The image portrays a caricature made by Charlie Hebdo
Good morning Farmer Family, and good start to the week …
All the bullish factors of the spring seem to have faded past week.
In the meantime, new bearish sentiments have come:
– A strongest dollar since ’02 was certantily deflationary;
– Brazil’s 2nd crop corn alone was larger than their 3 combine crops last season;
– Russia and Ukraine signed a landmark deal to reopen Ukrainian Black Sea ports for grain exports.
The deal is valid for 120 days and targets monthly exports of 5 million tonnes.
All of which has led to US farm markets mostly down during the week.
Front month corn prices ended the Friday session with 2% losses.
Soybean prices were 0.8% to 1.13% higher on Friday, rebounding from multi-month lows, as soy processors have slowed purchases of pricey old-crop soybeans, opting to wait for the autumn harvest of the 2022 crop.
Soymeal prices closed with 0.67% losses on the day, as soy oil rallied 2.94% on Friday.
For the week, Sep corn prices slipped another 6.62%.
Soybean prices, in spite had a promising start to the week, with prices up on Monday, had faded back throughout the week, with August deadline down 3.12% for the week.
Product values were only marginally higher at the end of the week, with soymeal up just 0.12% and bean oil 0.4% higher.
The wheat complex, on its part, after the rally early in the week, failed, going sharply down into the back half of the week.
Minneapolis spring wheat prices fell the most, with another net 3.94% drop from prior Friday.
Chicago SRW wheat prices ended a net 2.29% weaker and were back below the $8 mark.
Kansas City wheat prices closed with a 2.06% loss from Friday to Friday.
Wheat basis past week was mixed both in the Gulf and Pacific Northwest (PNW).
The weekly USDA reports were positive both for harvest pace and wheat conditions.
USDA’s Export Sales report indicated sales well off the week prior, but still 511,100 MT.
Sales commitments YTD are 7.647 MMT, that left many international buyers covered.
Average export pace for U.S. wheat from the season started, has been slow, despite the plunge in futures.
CBOT September wheat has tumbled more than $5 a bushel, or 41%, since mid-May.
Buyers are also eager to capitalize on the lower wheat price trend, but US wheat price is still $40 a tonne over world values.
Many farmers, in contrast, have plenty of on-farm storage and are reluctant to sell in the near term.
Hot weather ahead of other row crop harvests and winter wheat planting creates a “wait and see approach” for many farmers.
Per latest data from the CFTC showed on Friday, corn spec traders closed 24,916 of their open longs through the week of 7/19.
That left the group 125,303 contracts net long.
Commercial corn traders were adding new long hedges and closing short hedges for a net 35.5k contract reduction to their net short.
At 375,936 contracts, that is their weakest net short since October of 2020.
As for soybean, the report showed managed money firms were 87,832 contracts net long as of 7/19.
That was down 7,879 contracts by way of long liquidation to their weakest net long since December.
For the products, CFTC reported meal specs were 66,588 contracts net long as of 7/19.
That was down 1,702 contracts via net new selling through the week.
For soy oil, managed money firms were 1,033 contracts less net long via long liquidation.
As for wheat, CFTC reported CBOT SRW wheat spec traders as 6,816 contracts net short as of 7/19.
That was a net 372 contracts stronger net short as the new sellers offset the new spec buyers on a 7.1k contract increased OI.
For KC wheat, CFTC had the funds at 11,868 contracts net long.
That was down 4.5k wk/wk via net new selling.
MPLS spec traders were down to just 982 contracts net long as of 7/19’s settle.
That was via 5.3k longs vs 4.4k spec shorts.
On this morning, Chicago wheat prices rose 2.5%, after a Russia’s missile attack on Saturday, raised concerns over Ukrainian supplies, despite the deal between the two nations.
Corn rose 1.2%, while soybeans added 0.2%.
However, Ukraine pressed ahead on Sunday with efforts to restart grain exports from its Black Sea ports under the signed deal.
In energy markets, U.S. crude prices settled below $95 a barrel for the first time since April in choppy trading past Friday after the European Union said it would allow Russian state-owned companies to ship oil to third countries under an adjustment of sanctions agreed by member states.
