Good morning Farmer Family …
US farm markets, have been “on roller coasters” past week.
Early in the week prices soared when Russia pulled out of the grain export corridor, then, they quickly reversed the rout in midweek when Russia re-entered.
On Friday, they were on the rise again, as a general optimism on export sales, a sharply rising in energy prices and a softening U.S. Dollar pushed up prices.
Particularly, corn prices were slightly firm in the end week session, despite was a mostly uneventful session, indeed they closed 0.26% higher.
The soybean complex, saw the biggest boost, with soy oil ledding the rally, up 2.5% for the session.
Bean prices closed the end week session with 1.76% gains, while meal prices rose 1.47%.
The wheat complex, on its part, trended moderately higher on Friday, as Chicago SRW wheat prices added 0.86%, Kansas City HRW wheat prices rose 1.27%, and Minneapolis spring wheat gained 1.22%.
For the week, corn prices although posted a 21,5 cent range on the week, mostly to the high side, were unchanged from the prior Friday.
Soybeans gained some steam past week, as November contract was up 4.59% and January closed the week with 4.4% gains.
The product values were mixed on the week, with soy oil holding the complex up, rallying 7.49%.
Soybean meal has been weaker, with a 1.18% weekly loss.
The wheat complex, closed the week higher despite the turnaround in the middweek session.
Chicago SRW wheat prices, indeed, rallied 2.23% for the week.
Kansas City HRW wheat prices were 3.05% higher from the prior Friday.
Minneapolis spring wheat rose 1.01% from Friday to Friday.
After the sessions close, Friday’s weekly Commitment of Traders data showed that as of the 11/1 settle, managed money firms in corn had added 6,189 new longs and lifted 1.4k shorts.
That left the group 7,586 contracts more net long to 271,960.
Commercials added 34k new hedges through the week, including 9.8k longs and 24k shorts.
On net the commercial position was 14.2k contracts more short to 490,638 contracts.
As for soybean, the report showed spec traders 25,918 contracts more net long through net new buying as of 11/1.
That left them back above the 101,329 contract net long for the first time since 9/20.
Commercial soybean traders lifted 65,556 hedges through the week, with more long liquidation than short covering, for a 27.3k contract stronger net short of 140,670 contracts.
As for wheat the report had Chicago wheat specs adding 5k new longs and 6.1k new shorts through the week that ended 11/1.
That left thegroup 1,097 contracts more net short to 37,149 contracts.
That remains their strongest net short since June of 2020.
In KC wheat, managed money firms were 1,218 contracts less net long to 23,408 contracts as of 11/1.
That came mostly via net new selling.
In spring wheat, managed money had added 208 new longs and lifted 123 shorts for a 1,176 contract net long.
Corn basis bids were mostly steady across the central U.S. past Friday but did tilt 3 cents higher at an Ohio elevator and 5 cent slower at an Iowa processor.
Soybean basis bids were steady to firm, after rising 10 cents higher at an Ohio elevator and improving 5 to 10 cents at three Midwestern processors.
As for wheat, basis was mixed in both the Gulf and Pacific Northwest (PNW) during the past week.
Gulf HRS and HRW basis were down while SRW remained flat.
In the PNW HRS basis was flat, while HRW basis and soft white prices were up.
Wheat prices remained high, and actions in the Black Sea made day-to-day pricing challenging to predict.
In the Gulf, slow wheat demand has pushed basis down, except for SRW, which remained firm due to the Mississippi River issues.
Heavy rain in Australia, which has led to speculation about milling quality, helped push U.S. soft white prices higher.
Steady demand for PNW wheat helped keep basis firm.
On this morning, Chicago soybeans prices slid, after China denied it was considering easing its zero-COVID policy, and data showed country’s soybeans purchases decliedn in October.
Wheat and corn also fell.
Particularly, the most-active soybean contract on the Chicago Board of Trade (CBOT) was down 0.6% at $14.53-3/4 a bushel, as of 03:44 GMT.
