Good morning, Farmer Family …
US farm markets rose on Friday and posted weekly gains following recent declines to multi-month lows, as traders added a weather risk premium to the markets ahead of the three-day holiday weekend.
Corn prices indeed rallied 2.24% reaching a one-month high.
Soybeans were 1% higher, with soymeal up 1.26%, and soybean oil closing 0.62% in the black.
Wheat prices also settled with gains across all three classes.
Chicago SRW wheat contract led the way with 1.94% gains.
KC HRW closed up by 0.15%, and MPLS spring wheat prices closed up 1.55%.
Looking at the U.S. Drought Monitor released on Thursday shows that the percentage of crop acres currently in some level of drought includeed:
• 26% of corn acres;
• 36% of cotton acres;
• 20% of soybean acres;
• 47% of wheat acres.
Notably, the U.S. Drought Monitor shows that nearly 100% of Kansas and Nebraska are experiencing moderate to severe drought, and the core of Kansas is in exceptional drought.
Portions of Illinois, Iowa, Oklahoma, South Dakota and Texas are also enduring drought conditions.
Little to no rain is projected for the Memorial Day holiday and through next week, aside from a few showers.
Below-normal rainfall is expected to continue across the Midwest, eastern Plains and Delta over the next 15 days, forecaster Maxar said.
The conditions will allow dryness to worsen and expand further, increasing stress on corn and soybeans, the firm said.
Stress from dryness will affect about 40% of the corn crop come early June, according to Commodity Weather Group.
Hopes that the Biden administration and Republicans in Congress will reach an agreement to raise the government’s debt ceiling helped support gains in commodity and equity markets.
For the week, corn prices were up 8.92%.
New crop december also joined the bull party, climbing 6.95%.
Soybeans clawed back some of their losses from the week prior, as July was up 2.3%.
New crop also had a nice rebound, moving 1.2% higher.
The products were mixed, as meal lost 1.69%, and bean oil was back up 3.28%.
The wheat complex also was mixed across the three exchanges.
Kansas City HRW was the weak spot, down 0.6%, while MPLS was up 1.74%, and Chicago was back up 1.82% since the prior Friday after holding at round number support of $6.
However, the 2023 growing season has a long way to go, and sufficient topsoil moisture was available through last week to support good emergence of both corn, soybean and wheat spring crops.
Crop Progress data from last Monday showed the US corn crop was 81% planted as of Sunday May 21.
That was 6% above the 5-year average.
Emergence was pegged at 52%, 7% above the normal pace.
The US soybean crop was tallied at 66% planted by 5/21 compared to the 52% average.
The crop was also 36% emerged, above the 24% 5-year average.
Spring wheat crop planting pace picked up a little in the week that ended on May 21, now just 9% below the average pace at 64% planted by 5/21.
Emergence was 32%, behind the 40% average.
The report showed the winter wheat crop at 61% headed, even with the pace.
Condition ratings were up 2% at 31% gd/ex.
Tomorrow, the U.S. Department of Agriculture is expected to issue a weekly update on corn and soybean planting progress and its first condition ratings of the season for the corn crop.
The government has projected supplies of both crops will rise sharply in the coming year due to forecasts for record harvests.
On Wednesday, the weekly EIA report showed ethanol production throttling back by 4,000 barrels per day in the week ending on May 19, totaling 983,000 barrels per day that week.
However, stocks slipped a massive 1.15 million barrels lower to 22.041 million.
That was the largest weekly draw in 27 months, with a bulk via the Gulf and implying a large export total.
Meantime, the weekly export sales data from USDA Thursday showed for corn the third net reduction in the last 4 weeks, as exporters cancelled a net 75,153 MT.
The main reason for the reduction has been cancellations by China, which has totaled 1.16 MMT in those 4 weeks.
New crop sales totaled just 52,099 MT. We are now just 84% of the new USDA forecast.
The normal 5-year average pace is to be 97% sold by this date.
As for soybean, the report indicated bean sales creeping back higher to 115,042 MT in the week that ended on May 18.
New crop bookings were light, at just 1,100 MT.
Commitments for old crop are 93% of USDA’s forecast total, compared to the 5-year average pace at 99%.
