Good morning Farmer Family and good start to the week …
US farm markets, have been crazy past week.
In spite that, some operators likely still not thrown the towel, waiting for the element of surprise.
Meantime, wheat prices tumbled to a five-month low last Friday.
Hopes for a pick-up in exports from Ukraine, a strong dollar and harvest pressure, surpassed a lot the renewed interest for U.S. supplies, thus the board dropped another double digits.
Particularly, CBOT SRW wheat price closed the last trading day of the week with 2.3% losses.
Kansas City wheat prices closed 1.33% lower.
Minneapolis spring wheat prices went home firmer, however at the bell, Sep contract was still down 0.41% from Thursday’s settle.
For the week, Chicago was the leader of the downside, losing 12.87% and dropping below $8 mark.
That was the biggest weekly loss in percentage terms for the contract since March 2011.
Kansas City HRW wheat was close behind, down 11.45%.
MPLS spring wheat was 8.57% lower on the week.
Corn prices, on their part, ended the Friday session mixed as Sep contract was fractionally lower down 0.12%, while Dec contract was up 0.46%.
For Dec contract, that was their seventh gain in the last eight sessions, on concerns about hot weather stressing the U.S. crop as it passes through pollination.
However, the rain forecasts across the eastern Corn Belt, led to a drop in prices.
Thus, for the week, although prices initially rose early in the week, then tumbled and never recovered, with Sep slipped 4.58%, while Dec contract gained only 7.4 cents week on week.
Nov soybeans posted modest gains up 0.09% past Friday.
They were supported by weather concerns, but gains were limited as the crop still was not in a critical development phase.
Thus, the August and Sep contracts were red at the bell.
Particularly, Aug was down 0.39%, with Sep 0.02% lower, meanwhile, Nov contract was 0.09% higher by the close.
In the products, the board was mixed going into Friday.
Meal closed 1.8% to 2.5% in the red, while soy oil prices were 3.3% to 4.4% higher.
For the week, soybeans held steady from Wednesday to the Friday close, but early week losses were too much, as August was down 3.12% since the prior Friday.
Product values were lower, with soymeal leaking 0.07% for the week and bean oil was down 4.01%.
Total export sales of US wheat nearly quadrupled in the week ended 7 July, topping 1 million tonnes (Mt).
Destination China accounted for a quarter of that.
Friday‘s Commitment of Traders report indicated spec funds closed another 17k longs contract in the week ending July 12.
The group also added some shorts for a 21,693 contract lighter net long of 151,174 contracts.
That is their lowest net long since October of 2020.
The commercials were also less net short wk/wk, but by the way of net new buying.
As for soybean, spec traders reduced exposure through the week that ended 7/12.
The weekly CoT report confirmed 25,717 fewer contracts were in play compared to the prior week, for a 9,337 contract reduced net long of 95,711 contracts.
That was the group’s weakest net long since last December. Commercial soybean traders also reduced exposure by way of 19.9k fewer short hedges and 8.8k fewer long hedges.
That reduced their net short to 157k contracts.
As for wheat, data had the SRW spec traders as 6,444 contracts net short as of 7/12.
That was a 6,402 contract stronger net short wk/wk by way of further long liquidation.
In KC wheat, spec traders were 5,650 contracts less net long to 16,387 contracts.
That long liquidation left the group at their weakest net long since June of last year.
Managed money firms were 2,477 contracts less net long in MPLS wheat as from 7/5 to 7/12.
The group was still 2,654 contracts net long.
On this morning, by 03:17 GMT, Chicago wheat futures rose 2%, with the market rising for the first time in six sessions.
Corn gained 0.5%, on concerns over hot weather threatening the U.S. crop in its critical phase of pollination.
Meanwhile soybeans gained 1.1%.
In energy markets, oil gained 2.5% last Friday after a U.S. official said that an immediate Saudi oil output boost was not expected.
Thus, Brent crude futures settled at $101.16 a barrel, rising $2.06, or 2.1%, while West Texas Intermediate crude settled at $97.59 a barrel, gaining $1.81, or 1.9%.
However, both benchmarks saw their biggest weekly percentage drops in about a month, largely on fears that a nearing recession would chop away at demand.