Wheat dropped 1.1% to $8.38-3/4 a bushel and corn slid 0.6% to $6.77 a bushel, the weakest since Oct. 24.
In energy markets, oil prices settled up by more than 5% last Friday.
Uncertainty around future interest rate hikes by the U.S. Federal Reserve, a looming EU ban on Russian oil and the possibility of China could easy some COVID restrictions, have supported markets, though fears of global recession capped gains.
Thus, Brent crude futures settled up $3.99 to $98.57 per barrel, a weekly gain of 2.9%.
U.S. West Texas Intermediate (WTI) crude futures were up $2.96, or 5%, at $92.61, a 4.7% weekly gain.
A former Chinese disease control official said substantial changes to the country’s COVID-19 policy are to take place soon.
Thus, China’s stock markets have been buoyed past week by this rumours, despite the lack of any announced changes!
Signals about the size of U.S. interest rate hikes had caused losses in oil prices during the week.
However, the U.S. Labor Department’s non-farm payrolls report on Friday showed a rise in the unemployment rate to 3.7% last month from 3.5% in September.
That suggested some loosening in labor market conditions, that could give the Fed cover to shift towards smaller rate increases.
Consequentily the dollar weakened supporting oil demand.
Additionally, supply is expected to remain tight.
The upcoming ban on Russian oil sales are certainly supportive.
However, the main catalyst past week, was reports that China may ease its zero-Covid restrictions, which would been a boon to its economy and oil demand.
On the bearish side, fears of a recession in the United States, grew last Thursday after Fed Chairman Jerome Powell said it was “very premature” to be thinking about pausing interest rate hikes.
The Bank of England warned, also on Thursday, that it thinks Britain has entered a recession and the economy might not grow for another two years.
In this context, Saudi Arabia lowered December official selling prices for its flagship Arab Light crude to Asia by 40 cents to a premium of $5.45 a barrel versus the Oman/Dubai average, although the cut was in line with trade expectations.
Meantime, on this morning, oil prices fell more than $1 a barrel.
Brent crude futures, indeed, dropped $1.20, or 1.2%, to $97.37 a barrel by 02:27 GMT.
U.S. West Texas Intermediate crude was at $91.24 a barrel, down $1.37, or 1.5%, dropping to a session-low of $90.40 a barrel earlier in the session.
Oil prices dropped sharply as the Chinese officials vowed to stick to the COVID-zero policy while infected cases climbed in China, which may cause more restrictions measures, darkening the demand outlook.
Looking into this week, investors are awaiting the U.S. Energy Information Administration’s short-term energy outlook and the November U.S. Consumer Price Index for insight on the pace of inflation.
In ocean freight markets, the Baltic Exchange’s dry bulk sea freight index rose past Friday for the first time in 13 sessions, helped by an uptick in capesize rates.
The overall index, indeed, rose 33 points, or about 2.6%, to 1,323.
However, the index fell about 13.8% in its second straight weekly decline.
Particularly, the capesize index rose 118 points, or about 9.6%, to 1,343.
However, it recorded its worst week since late August, shedding about 19.6% past week.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as coal and steel-making ingredient iron ore, were up $981 at $11,139.
The panamax index rose 1 point to 1,700.
It fell about 6.4% for the week in its second consecutive weekly fall.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, rose $4 to $15,299.
The supramax index fell 19 points to 1,268.
It marked its worst week in a year with a drop of about 14.5%.
In equity markets, U.S. stocks closed higher on Friday.
The Dow Jones Industrial Average rose 401.97 points, or 1.26%, to 32,403.22, the S&P 500 gained 50.66 points, or 1.36%, to 3,770.55 and the Nasdaq Composite added 132.31 points, or 1.28%, to 10,475.25.
However, for the week, the Dow fell 1.39% to snap a four-week winning streak, the S&P dropped 3.34% and the Nasdaq slid 5.65% for its biggest weekly percentage decline since January.