The EU announcement has came after Russian Central Bank Governor Elvira Nabiullina said it will not supply crude to countries that decide to impose a price cap on its oil and instead redirect it to countries which are ready to “cooperate” with Russia.
In this context, on Friday U.S. West Texas Intermediate crude (WTI) settled $1.65, or 1.7%, lower at $94.70 a barrel, while Brent crude futures fell 66 cents, or 0.6%, to $103.20.
Consequentially, WTI closed lower for the third straight week.
WTI was pummelled after data showed that U.S. gasoline demand had dropped nearly 8% from a year earlier in the midst of the peak summer driving season, hit by record prices at the pump.
In contrast, signs of strong demand in Asia propped up the Brent benchmark, which settled higher for the first time in six weeks.
Prices, however, were held back by worries of interest rate hikes that could slash demand.
Also, the resumption of some Libyan crude oil output, dragged price oil down.
Libya’s oil production is at more than 800,000 barrels per day (bpd) and will reach 1.2 million bpd by next month, the Libyan oil ministry said.
Also, Iraq has the capacity to increase its oil production by 200,000 bpd this year if asked, an executive of Iraq’s Basra Oil Co said.
U.S. oil rigs, an early indicator of future output, remained steady at 599 past week.
Meantime, money managers raised their net long U.S. crude and Brent futures and options positions in the week to July 19, per latest data from the U.S. Commodity Futures Trading Commission (CFTC) and Intercontinental Exchange.
On this morning, oil prices dropped again, extending a recent losing streak on concerns that an expected rise in U.S. interest rates would weaken fuel demand.
Officials at the Fed, indeed, have indicated that the central bank would likely raise rates by 75 basis points at its July 26-27 meeting, a hefty increase that it hasn’t otherwise implemented since 1994.
That will put the Fed’s benchmark rate in a range of 2.25% to 2.5%, the highest level since 2018.
Thus, Brent crude futures for September settlement fell $1.19, or 1.2%, to $102.01 a barrel by 06:45 GMT, down for a fourth day.
U.S. West Texas Intermediate (WTI) crude futures for September delivery slid $1.33, or 1.4%, to $93.37 a barrel, also down for a fourth day.
In freight markets, the Baltic Exchange’s main sea freight index rose past Friday, as rates went up across its component vessel segments.
The overall index, which factors in rates for capesize, panamax and supramax shipping vessels, indeed, was up 28 points, or 1.3%, at 2,146 points.
It edged down 0.2% for the week.
Particularly, the capesize index snapped a three-day losing streak, gaining 43 points, or 1.6%, to 2,696 points.
However, the index saw its worst week since late-June, falling by 7.6%.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were up $363 at $22,362.
The panamax index was up 42 points, or 2,1%, at a 10-day high of 2,093 points.
The index also posted its highest weekly gain of 11% in nearly four months.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, increased by $383 to $18,838.
The supramax index rose by 7 points to 2,080 points, logging its first weekly rise of 2% since May 20.
In equity markets, U.S. stocks ended lower last Friday.
Still, all three major indexes posted weekly gains despite Friday’s losses with the tech heavy Nasdaq closing out the week 3.3% higher.
The S&P 500 advanced 2.4%, and the Dow gained 2%.
On Friday, however, the Dow Jones Industrial Average fell 137.61 points, or 0.43%, to 31,899.29, the S&P 500 lost 37.32 points, or 0.93%, to 3,961.63 and the Nasdaq Composite dropped 225.50 points, or 1.87%, to 11,834.11.
A disappointing earnings from Snap spooked investors as Snapchat owner posted its weakest-ever quarterly sales growth as a public company, sending Snap Inc’s shares down nearly 40%.
Shares in social media and ad tech firms also dropped.
Seagate Technology Holdings Plc, the world’s biggest maker of computer hard drivers, closed down more than -8% after giving a weak forecast for the current pricing period citing “weakening global economic conditions.”
Online companies that depend heavily on ads, such as tech giants Meta Platforms Inc and Alphabet Inc tumbled 7.6% and 5.6%, respectively, weighing on the Nasdaq.
The S&P 500 communication services and information technology tumbled 4.3% and 1.4%, respectively.
Verizon Communications Inc tumbled 6.8% after announcing it cut its annual adjusted profit forecast as inflation weighs.