As for wheat, data indicated old crop bookings at a MY low net reduction of 45,083 MT.
New crop sales backed off of last week’s MY high to 245,136 MT.
Old crop export commitments are now at 18.985 MMT as of 5/11.
That is still 4% below a year ago and 90% of the USDA full year export projection, vs. the 106% average pace.
In this context, wheat basis ended the week mixed as marketing year 2022/23 approaches its May 31 end and buyers eye the 2023/24 harvest.
HRS basis increased in the Gulf and remained steady in the Pacific Northwest (PNW) and Great Lakes to encourage farmers to sell remaining stocks.
Meanwhile, HRW basis decreased in both export regions pressured by the upcoming new crop harvest with little demand to prop up basis levels.
Domestic demand still supports SRW basis, while SW prices firmed to encourage sales.
Recent business from routine PNW buyers also lent support.
As a result, as for May 25, 2023, FOB prices for US wheat No 2 Hard Red Winter (HRW) were at $361/mt, down $15/mt week on week.
US wheat No 2 Soft Red Winter (SRW) was valued at $250/mt, down $2/mt from prior week.
Northern Durum offers from the Great Lakes, for June 2023 delivery were at $10.07/bu ($370.00/mt, unch), unchanged.
As for corn, US corn 3YC (Gulf) was at $264/mt, up $15/mt.
As for soybean, US soybean 2Y (Gulf) quoted at $520/mt, down $4/mt.
USDA’s weekly Ethanol report showed cash ethanol prices ranged $2.28 to $2.43/gal regionally this week with prices mostly UNCH to 9 cents weaker.
Regional corn oil quotes were centered around 55 cents/lb and were mostly 1 to 2 cents weaker.
DDGS prices were also weaker, down from $5 to $35/ton through the week to ~$220/ton.
USDA reported the weekly cash average B100 price at $3.82/gal in MN – unchanged from last week.
After the sessions close, Friday CFTC’s weekly CoT report had managed money spec traders as net new sellers in the week that ended 5/23.
They extended their net short by 6k contracts to 98,027.
Commercial corn hedgers added 6k new longs and closed 9.6k shorts through the week.
As for soybean, the report had soybean specs exiting longs and adding shorts through the week that ended 5/23.
That dropped their net long position 19.8k to 4,147 contracts.
The commercial soybean hedgers were adding long hedges to reduce their net short to 79.3k contracts.
The managed money meal traders were shown at a 73,789 contract net long, down 6.5k contracts wk/wk.
Managed money firms were adding soy oil positions through the week, for a net 500 contract stronger net short of 36,877 contracts.
As for wheat, data had managed money at a 118,788 contract net short in SRW as of 5/23.
That was a 6k contract larger net short for the week.
In KC wheat, they added just 28 contracts to their net long position by Tuesday, now at 16,621 contracts.
CFTC reported managed money traders at a 6,402 contract net short in MPLS wheat.
That was a 1.6k contract stronger net short through the week.
On this morning, US markets are closed for the holiday, with trading set to resume with the Monday night electronic session.
From Canada, Agriculture and Agri-Food Canada revised down its 2023-24 canola production forecast by 0.1Mt, to 18.4Mt (18.2Mt previous year).
On the other hand, all-wheat production forecast was increased by 1.5Mt, to 35.8Mt (33.8Mt previous year) and the barley production forecast was cut by 0.5Mt, to 9.5Mt (10.0Mt).
Meantime, the Grain Statistics weekly report showed producers’ deliveries of common wheat at 194,3k mt in the week 42 of this shipping season.
That was up from 125,6k mt posted prior week.
Deliveries of durum wheat, in contrast, continued to be weaker at 20,1k mt, compared with 27,3k mt showed in prior week.
That is down also from the four-week average of 41,300 mt.
Canada exported 144,4k mt of common wheat in week 42.
That was down from 372,5k mt of a week earlier.
Durum wheat exports, in contrast were higher, moving up from 57,5k mt to 102.6k mt.
Total Commercial Stocks of common wheat stood at 2.007,6k mt.
That was up from 1.974.5k mt posted in week 41.
Total durum commercial stocks, in contrast, were weaker, moving down from 334,5k mt a week earlier, to 295,3k mt.
