Daily Update – July 05, 2023

Good morning, Farmer Family …

Main Markets

US markets were closed on Tuesday for the Independence Day holiday. In the overnight session, incorporating the latest crop ratings, soybean prices rose, while wheat and corn prices continued to ease.
Central America
Mexico’s corn production is estimated at about 28.5 million metric tons this year, its agriculture ministry said Tuesday. The production, which represents both white and yellow corn, marks growth of more than 2 million metric tons, the ministry said in a statement. Notably, white corn, is expected to see a production of 24.9 million metric tons, while yellow corn’s output could reach 3.61 million metric tons this year, according to official data. The government attributed the increase to its free fertilizer program for small-scale farmers.
South America
Brazilian national agricultural agency Conab reported that as at 3 Jul, the 2022-23 first maize crop harvest was 95pc complete, and the second (safrinha) crop threshing was 20pc complete. It said fieldwork was most advanced in Mato Grosso where continued decent productivity was reported. Season 2023-24 wheat planting was 80pc complete (71pc previous year). Despite crops being generally estimated to be in good condition, high moisture levels in Rio Grande do Sul have resulted in incidences of fungal disease. It noted pest infestation in Sao Paulo amid dry weather.
European grain prices rose on Tuesday inspite a light trade, with market supported by renewed speculation the Black Sea grain corridor won’t be extended. There are rumors that Russia had rejected the proposed compromise to allow Russia’s Rosselkhozbank to set up a subsidiary that could connect to SWIFT. Russian Foreign Ministry spokeswoman Maria Zakharova dismissed the idea as deliberately unworkable, saying it would take many months to set up such a unit and another three months to connect to SWIFT. She also rejected a UN attempt to create an alternative payment channel between Rosselkhozbank and JP Morgan, saying there was no real replacement for SWIFT. The Russian foreign ministry said on Tuesday it was obvious there were no grounds to extend the deal beyond 17 July and that Russia was doing everything necessary for all ships covered by the deal to leave the Black Sea before that date. On Wednesday, the Kremlin said it has not taken a final decision about whether to extend the Black Sea grain deal. On the other hand, Germany’s 2023 winter wheat harvest will fall some 7% on the year to an estimated 20.59 million metric tons. Demand is picking up after the Eid holidays in the Middle East and North Africa. Thus, front-month September milling wheat on Paris-based Euronext settled at 228.00 euros a tonne, up 1.75 euros. However, cheap offers of Russian and Romanian wheat depressed export prospects for western EU wheat, even with uncertainty about Ukrainian sales. Thus, the forecast from farmers’ association DVB, would mean only a reduced German wheat export surplus. About 2022/23 export season, soft wheat exports from the European Union in the 2022/23 season that ended on June 30 reached 31.1 million metric tons, up 12% from the previous year, European Commission data showed on Tuesday. EU 2022/23 barley exports totalled 6.4 million tons, against 7.12 million in 2021/22, while EU 2022/23 maize imports stood at 25.8 million tons, up from 16.42 million. European Union soybean imports in the 2022/23 season that ended on June 30 reached 13.02 million metric tons. That compared with 14.54 million tons in the previous 2021/22 season. EU rapeseed imports in 2022/23 reached 7.35 million tons, compared with 5.52 million in 2021/22. Soymeal imports 2022/23 totalled 15.77 million tons against 16.52 million the prior season, while palm oil imports stood at 3.99 million tons versus 4.92 million in 2020/21.
Ukraine’s grain exports for the new 2023/24 season stood at 276,000 metric tons as of July 5, Agriculture Ministry data showed on Wednesday. The volume included 191,000 tons of corn, 65,000 tons of wheat and 20,000 tons of barley. The ministry did not give an exact comparison for the same date a year ago but said that Ukraine had exported 163,000 tons of grain as of July 6, 2022. Exports for the entire 2022/23 season were almost 49 million tons, exceeding the previous season’s 48.4 million tons.
The Russian Grain Union has tipped 2023-24 grain production at 130-140Mt, down from around 158Mt in 2022-23, with exports (Jul/Jun) seen at around 55Mt (57Mt previous year). Meantime, AgriCensus, pegged Russia’s 2022-23 wheat exports at 44.7Mt based on port-line up data, 51pc higher than the previous year, including 9.1Mt exported to Turkey, 8.1Mt to Egypt and 2.7Mt to Iran.
China has ensured a stable wheat market while maintaining its wheat purchase level amid efforts to facilitate the summer harvest. As of June 30, enterprises across China’s major grain-producing regions have purchased about 25 billion kg of wheat, data from the National Food and Strategic Reserves Administration showed Monday. The purchase price for wheat in major grain-producing regions averaged 2.76 yuan (about 0.38 U.S. dollars) per kg, the administration said, expecting the price to remain stable in the future. Despite adverse meteorological conditions, China is making multi-pronged efforts to safeguard grain security. As a move in the direction, the Agricultural Development Bank of China has issued 110 billion yuan of credit to support the purchase of summer grain.
Aussie local market was still a little subdued yesterday. During the Australian session, however, Winnipeg canola screamed out of the blocks, quickly rallying C$20/t higher. It was an interesting move given the US markets were closed. StatsCan recently increased its canola area to 22.1 million acres, 3.2pc higher than 2022 which, when using a 40bu/ac yield produces the largest crop since 2019. However, Alberta canola conditions are rated at 43pc good/excellent (75pc previous year, 76pc five-year avg); it is a case of swings and roundabouts. Late in the day, WA 2023-24 canola bids advanced to A$770/t, the highest level since Feb. ASX wheat settled down $2/t to $386/t but without a trade going through. Track APW1 multigrade bids for new crop were $385/t in the west and $400/t in Pt Kembla. Local spot cash markets were softer, once again, without fanfare. Delivered Darling Downs wheat was nominally $410-415/t while Geelong/Melb delivered was quoted at $397/t.


