GRAIN MARKET VIEW
Daily Update – July 21, 2023
Good morning, Farmer Family …
Main Markets
USA
US farm markets were mixed on Thursday.
Corn prices shifted 1.51%.
Soybean rose 0.23%, but the rest of the soy complex saw soymeal fading 0.74% lower, and soyoil jumping more than 2.4% higher.
Wheat prices also were mixed as Chicago SRW eased 0.10%, while Kansas City HRW rose 0.92%, and Minneapolis spring wheat added 0.53%.
Chicago wheat prices dipped but remained near recent peaks.
2023/24 global wheat production is forecast at an above average level, incl. a potentially record outturn in Pakistan, where plantings exceeded initial outlooks, while favourable weather boosted yield expectations, the International Grains Council said.
US weekly export sales data indicated just 170,658 MT of all wheat sales in the week that ended on July 13.
That was a 3-week low and below the trade expectations.
Total sales commitments for this year lag 2022/23 by 31.6% at just 5.19 MMT.
However, a third night of Russian attacks on Ukrainian ports renewed concerns about disruptions to exports needed to meet world demand and stave off rising food prices.
Adding more pressure, and in response to Kremlin which which said it is targeting ships heading to Ukraine’s Black Sea ports, Ukraine’s Defense Ministry said on Thursday it would consider all ships traveling to Russian ports as potential carriers of military cargo starting on Friday.
That raised the risk of retaliation against the shippers of Russian grains, and the implications could be massive for world supplies.
Concerns about tight stocks lent support to Kansas City hard red winter wheat and MGEX spring wheat contracts, which track the high-protein crops that are in short supply.
Corn and soybean prices were mostly weaker on profit-taking setbacks.
The International Grains Council raised its 2023/24 global corn production estimates by 9 million metric tons to 1.22 billion metric tons, attributing it to increased production potential in the U.S. now seen at 383.7 million metric tons, up from a previous projection of 373.4 million tons.
US weekly export sales were another disappointment both for the corn and soybean bulls, as corn export sales were at 236,809 MT of old crop sales booked in the week that ended on July 13.
That was on the low side of estimates and nearly half of what was reported last week.
New crop sales totaled 491,595 MT in that week, the second largest this MY and on the high side of trade estimates.
Cumulative totals for the 2022/23 marketing year are still noticeably lower than last year’s pace after reaching 35.84 MMT.
As for soybean, USDA tallied old crop soybeans bookings of 127,047 MT, in the middle of trade estimates and above last week.
New crop sales totaled a MY high 760,275 MT, which was above the high end of estimates.
However, cumulative totals for the 2022/23 marketing year are still more than 2.7 MMT lower than last year’s pace so far, with 49.89 MMT.
Soybean meal sales totaled 407,761 MT, with 22/23 sales of 272,461 MT, a 7-week high.
Soy oil sales continued their sluggish pace, with net cancellations of 756 MT, mainly from Canada.
Meantime, the Environmental Protection Agency reported that the U.S. generated 1.28 billion ethanol blending credits in June, which was a steady pace when compared to May’s volume.
The U.S. also generated 674 million biodiesel blending credits last month, down comapred 750 million in May.
On the other hand, according to the International Grains Council, although the latest USDA Acreage Report scaled back 2023/24 US soybean seeding, most notably in North Dakota and Illinois, production is presently forecast fractionally higher y/y on assumed trend yields, albeit as the coming weeks are crucial for crop development.
Also, owing to a slightly reduced US soybeans harvest, and with domestic use expected at an all-time high, US exports in 2023/24 (Sep/Aug) are projected contract y/y, representing a third successive season of decline, said.
However, declines in prices were kept in check by outlooks for hot weather in key U.S. Midwest growing areas.
In this context, corn basis bids were steady to weak after softening 2 to 10 cents lower across half a dozen Midwestern locations.
Soybean basis bids were steady to soft after eroding 10 to 30 cents lower across eight Midwestern locations.
Commodity funds were net sellers of CBOT corn, soybean, wheat and soymeal futures contracts.
