US farm markets ended past week on a high note.
Corn prices rally extended into the weekend with another 1.72% gain on Friday.
For the week they took another 20 cent gain, or up 3.20%.
That represented a total 39 ¾ cent gain over the past 2 weeks.
Friday’s soybean market added another double digits to the upside, gaining 1.50%.
This had meant, soybeans added another 3.94% gain for the week and taking the 2 week move for March to $1.00 ¼ higher!
Soymeal futures were also higher on Friday having added 1.61% to the upside.
Thus soymeal joined the party, past week, going up $18.50/ton, or 4.71% wow.
Soyoil prices went home on Friday off their highs, but still 1.45% higher for the session.
Soybean oil rallied 3.60% through the week.
Wheat prices recovered on Friday after sharp drops Wednesday and Thursday.
Particularly, SRW went home with 1.19% gains, which left the March contract 0.81% higher from Friday to Friday.
KC HRW futures were up 1.19% at the bell.
That left March back above $8 on the board, and 1.13% above the Friday settle prior week.
For the Minneapolis spring wheat futures, Friday’s gains were 1.97%, enough to limit the week’s drop to 1.68%.
Going inside the numbers, corn futures for the week, were up 19.8 cents to $6.36/bu.
Soybean futures were up $0.557 at $14.70/bu.
Soymeal jumped by $18,5/smt at $411.20 smt.
Soy oil soared $2.27 cents at $65.27.
CBOT soft red winter (SRW) futures rose 63 cents to close at $7.86/bu.
KCBT hard red winter (HRW) futures gained 90 cents to end at $8.02/bu.
MGE hard red spring (HRS) futures shedded 15.70 cents to close at $9.20/bu.
In energy market, oil prices rose to a more than seven-year peak on Friday and recorded their sixth straight weekly gain as geopolitical turmoil exacerbated concerns over tight energy supply.
On a weekly basis, the benchmark contracts notched their longest run of gains since October.
Indeed, Brent futures rose 69 cents in the end week session, to settle at $90.03 a barrel, after hitting $91.70, the highest level since October 2014.
U.S. crude closed 21 cents higher at $86.82 per barrel, after hitting a seven-year peak of $88.84 during the session.
For the week, Brent futures gained 2.43%, while U.S. West Texas Intermediate (WTI) crude lifted 1.97%.
Meantime, oil rose more than 1% on this morning to near 7-year highs hit in the previous session, while supply concerns and political tensions in Eastern Europe and the Middle East put prices on track for their biggest monthly gain in almost a year.
In fact, Brent crude rose $1.07, or 1.2%, to $91.10 a barrel at 03:25 GMT.
The front-month contract for March delivery expires later in the day.
The most-active Brent contract, for April delivery , was trading at $89.51, up 99 cents or 1.1%.
U.S. West Texas Intermediate crude added $1.07, or 1.2%, to $87.89 a barrel.
In the freight market, the Baltic Exchange’s dry bulk sea freight index registered its biggest daily percentage gain since September, last Friday, boosted by a jump in capesize vessel rates.
The overall index, which factors in rates for capesize, panamax and supramax vessels, indeed, rose 79 points, or 6.1%, to 1,381.
However, the index was down 2% for the week, its fourth consecutive weekly decline.
Particularly the capesize index climbed 257 points, or 31.4%, to 1,075, its highest level in more than a week.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, rose by $2,138 to $8,918.
The panamax index eased 6 points to 1,840, its lowest since April.
Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, fell by $58 to $16,557.
The supramax index slipped 16 points to its lowest level since February 2021 at 1,597.
In equities markets, world stocks rallied last Friday as investors turned their eyes toward corporate earnings and ignored geopolitical turmoil and Federal Reserve tightening concerns.
Indeed, MSCI’s 50-country main world index rose 1.49% but remained on the brink of its worst January since the 2008 global financial crisis after shedding roughly $7 trillion in value.
Strong earnings from tech firms including Apple, which rose nearly 7% after reporting record sales over the holiday quarter, and Microsoft which rose 2.8%, buoyed U.S. markets during the end week session.
In this context, all three major U.S. stock indexes closed higher past Friday.
Indeed, the Dow Jones Industrial Average rose 1.65% and the S&P 500 gained 2.43%.
The Nasdaq Composite added 3.13%.
Particularly, the S&P 500 rose 105.34 points to 4,431.85, posting a weekly gain of 0.77%.
