LAST WEEK MARKET COMMENT

US farm markets ended past week in a mixed mode.

Althought traders continued to assess both the state of Russia/Ukraine tensions and South American weather forecasts, they moved amid a high volatility, with cautious ahead of the long weekend.

Indeed, US markets are closed today for President Day.

Thus, as we underlined in Friday report, being the geopolitical risk on the Black Sea basin already widely priced in, traders has been reluctant to maintain their positions during the long weekend.

Consequentially, wheat for exemple, lost some ground in Chicago as a big wheat sale at the very end of the session occurred, with someone sold 5K contracts.

In contraxt, South America weather concerns remained apparently justified, as the size of the South American soybean crop may still be overestimated.

This week will be marked by the USDA agriculture forum which will take place on February 25th.

The first echoes of surfaces which would be established this spring in the USA would be 92 million acres for corn and 87.5 million acres for soybeans.

This will serve as the basis for integrating the planting intentions which will be communicated on March 31st.

The uncertainty comes from the price of fertilizers which, by rising sharply, could encourage American farmers to plant a little more soy at the expense of corn.

In this context, corn prices, in spite bounced around for most of the week, closed last Friday session only with a 0.65% gain, posting a 0.5% gain for the week.

Soybeans rallied another 0.6% on Friday and 1.17% during the week.

Consequentially, they closed out the week above $16 for the first time since last May.

Soybean meal pulled back 0.29% for the Friday session and 1.91% for the week.

Soy oil was up 1.14% for the end week session and 2.81% vs. the prior Friday.

The wheat complex posted mixed results past week, with bulls pulled KC higher by 1.49% last Friday and so 1.33% for the week.

Meantime, both CBOT and MPLS wheat saw prices weaker compared prior week, down around 0.1% respectively, as CBOT fell 0.13% , while MPLS lifted 0.37% last Friday.

In energy market, oil prices also ended the week mixed, as investors weighed a potential supply disruption resulting from the Russia-Ukraine crisis against the prospect of increased Iranian oil exports.

Thus, on Friday Brent crude futures settled 57 cents, or 0.6%, higher at $93.54 a barrel, while U.S. West Texas Intermediate (WTI) crude ended down 69 cents, or 0.5%, at $91.07 a barrel.

For the week, Brent posted a small 0.9% rise in its ninth weekly gain, while WTI fell 1.7% in week, snapping an eight-week rally.

Both benchmarks hit their highest levels since September 2014 past Monday, but growing prospects of easing oil sanctions against Iran has weighed on the market.

However, on this morning oil prices calmed down after fluctuating initially.

Brent crude futures and U.S. West Texas Intermediate (WTI) crude rose more than $1 a barrel at the start of Asian trade but subsequently swung to nearly $1 loss on news of a possible summit between the United States and Russia.

The office of French President Emmanuel Macron, indeed, said in a statement on this morning that U.S. President Joe Biden and Russian President Vladimir Putin have agreed in principle to a summit over Ukraine.

Thus, Brent crude futures were at $93.39 a barrel at 04:45 GMT, down 15 cents or 0.2%, after earlier touching $95, while U.S. West Texas Intermediate crude futures had climbed 7 cents to $91.14 a barrel, off an earlier high of $92.93.

In the freight market, the Baltic Exchange’s dry bulk sea freight index rose on Friday, helped by an uptick in capesize and panamax vessel rates.

The overall index, which factors in rates for capesize, panamax and supramax vessels, rose 78 points, or 4.1%, to 1,964.

However, the index dropped 0.7% for the week.

The capesize index jumped 228 points, or 15.8%, to 1,675.

However for the week the index fell 182 points or 9.8%.

Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, rose by $1,888 to $13,888.

The panamax index edged up 10 points to 2,375 on Friday, but posted for the week 28 points losse or by 1.16%.

Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, rose $87 to $21,375.

The supramax index fell by 1 point to 2,325 on Friday, but went home with 167 points gains or 7.74% .

