Good morning Farmer Family …
Grain prices made moderate inroads last Friday, as traders squared their positions ahead of Memorial Day which fall today.
There are a variety of bullish factors still in play.
The poor winter wheat crop quality both in U.S. and France.
A sluggish US spring planting pace both for corn and soybeans.
Geopolitical tensions due the ongoing war in Ukraine and more …
Thus, US farm markets last Friday saw corn prices to rise 1.6% higher.
Soybeans found more modest gains of around 0.3%.
Soymeal prices ended the day with 0.96% gains.
Soy oil prices closed off their daily lows, but were still down by 1.18% on the day.
The wheat complex captured decent gains with Chicago wheat prices went home 1.25% higher.
Kansas City wheat prices ended the Friday session 0.55% up, though prices were up by over 20 cents earlier in the day.
Minneapolis wheat ended 0.97% higher on the day.
However, wanting to take stock of the week, things went differently.
For the week, indeed, despite we have seen a 33 cent range during the week, corn prices were down around 0.2% from Friday to Friday.
Soybeans were the only bright spot in the row crops past week, with July up 1.58% and hitting new contract highs on Friday, while new crop November closed up with 1.47% gains for the week.
Product values were mixed, with meal somewhat supportive, up $2.40/ton or 0.56% and soy oil down 136 points or -1.68%.
Wheat prices saw some spreading on the week, with the winter wheat contracts weaker and spring wheat higher.
Reports of Russia opening an export corridor out of Ukraine in exchange for the lifting of some sanctions, indeed, shot things lower.
However, skepticism appeared quickly when it was realized that things weren’t that simple to put into action.
Thus, Minneapolis popped out to a 2.02% jump from prior Friday on the wake of slow planting pace.
Meanwhile, Chicago SRW prices were down 0.97% and Kansas City wheat contracts down nearly 1.4%, as the harvest is just started in the northen emisphere.
In energy markets, oil prices rose last Friday.
Both benchmark, closed out the week with gains.
The U.S. Memorial Day holiday, rapresent the start of peak U.S. demand season.
Both gasoline and heating oil futures outpacing crude this year due a strong demand.
Iranian forces seized two Greek oil tankers last Friday in the Persian Gulf.
European Union contined to negotiate over whether to impose an outright ban on Russian crude oil.
Hungary’s resistance to oil sanctions and reluctance of other countries have held up implementation of a sixth package of sanctions by the 27-member EU against Russia.
Global oil benchmark Brent crude could rise past $150 a barrel if there is a sharp contraction in Russian oil exports, Bank of America (BofA) Global Research said on Friday.
Russian President Vladimir Putin told Austrian Chancellor Karl Nehammer that Moscow would meet its natural gas delivery commitments.
Meanwhile, U.S. energy firms cut oil and natural gas rigs this week for the first time in 31 weeks, but the rig count rose for a record 22nd month in a row even.
The U.S. oil and gas rig count, an early indicator of future output, fell by one to 727 in the week to May 27.
However, despite this week’s rig decline, the total count was still up 270, or 59%, over this time compared last year.
In May, the total oil and gas rig count rose 29, the biggest monthly rise since Febrauary.
U.S. oil rigs fell two to 574 this week, their first decline in 10 weeks, while gas rigs rose one to 151 to their highest since September 2019.
For the month, the oil rig count rose for a record 21 months in a row, while the gas rig count was up for a ninth month in a row, the most since May 2017.
Even though the rig count has climbed every month since August 2020, weekly increases have mostly been in single digits and oil production is still below pre-pandemic record levels as many companies focus more on returning money to investors and paying down debt rather than boosting output.
U.S. crude production was on track to rise from 11.2 million barrels per day (bpd) in 2021 to 11.9 million bpd in 2022 and 12.9 million bpd in 2023, according to federal energy data.
That compares with a record 12.3 million bpd in 2019.