That was the index’s biggest daily gain since June 2020, but has came late in a week where investors had been monitoring the S&P 500 for what market watchers call a “correction”, when an index sheds more than 10% of its value from a record high.
The index, indeed, is now 7.6% below the latest record reached on Jan. 3.
The Dow gained 564.69 points closing to 34,725.47, for a weekly gain of 1.34%.
The Nasdaq rose 417.79 points to 13,770.57, that left substantially unchanged from prior week.
The dollar, meanwhile, consolidated gains and posted its biggest weekly rise in seven months as markets priced in a year ahead of aggressive hikes in U.S. interest rates.
Thus, the prospect of faster or larger U.S. interest rate hikes and possible stimulus withdrawal has lifted the dollar index, which had fell 0.138% to 95.636 prior week, but this past week increased to 97.226, gaining for the week, more then 1.6%.
On the other hand, in the 12 months through December, the PCE (personal consumption expenditure price index) increased 5.8%, but still no more than had been expected.
That was the largest advance since 1982 and followed a 5.7% year-on-year increase in November.
The pan-European STOXX 600 index, in contrast, closed down 0.99% on the day for a fourth week of losses, weighed down by worries over the situation in Russia and Ukraine.
Meantime, Asian stocks followed Wall Street higher on this morning, at the start of a week when China, South Korea and Southeast Asian markets will close for the Lunar New Year holiday.
Thus, the Nikkei 225 in Tokyo rose 1.2% to 27,028.84 after the government reported December retail sales fell 1% from the previous month’s 2 1/2-year high.
That was driven by a 4% fall in food purchases.
The Hang Seng gained 1.1% to 23,802.26 and Sydney’s S&P-ASX 200 shed 0.2% to 6,971.60.
India’s Sensex opened up 1.3% at 57,960.41. New Zealand and Southeast Asian markets gained.
On the weather side, drought’s footprint in the High Plains has been increasing throughout the winter, covering 83.0% of the region three months ago and covering 90.3% through January 25, per the latest updates to the U.S. Drought Monitor.
The Midwest is faring better, with drought covering 38.9% of the region.
Particularly, despite some improvement to drought over the fall and winter in the Dakotas, topsoil moisture is greater than 40% very short to short.
Across all other plains states topsoil moisture is at least one half very short or short.
Further south, exceptional drought expanded in western Oklahoma and topsoil was rated 81% very short to short and in Texas it is 64%.
In the PNW, the week was dry.
The region has experienced improvements over the water year which began October 1 however more rain is necessary to sustain drought improvements for the region.
In this context, the USDA past week said at least one quarter of winter wheat is rated very poor to poor with Kansas (31%), Wyoming (33%) and Colorado (40%) each above that mark.
Winter wheat was rated 71% very poor or poor in Texas and 43% in Oklahoma, compared to 45% and 16% respectively seen in November.
Meantime, weather condition changed fastly on Saturday.
More than 1,400 U.S. flights were cancelled on Sunday after the U.S. northeast states were walloped a day earlier by a deadly winter storm that prompted several states to declare emergencies.
A storm system will produce locally heavy snow across the northern Cascades/Rockies tonight before impacting the Northern Plains with gusty winds and potential blizzard conditions beginning Monday evening.
Also, heavy rain and scattered flash floods possible throughout southeast Texas on Monday.
In this context, although there is some relief about the forecast for the US’ HRW wheat areas, note there is also an Arctic blast heading to much of the SRW belt.
Predicated are temperatures of -20 degrees Celsius versus -7 as the normal minimum for this time of year.
On the supply side, IHS Markit Agribusiness is now projecting 2022 U.S. corn plantings at 91.489 million acres.
That’s slightly down from the group’s December estimate of 91.578 million acres and nearly 2 million acres below 2021’s tally of 93.357 million acres.
As for soybean, IHS Markit Agribusiness is now forecasting 2022 U.S. soybean plantings at 87.805 million acres, which is lower than its December estimate of 88.815 million acres but still ahead of 2021’s tally of 87.195 million acres.
As for wheat, IHS Markit estimates 2022 wheat area at 48.157m acres.
Getting there, the firm matched USDA’s winter wheat area of 34.397m acres (up from 33.648m planted for 21/22), with 12.01m for spring wheat.
That is up from 11.42 planted last year, but below IHS Markit’s prior estimate.