Twitter Inc, in contrast, reversed earlier losses to add 0.8% following a surprise fall in revenue.
American Express Co rose 1.9% on strong earnings and an increased revenue forecast.
Also, a slide in T-note yields last Friday supported stocks after the 10-year T-note yield dropped to an 8-week low of 2.76% from 2.91% late Thursday.
The two-year Treasury yield tumbled again, to 2.98% from 3.09% late Thursday and from 3.14% a prior week, on worries about the economy.
Friday’s U.S. economic data, indeed, was slightly supportive for stocks but showed a July U.S. S&P Global manufacturing PMI which fell -0.4 to a 2-year low of 52.3.
However, that was stronger than expectations of 52.0.
In Europe, European shares notched up their best week in two months past Friday as concerns over an energy supply crunch eased.
Russian gas flows to Europe, indeed, has been resumed after a scheduled maintenance outage.
Consequentially, the pan-European STOXX 600 index closed 0.3% up at its highest level since June 10, while for the week it jumped nearly 2.9%.
However, market participants were fretted, as euro zone business activity unexpectedly shrank in July.
Thus, gains were led by sectors that are more resilient to uncertainty such as real estate, up 4.3%, followed by utilities, and food and beverages stocks.
Just Eat Takeaway jumped 13.8% after the online takeaway food company’s German rival Delivery Hero forecast a smaller loss as it shifted its focus to profitability.
Aluminium-maker Norsk Hydro gained 6.4% after proposing an extra dividend and offering share buybacks.
Rising in oil prices lifted heavy-weigh energy stocks 1.2%.
Economy-linked stocks such as banks, in contrast, dropped 1.2%.
In earnings reports, Danske Bank fell 2.2% as it axed dividends.
Swiss elevator and escalator manufacturer Schindler slipped 3.9% after cutting 2022 revenue guidance.
Uniper plunged 28.9% after the German government stepped in to rescue the gas importer with a 15 billion euro ($15.28 billion) bailout.
After a volatile session following the resignation of Prime Minister Mario Draghi on Thursday, Italian shares (FTMIB) inched up 0.1% on Friday as the country prepared for a snap national election on Sept. 25.
On this morning, Asian shares tumbled after Friday’s retreat on Wall Street.
Tokyo’s Nikkei 225 shed 0.9% to 27,676.97 and the Kospi in Seoul slipped 0.6% to 2,406.98.
Hong Kong’s Hang Seng declined 1.2% to 20,365.99, while the Shanghai Composite index gave up 0.8% to 3,245.19.
In Australia, the S&P/ASX 200 edged 0.2% lower to 6,781.60.
On Thursday the Commerce Department will release its first estimate of the economy’s output in the April-June quarter.
Some economists forecast it may show a contraction for the second quarter in a row.
The economy shrank 1.6% in the January-March quarter.
Two straight negative readings is considered an informal definition of a recession, though in this case economists think that’s misleading.
The U.S. economy is slowing but healthy hiring shows it is not yet in recession, Treasury Secretary Janet Yellen said Sunday on NBC’s “Meet the Press.”
In currency trading, the dollar index past Friday fell by -0.20% and posted a 2-1/2 week low, due the sharp drop in the 10-year T-note yield.
Also, strength in the yen undercut the dollar after USD/JPY slid to a 2-week low.
Particularly, the U.S. Dollar Index decreased from prior week’s 108.24 to close at 106.25.
The dollar recovered from its worst levels Friday after stocks fell, which boosted liquidity demand for the dollar.
EUR/USD on Friday fell by -0.24%.
Signs of a slowdown in economic activity in the Eurozone weighed on EUR/USD Friday after the Eurozone July S&P Global manufacturing PMI fell to a 2-year low.
Also, the Bundesbank warned that worries about Russian gas “are weighing on the outlook” for German growth.
The Eurozone July S&P Global manufacturing PMI fell -2.5 to a 2-year low of 49.6, weaker than expectations of 51.0.
Also, the Eurozone July S&P Global composite PMI fell -2.6 to a 17-month low of 49.4, weaker than expectations of 51.0.
USD/JPY on its part fell by -0.90% last Friday.
Friday’s data that showed a bigger than expected increase in Japanese consumer prices is hawkish for BOJ policy and sparked short-covering in the yen.