The trade has been volatile.
Investors wrestled with a mixed jobs report and comments from Federal Reserve officials on the pace of interest rate hikes.
The job report, as we said, showed an uptick in the unemployment rate in October, indicating some signs of slack may finally be starting to emerge in the job market and give the Fed room to downsize its rate hikes beginning in December.
But the data also showed average hourly earnings rose slightly more than expected, as did job growth, pointing to a labor market that largely remains on firm footing.
Thus, Fed officials echoed Powell’s comments about needing to continue to raise rates for a longer period of time and potentially above the 4.6% level the central bank penciled in at its September meeting.
Hopes of an easing in China’s tough COVID-19 curbs supported Asian markets past week, but also some areas of the US market.
On Friday stocks in Hong Kong, indeed, surged 5.4%, while stocks in Shanghai jumped 2.4%, and both markets finished the week with strong gains.
In the USA Alibaba closed up 7.05% and JD.com was up 9.74%.
Those hopes also helped boost prices of commodities such as copper, which in turn lifted the materials sector 3.41% as the best performing of the 11 major S&P sectors.
Shares of miner Freeport-McMoRan soared 11.5% for the biggest gain in the S&P 500.
Among others, Starbucks Corp jumped 8.48%, while DoorDash Inc’s shares were boosted by 8.32%.
On this morning, Asian stocks were resilient.
Hong Kong’s Hang Seng index gained 2.7% to 16,595.91 and the Shanghai Composite rose 0.2% to 3,077.85.
Japan’s benchmark Nikkei 225 jumped 1.2% to finish at 27,527.64. Australia’s S&P/ASX 200 gained 0.6% to 6,933.70.
South Korea’s Kospi gained nearly 1.0% to 2,371.79.
Shares rose in Taiwan and but edged lower in India.
However, over the weekend, Beijing has dashed hopes of China re-opening in the horizon, by reasserting of zero-COVID policies, and this could induce to fresh caution.
Also, China reported its trade shrank in October as global demand weakened and anti-virus controls weighed on domestic consumer spending.
Exports declined 0.3% from a year earlier, down from September’s 5.7% growth, the customs agency reported Monday.
Imports fell 0.7%, compared with the previous month’s 0.3% expansion.
In the U.S., Tuesday’s election will decide control of Congress and key governorships.
History suggests the party in power may suffer significant losses in the midterms.
Thus, analysts say regional markets may take a wait-and-see approach ahead of the U.S. mid-term vote, and focus will now turn to a key consumer inflation reading due this week.
In currency trading, the dollar tumbled past Friday after the U.S. nonfarm payrolls report for October showed the world’s largest economy created more new jobs than expected, but also flashed signs of a slowdown with a higher unemployment rate and lower wage inflation.
Particularly, the dollar fell 1.1% against the yen to 146.65 yen, posting losses for a third straight week.
The euro, on the other hand, rose 2.2% to $0.9960 .
The dollar index, fell 1.9% to 110.77, for its largest one-day percentage loss since November 2015.
The greenback initially had rose immediately after the data, but fell as market participants digested the jobs report, noting the data was not all positive and supports the view the Federal Reserve could slow the pace of future rate hikes.
The yield on the two-year Treasury fell to 4.68% from 4.72% late Thursday.
Meanwhile, the 10-year yield, which helps dictate rates for mortgages and other loans, edged higher to 4.16% from 4.15%.
On this morning, the U.S. dollar edged up to 147.22 Japanese yen from 146.65 yen.
The euro eased to 99.29 cents from 99.60 cents.
Going back to analyzing the other Ag markets …
In Canada, producers’ deliveries of common wheat in week 13 of the shipping season, were at 441,4k mt.
That was slightly lower from 491,5k posted a week erlier.
Deliveries of durum wheat also decreased to 96.7k mt from 148.2k mt a week earlier.