The funds were net buyers of CBOT soyoil futures.
On this morning, Chicago wheat prices were on track to record a near 7% gain this week despite a sharp fall on Friday as traders booked profits ahead of the weekend and on easing concerns about a lack of global supply despite Russia’s attacks on Ukrainian Black Sea ports.
Major grain importers in the Middle East and North Africa have reacted calmly to the end of the safe shipping corridor for Ukraine’s exports through the Black Sea this week.
If you look at Russia’s large crop and the good harvests in France and elsewhere in the EU it doesn’t seem like there is going to be a wheat shortage problem.
As a result, the most-active wheat contract on the Chicago Board of Trade (CBOT) was down 2.65% at $7.07-3/4 a bushel, as of 11:40 GMT, corn fell 0.6% to $5.32-1/4 a bushel and soybeans lost 1.2% to $13.88-1/2 a bushel.
For the week, wheat has climbed 6.9%.
It is still only about half the record high price of $13.63-1/2 per bushel hit in March 2022.
Corn has added almost 3.6% and soybeans have gained 1.3%.
Canada
Saskatchewan Agriculture’s weekly Crop Report as of July 17 points to another warm week, “pockets of moisture” and a continued rapid pace of crop growth.
An estimated 35% of the province’s fall cereals (31%), 37% of spring cereals (33%), 33% of oilseeds (33%) and 35% of pulse crops (28%) are viewed as ahead of normal growth stages for this week, with the previous week’s estimate in brackets, while signaling an early harvest on the way.
The 37% estimate for spring cereals is equal to the estimate for the same week in the drought year of 2021, while the 33% estimate for oilseeds is three points below the estimate for 2021.
The 35% estimate for fall cereals is nine points below the 2021 estimate, and the 35% estimate for pulse crops is eight points below the 2021 estimate.
While the percentages shown are provincial averages, there is a significant variance seen in data across the province.
The lowest percentages for crop viewed as ahead of average growth stages is seen in the Southeast Region of the province, with both spring cereals and oilseeds rated at 17% ahead of normal, while pulses are rated at 26% ahead of normal.
The Northeast Region is the furthest ahead of normal, with 44% of oilseeds ahead of normal growth stages, ranging to 94% of fall cereals.
South America
Brazil’s Abiove increased its estimates for the country’s current soybean crop to 156.49 MMT in what is increasingly looking like a record-breaking crop.
Abiove also increased its outlook for Brazil’s 2022/23 soybean exports, with a new estimate of 97.51MMT.
Soymeal exports are expected to reach 22 million metric tons.
AgroConsult raised the estimates of Brazil’s 22/23 second corn crop from 102.4Mt to 107.2Mt, which is seen 16pc higher than the previous year.
In Argentina, rains that have slaked Argentina’s drought-hit farmlands have allowed soil moisture to recover and 71% of the area planned for wheat harvesting has now been planted under fair water conditions, the Buenos Aires Grains Exchange said on Thursday.
Meantime, USDA attaché, estimated MY 2022/2023 soybean production at 21.25 million metric tons (MMT), 3.75 MMT below the official USDA estimate on lower than expected yields.
Soybean sales have been driven primarily by government programs offering exchange rate incentives and farmers are holding remaining soybean in anticipation of similar future programs.
Precipitation levels have improved in recent months across much of the growing region.
Europe
In Europe, grain and oilseed markets also were mixed, with wheat extending previous gains, while corn and rapeseed closed slightly weaker.
We saw another session of high volatility against a backdrop of revived tension in the Black Sea region, with many questions raised about shipping activity.
European exporters are obviously keeping a close eye on developments.
The euro’s easing against the dollar, is also a factor to watch, after the recent uptrend of recent weeks.
According to farm office FranceAgriMer, the French soft wheat harvest ran slightly ahead of average by July 17 and winter barley cuttings were virtually complete, with grain crop conditions unchanged from the previous week.