Brent, indeed, lost 5.5% in its third weekly drop, while WTI was down 6.9% in its second weekly decline.
The U.S. oil rig count, an early indicator of future output, inched up by two to 599 this week to their highest since March 2020.
Also signalling more oil supply on the horizon was Libya’s oil chief, who said crude output will resume after meeting groups that have blockaded the country’s oil facilities for months.
That could mean a return of 850,000 barrels per day.
Bearish market sentiment has also followed renewed COVID-19 outbreaks in China, which have hampered a demand recovery.
China’s refinery throughput in June, indeed, shrank nearly 10% from a year earlier, with output for the first half of the year down 6% in the first annual decline for the period since at least 2011, data showed on Friday.
On this morning, oil prices extended gains, propped up by a weaker dollar and tight supplies that offset concerns about recession and the prospect of widespread COVID-19 lockdowns in China again reducing fuel demand.
Brent crude futures for September settlement rose 69 cents, or 0.7%, to $101.85 a barrel by 04:21 GMT.
U.S. West Texas Intermediate (WTI) crude futures for August delivery edged up 27 cents, or 0.3%, to $97.86 a barrel.
Global markets are focused this week on the resumption of Russian gas flows to Europe via the Nord Stream 1 pipeline which is scheduled to end maintenance on July 21.
Governments, markets and companies fear the shutdown may be extended because of the war in Ukraine.
Loss of that gas would hit Germany hard and heighten the threat of a recession.
Separately, U.S. Treasury Secretary Janet Yellen said on Saturday she had productive meetings about a proposed price cap on Russian oil with a host of countries on the sidelines of a meeting of the finance chiefs of the Group of 20 major economies.
Meantime, China’s commerce ministry had said setting a cap on the Russian oil price is a “very complicated issue” and the precondition to solve the Ukraine crisis is to promote peace talks among relevant parties.
In freight markets, the Baltic Exchange’s main sea freight index, tracking rates for ships ferrying dry bulk commodities, logged its first weekly gain since mid-June, as a jump in capesize rates outweighed declines in other vessel segments.
The overall index, which factors in rates for capesize, panamax and supramax shipping vessels, indeed, was up 140 points, or nearly 7%, at 2,150 points, its highest since July 4.
It rose 4% for the week.
Particularly, the capesize index rose 462 points, or 18.8%, to 2,919 points, its highest since June 20.
The index gained 29% for the week.
The capesize sector is witnessing modest strength, driven mainly by iron ore exports from Brazil, underpinning the Baltic index, analysts said.
There is also demand for coal from Colombia and South Africa in Europe, and this helps the dry bulk market, as it translates into earning of around $20,000, which is very good,” they added.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were up $3,834 at $24,209.
The panamax index, in contrast, was down 35 points, or 1.8%, at 1,885 points, its lowest since Feb. 7.
Down 15.2%, the panamax index had its worst week since Jan. 21 and logged its fourth straight weekly fall.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, decreased $311 to $16,969.
The supramax index fell by 11 points to a new five-month low of 2,039 points, registering its eighth consecutive weekly decline.
In equity markets, U.S. stock indexes past Friday moved sharply higher.
A rally in bank stocks lifted the overall market.
Hopes for a less-aggressive Fed boosted stocks after Friday’s data from the University of Michigan showed that 5-10 year inflation expectations fell more than expected to the lowest level in a year.
Indeed, the University of Michigan’s July U.S. consumer sentiment index unexpectedly rose +1.1 to 51.1, stronger than expectations of unchanged at 50.0.
Meanwhile, the 5-10 year inflation expectations level fell to 2.8%, lower than expectations of 3.0% and the lowest in a year.
In addition, inflation concerns subsided a bit after June import prices unexpectedly declined.
Particularly, U.S. June import prices ex-petroleum fell -0.4% m/m, weaker than expectations of +0.2% m/m and the largest decline in more than 2 years.
The strong dollar should in theory be pushing import prices lower.
U.S. June retail sales rose +1.0% m/m and +1.0% m/m ex-autos, stronger than expectations of +0.9% m/m and +0.7% m/m ex-autos.
Also, U.S. June manufacturing production fell -0.5% m/m, weaker than expectations of -0.1% m/m.
