GRAIN MARKET VIEW
LAST WEEK MARKET COMMENT – July 31, 2023
Good morning, Farmer Family …
Main Markets
USA
US farm markets were hit by an end-of-week selloff, on Friday.
Corn prices fell another 2.30%.
Soybeans tumbled 2.95%.
The rest of the soy complex also tracked lower, with soymeal dropping 2%, while soyoil was down 1.47%.
Wheat losses were variable, as Chicago SRW fell 1.19%, Kansas City HRW dropped 1.18%, and Minneapolis spirng wheat eased 0.91%.
Chicago grains and soybean prices fell to their lowest prices in more than a week, on hopes that U.S. weather will improve for crops.
USDA reported 59% of the corn crop was experiencing drought conditions via the Drought Monitor; a 4ppt increase from the week earlier.
For soybean, the USDA reported 53% of soybean crops were in drought conditions.
That was a 3% point increase from last week.
Thus, operators were expecting the USDA, may lower weekly condition ratings for corn and soybean crops because of recent heat.
However, some wet weather across much of the central U.S. this past weekend, saw some areas gathering another 0.75”.
The 8-to-14-day outlook predicts some above-normal precipitation for parts of the Northern and Central Plains between August 4 and August 10, with cooler-than-normal conditions likely for a big portion of the Midwest and Plains during this time.
August, is the key period of development for U.S. soybean crops.
And as all eyes were on the weathery, thus traders largely ignored three more soybeans flash sales announced by USDA.
Private exporters indeed reported having sold 325,000 metric tons of soybeans for delivery to China during the 2023/2024 marketing year;
171,460 metric tons of soybeans for delivery to Mexico during the 2023/2024 marketing year, and 413,000 metric tons of soybeans for delivery to unknown destinations during the 2023/2024 marketing year.
However, end week technical selling pressured prices leaving into the red.
The trade also was trying to believe Russia may ease its attacks on Ukraine’s grain facilities.
Thus, commodity funds continued their sales, with 9,500 lots of corn, 7,500 lots of soybeans and 4,500 lots of corn sold.
However, a senior Ukrainian official on Friday accused Russia of threatening civilian vessels in the Black Sea.
Also, the Russian military said it shot down a Ukrainian missile over the southern Russian city of Taganrog.
And that, limited the decline.
For the week, corn prices rallied sharply on Monday, and then spent the rest of the week giving it back.
September contract indeed closed down 1.14%.
Soybeans has some big moves during the week, with August getting as high as $15.80 ¾ before melting down and posting a net loss of 0.95%.
Bean oil dragged the market, down 2.6%.
Meal, in contarst, was the only star light, posting 2.8% gains on the week.
The wheat complex was a bit disjointed.
Kansas City HRW indeed closed down 0.47%, while Chicago SRW managed to hang 0.97% gain, and Minneapolis spring wheat was up just over 1% for the week.
On Monday, 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 Wednesday, the EIA reported ethanol output averaged 1.094m barrels per day for the week that ended 7/21.
That was a 24k bpd increase for the week.
however, also stocks were up by 62k barrels to 23.228 million.
On Thursday, the weekly Export Sales report indicated corn exports improving on the week to 314,000 MT in the week that ended 7/21.
Export commitments are 96% of the full year forecast vs. the 5-year average of 102%.
As for soybeans, the report showed net soybean sales of 198,000 MT.
Commitments for old crop are now 98% of the USDA forecast, compared to the 5-year average pace at 103%.
Accumulated shipments are 50.159 MMT, down 6% from last year but 3.1% larger than the five year average.
As for wheat, data showed 23/24 wheat bookings at another weak number of 233,000 MT during the week that ended on July 21.
New crop export commitments are at 3.346 MMT.
That’s 43% below a year ago and 28% of the USDA full year export projection.
It is still early but things are getting off to a very slow start.
The Wheat Quality Council’s Spring Wheat and Durum Tour concluded Thursday, July 27, in Fargo, North Dakota.
After three days of scouting fields across the state and some into neighboring Minnesota, the total weighted average yield for spring wheat was estimated at 47.4 bushels per acre (bpa), while durum finished at 43.9 bpa.
Last year, the yield estimates for the tour were 49.1 bpa for spring wheat and 39.0 bpa for durum.
