Good morning Farmer Family …
US farm markets finished on a high note last Friday.
Corn, soybeans and wheat, indeed, all made moderate inroads in the end week session.
Friday’s US jobs report showed more than 200,000 jobs created in September, and the unemployment rate was only 3.5%.
That wasn’t seen good by investors, as low unemployment tends to put upward inflationary pressure on wages, while the Fed must to keep inflation down.
Thus, the dollar index soared, reversing from the early week sell off.
The heavy tech stocks, were hammered.
Oil prices which usually trades opposite the dollar rose, as OPEC+ cut production.
Meantime, commodities ag prices, which typically don’t benefit from a strong dollar, rose as higher crude/gasoline/diesel was seen good for ethanol and biodiesel use.
Thus, corn prices lifted 1.15% higher.
Soybean prices tacked on moderate gains of around 0.7%.
Soymeal prices were around 1.9% higher on the board.
Soybean oil closed the last trade day of the week 0.88% higher.
The wheat complex followed the broad set of other commodities higher, although traders remained leery of a very strong U.S. Dollar, which could hinder some future sales.
Thus, Chicago SRW wheat price picked up just 0.14%, Kansas City HRW closed 0.39% firmer, and MGEX spring wheat prices gained a 0.57% on the day.
For the week, corn prices managed to continue the slow ascension higher, as December pulled out a 0.84% gain from Friday to Friday.
Soybeans got help from the stronger Friday session, as November eked out just a 0.16% gain week on week.
Soy oil was up a strong 8.19% for the week, thanks crude oil strength.
Meal prices, in contrast, posted a 0.57% weekly drops.
The wheat complex, was the biggest weak spot for commodities past week.
Chicago SRW, indeed, was down 4.48%, giving back all of prior week’s gain.
Kansas City HRW wasn’t as bad, dropping 2.29% on the week.
Minneapolis spring wheat was the firmest, losing just 1.43% since prior Friday.
Past week, basis for wheat was up in both the Gulf and Pacific Northwest (PNW).
Basis in the Gulf was driven primarily by increased barge freight in the Mississippi River.
The weekly Grain Transportation Report (GTR) showed that rail efficiency has improved over the last two weeks, with speeds for grain trains improving and more grain carloads moved.
However, the report noted that rail performance still lags behind last year.
A strong dollar, stunted U.S. wheat’s competitiveness in the international market.
At the same time, tighter export capacity this time of year due to peak corn and soybean export programs adds to the overall basis cost.
Meantime, Ingram Barge Company, one of the country’s largest barge shippers, said Thursday it was “providing formal notice of a force majeure event” as low water on the Mississippi River disrupted its operations on the major shipping waterway.
The declaration affected the portion of Ingram’s operating network at locations downriver from Baton Rouge, Louisiana.
On Friday, the Commitment of Traders report showed the managed money net long grew by 5,874 contracts to 243,728.
That came via net new buying.
On the commercial side, commercial short hedges increased by 31,771 contracts and commercial long hedges increased by 24,351 contracts.
That was a net 7.4k contract stronger net short of 440,762 contracts.
As for soybean, the report showed long liquidation from specs through the week that ended 10/4.
The 15,520 fewer contracts (14%) left the group 77,488 contracts net long – the smallest said position since December 2021.
Commercial soybean hedgers closed 2.1k shorts and added 7.4k longs for a 9.5k contract weaker net short of 106,835 contracts.
In soymeal, the spec traders were 13,845 contracts less net long to 79,700.
Managed money firms held a 4,337 contract stronger net long in soybean oil through the week, at 62,754 contracts as of 10/4.
As for wheat, CFTC reported managed money firms were 2,178 contracts less net short in CBOT wheat through the week that ended 10/4.
More shorts were exited than longs, and the group was 12,219 contracts net short on 11,688 contracts (9.7%) less OI.
In KC wheat they added to their net long for the 4th consecutive week, raising it 1,726 contracts to 25,631 contracts by October 4.
In MPLS wheat the funds were 448 contracts less net long at 3,788 contracts.
On this morning, Chicago wheat prices jumped more than 1%.
Corn rose for a second session in a row and soybeans gained 1.8%.