The U.S. July Empire manufacturing survey general business conditions index unexpectedly rose +12.3 to 11.1, stronger than expectations of a decline to -2.0.
Meantime, the yield on the 10-year Treasury slipped to 2.92% from 2.96% late Thursday.
The yield on the two-year Treasury rose to 3.14% from 3.13% late Thursday.
In this context, Wall Street capped a week of losses with a broad rally, as the S&P 500 rose 1.9%, snapping a five-day losing streak, although the gains weren’t enough to pull the benchmark index out of the red for the week.
The Dow Jones Industrial Average rose 2.1% and the Nasdaq gained 1.8%. Smaller company stocks outgained the broader market, sending the Russell 2000 index 2.2% higher.
Those indexes also posted losses for the week, however.
All told, the S&P 500 rose 72.78 points to 3,863.16.
The Dow rose 658.09 points to 31,288.26 and the Nasdaq rose 201.24 points to 11,452.42.
The Russell 2000 gained 36.87 points to 1,744.37.
Meantime, shares were higher in Asia on Monday.
Hong Kong’s Hang Seng index surged 1% to 20,507.34, while the Shanghai Composite index gained 0.7% to 3,251.54.
In Seoul, the Kospi jumped 1.4% to 2,363.36.
Australia’sS&P/ASX 500 added 0.5% to 6,637.50.
New Zealand shares edged higher even after the government reported that inflation hit a 32-year high of 7.3% in the April-June quarter.
It was 6.9% in the previous quarter.
On Sunday, the New Zealand government announced it would extend until January a program to cut gas taxes and public transport costs.
Markets in Japan were closed for a holiday.
In currency trading, the U.S. Dollar Index (Sep ’22) was down 0.456 points to 107.911.
From South America, the Buenos Aires Grain Exchange estimates the Argentine corn harvest is 58% complete.
This trails last year by 4% and is 12% behind their 5-year average.
The crop is still estimated at 49 MMT but with yields improving and decent, their estimate is likely to rise in the coming weeks.
The Exchange also keeps Argentine seedings at 6.2 million but caution that the dryness may lead to eventual reductions.
No production estimate as of yet but Rosario is at 17.7 (down 800 K) and the USDA is optimistic at 19.5 million.
In Europe, grain prices suffered heavy losses on Friday evening.
Rapeseed, for its part, took advantage of the sharp upturn in the prices of crude oil to regain a little height.
However, both wheat and rapessed closed the week lower, while corn prices were sligtly higher week on week.
Germany association of cooperatives, estimates national production up by +5.3% compared to last year.
German wheat production could thus exceed 22.5 Mt, a figure which nevertheless remains lower than the June estimate resulting from the arrival of the heat wave.
In rapeseed, German production is also announced to be up by +8.2% at 3.77 Mt, close to June expectations.
Consultancy Strategie Grains, in contrast, cut all its forecasts for this year’s grain crops in the European Union, as it fine-tuned wheat and barley estimates as harvest progresses in the bloc and pointing to dry weather threatening maize fields.
The EU wheat crop is now expected at 123.3 million tonnes, down from 124.4 million projected in June and below the revised 129.9 million tonnes harvested last year.
The barley harvest was seen at 49.6 million tonnes, down from 50.3 million last month and 51.9 million in 2021.
In maize, the crop was seen falling to 65.4 million tonnes, down from 66.8 million tonnes seen last month and 69.7 million last year.
On the wheat market, the analyst kept its EU export forecast nearly unchanged at 30.4 million tonnes.
Meantime, French farmers had harvested 50% of this year’s soft wheat crop by July 11 compared with 14% a week earlier and far ahead of last season after hot and dry weather boosted crop development, farm office FranceAgriMer said on Friday.
French farmers had only harvested 3% of the soft wheat crop by the same time in 2021.
An estimated 64% of soft wheat was in good or excellent condition, up from 63% the previous week but down from 76% last year, FranceAgriMer said in a cereal crop report.
Details per region showed contrasting results, with poor conditions in the south, much better ones in the north and excellent ones in the far east.
Winter barley harvesting was nearly over, with 97% of the crop gathered by Monday against 83% a week earlier and just 39% a year ago, the office’s report showed.
