Good morning Farmer Family and good start to the week …
US farm markets rebounded last Friday.
Corn prices rose 1.18%.
Soybean prices earned 1.85%.
Soymeal closed 0.33% higher.
Bean oil prices ended with +4.09% gains.
December wheat contracts, mostly saw double-digit gains, as Chicago SRW wheat prices rose 2.11%, Kansas City HRW prices added 1.12%, while Minneapolis spring wheat prices picked up 0.39%.
Broader markets have drived commodity ags higher.
A weakening U.S. Dollar, after Friday’s data showed the U.S. labor market was starting to loosen, lent some support, leding up crude oil prices and other commodities as fears waned about aggressive interest rate hikes from the Federal Reserve.
Meantime, operators squarred their positions ahead of the three-day weekend, as today is the Labor Day holiday in the USA and markets will stay closed.
Traders also started to adjust positions ahead of the USDA’s monthly WASDE reports on Sept. 12.
For the week, corn prices slipped Tuesday through Thursday, but Monday’s and Friday’s gains helped new crop December to bump 0.21% on the week.
Soybeans were sent into a tailspin past week, despite the strong Friday session.
November soybean, indeed, closed 2.79% lower over the week.
Oct meal was a weak spot in the product values down 2.33%, while soy oil was just up 0.03% for the week.
Chicago SRW wheat prices in Dec contracts, had a big rally on Monday and nasty sell off on Thursday but were up 0.72%% net for the week.
Kansas City HRW wheat wasn’t as well balanced, as lost 0.52% on the week.
Meanwhile, Minneapolis spring wheat saw a 2.13% net decline.
Friday’s CFTC Commitment of Traders report revealed that managed money spec funds corn traders were buying corn through the week that ended August 30.
Particularly, they added 30.4k contracts on top of 8.8k fewer shorts for a 39,251 contract stronger net long position of 221,467 contracts.
That was their largest net long since June 28.
Commercials were lifting hedges through the week, with a net 46,200 fewer open contracts as of 8/30.
They closed more longs than shorts and expanded their net short to 449,986 contracts.
As for soybean the report had spec funds 101,801contracts net long in soybeans as of August 30.
That was down 2,670 contracts from the previous week.
Commercial soybean traders were adding long hedges and reduced the group’s net short by 6,641 contracts to 139,295.
In the products, CFTC data had the funds 93,626 contracts net long in meal as of 8/30 and 49,186 contracts net long in bean oil.
For meal that was a weekly decline of 2,092 contracts to their net long, though soy oil specs extended their net long by 6,978 contracts wk/wk.
As for wheat, data showed money managers in CBOT wheat futures and options paring 3,822 contracts from their net short position in the week ending 8/30.
They were net short 22,247 contracts as of Tuesday.
In KC wheat they added 3,033 contracts to their net long position, bumping it up to 12,458 contracts by Tuesday.
Spring wheat spec traders reduced exposure on both sides for a net 23 contract weaker net short of 1,441 contracts.
On the weather side, heavy rainfall across much of the south, including Texas and Oklahoma, continued to improve large areas experienced significant rain deficits.
Only northern Oklahoma, saw drought expand in the region.
In the High Plains, in North and South Dakota, Nebraska, and Kansas had worsening conditions.
In the west, Montana remained abnormally dry.
The World Meteorological Organization past week predicted that La Nina would “last until at least the end of the year.”
This will be the third consecutive northern hemisphere winter with the La Nina weather pattern, a rare occurrence.
The weather pattern affects temperatures and precipitation patterns, exacerbating drought conditions.
The eastern Corn Belt could see another round of rainfall and collect another 0.75” or more in some areas until Tuesday, while areas farther west will remain dry during this time.
The agency’s 8-to-14-day outlook predicts seasonally wet weather for the southern U.S. between September 9 and September 15, while most of the country will see warmer-than-normal conditions.
In this context, StoneX Group has revised down its US 2022/23 maize production forecast by 6.3Mt to 359.9Mt (364.7m WASDE Aug), with average yields trimmed by 0.2t/ha to 10.8t/ha (11.1t/ha, 11.1t/ha).
Soybean production forecast was increased by 0.7Mt, to 122.9Mt (123.3Mt), with yields raised slightly, to 3.5t/ha (3.5t/ha).
Meantime, corn basis bids faced a few wild swings past Friday, jumping as much as 60 cents higher at a Nebraska elevator while tumbling as much as 35 cents lower at an Ohio elevator.
Soybean basis bids also showed plenty of volatility after sliding 15 to 85 cents lower at two Midwestern elevators while firming 10 to 60 cents higher at three other Midwestern locations.
As for wheat, last week, basis was mixed in the Gulf and Pacific Northwest (PNW).
In the Gulf, HRS and SRW basis was up while HRW basis was unchanged.