Thousands of tonnes of wheat and canola are reportedly stranded in Canada after rain has hampered deliveries at the country’s largest port during peak shipping season.
Grain terminals in Vancouver are having trouble loading and unloading grain amid heavy, persistent rain in British Columbia, creating a backlog of trains that are unable to deliver to the port.
Meantime, Canada exported 424.4k mt of common wheat in week 13 of the shipping season.
That was down from 533.9k mt posted a week earlier.
Durum wheat exports, also were weaker at 101.5k mt, down from 161.7k mt a week earlier.
Consequentially, total Commercial Stocks of common wheat stood at 2.833,2k mt, down from 2.916,3k mt a week earlier.
As for durum, total commercial stocks were at 782,6k mt, down from 833k mt posted the prior week.
Cumulative exports for common wheat are now at 4.628,1k mt, up from 3.291,9k mt year ago to date.
As for durum wheat, cumulative exports reached 823,4k mt, that was down from 860,2k mt year ago to date.
Cash bids for durum wheat have been higher past week.
Indeed, looking at an average regional price of $498.53/mt as of Nov 4, that was $12.44/mt higher than the prior week.
From South America, Brazil’s Paranagua Port was re-opened after protesters blocked access following President Bolsonaro’s loss to rival Luiz Ignacio Lula da Silva.
The protests cut port activity to a fraction of its daily activity.
Roads across the country were blocked in protest of da Silva’s narrow defeat of Bolsonaro.
Meantime, forward sales of Brazilian soybeans are well below last year and the historical average as farmers hold on to crops in the hope of fetching better prices.
According to Safras & Mercado, indeed, volumes of pre-sold soy advanced little from last month, but still just below 21% of the expected output in Brazil.
In 2021 at this time, forward soy sales were at 30.6% of the projected total production while the historical average for this period in the season is 34.2%, Safras noted.
Taking into account an estimated output of 151.497 million tonnes, Safras calculates committed sales amounting to 31.2 million tonnes of Brazil’s new soy crop.
In relation to the 2021/2022 soy crop, an estimated 89.2% of production has been sold.
A year ago, sales of same-year crop were at 92% as Chinese demand was stronger.
The five-year average for this time in the season is sales of 94% of the crop, Safras said.
The Buenos Aires grains exchange last Thursday cut their forecasts for Argentina’s wheat production 2022/2023 to 14 million tonnes, down from 15.2 million tonnes previously.
Meantime the government has announced that due to severe drought conditions and a smaller than expected harvest, current wheat export licenses will be extended for up to 360 days.
The measure would apply to shipments originally scheduled to load between 1 Dec and 28 Feb.
Drought conditions have caused some delays for soybean plantings in Argentina.
“The extreme climatic conditions now put soybean planting on the ropes,” according to a recent report from the Rosario grains exchange.
“It is the most difficult and uncertain planting of the last 12 years.”
The Rosario grains exchange currently estimates that the country’s 2022/23 soybean footprint will be 42.008 million acres.
In Europe, French farm office FranceAgriMer has marked 99% of the country’s corn harvest as complete through October 31, keeping it 28 days ahead of 2021’s pace and 18 days ahead of the prior five-year average.
Production is expected to fall to a three-decade low after suffering through widespread drought and multiple heatwaves.
French farm office FranceAgriMer also reported that the country’s 2022/23 soft wheat crop plantings were 84% complete through October 31, up from 63% a week ago.
Emergence is at 61% over the same period.
Farm field work has progressed faster than it has in recent years.
However, the warmest October in 40 years has accelerated crop development so much that it has left them fragile to sudden frosts later in the season, French crop institute Arvalis warned on Friday.
In Germany, tight port capacity carried an 11 euro premium over the Euronext December wheat contract past week.
From the Black Sea basin, Russia wants Western countries to ease curbs on state-owned agriculture lender Rosselkhozbank to facilitate Russian grain exports.
Russia is seeking restoration of the bank’s relations with correspondent banks despite sanctions.