This volume is down 46.3% from one year ago and down 40.4% from the five-year average for this week.
But this report follows a string of solid weekly exports, averaging 131,750 mt during the past four weeks.
Cumulative exports for common wheat were at 16.125,5k mt.
That is compared 9.346,7k mt a year ago.
Durum cumulative exports reached 4.483,6k mt vs 2.118,9 a year ago.
In this context, as of May 26, the 1CWAD (Canadian durum wheat with 13,5% protein) average regional price was at C$402.07/t, down C$0.5/t.
The 1 CWRS (Canadian common wheat with 13,5% protein) average regional price was at C$379.18/t up C$8.77/t.
(USD/CAD = $1.3612 up from $1.3494 the prior week).
From South America, Brazilian consultancy Agroconsult raised its estimates for the country’s second corn crop production for the 2022/23 season, with a new tally of 102.39 MMT, against 97.2 posted last month.
CONAB reported that Brazil’s Safrinha corn crop was 0.2% harvested, with 13.6% mature.
Brazil’s safrinha crop accounts for around 75% of the country’s total corn production.
As for soybean, crop Consultant Michael Cordonnier maintained his Brazilian soybean crop estimate at 155Mt and corn at 125Mt.
Meantime, Brazil’s ANEC estimates May corn exports will total 387k MT, which is down from 571k MT in their prior forecast.
ANEC also reported Brazil’s May soymeal exports were on pace to reach 2.5 MMT for May.
The soybean export is estimated to be 15.9 MMT.
In Argentina, the Buenos Aires grains exchange said on Wednesday that intense rains in recent days in Argentina’s key agricultural farmland has improved expectations for the 2023/2024 wheat crop.
Notably, the total crop is estimated at 18 million tonnes, up from the 12.4 million tonnes harvested in the previous season.
However, the recent rainfall has also caused delays in the harvesting of soybeans in the current 2022/2023 harvesting season, estimated at just 21 million tonnes.
Soybean farmers have reaped 78% of the planted area so far.
For the 2022/2023 corn harvest, farmers have harvested nearly 27% of the planted area, with production estimated at 36 million tonnes.
In this context, as of May 25, price for Argentina wheat Grade 2 quality, delivered Up River was at US$376/t, unchanged from the prior week.
Price for Argentina feed corn (Up River) was at US$254/t, up $6/t w.o.w..
Price for Argentina feed barley (Up River) was at US$235/t, down $5/t.
Price for Argentina soybean (Up River) was at US$509/t, down $5/t.
Price for Brazilian feed corn (Paranagua) was at US$240/t, up $12/t.
Price for Brazilian soybean (Paranagua) was at US$468/t, up $3/t.
In Europe, grain markets rose, with wheat posting 2.58% weekly gains, as the Black Sea grain deal, is slow to get moving after extension.
Meanwhile, rapeseeds extended their gains, up 3.91% for the week, in the wake of palm oil higher.
The EU’s crop monitoring service on Monday raised its forecasts of this year’s EU soft wheat yield, citing a good crop outlook overall except in the drought-affected Iberian peninsula.
According to the European crop monitoring agency MARS, indeed, soft wheat yields in the EU this year are estimated at 6.01 t/ha, up 4% from last month’s estimate of 5.96 t/ha.
For barley, future yields are expected to be 4.89 t/ha compared to 4.92 estimated last month, down 3% from last year.
For rapeseed, future yields are expected to be 3.34 t/ha compared to 3.31 t/ha estimated last month, and up 8% compared to the 5-year average.
On this wake, the European Commission has pegged EU soft-wheat production at 131.5Mt, up from an April estimate for 130.2Mt.
That’s up 4.6pc y/y and 5.8pc above the five-year average.
Grain production prospects are improving in France and Romania, offsetting the drought in Spain.
Soft-wheat export forecast kept steady at 32Mt.
Barley crop estimate trimmed 0.2Mt to 52Mt, corn crop estimate cut 0.3Mt to 64.1Mt.
Similarly, the EU’s Copa-Cogeca estimates 2023 grain production at 277 MMT, up 4.6% yr/yr.
Their soft wheat outlook is expected to increase 2.8%.