In this context, Brent crude rose $2.03, or 1.7%, to settle at $119.43, last Friday.
U.S. West Texas Intermediate (WTI) crude rose 98 cents, or 0.9%, to settle at $115.07 a barrel.
For the week, Brent rose 6% while WTI gained 1.5%.
Meantime, oil prices rose also on Monday, hitting their highest in more than two months.
The Brent crude futures contract for July, which will expire on Tuesday, was up 47 cents, or 0.4%, at $119.90 a barrel at 06:59 GMT, after rising as high as $120.50 earlier in the session.
The August Brent contract , which is more active, rose 61 cents, or 0.5%, to $116.17 a barrel.
U.S. West Texas Intermediate (WTI) crude futures jumped 72 cents, or 0.6%, to $115.79 a barrel, extending solid gains made last week.
In freight markets, the Baltic Exchange Dry Index slipped 252 points, or 8.6% to 2,681 points last Friday, the lowest since May 5th, extending losses for the fourth straight session, amid lower rates across all its vessel segments.
The capesize index, which tracks iron ore and coal cargos of 150,000-tonnes, plunged 19% to 2,818 points; and the panamax index which tracks cargoes of about 60,000 to 70,000 tonnes of coal and grains, fell 2.9% to 3,048 points.
Among smaller vessels, the supramax index shed 27 points to 2,796 points.
The Baltic Exchange Dry Index plunged 19.8% past week, heading for its first weekly fall in seven.
In equity markets, global markets enjoyed a broad-based rally last Friday, while the yield on benchmark U.S. Treasuries fell after data showed that U.S. consumer spending rose in April and the uptick in inflation slowed, two signs the world’s largest economy could be on track to grow this quarter.
Particularly, the Commerce Department said that inflation rose 6.3% in April from a year earlier, the first slowdown since November 2020 and a sign that high prices may finally be moderating, at least for now.
U.S. Apr personal spending which accounts for more than two-thirds of U.S. economic activity, rose +0.9% m/m, stronger than expectations of +0.8% m/m and March personal spending was revised upward to +1.4% m/m from+1.1% m/m.
However, U.S. Apr personal income rose +0.4% m/m, weaker than expectations of +0.5% m/m.
U.S. Apr PCE core deflator rose +0.3% m/m and +4.9% y/y, right on expectations.
The +4.9% y/y gain was the weakest report in 4 months.
On the negative side, the final University of Michigan U.S. May consumer sentiment index was unexpectedly revised downward by -0.7 points to a 10-3/4 year low of 58.4 from the previously reported 59.1.
Strength in technology stocks past Friday, boosted the overall market, with Dell Technologies closing up +12% and Marvell Technology up +6% after both companies reported stronger-than-expected quarterly earnings.
Positive carry-over from a rally in China’s Shanghai Composite was also supportive for U.S. stock indexes after two of China’s biggest internet companies, Alibaba Group Holding and Baidu, reported better-than-expected quarterly sales growth.
Asian shares also benefited from hopes of stabilizing Sino-U.S. ties and more Chinese government stimulus.
The United States, indeed, would not block China from expanding its economy, but wanted it to adhere to international rules, Secretary of State Antony Blinken said on Thursday in remarks that some investors interpreted as positive for bilateral ties.
Meantime, global equity funds are returning to the market to buy stocks, which is supporting prices.
According to a Bank of America note citing EPFR Global data, investors added about $20 billion to global stock funds in the week ended May 25, led by inflows into the U.S.
In this context, the MSCI world equity index, which tracks shares in 45 nations, was up 2.12% last Friday.
European shares hit a three-week high and rose 1.42%.
Britain’s FTSE also hit a three-week high, and was heading for its best weekly showing since mid-March.
Emerging market stocks rose 1.98%.
MSCI’s broadest index of Asia-Pacific shares outside Japan closed 2.17% higher, while Japan’s Nikkei rose 0.66%.
