Good morning Farmer Family and good start to the week …
US farm markets
Corn prices finished slightly higher on Friday.
The market was underpinned by U.S. supply concerns.
Traders analyzed forecasts for U.S. crop weather, with high temperatures expected to hit corn in the Midwest in the coming days.
In this context, the benchmark posted a fifth consecutive day of gains as slow farmer sales and firm cash prices supported the market.
June WASDE report, pegged corn ending stocks at 1.485 billion bushels for 2021/22 and 1.400 billion for 2022/23.
Both were above analysts’ expectations, nevertheless.
Soybean prices ended weaker on Friday on profit-taking.
Prices rallied close to an all-time high on strong U.S. export demand and supply concerns.
Supply uncertainty remained, after WASDE report cut estimates for 2021/22 US domestic ending stocks by about 13% to 205 million bushels in a monthly report.
That was below analysts’ expectations for 218 million.
The USDA, meantime, raised its outlook for U.S. soy exports for 2021/22 by 30 million bushels to 2.17 billion.
For wheat, Kansas City hard red wheat prices ended higher on Friday.
USDA reduced its domestic production estimate for the crop, pegging hard red winter wheat production at 582 million bushels.
That was down from its May estimate of 590 million bushels and below analysts’ expectations for 585 million.
Projections for U.S. soft red winter wheat and white winter wheat production increased from May, in contrast.
Thus, Chicago Board of Trade soft red winter wheat and MGEX spring wheat eased.
For the week, corn prices clawed back most of last week’s losses with July up 6.36% on the week, a 46 ¼ cent move.
New crop Dec was up 4.42% (30 ½ cents).
Soybeans rallied up 2.81% or 47 ¾ cents for the week.
Product values were mixed, with meal up 5.2%.
July meal, indeed, closed the week up by $21.20/ton, while soy oil lost 1.27% or $1.04.
Wheat prices were higher in all three markets, with Chicago SRW up 2.95%.
KC HRW was up 3.7% and MPLS gained 2.49% for the week.
Meantime, large speculators cut their net long position in CBOT corn futures in the week to June 7, regulatory data released on Friday showed.
The Commodity Futures Trading Commission’s weekly commitments of traders report also showed that noncommercial traders, a category that includes hedge funds, increased their net short position in CBOT wheat and cut their net long position in soybeans.
The funds were net sellers on Friday in soybeans for 13,500 lots and net buyers in corn for 500 lots.
They were wheat neutral.
Energy markets
Oil prices fell on Friday, after U.S. consumer prices rose more than expected and China imposed new COVID-19 lockdown measures.
Brent crude fell $1.06 to settle at $122.01 a barrel. U.S. West Texas Intermediate crude fell 84 cents to settle at $120.67 a barrel.
Both benchmarks still posted weekly gains, 1.9% for Brent and 1.5% for WTI.
For the day, oil prices sank along with Wall Street stocks after news that U.S. consumer prices accelerated in May.
On this morning, oil dropped about $2 a barrel, as a flare-up in COVID-19 cases in Beijing dented hopes of a Chinese demand rebound, while worries about more interest rate hikes to control rampant inflation added further pressure.
Brent crude was down $1.86, or 1.5%, to $120.15 at 0907 GMT, while U.S. West Texas Intermediate crude was down $2.15, or 1.8%, at $118.52.
Freight rate market
The Baltic Exchange’s main sea freight index extended its slide on Friday and closed a straight third weekly loss.
The overall index, indeed, lost 22 points to 2,320 points.
The index was down 12% for the week.
Rates weakened across smaller vessel segments.
Particularly, the capesize index on Friday inched up 2 points to 2,371 but has lost about 19% this week.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, increased by $22 to $19,665.
The panamax index dropped 45 points, or 1.7%, to 2,629 points and has lost about 7.8% in this week.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, decreased by $402 to $23,662.
The supramax index lost 32 points to 2,495.
Equity markets
US stocks fell sharply on Friday over the unfavorable CPI and consumer sentiment reports.
Losses added to Thursday’s sharp losses when the S&P 500 index plunged by -2.38% and the Nasdaq 100 index fell by -2.74%.
Combined with its losses from Thursday, the three indices posted their biggest weekly declines since January, tumbling roughly 5% each.
Indeed, the Dow Jones Industrial Average fell 2.73% or 880.00 points to 31,392.79, the S&P 500 lost 2.91% or 116.96 points to 3,900.86 and the Nasdaq Composite dropped 3.52% or 414.20 to 11,340.02.
Meantime, this morning, in Asia Chinese blue chips fell 1.42% and Hong Kong’s Hang Seng suffered a 3.29% slide.
Japan’s Nikkei slumped 3.03% and South Korea’s Kospi declined 3.27%.
China’s growth shares sagged, with tech giants listed in Hong Kong slumping 4.45%.
Index heavyweights Alibaba, Tencent and Meituan were each down between 4% and 6%.
World stocks fell towards fresh 2022 lows.
