GRAIN MARKET VIEW
Daily Update – July 25, 2023
Good morning, Farmer Family …
Main Markets
USA
US farm markets climbed on Monday.
Chicago SRW wheat prices closed with limit-up gains, jumping 8.60%.
Kansas City HRW climbed 6.77%, and Minneapolis HRS rose 5.52%.
As a result, the winter wheat markets will all trade with expanded 90c limits in the Tuesday session.
Corn prices also made substantial inroads, rising 6.36%.
Soybean prices enjoyed gains of around 1.5% thanks largely to spillover strength from red-hot wheat and corn prices.
The rest of the soy complex was also in the green, with soymeal prices 1.02% firmer, while soyoil climbed 3.73%.
Russia attacked Ukrainian ports and grain infrastructure, including the first attack on Danube River grain warehouses, targeting a vital export route for Kyiv.
The attacks sharpened traders’ focus on long-term threats to global grain supplies and food security.
In other news, the European Union’s crop monitoring service on Monday further reduced its crop yield forecasts for this year’s harvest in the bloc, including grains, oilseeds and sugar beet, citing dry and hot weather conditions.
Corn and soybeans followed wheat prices higher, with outlooks for hot weather this week in the U.S. crop belt adding support.
However, Russia continues to dump cheap wheat on the world market, and Brazil’s record harvest has the world well-supplied with corn near-term.
Meantime, USDA’s weekly Export Inspections data reported 309,981 MT of corn was shipped during the week that ended 7/20.
That was down 101.5k MT from the week prior and down by 444k MT from the same week last year.
The inspections report had the season’s accumulated shipment at 34.232 MMT, compared to 51.08 MMT at the same point last year.
As for soybean, the report showed 283,378 MT of soybeans were shipped for the week that ended 7/20.
That was up from 160k MT last week but was below the 403k MT from the same week last year.
USDA reported the full year bean export total at 50.177 MMT, compared to 53.09 MMT last year.
As for wheat, the report had wheat shipments at 358,796 MT.
That was an 85,621 MT increase for the week, but was 116.7k MT lighter yr/yr.
The season’s total reached 2.153 MMT as of 7/20, compared to 2.592 MMT last year.
Separately, the USDA flashed a 121k MT new crop soybean sale to China.
In this context, corn basis bids were steady to mixed after trending as much as 15 cents higher at a Nebraska processor and as much as 10 cents lower at an Iowa river terminal.
Soybean basis bids were mostly steady to soft, after tracking 5 to 25 cents lower across four Midwestern processors.
An Iowa river terminal bucked the overall trend after firming 9 cents.
Commodity funds were net buyers of CBOT corn, wheat, soybean, soyoil and soymeal futures contracts.
After the sessions close, USDA’s weekly Crop Progress report had 68% of the corn crop silking as of 7/23.
That was 3% points ahead of normal.
NASS also reported 16% in the dough stage vs 14% on average.
57% of corn crop was in “good to excellent” condition, steady with the previous week despite trade expectations for a slight improvement.
As for soybean, the report had 70% of beans blooming.
That was up from 56% last week and compares to 66% on average.
NASS data had 35% of the crop setting pods, 4ppts ahead of average.
Soybean conditions were shown at 54% as good to excellent, down from 55% last week.
As for wheat, the spring wheat crop was shown 94% headed, 1ppt ahead of average, while ratings fell to 49% good-to-excellent, down from 51% previously.
Analysts on average had expected no change
Meantime, the harvest of the U.S. winter wheat crop was progressing slowly, as harvest was 68% complete, up from 56% a week ago but lagging the average trade estimate of 70% and the five-year average of 77%.
On this morning, Chicago wheat prices rose to a five-month top, gaining 2%.
Corn edged higher, while soybeans eased.
Notably, the most-active wheat contract on the Chicago Board of Trade (CBOT) added 2% to $7.72-1/2 a bushel, as of 03:38 GMT, after earlier touching $7.77-1/4, its strongest since Feb. 21.
Corn rose 0.1% to $5.69 a bushel, while soybeans lost 0.1% to $14.23-1/2 a bushel.
The slowdown in Ukrainian exports has been priced into the market and buyers are now waiting to see what happens to Russian wheat exports.
Any restrictions on movement of ships from Russia will be bullish for prices.