In this context, corn basis bids were steady to weak across the central U.S. after falling 2 to 15 cents lower across four Midwestern locations.
Soybean basis bids were steady to mixed after moving as much as 10 cents higher at an Illinois processor and as much as 20 cents lower at an Ohio river terminal.
As for wheat, basis ended the week mixed.
HRS basis was up in the Gulf and the Pacific Northwest (PNW), hitting a floor after several weeks of decline.
PNW HRS basis levels hit their lowest level since 2007.
HRW was steady in the Gulf and up in the PNW, boosted by a change in protein premium for the PNW tributary.
SRW basis was down, pressured by above-average production and a lack of nearby demand.
SW prices decreased, and harvest continues to pick up speed in the PNW.
As a result, as of July 27, 2023, FOB prices for US wheat No 2 Hard Red Winter (HRW) were at $355/mt, down $3/mt week on week.
US wheat No 2 Soft Red Winter (SRW) was valued at $275/mt, down $3/mt from prior week.
Northern Durum offers from the Great Lakes, for August 2023 delivery were at $10.89/bu ($400.00/mt, unchanged), unch.
As for corn, US corn 3YC (Gulf) was at $241/mt, down $1/mt.
As for soybean, US soybean 2Y (Gulf) quoted at $598/mt, up $14/mt.
USDA’s weekly Ethanol Report showed the cash market was mostly a nickel weaker through the week from $2.30 to $2.50/gal regionally.
DDGS were quoted from $190 to $220/ton during the week and were mixed from -$15 to +$30 regionally.
The Cash corn oil market was mostly 4 to 10 cents stronger for the week mostly near 68-70 cents/lb.
USDA quoted the B100 cash price at $5.73 in MN and $5.72 in IL for the week.
After the Friday sessions close, for corn, Weekly CFTC data showed managed money funds flipped back to net long on a 73,529 contract swing.
The funds closed 48.7k shorts and added 24.8k longs during the week that ended 7/25.
That left them 26,603 contracts net long.
Commercial hedgers expanded their net short by 48k contracts to 221.7k after net new selling and long liquidation.
For soybeans, the report showed net new buying and short covering from the soybean spec traders during the week that ended 7/28.
That extended their net long by 24,925 contracts to 120,739.
Commercial soybean hedgers added 42k new shorts (+11% of short OI) through the week taking their net short to 187,370 contracts.
The funds were 11k contracts more net long in soymeal to 70k on net new buying.
Soy oil spec traders were shown at 54,190 contracts net long after 9k new longs were added.
For wheat, the report indicated managed money spec traders reducing their net short in Chicago wheat by 14,086 during the week that ended 7/28.
That lifted their net short to a 38 week low of 40,332 contracts.
In KC wheat, the spec traders were shown as net new buyers and extended their net long 10,495 contracts to 23,145.
The CoT report had managed money funds at an 8,966 contract net long for HRS, up by 2,379 contracts for the week via short covering.
On this morning, Chicago corn slid for a fifth consecutive session, while soybeans dropped to a two-week low.
Expectations of milder weather in the U.S. Midwest reduced concerns over supplies.
Wheat slid almost 2%, but was on track for a second month of gains after worries over Black Sea supplies.
Notably, the most-active corn contract on the Chicago Board of Trade (CBOT) was down 2.1% at $5.19 a bushel, as of 04:07 GMT, and soybeans gave up 1.8% to $13.57-1/2 a bushel, after declining to their lowest since July 14 at $13.57 a bushel.
Wheat fell 1.9% to $6.90-3/4 a bushel.
In July, corn has risen around 5%, soybeans are up 1% and wheat climbed 6%.
Canada
The July 21 Outlook for Principal Field Crops published by Agriculture and Agri-Food Canada decreased the wheat yield forecast by 1% to 3.34 MT/hectare due to hot, dry weather throughout much of the wheat-growing regions, particularly in Saskatchewan and Alberta.
The Saskatchewan Crop Report noted that crop yield potential has decreased in many parts of the province due to the dry heat.
It said producers were hoping for more rain before harvest to finish seed filling.
Cereal crops that cannot be harvested due to dry conditions and grasshopper damage are being salvaged for livestock feed to support neighbouring livestock producers.
There were several storms throughout the province this past week.
