Good morning Farmer Family and good start to the week …
U.S. farm markets weakened last Friday.
Traders monitored closely diplomatic talks aimed at resuming shipments of Ukrainian grain stalled since started war.
Chief United Nations, Martin Griffiths, has been in Moscow past week to discuss clearing the way for exports of grain and other food from Black Sea ports.
Putin called reports of Russia not allowing Ukrainian grain exports safe passage through the Black Sea “a bluff” and that “there are no problems with shipping grain out of Ukraine” although Ukrainian ports in the Black Sea have been mined during the ongoing conflict, making the passage for grain cargoes especially risky.
On this wake, Putin said the best solution would be to ship it through Belarus, as long as sanctions on that country were lifted.
Also, Senegal’s President Macky Sall said Putin claimed to be ready to enable the export of Ukrainian grain to ease the global food crisis hitting Africa especially hard.
On this wake, Sovecon, raised its forecast for Russia’s wheat exports in the new July-June marketing season by 1.3 million tonnes to a record 42.3 million tonnes.
Thus, corn prices faded Friday in the afternoon, closing 0.45% lower.
Corn prices traded within a dime range on the week’s last trade day, while the week’s trading range was 56 3/4 cents in July and 47 3/4 cents in December.
For the week, July corn was 6.47% lower and Dec was down by 5.48%.
The wheat complex led the way downside.
CBOT SRW wheat ended the last trade day of the week with 1.72% losses.
July SRW ended more than $1/bu lower or -10,15% from Friday to Friday.
Kansas City HRW prices went into the weekend with Friday losses of 1.97%.
From Friday to Friday, July KC wheat lost $1.14 or -9.26%.
Spring wheat futures ended the last trade day of the week down by 0.65%, with July closing $1.13 lower for the week or 8.66% down.
Soybean prices also declined past week, as market participants booked profits before the weekend.
Soybean, indeed, closed 1.82% lower on the last trade day of the week.
Through the week, July beans closed a net 2% cents lower and traded within a wide 75 3/4 cent range.
Soymeal prices closed 1.69% lower past Friday, with July contract completing the week a net 5.64% lower.
Soy oil prices faded into the close on Friday but ended the day with 0.5% gains.
Soy oil was the only star light of the week with July contract stayed 2.8% higher week over week.
Meantime, the Friday Commitment of Traders report showed the managed money spec funds in corn shrinked their net long by another 22,505 contracts in 7 days, taking it down to 268,964 contracts of futures and options as of May 31.
Commercials drawed down inventories, liquidating short hedges faster than end users were buying the dips, lefting the commercials 21.7k contracts less net short at 613,701 contracts.
Particularly, CFTC reported managed money traders had closed 12.9k open longs and opened 9.5k new shorts during the week of 5/31.
Commercial corn traders closed 12.5k corn short hedges and opened 9.2k new long hedges wk/wk.
Total OI across corn futures and options slid 15k contracts from week to week.
As for soybean, Friday’s CFTC report showed the managed money spec funds expanding their net long position in soybeans by another 1,563 contracts in the week ending May 31, putting them net long 164,630 at that point.
CFTC reported managed money funds were 47,362 contracts net long in soymeal, compared to 49,154 contracts last week on net new short selling.
In soybean oil, speculative traders were 64,461 contracts net long as of 5/31.
That was a wk/wk drop of 4,533 contracts.
For wheat, CFTC showed the managed money spec funds cutting 7,230 contracts from their Chicago SRW net long in the week ending 5/31.
Particularly, they closed 4.7k longs and opened 2.5k new shorts for a modest 15,024 contract net long.
They were still net long 40,650 contracts in KC HRW, after closing 2.8k longs and opening 1.1k new shorts, paring back that position.
The CoT report showed managed money firms were 292 contracts more net long wk/wk in spring wheat futures and options.
That extended their net long to 15,523 contracts as of 5/31.
On this morning, Chicago wheat prices climbed more than 4% this morning rising, as worries over global supplies are growing.
Concerns, indeed, grew about grain shipments from the key Black Sea region, after Russia attacked Ukraine’s capital Kyiv for the first time in more than a month.