Durum acres were estimated at 1.75 million acres.
On the demand side, Weekly Export Sales data put corn bookings at a 6-week high 1.402 MMT.
The 21/22 marketing year export commitments (shipped plus outstanding sales) have risen to 43.948 MMT, down 10% vs. last year at this time.
But that is 71% of the full year WASDE forecast, compared to the average 63% by late-January.
Accumulated exports are 30% of the USDA projection, matching the average pace.
As for soybean, export sales data showed a 6-week high for soybean bookings to 1.026 MMT of soybeans during the week ending January 20.
Total US export commitments are now 44.134 MMT, 24% smaller than last year’s record buying pace.
On the plus side, US Exporters have now booked 79% of the USDA full year estimate vs. the average 80% pace for this date.
Shipments have hit 63% of the full year WASDE forecast, running ahead of the 59% average pace.
As for wheat, during the week of 1/20, export sales posted a MY high 676,700 MT.
That pushed export commitments to 17.423 MMT, or 78% of USDA’s full year forecast, still lagging the average pace of 84% by now.
Shipments to date are 22% smaller than year ago, at 12.212 MMT.
That is 54% of the USDA projection vs the average of 60% by now.
Meantime, private exporters announced three more large soybean sales to USDA last Friday:
• 264,000 metric tons of soybeans for delivery to China during the 2022/2023 marketing year;
• 141,514 metric tons of soybeans for delivery to Mexico during the 2021/2022 marketing year;
• 251,500 metric tons of soybeans received in the reporting period for delivery to unknown destinations during the 2021/2022 marketing year.
On the other hand, CFTC’s weekly CoT report as for corn had managed money firms at 365,605 contracts net long at the settle for 1/25.
That was a 39,082 contract stronger net long from last week, fueled by net new spec buying.
The commercials also added 46,488 new shorts for a 47.5k contract stronger net short of 678,313 contracts.
That was the strongest commercial net short since May of last year.
As for soybean, the weekly Commitment of Traders report showed soybean spec traders increased their net long by 15,256 contracts to a 33-week high of 114,895 contracts.
Commercial bean traders increased their net short by 7,579 contracts to 257,085.
Commercial OI increased 31,183 contracts from Tuesday to Tuesday. In meal, CFTC reported managed money at 64,334 contracts net long as of 1/25.
That was a 409 contract reduction as the short covering and long liquidation through the week nearly matched.
Soybean oil spec traders extended their net long by 10,565 contracts to a 9 week strong 68,773.
As for wheat, the weekly CoT report showed wheat specs were 11,474 contracts less net short in CBT SRW.
The net new buying left managed money at a 13,427 contract net short as of 1/25.
In HRW, CFTC’s data showed managed money firms were 4,515 contracts more net long via short covering.
That left the group 40,634 contracts net long.
The weekly data showed long liquidation for MPLS wheat spec traders.
That reduced their net long by 517 contracts to 3,340.
In this context, corn basis bids were steady to soft last Friday after dropping 1 to 5 cents lower across three Midwestern locations.
Soybean basis bids were mostly steady but did move as much as 5 cents higher at an Ohio elevator and as much as 6 cents lower at an Iowa river terminal.
As for wheat, although there were big swings in Gulf HRW and HRS basis, past week ended down for all wheat classes except SRW, which was slightly up.
Wheat basis for all classes in the Pacific Northwest (PNW) was down but declined far less than in the Gulf.
Thus, logistics continue to play a key role.
Rail performance has improved since December, yet traders say COVID-related labor challenges and typical winter weather slowdowns are supporting basis somewhat.
Domestic mill demand is also absorbing capacity.
Meantime, the funds were net buyers last Friday for 19,000 lots of corn, 12,500 lots of soybeans and 5,500 lots of wheat.
From Canada, for 2022-23 season, the area seeded to durum in Canada is forecast to increase by 9% because of strong pricing, firm global demand and tight carry-in stocks.
As yields recover following the 2021-22 drought, production is expected to increase to 5.5 Mt, in line with the last five-year average.
Supply is projected at just under 6.0 Mt, 75% more than the short crop last year, but still 6% below the last five-year average due to the tight carry-in stocks from the previous year.
Exports are projected at 4.3 Mt, about 72% of total supply.
Domestic use is expected to return to average levels, approximately 0.95 Mt.
Carry-out stocks are expected to rise to 0.75 Mt (+67% y/y).
