Last week ended somewhat volatile on US farm market.
Indeed, front month corn futures prices were 1,36% higher.
New crop futures were up by less, only gaining 1,21%.
Five per cent firmer soybean meal led a rally in oilseeds markets lefting soybean prices 1,86% higher at the bell.
After trading with double digit gains to new level highs, the wheat markets cooled off a bit even if ended mostly firmer, registering moves less than 1pc.
Infact, CBT SRW was up 0,55%.
KC HRW futures ended the day 0,60% higher.
Spring wheat futures closed fractionally higher for March delivery, but into the red for nearby December contracts, around 0,31% down.
On macro markets, oil prices fell on Friday, wiping out gains from the previous session, on worries that the U.S. Federal Reserve will accelerate plans to boost interest rates to tame inflation.
Thus, Brent crude futures fell 70 cents, or 0.8%, to settle at $82.17 a barrel.
U.S. West Texas Intermediate (WTI) crude fell 80 cents, or 1%, to settle at $80.79 a barrel.
On a weekly basis, Brent fell 0.7%, while WTI declined 0.6%.
Crude oil prices continued to fell also on this morning on expectations of increasing supply, while higher energy costs and rising COVID-19 cases are also seen weighing on demand.
Thus, Brent crude futures fell 63 cents, or 0.8%, to $81.54 a barrel, as of 07:31 GMT.
U.S. West Texas Intermediate (WTI) crude lost 55 cents, or 0.7%, to $80.24 a barrel.
Oil markets have dropped for the last three weeks, hit by a strengthening dollar and speculation that President Joe Biden’s administration might release oil from the U.S. Strategic Petroleum Reserve to cool prices.
On freight market, the Baltic Dry Index (BDI), an assessment of the average cost to ship raw materials such as grains, coal, and iron ore, increased 3% on the week to end at 2,807.
On equities markets, global equity markets rallied on Friday, with European shares hitting new highs on strong earnings, while the dollar eased but posted its biggest weekly gain since late August.
Thus, MSCI’s all-country world index closed up 0.64%, while the broad STOXX Europe 600 index rose 0.30% to a record closing high.
France’s CAC40 index and Germany’s DAX index also ended at record closing highs.
On Wall Street, the Dow Jones Industrial Average rose 0.50%, the S&P 500 added 0.72% and the Nasdaq Composite advanced 1.00%.
For the week, on the other hand, the three major indices were mixed, albeit mostly higher.
Indeed, the S&P 500 was up +33.58 points or 0.72%, the Dow Jones was down -316.15 or 0.87%, the Nasdaq Composite was up +156.68 points or 1%.
The U.S. Dollar Index increased from last week’s 94.302 to close at 95.128.
Meantime, Asian shares edged cautiously higher on this morning as U.S. stock futures made early gains, though investors were wary of bearish surprises in a batch of Chinese economic data due out later.
Annual growth in retail sales, industrial output and urban investment are all expected to slow further in October partly due to pandemic restrictions and strains in the housing market.
Economists at CBA argued there was a chance the People’s Bank of China would cut bank reserve requirements (RRR) this week to support activity.
Thus, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.1% on this morning.
Japan’s Nikkei gained 0.7%, while the Kospi in South Korea surged 1% to 2,999.52.
Hong Kong’s Hang Seng index edged 0.1% higher to 25,307.34, while the Shanghai Composite index slipped 0.2% to 3,552.74.
In Australia, the S&P/ASX 200 added 0.3% to 7,470.10.
Coming back on grains market, wheat is driving the agricultural futures markets, fundamentals supporting the buying and, every day it seems, another global end user sniffing around for tonnage.
But as soybean meal showed on Friday night, demand is strong in other commodities as well.
Amid increased chatter about the tightness of Argentine meal, US soybean meal export sales were particularly strong.
This fuelled Friday’s sharply higher US meal basis.
Price rises were compounded by harvest delays caused by rain and snow in the US.
