Good morning Farmer Family …
Past Friday we received the highly anticipated Grain Stocks and Small Grain report from NASS, and the USDA said the 2022 U.S. wheat harvest was smaller than previously forecast.
All wheat production, indeed, totaled 1.65 billion bushels in 2022, up less than 1 percent from the 2021 total of 1.65 billion bushels.
Area harvested for grain totaled 35.5 million acres, down 4 percent from the previous year.
The United States yield was estimated at 46.5 bushels per acre, up 2.2 bushels from the previous year.
The levels of production and changes from 2021 by type were: winter wheat, 1.10 billion bushels, down 14 percent; other spring wheat, 482 million bushels, up 46 percent; and Durum wheat, 64.0 million bushels, up 70 percent.
That helped to tighten first quarter stocks to 1.776 bbu, or just up 2 mbu from last year and 17 mbu below estimates.
Analysts’ average estimate indeed, were 1.778 billion bushels, while 1.783 billion bushels were showed in the USDA’s August assessment.
Corn also found tighter-than-expected stocks, with the USDA pegging corn stocks at 1.377 billion bushels, down from trade expectations of 1.512 billion bushels, and 148 mbu below the WASDE’s balance sheet in September.
Implied Q4 use to finish the 21/22 season was 2.97 bbu, compared to 2.877 bbu used in Q4 of 20/21.
USDA revised 21/22 production 41 mbu lower to 15.074 bbu.
As for soybean, the agency upgraded its stocks assessment to 273.76 million bushels.
That was a 34 mbu increase from the WASDE report on the Sep 12th, and significantly higher than the average trade guess of 242 million bushels.
2021/22’s final quarter usage was implied at 698 mbu, compared to the 512 mbu finish to last year.
USDA revised the 21/22 production number to 4.465 bbu, which was up by 30 mbu from their prior figure.
In this context, after the report was published, wheat prices soared on US farm markets, although then faded into the close, on profit takings.
December Chicago SRW wheat prices, indeed, ultimately closed “just” 2.82% higher.
Kansas City HRW wheat prices went home with 2.56% gains.
Minneapolis spring wheat prices closed up by 1.66%.
Corn prices rallied 1.19%, but also in this case, profit taking pulled things back down some by the close.
The world is heading toward the tightest grain inventories in years despite the resumption of exports from Ukraine, as the shipments are too few and harvests from other major crop producers are smaller than initially expected.
U.S. corn inventory estimates came as the European Commission cut its forecast for this year’s maize harvest in the region to 55.5 million tonnes from 59.3 million in late August, joining other forecasters in projecting a 15-year low for the drought-hit crop.
The 6.4% decrease marked the third sharp reduction in a row to the Commission’s monthly forecast for corn harvest.
Wheat and corn prices were also supported by Russia’s annexation of parts of Ukraine followed by increased U.S. sanctions.
Heightening Russia-Ukraine tensions, indeed, are raising doubts about whether the United Nations-supervised shipping corridor for Ukrainian grain would last.
The soybean complex, in contrast, spent the Friday afternoon in retreat after the NASS data was released.
Particularly, soybeans ended the day with 3.26% losses.
Soymeal prices were 1.44% weaker at the close.
Bean oil prices ended the day down by 3.16%.
For the week, corn prices, ended the week, milking out just a 0.12% gain, in December contract.
Soybeans felt pressure for much of the week, logging a 4.28% weekly decline, its biggest since the week ended June 24, 2022.
The product values were also weaker, as soy meal was down 8.34% for the week and soy oil down 2.46%.
The wheat complex, meantime, was once again a bright spot, past week.
Chicago and Kansas City had a 4.66% and 4.31% net gain, respectively, for the week, .
Minneapolis gained 3.45% from Friday to Friday.
after sessions close, Friday’s CFTC Commitment of Traders report showed managed money spec funds trimming 10,055 contracts from their net long in the week ending September 27 to 237,854 contracts.
Particularly, the funds closed out 18.8k longs and 8.8k shorts.