On Tuesday, the European Commission showed that as of May 21, the EU would have exported 28 million tonnes of soft wheat against 24.86 million last year.
There is demand for old crop from Spain as the drought there continues.”
Port data in France showed a cargo of 8,000 tonnes of wheat was due to load at Rouen for shipment to Spain.
Barley exports, on the other hand, fell to 5.82 million tonnes against 6.82.
For corn, imports were up sharply at 23.99 million tonnes against 14.70 last year to date.
Rapeseed imports into the EU on May 21st stood at 6.94 million tonnes against 4.97 last year to date.
Soybean imports, in contrast, have reached 11.36 MMT, which is around 12% below last year’s pace so far.
EU soymeal imports are also trending lower year-over-year, reaching 14.09 million metric tons over the same period.
Meantime, the European Union agreed on Thursday to suspend restrictions on imports from Ukraine for a further year after warding off an import ban imposed by some EU nations amid farmer protests over low prices.
Ukrainian President Volodymyr Zelenskiy thanked the EU for the extension and pledged to work towards meeting the union’s standards required to secure membership of the 27-nation bloc.
The suspension of all duties, however, has led to complaints from farming groups.
Thus, five neighbouring countries – Hungary, Poland, Bulgaria, Romania and Slovakia – will bar domestic sales of certain grains from Ukraine, allowing only their transit for export elsewhere.
The European Parliament has already backed the tariff suspension proposal.
On Friday, data from farm office FranceAgriMer showed the conditions of French soft wheat were stable in the week to May 22, holding at its best level in at least a decade.
An estimated 93% of soft wheat was in good or excellent condition, (vs. 69pc previous year).
Durum wheat was seen at 86pc (compared 87pc previous week, 67pc previous year).
The good/excellent ratings for winter and spring barley were also unchanged from the prior week, at 90% ( vs 66pc previous year) and 95% (61%) respectively.
In a first rating for this year’s grain maize crop, FranceAgriMer estimated that 94% of the crop was in good or excellent condition against 90% a year earlier.
Farmers were nearing the end of maize planting, with 95% of the expected area drilled.
Planting progress, which was hampered by rainy, cool weather, remained behind an average level of the past five years at 97%.
Meantime, Germany’s grains harvest is now seen at 43.2Mt, up from an April estimate of 42.8mt, but slightly below 2022.
Notably, according to the country’s association of farm cooperatives, Germany’s 2023 wheat crop of all types will fall 0.9% on the year to 22.31 million tonnes (22.5Mt in 2022).
The association forecast Germany’s 2023 winter rapeseed crop will be about the same size as the crop last year at 4.28 million tonnes.
Barley is seen at 10.9Mt, (11.2Mt in 2022).
However, this compares to its April forecast of a German 2023 wheat crop of 22.15 million tonnes, and a winter rapeseed crop of 4.25 million tonnes.
As for rapeseed, as we said prices bounced back mainly in the wake of palm oil.
The market also found support from EU’s possible reaction over the recent months massive imports of biodiesel, which are destabilising our markets.
EU vegetable oil and protein meal industry association FEDIOL has released a statement saying “imports of biofuels, classified as waste based, for example identified as HVO (hydro-treated vegetable oil) or FAME (fatty acid methyl esters) are taking place at such scale, that it has led to important disturbances in the EU markets for rapeseed methyl ester, and as a consequence also in the rapeseed and rapeseed oil markets.
Over the last 5 months, prices for rapeseed oil have dropped significantly by over 30pc.
This will not only impact rapeseed farmers’ revenue, but also future planting decisions.
These trends cannot be explained by other market developments and are a signal that there is abnormal market behaviour.
The magnitude of biodiesel imports’ growth is such that it raises question as to the authenticity of their classification as originating from waste streams and that there is urgent need to investigate the legitimacy of these imports”.
According to the industrial association Fediol estimates, in April the processing volume of the main oilseeds (soybean, sunflower, and rapeseed) in the EU countries amounted to 3.33 mln tonnes, which is 0.04 mln tonnes lower compared to the previous month, but higher y-o-y (3.17 mln tonnes).
In particular, soybean processing last month totaled 1.23 mln tonnes, which is 4% higher month-on-month (1.19 mln tonnes), but 7% lower y-o-y (1.32 mln tonnes).