Particularly, the most-active wheat contract on the Chicago Board of Trade was up 1.5% at $8.93 a bushel, as of 01:12 GMT.
Corn added 0.5% to $6.86-3/4 a bushel and soybeans rose 1.7% to 13.90-1/4 a bushel.
Market is waiting to see how the Kremlin responds to the blast that hit Russia’s only bridge to Crimea.
Russian President Vladimir Putin accused Ukraine of orchestrating the explosion of the bridge linking Russia and Crimea, an act he described as terrorism.
On the other hand, the European Union’s maize harvest is in full swing and analysts expect to push the feed grain crop to a 15-year low.
The European Commission last Friday cut its EU maize crop forecast to 55.5 million tonnes.
Operators should still be cautious ahead of Wednesday’s USDA report.
Ahead of the October WASDE report, Bloomberg survey results show the trade is looking for USDA to trim the corn yield by 0.4 bpa on average to 172.1.
The full range of estimates is between a 2.4 bpa cut and a 1.4 bpa boost.
As for production, the average trade guess is to see 13.903 bbu, between 13.766 and 14.056 bbu. 22/22 carryout is expected to drop 93 mbu on average, reflecting the tighter than expected carry-in and the lower output.
As for soybean, survey respondents expect USDA to raise soybean yields by 0.1 bpa on average.
The full range of published numbers is between 49.8 bpa and 51.3 bpa.
Traders have the production figured between 70 mbu lower and 85 mbu above USDA’s September figure with a 4.38 bbu average trade guess.
Soybean carryout is expected to rise 45 mbu to 244.8 on average, mostly reflecting the higher than expected carry-in from the Grain Stocks report.
As for wheat, analysts expect USDA to cut the 22/23 wheat carry-out by 47.5 mbu to 562.
That comes via wide expectations from 477 on the low end to 637 on the high end.
Global wheat stocks have a tighter 8 MMT expected range, from 262.6 MMT to 270 MMT, with the average of estimates for a 700k MT cut to 267.9.
In energy markets, crude oil had its biggest weekly gain since March last Friday.
Benchmark U.S. crude jumped 4.7% to settle at $92.64 per barrel.
Brent crude, the international standard, rose 3.7% to settle at $97.92.
As we said, prices have shot higher because big oil-producing countries have pledged to cut production in order to keep prices up.
Oil rallied for the fifth day in a row even as the dollar.
A strong greenback, teorically, would pressure oil demand, making dollar-denominated crude more expensive for other currency holders.
But the price jump pushed both benchmarks into technically overbought territory for the first time since August for Brent and June for WTI.
Both contracts posted their second straight weekly gains, and their biggest weekly percentage gains since March, past week, with Brent was up about 11% and WTI 17% higher.
U.S. heating oil futures jumped 19% past week to their highest close since June, boosting the heating oil crack spread – a measure of refining profit margins – to its highest close on record, according to Refinitiv data going back to December 2009.
The OPEC+ cut comes ahead of a European Union embargo on Russian oil and will squeeze supply in an already tight market.
Meantime, the U.S. oil rig count, an early indicator of future production, fell by two past week to 602, according to energy services firm Baker Hughes Co, as high inflation forces producers to spend more money to secure workers and equipment.
Meantime, in Europe, divisions between EU leaders over capping gas prices and national rescue packages resurfaced, with Poland accusing Germany of “selfishness” in its response to a winter energy crunch caused by Russia’s war in Ukraine.
On this morning, oil prices fell.
Investors took their profits after a report on slowing economic activity in China, re-ignited concerns about falling global fuel demand.
Thus, Brent crude futures for December settlement fell by as much as 1.1%, and was last down 39 cents, or 0.4%, at $97.53 a barrel by 06:45 GMT.
West Texas Intermediate crude for November delivery declined by as much as 1.1% and was last at $92.27 a barrel, down 37 cents, or 0.4%.
The slowdown in the economy of China, adds to growing concerns about a possible global recession.
Other signs of slowing demand emerged from India.
Government data on Friday, indeed, showed that fuel demand in September fell to the lowest since November and was down 3.6% from August.
In ocean freight markets, the Baltic Exchange’s main sea freight index fell on Friday pressured by a dip in the capesize segment, but posted a weekly rise powered by overall gains across all vessel segments.
