Good morning Farmer Family and good start to the week …

US farm markets were mixed on Friday’s session but broke back into the red by the close. 

Losses on wheat were substantial.

The continued harvest pressure and spillover weakness from sharply lower crude oil prices, weighened on the markets. 

A firmer dollar, limited the export business.

Thus, Chicago wheat prices went home 4.08% in the red on Friday. 

Kansas City wheats ended Friday’s session 3.79% lower. 

Minneapolis spring wheat prices settled with 3.27% losses.

Corn and soybeans after tested moderate overnight gains, both closed with modest losses of around 0.4% each.

Front month soybean oil prices continued their slide with losses of 3.34% on the day.

Soymeal prices, meanwhile, ended the Friday session with $8.40 gains or up 1.95%. 

For the week, stock markets had a leading roul, kepting to drop. 

The Fed to bring down inflation, increased interest rate with the largest single hike in decades. 

Higher rates made the dollar a more attractive place to park money.

However, other countries too indicated that they would raise rates, meantime. 

Thus, the dollar skyroketed immediately before the Fed rate hike, but then downsized, along Wednesday and Thursday, supporting the wheat in particular as a lower dollar makes U.S. exports more competitive globally.

But, the dollar rose again on Friday, thanks higher T-note yields and a fall of yen after the BOJ maintained its ultra-easy policies.

The U.S. dollar past week rose to its highest level since December 2002 against a basket of currencies, making all commodities traded i US dollars more expensive for buyers using other currencies.

In this context, crude oil was down all week, posting the lowest close since May 25.

Operators, are warried a recession is caming.  

Ethanol and soy oil generally follow crude closely.

Thus, soybeans were hurt badly past week by an 8.69% drop in soy oil.

The spillover weakness from sharply lower crude oil prices, weighened into wheat markets too.

Corn, in contrast, gained ground, as it is more vulnerable to a hot and dry weather forecast in early July than are soybeans (yield typically more influenced by August).

Thus, corn prices, rose 1.46% from prior Friday. 

Soybeans were down 2.49% for the week. 

Product values were mixed, with meal up 2.1% during the week while soy oil collapsed by 8.69%.

Wheat prices were lower on all three contracts past week, with most of the drop on Friday. 

Kansas City wheat contract led the way to the downside, with 4.94% weekly losses.

Minneapolis spring wheat was down 4.26% for the week.

Chicago SRW was 3.41% lower from prior Friday.

In energy markets, oil prices tumbled about 6% to a four-week low on Friday.

Operators, as we said, are worried that interest rate hikes by major central banks could slow the global economy and cut demand for energy.

Thus, Brent futures fell $6.69, or 5.6%, to settle at $113.12 a barrel, while U.S. West Texas Intermediate (WTI) crude fell $8.03, or 6.8%, to settle at $109.56.

That was the lowest close for Brent since May 20 and the lowest for WTI since May 12. 

It was also the biggest daily percentage decline for Brent since early May and the biggest for WTI since late March.

For the week, Brent futures declined for the first time in five weeks, tumbling 7.3% last week.

WTI dropped 9.2% last week, for the first time in eight weeks.

Crude prices tumbled as the dollar rallied.

With the Fed expected to keep raising interest rates, open interest in WTI futures on the New York Mercantile Exchange fell on Thursday to its lowest level since May 2016 as investors cut back on risky assets. 

U.S. gasoline and diesel futures also slid over 4% on worries high pump prices will reduce demand.

Automobile group AAA said the price of diesel at the pump hit a record high $5.798 per gallon on Friday, while the price of gasoline hit a record high of $5.016 earlier in the week.

U.S. energy firms added seven oil and gas rigs in the week to June 17, reaching to 740, its highest since March 2020 after the President Joe Biden slammed producers for profiting from sky-high prices instead of doing more to boost output.

Russia, meanwhile, expects its oil exports to increase in 2022 despite Western sanctions and a European embargo, the Russian deputy energy minister said on Friday, according to Tass news agency.

Russian gas flows to Europe fell short of demand on Friday as an early heat wave in the south boosted demand for air conditioning.

On this morning, oil prices rose in a volatile trade.

Brent crude futures rose 42 cents, or 0.4%, to $113.54 a barrel by 06:33 GMT. 

U.S. West Texas Intermediate crude was at $109.85 a barrel, up 29 cents, or 0.3%. 

Oil from Russia, remains out of reach to most countries because of Western sanctions.

The impact had been partly mitigated by the release of strategic petroleum reserves.

However, if Washington sticks to its current pace, the U.S. strategic reserve will hit a 40-year low of 358 million barrels by October, analysts said.

Libya’s oil production has remained volatile.

The Libyan Oil Minister Mohamed Oun said on Monday that the country’s total production is at about 700,000 barrels per day (bpd), but Libya’s output had fallen to 100,000 to 150,000 bpd, a spokesman for the oil ministry said last week. 

Oil products exports from China, have continued to decline.