South America
Brazilian farmers had harvested 47% 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 11 percentage points from the previous week.
At the same time last year, 62% of Brazilian corn fields had been reaped, the consultancy’s statement said.
AgRural expects the 2023 crop to reach 102.9 million metric tons.
In Argentina, per latest data from the Ag Ministry, cumulative soybean crush in the first six months of 2023 was at 14.9Mt compared to 20.0Mt over the same period of previous year.
Soybean oil production was at 2.8Mt (3.8Mt previous year) and Soymeal output at 10.7Mt (14.4Mt).
Europe
In Europe, wheat prices soared 7.08%, and corn closed 5.45% higher.
Oilseed markets, in contrast were mixed as August rapeseed fell 3.83% as approaching to expire, while Nov rose 1.41%.
Wheat prices thus returned to last April levels.
Corn prices also experienced the same movement.
With this new geopoliticall concerns, European exporters are following the price gap between European and Russian origins with the greatest interest, also because there are some questions on Russian loading capacities.
The Kremlin indeed said on Monday that “increased vigilance” was needed after the Federal Security Service (FSB) alleged it had found traces of explosives on a ship travelling to Russia to pick up grain.
The FSB said the ship had been docked in the Ukrainian port of Kiliia in May, and that it may have been used to deliver explosives to Ukraine.
In France, the arrival of the rains in several production areas will lead to a slowdown in harvest sites.
Meantime, the European Union’s MARS program revised its yield estimates from last month.
In wheat, maize and rapeseed, the potentials are respectively down to 5.80 t/ha (-0.12 t/ha), 7.53 t/ha (-0.08 t/ha) and 3.20 t/ha (-0.09 t/ha).
Durum wheat remained unchanged to 3.39 t/ha.
North Africa
Egypt’s wheat imports rose 34% year on year (YoY) during the period from January to July 18th of the current year, Asharq Business reported, citing an official document.
The North African country received 5.66 million tons of wheat since the beginning of the year to July 18th, compared to 4.22 million tons over the same period a year earlier.
It is worth noting that Egypt is the largest wheat importer in the world, purchasing up to 12 million tons annually for the public and private sectors.
Ukraine
Ukrainian Grain Association lobby group has asked European Commission Executive Vice-President Valdis Dombrovskis to increase volumes of Ukrainian grain export via so-called solidarity lanes by 1Mt or 1.5Mt per month.
UkrAgroConsult estimates Ukraine’s maximum monthly exports via land and Danube ports at 4-5Mt.
It is estimated that 2-2.5Mt can be exported via land routes per month, and 2.2-2.6Mt via the Danube ports.
However, it should be noted logistics cost via these routes will be significantly higher than for exports via Ukraine’s deep-water ports, espeicially to deliver the commodities to Southeast Asia and China markets.
On this wake, almost 30 ships dropped anchor near Ukraine’s crucial Izmail port terminal, although it was unclear exactly what had caused them to stop.
However, insurance industry sources have said war risk cover for Ukraine’s ports that were part of the previous grain deal had been suspended, thus, some providers were reviewing whether to continue to provide cover for Danube ports.
Thus, the premiums for those that are still quoting is going to go up sure.
Russia
Russia and nations taking part in this week’s Russia-Africa summit will discuss Moscow’s grain and fertilisers exports, Oleg Ozerov, ambassador at large at the Russian foreign ministry, told the state RIA news agency in remarks published on Tuesday.
The second Russia-Africa summit will take place in St. Petersburg on July 27-29.
“The creation of logistics corridors, hubs not only for food and fertilizers, but also for any other products that the Russian Federation produces – this will be one of the topics of discussion,” Ozerov told RIA.
“It seems to me that the idea of such logistics corridors and the creation of grain hubs is promising and feasible.”
This week, President Vladimir Putin said Moscow can replace Ukrainian grain both commercially and free of charge.
On Monday, UN Secretary-General Antonio Guterres called on Russia on Monday to return to the Black Sea grain deal.
Sovecon estimates that the country’s July wheat exports will see a monthly increase of 23% with a new projection of 4,3 MMT.
Australia
ASX relaxed yesterday afternoon on thin trade to start the week at A$403/t Jan24.
Basis was standing up well against the Friday night fall in offshore wheat futures.