The overall index, indeed, fell 31 points, or about 1.6%, to 1,961.
It posted a weekly gain of 11.4%, gaining for five out of the last six weeks.
Particularly, the capesize index lost 110 points, or about 4.4%, at 2,396, but notched up a 23% weekly gain.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, were down $912 to $19,874.
The panamax index added three points to rise to 2,235, posting a fifth straight weekly gain of 7.3%.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, were up $32 to $20,116.
The supramax index rose 16 points to 1,706.
In equity markets, Wall Street fell sharply on Friday following the solid jobs report for September.
The Dow Jones Industrial Average closed down 630.15 points, or 2.11%, at 29,296.79, the S&P 500 lost 104.86 points, or 2.80%, to 3,639.66 and the Nasdaq Composite dropped 420.91 points, or 3.8%, to 10,652.41.
The jobs data, indeed, cemented another jumbo-sized 75 basis-point rate hike in November.
Consequentially, all 11 major S&P 500 sectors declined, with technology falling the most, down 4.14%.
The Philadelphia SE Semiconductor index fell 6.06% after a revenue warning from Advanced Micro Devices signaled a chip slump could be worse than expected.
The index posted its biggest single-day percentage decline in more than three weeks.
AMD shares fell 13.9% as the company’s third-quarter revenue estimates were about $1 billion lower than previously forecast.
It was the largest declining stock on the Nasdaq 100.
FedEx Corp slid 0.5% as the division that handles most e-commerce deliveries expects to lower volume forecasts because its customers plan to ship fewer holiday packages.
However, despite Friday’s nosedive, a hefty two-day rally earlier in the week pushed the S&P 500, the Dow and the Nasdaq to post their first week of gains after three straight weeks of losses.
For the week, indeed, the S&P 500 rose 1.51%, the Dow added 1.99% and the Nasdaq gained 0.73%.
The rise for crude helped stocks of oil-related companies to be among Wall Street’s very few to rise Friday.
Oilfield services provider Halliburton, indeed, climbed 2%.
That should keep the pressure up on inflation, which is still near a four-decade high but hopefully moderating.
This week’s consumer price index will provide a key snapshot of where inflation stands.
On this morning, Asian shares slipped, with Chinese markets logging moderate losses after they reopened from a weeklong holiday.
The Hang Seng in Hong Kong fell 2.5% to 17,298.32 while the Shanghai Composite index shed 0.4% to 3,012.58.
Bangkok’s SET lost 0.6% and India’s Sensex gave up 1.2%.
Markets were closed Monday in Tokyo, Taiwan and South Korea.
In currency trading, U.S. dollar index was last up 0.6% on Friday and hit its highest in a week.
The index was up about 18% for the year so far.
The U.S. dollar, indeed, strengthened against major currencies on Friday reversing early losses against the Japanese yen and was last up 0.2% at 145.42 yen.
The euro fell against the dollar, extending losses, and was last down 0.6% at $0.9735.
Sterling was down 0.9% at $1.1060, having fallen 1.4% overnight.
The dollar also gained against China’s offshore yuan Friday, and was last up 0.7% at 7.1313.
On this morning, the dollar rose to 145.44 Japanese yen, adding to pressure on Japan’s central bank to counter the yen’s prolonged slide by adjusting its policy of keeping its benchmark interest rate below zero to fend off deflation.
The euro was unchanged at 97.36 U.S. cents.
Going back to analyzing the other agricultural markets, in Canada, Canadian farmers are expected to harvest their third biggest wheat crop in 2022, rebounding after last year’s drought cut yields.
The weather over the past week was excellent for Saskatchewan harvest.
The province now has 90 per cent of the crop in the bin, up from 81 per cent last week and well ahead of the five-year average of 82 per cent.
High humidity in many parts of the southeast, east-central and northeast is making it difficult to combine and has also led to grain coming off at higher amounts of moisture than normal.
Producers must dry down the grain in order to store it properly.
Harvest in the southwest and west-central regions is virtually complete with mostly flax waiting to be harvested, which will likely occur after the next heavy killing frost.
The northwest has 94 per cent of their crop off, the northeast 87 per cent, the southeast 86 per cent and the east central 81 per cent.