The country’s gasoline exports in May fell 46% from a year earlier and diesel exports plunged 93% despite stalling domestic demand, as companies ran short of export quotas, Chinese customs data showed on Saturday.

The country’s crude oil imports from Russia in May, in contrast, soared 55% from a year earlier to a record level, displacing Saudi Arabia as the top supplier, due the discounted supplies from Moscow.

In freight markets, the Baltic Exchange’s main sea freight index rose for a fourth straight session and booked its first weekly gain in four on Friday, propelled by stronger demand across vessels.

The overall index, which factors in rates for capesize, panamax and supramax vessels, added 116 points, or 4.7%, to 2,578.

The index was up 11.1% for the week.

The capesize index gained 285 points, or 10.6%, to 2,987, notching a weekly rise of 26%, its biggest since mid-May.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, rose by $2,365 to $24,776.

The panamax index added 72 points, or 2.6%, to 2,862 points.

The index has gained nearly 9% this week, its best week since mid-April.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000-70,000 tonnes, increased by $644 to $25,757.

The supramax index edged up 7 points to 2,467.

In equity markets, U.S. stocks closed with a modest bounce on Friday.

Strength in technology stocks led the overall market higher.

Thus, the Dow Jones Industrial Average fell 38.29 points, or 0.13%, to 29,888.78, the S&P 500 gained 8.07 points, or 0.22%, at 3,674.84 and the Nasdaq Composite added 152.25 points, or 1.43%, at 10,798.35.

However, US stocks still suffered the biggest weekly percentage decline in two years.

Each of the three major Wall Street indexes fell the third week in a row. 

Particularly, the Dow lost 4.79% during the week.

That was its biggest weekly percentage drop since October, 2020.

The S&P 500 lost 5.79% and the Nasdaq slid 4.78% for the week.

The benchmark S&P 500 index suffered its biggest weekly percentage drop since March 2020, the height of the COVID-19 pandemic plunge.

The benchmark S&P index has slumped about 23% year-to-date and recently confirmed a bear market began on Jan. 3. 

The Dow Industrials was on the cusp of confirming its own bear market.

Economic data on Friday showed production at U.S. factories fell unexpectedly in the latest indication economic activity was on the wane.

U.S. May manufacturing production fell -0.1% m/m, weaker than expectations of +0.3% m/m and the first decline in four months.  

Also, May industrial production rose +0.2% m/m, weaker than expectations of +0.4% m/m.

Gains on Friday were led by the communication services and consumer discretionary sectors, which rose 1.31% and up 1.22%, respectively, on the session. 

The two have been among the worst performing of the 11 major groups on the year.

A positive for stocks is data from EPFR Global showing that U.S. stocks attracted $14.8 billion in inflows in the week through June 15. 

U.S. stock indexes also had carry-over support from a rally in European stocks after Bank of America Friday raised its recommendation on European stocks to neutral from negative.

Also contributing to choppy trading was the expiration of monthly and quarterly options contracts ahead of the Juneteenth market holiday on Monday.

Friday, indeed, was the quarterly expiration of stock futures and options known as triple witching.  

The expiration of $3.5 trillion in option positions and the weight-rebalancing of many indexes lent support to stocks Friday.

In contrast, energy, the year’s best performing sector, fell with a 5.57% tumble and suffered its biggest weekly percentage drop since March 2020.

Volatility, however, is the name of the game right now.

It is here to stay, and it is going to be here until we get a little bit more clarity on have we really reached peak inflation.

On Friday, Fed Chair Jerome Powell once again stressed the central bank’s focus on bringing back inflation to its 2% target while speaking at a conference.

Comments from Fed Chair Powell boosted T-note yields and bolstered speculation the Fed will pursue aggressive rate hikes to tame inflation.

Meantime, Asian markets were mostly lower Monday in cautious trading.

Shares fell in most Asian markets but rose in Hong Kong and India.

China kept its 1-year and 5-year loan prime rates unchanged in a widely expected move.

Rate cuts in the coming months are still likely.

Also, the government should hand out more fiscal stimulus.

Last week, Japan’s central bank also stuck to its near zero interest rate policy, although comments from Bank of Japan Gov.

In this context, Japan’s benchmark Nikkei 225 slid 0.7% to finish at 25,771.22. 

Australia’s S&P/ASX 200 slipped 0.6% to 6,433.40. 

South Korea’s Kospi dropped 2.0% to 6,433.40. 

Hong Kong’s Hang Seng edged up 0.4% to 21,148.92, while the Shanghai Composite was little changed, inching down less than 0.1% to 3,315.40.

In currency trading the dollar index (Sep ’22) on Friday rose by 1.071 (+1.04%) to 104.488 vs. 104.013 prior Friday.

The euro on Friday was down 0.45% to $1.0500 while the yen was at 134.96 vs dollar.

The prior week the euro had closed at $1.0517 while the yen was at 134.4 vs dollar.

On this morning, the U.S. dollar was trading at 134.66 Japanese yen, while the euro cost $1.0532.