In equities markets, U.S. stock indexes past Friday fell to 3-week lows and closed moderately lower, as under pressure from escalating Russia-Ukraine tensions.

Friday’s U.S. economic data was mixed for stocks.

On the bearish side, Jan leading indicators unexpectedly fell -0.3% m/m, weaker than expectations of a +0.2% increase and the biggest decline in 1-3/4 years.

On the positive side, U.S. Jan existing home sales unexpectedly rose +6.7% m/m to a 1-year high of 6.50 million, stronger than expectations of a -1.3% m/m decline to 6.10 million.

Weakness in technology stocks weighed on the overall market Friday, despite lower T-note yields.

The Nasdaq indeed, fell sharply, pulled down by declines in high-growth stocks, including Apple, Amazon and Microsoft.

Intel Corp tumbled 5.3% to its lowest since 2020.

Roku Inc slumped 22%.

DraftKings Inc also fell 22%.

Speculation about the Federal Reserve’s next move also weighed on equities.

Hawkish comments from Fed Governor Brainard, indeed, were bearish for stocks when she said it’s “appropriate” for the Fed to begin a series of interest rate hikes in March, and she sees a runoff of the Fed’s balance sheet starting in the next few FOMC meetings.

Also, New York Fed Bank President John Williams said it would be appropriate to hike interest rates in March, without mentioning the magnitude.

In this context, the Dow Jones Industrial Average fell 0.68% to end at 34,079.18 points, while the S&P 500 lost 0.72% to 4,348.87.

The Nasdaq Composite dropped 1.23% to 13,548.07.

The indexes logged weekly declines for the second straight week.

For the week, the S&P 500 fell 1.6%, the Dow lost 1.9% and the Nasdaq declined 1.8%.

The dollar index on Friday rose +0.249 (+0.26%) to close at 96.022.

However for the week lost 51 points, or 0.05%.

Meantime, Asian shares were mostly lower on this morning after the end week retreat on Wall Street.

Tokyo’s Nikkei 225 index lost 0.8% to 26,910.87, while the Hang Seng in Hong Kong shed 1.1% to 24,062.67.

In Seoul, the Kospi gave up 0.2% to 2,739.59 and the Shanghai Composite index fell 0.4% to 3,476.47.

India’s Sensex lost 0.2% and Thailand’s benchmark was 0.5% lower.

Australia’s S&P/ASX 200 gained 0.2% to 7,233.60.

On the weather side, across the U.S., for the week of February 8 through 14th, weather was dry.

In Kansas, moderate drought degraded into severe drought in the central part of the state; neighboring Nebraska also saw conditions deteriorate.

In South Dakota a lack of snow cover and above normal temperatures resulted in dryer conditions.

The Standardized Precipitation Index (SPI) in North Dakota supported a 1-category improvement.

Extreme drought expanded in south-central Montana while slightly improving in the northeastern part of the state.

Washington and Oregon are unusually dry for this time of year.

Warmer than average temperatures coupled with a lack of rainfall led to a 1-categor degradation in Oregon.

Meantime, most of the Northern Plains, upper Midwest and Great Lakes Region got some additional rain and/or snow.

Rainfall will continue until Tuesday.

However, the agency’s 8-to-14-day outlook expects seasonally dry weather to reemerge across the Midwest and Plains between February 25 and March 3, with widespread colder-than-normal conditions across most of the country likely during that time.

The current water deficit, is supporting HRW wheat prices.

On the demand side, Weekly EIA data showed ethanol production bouncing back above the 1 million barrel per day mark to 1.009 million.

Along with that, stocks rose a considerable 684,000 barrels to 25.483 million barrels.

Meantime, Thursday’s Export Sales report indicated 820,000 MT of old crop corn bookings for the week that ended 2/10.

Marketing year export commitments (shipped plus outstanding sales) are now at 46.532 MMT.

That is down 21% vs. last year at this time but is still 76% of the full year WASDE forecast, compared to the average 71% by mid-February.