Durum wheat
Algeria’s state grains agency OAIC is believed to have purchased durum wheat in an international tender that closed on Tuesday. The tonnage bought was unclear but initial estimates were around or above 200,000 metric tons. Initially estimated prices were at about $385 to $387 a metric ton c&f for larger Panamax shipments and about $390 to $400 a ton c&f for smaller handymax shipments. The grain was technically optional origin but durum from Mexico was a substantial part of the purchase. Some said the purchase also included Canadian durum. Shipment was sought in four periods: Aug. 1-15, Aug. 16-31, Sept. 1-15 and Sept. 16-30.


Energy markets
Energy markets saw oil prices climbing 2% with Brent crude futures settling $1.60 higher at $76.25 a barrel. Saudi Arabia on Monday said it would extend its voluntary output cut of 1 million barrels per day (bpd) to August while Russia and Algeria volunteered to lower their August output and export levels by 500,000 bpd and 20,000 bpd, respectively. If fully implemented, that would bring a combined reduction of 5.36 million bpd from August 2022, and possibly even more. The total cuts now stand at more than 5 million bpd, or 5% of global oil output. However, markets will wait to verify announced cuts. Also, concerns continue for high interest rates that will weigh on global demand. Business surveys have shown a slump in global factory activity because of sluggish demand in China and Europe, and U.S. manufacturing also fell further in June. This broader uncertainty is likely to overshadow OPEC+ efforts to tighten supply. On this morning, oil benchmark Brent fell, reversing some of yesterday gains. Brent indeed was down 46 cents, or 0.6%, at $75.79 a barrel by 07:04 GMT. U.S. West Texas Intermediate (WTI) crude futures were at $70.86 a barrel, up $1.07, or 1.5%, from Monday’s close, having traded through a U.S. holiday to mark Independence Day without a settlement. A private sector survey on Wednesday showed China’s services activity expanded at the slowest pace in five months in June, as weakening demand weighed on the post-pandemic recovery momentum. The market is also awaiting minutes from the June 13-14 meeting of the Federal Open Market Committee (FOMC) later on Wednesday for further clues on the U.S. central bank’s outlook. In this context, investors remained concerned about oil demand, therefore, they will be looking for demand cues from industry data on U.S. crude and product inventories from the American Petroleum Institute later on Wednesday and government data on Thursday, both delayed by a day due to the U.S. holiday. U.S. crude inventories were expected to fall by about 1.8 million barrels in the week to June 30, which would mark a third straight week of declines.
Ocean freight markets
The Baltic Exchange’s main sea freight index on Tuesday fell to its lowest level in nearly four weeks, pressured by a dip in the larger capesize and panamax vessel segments. The overall index, indeed, fell 24 points, or 2.3%, to 1,044 – its lowest level since June 8. Notably, the capesize index dipped 50 points, or 3%, to 1,601, declining for the seventh straight session. Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, decreased $413 to $13,279. The panamax index shed 26 points, or 2.6%, to a more than four-month trough at 988. Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, decreased $239 to $8,891. Among smaller vessels, the supramax index was unchanged at 747.
Equity markets
Asian markets sank, after Chinese industrial activity survey, showed Caixin’s purchasing managers’ index for services fell to 53.9 from May’s 57.1 on a 100-point scale on which numbers above 50 show activity increasing. It was the weakest reading this year. Growth in factory activity also slowed, and it is a problem as China is the biggest trading partner for all of its Asian neighbors. However, economic activity accelerated to 4.5% in the first three months of 2023 from last year’s 3%. China’s No. 2 leader, Premier Li Qiang, said last month growth was improving. He gave no details but expressed confidence China can hit this year’s official growth target of “about 5%.” Meantime, traders are uneasy about U.S.-Chinese tensions over technology trade after Beijing announced restrictions on exports of gallium and germanium. In this context, the Shanghai Composite Index fell 0.4% to 3,231.08 and the Hang Seng in Hong Kong sank 1.2% to 19,185.13. Tokyo’s Nikkei 225 lost 0.4% to 33,303.00 and the Kospi in Seoul retreated 0.4% to 2,585.16. Sydney’s S&P-ASX 200 shed 0.3% to 7,255.80. New Zealand and Southeast Asian markets declined.
Currency trading
The U.S. dollar drifted near the middle of its range of the past three weeks against major peers, with the dollar index down 0.1% to 102.99, after tracking between 103.75 and 102.75 since early June. Moves, however, were largely muted due yesterday holiday. Notably, the yen edged up 0.1% to 144.59 per dollar, just a touch below 145.07, which was its weakest in eight months as fears of official intervention took hold. The euro edged 0.2% higher to $1.0898, adding to its 0.34% overnight decline.

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

Author: Sandro F. Puglisi

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