A sell-off across markets saw European stocks fall for a fifth straight session.
Currency trade
The dollar index this morning gained as much as 0.5% on the day to 104.75, close to the two-decade peak of 105.01 hit in May.
It was last up 0.2% at 104.63.
The yen fell as much as 0.6% on the day to 135.22 yen per dollar, its lowest since 1998.
It was last broadly flat at 134.37 yen per dollar.
The euro, sterling and the Swiss franc all fell to around four-week lows versus the dollar on the day.
The euro slipped as much as 0.5% to $1.04560, and was last down 0.3% at $1.04775.
Sterling fell 0.8% to $1.22165, after data showed Britain’s economy unexpectedly shrank in April.
The Swiss franc dropped as much as 0.5% to 0.99230 franc per dollar.
Bitcoin tumbled 9% to 18-month lows around $24,000.
South America
Argentina’s 2022/23 wheat crop will likely come in at 18.5 million tonnes, down from 19 million tonnes previously estimated, the Rosario grains exchange said last Thursday, citing reduced planting by farmers due to dry weather.
The exchange cut its forecast for the planting area of the crop to 6.2 million hectares from a 6.35 million-hectare estimate previously.
That was the lowest in 12 years.
Planting of the crop is ongoing.
Farmers have planted 17% of the estimated area for wheat, some 13 percentage points behind the same stage last season.
Meantime, the exchange said that the 2021/22 soybean harvest had ended with some 42.2 million tonnes, above the 41.2 million that it had previously estimated, due to yields higher than expected.
Brazil was seen starting harvest for their 2nd crop, with Patria Agronegocios reporting 3.3% of the crop pulled in the fastest start to harvest.
Meantime, CONAB reported Brazil’s 2nd corn crop estimate at 88.015 MMT, up 323k MT from May on a slight yield boost.
Their total corn crop was lifted by 635k MT (0.5%) relative to the May report to 115.223 MMT.
This increase confirms the record volumes expected this year in the country.
As for soybean, CONAB put their June estimate for soybean production at 124.268 MMT.
That was up slightly from last month’s 123.829 MMT figure.
Yields were hardly lifted implying a larger harvested area.
Conab also expects to see corn exports at 37 MMT in the current marketing year.
Abiove projects soybean exports will come in around 76,99 MMT.
Soymeal exports are steady from prior estimates of 18.3 million metric tons, with soybean oil exports anticipated to reach 2.0 MMT.
In other news, Brazilian officials are considering a biodiesel blend of 15% for later this year, up from the current 10% requirement, citing trucking fuel shortages domestically – according to wire reports.
Responding to the news, Abiove suggests current production and stocks would allow for a 12% blend, though to reach 15% they would need to crush 3 MMT more beans per year, or import soy oil.
Europe
Grain prices “took advantage” of a contraction in the eurodollar parity.
Rapeseed has been partially penalized by the rapid drop in oil prices, and in a context of lack of competitiveness of rapeseed oils compared to other vegetable oils.
The re-containment of the city of Shanghai and a relaxation of export restrictions in Indonesia was indeed weighing heavily on the market.
Farm office FranceAgriMer past Thursday lowered its forecast for French soft wheat exports outside the European Union this season for a third month in a row, saying high prices due to the war in Ukraine had curbed international demand.
French soft wheat exports to non-EU destinations in the 2021/22 season that ends on June 30 are now expected at 9.1 million tonnes, down from 9.25 million projected in May, FranceAgriMer said in a cereal supply and demand update.
Morocco, whose harvest was hit by drought, was proving an exception with steady demand for French wheat.
FranceAgriMer kept its forecast of French soft wheat exports within the 27-country EU unchanged at 8.0 million tonnes.
It also held its projection for French soft wheat stocks at the end of the season steady at 3.2 million tonnes, with the reduced outlook for non-EU exports offset by a downward revision to harvest supply.
Meantime, analyst firm Strategie Grains reduced its forecast for EU soft wheat exports by nearly 2 million tonnes, also citing a drag on demand from elevated prices.
The French firm expects the 27-member bloc to export 28.0 million tonnes of soft wheat during the 2021/22 season ending on June 30, down from 29.9 million projected in May and 31.4 million seen in April.
Strategie Grains also reduced its EU wheat export outlook for 2022/23, to 30.3 million tonnes from 30.8 million forecast last month, due to weak global demand and rising competition from North American and Russian grains.
Sluggish exports in the final part of the campaign also prompted Strategie Grains to cut estimated EU barley exports in 2021/22 by 0.5 million tonnes to 7 million tonnes.
Traders nonetheless expect EU wheat to be in strong demand in the upcoming 2022/23 season, with availability of Ukrainian supplies uncertain despite talks to re-open the country’s ports.
For this summer’s harvest, showers and cooler temperatures in recent days have brought relief for spring crops, and damage from storms last weekend was thought to be very localised, Catherine Cauchard, head of FranceAgriMer’s crop monitoring service, said.