The harvest of lentils and field peas has finished.
Ninety-eight per cent of the durum, 97 per cent of the chickpeas, 93 per cent of the spring wheat, 90 per cent of the barley, 82 per cent of canola and 66 per cent of the flax has been combined across the province.
However, there are concerns about the ability of Canadian railroads to manage the logistics of moving wheat to export elevators.
Shippers are worried that there are not enough rail cars to move wheat currently.
“CP is working diligently with grain customers,” said a spokeswoman for Canadian Pacific.
She noted that CP increased rail capacity by 10% compared to a week earlier.
Producers’ deliveries of common wheat in week 9 of the shipping season, were at 459,8k mt.
That was weaker from 547.1k posted a week erlier.
Deliveries of durum wheat increased to 134.5k mt down from 97.0k mt a week earlier.
Meantime, Canada exported 380.4k mt of common wheat in week 9 of the shipping season.
That was weaker from 627.8k mt a week earlier.
Durum wheat exports, in contrast, were sharply higher at 75.9k mt, up from 27.7k mt a week earlier.
Consequentially, total Commercial Stocks of common wheat stood at 3.300,7k mt, slightly up from 3.245,9k mt a week earlier.
As for durum, total commercial stocks were at 759,8k mt, up from 675,5k mt a prior week.
Once again, there was very little rain this past week, with only trace amounts being recorded for most regions.
Some parts of the southwest received two to three mm but it did very little to improve soil moisture conditions.
All areas of the province are reporting that they are either extremely dry or becoming drier each week.
This includes the southeast and east-central regions, which started the season with an abundance of moisture.
Some producers are starting other fall field work, such as post-harvest weed control and harrowing.
Winter cereals are not able to be planted in many areas due to the lack of soil moisture.
Fall fertilizer applications are also not possible in many regions due to these dry conditions.
From South America, the Argentinian General Administration of Ports (AGP) will start charging a toll along the Paraguay-Parana waterway, the Argentine Ministry of Transport announced.
The waterway is used by 20,000 barges annually, including international cargo, and is responsible for moving 80% of Argentina’s exports, reported AgriCensus.
The government said some areas could charge $1.47/MT.
The government said the charge would allow investments in improved navigation signaling and dredging.
Meantime, the Buenos Aires Grain Exchange rated 2022/23 wheat conditions 54pc fair/excellent (55pc last week, 74pc last year), with the majority of poor crops in central and northern areas due to drought.
If there is no rainfall over the next seven days conditions and yield potential may deteriorate further, including in southern regions.
Brazil’s 2022/2023 total corn crop could reach 126.941 million tonnes, up 12.5% from 112.805 million tonnes in the previous cycle, the agricultural agency CONAB said.
Brazilian farmers are expected to plant 14.6% more first-crop corn and 12.4% more second-crop corn in 2022/2023.
Brazil’s 2022/2023 soybean crop could reach 152.352 million tonnes, up 21.3% from 125.550 million tonnes produced in the previous cycle.
Brazil’s 2022/2023 soybean area is expected to grow 3.4% to 42.892 million hectares.
Wheat production forecast was unchanged this month, at a record 9.4Mt (7.7Mt last year).
Meantime, Brazil grain exporters’ association ANEC sees October corn exports at 4.2Mt, up from 1.9Mt last year, also noting exports could reach 5.5Mt.
Soybean exports are seen at 3.1Mt, up from just under 3Mt in October 2021.
In Europe, markets remained suspended on the evolution of the situation in the Black Sea basin.
On Euronext, volumes traded on Friday were low, with a large part of the operators present on the Valencia Stock Exchange in Spain.
Rapeseed prices, meantime, rebounded in the wake of oil, canola and palm.
On the weather point of view, the current lack of rain allowed rapid progress on autumn sowing in France.
French wheat planting reached 3% of expected area through 10/3.
Meantime, French farm office FranceAgriMer reported that 67% of the country’s corn harvest is now complete, up from 51% a week ago and well ahead of 2021’s pace of 6%.
The 2022 harvest is trending 28 days ahead of last year’s pace and 18 days ahead of the prior five-year average after suffering severe drought and heat throughout the summer and early fall.