In the PNW, HRS basis was down slightly while HRW and soft white were marginally up.
Durum prices declined significantly in August as good growing conditions and higher yields have lifted analysts’ production expectations.
Dry conditions in the HRW growing areas of the High Plains have encouraged farmers to hold on to wheat with the expectation that prices may rally.
The ocean freight market has softened recently, but a strong U.S. dollar reduced U.S. wheat competitiveness.
To note, the USDA botched the rollout of their new weekly Export Sales reporting system, so we have no data for the next two weeks.
In energy markets, oil prices rose on Friday on expectations that OPEC+ will discuss output cuts in its meeting on Sept. 5.
Brent crude futures, indeed, rose 66 cents to settle at $93.02 a barrel, while U.S. West Texas Intermediate (WTI) crude futures rose 26 cents to settle at $86.87 a barrel.
However, concern over China’s COVID-19 curbs and weakness in the global economy loomed over the market.
Data showed Chinese factory activity in August contracted for the first time in three months in the face of weakening demand, while power shortages and COVID-19 outbreaks also disrupted output.
Iran said it had sent a “constructive” response to U.S. proposals aimed at reviving Tehran’s 2015 nuclear deal with world powers, although the United States gave a less positive assessment.
Consequentially, both benchmarks slid during the week with Brent posted a weekly drop of 7.9%, and WTI of 6.7%.
On this morning, Brent crude futures rose $1.88, or 2%, to $94.90 a barrel by 0345 GMT.
U.S. West Texas Intermediate crude was at $88.60 a barrel, up $1.73, or 2%.
G7 finance ministers agreed on Friday to impose a price cap on Russian oil, but provided just few new details to the plan, keeping Russian crude flowing to avoid price spikes.
U.S. energy firms past week cut by five to 760, the number of oil and natural gas rigs operating for the fourth time in five weeks.
Russia’s Gazprom said on Friday that natural gas supplies via the Nord Stream 1 pipeline would remain shut off after the main gas turbine at Portovaya compressor station near St Petersburg was found to have an oil leak.
Meantime, per latest data from CFTC showed on Friday, money managers cut their net long U.S. crude futures and options positions by 10,607 contracts to 168,431 in the week to Aug. 30.
In ocean freight markets, the Baltic Dry index, advanced 8.4%, to 1,086 points past Friday, the highest since August 25th, extending gains for the second straight session, helped by bigger vessel segments.
The capesize index, which tracks iron ore and coal cargos of 150,000 tonnes, increased for the second day, jumping 56.3% to 733 points; and the panamax index, which tracks about 60,000 to 70,000 tonnes of coal and grains cargoes, rose 3.3% to 1.271 points, on its best day in over a month.
Meanwhile, the supramax index was down for the sixth consecutive session, losing 45 points to 1,514 points.
Thus, the Baltic Dry index recorded a weekly gain of 0.4%, after six consecutive declines.
In equity markets, US stocks closed out the trading week on a down note past Friday.
Stocks were initially buoyed by news that the U.S. Aug unemployment rate rose +0.2 points to 3.7%.
That could give the Fed an opening for a less hawkish approach to monetary policy and allowed U.S. interest rates to drop.
However, the U.S. labor market remains generally strong, with Friday’s +315,000 rise in Aug nonfarm payrolls, stronger than expectations of +298,000.
Also, average hourly earnings rose 0.3%.
U.S. July factory orders unexpectedly fell -1.0% m/m, weaker than expectations of a +0.2% m/m increase and the biggest decline in 2-1/4 years.
Stocks were undercut also by disappointment that the Biden administration apparently does not plan to drop tariffs on Chinese goods anytime soon.
Additionally, gains were erased after Gazprom said it could not safely restart deliveries to Europe until it had fixed an oil leak found in a vital turbine and did not give a new time frame.
In this context, the Dow Jones Industrial Average fell 337.98 points, or 1.07%, to 31,318.44; the S&P 500 lost 42.59 points, or 1.07%, to 3,924.26; and the Nasdaq Composite dropped 154.26 points, or 1.31%, to 11,630.86.
All the three main indexes suffered their third straight weekly loss, as the Dow fell 2.99%, the S&P 500 declined 3.29% and the Nasdaq dropped 4.21%.
Energy was the only major S&P sector to end the session in positive territory, up 1.81%.
The focus now shifts to the August consumer price report due mid-month, the last major data available before the Fed’s Sept. 20-21 policy meeting.
Meantime, Asian stock markets mostly declined this morniong.
Tokyo, Hong Kong and South Korea declined.
Shanghai gained.
Particularly, the Shanghai Composite Index advanced 0.2% to 3,193.46, after controls on movement were tightened in the southern business center of Shenzhen following virus outbreaks.
Currently, 33 cities in China are under partial or full lockdowns, affecting more than 65 million residents, according to a local media estimate.