Accumulated exports are 36% of the USDA projection, 2% above the average pace.

As for soybean, weekly data indicated a sold 1.362 MMT of 21/22 soybeans were booked during the week of 2/10, with 1.526 MMT for new crop.

Total old crop US soybean export commitments are now 48.122 MMT, 19% smaller than last year’s record buying pace.

On the plus side, US Exporters have now booked 86% of the USDA full year estimate, beating out the 82% average pace for this date.

Shipments have hit 70% of the full year WASDE forecast, running ahead of the 65% average pace.

The pace of shipments needs to keep up with Brazilian crop peeking its way into the picture.

As for wheat, data indicated old crop wheat bookings of just 118,100 MT during the week of 2/10.

That was an improvement from the week previous but still well below the same week last year.

That pushed export commitments to 17.692MMT, or 80% of USDA’s full year forecast, still lagging the average pace of 89% by now.

Shipments to date are still 21% smaller than a year ago, at 13.404 MMT.

That is 60% of the USDA projection vs the average of 64% by now.

Meantime, on Thursday, private exporters reported to the USDA, sales of 120,000 metric tons of soybeans for delivery to unknown destinations during the 2021/2022 marketing year.

Also, on Friday were reported sales of 198,000 metric tons of soybeans for delivery to unknown destinations.

Of the total, 66,000 metric tons is for delivery during the 2021/2022 marketing year and 132,000 metric tons is for delivery during the 2022/2023 marketing year.

Meantime, managed money firms were 325,514 contracts net long in corn as of 2/15 according to the CFTC’s latest data released on Friday.

That was down 11,818 contracts from last week, driven mostly by long liquidation.

Commercial corn traders added hedges through the week, with a net 43,793 contracts of additional open interest and a net 4,189 contract stronger net short – to 667,107.

As for soybeans, the report showed soybean spec funds were 9,057 contracts more net long as of the 2/15 close.

That net new buying action left the group 175,372 contracts net long – which is their strongest net long since May of last year.

Commercial soybean traders were adding hedges for a 10,297 contract stronger net short of 306,822 contracts.

For products, report showed funds were buying soymeal through the week that ended 2/15.

That left the group 1,032 contracts more net long to 89,170 contracts – a 60-week high.

For soybean oil, CFTC had speculative traders at 70,381 contracts net long.

That was down by 2,401 contracts from long liquidation through the week.

As for wheat, data showed managed money firms were another 5,106 contracts more net short through the week that ended 2/15.

Those new spec shorts left the group 34,658 contracts net short, their strongest net short for SRW since June 30th of 2020.

In HRW, CoT data showed funds were net buyers through the week having extended their net long another 1,577 contracts to 36,050.

Managed money was reported at 5,268 contracts net long on 2/15 for Minneapolis wheat futures and options.

Driven by net new buying that was a 1,672 contract increase to their net position.

In this context, corn basis bids remained mostly steady across the central U.S. on Friday but did firm 2 cents higher at an Illinois river terminal.

Soybean basis bids firmed a penny at an Illinois river terminal and improved 2 cents at an Ohio elevator while holding steady elsewhere across the central U.S..

As for wheat, basis past week was mixed in both the Gulf and the Pacific Northwest (PNW).

Traders noted that train logistics have improved substantially since the start of the year.

Export sales have been steady the last couple weeks allowing basis to remain relatively flat.

A lack of moisture in the Plains states has created some reluctance to sell wheat too far ahead is also keeping basis mostly flat.

Repairs and maintenance to locks on the Columbia River began this month.

Each year the Army Corps of Engineers performs routine maintenance along the PNW river system.

According to the Northwest Portland District project manager, repairs are going as planned.

The closure is expected to last until March 19.

The Columbia Snake River System is responsible for around 53% of all U.S. wheat exports bound for export.

From South America, the rain forecast has improved significantly for Argentina.

Consequentially, that likely will take the sting out of values when US markets return on Monday night US time.