Commercials reduced short hedges and added long hedges in corn through the week, for a net 28.3k contract lighter net short of 433k contracts.
As for soybean, managed money soybean traders cut back their net long exposure in beans by another 9,860 contracts this week.
They were net long 94,831 contracts as of September 27, a 10-wk low.
Commercial soybean traders were adding long hedges via 12.3k contract for a reduced net short to 116,394 contracts – a 49 week low.
In soybean meal, the spec funds were 8,623 contracts less net long for a 93,545 contract net long.
Managed money was shown 58,417 contract net long in soybean oil as of 9/27, a 107 contract stronger net long through the week.
As for wheat, the report had SRW spec traders peeling back 1,306 contracts from their net short position to 14,397 contracts as of Tuesday evening.
For KC wheat, managed money was 23,905 contracts net long, a build of another 4,846 contracts on the week.
The report also showed short covering from MGE wheat specs, causing a 1,867 contract stronger net long of 4,236.
Meantime, corn basis bids were mostly steady across the central U.S. last Friday but did tilt as much as 5 cents higher at an Ohio elevator and as much as 10 cents lower at an Illinois river terminal.
Soybean basis bids were steady to mixed after rising 5 cents higher at two Midwestern processors and spilling as much as 15 cents lower at an Illinois river terminal.
As for wheat, past week, basis was down in the Gulf except for SRW.
Basis in the Pacific Northwest (PNW) was mixed.
The market was mainly focused on geopolitics again past week.
The continued momentum in futures prices has kept farmer selling sluggish as they anticipate prices to continue rising.
Meantime, minimal export demand means grain merchandisers are in no rush to purchase grain from farmers, while grain traders are focused on soybeans this time of year.
The SRW Gulf basis, in contrast, rose significantly due mainly to barge transportation problems associated with low river levels.
Mississippi River barge rates, indeed, are 58% higher than a year ago, according to USDA’s weekly Grain Transportation Report (GTR).
On this morning, Chicago wheat prices kicked off the last quarter of 2022 on a bullish note, climbing 1%.
Corn rose for a second consecutive session, while soybeans climbed after declining on Friday.
Particularly, the Chicago Board of Trade most-active wheat contract rose 1% to $9.30-3/4, as of 02:24 GMT, not far from Friday’s three-month high of $9.46 a bushel.
Corn added 1.2% to $6.85-3/4 a bushel and soybeans gained 0.4% at $13.70-1/4 a bushel.
In energy markets, oil prices dipped last Friday.
However, they notched their first weekly gain in five, underpinned by the possibility that OPEC+ will agree to cut crude output when it meets on Oct. 5.
Brent crude futures for November, which expire on Friday, indeed, fell 53 cents, or 0.6%, to $87.96 a barrel.
The more active December contract was down $2.07 at $85.11.
U.S. West Texas Intermediate (WTI) crude futures fell $1.74, or 2.1%, to $79.49.
Both contracts had rose by more than $1 during the session but then dropped on news that OPEC’s oil output rose in September to its highest since 2020, surpassing a pledged hike for the month.
Brent and WTI, however, gained 2% and 1% on a weekly basis, marking the first weekly rise since August and following nine-month lows hit past week.
But prices finished the third quarter with chunky 23% and 25% declines respectively.
Meantime, according to the U.S. Commodity Futures Trading Commission (CFTC), money managers cut their net long U.S. crude futures and options positions in the week to September 27.
On this morning, oil prices jumped more than 3% in early Asian trade, as OPEC+ considers cutting output by more than 1 million barrels a day, for its biggest reduction since the pandemic, in a bid to support the market.
If agreed, it will be the group’s second consecutive monthly cut after reducing output by 100,000 bpd last month.
Global gas markets to remain tight next year amid supply squeeze-IEA.
Saudi Arabia may raise Nov official crude prices for Asia.
The dollar index fell for a fourth consecutive day on this morning after touching its peak in two decades.
A cheaper dollar could bolster the appetite of oil buyers who use other currencies and support oil prices.
