Rainy forecasts for the Midwest, along with worries over a new Supreme Court biofuels ruling, pushed most US grain prices into the red last Friday.
Corn and soybean prices eroded 3% lower.
Winter wheat contracts also suffered, dropping between 1% and 2.5%.
Spring wheat, in contrast, bucked the overall trend gaining about 1,2%, as dry forecasts for the Northern Plains and declining quality ratings spurred another round of technical buying.
On macro markets, energy futures were mixed with crude oil climbed nearly 1% higher to $74 per barrel, while gasoline and diesel each dropped about 0.75% lower.
Investors are still wary of rising inflation but expressed some support that the Federal Reserve’s assertion is correct that inflation is largely expected to be “transitory”, thus, on Wall St., the S&P 500 reached new record highs and the Dow climbed another 237 points higher reaching at 34,433.
The U.S. Dollar firmed slightly, meantime.
Coming back on grains market, corn prices fell after a Supreme Court ruling seen as unfavorable to the biofuels industry was announced.
The U.S. Supreme Court, indeed, issued a 6-3 ruling that will favors small oil refineries that were seeking exemptions to the renewable fuel standard’s biofuel blending requirements.
The decision is widely seen as a major setback for ethanol and biodiesel producers.
Also soybean prices fell sharply after the Supreme Court’s oil refinery exemption decision.
Spillover weakness from corn provided additional headwinds.
Wheat prices were mixed with winter wheat contracts eroded on a round of technical selling largely spurred by spillover weakness from corn and soybeans, while spring wheat contracts firmed again on weather worries and concerns over crop quality.
However, some beneficial rains arrived, as we know rain and sun makes grain and there is plenty in the forecast this week.
Indeed, what started as a weekend of chances now extends through the end of this week.
Mid-last week relief was welcome for corn, beans, milo and sesame.
The wetter weather however has combines scurrying to get finished as the wheat harvest progresses further north faster than usual with hot temps covering Kansas at the same time as Texas and Oklahoma that are now near 70 percent complete.
Kansas is only about 30 percent complete.
The additional precip and cooler temps reaching only the low-to-mid 80’s will be ideal for tasseling corn and other summer crops getting started.
Average trade guesses for corn acreage versus USDA’s last March update call for an increase of 2.6 million acres and a 1.36 million acre increase for soybeans.
Winter, spring wheat and cotton acres are all expected to be down slightly while sorghum acres called higher, which is no surprise given attractive basis bids above corn futures.
June 1st grain stocks in the US are expected to be significantly lower versus last year, but no news, this was the impetus behind the rally in grains.
No matter where the acre number for corn and soybeans ends up, it will likely be the trigger for returning volatility coinciding with the end of the month.
Meantime, USDA announced a large private export sale of 112,200 MT of soymeal to Mexico, last Friday.
That is to be split 75/25 between 21/22 and 22/23 delivery.
In this context, corn basis bids were mostly steady to weak, tumbling as much as 35 cents lower at an Indiana ethanol plant.
But another Indiana ethanol facility raised bids by 5 cents, and an Illinois river terminal firmed 4 cents higher, bucking the overall trend.
Soybean basis bids were mostly steady across the central U.S., but did take a 10-cent spill at an Indiana processor.
Meantime, the weekly CoT report showed corn specs reduced exposure on the week ending 6/22, closing out 15k longs and 6k shorts.
On net, CFTC said managed money was 243,465 contracts long.
Commercials also reduced positions, closing 7.6% of their positions over the week.
That left commercials 31,156 contracts less net short at 536,530.
Managed money was seen at 80,304 contracts net long in soybeans as of 6/22.
That was a 27,188 contract reduction to their CFTC net position driven by long liquidation.
Commercials covered shorts, and added longs for a net 51,439 contract reduced short of 156,685 contracts.
Managed money expanded their net long in soymeal through the week, through net new buying.
Soybean oil spec traders sold back longs for a net long reduction of 15,074 contracts leaving them 52,152 net long.
The weekly CoT report showed CBT wheat speculative traders flipped back to net long after short covering through the week ending 6/22. The 11,411 contract flip left managed money 3,015 contracts net long.
In HRW, funds covered longs further reducing their net long to 14,852 contracts.
CFTC showed managed money at 10,867 contracts net long as of June 22, after a week of long liquidation.
Note that grain bids will roll to the September futures contract by Tuesday if not already and likely apply the carry to the basis, which means the basis will become more negative given the September futures are higher.
From South America, Agroconsult estimated Brazil’s 2nd crop at 65.3 MMT, which was down 900k MT from their May forecast citing a 20 bag/HA yield loss yr/yr.
On European market, grain prices slipped again into negative territory, to fresh multiweek lows, carried away by the pullback of US corn.
September milling wheat on Paris-based Euronext settled down 3.00 euros, or 1.5%, at 201.50 euros ($240.47) a tonne.
Slipping below Thursday’s four-week low of 203.50 euros, the front-month contract earlier set its weakest level since April 13 at 200.75 euros.
The more active December futures ended down 2.75 euros at 202.50 euros, after touching a four-week low at 201.50 euros.
The new-crop contracts were being underpinned by chart support around 200-202 euros.
Rapeseed, all the same stood out by resuming its bullish march.