Japan’s June national CPI ex-fresh food & energy rose +1.0% y/y, stronger than expectations of +0.9% y/y and the biggest increase in 6-1/2 years.
The Japan July Jibun Bank manufacturing PMI fell -0.5 to a 10-month low of 52.2.
From Canada, Canada’s Agriculture and Agri-Food latest crop report raised 2022/23 all-wheat production forecast by 0.6Mt, to 33.7Mt (21.7Mt previous year).
The canola production forecast was increased by 0.4Mt, to 18.4Mt (12.6Mt previous year) and the barley production outlook was lowered by 0.2Mt, to 9.1Mt (6.9Mt last year).
Rain in major North American growing regions added some bearish pressure past week.
For the period July 12 to 18, 2022, Sask Ag rated spring wheat at 74% Gd/ Exc., 22% fair, and 4% poor.
Alberta Ag rated spring wheat at 83% Gd/Exc.
Sask Ag rated durum wheat at 58% Gd/ Exc., 32% fair, and 10% poor to very poor.
Alberta Ag rated durum wheat at 64% Gd/Exc.
Meantime, Canadian weekly wheat exports for week 49, were poor at only 133k mt, for a YTD total of 10.5 million mt, compared to 18.8 million mt the year prior.
Durum exports for week 49 were an improved 105k mt, for a YTD total of 2.5 million mt, compared to 5.8 million mt last YTD.
On the other hand, Canada is said to have inked a deal to import new crop rapeseed supplies from Ukraine with shipments to be executed in August.
From South America, Argentina’s BAGE reported corn harvest as 67.2% complete, trailing the 5-year average by 8 points.
Production remains estimated at 49 MMT.
The Argentine Agriculture Ministry reports producer sales of the 20/21 soybean harvest total 20.4 MMT as of mid-July, down 19% versus a year ago.
Argentina has exported 1.4 MMT of soybean meal so far this month which puts the country on pace to ship 2.2 MMT.
This is 400 K below both last month and a year ago.
Argentina’s Buenos Aires Grains Exchange reported 22/23 wheat planting reached 97% complete on 6.1m HA.
That means a reducction of Argentine wheat area, by 100 K hectares, and are now down ½ million from a late May forecast.
Brazil’s corn export line-up was 508.000t week-to-week on Monday at 5,99 MMT, an increase of 2.67 MMT or 125% compared to the numbers from a year ago.
ANEC expects Brazil’s July soybean exports to reach 7.9 MMT, below the 8.7 MMT shipped in July of 2021.
Shipments the first 11 days of the month are however, running 16% ahead of last year at 5.0 MMT.
Rather than declining seasonally, Brazil’s soybean export line-up increased 272.000t to 5.44MMT, 190.500t fewer than a year ago.
Soybean meal fell 97 K to 1.75 MMT but is 30%/400 K larger than a year ago.
Soybean exports from Brazil are expected to total 91.5 million tonnes in 2023, up from the 77.2 million estimated for 2022., according to Safra & Mercado.
In Europe, the reassuring news on access to the volumes available in Ukraine caused grain prices at the end of the week to mark a sharp decline both on Euronext and on the physical markets.
On Friday, French wheat price for Sep deadline, tumbled €25/tonne on Ukraine/Russia port agreement.
Benchmark December milling wheat, unofficially closed down 6.1% at 314.75 euros ($321.77) tonne, after hitting 311.50 euros, a price unseen on the contract since late March.
Corn price also dropped by €10.25/tonne.
However, the implementation of this agreement will have to be closely monitored.
Saturday attak on Odessa raised doubts about the resumption of port activity in serene conditions and about compliance with the freshly signed agreement.
For the week, Paris-based Euronext exchange, saw grain prices substantially unchenged, as September’s wheat prices closed at €325.75 per tonne, or up just €0.25/t from prior week, while August corn price, was down €0.25/t for the week, closing at 323 euros per ton.
Rapeseed, on its part, despite a decline in oil and palm oil on Friday, rebounded at the end of the week, but without in any way managing to offset the downward movement had during the week, as the August deadline, tumbled to €633.5/t, losing €41.75/t for the week.
Buyers from China purchased large volumes of French wheat, past week.