The Nikkei 225 in Tokyo lost less than 0.1% to 27,646.27 while the Hang Seng in Hong Kong tumbled 1.3% to 19,203.24.
The Kospi in Seoul lost 0.3% to 2,403.12 while Sydney’s S&P-ASX 200 added 0.3% to 6,846.70.
New Zealand and Bangkok declined while Singapore and Indonesia advanced.
In currency trading, the dollar index on Friday fell -0.09% to 109.575 and eased from Thursday’s 20-year high.
However, for the week it gained 0.75%.
The EUR/USD rose slightly by +0.11% to 0.9955 on Friday.
European energy crisis concerns eased and gave the euro a boost after European nat-gas prices plunged -11% to a 3-week low.
Eurozone economic news was bearish for EUR/USD.
German July exports fell -2.1% m/m, the biggest decline in 4 months.
Also, German July imports fell -1.5% m/m, the biggest decline in 6 months.
The Eurozone July PPI rose a record +37.9% y/y, stronger than expectations of +37.3% y/y.
The USD/JPY was little changed in the end week session, up 0.01% to 140.21.
The yen recovered from an early 24-year low on jawboning from Japanese Finance Minister Suzuki, who said sudden moves in the yen are not desirable and that the currency market needs to be closely monitored.
On this morning, the dollar advanced to 140.33 yen from Friday’s 140.13 yen.
The euro declined to 99.08 cents from 99.64 cents.
In Canada, Statistics Canada said past week that total Canadian wheat production would increase 55% this season to 34.6 MMT, the third largest harvest since 1908.
Saskatchewan’s wheat harvest was 23% complete at 8/29 – compared to 26% on average.
Meantime, Canada exported 265.6k mt of common wheat in week 4 of the shipping season, up from 129.6k mt in the second week.
Durum wheat exports were at 24.6k mt vs 40.3k mt a week earlier.
From South America, StoneX Group 2022/23 Brazilian soybean production forecast was raised by 0.9Mt, to 153.6Mt (150.4m Conab Aug f’cast, 124.0m previous year).
Total maize output seen at 125.1Mt (125.5m, 114.7m).
Meantime, Brazilian export data showed 7.554 MMT of corn was shipped during August, compared to 4.336 MMT during August ’21.
That was a year-over-year increase of 74%.
As for soybean, data showed 6.16 MMT of beans were shipped in August from Brazil.
That was down from 6.48 MMT during the same month last year.
Brazilian mills have limited imports of wheat due to rising prices and the impact of domestic inflation on consumption, which affected demand for pasta, cookies and bread, industry representatives and analysts said on Friday.
Wheat imports through July reached the lowest levels since 2017, totaling about 3.7 million tonnes, according to government data.
In August, the downward trend continued, as imports fell 9.7% compared to the same month last year, to 536,600 tonnes.
The average price of the imported tonne shot up to $441 last month from $276.3 in August of last year, according trade data.
Brazilian wheat production could reach a new record of almost 10 million tonnes in 2022 after a historical high of 7.6 million tonnes in 2021.
The country should end the year with about 3 million tonnes exported and domestic demand of 12 million, meaning it will continue to be net importer for some time.
Imported wheat is currently cheaper than domestic wheat.
BAGE reported that 23.7% of Argentina’s wheat area is facing poor conditions and will have below trend yields.
Through the end of August, Argentina’s farmers sold nearly 52% of the 44-million-tonne soy harvest during the 2021/2022 season, according to official data, significantly below sales notched during the same period in the previous season.
As a consequence, Argentina’s Economy Minister Sergio Massa announced new incentives beginning on Monday for soybean farmers to sell more of their stock by accessing a better exchange rate, in a bid to boost exports and hard currency reserves.
The Sunday announcement covers incentives that are set to last through Sept. 30.
Massa, said soybean farmers and exporters will for the remainder of September be able to sell and ship a tonne of the grain using an exchange rate of 200 pesos per U.S. dollar.
That is well above the tightly controlled official rate of around 139 per greenback.
The minister said the incentives will lead to sales of $1 billion over the next three days.
In Europe, French weekly corn crop ratings declined, reflecting the impact of dry and hot summer weather.
Farm office FranceAgriMer, indeed, rated 45% of French maize in good or excellent condition by Aug. 29, down from 47% the previous week and the lowest rating in more than 10 years.
The euro marks a new drop against the dollar, evolving at the start of the week below the level of 0.9900.
The economic situation troubled by inflation and fears in Europe related to the cost of energy still raise many doubts about the risks of recession and the cost of businesses.
The prospect of an increasing export rate from Ukraine and Russia weighed a lot on grain prices past week.
From North Africa, Egypt’s state grains buyer, the General Authority for Supply Commodities, is believed to have bought 120,000 tonnes of Russian wheat via direct talks with suppliers.