Indeed, winter is about to make its entrance in the Upper Midwest and Eastern Great Lakes, according to NOAA’s short-range forecasts.
Two separate winter storm systems hit the region between Saturday and Sunday, dropping up to a quarter inch of precipitation in the region.
Wind and a cold front have accompanied the system.
There were between one and three inches of snow accumulation in the region, with up to an inch of rain dousing the Eastern Corn Belt.
Heavy rain and mountain snow culminate today over the Pacific Northwest before tapering off tonight.
A rapidly intensifying low pressure system will bring high winds across the northern Rockies today and through the northern Plains on Tuesday.
Areas of rain/snow over the Northeast will gradually taper off as low pressure system exits New England.
The latest round of heavy precipitation across northwestern Washington state will reach peak intensity today as multiple frontal waves push onshore and consolidate into a major low pressure system centered over British Columbia.
Deep mild air ahead of the system will keep much of the precipitation as heavy rain even up into the mountainous terrains, with only the highest peaks seeing heavy snow.
A strong cold front will then sweep across the Pacific Northwest later today through tonight as the low pressure system intensifies.
Cold air rushing in behind the front will change the heavy rain quickly to heavy snow across the higher elevations along with high winds.
The system will likely reach peak intensity tonight over Alberta Canada and then slowly weakens as it tracks across the Canadian prairies through Wednesday morning.
A widespread high wind event is anticipated for the northern Rockies then spreading east through the northern Plains to the upper Midwest for the next couple of days.
Only modest snow amounts are forecast for the northern Rockies with this system followed by little precipitation across the northern Plains given an apparent lack of available moisture.
High temperatures will rise steeply across the High Plains well into the 70s for the next couple of afternoons, which are between 25-30 degrees above average for this time of the year.
In contrast, colder than normal temperatures will surge into the Pacific Northwest.
Meanwhile, an Alberta clipper will begin to depart the Northeast today.
Areas of rain/snow associated with this system over the Great Lakes to New England will slowly taper off through Tuesday.
Another weaker clipper system will produce light rain/snow across the northern Plains to the Midwest through tonight before dissipating.
Temperatures will be colder than normal across the East today in the wake of the Alberta clipper, with morning lows dropping to near freezing as far south as the interior Southeast.
However, a steady warm up is anticipated as the very mild air across the mid-section of the country heads progressively towards the eastern U.S. through midweek.
Meantime, the tail of the US corn and bean harvest has been plagued by delays which have helped keep domestic basis big, mainly from the ethanol producer, despite a lacklustre export program.
Indeed, export sales data released last Friday showed 1.067 MMT of corn was booked through the week of 11/04.
That was 13% below last week but 9% above sales from the same week last year.
Corn exports were 718k MT during the week, which brought the MYTD total to 6.61 MMT.
That remains 13% behind last year’s export pace while the 1.263 bbu of total commitments is still 6% behind 2020/21.
As for soybean, USDA announced a private export sale of 256,930 MT of soybeans to unknown destinations on Friday.
The weekly report showed soybeans export sales through the week that ended 11/04 were 1.289 MMT.
The week’s shipments were a record (not included gov’t shutdown compiled reporting) at 3.702 MMT (136 million bushels, the equivalent of more than 2000 barges!).
China was the week’s top destination with 2.34 MMT of the total.
Accumulated soybean exports were back to within 18% of last year’s pace, at 14.28 MMT, with 1.223 billion bushels of MYTD commitments.
As for wheat, the weekly FAS Export Sales report showed 285,915 MT of wheat were booked through the week that ended 11/04.
That was 29% under last week’s sale and 5% below the same week last year.
The trade was looking for between 200,000 and 500,000 MT going in. Weekly shipments were reported at 269,975 MT of wheat.
That was a 4-week high but still 24% under the same week last year.
Accumulated wheat shipments through the first 23 weeks are 21% behind last season at 8.96 MMT (329.35 mbu).
On the other hand, the Daily Ethanol report from USDA last Friday showed the week’s average corn oil price was down to between 59.83 cents/lb and 61.55 cents.