At the same time, the EU reduced the volume of rapeseed processing in April by 2% to 1.63 mln tonnes (+20% y-o-y).
As for sunflower seeds, in April, the processing amounted to 477 thsd tonnes (-8% m-o-m, -2% y-o-y).
In general, since the beginning of 2023, oilseeds processing in the EU has reached 13.16 mln tonnes (13 mln tonnes in January-April 2022), including soybeans – 4.66 mln tonnes, rapeseed – 6.55 mln tonnes, sunflower seeds – 1.96 mln tonnes.
From South Africa, South African farmers are expected to harvest 4.65% more maize in the 2022/2023 season compared with the previous season, the government’s Crop Estimates Committee (CEC) said on Thursday.
The CEC’s fourth summer crop forecast estimates the 2023 harvest at 16.19 million tonnes, up from the 15.47 million tonnes harvested last season.
The harvest is expected to consist of 8.54 million tonnes of white maize, used for human consumption, and 7.65 million tonnes of yellow maize, used mainly in animal feed, it said.
Meantime, South Africa hopes its new price edge over major global corn producers will help it secure a share of China’s huge grain market, a farmer’s union has said.
Africa’s top corn producer hopes to build on the recent export of 108,104 tonnes of yellow feed maize to China, its biggest export to the Asian country on record.
The recent export is small relative to South Africa’s annual average exports of about 3 million tonnes, but could be a significant foray into the world’s biggest corn market.
Data supplied by GrainSA shows South African corn has been cheaper than grain from the United States, as well as Brazil, Argentina and the European Union since 2020.
South Africa still has 515,162 tonnes of yellow maize exports planned for a range of markets until the beginning of July, GrainSA said.
So far, it has exported 3.6 million tonnes of the 2022/23 corn crop.
GrainSA said the country also recently signed a soybean export protocol with China and hopes to secure a market for the crop, the production of which reached a record 2.7 million tonnes in the 2022/23 season.
From Levant, Turkish Statistical Office reports 2023 wheat production is expected to increase by 3.8pc to 20.5Mt.
Barley production seen rising 1.2pc to 8.6Mt.
Meantime, Turkish President Recep Tayyip Erdogan, was re-elected yesterday, gaining 52.1pc of the vote, compared with 47.9pc for his challenger, Kemal Kilicdaroglu.
From the Black Sea basin, Ukraine accused Russia of cutting Pivdennyi port out of the Black Sea deal.
But Russia complained that it had been unable to export ammonia via a pipeline to Pivdennyi under the agreement.
The U.N. said on Friday that the Black Sea deal also provides for the exports of fertilizer, including ammonia, but “there have been no such exports so far.”
“Russia is ready without delay, in a matter of days, to launch the Togliatti-Odesa ammonia pipeline, while Kyiv has been stalling it for almost a year, imposing new conditions,” Russian foreign ministry spokeswoman Maria Zakharova said on Friday.
A Ukrainian government source had said that Kyiv would consider allowing Russian ammonia to transit its territory for export if the Black Sea grain deal was expanded to include more Ukrainian ports and a wider range of commodities.
Meantime, “according to information shared by the Ukrainian delegation with the parties at the JCC, there are 54 vessels waiting to move to Ukrainian ports. Out of these, 11 applications have been shared with the JCC for registration,” the U.N. said.
No new ships were registered on Thursday by the JCC, but two were agreed on Friday, the U.N. said, adding that there are currently 13 vessels loading in Ukrainian ports – six in Chornomorsk and seven in Odesa.
It also said that the average number of daily inbound and outbound inspections had dropped to 3.2 during May – the lowest level since operations began in August.
Russia signaled on Thursday that if demands to improve its grain and fertilizer exports are not met then it will not extend the deal beyond July 17.
From Ukraine, Ukrainian 2023 spring grain sowing was 97% complete at almost 5.3 million hectares on May 25, agriculture ministry data showed on Thursday.
The total sown area at May 25 included 261,900 hectares of spring wheat, 763,300 hectares of barley, 135,600 hectares of peas, 145,500 hectares of oats and 3.7 million hectares of corn.