After the condition of France’s soft wheat crops declined for a fifth consecutive week, as an estimated 67% of the soft wheat crop was in good or excellent condition in the week to May 30, down from 69% the previous week due the drought, French wheat crops have been hit by heavy hail and fierce storms over the weekend, according to a statement released on Monday by the National Farmers’ Union Federation (FNSEA).
“The damages are very significant, with some farms seeing 100% of their crop affected,” the statement said.
The wheat harvest is nearing in France and damage to its crop could add pressure to already strained global wheat supply and strong demand is underpinning prices.
In this context, corn also gained more then 1.5% while soybeans advanced more than one percent.
In energy markets, oil settled higher past Friday.
Expectations that global supply should tighten as China eases COVID restrictions, have prevailed on OPEC’s decision to increase production targets.
Thus, Brent crude rose $2.11, or 1.8%, to settle at $119.72 a barrel.
U.S. West Texas Intermediate (WTI) crude advanced $2, or 1.7%, to $118.87.
Both benchmarks were up by $3 in after hours trading.
Brent crude rose 3.6% for the week while U.S. crude notched a sixth weekly gain, up 3.17% for the week, on tight U.S. supply.
That has prompted talk of fuel export curbs or a windfall tax on oil and gas producers.
Supplies remain tight.
Past Thursday, a U.S. weekly inventory report showed crude stockpiles fell by a more-than-expected 5.1 million barrels.
Gasoline inventories also dropped.
U.S. energy firms past week left oil and natural gas rigs unchanged at 727 in the week to June 3.
Meantime, oil futures gained this morning, with Brent rising above $120 a barrel after Saudi Arabia raised prices for its crude sales in July.
Brent crude, indeed, firmed 68 cents, or 0.6%, to $120.40 a barrel at 06:40 GMT after touching an intraday high of $121.95.
U.S. West Texas Intermediate (WTI) crude futures were up 61 cents, or 0.5%, at $119.48 a barrel after earlier hitting a three-month high of $120.99.
Saudi Arabia, indeed, raised the July official selling price for its flagship Arab light crude to Asia by $2.10 from June to $6.50 premium versus the average of the Oman and Dubai benchmarks, state oil producer Aramco said on Sunday.
The price increase came despite a decision last week by the OPEC+, to increase output in July and August by 648,000 barrels per day, or 50% more than planned as the decision is widely seen as unlikely to meet demand because the increased allocation is spread across on all members, including Russia, which is facing sanctions.
Thusm, “while that increase is sorely needed, it falls short of demand growth expectations”.
On this wake, on Monday, Citibank and Barclays raised their price forecasts for 2022 and 2023.
In freight markets, the Baltic Exchange’s main index, which takes into account rates for capesize, panamax, and supramax vessels, was not listed both onThursday and Friday during past week.
The London Stock Exchange, indeed, was closed due to the long weekend for the Queen Elizabeth II Platinum Jubilee celebrations.
Past Wednesday, the latest day trading of the week, the Baltic Exchange Dry Index rose 67 points, or 2.6% to 2,633 points, halting six consecutive sessions of losses, amid greater demand in the larger vessel segment.
The capesize index, which tracks iron ore and coal cargos of 150,000-tonnes, surged 9.7% to 2,927 points, likely tracking a rally in iron ore prices.
Meanwhile, the panamax index which tracks cargoes of about 60,000 to 70,000 tonnes of coal and grains, went down 0.8% to 2,851 points.
Among smaller vessels, the supramax index lost 40 points to 2,703 points.
In equity markets, U.S. stock indexes past Friday posted moderate losses.
U.S. May nonfarm payrolls rose more than expected, which bolstered the case for the Fed to be more aggressive in tightening monetary policy.
Particularly, U.S. May nonfarm payrolls rose +390,000, stronger than expectations of +318,000.
The May unemployment rate was unchanged at 3.6%, slightly weaker than expectations of a decline to 3.5%.
U.S. May average hourly earnings rose +5.2% y/y, right on expectations and a slowdown from +5.5% y/y in April.
The U.S. May ISM services index fell -1.2 to a 15-month low of 55.9, weaker than expectations of 56.5.