The cargoes are believed to have been sold by trading company Solaris at a price of $340 per tonne on a cost and freight basis.
Egypt, since mid-July, opted to buy around 1.5 million tonnes of wheat through private direct talks with global companies.
Algerian traders reportedly purchased an estimated 105,000t milling wheat from Russia at around $364/t c&f, Sep/Oct shipment.
From the Black Sea basin, Ukraine’s sunflower and soybean harvests have begun.
The country’s sunflower harvest is just 1% complete, with a total production of 81,700 metric tons so far.
To date 89 ships have left Ukrainian ports carrying 1.2Mt corn, 386,000t wheat, 150,000t sunflower oil, 82,000t rapeseed, 77,000t barley and 69,000t sunflower meal.
There are currently 40 vessels either moored at port or inbound.
Ukraine’s agriculture minister said agricultural exports could be between 6 and 6.5 MMT in October, doubling the export volume in July after the reopening of Ukraine’s seaports.
Ukraine’s 2022 grain harvest is expected to be 50.0 MMT, including 19.0 MMT wheat.
However, Ukraine’s Agri Council lobby group expect to see ~50% reductions to winter grain planted area.
Last year’s area included 8.4m HA (~20.8m acres) with 6.2m HA (~15.35m acres) of wheat.
From Russia, the country is ready to export up to 30 million tonnes of grain in the second half of 2022, its agriculture ministry said in a statement on Friday.
“This will support countries in need and help stabilise the global food situation,” the ministry added.
On this wake, the Ministry of Agriculture cut once again by 16.9% the export duty on wheat, last week.
Particularly, the export duty on wheat from the Russian Federation will decrease to 3,368.9 from 4,053.8 rubles per ton a week earlier.
The duty on barley also will decrease to 2,699.2 rubles from 2,729.3 rubles per ton.
As for corn – it will up to 3,663.7 rubles from 3,569.9 rubles a week earlier.
This new duty rates will be in effect through September 13, inclusive.
The duties were calculated based on indicative prices: $329.3 per ton for wheat ($348 a week earlier), $294.7 for barley ($297.5), $317.6 for corn ($317.6).
On September 10, the Kazakhstan government will lift the restrictions on wheat and flour exports it set in May to lower domestic prices.
Agriculture Minister Yerbol Karashukeyev said that “the situation has changed now,” adding that the outlook for wheat production has improved.
He said Kazakhstan would produce 13.0 MMT of wheat this season compared to 11.8 MMT last season.
From the Middle East, Iraq’s trade ministry said it plans to import more wheat for local flour production to decrease dependence on more expensive imported flour.
The price of a 50-kilogram imported sack of flour is currently between $31 and $35.
In need of 4.5 million to 5 million tonnes of wheat a year, Iraq announced in July that it is looking to buy 1.5 million tonnes in order to cover the country’s consumption in the first months of the next year, but it is unclear, how much more wheat it would import.
The ministry is likely moving towards making direct purchases.
From the Middle Kingdom, China will again auction off another 500.000t of its state imported soybean reserves on September 9.
The country has routinely offered similarly sized auctions throughout 2022 in an effort to quell high prices and replenish local supplies.
From Australia, local markets rounded off the week a touch softer to relatively unchanged on the boards, current crop liquidity slowing on Friday.
Domestic demand continues to be on the bid for pre-harvest delivery through October-November slots.
The grains industry is working to find tens of thousands of harvest casuals to fill roles both on farm and at grain receival sites, with major bulk handlers requiring over 7500 workers for the harvest period.
The rural workforce crisis was a talking point at the Federal Government’s jobs summit last week.
The 8-day forecast is looking pretty wet across the entire winter cropping region with 15-50mm expected across the board.
FAO Food Price Index – August 2022
The United Nations food agency’s world price index fell for a fifth month in a row in August, further from all-time highs hit earlier this year, as the resumption of grain exports from Ukrainian ports contributed to improved supply prospects.
Particularly, it averaged 138.0 points last month versus a revised 140.7 for July.
The July figure was previously put at 140.9.
The August reading was, however, 7.9% higher than a year earlier.
Separately, FAO slashed its 2022 global cereal grain production forecast by 17.2Mt from last month to 2,774Mt amid “persistent drought conditions in northern hemisphere countries.”
FAO now forecasts 2022 global cereal grain production down 38.9Mt (1.4pc) from last year.
Watching this week’s market, in the USA, is the Labor Day this morning, and markets are closed.
European markets are open regularly.
Tuesday we will have the weekly Export Inspections reportand the Crop Progress.
On Wednesday Census will release monthly export data for July.
Thursday will show a delayed version of the EIA report for ethanol stocks and production.
Friday would normally have been the Export Sales report, but due to difficulties in switching to a new system, the next data dump is on September 15.
That’s all, thank you.
We wish you a good day.
Author: Sandro F. Puglisi