Durum wheat harvesting was 82% complete, versus 50% a week earlier, while 41% of the spring barley crop had been cut, from 14% the previous week.
A second wave of warm and dry weather forecast for this week is expected to keep field work brisk.
But the expected sweltering temperatures and sparse rain could hurt maize crops.
An estimated 83% of the maize crop was rated good or excellent by Monday, down slightly from 84% the previous week and compared with 89% a year earlier.
From Africa, Nigeria has approved imports of a drought-resistant, genetically modified wheat developed by Argentina’s Bioceres.
The African country joins the list of others who have already authorized the importation of goods made from Bioceres’ HB4 wheat, including Australia, New Zealand and Brazil.
Nigeria is set to import 6.5 million tonnes of wheat through the 2022-2023 season, according to data from the U.S. Department of Agriculture.
From the Black Sea basin, Russian farmers have harvested almost 20Mt grain, the country’s agriculture ministry was reported as saying in a Telegram channel app.
The harvest included 15.5Mt wheat and 3.5Mt barley, pace and yield are reportedly higher than previous year on some crops.
Moscow-based Institute for Agricultural Market Studies IKAR raised its 2022 Russian wheat crop forecast by 1.8Mt to 90.5Mt.
It increased its 2022-23 Russian wheat export forecast by 2Mt to 44Mt.
Meantime, Russia on Friday has set out its grain export taxes for yhe period July 20-26.
According to the agriculture ministry the export duty will increase for all products wheat, barley and corn.
Particularly, for wheat will increase to 5,984.9 roubles/tonne, from 5,558.9 roubles/tonne of a week earlier.
For barley, will move up to 4,413.7 roubles/tonne, from 3,775.9 roubles/tonne the prior week.
For corn, the tax will up to 3,144.9 roubles/tonne, from 3,075.1 roubles/tonne the previus period.
As for indicative price, for wheat will be 386.8 $/tonne, for barley 332.9 $/tonne, and for corn 303.0 $/tonne.
That is compared with 401.6 $/tonne for wheat, 340.7 $/tonne for barley, and 323.0 $/tonne for corn of a week earlier.
(as of July 15, $1 = 57.1650 roubles).
Meantime, Russia has increased the quota for its exports of sunflower oil and sunflower meal, the government said on Sunday, citing sufficient domestic supplies.
The country banned exports of sunflower seeds from the end of March until the end of August and imposed an export quota on sunflower oil to avoid shortages and ease pressure on domestic prices.
The government on Sunday said that the export quota for sunflower oil has been increased by 400,000 tonnes from the previous cap of 1.5 million tonnes while the restriction on exports of sunflower meal was raised by 150,000 tonnes from a previous limit of 700,000 tonnes.
The restrictions are in place until Aug. 31.
The decision to ease restrictions was made because the domestic market has sufficient supplies, the government said, adding that producers will benefit from increased exports.
In Ukraine, Ukrainian farmers have threshed 3.6 million tonnes of grain of the 2022 grain harvest from about 10% of the sowing area, Ukrainian agriculture ministry said on Friday.
The ministry said in a statement that the yield averaged 2.93 tonnes per hectare.
Ministry data showed that the volume included 1.7 million tonnes of wheat with an average yield of 2.88 tonnes per hectare, 1.8 million tonnes of barley with a yield of 3.09 tonnes per hectare and 77,300 tonnes of peas with a yield of 1.84 tonnes.
The ministry also said farmers harvested 679,200 tonnes of rapeseed from 133,700 hectares or 11% of the sown area.
The grain yield is far below last year’s level, both by a sharp rise in the cost of fertilizers and other necessary materials due to the blocked seaports, and by unfavourable weather in the south of the country, where harvesting is currently underway.
From the Middle East, Iran’s purchases of domestically-grown wheat have exceeded five million metric tons in the harvesting season that began in early April, a sign the country has been successful in its plans to ensure food security.
Iran’s agriculture minister Javad Sadatinejad said past Thursday that the government had spent 110 trillion rials ($344 million) on domestic wheat purchases this year.
He said payments to farmers will be fast-tracked in the upcoming weeks to meet a target of at least six million tons in domestic wheat purchase at the end of the harvesting season in late July.