Some resulted in rainfall amounts up to 37 to 40 mm which will give crops some reprieve from the heat stress and encourage seed fill.
Spring wheat is rated only 35pc good to excellent, down from 50pc two weeks ago.
Durum wheat is rated only 16% good to excellent, down from 26pc a week ago.
Canola is at 35pc good to excellent.
Nonetheless, total production is forecast to increase 4% on the year to 35.3 MMT due to a higher seeded area though the production estimate is down 1% from the June estimates.
Meantime, as of week 51 the Canadian Grain Commission in its Grain Statistics Weekly showed producers’ deliveries of common wheat were at 323,5k mt.
That was down from 389,8k mt posted prior week.
Deliveries of durum wheat also were weaker at 36,6k mt, compared with 42,3k mt showed in prior week.
Canada exported 250,0k mt of common wheat in week 51.
That was down from 408,3k mt of a week earlier.
Durum wheat exports, were substantially steady moving from 43.3k mt to 43.1k mt.
Total Commercial Stocks of common wheat stood at 1.991,1k mt, slightly down from 2.064,1k mt in the previous week.
Total durum commercial stocks in contrast also were weaker, moving down from 309,6k mt a week earlier, to 298,6k mt.
Cumulative exports for common wheat were at 19.162,2k mt.
That is compared 11.098,8k mt a year ago.
Durum cumulative exports reached 5.011,1k mt vs 2.551,9 a year ago.
Meantime, as of July 28, the 1CWAD (Canadian durum wheat with 13,5% protein) average regional price was at C$476.05/t, up C$36.38/t.
Canadian durum wheat price –CA St Lawrence (CWAD) was offered at US$460/t FOB, up $80/t from a week earlier.
The 1 CWRS (Canadian common wheat with 13,5% protein) average regional price was at 395,46/t, up C$0.60/t.
(USD/CAD = $1.3250 up from $1.3223 the prior week).
South America
Brazilian grain exporters association Anec has raised its forecast for soybean exports in July to 9.1 million tons from 8.8 million tons last week, the association said in a report.
The new figure represents an increase of 2.1 million tons from 7 million tons of July 2022 shipments.
Anec pegged meal exports at 2.53 MMT, down a bit from 2.58 MMT.
Brazilian Anec estimated Jul corn exports at 6.43 MMT, down from 6.8 MMT;
Recent rains in Argentina’s agricultural region have allowed soil moisture to recover and 72.1% of the planned wheat harvest has now been planted under good and optimal conditions, the Buenos Aires grains exchange said on Thursday.
The exchange in its weekly report said that 28% of the fields at the national level have begun the “tillering stage,” when secondary shoots called tillers are produced.
It added that 96.4% of the 6 million hectares estimated for the 2023/24 cycle have already been planted.
Farmers meanwhile have harvested 68.4% of the area planted for Argentina’s 2022/23 cycle’s corn crop.
This should yield an estimated 34 million metric tons, the exchange said.
In this context, as of July 27, price for Argentina wheat Grade 2 quality, delivered Up River was at US$324/t, down $18/t from the prior week.
Price for Argentina feed corn (Up River) was at US$243/t, up $12/t w.o.w..
Price for Argentina feed barley (Up River) was at US$235/t, up $10/t.
Price for Argentina soybean (Up River) was at US$568/t, up $12/t.
Price for Brazilian feed corn (Paranagua) was at US$224/t, down $5/t.
Price for Brazilian soybean (Paranagua) was at US$549/t, up $22/t.
Europe
In Europe wheat prices closed near the same level of the previous Friday, erasing all weekly gains, as concerns over Black Sea supplies were tempered by improved supply prospects in other parts of the world and low demand.
Front-month September milling wheat on Paris-based Euronext indeed closed 1.2% lower at 248.50 euros ($274.00) a metric ton.
The European market was also pressured by a fall in Chicago where traders said the rally earlier in the week on escalations in the Russia-Ukraine war had pushed the market into technically overbought territory.
Import demand remains low in the current uncertain market.
There have been no new wheat tenders past week from the big Middle East and North African importers, with only feed grains in demand.
Weekly data on European Union exports and imports of cereal and oilseed products have not been published due to ongoing technical issues, the European Commission said on Tuesday in a message posted on its website.