Thus, Brent crude futures rebounded $2.36, or 2.8%, to $87.50 a barrel by 06:22 GMT.
U.S. West Texas Intermediate crude was up 2.9%, or $2.27, at $81.76 a barrel.
But analysts expect the hit to supply from the cut will be markedly lower than the headline number, as many OPEC+ members are producing far less than their quotas.
Consequentially, while prompt prices could strengthen further in the immediate short term, concerns over a global recession are likely to limit the upside.
Also, the resultant increase in OPEC+ spare capacity will likely put more downward pressure on long-dated prices.
Meantime, on Friday, China issued its biggest quota for exports of oil products this year and topped up crude import quotas for independent refiners.
State and private refiners can export as much as 15 million tonnes of gasoline, diesel, jet fuel and low-sulphur fuel oil, adding much needed supplies into global markets.
However, some analysts and traders said a part of China’s exports will likely to spill over into the early 2023, as refiners will need time to ramp up.
In ocean freight markets, the Baltic Exchange’s main sea freight index, rose past Friday and logged its best month in 2 years propelled by a corresponding rise in capesize and panamax demand.
The overall index, indeed, snapped its four-session long streak of declines to gain 3 points to 1,760.
It jumped about 82.4% for the month, its best since June 2020.
However, the main index registered a second straight quarterly dip, shedding 21.4%.
The capesize index also snapped a four-day long losing streak and added 1 point to 1,955.
For the month, it soared 547%, logging its best performance since June 2020.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as coal and steel-making ingredient iron ore used in construction, were up $12 at $16,214.
Capesizes still lost about 20% for the quarter.
The panamax index rose 19 points, or about 1%, to 2,082.
It rose 71% on its best month since September 2013.
However, it also saw its second straight quarterly decline of about 16.2%.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, increased $175to $18,742.
The supramax index fell 11 points to 1,663.
In equity markets, US stocks past Friday gave up an early advance and sold off for the remainder of the day.
Fed comments were on the hawkish side, which pushed T-note yields higher and weighed on stocks.
Treasury yields initially eased a bit, letting off some of the pressure that’s built on markets, but then turned higher by late afternoon.
Particularly, the yield on the 10-year Treasury rose to 3.81% from 3.79% late Thursday.
The two-year yield, which more closely tracks expectations for Fed action, rose to 4.23% from 4.19%.
Stocks were also pressured after U.S. economic news.
U.S. Aug personal spending, indeed, rose +0.4% m/m, stronger than expectations of +0.2% m/m.
Aug personal income rose +0.3% m/m, right on expectations.
The U.S. Aug PCE core deflator rose +0.6% m/m and +4.9% y/y, stronger than expectations of +0.5% m/m and +4.7% y/y.
Meantime, the U.S. Sep MNI Chicago PMI fell -6.5 to 45.7, weaker than expectations of 51.8 and the weakest level in 2-1/4 years.
Also, the University of Michigan’s U.S. Sep consumer sentiment index was revised downward by -0.9 points to 58.6 from the previously reported 59.5.
Finally, the 5-10 year inflation expectations were revised lower by -0.1 to a 17-month low of 2.7% from the previously reported 2.8%.
In this context, Wall Street closed out a miserable September past Friday with the S&P 500’s worst monthly skid since March 2020.
The benchmark index, indeed, ended the month with a 9.3% loss and posted its third straight losing quarter.
For the session, the S&P 500 fell 54.85 points, or 1.5%, to close at 3,585.62, after flipping between small losses and gains in the early going.
It posted a weekly loss in six out of the last seven weeks.
The Dow Jones Industrial Average dropped 500.10 points, or 1.7%, to 28,725.51.
The Nasdaq composite slid 161.89 points, or 1.5%, to 10,575.62.
The tech-heavy index sank 10.5% in September and is down 32.4% so far this year.
Smaller company stocks also had a rough September.
The Russell 2000 ended the month down 9.7%.
For the session, it lost 10.21 points, or 0.6%, to 1,664.72.
Cruise ship operator Carnival dropped 23.3% for the biggest decline among S&P 500 stocks.