The ministry said farmers had also sown 240,900 hectares of sugar beet, 4.62 million hectares of sunflowers and 1.6 million hectares of soy beans.
The ministry has said the overall spring grain sowing area could shrink to 5.5 million hectares in 2023 from 5.9 million in 2022.
Ukraine’s grain sowing area – for both winter and spring – could decrease by 1.4 million hectares to 10.2 million hectares this year while the area sown to oilseeds could rise, the ministry said last month.
In this context, SovEcon estimates Ukraine wheat production at 18.5Mt, up 0.4Mt from a previous estimate, due to strong April rains.
Corn crop estimate revised down 0.3Mt to 23.1Mt, on smaller plantings.
Grain exports in the 2023-24 season are expected to shrink y/y because of lower harvests and smaller reserves, with wheat seen at 10.5Mt (16Mt previous year) and corn seen at 19Mt (28.3Mt).
From Russia, the Russian government plans to introduce a new law that allows for the redistribution of unused grain quotas by exporters.
As of May 17, only 62% of export quotas have been utilized, with 16.0 MMT exported out of a possible 25.5 MMT.
Foreign companies, such as Viterra, Cargill, and Louis Dreyfus, had a particularly low fulfillment rate.
The unused quotas remain a concern, especially as the Russian wheat harvest is expected to begin earlier than normal and wheat stocks are predicted at record highs.
Simultaneously, the market is assessing the impact of foreign multinational companies ceasing origination in Russia beginning July 1.
Meantime, according to a decree published on an official government website on Saturday, Russia will raise its base price for calculating wheat, barley and maize export taxes.
The move should result in the duty itself decreasing.
The decree comes into force on June 1.
Notably, the new base price for calculating the wheat export tax is set at 17,000 roubles ($218.73) per tonne, the document showed. It was previously at 15,000 roubles a tonne.
The base price for calculating barley and maize export taxes will also rise by 2,000 roubles to 15,875 roubles per tonne.
From the Middle East, figures by the United States Department of Agriculture (USDA) show that wheat output in Iran is going to increase by 10% this year.
USDA figures cited in a Wednesday report by Iran’s official IRNA news agency showed that total wheat output in Iran could reach 14.5 million metric tons (mt) this year, up from 13.2 million mt reported in 2022.
The figures mean Iran will be the 12th largest wheat supplier in the world in 2023, said the USDA.
The USDA said Iran’s wheat imports will drop by 0.5 million mt to 4 million mt this year, adding that wheat inventories in the country will remain at levels seen at the end of 2022 which were reported to be 4.44 million mt.
The figures showed that Iran’s barley output is also expected to increase by 7% to 3.2 million mt in 2023 while imports will reach 2.3 million mt over the same period, up slightly from 2.2 million mt of imports reported last year.
From the Middle Kingdom, Refinitiv Commodities Research reported beneficial rainfall and temperatures in China’s key wheat producing areas in the north indicate that wheat yields will likely be record high, including in Hebei and Shandong provinces.
Vegetation densities extracted from satellite imagery also show good or excellent crop conditions.
With forecasts for favourable weather over the next two weeks, 2023-24 wheat production is seen fractionally higher than before, at 139.9Mt (137.7Mt previous year).
Meantime, China hopes the Black Sea grain deal can be implemented in a balanced and comprehensive manner, and wants to cooperate on global food security, foreign ministry spokesperson Mao Ning said on Friday.
From South East Asia, Malaysian palm oil prices ended higher for a third straight day on Friday to log weekly gains on stronger rival oil prices and production concerns over the impact of El Nino.
Notably, the benchmark palm oil contract FCPOc3 for August delivery on the Bursa Malaysia Derivatives Exchange gained 61 ringgit, or 1.75%, to 3,554 ringgit ($801.35) a tonne, its highest closing since May 15.
The contract has rose 2.1% for the week.
Prices have been underpinned by concerns over adverse weather conditions and as top buyers India and China, where palm oil inventories are low, look to make purchases at the current prices levels.
Crude palm oil production in Malaysia could drop between 1 million and 3 million tonnes next year due to the El Nino weather pattern, the Malaysian Palm Oil Board (MPOB) said on Friday.