In this context, Cleveland Fed President Mester reiterated that she favors raising rates by 50 bp at the June and July FOMC meetings.
She also said she could support raising interest rates by 50 bp in September.
That pushed the two-year Treasury yield, which tends to move with expectations for Fed action, to rise to 2.68% from 2.62% just before the report’s release.
Meantime, the 10-year T-note yield, which tracks expectations for longer-term growth and inflation, rose to 2.95% from 2.91% after earlier climbing as high as 2.99%.
A -9% fall in Tesla dragged technology stocks lower after CEO Musk in an email to executives, said he has a “super bad feeling” about the economy and needs to cut about 10% of jobs at the electric car maker.
IPhone maker Apple finished down 3.9% after a bearish brokerage outlook and a report that EU countries and lawmakers would agree next week on a common charging port for mobile devices and headphones – a proposal Apple has criticized.
Companies from Walmart to Delta Air Lines have recently warned how inflation is eating into their profits.
JPMorgan Chase’s CEO, Jamie Dimon, said earlier this week that he’s preparing his company for a possible economic “hurricane”.
In this context, last Friday the technology-heavy Nasdaq led the declines, falling 304.16 points, or 2.47%, to 12,012.73, as shares of market heavyweights Apple Inc and Tesla Inc were the biggest drags on the market.
The S&P 500 index fell 68.28 points, or 1.63%, to 4,108.54 dragging the benchmark S&P 500 into its eighth weekly loss in the last nine.
The Dow Jones Industrial Average fell 348.58 points, or 1.05%, to 32,899.70.
For the week, the S&P 500 fell 1.2% while the Nasdaq declined 0.98% and the Dow lost 0.94%.
Meantime, this morning in Asia, the Shanghai Composite Index rose 1.3% to 3,236.37 after the business news magazine Caixin said its monthly purchasing managers’ index for services rose to 41.4 from April’s 36.2 on a 100-point scale on which numbers below 50 show activity contracting.
The Hang Seng in Hong Kong gained 1.8% to 21,470.94 and the Nikkei 225 in Tokyo added 0.6% to 27,915.89.
Korean markets were closed for a holiday.
Sydney’s S&P-ASX 200 shed 0.5% to 7,206.30.
New Zealand markets were closed for a holiday.
India’s Sensex lost less than 0.1% to 55,716.30.
Southeast Asian markets declined.
Global stock markets and Wall Street futures advanced after the downturn in China’s service industries eased and news reports said the Biden administration might lift U.S. tariffs on some Chinese imports.
London and Frankfurt opened higher.
In currency trading, the dollar index (Jun ’22) past Friday rose by +0.328 (+0.32%) to 102.160, as the increase in the 10-year T-note yield to a 2-week high strengthened the dollar’s interest rate differentials.
Also, the slide in stocks boosted the liquidity demand for the dollar.
Finally, Friday’s stronger-than-expected U.S. May payroll report was bullish for the dollar.
Thus, EUR/USD last Friday fell by -0.0016 (-0.24%) to 1.0719, weighed down by dollar strength.
Also, weak Eurozone economic data pressured the euro.
Eurozone Apr retail sales, indeed, unexpectedly fell -1.3% m/m, weaker than expectations of +0.1% m/m.
The Eurozone May S&P Global composite PMI was revised downward to 54.8 from the previously reported 54.9.
Losses in EUR/USD were limited on stronger-than-expected German trade data for April and after the 10-year German bund yield soared to a 7-3/4 year high.
German Apr exports, indeed, rose +4.4% m/m, stronger than expectations of +1.0% m/m.
German Apr imports unexpectedly rose +3.1% m/m, stronger than expectations of -2.0% m/m.
USD/JPY past Friday rose by +1.05 (+0.81%) to 130,88 and posted a 3-week high on strong T-note yields.
The yen was already on the defensive after the Nikkei Stock Index rallied to a 4-week high, which reduced the safe-haven demand for the yen.
The yen did garner some support past Friday after the Japan May Jibun Bank services PMI was revised upward to a 6-month high at 52.6 from the previously reported 51.7.