Demand from the biodiesel industry, stocks at a low level and very reduced production prospects for 2021 are indeed contributing to the tension on this market.
Favourable winter wheat harvest prospects across Europe and the Black Sea region have also weighed, of course.
Competition in export markets could be fierce with improving production prospects for the world’s leading wheat exporter, Russia.
News of a shipment of Russian wheat to Algeria and talk of recent Australian wheat sales to China has raised doubts about French prospects in its top two export markets.
Growing conditions in France are still encouraging despite a slight deterioration recorded week over week, meantime.
According to French farm office FranceAgriMer estimates through June 21, that soft wheat is considered “good to very good” at 79%, against 56% last year and 70% on average, even if two-point decline from a week ago.
“Good to very good” corn still accounts for 89% of crops, compared to 83% last year and 78% on average.
Durum wheat ratings fell three points week-over-week, with 67% rated in good-to-excellent condition, but are above than last year and the five years average.
Weather forecasts showing further showers into this week were raising some concern about French crops, although drier, warmer weather expected at the start of July was seen as reassuring for later-developing crops in the north.
Meantime, the European Union awarded nearly 2.3 million bushels of wheat imports for July at reduced or duty-free rates.
Quotas have rarely been used so far this year.
No EU corn import quotas were awarded for July.
From Black sea basin, Ukraine’s Ag Ministry reported 21/22 corn planting was complete, with 5.352m HA, up from 4.927 million hectares last season.
Spring wheat planting had finished for the 21/22 season with 176,020 HA, up from 165,500 HA last year.
For all wheat, Ukraine sees production at 29.2 MMT, up 300k from their prior forecast.
Ukraine’s corn exports for the 2020/21 marketing year have reached 889.7 million bushels.
Total grain exports are down around 22% this season.
Ukrainian wheat exports for the 2020/21 marketing year have reached 602.6 million bushels.
Ukraine has also exported 192.9 million bushels of barley this season.
Russia’s wheat tax has increased to US$41.30/t.
The increase was entirely expected as the formula takes it directly from the published price indexes.
From the Middle Kingdome, as known China’s communist leadership is sensitivity of food inflation and considers it a national security threat.
When China buys, the market moves.
In recent years, however, China has been stepping up efforts to control the public domain.
On this wake, past week was closed also Hong Kong’s Pro-Democracy Apply Daily Newspaper.
Consequentially is becoming always harder take data from China.
This problem has also extended to reports on crop conditions and demand needs.
In add, it was reported past week that a Chinese grain analyst was jailed with another under house arrest for reporting on crop shortages and import needs.
As the fear of arrest slows the flow of accurate analysis from within China to outside markets, surprises to the market could become more acute.
From Australia, widespread rain across much of the Australian grainbelt and softer offshore markets have seen feedgrain prices weaken in the past week.
However, continued demand from export coupled with steady buying from domestic consumers has provided support.
The nearby spread between wheat and barley in southern Queensland has narrowed further this week to around $15 per tonne, compared with more than $40/t in southern markets.
Trade sources across eastern Australia say trucks have become easier to get in the past week, following months of painfully tight logistics.
Nearby New-crop
Barley Downs $310 up $2 $280 down $10 Jan
Wheat Downs $325 down $8 $305 down $12 Jan
Sorghum Downs $312 down $5 $275 Mar-Apr steady
Barley Melbourne $285 down $3 $280 down $5 Jan
Wheat Melbourne $328 down $6 $325 down $8 Jan
On the international trade scenario, Bangladesh’s cabinet committee on economic affairs, approved a proposal in this regard to bring in the cereal grain from the Russian Federation under government to government initiative.
Of it, 2 lakh tonnes of wheat will be procured following the direct purchase method and the rest 3 lakh tonnes through open tender.
For faster import, the cabinet committee also reduced the tender submission time to 15 days from 45 days since the publication of the tender in newspapers.
The cabinet committee on public purchase approved 14 proposals worth Tk 1,605.51 crore.
Different ministries and divisions placed the proposals at the 23rd meeting of the cabinet committee on public purchase in a meeting led by Finance Minister AHM Mustafa Kamal.
Of the Tk 1,605 crore, the government will give around Tk 1,552 crore while the rest around Tk 53 crore will come from the World Bank as loan.
Egypt’s General Authority for Supply Commodities (GASC) set a tender on Saturday to buy an unspecified amount of wheat from global suppliers for shipment from Aug. 25-Sept. 5 for payment at sight.
GASC Vice Chairman Ahmed Youssef said the authority was seeking to buy cargoes of soft and/or milling wheat from the United States, Canada, Australia, France, Germany, Poland, Argentina, Russia, Kazakhstan, Ukraine, Romania, Bulgaria, Hungary, Paraguay and Serbia.
Tenders should reach GASC by noon (1000 GMT) of this morning.
The results should come out after 3:30 p.m. (1330 GMT).
Youssef also said that suppliers may present shipment offers for their own cargoes at the tender per an amendment to the tender book announced last week.
The change came after GASC cancelled its latest wheat tender on June 15, a move many traders attributed to high shipping prices and low number of vessels presented at the tender.
For the current tender, GASC is seeking to buy 55,000- to 60,000-tonne cargoes.