In this context, all three major U.S. stock indexes past Friday rallied for a third day, with the S&P 500, Nasdaq 100, and Dow Jones Industrials posting 3-week highs bringing a decisive end to their longest weekly losing streaks in decades.
Particularly, the Dow Jones Industrial Average rose 575.77 points, or 1.76%, to 33,212.96.
The S&P 500 gained 100.4 points, or 2.47%, to 4,158.24.
The Nasdaq Composite added 390.48 points, or 3.33%, to 12,131.13.
Smaller company stocks also gained ground.
The Russell 2000 rose 49.66 points, or 2.7%, to 1,887.90.
For the week, the Nasdaq composite bounced by 6.84%.
The S&P 500 jumped 6.58% higher, its best weekly gain since November 2020.
The Russell 2000 gained 6.46%.
The Dow Jones Industrial Average rose by 6.24%.
The yield on benchmark 10-year Treasury notes was last 2.7432%.
It had hit a three-year high of 3.2030% earlier this month on fears that the Fed may have to raise rates rapidly to bring inflation under control.
Lower yields show the Fed’s monetary policy is succeeding in tightening credit and slowing down prices.
“The 10-year yield is suggesting we don’t have to have inflation break above 9-10%,” some analysts said.
And seems “we are getting close to a peak in inflation” they added.
Meantime, the two-year yield , which rises with traders’ expectations of higher fed fund rates, fell to 2.4839%.
Meantime, Asian stocks rose this morning on the wake of Friday’s Wall Street rally.
China eased anti-virus curbs on business activity in Shanghai and Beijing.
Thus, the Shanghai Composite Index advanced 0.5% to 3,145.77 after more factories and shops in Beijing and Shanghai were allowed to reopen.
Shanghai, China’s commercial capital, announced tax breaks and subsidies to help businesses recover from a two-month shutdown.
The Nikkei 225 in Tokyo surged 2.3% to 27,382.03 and the Hang Seng in Hong Kong gained 1.9% to 21,093.21.
The Kospi in South Korea advanced 1.2% to 2,668.31.
Sydney’s S&P-ASX 200 was 1.4% higher at 7,2890.10.
India’s Sensex opened up 2.1% at 56,025.84.
New Zealand and Singapore gained while Indonesia retreated.
In currency trading, the swing toward broadly positive market sentiment drove the dollar to one-month lows against an index of currencies.
The dollar index (Jun ’22) last Friday fell by -0.160 (-0.16%) at 101.698 to a 1-month low as the rally in stocks curbed liquidity demand for the dollar.
For the week the dollar index fell 1.43%.
The EUR/USD past Friday rose by +0.0011 (+0.1%) to 1.0735.
Gains in EUR/USD, however, were limited Friday on dovish comments from ECB Governing Council member de Cos who said “the process of increasing interest rates should be gradual.”
The USD/JPY fell by -0.01 (-0.01%) to 127.13, as the yen strengthened on a weaker dollar.
The yen also had carry-over support from Thursday when BOJ Governor Kuroda said the BOJ could manage an exit from its decades-long monetary policy and that U.S. rate rises would not necessarily keep the yen weak.
For the week, the euro rose by 0.0173 points or 1,64%, while the yen lost 0.73 poits or 0.57%.
On the weather side, the Texas panhandle and central and northern Oklahoma received much-needed rain past week, with as much as six inches in some areas.
Across the High Plains, the rain was widespread with varying amounts.
Northeast Nebraska saw considerable improvement to severe drought conditions.
In the western portion of the United States, conditions were dry in wheat-growing areas.
However, considerable seasonal rain has shrunk areas rated with abnormal dryness and severe drought conditions across Washington, Oregon, Idaho, and Montana.
More wet weather rolled through the Northern Plains this past weekend, with drier conditions in the farther east.
The agency’s 8-to-14-day outlook predicts seasonally cool weather returning to the Corn Belt between June 3 and June 9, with wetter-than-normal conditions sticking around the Northern Plains.