The office said in a crop report that French farmers had harvested 58% of the soft wheat crop by Monday, up from 33% a week earlier and an average of 53% but well behind last year’s fast pace of 79%.
The winter barley harvest was 99% complete, compared to an average of the last five years of 91%.
An estimated 80% of soft wheat was in good or excellent condition, unchanged from the previous week.
FranceAgriMer estimated that 82% of the French grain maize crop was in good or excellent condition by July 17, unchanged from the previous week and 75% a year earlier.
The condition of spring barley was stable compared to the previous week at 73%.
Durum wheat harvesting was 89% complete, versus 65% a week earlier, while 68% of the spring barley crop had been cut, up from 35% the previous week.
Meantime, the IGC on Thursday published its new balance sheet estimates for the 2023/2024 marketing year, revising upwards production volumes and cereal stocks.
Notably, the inter-governmental body raised world grain production to 2.297 billion tonnes for the 2023/24 season, up from a June forecast of 2.292 billion tonnes.
Stockpiles also were raised in the report to 581Mt from 577Mt.
As for rapeseed, the European market is nervous due harvest time.
Also, the approaching close of the August 2023 maturity and the return of prices well above €500/t during the session led the market to pull back at the end of the day, dragging the other maturities in its wake.
Meantime, after the new geopolitical tension from the Black Sea region, the head of the port’s business association of Romania’s Constanta port said, the port has capacity to handle extra cargoes until mid-August.
A lag in domestic grain harvesting and the reluctance of some Romanian farmers to sell their crops at low prices indeed meant capacity would be available for Ukrainian grain until mid-August.
Operators were seeking to increase capacity.
Transit pressure will mount on Constanta, which traditionally handles Romania’s crop exports and those of its landlocked neighbours, including Hungary and Serbia.
Overall, it handled 15.25 million metric tonnes of grains in the first six months of this year, a 24.5% increase on the same time last year, the Constanta Port Authority said.
Ukrainian grains accounted for 7.5 million tonnes of the total. By comparison, Romanian port operators handled 8.6 million tonnes of Ukrainian grain in the whole of 2022.
Operators of grain terminals have increased investment in equipment and management to boost operating capacity compared with the start of the war.
At its peak so far, Constanta handled 25 million tonnes of grain per year, likely will be exceeded in 2023.
North Africa
Tunisia’s grain harvest declined this year by 60% to 250,000 tonnes due to drought, the Agriculture Ministry said on Friday.
The decline in the grain crop would deepen Tunisia’s financial difficulties as it tries to clinch an international rescue package.
Some 99% of this season’s crop is durum wheat, the Agriculture Ministry official Salwa Ben Hdid told reporters.
South Africa
According to the USDA attaché, the country is currently harvesting its second largest corn crop in history and a fourth consecutive bumper crop.
This creates a bearish outlook on local corn prices and will limit an expansion in the area to be planted with corn in marketing year (MY) 2023/24.
Additionally, the attaché foresees that the positive trend in soybean plantings will continue, also limiting possible expansion of corn area.
However, South Africa should maintain its status as a net exporter of corn under normal climatic conditions.
The attaché estimates South Africa could export around 2.5 million metric tons (MMT) of corn in MY 2023/24, while exports in MY 2022/23 are expected to reach 4 MMT.
In MY 2021/22, South Africa exported 3.7 MMT of corn, keeping exports on the same level as MY 2020/21.
Russia
A Russian government-linked think-tank considers the quality of soft wheat this season to be quite high, while some other industry experts and the Ministry of Agriculture say it is still lower than last year.
As of July 12, wheat harvesting was progressing at the slowest pace since 2016.
SovEcon news agency reported that wheat harvest so far was at 7.3 million tons from 1.9 million hectares comparing to 12.6 million tons from 3.0 million hectares a year earlier.
The quality of soft wheat this season is at a fairly high, decent level.
The Russian Agriculture Ministry said on Wednesday that more than 21 million tons of grain had been threshed in 35 regions during the harvesting campaign.
It confirmed the forecast of grain harvest of at least 123 million tons and exports of about 55 million tons.