However, Malaysia’s exports during May 1 to May 25 fell 0.7% from the same week in April, cargo surveyor Intertek Testing Services said on Friday, though another cargo surveyor, AmSpec Agri Malaysia, said exports rose 0.7%.
In India, according to the Indian farm ministry, forecasts predict a record wheat harvest of 112.7 MMT in 2023, despite abnormal rains in February and March.
Despite the record production, India is unlikely to lift the ban placed on wheat exports in May 2022.
From Australia, the local market was firmer to finish the week supported by offshore futures rallying and a weaker AUD.
ASX January 2024 pushed to $398/t, gaining $18/t for the week.
Everyone is watching the weather as the grower waits for production security and the trade looks for liquidity creating a bit of a standoff.
On the weather side, SA picked up some handy rainfall totals for the week with 10-50mm received across most cropping regions and Vic picked up 10-25mm.
There is more rainfall on the radar for most cropping regions with southern WA and NSW looking to pick up the best totals.
The 10-25mm forecast for parts of northwest NSW would be very welcome to get more crop in the ground after a dry autumn and the 10-15mm for other areas will keep things ticking along nicely if it eventuates.
On the international trade scene, Taiwan Flour Millers’ Association reportedly purchased an estimated 56,000 t US milling wheats, including 37,610t DNS (14.5pc), at $399.14/t fob, 11,720t HRW (12.5pc), at $334.00/t fob, and 6,670t SW, at $265.65/t fob.
As for outside markets …
In energy markets, oil prices ticked up on Friday as U.S. officials appeared close to striking a debt-ceiling deal, and as the market weighed conflicting messages on supply from Russia and Saudi Arabia ahead of the next OPEC+ policy meeting.
Notably, Brent crude settled 69 cents, or 0.9%, higher at $76.95 a barrel.
U.S. West Texas Intermediate closed up 84 cents, or 1.2%, at $72.67 a barrel.
On a weekly basis, both benchmarks posted a second week of gains with Brent climbing 1.7%, while WTI rose 1.6%.
Benchmarks had settled more than $2 per barrel lower on Thursday after Russian Deputy Prime Minister Alexander Novak played down the prospect of further OPEC+ production cuts at its meeting in Vienna on June 4.
Russia was leaning toward leaving oil production volumes unchanged because Moscow is content with current prices and output.
That contrasted with earlier hints of possible output cuts from Saudi Arabian Energy Minister.
Meanwhile, U.S. demand for gasoline is expected to remain strong with motorist group AAA predicting the May 27-29 Memorial Day holiday weekend will be the third-busiest for auto travel since 2000.
On the supply side, U.S. oil rigs fell five to 570 this week, according to a report from energy services firm Baker Hughes Co.
In May, the oil count fell by 21 rigs, which was the biggest monthly drop since June 2020.
However, slowing economic growth and sticky inflation in Europe has capped price gains, with Dutch Central Bank chief Klaas Knot saying the European Central Bank needs at least two more 25-basis-point interest rate hikes.
After the sessions close, the U.S. Commodity Futures Trading Commission (CFTC) showed money managers cut their net long U.S. crude futures and options positions in the week to May 23.
In ocean freight markets, the Baltic Exchange’s main sea freight index logged its worst weekly decline in more than four months on Friday, weighed down by declining rates across vessels.
The overall index, indeed, dropped 43 points, or 3.5%, to 1,172 points.
The main index was down 15.3%, its biggest weekly fall since Jan. 20.
Notably, the capesize index posted its second straight weekly dip, falling 75 points, or 4.3%, to 1,683 points.
The index declined about 20% this week.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, fell $621 to $13,956.
The panamax index lost 22 points, or 1.9% to 1,119 points, and was headed for its seventh straight weekly fall.
The index dropped 8.4% for the week.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, dropped $200 to $10,072.
Among smaller vessels, the supramax index was down 34 points, or 3.5%, at 946 points.
It was headed for its worst week since Jan. 13, dropping 12.3% for the week.
In equity markets, US stock indexes Friday closed moderately higher, as negotiators appeared to be moving closer to an agreement to raise the U.S. debt ceiling and cap federal spending for two years.
Although most lawmakers have left Washington D.C. and gone home for the long holiday weekend, negotiators have been asked to keep working until they reach a deal.