The average Canadian crop year producer price for durum is forecast to decline from current levels due to larger world production, but will still remain relatively strong due to tight stocks.
The average SK CWAD 1 13% cash price for 2022-23 is currently forecast at $400/tonne.
From South America, in Argentina the USDA attaché is revising its corn production estimate downwards to 51.0 million tonnes against 54 million posted in the last USDA report.
Despite an improvement in cultivation conditions in Argentina, the Buenos Aires Commodity Exchange has also lowered its national soybean area estimate by 100 kha, to 16.4 Mha (16.9 Mha in 2021).
On the other hand, Argentine wheat exports had their best December in history, reaching 2.27 million tonnes (Mt), according to the Rosario Stock Exchange (BCR).
Thus, the twelfth month of the year and the first of the cereal commercial campaign closed with record volumes for an amount never recorded before, in a context where the final production was 22.1Mt.
Private crush firm Abiove estimated the Brazilian soy S&Ds off a 135.8 MMT.
That was a 4.2 MMT reduction from their prior figure, with most of the difference absorbed in exports.
Abiove has their new Brazilian soy export forecast at 86.9 MMT, which was 4.2 MMT lighter than their prior estimate.
Crush was firm at 48 MMT, and carryout figured at 3.9 MMT.
In Europe, Euronext rose again last Friday in a market still marked by the Ukrainian crisis.
The scenario of a Russian invasion remains judged as not very credible by many observers, but the failure of the last negotiations between the US and Russia has catalyzed many fears.
The likely disruption of trade flows in the Black Sea thus continued to drive up grain prices.
Also, Friday was marked by the interventions of specialists in the agricultural sector at the “Paris Grain Day” organized by Agritel firm’s where the consensus of operators was displayed this year at 3.87, confirming the bullish sentiment on the markets on a scale from one to five, with 1 being very bearish and 5 being very bullish.
From the Black Sea basin, the Russian agriculture ministry last Friday has amended the export tax for wheat, barley and corn for the week of February 02-08, 2022.
Particularly, the tax will be $93.9 on wheat, $74.6 on barley and $49.2 on corn.
Indicative price will be $334.2 for wheat, $291.7 for barley and $255.3 for corn.
That is compared, with prior week (Jan 26-Feb 01) when the tax was $95.8 for wheat, $74.40 for barley and $50.6 for corn, while indicative price were $336.9 for wheat, $291.3 for barley and $257.4 for corn.
The tax on Russian grain exports is “highly likely” to continue in the long term, but it could evolve into a more flexible system, Christina Serebryakova, a broker at Atria Brokers, told at the Paris Grain Day on Thursday.
The Russian government has established a “significant source of revenue” through the tax and is unlikely to abandon it anytime soon, Ms Serebryakova added.
Meantime, Black Sea wheat was down $0.50/t in Friday trading.
From the Middle Kingdom, corn values continued to be elevated by the Russia-Ukraine tension, given China’s program for importing Ukraine corn.
Indeed, Dalian corn has reflected this uncertainty, trading at levels on Thursday and Friday not seen since May last year.
From Australia, more rain on the way with 80-100mm forecast for the Darling Downs.
Many growers are focused on getting an early sorghum harvest in the bin so quality will be watch closely.
Based on export margins, Australia is set to export just under 2mmt this upcoming marketing year but this program will be sensitive to quality.
Meantime, local markets were somewhat subdued over the week despite further confirmation that Australia is still the cheapest grain globally.
Reports that the Philippines feed wheat tender traded at USD$356-359 CNF which, back of envelope puts 72 kg/hl type feed wheat at AUD$405/mt track vs values on Friday around AUD$340-50/mt.
On the international scene, Egypt bought 420,000 t of wheat, all Black Sea origins, France was penalized by the differential in freight costs.
France will have to find wheat destinations other than Algeria, as until the last call last week, for the tender was shunned French origin.
Watching this week market, markets will have quite a bit of data to chew.
Per the normal weekly schedule, the Export Inspections data will be released later on this morning.
In the afternoon, cattle traders will have the semi-annual Cattle Inventory report to dissect.
Grain traders will get the monthly Grain Crushing and Fats & Oils report on Tuesday afternoon.
Weekly EIA data will be released on Wednesday morning.
The weekly Export Sales report is expected on Thursday.
Author: Sandro F. Puglisi