Traders also were assessing a statement from Russian President Vladimir Putin on Thursday to African leaders that he would gift them tens of thousands of tons of grain to help them overcome the end of the safe shipping channel for Ukrainian exports.
However, there were new reports on Friday that African nations at the meeting in Russia were calling for Ukraine’s safe shipping channel to be reopened.
Russia has the big supplies and the capacity to ship and give free gifts of large volumes of wheat to Africa.
The question is whether Russia has made the political decision to follow through by making large deliveries to Africa at low prices.
Meantime, as for harvests, the European Commission continues to reduce its 2023 production estimates for the EU27 for all products:
Soft wheat is now seen at 126.4 Mt vs. 128.9 Mt estimated last month;
Barley 48.7 Mt vs. 49.7 Mt estimated last month;
Corn 63.00 Mt against 63.7 Mt estimated last month;
Rapeseed 19.4 Mt vs. 19.9 Mt estimated last month
Sunflower 10.6 Mt vs. 10.8 Mt estimated last month.
The latest EU MARS update notes that owing to prolonged dry conditions in western, central and northern Europe, as well as in eastern growing areas of Romania, coupled with above normal temperatures in some areas, 2023-24 yield outlooks for spring barley, durum and sunflowerseed have been adversely impacted.
In this context, the 2023-24 common wheat yield is estimated at 5.8t/ha, down 2pc from June, but similar to the 5-year avg. Winter barley unchanged at 5.9t/ha (2pc above avg) and spring barley at 3.6t/ha (-3pc from June, 14pc below avg).
Maize at 7.5 t/ha (-1pc from June, 1pc above avg), rapeseed at 3.2 t/ha (-3pc from June but 3pc above avg) and sunflowerseed at 2.1t/ha (-4pc from June and 5pc below average).
On this wake, French farm office FranceAgriMer trimmed its quality ratings once again for the country’s current soft wheat crop, from 80% in good-to-excellent condition in the prior week down to 78% through July 24.
This season’s harvest has reached 83% completion over the same period, versus 59% a week ago.
However, France’s soft wheat crop is expected to rise by nearly 4pc from last year helped by June showers ahead of harvesting, according to the farm ministry.
The ministry forecast the crop at 35Mt compared with 33.69Mt last year.
Agritel pegged French 2023 soft wheat crop at 34.8 Mt.
On the geopolitical side, according to the EU Agriculture Commissioner, the European Union should consider using its funds to support the cost of transiting Ukrainian grain through its member states.
Meantime, German agriculture minister criticised the 5 countries for proposing curbs despite taking €100mn from EU as compensation for lost income.
“It’s not acceptable that states receive funds from Brussels as a form of mitigation and still close their borders”.
South Africa
South African farmers are expected to harvest 5.7% more maize in the 2022/2023 season compared with the previous season, the government’s Crop Estimates Committee (CEC) said on Wednesday.
The CEC’s latest summer crop forecast estimates the 2023 harvest at 16.354 million tonnes, up from the 15.470 million tonnes harvested last season.
The harvest is expected to consist of 8.638 million tonnes of white maize, used for human consumption, and 7.716 million tonnes of yellow maize, used mainly in animal feed.
Turkey
According to the USDA attaché in Istanbul, the wheat and barley harvest continues toward conclusion in Turkey, with a surprisingly better performance than expected after generous spring rains following a historic winter drought.
Wheat production is revised higher at 18.5 million metric tons (MMT), and barley production is forecast at 7.8 MMT in Marketing Year (MY) 2023/24.
The first corn crop planting s finished with total corn production forecast at 8 MMT.
Turkey imported record grain amounts in MY2022/23.
Turkey became the biggest buyer of Russian grain in 2022/23.
Ukraine
Russian airstrikes at the Danube River port of Reni destroyed some grain warehouses and left the port inoperable.
With the Black Sea Grain Initiative voided, the Danube River ports are an essential avenue for grain exports from Ukraine.
Past airstrikes also damaged infrastructure at the Black Sea ports of Odesa and Chornomorsk.
In the aftermath of the attacks, NATO officials said they will increase surveillance in the Black Sea Region.
Meantime, Ukrainian farmers have so far harvested more than 11 million tons of the 2023 grain harvest, the agriculture ministry said on Friday.
The ministry said 11.2 million tons of grain from the new harvest had been threshed so far.