However, production fears pushed the Buenos Aires Commodity Exchange to lower its ratings of Argentine soybeans from “good to excellent” by six points, to 31% (18% last year), while those of corn have been cut by nine points, at 19% (24% in 2020).

Meantime, Argentina’s grain inspectors union URGARA said on Friday it will launch a 24-hour commercial strike on Monday to demand a wage bonus, but said the strike would not affect grain shipments.

Brazilian grain growers in Mato Grosso, have opened talks to export 5 million tonnes of corn directly to Iran, a statement from soy and corn farmers group Aprosoja-MT said on Friday.

Under the talks, which involve Brazilian growers and fertilizer companies in Tehran, farmers would sell produce and Iranian suppliers would commit to providing fertilizers.

Iran was the second-biggest buyer of Brazilian corn in 2021, behind Egypt, importing 3.1 million tonnes, shipping data shows.

This year it has already imported 430,000 tonnes.

In Europe, the concerning rise in tension between Russia and West, on the eve of the long weekend in Chicago, prompted a rapid rise in prices on Euronext, in spite competitiveness of the Black Sea origins.

Indeed, in its latest review of grain markets, FranceAgriMer pointed out that ” cereal importers fear a default (by producing countries) in the Black Sea which would result in a transfer to American and European origins and so, to very high prices in a context scarcity of supply”.

For the time being, “from commercial sources, grain exports have not been affected despite Russian naval exercises in the Black Sea and the Sea of Azov”.

“The activity slowed down at the beginning of the past week, the participants were waiting to see the impact of these maneuvers and a possible blockage of the maritime corridors”, has said Agritel firm in a note.

In terms of demand, FranceAgriMer notes that the French origin was “twice ruled out of calls for tenders” from Algeria before being called upon again during the last “but the Black Sea offers has been more competitive “.

The French agricultural office also noted that milling wheat prices are 52% higher “compared to the five-year average of the close (contract)”.

Regarding corn, prices in China “are down from last year’s high level and demand is weakening as stocks of imported maize come onto the market “.

Meantime, nearly all soft wheat crops in France, were in good shape in the week to Feb. 14, farm office FranceAgriMer said last Friday in its first cereal crop update of 2022.

An estimated 95% of soft wheat, France’s main cereal crop, was in good or excellent condition, unchanged from a week earlier.

The latest rating was slightly below a 99% score in FranceAgriMer’s previous report issued before winter but was above the 86% registered a year ago.

Wheat crops sown last autumn in western Europe have generally benefited from moderate winter weather and adequate moisture, according to analysts.

Growing conditions also remained favourable for French winter barley and durum wheat, with good/excellent ratings of 94% and 89% respectively, FranceAgriMer says.

Sowing of spring barley, the first major cereal crop to be drilled at the end of winter, was well under way with 27% of the expected area sown by Feb. 14, the office said.

That compared with 20% a week earlier and 16% a year ago.

Meantime, in Poland, prices dropped again this week as weak exports and slow domestic demand met more farmer sales.

Exporter purchase offers for 12.5% protein wheat fell about 10 zloty on the week to around 1,230 zloty a tonne (272.1 euros) for March delivery to ports.

Polish flour mills also cut their purchase offers by about 20 zloty to around 1,200-1,260 zloty a tonne for nearby delivery to mills depending on the region.

“Poland’s wheat exports are looking very quiet and I can see no large bulk carriers currently scheduled to load wheat in Poland,” one Polish traders said.

From North Africa, Morocco is expecting a very poor harvest, a consequence of the persistent water deficit affecting the country.

Meantime, Morocco’s braces for a surge in the bill of subsidies to keep bread prices stable from 1.3 billion dirhams in a normal year to 3.844 billion dirhams expected this year, Delegate Minister in charge of the budget Fouzi Lekjaa said.

The referential price of soft wheat ceiled at 260 dirhams per quintal.

International prices jumped to 315 dollars per ton this year from 290 dollars last year.

Morocco’s official statistics agency HCP said spending on subsidies would represent 1.6% of GDP this year.