For the week the dollar index rose 462 points or 0.45%.
The euro decreased by 0.0016 points or 0,15%, while the yen lost 3.75 poits or 2.95%.
On this morning the dollar declined to 130.79 yen, the euro rose to $1.0745.
From South America, past week the Buenos Aires Grains Exchange lifted their soybean yield estimate 3.1% and raised their production outlook to 43.3 MMT, up from 42 MMT.
Soybeans in Argentina were reported as 94% harvested.
Argentina’s Buenos Aires Grains Exchange estimates that the country’s 2022/23 wheat plantings will come in around 6.5 million hectares.
That’s slightly lower than the group’s prior estimate of 6.6 million hectares , based on low soil moisture and scant rains in the near-term forecasts.
Before past Wednesday, farmers had sown 13.9% of the estimated area.
“If this scenario extends throughout the month of June, it could cause further reductions in the projected area,” BdeC warned.
On the soybean front, the exchange said it sees an uptick production at 43.3 million tonnes for the 2021/22 season, up from the 42 million tonnes previously estimated.
“Better than expected yields in the center and north of the agricultural area allow us to increase” the production estimate, BdeC said, adding in its weekly crop report that 94.3% of land planted with soybeans had been harvested.
Regarding corn, the exchange said the country’s corn harvest was 32% complete and estimated the 2021/22 harvest at 49 million tonnes.
According to StoneX, corn production in Brazil could reach 116.8 million tonnes this year, and that of soybeans 124.4 million tonnes.
Meantime, data from Anec shows Brazilian corn shipments were 1.09 MMT for May, compared to 1.27 MMT last season.
That was 14.4% below the group’s prior estimate it made a week earlier.
Anec also reported 10.73 MMT of soybeans left Brazil in May, compared to 11.278 MMT shipped in May ’21.
That is 4.9% below the group’s prior estimate, issued a week ago.
Meal exports were reported as 1.854 MMT compared to 1.9 MMT last year.
Ultimately, Anec also estimates that Brazilian wheat exports came in at 108.800 t last month.
Meantime, Brazil is testing a variety of drought resistant, genetically modified wheat in a bid to become more self-sufficient in the staple crop as global supplies tighten.
The move is the latest sign of increasing interest worldwide in planting wheat that can withstand drought, as more extreme weather linked to climate change increases the risk of global famine.
In Europe, as we said, Farm office FranceAgriMer showed last Friday that growing conditions for wheat and barley crops in France continued to decline for a fifth straight week.
An estimated 67% of French soft wheat was in good or excellent condition by May 30, against 69% the previous week and 80% a year ago, the office’s data showed.
Durum conditions also moved down to 64% from 67% a week ago.
French barley conditions also dropped, as in the previous week.
The good to excellent rating for winter barley fell 1 percentage points to 65%, while the corresponding score for spring barley dropped 7 percentage points to 54%, FranceAgriMer’s report showed.
Farmers rounded off maize planting, with 100% of the expected area sown.
Rating for emerged maize plants, was unchanged at 91% of the crop in good or excellent conditions FranceAgriMer said.
However, the Paris-based Euronext exchange on Friday saw September’s wheat prices to close the week at €378.25, a decline of €36.5 from past week.
June corn price was down €24.75/t for the week, closing at 327.5 euros per ton.
Rapeseed for August deadline, slumped €52.5/t for the week, to close €775.75/t.
Hopes of a deal to unblock Ukraine’s ports has prompted a sell-off in wheat earlier past week, although traders remained cautious about terms being agreed with Moscow.
Meantime, French wheat crops have been hit by heavy hail and fierce storms over the weekend, according to a statement released on Monday by the National Farmers’ Union Federation (FNSEA).
“The damages are very significant, with some farms seeing 100% of their crop affected,” the statement said.
The wheat harvest is nearing in France and damage to its crop could add pressure to already strained global wheat supply, while strong demand is underpinning prices.
From North Africa, Egypt barred the entry of a ship carrying 55,000 tonnes of Indian durum wheat originally intended for Turkey because it did not meet quarantine requirements, Egyptian plant quarantine chief Ahmed El Attar said on Saturday.