Rivals Norwegian Cruise Line and Royal Caribbean Group slid 18% and 13.2%, respectively.
Nike slumped 12.8%, its worst day in more than 20 years.
The amount of shoes and gear in Nike’s inventories swelled by 44% from a year earlier.
Not all stocks took a beating in September.
Biogen soared 35%, but it was an outlier.
FedEx was among the market’s biggest losers, ending the month 29.6% lower.
Looking at the third quarter, which included a market rally in July, Netflix was among the best performers, climbing 34.6%.
But it’s still down 60.9% for the year.
On this morning, Asian shares were mostly lower.
Tokyo rose while other regional markets declined.
Particularly, Japan’s Nikkei 225 index gained 1.1% to 26,215.79 after a Bank of Japan quarterly survey showed sentiment among manufacturers has darkened, reflecting rising costs, the weakening yen and lingering pandemic-related restrictions.
The headline measure for the “tankan,” measuring sentiment among large manufacturers, indeed, was plus 8, down from plus 9 the previous quarter.
Elsewhere in Asia, Hong Kong’s Hang Seng index fell 0.9% to 17,073.81.
Australia’s S&P/ASX 200 slipped 0.3% to 6,456.90.
Taiwan’s Taiex lost 0.9% and Bangkok’s SET declined 1.3%.
Shanghai was closed for China’s weeklong National Day holidays.
In currency trading, the dollar was trading at 145.04 yen early Monday, up from 144.68 yen late Friday.
The euro was at 97.98 cents, up from 97.96 cents.
From Canada, Canadian wheat export volume doubled week-on-week.
Particularly, Canada exported 627.8k mt of common wheat in week 8 of the shipping season, sharply higher from 278.5k mt a week earlier.
Durum wheat exports, in contrast, were at only 27.7k mt, down from 77.2k mt a week earlier.
Producers’ deliveries of common wheat in week 8 of the shipping season, were at 547,10k mt.
That was weaker from 767.4k of a week erlier.
Deliveries of durum wheat also decreased to 97.0k mt down from 115.4k mt a week earlier.
Meantime, total Commercial Stocks of common wheat stood at 3.245,9k mt, down from 3.308,5k mt a week earlier.
As for durum, total commercial stocks were at 675,5k mt, up from 653,9k mt a prior week.
From South America, Brazil’s Abiove said crushing margins have weakened and turned negative resulting in a reduced daily output.
Brazil processes ~202k MT of beans per day under normal circumstances according to Abiove.
According to Embrapa, the government research agency, Brazilian wheat farmers could double the area planted with wheat.
The agency said that improved wheat varieties better adapted to the dry, hot climate of the Cerrado, a region near the Amazon rain forest, are already producing twice the national average.
If realized, the yield improvements would contribute to Brazil’s goal of boosting agriculture independence.
Brazil likely will produce 11.0 MMT of wheat this year, just 1.0 MMT short of the country’s 12.0 MMT domestic consumption.
Brazil imports most of its wheat from neighboring Argentina.
In Argentina, the Buenos Aires Grains Exchange maintained their estimate for 7.5m HA of 22/23 corn area, with planting progress 6% finished.
BAGE said wheat sowing was complete but corn plantings were underway, due to adverse planting conditions.
On this wake, the soybean area may grow as it’s planted later in the year.
Argentina is the world’s leading soy oil and meal exporter.
And as global demand for soybeans is growing, that could have some effects on wheat production too.
Meantime, BAGE reported their initial 22/23 wheat harvest as 17.5 MMT for Argentina, down by 22% yr/yr.
At the same time, BAGE expects soybean production to increase 15.5% following a larger planted area.
Argentine farmers have sold 13.9 million tonnes of soybeans since the launch of a preferential “soy dollar” exchange rate at the start of September, a measure which expired on September 30.
The government brought in on Sept. 5 a preferential exchange rate of 200 pesos per dollar for exporters to convert their earnings in foreign currency back to pesos, well above the controlled official rate now around 147 pesos.