The largest quantity of grain has been harvested in the southern region of Odesa, it said.
The agriculture ministry said the harvest so far included 2,881,300 tons of barley, 8,063,100 tons of wheat and 280,100 tons of peas.
Farmers in the Ternopil, Zaporizhzhia, Kyiv and Vinnytsia regions have finished harvesting peas, the ministry added.
Meantime, according to the State Statistics Service, in 2023/24 MY, as of July 26, Ukraine exported 1.905 mln tonnes of grains and pulses, reported the press service of the Ministry of Agrarian Policy of Ukraine.
In particular, Ukraine shipped to foreign markets:
– wheat – 649 thsd tonnes (325 thsd tonnes as of July 25, 2022);
– barley – 238 thsd tonnes (31 thsd tonnes);
– rye – 0.4 thsd tonnes (0)
– corn – 1.014 mln tonnes (941 thsd tonnes).
As of July 26, the total export of Ukrainian flour reached 10.9 thsd tonnes compared to 4.9 thsd tonnes last year, including 7.9 (3) thsd tonnes of wheat flour.
Last year, as of July 29, Ukraine grain exports totaled 1.405 mln tonnes.
However, 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 “It should be noted logistics cost via these routes will be significantly higher than for exports via Ukraine’s deep-water ports.”
“This is not a complete replacement for the grain corridor activity, the logistics costs will be more to deliver the commodities to markets in Southeast Asia and China”.
Russia
Russian President Vladimir Putin told a summit with African leaders in St Petersburg on Thursday that Russia is able to replace Ukrainian grain exports to Africa, and that Moscow would be ready to start supplying grain for free to six African countries within three to four months.
Notably, he said Moscow would move towards a fairer system of resource distribution and that Russia was prepared to provide 50,000 tonnes of grain each to Burkina Faso, Zimbabwe, Mali, Somalia, the Central African Republic and Eritrea, implying up to 300K in total.
To put that into perspective, Sovecon estimates Russian July wheat exports at 4.3 MMT, and August at 5MMT+.
According to the president of the Russian Grain Union 2023-24 grains exports could reach up to 60Mt.
Russia nearly tripled its wheat exports to Africa in the first half of this year to 9 million tonnes, Agriculture Minister Dmitry Patrushev said on Friday, according to the Interfax news agency.
Overall agricultural exports to Africa nearly doubled to $3.3 billion in the same period, he said.
Total African grain imports are roughly estimated at 80-90 MMT.
Meantime, Russia’s wheat production potential is on the rise, according to the country’s Sovecon consultancy, which slightly raised its estimates to 87.09 MMT.
However, Sovecon cut its barley crop forecast to 18.6 million tons from 19.9 million tons.
In other news, Russia has introduced a temporary ban on rice export until 31/12/2023.
The ban will not apply to deliveries to the EAEU countries, Abkhazia and South Ossetia.
Russia will get buyers of its farm exports to pay in roubles rather than dollars as a way to circumvent western sanctions, Deputy Prime Minister Viktoria Abramchenko said on Friday.
Australia
Aussie grain prices were firmed past week, the exception being the northern barley market, where transshipments into Brisbane and priced earlier have allowed that market to sink by $5 per tonne.
The severity of dry conditions in northern New South Wales has growers and traders increasingly nervous about the impact of a dry spring on volumes available to the northern feed market, where more livestock are going on to feed as pastures dry off.
In contrast, crop conditions in southern NSW, and across Victoria and South Australia are generally very good.
Meantime, local markets rounded out the week relatively steady given AGIC was on last week.
The trade and growers will be looking to kick things off again this week.
With international values remaining volatile, there still is a domestic consumptive back-end program to chip away at and exports continue to roll on for the August period.
On the weather side, WA has another 5-15mm on the 8-day rainfall forecast, with the heavier totals again expected in the south.
This will top up the rainfall received over the last week which saw 5-25mm mostly in the southeast.
SA and western Vic can expect 5-15mm and eastern Vic has its weekly 15-25mm on the radar again.
Southern and central NSW have 5-10mm on the forecast which falls back to below 5mm further north and northwest which extends over the border into southern Qld.
The ongoing dry conditions in northern NSW are starting to take a toll, especially for crops west of the Newell.