Last week’s averages were all above 62.79 cents.
DDGS prices were firmer during the week ending 11/12, with NOLA FOB prices up to $240/ton and the PNW at $295/ton.
That compares to $236 and $280 last week.
USDA’s Daily Biofuels update saw the national average cash price for B100 biodiesel at $5.41/gallon, compared to last week’s average price of $5.59.
The CME Synthetic Soy Crush spread was weaker on the day, down to $2.11/bu.
That is still a favorable margin on the December spread, but well off the high set a few days ago.
Ahead of today’s NOPA crush report, analysts expect NOPA members processed 181.945 mbu of soybeans in October.
The full range of estimates is 176 to 187 mbu.
Soybean oil stocks on hand as of the end of October are estimated to come in at 1.724 billion lbs.
In this context, the funds were net buyers Friday for 12,500 lots of corn, 16,000 lots of soybeans and 3,500 lots of wheat.
Meantime, cash corn prices firmed at end user locations across the Midwest, led by widened basis offerings at ethanol plants.
Corn harvest is rapidly coming to a close and buyers are trying to incentivize producers to sell directly to cash markets instead of storing grain for later sales.
Dealers expect that if farmers opt to store grain, they are not likely to pull it out of the bins to sell until after New Year’s – at the earliest.
Cash bids for soymeal rose at truck and rail terminals destined for the South.
Processors continue to compete with exporters for available bushels.
Export Sales report suggesting that cash prices offered by processors will need to continue to rise to pull more bushels away from the export market and into domestic production.
Cash prices rose on steady soymeal and export demand, as processors attempt to convince growers to bring freshly harvested supplies to market instead of leaving it in storage.
Expectations for increasing crush volumes, as evidenced by pre-NOPA report estimates, also lent support to the soy complex in Friday’s trading session.
Basis offerings for hard red winter wheat in the Southern Plains were largely unchanged.
An Oklahoma grain originator reported slow farmer sales after weekly export data reported a week-over-week decrease in hard red winter wheat exports.
From South America, Brazil’s CONAB forecasted the 2021/22 corn crop at 116.7 MMT in their November estimate.
That was a 0.34% boost from the October figure, but below the 18 MMT in USDA’s WASDE.
Rosario’s Grains Exchange estimated Argentina corn production between 55-56 MMT, citing considerable rainfall projections.
USDA has Argentina pegged at 54.5 MMT.
Corn planting in Argentina was 42% complete.
As for soybean, Brazil’s CONAB estimated soybean output at 140.8 MMT in their November update.
That was 0.89% above their prior figure, but below USDA’s 144 MMT projection.
The Rosario Grains Exchange reported soybean planting at 17% of the forecasted area, citing the lowest Argentine acreage total for beans in 15 years – at ~16.18m HA.
On European market, according to the French farm office FranceAgriMer, farmers had harvested 83% of the country’s corn area by Nov. 8.
That is up compared 73% a week earlier.
However, harvest work continued to lag the pace 97% achieved last year.
As for winter grains sowing, farmers had drilled 87% of the expected soft wheat area by Nov. 8, against 80% the previous week and 86% a year ago.
Durum wheat sowing, meantime, was lagging last year’s pace, with only 38% of the expected area drilled, compared with 50% a year ago.
As for winter barley, 94% of the area had been sown, compared with 90% a week earlier and 93% a year ago.
The first rating of emerged winter barley plants, have seen 99% of crops were in good or excellent condition, up from 94% a year ago.
Meantime, Euronext ended the week on a nice positive note, with in particular a rapeseed contract which confirmed its good performance above 700 € / t!
The oil market remains extremely tight and the resumption of Malaysian palm exports to Asia is providing additional support.
The soy complex also drove oilseeds higher after the announcement of still strong US international sales last week.
The wheat market for its part was pulled up by the Russian announcement of a further increase of $ 7.20 / t in its export tax on wheat, to $ 77.70 / t.
Thus, on Euronext, wheat prices could come back to test the psychological threshold of € 300 / t on the December deadline.
