New crop canola hit the $800 mark for a brief moment yesterday which resulted in some grower selling.
Levels settled very quickly into the $790-795 range.
WA current crop feed barley gained $4-5 through the day, closing out at $294 FIS Kwinana.
Minimal rain was seen overnight in the east with some localised falls of up to 5mm, mainly in Barwon and the Western Districts.
In WA, coastal cropping areas in South West region, the Midlands and parts of the Great Southern received falls ranging from 10-50mm overnight.
Auctions
Macroeconomics
Energy markets
Oil prices dipped about 0.5%, on profit-taking despite tighter U.S. supplies.
U.S. crude inventories fell by 708,000 barrels in the last week to 457.4 million barrels, compared with analysts’ expectations for a drop of 2.4 million barrels, Energy Information Administration data showed on Wednesday.
The data showed inventories in the Strategic Petroleum Reserve climbed for the first time since January 2021, as the U.S. tries to refill the reserve following last year’s record drawdown.
U.S. economic data on Tuesday showed retail sales rose less than expected in June.
As a result, investors took profits following earlier gains and Brent futures dipped 17 cents at $79.46 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped 40 cents at $75.35 a barrel.
Strength in the U.S. dollar index also weighed on prices.
On this morning, oil prices were little changed, as a lower-than-expected drop in U.S. crude inventories and a potentially weaker demand outlook kept investors cautious.
Thus, September Brent futures dipped 2 cents at $79.44 a barrel by 05:30 GMT, while August U.S. West Texas Intermediate (WTI) crude rose 1 cent to $75.36 a barrel.
The August WTI contract expires on Thursday.
Crude prices may struggle to find a clear direction amid a mixed global demand outlook in the next few weeks.
Ocean freight markets
The Baltic Exchange’s main sea freight index in London lost 3.2%, falling for a fourth straight session, pressured by lower rates for larger capesize and panamax vessel segments.
The overall index, indeed, fell by 33 points, or 3.2%, to 1,004.
Notably, the capesize index went down by 61 points, or 4%, to its lowest level in near six-week at 1,468.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes carrying commodities such as iron ore and coal, decreased by $498 to $12,178.
The panamax index shed 59 points or 5.6% to 993 – its biggest daily percentage drop since Jan. 3.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, slipped by $530 to $8,940.
Among smaller vessels, the supramax index edged up by 8 points to 754.
Equity markets
US stock indexes kept only moderate gains, while bond yields remained lower, on weaker-than-expected U.S. June housing starts report.
U.S. June housing starts indeed fell -8.0% m/m to 1.434 million, weaker than expectations of 1.480 million.
June building permits, a proxy for future construction, unexpectedly fell -3.7% m/m to 1.440 million, weaker than expectations of an increase to 1.500 million.
Thus the markets are now discounting the odds at 96% for a +25 bp rate hike at the next FOMC meeting on July 25-26.
As a result, the 10-year T-note yield dropped to a 2-1/2 week low of 3.725% and finished down -4.6 bp at 3.739%.
Positive Q2 corporate earnings results were supportive for stocks.
One of Wall Street’s biggest winners was Carvana, which soared 40.2%.
The earnings reporting season is picking up momentum in its second week.
Analysts are forecasting a third straight quarter of weaker earnings per share for S&P 500 companies, but that low bar makes it easier for companies to top expectations.
Meantime, easing inflation pressures in the UK sparked a rally in European government bonds, as the 10-year UK gilt yield fell to a 6-week low, which fueled rallies in U.S. bonds and stocks.
The UK June CPI eased to +7.9% y/y from +8.7% y/y in May, better than expectations of +8.2% y/y.
In this context, the S&P 500 rose 0.2% to 4,565.72.
It is now up nearly 19% for the year so far and at its highest level in more than 15 months.
The Dow Jones Industrial Average gained 0.3% to 35,061.21 and the Nasdaq composite edged up less than 0.1%, to 14,358.02.
On this morning, Asian shares were mixed after Japan reported weaker than expected trade data for June, with imports falling nearly 13% from a year earlier.
Shares rose in Sydney and Hong Kong but fell in Shanghai, Tokyo and Seoul.
Japan logged a trade surplus in June for the first time in nearly two years as imports sank, largely due to lower oil prices.
Exports rose only 1.5% from a year earlier despite sharp increases in shipments of vehicles as supply chain problems eased.
Also, economists say they anticipate weaker exports in coming months as demand in other major economies slows.
As a result, Japan’s benchmark Nikkei 225 declined 1.1% to 32,542.52.
Australia’s S&P/ASX 200 added 0.2% to 7,335.70.
South Korea’s Kospi edged down less than 0.1% to 2,606.81.
Hong Kong’s Hang Seng gained 0.2% to 19,984.90, while the Shanghai Composite shed 0.3% to 3,188.44.
Currency trading
The dollar index rose by +0.36% on weakness in the British pound and the yen, though weaker-than-expected U.S. housing starts report along with a decline in T-note yields, limited the dollar’s upside.
Notably, the GBP/USD fell to a 1-week low on better-than-expected UK inflation news.
The USD/JPY rose by +0.62%, with the yen under pressure after BOJ Governor Ueda indicated there would be a continuation of the BOJ’s easy monetary policy.
Also, a rally in the Nikkei Stock Index to a 1-1/2 week high Wednesday curbed safe-haven demand for the yen.
The EUR/USD, meantime, fell by -0.23%, as decline in the 10-year German bund yield to a 3-week low weakened the euro’s interest rate differentials.
However, losses in EUR/USD were limited after the Eurozone June core CPI was revised higher, a hawkish factor for ECB policy.
Eurozone May construction output rose +0.2% m/m, the first increase in 3 months.
Eurozone Jun new car registrations rose +17.8% y/y to 1.045 million, the eleventh consecutive monthly increase.
Eurozone Jun core CPI was revised slightly by +0.1 to 5.5% from 5.4%.
On this morning, the U.S. dollar fell to 139.19 Japanese yen from 139.68 yen.
The euro cost $1.1226, up from $1.1204.