Stocks moved higher despite stronger-than-expected U.S. economic reports that pushed bond yields higher and bolstered the outlook for the Fed to keep raising interest rates.
Notably, U.S. Apr personal spending rose +0.8% m/m, stronger than expectations of +0.5% m/m.
Apr personal income rose +0.4% m/m, right on expectations.
The U.S. Apr PCE core deflator, the Fed’s preferred inflation gauge, rose +0.4% m/m and +4.7% y/y, stronger than expectations of +0.3% m/m and +4.6% y/y.
U.S. Apr capital goods orders nondefense ex-aircraft and parts, a proxy for capital spending, unexpectedly rose +1.4% m/m, stronger than expectations of a decline of -0.1% m/m and the biggest increase in 16 months.
The University of Michigan U.S. May consumer sentiment index was revised upward by +1.5 to 59.2, stronger than expectations of 58.0.
Thus, the 10-year T-note yield rose to a 2-1/2 month high of 3.857% and finished up +0.3 bp at 3.818%.
Movement for the two-year Treasury yield, which tends to track expectations for Fed action, was more forceful.
It jumped to 4.56% from 4.49% prior to the report.
However, on the bullish side for stocks, chip stocks rallied for a second day Friday, led by a +32% surge in Marvell Technology after it reported Q1 net revenue above consensus and projected fiscal 2024 artificial intelligence (AI) revenue to “a least double” from a year ago.
Also, Workday closed up more than +10% after reporting Q1 subscription revenue above consensus and raising the lower end of its 2024 subscription revenue estimate.
In addition, Ford Motor closed up more than +6% after announcing that it entered into a pact with Tesla that will allow Ford electric vehicle customers to access more than 12,000 Tesla Superchargers across the U.S. and Canada starting in spring 2024.
In this context, the S&P 500 rose, 54.17 points, or 1.3% to close at 4,205.45.
It notched a small gain for the week and is in the green as May nears its close.
The Dow Jones Industrial Average rose 328.69 points, or 1%, to 33,093.34.
The tech-heavy Nasdaq notched the biggest gains, rising 277.59 points, or 2.2%, to 12,975.69.
The index rose 2.5% for the week as artificial intelligence became a big focus for investors.
The S&P 500 rose 0.3% for the week, while the Dow fell 1.0%.
In currency trading, the dollar index fell by -0.04%, with the dollar retreating from a 2-1/4 month high.
A rally in stocks Friday curbed liquidity demand for the dollar.
Also, T-note yields fell back from their highest levels, which weighed on the dollar.
Notably, the EUR/USD rose by +0.04%, with the euro Friday recovering from a 2-1/4 month low and posting modest gains as weakness in the dollar sparked short covering in EUR/USD.
Also, hawkish comments from ECB Governing Council member Vujcic gave EUR/USD a boost when he said, “Inflation momentum in the Eurozone is still persistent, especially the core and food components.”
However, gains in the euro were contained after a gauge of economic sentiment in Italy fell to a 5-month low.
The Italy May economic sentiment index, indeed, fell -1.7 to a 5-month low of 108.7.
As for the USD/JPY it rose by +0.41%, with the yen moving lower for a third straight session and dropping to a 6-month low against the dollar.
Japanese price reports Friday were hawkish for BOJ policy and bullish for the yen.
Japan Apr PPI services prices eased to +1.6% y/y from +1.7% y/y in Mar but were stronger than expectations of +1.4% y/y.
Also, Japan’s Tokyo May CPI ex-fresh food and energy rose +3.9% y/y, the largest increase in 41 years.
Watching this week’s market …
US markets are closed on Monday in observation of Memorial Day.
They will open back up Monday night for the Tuesday session.
Due to the holiday the USDA Export Inspections and Crop Progress reports will be pushed back to Tuesday.
June begins on Thursday, with EIA releasing their weekly production and stocks report including ethanol.
That night will show the monthly domestic use reports via the Grain Crushings, Fats & Oils, and Cotton Systems reports.
Export Sales data will be published on Friday morning.
June live cattle options also expire on Friday.
That’s all, thank you.
We wish you a nice day and a good start to the week.
Author: Sandro F. Puglisi
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