From the Black Sea basin, Black Sea wheat prices closed last week lower despite recent tenders.

Thus, in Ukraine, wheat spot prices 11.5% lost last Friday -$1/t to settle at $304/t, as sellers continued to lower their offers amid rising exportable stocks in Ukraine and Russia.

The prices of the new crop recorded even more marked losses at the end of the week, in the context of favorable conditions for the 2022/23 harvest in the Black Sea basin.

The attention of operators remains fixed on the evolution of the conflict between the two countries, the outcome of which is still very uncertain.

Meantime, Russian wheat export prices also fell for a sixth consecutive week last week.

Russian ministry on Friday has amended the export tax for wheat, barley and corn for the week of February 24, 2022 to March 2, 2022.

The export duty will be $91 on wheat, $73.3 on barley and $52.2 on corn.

Indicative prices will be $330.1 for wheat, $289.8 for barley and $259.6 for corn.

That is compared, with prior week (Feb 16-23) when the tax was $92.8 for wheat, $74.1 for barley and $52.7 for corn, while indicative price were $332.7 for wheat, $290.9 for barley and $260.3 for corn.

The Duma, the lower house of the Russian Federal Assembly, comes out in favor of eliminating or reducing floating export taxes on grain in Russia.

However, the opinion of the market is that this tax will not be abolished in the short and medium term, but that a new calculation formula, more favorable to agricultural producers, could be adopted soon, Agritel firm said.

From The Middle Kingdom, due to negative crush margins, some soybean crushing plants in China are suspending operations, according to industry sources.

Bunge, Louis Dreyfus Company (LDC), Cargill and other plants have or plan to suspend operations.

The market is waiting for the Chinese government to sell about 5 MMT of soybeans from its reserves to cover demand from March to May.

Over the past week, an estimated 10 to 12 cargoes of soybeans have been canceled from South America due to high soybean prices and low Chinese soymeal prices.

Meantime, China sold 508,089 tonnes of wheat or 96.64% of the total offer at an auction of state reserves held Feb. 16, the National Grain Trade Center said on its website on Monday.

The average price of the wheat sold was 2,689 yuan ($425.13) per tonne.

($1 = 6.3251 Chinese yuan renminbi).

From South East Asia, India is making unprecedented levels of soyoil purchases from the United States, with traders recently signing deals to import 100,000 metric tons.

India also purchased 30,000 MT of soyoil from the Black Sea Region.

Palm oil out of Indonesia is seen as prohibitively expensive right now, and South American soyoil supplies are in doubt due to ongoing drought there.

From Australia, on the east coast the rain started to avvive on the maps late last week.

The BOM forecast widespread 15-25mm for the eastern cropping belt.

This rain will continue to add to the soil moisture profile for 22/23 season.

Meantime, local grain markets remained relatively steady last week, wheat markets firmed in the areas that it needed it for export and domestic use along the east coast.

Barley continued to get a bid amid more malt activity on Friday.

Canola markets held ground into Friday and more export interest appeared.

On the international trade scene, Iranian state-owned animal feed importer SLAL is believed to have purchased animal feed corn, feed barley and soymeal in an international tender which closed on Wednesday.

The volume bought was unclear but initial trader estimates were purchases of about 120,000 tonnes of feed barley, 120,000 tonnes of feed corn and 180,000 tonnes of soymeal.

The tender had sought 60,000 tonnes of each commodity.

Watching this week market, the week starts with the President holiday in the USA.

Thus, both the government and markets are off today.

Traders will restart, adjusting to any breaking news.

March options will expire on Friday.

On Tuesday will out the delayed Export Inspections report.

We will also get the Cold Storage report from NASS showing January 31 meat stocks on Tuesday afternoon.

On Thursday EIA will release the weekly ethanol production and stocks report.

On Feb. 24-25, USDA will hold it’s annual Agricultural Outlook Forum.

USDA will release its initial forecast for the agricultural economy, commodity markets and trade in 2022 and discuss U.S. farm income situation.