From Europe, the European Commission last Friday cut its forecast for this year’s maize harvest in the European Union to 55.5 million tonnes from 59.3 million in late August, joining other forecasters in projecting a 15-year low for the drought-hit crop.
The 6.4% decrease marked the third sharp reduction in a row to the Commission’s monthly forecast for the maize harvest.
Meantime, the EU’s executive raised its forecast of EU maize imports in the 2022/23 season, to 21 million tonnes from 20 million expected a month ago, and lowered projected EU maize exports to 3.5 million from 4 million tonnes.
It also cut expected use of maize in livestock feed in the EU by 4.2 million tonnes to 60.5 million.
In contrast, the Commission raised its forecast of EU usable production of common wheat, or soft wheat, in 2022/23 to 127.0 million tonnes from 126.0 million last month, and increased estimated barley output to 51.5 million tonnes from 50.4 million.
It shifted some feed demand from maize towards soft wheat, which is now expected to provide 40 million tonnes for feed, 2.7 million more than forecast last month.
At the same time, it revised down total cereal use in feed to reflect lower expected pork, poultry and milk production.
Projected soft wheat exports in 2022/23 were kept unchanged at 36 million tonnes.
In oilseeds, the Commission revised up estimated rapeseed production in 2022/23 by 0.5 million tonnes to 19.3 million, and increased expected sunflower seed output by 0.4 million tonnes to 10.3 million.
Meantime, the FranceAgriMer reported 51% of the 22/23 crop was harvested through Sep 26.
That was up from 26% prior week and compares to 2% at the same time last year.
Meantime, Rouen reported 75,700 MT of corn shipments during the week of 9/28 – a near 50% drop off compared to the prior week.
On the other hand, surging gas prices and shrinking profit margins have led some fertilizer producers to cut production.
According to the German federal statistics office, Destatis, fertilizer prices nearly doubled in August compared to a year ago.
Russia’s Gazprom reduced its gas delivery to Europe this summer, leading to soaring gas prices on the continent.
“A mysterious” pipeline explosion past week further curtailed gas deliveries.
Higher fertilizer costs are just one of the fundamentals driving the volatility in grain markets.
From the Middle East, Iraq plans to plant one million hectares with wheat and “a very small amount” of barley in its 2022-2023 winter crop planting season, the ministry of water resources said in a Sunday statement.
The Iraqi cabinet directed the trade ministry to import wheat to store for the future, the statement said.
Iraq, has faced water shortages for several years.
The ministry of water resources said on Friday that 2022 was the driest year Iraq has witnessed since 1930.
Iraq harvested 625,000 hectares in the 2021-2022 season, according to the agriculture ministry.
From Russia, SovEcon, said that farmers had sown 8.6 million hectares of winter grain so far, 1.5 million hectares less than a year ago.
“This is the lowest area for this week since 2013.
The farmers need to speed up shortly, or we are likely to see a substantial decrease in the final area” the consultancy said.
IKAR, meantime, said fields were too wet to plant in some areas with more rain expected.
Worse, farmers are among the 300,000 Russians eligible to be drafted in Russia’s first mobilization since WWII.
News past Thursday that sanctions-hit VTB Bank has urged President Vladimir Putin to curb the activities of Western grain traders in Russia, has added morre caution about sourcing supplies from Russia and so, about Black Sea grain trade.
Meantime, as of October 5, the export duty on wheat will decrease to 2,119.0 from 2,476.6 rubles per ton a week earlier.
The duty on barley, also will decrease to 1,849.8 rubles from 2,152.6 rubles per ton a week earlier.
Also for corn it will down to 3,295.6 rubles from 3,659.9 rubles a week earlier.
This new duty rates will be in effect through October 11, inclusive.
The duties were calculated based on indicative prices: $308.1 per ton for wheat ($308.2 a week earlier), $282.3 for barley ($281.8), $317.6 for corn ($317.6).
Meantime, Russia may start providing trade finance to importers of its grain, Agriculture Minister Dmitry Patrushev said.