Separately, Egypt was expecting the arrival of its first Indian wheat shipment later on Saturday, purchased by the Egyptian private sector.
From the Black Sea basin, on week 22, freight rates in the Azov and Black Sea region moved sideways.
The rate for a shipment of 3,000 tons of wheat from Azov to Marmara Sea ports was $36-37 per ton.
According to Sea Lines shipbrokers, there was still very little cargo in the market, which was due to the end of the season and the lack of supply in the domestic market.
The main directions of requests were Turkey, Israel and Albania.
As prior week, the rates in Azov don´t decreased as a result of a stable activity in the Black Sea, where there were large cargo flows both from Russian ports and from the Danube ports of Ukraine.
Most charterers do not expect shipments to resume before the start of the new grain season in July.
According to Sea Lines, on week 22, freight rates for shipping wheat by 3,000 dwt bulkers from Azov made $35 to the Black Sea, $37 to Marmara, $54 to Mersin and $62 to Egypt.
Freight rates from Rostov AB (after bridge) were $1 above, from Rostov BB (before bridge) the same, from Yeisk and Taganrog $1 below, and from Temryuk $3 below those from the port of Azov.
In the Caspian, freight rates declined.
On week 22, freight rates for shipping corn by 3,000 dwt bulkers to Iran made $20 from Aktau, $27 from Makhachkala, and $32 from Astrakhan.
Meantime, on Friday Russia has set out its grain export taxes for June 8-15, 2022.
It will increase for wheat to $129.2 per ton against $$121.2 per ton this week, according to the materials of the Ministry of Agriculture.
The duty on corn also will increase to $78.7 from $73.9 a week ago, while on barley exports remains at the same level of $76.5 per ton.
The wheat rate is calculated based on the indicative price of $383.4 per ton, for barley — $294.3 per ton, for corn $297.5 per ton.
That compared the prior week when indicative prices were at $373.2 per ton for wheat, $294.3 per ton for barley, $290.7 per ton for corn.
In Ukraine, Ukraine’s grain exports have reached 47.2 million tonnes so far in the 2021/22 July-June season, including 148,000 tonnes in the first five days of June, the agriculture ministry said on Monday.
The ministry said the total volume included 18.578 million tonnes of wheat, 22.4 million tonnes of corn and 5.7 million tonnes of barley.
Corn shipments dominated exports in June, it added.
From the Middle East, Saudi Arabia’s state grain buyer SAGO said on Sunday it had awarded Saudi Agricultural and Livestock Investment Co (SALIC) a contract to supply 240,000 tonnes of wheat from abroad to be delivered to the kingdom between August and October 2022.
The awarded cargo represents the first batch of Sago’s purchases from Saudis who have invested in agricultural assets abroad, and is equivalent to 20% of the total amount allocated to those investors, SAGO governor Ahmad Al-Fares said in a statement.
Sago did not specify the origin of the wheat that will be supplied by SALIC.
From South East Asia, Indonesia has issued around 302,000 tonnes of palm oil export permits since the country restarted exports, senior minister Luhut Pandjaitan said on Sunday, while reassuring farmers and exporters that authorities would speed up the permit process.
An Indonesia Palm Oil Association official said on Friday a number of palm oil mills have stopped buying palm fruits from farmers due to a lack of exports, while farmers complained that the price of fruit was yet to recover to levels seen before the ban after falling by about 75%.
Indonesia typically exports around 2.5 million tonnes of palm oil products per month.
The government would require palm oil companies to sell an equivalent of 300,000 tonnes of cooking oil per month under the DMO during a transition period following the resumption of exports.
The government has made an adjustment regarding the export levy and a regulation spelling out the changes would be issued soon.
Indonesia currently imposes a maximum $375 per tonne levy for crude palm oil exports on top of a maximum $200 per tonne export tax.
The levy ceiling was raised in March in efforts to encourage more onshore sales.
Since November, authorities have rolled out a bewildering array of measures including subsidies, export permit requirements and a palm oil levy as well as export bans to try to contain cooking oil prices with little success.
On this wake, the government would conduct an audit on the palm sector to make sure that such problems would not recur in the future.
