US wheat prices continued to trade significantly higher Friday on tightening US stocks.
The Russian lower production potential and some weather woes in Europe have did post to the wheat the biggest weekly gains sice six years.
Soybeans trended modestly higher.
Corn prices in contrast ran up against a round of technical selling that led to losses of more than 1% by the close.
On macro markets, oil prices fell more than $1 a barrel this morning, after the OPEC+ group of producers overcame internal divisions and agreed to boost output, sparking some concerns about a crude surplus as COVID-19 infections continue to rise in many countries.
So, Brent crude was down $1.08, or 1.5%, at $72.51 a barrel by 02.20 GMT, after falling nearly 3% last week.
U.S. oil was down $1.01 cents, or 1.4%, at $70.80 a barrel, having declined almost 4% last week.
The group, which includes members of the Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia, agreed new production shares from May 2022.
The ongoing debate about inflation looks to bring no near-term resolution, but markets remain concerned about the increases to expense budgets that some companies are starting to factor in.
Comments from Bloomberg over the weekend indicated that some 7/8ths of earnings calls in the last month included some discussion of inflation.
Consequentially, on Wall St., the Dow dropped 299 points to 34,687 as investors returned their focus on inflation fears.
On a more positive note, US retail and food service sales increased 0.6% last month, with analysts expecting to see a drop of 0.4%.
Coming back on grains market, US Corn Belt weather is forecast hotter and drier.
A few showers are forecast for the eastern states but otherwise dry this week.
The persistence of dry weather over the north-west of the Corn Belt remains a support for corn and soybean prices.
The latter is also supported by renewed tension in soybean oil in the wake of the increase in Canola in Canada.
Likewise, no rain for the majority of the Canadian wheat belt, not that it matters much at this point for many of the crops are already past recovery, but the week is beginning with a new heatwave which move some concerns.
The Chicago market like Kansas City only follows Minneapolis’ bullish surge.
It is still the very strong degradation of spring wheat on both sides of the US-Canadian border that is fueling this upward spiral.
Meantime, a flash export sale of 134,000t of new crop SRW to China was reported in the US last Friday.
This atypical purchase of US SRW wheat by China reinforces the firmness of wheat in Chicago but, on the contrary, weighs slightly on corn, disappointed to be shunned by the Chinese buyers.
Tonight’s USDA US crop progress report will be the first update this year for spring wheat harvest progress.
Very little has been cut already but crops are reported to be burning up rapidly in some earlier planted areas and are looking at being harvest ready 2-3 weeks ahead of schedule.
Early yield reports generally have been dismal, as expected, and there are more reports of extremely low test weight in early cuttings.
The CFTC Commitment of Traders report on Friday, based on data of Tuesday 13 July, had managed money some 10,000 contracts shorter on Chicago wheat compared with previous week.
Note that the snapshot, taken on a Tuesday, occurred prior to the mid-week rally.
Likewise, corn and beans.
In this context, corn basis bids weakened across a handful of Midwestern locations last Friday, falling as much as 15 cents at an Iowa processor.
Soybean basis bids spilled 10 cents lower at a Nebraska processor while holding steady elsewhere across the central U.S.
From South America, despite some weather challenges, Brazilian farmers are expected to harvest more than 5 billion bushels of soybeans this season, rewriting record books and outpacing last year’s harvest by 9%.
Argentina has passed new laws reducing the blend of biodiesel in their fuels from 10pc prior, to 5pc now, and potentially lower in the future.
On European market, last week will be sadly remembered for its unprecedented amounts of precipitation in some European places.
The sun is finally back and is accompanied by a very sharp rise in temperatures.
Harvesting can thus gradually resume depending on the plots’ wiping capacity.
If the earliest areas are already advancing in wheat and finishing rapeseed, the later areas or those most affected by bad weather will not start winter barley until the next few days.
The delay of the harvest in Western Europe and of course all the worries accompanying the recent bad weather have largely supported prices throughout the past week.
However, the return of prices above 210 € / t on Euronext mainly occurs in the upward wake of the three wheat futures contracts listed in the United States.
In fact, heavy rains in France have certanly hurted the country’s soft wheat quality ratings, according to farm office FranceAgriMer.
However, through July 12, 76% of the crop is still rated in good-to-excellent condition, even if that’s a three-point drop from the prior week.