Meantime, numerous severe thunderstorms are forecast across parts of the Northern Plains and Upper Mississippi Valley southward into the central Plains today into tonight.
Large to giant hail, 60-80 mph gusts, and tornadoes are probable, including the possibility for a couple of intense long-track tornadoes.
On the other hand, the weekly Commitment of Traders report showed a 48,242 contract reduction in managed money’s net position for corn futures and options through the week that ended 5/24.
That wk/wk reduction, from 340k contracts to 291.4k, was mainly fueled by 30.9k corn spec longs being closed.
Their short position itself was the largest since December 2020.
Commercial hedgers also reduced exposure through the week, buying back 54.8k contracts for a 58k lighter net short of 635,456 contracts.
As for soybean, the report showed managed money soybean traders were 163,067 contracts net long as of 5/24.
That was a wk/wk increase of 15.7k contracts on net new buying.
Commercial soybean traders also added 10.4k new shorts for a 12,294 contract stronger net short of 245,822.
For soymeal, the weekly positions update from the CFTC showed specs were 13,231 contracts more net long wk/wk on short covering.
That left the group 49,154 contracts net long.
Soybean oil spec traders cut their net long by 17,243 contracts to an 18-wk low 68,994.
Their change from last Tuesday was mainly rotation as 10k longs were closed to 7.3k new spec shorts opened.
As for wheat, CoT data showed managed money firms were 22,254 contracts net long in SRW.
The 4,334 contract net long reduction from 5/17 to 5/24 was primarily long liquidation.
In KC wheat, the funds were 2,244 contracts less net long via new short sellers.
The group was still 44.5k contracts net long as of Tuesday’s settle.
CFTC reported spring wheat speculative traders as 15,231 contracts net long.
That was down 2,944 wk/wk on long liquidation.
In this context, corn basis bids were largely steady but slightly mixed at a few Midwestern locations past Friday, moving as much as 3 cents higher at an Iowa ethanol plant and as much as 3 cents lower at an Ohio elevator.
Soybean basis bids were mostly steady to soft across the central U.S. after dropping 5 to 15 cents lower at five Midwestern locations.
An Indiana processor bucked the overall trend after firming 5 cents higher.
As for wheat, basis for all wheat classes was down in both the Gulf and Pacific Northwest (PNW) past week.
Well-timed rain in the central Plains helped ease basis for HRW.
Advancing planting progress and significant moisture in parts of eastern Montana and western North Dakota also eased HRS basis.
The funds were net buyers on Friday for 13,000 lots of corn, 3,000 lots of soybeans and 6,000 lots of wheat.
In Canada, heavy rain in Manitoba, a Canadian province, has slowed spring grain planting, according to a May 24 crop report.
The provincial seeding report showed 10% completion, behind the 5-year average of 77%, and estimated that farmers were about 3 to 4 weeks behind normal seeding progress.
Alberta, a neighboring Canadian province, showed spring wheat planting was 59% complete, ahead of the 5-year average of 55%.
Meanwhile, canola plantings are estimated to be 64% complete as of May 24 in the province of Alberta.
Saskatchewan reported 52% of spring crops were planted as of 5/23, compared to 33% prior week and the 78% average.
From South America, Brazil’s corn exports is expected to reach 37-40 million mt in 2022.
Argentina’s fertilizer association, Fertilizar, said that fertilizer use is expected to drop 7% compared to last year due to higher fertilizer prices, tight availability and political uncertainty.
Meantime, soybean harvest advances to 89.9% complete in Argentina according to the BAGE.
In Europe, the week ended with grain prices on a strong note on Friday.
Meanwhile, rapeseed prices changed little.
French farm office FranceAgriMer reported that the country’s soft wheat quality ratings have degraded another four points lower, with 69% rated in good-to-excellent condition through May 23.
Durum conditions also moved down to 67% from 74% the prior week.