Particularly, Russia, is working with Eximbank and the Russian agency for export credit and investment insurance to provide financing to foreign companies for the purchase of Russian products, Patrushev said to the RBC business daily in an interview.
Speaking about farmers being among those drafted into the military in Russia’s partial mobilisation at a busy time in the sowing season, Patrushev said his ministry would make efforts to ensure the smooth running of the farming industry.
From Ukraine, grain exports fell by 23.6% year on year in September to 4.278 million tonnes, but reached the highest level since the war started.
Particularly, September’s exports included 2.08 million tonnes of corn, 1.75 million tonnes of wheat and 432,000 tonnes of barley.
In August, Ukraine had exported around 3 million tonnes of grain, including 1.85 million tonnes of corn and 900,000 tonnes of wheat.
Exports so far in the current July to June season have included 4.8 million tonnes of corn, 3 million tonnes of wheat and 762,000 tonnes of barley, according to the data.
That means Ukraine’s grain exports are down 40.3% year on year so far in the 2022/23 season.
However, the pace of shipments is increasing gradually.
Meantime, a fifth vessel chartered by the United Nations World Food Programme (WFP), NEW ISLAND, has arrived at Ukraine’s Black Sea port of Chornomorsk and will deliver Ukrainian wheat to Somalia, Ukraine’s infrastructure ministry said on Sunday.
Ukraine has already shipped wheat to Ethiopia, Yemen and Afghanistan under the programme.
The ministry also said on Sunday that a total of 5.8 million tonnes of agricultural products had so far left Ukrainian ports under the U.N.-brokered deal.
That includes some 114,700 tonnes which left Ukraine’s Black Sea ports on eight ships on Sunday.
From the Middle Kingdom, China announced a plan to reduce port cargo fees by 20% for the Q4 of 2022.
From Australia, the collapsing protein outlook for Australia’s wheat has domestic and export buyers of new crop largely sitting out of the market as harvest cranks up.
It is already under way for wheat in Central Queensland (CQ) and canola in Western Australia’s Geraldton zone, and volume wheat and barley is expected to hit the bins in Queensland from mid-October.
A proliferation of wheat cargoes on nearby export stems indicates demand is hot for Australian wheat, helped by the weaker Australian dollar, but offset by recessionary concerns in many global economies.
While growers and traders are aware the La Niña event could well slow harvest and haulage, big stocks in New South Wales and WA are providing a buffer for consumers and exporters.
On the international trade scene, Pakistan passed on all offers for its international tender to purchase 300.000t of wheat that closed past week.
A similar tender is likely to be issued soon, especially considering the fallout from devastating floods that caused an estimated $30 billion in damages earlier this year.
South Korea purchased 60.000t of animal feed corn in a private deal last Friday after cancelling an international tender for a similar amount.
The grain is likely sourced from South American or South Africa and is for shipment in November.
Algeria’s state grains agency OAIC is believed to have bought about 300,000 tonnes of milling wheat in an international tender which closed past Thursday.
The purchase was expected to be largely sourced from Russia, although technically supplies are optional origin.
Talks had continued on Friday but it was unclear if more had been bought.
Most traders last Friday estimated the tonnage bought at about 300,000 tonnes, above most earlier assessments of 150,000 to 200,00 tonnes.
Watching this week’s market, the calendar switched to October, so begun a new month also for trading.
October meal and bean oil are in deliveries, thus we will start to analyze December’s contracts.
Today will be busy for the USDA, with the weekly Export Inspections data out in the afternoon and the Crop Progress report overnight after the sessions close.
Today, we will also get monthly domestic use data via the Grain Crushing and Fats & Oils report.
Fast forward to Wednesday and the EIA will release their weekly report showing ethanol stocks and production.
We will also receive monthly trade data from Census.
On Thursday, we will see the weekly FAS Export Sales report in the afternoon.
Friday is the expiration day for October live cattle options, as well as October cotton futures.
That’s all, thank you.
We wish you a good day and a good start to the week.
Author: Sandro F. Puglisi