Also in Europe, grain prices ended the end week session in the red, carried away by fears of a global recession.

Euro zone consumer inflation jumped to a record 8.1pc for the year to May, unchanged from the preliminary figure for the month, but up from 7.4pc reported the previous month, amid soaring food and energy prices. 

Core inflation, which excludes food and energy prices, rose 4.4pc, up from the 3.9pc seen a month earlier. 

Rapeseed prices, in contrast, rose slightly, but the trend remained heavy in the short term due to the decline in palm prices and other oils, a consequence of exports granted by the Indonesian government. 

The leaders of France, Germany and Italy visited Kyiv as part of a high-profile trip to smooth tensions over what Ukrainian officials perceive as lukewarm support in their fight against Russia.

During the week, we saw firmness on the grain markets in a context of weather market. 

An heat wave was hitting the western Europe.

Traders and analysts are now monitoring the impact of the heatwave that has spread northwards from Spain this week, with temperatures reaching 40 degrees Celsius (104°F) in southern France on Thursday.

While damage may be limited in the south, where wheat and barley crops are already mature, there is concern that temperature peaks in central France could have hurted cereals.

Meantime, the first returns from the winter barley cuts in France confirm very great heterogeneity in terms of yields depending on the region and the nature of the plots. 

It can go from simple to double.

The winter barley harvest is under way, with 2% of the crop area cut by last Monday, FranceAgriMer said.

Coldiretti, an Italian agricultural lobby, said the effects of drought have cut wheat yields across the country. 

They added that the smaller yield will increase “dependence on foreign countries.” 

The group said that Italy grows around 36% of the soft wheat used in its domestic bread, biscuits, and cakes and 62% of the durum used in pasta.

Meantime, FranceAgriMer showed on Friday growing conditions for wheat and barley crops in France continued to decline for a seventh straight week.

An estimated 65% of French soft wheat was in good or excellent condition by June 13, against 66% the previous week and 81% a year ago.

The rating has dropped by 26 percentage points since the start of May.

Durum conditions also moved down to 61% from 62% the previus 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 63%.

The corresponding score for spring barley, in contrast, increased by 1 percentage points to 54%, FranceAgriMer’s report showed.

Rating for emerged maize plants, was at 87%, down from 88% of the crop valued in good or excellent conditions prior week.

In this context, Paris-based Euronext exchange saw September’s wheat prices to close the week at €391.5, an decrease of €0.25 from prior week, but was down 6.25 €/t during the end wek session. 

August corn price was up €2.75/t for the week, closing at 337.5 euros per ton, but lost €2/t on Friday session.

Rapeseed for August deadline, fell €18.25/t for the week, to close €766.75/t. 

Losses were partially recovered during Friday session, when rapeseed gained 9€/t.

In Russia, on Friday the Ministry has set out its grain export taxes for June 22-28, 2022.

It will increase for wheat to $142.0 per ton against $131.6 per ton this week, according to the materials of the Ministry of Agriculture. 

The duty on corn also will increase to $86.5 from $84.0 a week ago.

Ditto for barley to $117.5 fromof $92.8 per ton.

The wheat rate is calculated based on the indicative price of $399.4 per ton, for barley — $352.5 per ton, for corn $308.6 per ton.

That, it’s compared with the prior week when indicative prices were at $386.4 per ton for wheat, $317.6 per ton for barley, $305.5 per ton for corn.

From Australia, markets ended the week with most wheat and barley values unchanged. 

New crop canola was choppy all week. Friday saw more current crop liquidity as local depot grain picked up a bid and traded while delivered for July and August also found some levels that were happy to trade. 

ASX Jan 23 East Coast Wheat settled a buck firmer at A$473. 

Barley was unchanged with SA wide trade bid offer spread of $15/t. 

The 8-day forecast is still looking relatively dry for southern Queensland and the northern half of NSW which will help keep the late plant momentum going. 

On international trade scene, Algeria’s state grains agency OAIC has issued an international tender to buy soft milling wheat to be sourced from optional origins.

The tender sought a nominal 50,000 tonnes but Algeria often buys considerably more in its tenders than the nominal volume sought.

The deadline for submission of price offers in the tender is Tuesday, June 21, with offers having to remain valid until Wednesday, June 22.

The wheat is sought for shipment in two periods from the main supply regions including Europe: Aug. 1-15 and Aug. 16-31.

If sourced from South America or Australia, shipment is one month earlier.

Watching this week’s market, US market and government are off today in observance of Juneteenth. 

That pushes the weekly USDA Export Inspections report to Tuesday afternoon, with the Crop Progress report out overnight after the session close. 

Skip ahead to Thursday and we will have the weekly EIA report showing ethanol production and stocks. 

The monthly Cold Storage report will be out Thursday afternoon. 

Friday will mark the expiration of July grain options, as well as the monthly Cattle on Feed report from NASS.

That’s all, thank you.

To all of you, we wish you a good start to the week …

Good harvest 2022!

Author: Sandro F. Puglisi  

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