Quality ratings have eroded 20 points lower over the past three weeks.
Year-ago results saw 80% of the crop in good-to-excellent condition.
French barley conditions also dropped, as in the previous week.
The good to excellent rating for winter barley fell 5 percentage points to 66%, while the corresponding score for spring barley dropped 8 percentage points to 61%, FranceAgriMer’s report showed.
Also, French farm office FranceAgriMer reports that 99% of the country’s 2022 corn crop has been planted through May 23.
It also notes that 91% of the crop is rated in good-to-excellent condition, versus 93% in the prior week.
In spite that, grain trade association Coceral raised past Friday its forecast of this year’s soft wheat production in the European Union and Britain, to 143.0 million tonnes from 141.3 million estimated in March, notably due to beneficial rainfall in Spain.
The raised forecast compared with 2021 production of 143.9 million tonnes, Coceral said.
However, Coceral raised slightly its projection for the French soft wheat crop, to 34.8 million tonnes from 34.5 million in March, as it revised up the crop area while leaving unchanged its yield forecast.
That contrasts with reduced estimates from some analysts and traders who have pointed to stress on plants from very dry conditions.
Forecast for EU soft wheat production, not including Britain, was seen at 127.4 million tonnes compared with 126.9 million in March, Coceral’s data showed.
For barley, Coceral raised its harvest outlook for the EU plus Britain to 60.0 million tonnes from 59.2 million in March, now slightly above a 2021 crop of 59.4 million.
Projected corn production for the EU’s 27 countries and Britain was lowered to 66.0 million tonnes from 67.3 million in March, now below a 2021 crop of 67.2 million, Cocereal said.
For rapeseed, Europe’s main oilseed crop, forecast output in the EU and Britain this year was increased to 19.5 million tonnes from 19.3 million and well above a 2021 crop of 18.5 million.
From Levant, Jordan’s wheat reserves are sufficient for 13 months and the country is in the process of raising stocks to 15 months, state TV reported on Sunday, citing the minister of agriculture.
From the Black Sea basin, Russian President Vladimir Putin told the leaders of France and Germany in a phone call on Saturday that Russia was willing to discuss ways to make it possible for Ukraine to export grain from Black Sea ports.
To date, Ukrainian exports must be carried out by train or truck, which requires much heavier logistics than by sea.
In addition, the difference in track gauge between European and Ukrainian rail requires transhipment at the border.
Meantime, the Russian-controlled Ukrainian region of Kherson has begun exporting grain that was harvested last year to Russia, the TASS news agency cited a senior local official as saying on Monday.
“We have space to store (the new crop) although we have a lot of grain here. People are now partially taking it out, having agreed with those who buy it from the Russian side,” said Kirill Stremousov, deputy head of the Military-Civilian Administration.
Stremousov was also cited as saying the administration was working on the supplies of sunflower seeds to local and Russian processing plants.
Russia has set out its grain export taxes for June 1-7, 2022, last Friday.
It will increase for wheat to $121.2 per ton against $110.5 per ton this week, according to the materials of the Ministry of Agriculture.
The duty on barley exports remains at the same level of $76.5 per ton, while the duty on corn will decreased to $73.9 from $76.5 a week ago.
The wheat rate is calculated based on the indicative price of $373.2 per ton, for barley — $294.3 per ton, for corn $290.7 per ton.
That is compared with the prior week when indicative prices were at $357.9 per ton for wheat, $294.3 per ton for barley, $294.3 per ton for corn.
Meantime, Russia will not remove its ban on exports of sunflower seeds at the end of August, Interfax news agency reported on Friday, citing the first deputy agriculture minister Oksana Lut.
Russia banned exports of sunflower seeds from April 1 to Aug. 31 to protect domestic supply for sunflower oil producers.
The ban “will not be removed until there is enough raw material to fulfil our processing capacity,” Interfax quoted Lut as saying.