Auctions
Corn
Leading South Korean animal feed maker Nonghyup Feed Inc. (NOFI) bought an estimated 68,000 metric tons of animal feed corn in an international tender for up to 138,000 metric tonnes on Friday.
The corn was expected to be sourced from either South America or South Africa.
It was bought in one consignment with arrival in South Korea around Dec. 1 at a premium of 128.00 U.S. cents a bushel c&f over the Chicago December 2023 corn contract CZ3. The seller was believed to be trading house Cofco.
No purchase was reported of a second corn consignment of up to 69,000 metric tons also sought by NOFI for arrival in South Korea around Dec. 7.
If sourced from South America, shipment of the consignment purchased was sought between Oct. 3-Oct. 22 or from South Africa between Oct. 13-Nov. 1.
Milling wheat
The Taiwan Flour Millers Association reportedly purchased an estimated 108,000t milling wheat from the US for Sep/Oct shipment from PNW ports, including DNS (14.5pc min. protein content) at $379.41-$387.29 c&f, HRW (12.5pc) at $366.56-$371.22 c&f and Soft White Wheat (8.5pc-10.0pc protein range) at $318.76-$333.01 c&f.
Milling wheat
Algeria’s state grains agency OAIC has issued an international tender to buy soft milling wheat to be sourced from optional origins.
The tender sought a nominal 50,000 metric tons but Algeria often buys considerably more in its tenders than the nominal volume sought.
The deadline for submission of price offers in the tender is also Monday, July 31, with offers having to remain valid until Tuesday, Aug. 1.
The wheat is sought for shipment in two periods from the main supply regions including Europe: Oct. 1-15 and Oct. 16-31.
If sourced from South America or Australia, shipment is one month earlier.
Macroeconomics
Energy markets
Oil prices rose on Friday and notched a fifth straight week of gains.
Brent crude indeed settled 75 cents higher to $84.99 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 49 cents to $80.58 a barrel.
Both benchmarks fell by as much as $1 briefly earlier in the session, as investors took profits after WTI rose above $80 per barrel.
However, bolstered by supply cuts from the OPEC+ alliance announced earlier this month, both oil benchmarks gained nearly 5% for the week.
The benchmarks are on track to gain over 13% for the month.
Risk appetite in wider financial markets has been fueled by growing expectations that central banks such as the U.S. Federal Reserve and European Central Bank are nearing the end of policy tightening campaigns, boosting the outlook for global growth and energy demand.
Bullish demand expectations were boosted after U.S. second quarter gross domestic product grew at a forecast-beating 2.4%.
Meanwhile, policymakers in China have pledged to step up stimulus measures, after the world’s second-largest economy grew at a frail pace in the second quarter.
On the supply side, U.S. oil rigs fell by one to 529 this week, their lowest since March 2022, energy services firm Baker Hughes said on Friday.
The data is an indication of future supply.
On this morning, oil prices edged lower, but were hovering near three-month highs and were set to post their biggest monthly gains in more than a year on expectations that Saudi Arabia would extend voluntary output cuts into September and tighten global supply.
Brent crude futures indeed were down 30 cents to $84.69 a barrel by 06:32 GMT, while U.S. West Texas Intermediate crude was at $80.36 a barrel, down 22 cents.
The September Brent contract will expire on Monday.
The more active October contract was at $84.16 a barrel, down 25 cents.
Both are on track to close July with their biggest monthly gains since January 2022.
Ocean freight markets
The Baltic Exchange’s main sea freight index rose on Friday and logged its best week in five, helped mostly by a rebound in the capesize segment.
The overall index, indeed, edged up 13 points to 1,110.
It posted a weekly gain of 13.5%.
Notably, the capesize index rose 29 points, or 1.6%, to 1,830.
The index rose 27% for the week, its best in five.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, increased by $243 to $15,180.
The panamax index gained 20 points, or 2.1%, to 975, a peak since July 19.
The index gained about 5.5% for the week.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, increased $180 to $8,774.
Among smaller vessels, the supramax index fell by 7 points to 726.
Equity markets
US stocks indexes closed moderately higher, after key measures of U.S. inflation cooled, bolstering optimism the economy can avoid a recession and that the Federal Reserve can achieve a soft landing.
U.S. Jun personal spending rose +0.5% m/m, stronger than expectations of +0.4% m/m.