China
Recent rainfall in China’s northeastern breadbasket has relieved drought across most of the region and replenished soil moisture.
The area hit by drought in the northeast exceeded 20 million mu (1.33 million hectares) in May and June.
Rainfall since late June has replenished soil moisture and “basically eased the drought”, with only 1 million mu (66,666 hectares) of farmland still affected in Inner Mongolia.
Meantime, the area planted with corn has increased this year due to the good market price.
However, China has called for Chinese farmers to grow more grain and to receive a guaranteed income, after the expiry earlier this week of the Black Sea grain deal.
According to broadcaster CCTV, which cited the Central Financial and Economic Affairs Commission chaired by president Xi Jinping on Thursday, lawmakers said it was necessary to use China’s saline-alkali land to its full potential and expand agricultural production capacity.
China will safeguard its current red line of 1.8 billion mu (120 million hectares)of arable land.
South-East Asia
India has ordered a halt to its largest rice export category.
The government of India has amended the export policy and imposed a ban on non-basmati white rice in an effort to relieve the recent rise in prices in the domestic market.
India accounts for more than 40pc of world rice exports, and the category impacted accounted for around 10 million tonnes (Mt) of the total 22Mt Indian rice exports last year.
Australia
The forecast is showing some positive signs for some rain relief in the back end of July.
This will be much needed and well timed if it were to eventuate.
Meantime, the Eastern States were all firmer again off the back of offshore rallies but couldn’t keep up 1 for 1.
Basis sharpened on all fronts.
Some engagement emerged from sellers on all fronts as new crop reached $420 track APW1 & $765 CAN in PKE.
ASX Jan wheat settled at $402.
Vic new crop barley values improved $5 to close around $332.
New crop WA canola rose to $805 for both GM and non-GM which attracted good interest from the grower.
New crop WA wheat was firmer, with the APW MG levels reaching $415 for Geraldton/Kwinana and around $410-412 for Esperance and Albany port zones.
WA current crop feed barley rallied further, trading reasonable volumes at $300 FIS Kwinana/Albany and $305 FIS Esperance.
Auctions
Milling wheat
The Taiwan Flour Millers’ Association has issued an international tender to purchase an estimated 108,000 metric tons of grade 1 milling wheat to be sourced from the United States.
The deadline for submission of price offers in the tender is July 27.
The tender seeks two consignments both involving a range of different wheat types for shipment from the U.S. Pacific Northwest coast.
The first consignment of 56,000 metric tons is sought for shipment for Sept. 6-20 and the second of 52,000 metric tons for Sept. 22-Oct. 6.
Wheat types sought include dark northern spring, hard red winter and soft white wheat.
Macroeconomics
Energy markets
Oil prices settled slightly higher amid low crude stocks, strong Chinese crude imports, and cautious economic outlook.
September Brent futures indeed climbed 18 cents, or 0.2%, to settle at $79.64 a barrel.
August U.S. West Texas Intermediate (WTI) crude gained 28 cents, or 0.4%, to settle at $75.63 a barrel.
The August WTI contract expires on Thursday.
The more active September WTI crude settled 36 cents higher at $75.65.
On this morning, Oil prices rose, buoyed by evidence of tightening supplies and economic stimulus in slow-recovering China.
Brent futures were up $1.02 at $80.66 a barrel by 11:34 GMT, while U.S. West Texas Intermediate (WTI) crude climbed $1 to $76.65 a barrel.
On Friday, Chinese authorities unveiled plans to help boost sales of automobiles and electronics.
The announcement remains short on detail but notions of China buying more cars gives rise in hope for oil investor bulls.
Ocean freight markets
The Baltic Exchange’s main sea freight index tracking rates for ships carrying dry bulk commodities, fell for the fifth straight session on Thursday, hurt by weaker demand for larger vessels.
The overall index, indeed, fell by 27 points, or 2.7%, to 977.