French wheat exports for the week of July 20th tripled to 119 K with the total destined for Morocco.
The French wheat crop was 84% harvested for soft and 96% for durum.
Soft wheat ratings fell 1 to 63%, 2 points below the average, while the durum held at 56% G/E, 8 points below average.
Also, it should be noted, that the high temperatures recorded have caused a sharp deterioration in crops corn condition, as the ratings of crops in a “good to excellent” condition are thus down -8 points compared to the previous week and are still at risk of see degrade during the new update.
French corn, indeed, was rated 75pc good or excellent condition by July 18 against 83pc the previous week and 90pc last year.
From the Black Sea basin, Russia AgMin said over 30 MMT of grain has harvested by July 21.
Of that, included 25.3 MMT of wheat and 3.9 MMT of barley.
Yield is significantly higher than last year at 4.17 MT/HA vs 3.33 MT/HA a year earlier.
Meantime, Russia exported 540,000 tonnes of grain last week, compared with 500,000 tonnes the previous week, according to the port data.
In this context, Russian wheat export prices fell last week.
Particularly, according to the IKAR, Russian prices for wheat with 12.5% protein content and for supply from Black Sea ports fell by $5 to $355 a tonne free on board (FOB) at the end of last week.
According to Sovecon, wheat prices for imminent supply were at $350-355 per tonne vs $355-360 a week before.
Price for domestic 3rd class wheat, European part of Russia, excluded delivery was at 13,025 rbls/t ($225.54) -250 rbls (Sovecon);
Price for sunflower seeds was at 25,600 rbls/t -650 rbls (Sovecon); Price for domestic sunflower oil was at 73,175 rbls/t -825 rbls (Sovecon);
Price for domestic soybeans was at 34,400 rbls/t -525 rbls (Sovecon); Export price for sunflower oil was at $1,380/t -$20 (Sovecon);
Export price for sunflower oil was at $1,250/t -$60 (IKAR);
Price for white sugar, Russia’s south was at $1,080/t -$9.9 (IKAR).
($1 = 57.7500 roubles)
On Friday, Russia has set out its grain export taxes for July 27 – August 2.
According to the agriculture ministry the export duty will decrease for all products wheat, barley and corn.
Particularly, for wheat will decrease to 4,951.7 roubles/tonne, from 5,984.9 roubles/tonne of a week earlier.
For barley, will move down to 3,002.6 roubles/tonne, from 4,413.7 roubles/tonne the prior week.
For corn, the tax will down to 2,923.4 roubles/tonne, from 3,144.9 roubles/tonne the previus period.
As for indicative price, for wheat it will be 388.2 $/tonne, for barley 321.0 $/tonne, and for corn 319.0 $/tonne.
That is compared with 386.8 $/tonne for wheat, 332.9 $/tonne for barley, and 303.0 $/tonne for corn of a week earlier.
Russia also has set its export tax for sunflower oil at 15,987.1 roubles ($278) per tonne for August, up from 8,615.9 roubles in July, the agriculture ministry said on Monday.
The August tax is based on an indicative price of $1,873.3 a tonne, the ministry said.
Russia changed the formula it uses for calculating the sunflower oil export tax in July to support shipments against a backdrop of a strong rouble.
Meantime, Russia’s foreign minister, Sergei Lavrov, offered reassurances over Russian grain supplies to Egypt during a visit to Cairo on Sunday, amid uncertainty over the deal to resume Ukrainian exports from the Black Sea.
Ukraine forged ahead with efforts to restart grain exports from its Black Sea ports under the grain deal struck a day earlier with Turkish and United Nations mediation, but warned deliveries would suffer if a Russian missile strike on Odesa was a sign of more to come.
The Ukrainian military, said the Russian missiles did not hit the port’s grain storage area or cause significant damage.
Russia said on Sunday its forces had hit a Ukrainian warship and a weapons store in Odesa with precision missiles.
Kyiv said preparations to resume grain shipments were ongoing.
Ukraine’s grain exports in the first 24 days of July, the first month of the 2022/23 season, were down 39.5% year on year at 1.08 million tonnes, the agriculture ministry said on this morning.
That included 766,000 tonnes of corn, 222,000 tonnes of wheat and 88,000 tonnes of barley.