But Strategie Grains cut its forecasts for the EU’s 2022 wheat and barley harvest this month, citing overly dry conditions during the first half of the growing season in many countries, notably France.
The EU wheat crop, indeed, was expected at 124.4 million tonnes, down from 126.2 million projected in May and 130.5 million harvested last year but close to the five-year average.
The barley harvest was seen at 50.3 million tonnes, down from 51.7 million last month and 52.0 million in 2021 with the fall mainly due to a lower spring barley output, it said.
In contrast, the corn crop outlook had improved slightly, with the EU 2022 seen harvesting 66.8 million tonnes, up from 66.7 million last month but still well below the 69.5 million harvested last year
As for ending stocks, FranceAgriMer forecasted corn stocks in 2021/22 were increased to 2.6 million tonnes from 2.2 million as the office revised up supply and lowered projected demand for livestock feed.
France’s worst-ever bird flu outbreak and wider difficulties in the livestock sector have reduced feed demand.
Projected barley stocks also were raised to 1.4 million tonnes from 1.3 million last month, reflecting cuts to expected exports and feed demand, FranceAgriMer’s data showed.
Meantime, farm office FranceAgriMer showed on Friday growing conditions for wheat and barley crops in France continued to decline for a sixth straight week.
An estimated 66% of French soft wheat was in good or excellent condition by June 6, against 67% the previous week and 81% a year ago, the office’s data showed.
The rating has dropped by 25 percentage points since the start of May
Durum conditions also moved down to 62% from 64% the prior week and down from 70% a year ago.
French barley conditions also dropped, as in the previous week.
The good to excellent rating for winter barley fell 1 percentage points to 64%.
Ditto the corresponding score for spring barley dropped 1 percentage points to 53%, FranceAgriMer’s report showed.
Rating for emerged corn plants, was at 88%, down from 90% of the crop valued in good or excellent conditions prior week.
North Africa
Egypt has procured 3.9 million tonnes of domestic wheat during the current harvest season so far, surpassing last year’s full-season total by 300,000 tonnes, the state-run General Company for Silos and Storage’s chairman said on Sunday.
Black Sea basin
Ukraine southern Odesa region started 2022 grain harvest.
Russia has set out its grain export taxes for June 16-21, 2022.
It will increase for wheat to $131.6 per ton against $$129.2 per ton this week, according to the materials of the Ministry of Agriculture.
The duty on corn also will increase to $84.0 from $78.7 a week ago.
Ditto for barley to $92.8 fromof $76.5 per ton.
The wheat rate is calculated based on the indicative price of $386.4 per ton, for barley — $317.6 per ton, for corn $305.5 per ton.
That, it’s compared with the prior week when indicative prices were at $383.4 per ton for wheat, $294.3 per ton for barley, $297.5 per ton for corn.
China
China’s corn supplies in the market are quite ample, the agriculture ministry said on Friday.
Indonesia
Indonesia has approved export permits for 1.16 million tonnes of palm oil products under a programme to accelerate shipments after it reopened exports, Trade Ministry senior official Oke Nurwan said on Monday.
Australia
ABARES released their latest crop report with key takeaways.
National area planted to winter crops in 2022–23 is forecast to be the second highest on record at 23.4 million hectares.
Australia is forecast to produce 30.3 million tonnes (Mt) of wheat in 2022-23, with barley forecast at 10.9Mt and canola at 5.6Mt, according to figures released today by ABARES in its Australian Crop Report June 2022 edition.
Both wheat and barley production from the crop now being planted are forecast to be the fourth-largest on record, while canola production at 5.6Mt is the second largest on record, behind only last year’s crop.
Winter-crop production including pulses, oats and other crops is forecast to reach 50.9Mt, the fourth highest on record.
Summer crops production in 2021–22 is estimated to reach a new national record of 5.5 million tonnes.
Particularly, sorghum at 2.7Mt and cotton lint at 1.3Mt.
International trade scene
Little activity except for a call for tenders from Jordan for 120,000 t of feed barley.
OUTLOOK
Inflation grabbed the headlines on Friday.
US CPI up 8.6%, the highest in 40 years.
The stock market took the news badly, closing sharply lower for the day and posting yet another down week.
This mornin didn’t fared better …
Consumers are cutting back on non-essential purchases.
Commodities typically outperform equities in a high inflation environment, but at least to now, they weren’t acting that way.
Certantly USDA reports on Friday complicated things a bit.
Also, the US dollar, which typically is weaker in a high inflation environment, in contrast continuing up sharply also to start the week.
Fed will raise rates faster then forecats.
That makes the US a more attractive place to park “hot money”, selling other currencies and buying dollars.
There are other pieces to the puzzle, but these are enough to make it already hard to solve!
In the coming days, publications may be delayed or canceled due to commitments due to the harvest.
The essential information, however, will continue to be released on a regular basis.
That’s all, thank you.
To all of you, I wish you a good start to the week and …
Good harvest 2022!
Author: Sandro F. Puglisi