The pace of harvest is extremely slow, with progress of just 4% (compared with 42% a year ago).
Meantime, French farm office FranceAgriMer also reports that 89% of the country’s corn crop is in good-to-excellent condition through July 12, unchanged from a week ago.
Despite the persistence of high heat and the lack of water over western Canada which are also supporting the prices of Canola in Winnipeg, Euronext rapeseed remained on the defensive with a close on Friday evening under the strong resistance of € 550 / t on August 2020.
European corn is progressing despite the recent generally favorable rains, with the November 2021 deadline back above 200 € / t due to concerns related to the heat which is currently gripping the Black Sea basin.
To note African Swine Fever is making headlines again, as small-scale culling occurring in Germany.
From Black Sea basin, the heat is currently reigns.
That is conducive to rapid progress in harvesting sites.
In barley first of all, Ukraine and Russia show an advance of 25% and 10% respectively.
The average yield obtained in Ukraine since the beginning of the harvest appears well beyond historical references at this stage of development.
This is displayed at 4.3 t / ha although it has never exceeded 3.5 t / ha for an equivalent cut area.
Ukraine, as expecting a total grain harvest of about 76 million metric tons, which would be a year-over-year increase of nearly 17%, if realized.
Russian producers are also registering good yields, in the upper range of the results obtained in previous years.
In wheat, the situation is much more heterogeneous between the two countries, with Ukraine recording record yields at the start of the harvest and Russia, whose average yields continue to disappoint when already nearly a sixth of the acreage there been harvested.
In this context, according to the APK-Inform, Ukrainian milling wheat export bid prices rose by $3 to $6 a tonne over the past week.
In fact, the 2021 harvest’s soft milling wheat with 12.5% protein was traded at $225 to $232 Black Sea free on board (FOB).
Feed wheat prices were flat at $217-$224 FOB.
Corn bid export prices fell by $3 over the past week to $263-$270 a tonne FOB.
Bid prices for Ukrainian new-crop barley rose $5 to $200-$215 a tonne FOB Black Sea.
Ukrainian government expecting exports to rise to 56 million tonnes in the 2021/22 season thanks to a bigger harvest.
In fact Ukraine has said it can harvest about 30 million tonnes of wheat this year, up from 25 million tonnes in 2020.
Meantime, Ukraine’s grain export has reached 1 million tonnes so far the new 2021/22 July-June season, 108,000 tonnes less than a year earlier, agriculture ministry data showed on Monday.
That included 292,000 tonnes of wheat, 207,000 tonnes of barley and 498,000 tonnes of corn, the data showed.
Also Russian wheat export prices rose last week on the back of sharply higher prices in Chicago and expectations of a less impressive crop in Russia.
In fact, according to IKAR, Russian wheat with 12.5% protein loading from Black Sea ports for supply in August was $241 a tonne free on board (FOB) at the end of last week, up $3 from the previous week.
Sovecon, on its part, recorded a $5 rise to $239 per tonne of wheat.
Barley was unchanged at $212, it said.
Other Russian data provided by Sovecon and IKAR showed the following prices:
– Domestic 3rd class wheat – European part of Russia excludes delivery – 12,400 roubles/t -125 rbls, ($167.59) (Sovecon);
Sunflower seeds 38,000 rbls/t +200 rbls (Sovecon);
Domestic sunflower oil 91,650 rbls/t unchanged (Sovecon);
Export $1,205/t +$85 sunflower oil (Sovecon);
Export sunflower oil $1,210/t +$80 (IKAR);
Soybeans 47,800 rbls/t unchanged (Sovecon);
White sugar – Russia’s south – $548.4/t -$6 (IKAR).
($1 = 73.9920 roubles).
From the Middle Kingdom, China’s state stockpiler Sinograin auctioned off nearly 500,000 bushels of corn originally imported from the United States, although that was only 7% of the total offered. Sinograin has offered a flurry of similar sales in recent weeks to ease rising prices.
From Australia, weather maps have the storm for WA expanding further inland, although pulling back slightly some forecasts for coastal areas.
Rainfall in the approx. 20 mm range is forecast for most of the wheat belt.
Rains received so far have been generally light but widespread and gentle.
We wish you a good market week.