Jun personal income rose +0.3% m/m, weaker than expectations of +0.5% m/m.
The U.S. Jun PCE core deflator, the Fed’s preferred gauge of inflation, eased to +4.1% y/y from +4.6% y/y in May, better than expectations of +4.2% y/y and the slowest pace of increase in 1-3/4 years.
The U.S. Q2 employment cost index rose +1.0% (q/q annualized), slower than expectations of +1.1% and the smallest pace of increase in 2 years.
The University of Michigan U.S. Jul consumer sentiment was revised lower to 71.6 from the initially reported 72.6.
In this context, the markets are discounting the odds at 22% for a +25 bp rate hike at the September 20 FOMC meeting.
Thus, the 10-year T-note yield fell from a 2-1/2 week high of 4.038% and finished down -3.3 bp at 3.965%, lifting megacap growth and technology stocks sharply higher.
And strength in technology stocks boosted the overall market, with Intel jumping more than +6%.
All three major U.S. indexes indeed ended the week with gains, also thanks a slew of Big Tech earnings.
As a result, the Dow Jones Industrial Average rose 176.37 points, or 0.5%, to 35,459.09, the S&P 500 gained 44.76 points, or 0.99%, to 4,582.17 and the Nasdaq Composite added 266.55 points, or 1.9%, to 14,316.66.
For the week, the Nasdaq climbed 2.02%, while the S&P rose 1.01%, and the Dow gained 0.66%.
The gains gave the S&P 500 its highest close since April 4, 2022.
On this morning, shares were mostly higher in Asia.
Sentiment also has been boosted by revived hopes for more stimulus from Beijing for the sluggish Chinese economy.
Thus, the Hang Seng in Hong Kong rose 1.5% to 20,208.78 while the Shanghai Composite index advanced 0.6% to 3,296.58.
Tokyo’s Nikkei 225 index was up 1.1% at 33,133.39.
In Seoul, the Kospi climbed 0.7% to 2,626.86.
Australia’s S&P/ASX 200 edged 0.1% lower, to 7,399.00 and the SET in Bangkok was up 0.6%.
The Sensex in India was little changed.
Currency trading
The dollar index fell by -0.14%, with the dollar falling back from a 2-1/2 week high, after weaker-than-expected U.S. inflation news knocked T-note yields lower.
Also, strength in the yen weighed on the dollar, as the yen initially climbed to a 1-1/2 week high after the BOJ tweaked its yield curve control program and raised the upper limit of its 10-year JGB yield target to 1.0% from 0.5%.
Also, stronger-than-expected Japanese inflation news was hawkish for BOJ policy and supportive for the yen after Tokyo Jul CPI rose more than expected.
However, the yen retreated on dovish comments from BOJ Governor Ueda, who said Friday’s move by the BOJ to adjust its yield curve control was not a step toward normalization of BOJ policy and that there is a “long way” before the BOJ raises negative interest rates.
Thus, the USD/JPY rose by +1.07% at the end of the session.
As for the EUR/USD it rose by +0.46%, with the euro recovering from a 3-week low, on hawkish comments from ECB Governing Council member and Bundesbank President Nagel, who said, “Core inflation is stubborn, so our monetary policy needs to be even more stubborn.”
Eurozone Jul economic confidence fell -0.8 to a 9-month low of 94.5, weaker than expectations of 95.0.
German Q2 GDP was unchanged q/q, weaker than expectations of +0.1% q/q.
German Jul CPI (EU harmonized) eased to +6.5% y/y from +6.8% y/y in Jun, better than expectations of +6.6% y/y.
France Q2 GDP rose +0.5% q/q, stronger than expectations of +0.1% q/q.
On this morning, the U.S. dollar rose to 141.87 Japanese yen from Friday’s 141.01 yen. The euro slipped to $1.1012 from $1.1019.
Watching this week’s market …
The markets will wrap up July on Monday and then we’re into August.
Monday have a normal report release schedule, with the weekly Export Inspections and Crop Progress reports.
We will see June’s monthly domestic use data from USDA on Tuesday, via the Grain Crushing, Fats & Oils, and Cotton Systems reports.
The weekly EIA report for ethanol production and stocks is due on Wednesday.
The weekly Export Sales report comes out on Thursday.