Quality ratings were steady from a week ago, with 41% of the crop in good-to-excellent condition through October 3.
Meantime, as we said, the European Commission estimates corn production at 55.5 million tonnes, the lowest volume since 2007.
The AGPM showed a production estimate of 10 million tonnes for France.
In this context, EU imports could show a high level of 21 million tonnes.
From Russia, Agriculture Ministry reports that as at 3 October, the 2022/23 wheat harvest yielded 102.1Mt, with yields at 3.6t/ha (+28pc on same period last year), barley harvest was at 23.8Mt with yields at 3.0t/ha (+30pc y/y).
It also reports low soil moisture reserves in Krasnodar, Rostov and Stavropol pose risks for 2023/24 winter grain production, including wheat.
Meantime, as of October 12, the export duty on wheat will decrease to 1,926.8 from 2,119.0 rubles per ton a week earlier.
The duty on barley, also will decrease to 1,632.0 rubles from 1,849.8 rubles per ton a week earlier.
Also for corn it will down to 3,114.1 rubles from 3,295.6 rubles a week earlier.
This new duty rates will be in effect through October 18, inclusive.
The duties were calculated based on indicative prices: $307.7 per ton for wheat ($308.1 a week earlier), $280.9 for barley ($282.3), $317.6 for corn ($317.6).
From Ukraine, according to the Minister of Agriculture, wheat production this year will be 19.2 million tonnes and that of barley 5.5 million tonnes, compared to 32.2 and 9.4 million tonnes respectively last year.
Corn harvest sites would be carried out at 2.3% and those of sunflower at 28%.
Meantime, analysis of data provided by Ukraine’s agriculture ministry shows the pace of winter wheat planting is three times slower than last year.
As of October 3, farmers have planted 1.1 million hectares, 27% of the expected winter wheat area.
Last year farmers had planted 3.1 million hectares by this time.
Local officials said rain across the area and a lack of funds were to blame for the slower planting pace.
Barva Invest, a consultancy, estimated that farmers could plant 3.4 million hectares for harvest in 2023.
The CEO of IMC Integrated Agricultural Business said that Ukraine can produce enough wheat in 2023 for its domestic use, “but not everything will be so rosy with exports.”
U.N. Secretary-General Antonio Guterres and his team are working to expand and extend for a year the U.N.-brokered deal allowing Ukrainian Black Sea grain exports, which could expire in late November.
Meantime, a fifth vessel chartered by the United Nations World Food Programme (WFP) has left Ukraine’s Black Sea port of Chornomorsk and will deliver 30,000 tonnes of Ukrainian wheat to Ethiopia, Ukraine’s infrastructure ministry said on Friday.
From the Middle Kingdom, China’s hog prices rose as much as 6% on this morning, after a surge in demand during the week-long National Day holiday, amid tight supply, pushed up spot prices.
The contract for live hogs for January, the most-active on the Dalian Commodity Exchange, indeed, rose by 5.8%, the biggest daily gain since hog futures were launched last year, to 23,735 yuan ($3,336.71) per tonne as of 2:42 p.m.(06:42 GMT).
Spot prices for hogs reached 26.2 yuan per kg on Sunday, up 8% since Sept. 25.
Prices are at the highest since March 2021.
China’s hog production has contracted in recent months, after months of heavy losses by farmers since last year led some to reduce breeding.
China’s state planner said on Sunday it will release a new batch of pork from state reserves to try to cool prices.
The state planner has sought to reassure the market that supply is sufficient and has blamed farmers for holding back supplies.
It has also blamed unofficial media reports for fuelling market concerns.
Further measures are expected, which could include more pork reserve sales while the authorities seeking pledges from large producers to maintain steady production.
($1 = 7.1133 Chinese yuan renminbi).
From Australia, the country exported 2,515,031 tonnes of wheat in August, down 3 per cent from the 2,583,590t shipped in July, according to the latest data from the Australian Bureau of Statistics (ABS).
In the boxed market, Vietnam on 51,365t was the biggest buyer, followed by Taiwan on 37,720t and Malaysia on 28,802t.
In the bulk market, the largest-volume destination was Indonesia on 419,220t followed by The Philippines on 411,496t and China on 298,810t.
The China figure is less than half that of the previous month, and is likely a reflection of Black Sea wheat hitting the market.