From the Middle Kingdom, buyers from China purchased large volumes of Australian and French wheat past week.
Particularly, traders reported purchases of around 1 million tonnes of Australian wheat, both for animal feed and flour milling, for shipment periods between September and March.
In addition China bought at least two shiploads, possibly up to seven, of French wheat this week for shipment between September and November, they said.
The French purchase involved low-quality wheat of 10.5% protein for at least two of the shipments.
China’s weekly soybean crush for the week ending slipped 10 K to1.7 MMT, dropping below trade estimates as the result of declining feedstocks and slow soybean meal demand.
Meantime, China will release another 500k MT of soybeans from state reserves on 7/29.
From South East Asia, Indonesia continues to approve palm oil export licenses to reduce stock levels and keep production flowing.
The export levy has been reduced to zero for July and August.
From India, according to the USDA attaché in New Delhi, the weak southwest monsoon in first half of June 2022 slowed ongoing plantings of the kharif (fall harvested) season crops.
Plantings will recover under adequate soil moisture conditions with the revival of monsoon starting the third week of June, along with expected normal precipitation in July.
On July 6, India’s Ministry of Commerce and Industry notified authorizing the export of wheat flour and other products … only on the recommendation of Inter-Ministerial Committee on the Export of Wheat.
Based on the domestic market supply situation, FAS New Delhi continues to estimate market year (MY) 2022/2023 wheat production at 99 million metric tons (MMT), exports at 6 MMT, and ending stocks at 8.5 MMT.
From Australia, Southern markets for wheat and barley were firmed past week on renewed competition from container packers, while northern markets were mostly steady, despite some sell-side pressure.
A squeeze in the Sydney market tied to rail outages has now abated with the reopening of the Hunter and second Main South line.
Waterlogging remains an issue for some winter crops in southern Queensland and New South Wales, both of which had a mostly dry week which has enabled top-dressing and weed spraying to take place where paddocks are dry enough to allow field work.
Most of Western Australia’s growing areas had a welcome 15-30 millimetres of rain in the past week, and parts of Victoria and South Australia had a handy 5-10mm.
Meantime, Friday’s local values eased liquidity slowed.
Trade bids and offers widened and growers remain “sticky” on the balance of their current crop sales programs.
Maritime Union of Australia (MUA) members are not ruling out possible strike action at the GrainCorp Newcastle Port terminal as reports emerge that the company is preparing a scab workforce to takeover in the event of a stoppage.
Negotiations remain at a stalemate between both parties who are in talks about the pay and conditions for the about 60 staff at the site.
It was a relatively dry weekend for Qld, NSW and SA. WA and central Vic picked up the highest rainfall totals of 5-25mm.
On international trade scene, the lowest price offered in the tender from Pakistan to purchase 200,000 tonnes of wheat which closed on Monday was believed to be $407.49 a tonne c&f.
The state agency Trading Corporation of Pakistan (TCP) is still considering the offers and no purchase has been reported.
The lowest offer was said to have been submitted by trading house Falconbridge.
Offers for immediate payment terms were submitted by:
Falconbridge: 110,000 tonnes at $407.49/t;
Agrocorp: 120,000 tonnes at $412.92/t;
Viterra: 120,000 tonnes at $413.44/t;
Olam: 110,000 tonnes at $450.00/t;
Cargill: 110,000 tonnes at $459.90/t.
Offers for delayed payment in 90 days were submitted by:
Agrocorp: 120,000 tonnes at $419.92/t;
Olam: 110,000 tonnes at $458.00/t;
Shipment in the tender is sought between Sept. 1-16.
The TCP had on July 21 bought 300,000 tonnes of wheat in a previous tender all at $404.86 c&f free out.
Watching this week’s market, USDA will be out with Export Inspections data in the afternoon and the Crop Progress report that overnight after the sessions close.
The Fed will meet next Tuesday and Wednesday to decide on the likely next rate hike.
The weekly EIA ethanol numbers will be out on Wednesday.
Thursday will have the weekly Export Sales report from USDA.
Friday marks first notice day for August soybean futures.
That’s all, thank you.
To all of you, we wish you a good day and a good start to the week.
Good Harvest 2022!
Author: Sandro F. Puglisi