Also, in a meeting of the Eurasian Economic Commission (EEC) past week, Russia said that members should impose quotas and duties on wheat and flour exports to third countries.
The Russian agriculture minister said the move would prevent the reexport of Russian grain through Eurasian Economic Union (EAEU) members.
The EEC and EAEU are economic blocs consisting of former Soviet countries.
Meantime, Interfax estimates Russia’s 22/23 wheat export shipments will be 40 MMT out of an 86 MMT crop.
That would be up from the 84.7 MMT crop reaped in 21/22.
This export projection is larger than the USDA forecasts of 33 MMT for old crop and 36 MMT for NMY.
From South East Asia, in Pakistan, pre-empting shortage and rising prices, the Economic Coordination Committee (ECC) of the Cabinet on Saturday decided to import two million tonnes of wheat on a government-to-government (G2G) basis, while 1m tonnes through an international tendering process under the existing arrangement.
Passco ASSCO will be the recipient agency for the imported wheat.
Wheat production decreased from 27.5m tonnes in 2020-21 to 26.4m tonnes in 2021-22.
The ECC after deliberation allowed the continuation of the existing subsidy for two weeks on essential commodities — wheat flour (atta), sugar, rice, and pulses, and Rs100/kg subsidy on ghee at Utility Stores.
The finance division will also release the outstanding amount on account of subsidy under the PM Relief Package–2020 approved by the ECC for the previous months.
ECC allowed the Trading Corporation of Pakistan to import 200,000 tonnes of granular urea from China on a G2G basis on a deferred payment basis within 90 days.
The ECC approved a summary for removing 2pc additional custom duty on the import of palm oil for shipments originating from all sources except Indonesia for June 10-20, 2022, subject to the approval of the federal cabinet.
In India, production estimates has been revised down sharply, probably below 100 million tonnes, limiting the country’s export potential in a still very tense global context.
From Australia, bids for wheat and barley fell roughly $10-$15/t over last week on current crop, while new-crop multigrade bids to growers were relatively unchanged.
Barley markets fell $5-$10/t over last week on current crop, while northern feedgrain values were mixed.
Canola bounced back on Friday, with new- crop bids up $20-$30/t.
Apart from rain in New South Wales, it was a relatively dry weekend across the Australian grainbelt.
In NSW, there are plenty of reports of seed burst, crops under water or washed away, or not planted at all because of ongoing wet conditions.
Resowing will be on the agenda for many in central and northern NSW; in some cases, winter-crop area will be left for summer crops, most likely cotton.
The forecast is for more rain this week for most of NSW, Victoria and South Australia.
Port congestion ramped up again this week with wait times increasing from 16 to 18 days in Albany, 26 to 29 days in Brisbane and 17 to 21 days at Pinkenba.
Wait times fell from 25 to 23 in Kwinana, with 11 vessels anchored and waiting to load.
On the international trade scene, Algeria’s state grains agency OAIC has issued an international tender to buy milling wheat for shipment to one or both of Mostaganem and Tenes, two small ports, suggesting a limited volume may be purchased.
The optional-origin tender specified possible shipment dates covering all of July and August if wheat is sourced from main supplier regions including Europe, with shipment required one month earlier if wheat comes from South America or Australia.
The bidding deadline is on Tuesday.
Watching this week’s market, today US markets are closed in observance of Memorial Day.
The markets will open overnight for the Tuesday session.
USDA reports will also be pushed back a day with Export Inspection on Tuesday morning and Crop Progress that afternoon.
Wednesday will have the monthly USDA domestic use reports for April via the Grain Crushing, Fats & Oils, and Cotton Systems reports.
Move to Thursday and EIA will release ethanol production and stocks data.
Weekly Export Sales data will also be a day late, with the report published on Friday morning.
June live cattle options also expire on Friday.
That’s all.
To all of you, we wish you a good day and a good start to the week.
Author: Sandro F. Puglisi