According to Lachstock Consulting’s Australian Export Vessels Lineup summary released October 5, the September bulk-shipment figure is likely to dip below 2 million tonnes (Mt) in both September and October.
Volume is expected to surge in November on new-crop availability.
While big carry-outs in New South Wales and Western Australia are the buffer for wheat exporters should rain delay harvest, stocks in South Australia especially are low, and will kick once its harvest gets under way in earnest next month, weather permitting.
Meantime, on Friday markets have been tracking sideways with everyone very hesitant because of weather at the moment.
Execution programs are in a spin this morning with east coast bulk handler sites dropping like flies due to flooding and wet weather.
Bureau of Meteorology weekend Watch and Act warnings were issued across much of NSW and Victoria as intense rain flooded parts of both states.
Evacuation orders were issued for areas along the Lachlan and Hawkesbury rivers, with more than 100 warnings issued across NSW as of Sunday night.
Unfortunately, the next weather system is expected to arrive this Wednesday/Thursday and the highest rainfall totals are expected across Victoria and southern NSW.
The GIWA October Crop Report said perfect conditions for grain fill during September have pushed tonnage estimates for the WA grain harvest to the near record levels.
Mild temperatures across the whole state and the absence of any significant frost events have combined to give the crops every chance of achieving above average yields for all crops in all regions with wheat production now forecast at just over 12Mt, barley 6Mt and canola 3.8Mt.
On the international trade scene, Algeria’s state grains agency OAIC has issued an international tender to buy soft milling wheat to be sourced from optional origins.
The tender sought a nominal 50,000 tonnes but Algeria often buys considerably more in its tenders than the nominal volume sought.
The deadline for submission of price offers in the tender is Tuesday, Oct. 11, with offers having to remain valid until Wednesday, Oct. 12.
The wheat is sought for shipment in two periods from the main supply regions including Europe: Nov. 1-15 and Nov. 16-30.
If sourced from South America or Australia, shipment is one month earlier.
FAO Price Index for September 2022
The United Nations food agency’s world price index fell for a sixth month in a row in September, receding from all-time highs posted earlier this year.
The FAO, indeed, said on Friday that its price index, which tracks the most globally traded food commodities, averaged 136.3 points last month versus a revised 137.9 for August.
The August figure was previously put at 138.0.
The index has fallen from a record of 159.7 in March.
The September reading was, however, 5.5% higher than a year earlier.
The latest drop was driven by a 6.6% month-on-month fall in vegetable oil prices, with increased supplies and lower crude oil prices contributing to the decline.
Sugar, dairy and meat prices all slipped by less than one percentage point, relieving inflationary pressures.
By contrast, FAO’s cereal price index rose 1.5% month-on-month in September, with wheat prices climbing 2.2%.
Rice prices rose 2.2%.
In separate cereal supply and demand estimates, FAO lowered its forecast for global cereal production in 2022 to 2.768 billion tonnes from a previous 2.774 billion tonnes.
That is 1.7% below the estimated output for 2021.
World cereal use in 2022/23 is expected to surpass production at 2.784 million tonnes, leading to a projected 1.6% fall in global stocks compared with 2021/22 to 848 million tonnes.
That would represent a stocks-to-use ratio of 29.7%, down from 31.0% in 2021/22 but still relatively high historically, FAO said.
Watching this week’s market, the week should have started off with a quiet session today, as the US government offices are closed for Columbus Day, even if markets are open as it is first notice day for October live cattle futures.
However, tensions between Russia and Ukraine are supporting wheat prices as market is waiting to see how the Kremlin responds to the blast that hit Russia’s only bridge to Crimea.
On Tuesday, the USDA will release their normal Monday reports, with the Export Inspections report in the afternoon and Crop Progress report out after the session close.
Wednesday will be busy for grain traders, with the monthly Crop Production and WASDE reports.
Thursday will show the delayed release of the EIA report publishing new ethanol production and stocks data.
Friday rounds out the week with the Export Sales report in the afternoon.
It is also the last trading day for October lean hog futures and options, as well as October soybean meal and oil.
That’s all, thank you.
We wish you a good day and a good start to the week.
Author: Sandro F. Puglisi