Meantime, in India, palm oil exports in May were its highest in seven months and up 15% on April as the country overcame curbs on Indonesian exports by sourcing more of the commodity from Malaysia, Thailand and Papua New Guinea, five industry officials said.
Higher purchases by India, could support Malaysian palm oil prices, which are trading near a record high.
India imported 660,000 tonnes of palm oil in May, up from 572,508 tonnes in April, according to the average estimate from five dealers.
Indian imports from Indonesia fell in May, but refiners managed to buy more from Malaysia, Thailand and Papua New Guinea.
Meantime, India’s soyoil imports in May rose to 352,614 tonnes from 315,853 tonnes in April.
The country’s soyoil imports could rise sharply in coming months, because New Delhi has allowed duty free imports of 2 million tonnes of the commodity.
Sunflower oil imports jumped to 123,970 tonnes in May from 67,788 tonnes a month earlier, the government official said.
India buys soyoil mainly from Argentina and Brazil and sunflower oil from Ukraine and Russia, but as sunoil shipments from Ukraine have stopped, India is trying to import more from Russia.
From Australia, Aussie wheat exports in April were at 2,633,809 tonnes.
That was up 3 per cent from the March total of 2,563,899t, according to the latest export data from the Australian Bureau of Statistics (ABS).
China was the biggest market by far for April shipments, and was the destination for 758,915t of bulk and 2375t of containerised wheat.
Exports to China in April look like they have hit a new monthly high to surpass the January total of 687,033t.
Vietnam on 94,166t was the biggest destination for containerised grain, and with 245,754t of bulk also, bought 339,920t of April-shipped wheat.
Next was The Philippines with 316,810t of bulk and 16,649t of containerised wheat to total 333,459t.
April volume is thought to have risen in part because of less rain-related interruptions to shipments out of the New South Wales ports of Newcastle and Port Kembla, and Brisbane in Queensland.
While cargo numbers out of Port Kembla’s two terminals will be limited until September, when one of its two supplying rail lines is to due to come back into use after a lengthy closure caused by rain-related damage, other Australian ports are shipping at capacity.
According to Lachstock Consulting’s latest Australian Export Vessel Lineups report, shipping stems indicate bulk shipments of 2.54 million tonnes (Mt) of wheat in May and 2.65Mt in June can be expected to appear in upcoming export data.
USDA has estimated Australia’s 2021-22 (Oct-Sep) wheat exports at 27.5Mt, up from 23.85Mt in 2020-21.
Meantime, local markets ended last week softer and liquidity was moderate.
Offers slowed as the market eased.
Current crop wheat was softer by A$5-10/t while new crop was relatively unchanged.
Barley prices were mixed and liquidity was limited.
Canola markets continued to trend lower.
On the weather side, South Australia and Victorian growers saw more good rainfall over the weekend, receiving another widespread 10-30mm.
The forecasts now for the next 8-10 days remain relatively dry for southern Qld, northern and central NSW which will allow growers to get back on to paddocks to continue their late planting campaign.
The WA wheatbelt is forecast to receive 10-25mm.
On international trade scene, Egypt’s state grains buyer, the General Authority for Supply Commodities (GASC), said on Sunday it was seeking vegetable oils in an international purchasing tender for arrival August 5-25.
GASC said traders should submit bids for payment at sight and 180-day letters of credit, and it would choose between them.
The deadline for offers is June 8.
GASC had also set a local production tender for vegetable oils, seeking at least 3,000 tonnes of soyoil and 1,000 tonnes of sunflower oil for arrival July 25 – August 15.
It also asked suppliers to submit offers by June 8.
In a previous oils tender in April, GASC cancelled its international tender, opting to buy 56,500 tonnes of local oils instead.
Watching this week’s market, markets have a normal schedule this week, with USDA Export Inspections on Monday afternoon and Crop Progress that overnight.
Wednesday will have the EIA weekly ethanol production and stocks data.
Weekly Export Sales data will be out on Thursday.
The big event will be the USDA Crop Production and WASDE reports to be released on Friday.
That’s all.
To all of you, we wish you a good start to the week.
Author: Sandro F. Puglisi