Canola was not as resilient as the market gave back most of the move on Friday night.
Local markets will follow the offshore lead today.
Meantime, the rainfall forecast for the end of July has thinned out for most of the east coast.
The next significant rainfall event is becoming more and more important as the days warm up and the time between the last decent rainfall event increases.
Auctions
Macroeconomics
Energy markets
Oil prices climbed about 2% to a near three-month high, on tightening supply, rising U.S. gasoline demand, hopes for Chinese stimulus measures and technical buying.
Brent futures, indeed, rose $1.67, or 2.1%, to settle at $82.74 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.67, or 2.1%, to settle at $78.74.
On this morning, oil prices edged higher for a third straight session.
Notably, Brent futures gained 25 cents, or 0.3%, to $82.99 a barrel by 06:33 GMT, while U.S. West Texas Intermediate (WTI) crude rose 27 cents, also 0.3%, to $79.01.
Ocean freight markets
The Baltic Exchange’s main sea freight index, fell to its lowest since early June on Monday on lower rates for all vessel segments.
The overall index, indeed, dropped 11 points, or 1.12%, to 967, its lowest since June 5.
Notably, the capesize index shed 20 points, or 1.4%, at 1,422.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes carrying commodities such as iron ore and coal, fell $163 to $11,795.
The panamax index also retreated 14 points to 910, its lowest since late February.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, slid $134 to $8,186.
Among smaller vessels, the supramax index fell to 757.
Equity markets
US stocks posted moderate gains, as Monday’s rally in crude oil prices to a 3-month high lifted energy stocks and boosted the overall market.
Also, gains in regional bank stocks were supportive of the overall market.
Monday’s U.S. economic news was mixed for equities.
The Jun Chicago Fed activity index unexpectedly fell -0.4 to -0.32, weaker than expectations of an increase to -0.13.
However, the Jul S&P manufacturing PMI unexpectedly rose +2.7 to 49.0, stronger than expectations of a decline to 46.2.
Traders had expected at least a brief recession to begin this quarter.
Thus, quarterly corporate earnings results will be critical to the stock market’s direction this week.
The markets expect the Fed and the ECB this week to raise their respective interest rates by 25 bp.
Meantime, the 10-year T-note yield rose 1.8 bp to 3.853%.
In this context, on Wall Street, the benchmark S&P 500 index rose 0.4% to 4,554.64.
The Dow Jones Industrial Average gained 0.5% at 35,411.24 and the Nasdaq composite added 0.2% to 14,058.87.
On this morning, Asian stock markets followed Wall Street higher.
Shanghai, Hong Kong, Seoul and Sydney advanced.
Tokyo declined.
Notably, the Shanghai Composite Index rose 1.7% to 3,217.75 and the Hang Seng in Hong Kong surged 3.4% to 19,298.31.
The Nikkei 225 in Tokyo shed 0.3% to 32,605.97 while the Kospi in Seoul advanced less than 0.1% to 2,630.70.
Sydney’s S&P-ASX 200 gained 0.4% to 7,336.20.
New Zealand retreated while Singapore and Jakarta advanced.
The Chinese ruling party on Monday promised measures to boost sluggish economic growth by supporting real estate sales and other struggling sectors but gave no details and didn’t mention possible stimulus spending.
However, any stimulus is “unlikely to be significant” while Beijing takes a “gradual and targeted approach,” analysts said.
Currency trading
The dollar index rose by +0.28% and posted a 1-1/2 week high.
Weakness in the euro boosted the dollar after monthly Eurozone PMI reports missed expectations and hinted at a worsening slowdown in the Eurozone.
The EUR/USD indeed fell by -0.54% and posted a 1-1/2 week low.
Also, political uncertainty in Spain is bearish for EUR/USD after Sunday’s undecisive election results may leave Spain facing months of instability without a fully functioning government.
The dollar extended its gains on stronger-than-expected U.S. July S&P manufacturing activity report.
Higher T-note yields also supported the dollar.
As for the USD/JPY, it fell by -0.20%, with the yen rising moderately against the dollar on reports that the BOJ at this Friday’s meeting will raise its consumer inflation projection to around 2.5%, up from an April projection of 1.8%.
On this morning, the dollar declined to 141.35 yen from Monday’s 141.44 yen.
The euro advanced to $1.1076 from $1.1071.