Note that today the December options expire.
Corn, for its part, made clear progress thanks in particular to the delay in harvesting sites linked to the rain, but also to drying difficulties among storage organizations.
In addition to the fundamentals, there is geopolitics with tensions not only with Belarus, but also with Russia, which is concentrating troops at the gates of Ukraine.
Meantime, the strength of the dollar is an element of competitiveness for European origins limiting gains.
From the Black Sea basin, winter is coming with a drop in temperatures expected this week.
This could upset the last seedlings already damaged by the water deficit this fall.
Winter wheat planting has all but finished up in Ukraine, with the country’s agricultural ministry reporting 94% of the crop sown by November 11.
But dry weather in the region this fall has led to smaller acreages planted and could limit corn sowings in 2022.
Top wheat—producing regions Zaporizhzhia and Odessa reportedly did not finish winter wheat planting activities due the soil moisture shortfalls.
Meantime, grain loadings in Ukrainian ports accelerated rapidly last week, boosted by the arrival of new harvests and very strong demand from the Middle Empire.
Thus, corn prices are also rising in Ukraine, especially for distant deliveries.
On the other hand, Russia’s Ag Ministry reported the next week’s export tax rate at $77.10/MT, compared to $69.9/MT for this week.
Russian export tax increases have spooked the sellers, so the global consumer is searching for depth.
Consequently, wheat prices continued to rise also on the risk of seeing Russia quickly impose new restrictive measures on exports, in particular through quotas.
From the Middle Kingdom, corn prices in China are once again rising this fall.
A soggy harvest campaign slowed combining rates, eroding crop quality and yields along the way.
Rising energy prices have also propped up high corn prices on China’s Dalian Exchange, as corn futures prices have risen 9% over the past month.
In add, amid rising prices, farmers are holding on to grain in hopes of capturing the upward price potential.
From Australia, another week passed watching weather maps and radar images, as growers across the east coast and in SA get back on the paddocks.
We are starting, what looks set to be another stop-start week.
Current weather forecast models are predicting more rain across the country this week.
However, from some time the market has conviced that Argentina and Australia have to do the heavy lifting, while tonnage prospects have pencilled in there is still a big question mark over quality.
In fact, the most recent export data from ABS is from September.
To get a more current handle, Thomas Elder and AgFlow data analysts have worked toghether, to get a more current export view.
The result was that the blended data from ABS/AgFlow cumulative wheat exports for the year, showed that even if the current export forecast from the USDA is for 23.5mmt; their expectation is for over 25mmt for this season.
In this context, local markets continued to shine again as the week closed out.
Wheat was firmer across the board by $5-6/t which saw Port Adelaide bid $400/t to the grower for APW1 while NSW Port Kembla port zone was bid $365/t level.
ASX Jan eastern wheat contract settled at $374/t to finish the week up $17/t reaching a high of $385/t.
Barley gained a bid also and finished the week out stronger.
Delivered trade markets were up 5 bucks across the board on Friday and we continue to see prompt demand as the stop-start harvest continues.
In LSC latest lineups report approximately 800,000mt of barley is due to be loaded and shipped in November across WA, SA and Victoria with large portion of those shipments destined for Saudi Arabia.
Canola markets had an up-and-down week.
Friday saw moderate gains on the grower boards to be bid up $5/t.
We have seen a little more volatility as we work our way through harvest and the global trade in canola continues to run at a rate of knots.
On the international trade scenario, Iraq floated interest in 500.000 t of wheat imports for the 2021/22 marketing year.
Iraq will likely buy the wheat in December or early in the new year, which will likely tide the country over until next May’s harvest.
Algeria is launching a call for tenders in wheat for loadings in 3 periods between December 15 and the end of January.
The specifications for insect damage have been increased from 0.5% to 1%.
SA’s SALIC said that its two shipments from its investments in Ukraine, weighing 121k of wheat, arrived at Jeddah and Yanbu.
Author: Sandro F. Puglisi