Iran announced in February that it will nearly double its guaranteed purchase price for wheat to 110,000 rials ($0.35) per kilogram to ensure it will have access to enough supplies of domestically-grown wheat and to avoid problems in the global market because of the war between Ukraine and Russia.
Wheat imports into Iran would fall by 57% year-on-year in 2022-23 thanks to this major increase in domestic production of the crop.
Meantime, Iran’s Government Trading Corporation (GTC), which is responsible for grains supplies in the country, said past Thursday that hundreds of thousands of tons of wheat had been imported into Iran over the past four months despite the surge domestic output.
From the Middle Kingdom, China is rolling out a quota system to limit exports of phosphates, in the second half of this year.
The quotas, set well below year-ago export levels, would expand China’s intervention in the market to keep a lid on domestic prices and protect food security while global fertiliser prices are hovering near record highs.
China is the world’s biggest phosphates exporter, shipping 10 million tonnes last year, or about 30% of total world trade.
Its top buyers were India, Pakistan and Bangladesh, according to Chinese customs data.
China appears to have issued export quotas for just over 3 million tonnes of phosphates to producers for the second half of this year, a China fertiliser analyst said.
That would mark a 45% drop from China’s shipments of 5.5 million tonnes in the same period a year ago.
Although China has imposed export duties on fertilisers in the past, the latest measures mark its first use of inspection certificates and export quotas, analysts said.
The surge in prices over the last year has raised concerns for Beijing, which needs to guarantee food security.
Domestic Chinese prices remain at a significant discount to global prices, however, and are currently about $300 below the $1,000 per tonne quoted in Brazil, incentivising exports.
DAP and monoammonium phosphate exports in the first five months of this year totalled 2.3 million tonnes, down 20% from a year ago.
On the other hand, China’s first-half pork output rose 8.2% year on the year to 29.39 million tonnes, official data showed on Friday, after an increase in the size of its breeding herd.
China’s overall pig herd contracted slightly by 1.9% compared to the same period a year earlier to 430.57 million heads, according to the National Bureau of Statistics.
Meantime, China will release 500k MT of state reserve soybeans via auction on Friday the 22nd.
From Australia, local markets ended last week a mixed bag.
Current crop prices firmed slightly on Friday both up country and delivered port.
Eastern Australian trade in deport stocks remains quiet as logistics are still a headache.
Eastern Australian new crop values were unchanged to a buck softer.
Port congestion eased this week in Geelong, Geraldton and Kwinana but increased in Albany, Port Kembla and Portland.
Twenty six vessels were at anchor and 9 were loading as at last Friday.
Logistics are also being hampered by rail lines out of commission. Demand for trucks has increased.
On international trade scene, GASC announced an invitation to offer wheat on Tue 19 Jul. from the following origins:
US/ Canada/Australia/ Arg/Bzl basis C&F.
The shipment is request for the periods,16 -30 Sep and 1-15 Oct and 16-31 Oct and 1-15 Nov.
The payment terms are 180 days.
The suppliers have the right to participate in all the shipment periods or any of them.
Leading South Korean animal feed maker Nonghyup Feed Inc. (NOFI) has issued an international tender to purchase up to 60,000 tonnes of soymeal.
The deadline for submission of price offers in the tender is today, July 18.
The soymeal was sought in one consignment of between 50,000 to 60,000 tonnes for arrival in South Korea around Nov. 20.
Shipment was sought between Sept. 23-Oct. 12 if sourced from South America, between Nov. 1-Nov. 20 if from China, between Oct. 15-Nov. 3 if from the U.S. Pacific Northwest coast or between Sept. 28-Noct. 17 if from the U.S. Gulf,
Watching this week’s market, today we will have Export Inspections data in the afternoon, and the Crop Progress report overnight after the session close.
The weekly EIA ethanol numbers will be out on Wednesday.
Thursday will feature the weekly Export Sales report from USDA’s FAS division.
Friday marks the expiration of August grain options.
NASS will also release monthly Cattle on Feed and Cold Storage reports and the bi-annual Cattle Inventory report overnight.
That’s all, thank you.
To all of you, we wish you a good day and … Good Harvest 2022!
Author: Sandro F. Puglisi