Notably, the capesize index went down by 47 points, or 3.2%, at 1,421, its lowest since June 7.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes carrying commodities such as iron ore and coal, decreased by $391 to $11,787.
The panamax index shed 48 points, or 4.8%, to 945 – its biggest daily percentage drop since Feb. 22.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, slipped by $437 to $8,503.
Among smaller vessels, the supramax index edged up by 3 points to 757.
Equity markets
US stocks settled mostly lower, although the Dow Jones Industrials bucked the trend and climbed to a 15-month high.
A slump in Netflix and Tesla weighed on technology stocks and the broader market.
Netflix fell -8.4%, and Tesla dropped -9.7%.
A jump in bond yields weighed on stocks, after Thursday’s economic data showed U.S. labor market strength as weekly jobless claims unexpectedly fell to a 2-month low.
By contrast, better-than-expected quarterly earnings results from Johnson & Johnson and International Business Machines pushed the Dow Jones Industrials higher.
U.S. weekly initial unemployment claims unexpectedly fell -9,000 to a 2-month low of 228,000, showing a stronger labor market than expectations of an increase to 240,000.
The U.S. July Philadelphia Fed business outlook survey rose +0.2 to -13.5, weaker than expectations of -10.0.
U.S. June existing home sales fell -3.3% m/m to a 5-month low of 4.16 million, weaker than expectations of 4.20 million.
U.S. June leading indicators fell-0.7% m/m, weaker than expectations of -0.6% m/m.
As a result, the yield on the 10-year US Treasury rose to 3.85% from 3.75% late Wednesday.
The two-year Treasury yield climbed to 4.85% from 4.77%.
In this context, the S&P 500 fell 30.85, or 0.7%, to 4,534.87, coming off its highest close since early April 2022 and its seventh gain in the last eight days.
The Nasdaq composite dropped 294.71, or 2.1%, to 14,063.31 and its worst loss in more than four months.
The Dow Jones Industrial Average was an outlier and up 163.97 points, or 0.5%, to 35,225.18 because it has less of an emphasis on tech stocks.
The biggest loss in the S&P 500 came from Discover Financial, which slid 15.9%.
Doing the most work to limit the S&P 500’s losses was Johnson & Johnson, which rose 6.1%.
Johnson & Johnson’s rally was the main reason the Dow was able to rise for a ninth straight day.
On this morning, shares were mixed in Asia.
Hong Kong, Seoul and Bangkok advanced while Tokyo, Shanghai and Sydney declined.
Taiwan’s Taiex 0.8% fell after TSMC, the world’s biggest manufacturer of computer chips, said it expects its sales to fall 10% this year as demand wanes.
TSMC’s shares fell 3.1%.
Japan reported consumer inflation edged higher in June, from 3.2% to 3.3%, but mainly due to increases in electricity rates.
Price increases excluding energy and volatile food costs fell.
That eases pressure on the central bank to adjust the ultra-lax monetary policy that it has kept in place for over a decade to counter sluggish economic growth.
Thus, Tokyo’s Nikkei 225 index lost 0.4% to 32,351.56, while the S&P/ASX 200 declined 0.2% to 7,307.80.
The Shanghai Composite index slipped 0.2% to 3,162.37.
In Seoul, the Kospi gained 0.1% to 2,603.66 and Hong Kong’s Hang Seng index advanced 0.5% to 19,029.45.
Thailand’s SET rose 0.4%.
Currency trading
The dollar index rallied to a 1-week high, as a jump in bond yields supported the dollar.
Also, signs of strength in the U.S. labor market are hawkish for Fed policy and bullish for the dollar after weekly initial unemployment claims unexpectedly fell to a 2-month low.
In addition, the slump in stocks Thursday boosted the liquidity demand for the dollar.
Mentime, the EUR/USD fell by -0.63% and posted a 1-week low.
USD/JPY rose by +0.31%, with the yen tumbling to a 1-week low against the dollar.
On this morning, the U.S. dollar rose to 140.22 Japanese yen from 140.07 yen.
The euro strengthened to $1.1138 from $1.1130.