The plan would likely be to let Rosselkhozbank process payments for grain, with this playing a key part of talks on rolling over grain deal.
Before the latest sanctions, such payments were handled by international banks and subsidiaries of other Russian banks in Switzerland.
Ukraine’s corn harvest is currently down 72pc from a year ago because of adverse weather and disruptions caused by the war, according to Agriculture Ministry data saying 6.3Mt of corn has been harvested as of Nov. 4 vs 22.8Mt a year earlier, across 1.1million hectares — accounting for 27pc of plantings — vs 3.3Mha at 4 Nov last year.
From the Middle Kingdom, China has reported its highest number of new COVID-19 infections in six months, a day after health officials said they were sticking with strict coronavirus curbs.
Chinese stocks soared last week on rumours of a possible easing of COVID curbs and media reports that some tweaks to policy could be coming soon.
However, many analysts say they do not expect significant easing to begin until after China’s annual parliamentary session in March.
Meantime, China’s soybean imports in October fell 19% to 4.14 million tonnes from a year earlier, as the country curbed purchases amid high global prices and poor crush margins.
The October arrivals were, even lower than the 5 million tonnes that traders and analysts had predicted last month.
Soybean imports for the first 10 months of the year were at 73.18 million tonnes, down 7.4% compared with last year, data from the General Administration of Customs showed.
Meantime, cash soymeal prices touched records in recent weeks on tight supply.
In the top hog-raising province of Sichuan, prices reached 5,850 yuan ($810.78) a tonne last week, up 26% in two months.
Meantime, China sold 40,476 tonnes of wheat, or 100% of the total offer, at an auction of its state reserves on Nov. 2, the National Grain Trade Center said on Monday.
The average selling price of the wheat from the 2014, 2015 and 2016 crops was 2,865 yuan ($398.88) per tonne.
($1 = 7.1826 Chinese yuan).
From South East Asia, Indonesia will import up to 350,000 tonnes of soybeans to ensure affordable supplies for the country’s domestic tofu makers amid rising food prices, Trade Minister Zulkifli Hasan said on Monday.
The government has tasked state food procurement agency Bulog to bring in the imports, Zulkifli said.
“There will be subsidies. Bulog will buy the soybeans at 11,000 rupiah to 12,000 rupiah per kilogramme, but it will be sold at 10,000 rupiah (domestically),” he said.
Trade Ministry data showed that local prices of imported soybeans stood at 14,800 rupiah per kilogramme as of Nov. 4, an 18% increase compared to the average prices at the end of 2021.
“For the first stage, we are currently negotiating purchase of 50,000 tonnes of soybeans,” said Awaludin Iqbal, corporate secretary of Bulog.
From Australia, heavy rain and flooding in Australia’s wheat-growing areas is threatening wheat milling quality just before harvest.
Despite a third consecutive year of impressive wheat production, heavy rain may affect as much as half the crop in the eastern grain belt.
The rain will lead to quality issues and likely decrease the amount of quality milling wheat while increasing the amount destined as animal feed.
A very welcome dry couple of days were had over the weekend which will continue into this week with less than 10mm currently on the forecast for most.
Unfortunately, showers are expected to build again by Friday with 15-50mm expected to fall next weekend, with the heavier totals expected in Southern NSW and Vic.
All rivers in inland NSW are already in flood.
They could remain that way for weeks and possibly months.
Forbes became submerged in floodwaters as the Lachlan River peaked at 10.7 metres on Saturday evening, close to the levels of the 1952 floods, while in Wagga the Murrumbidgee River peaked on Friday at 9.72m, its highest level in a decade.
There were 101 flood warnings in place as of late Sunday.
Meantime, local markets rounded out the week a touch firmer on milling wheat.
ASX Eastern Wheat January contract on Friday settled down $5.50/t at $488/t.
Harvest activity though Qld/Northern NSW and WA continued to trickle in with mixed results.
Meantime, fine warm weather in SA is set to kick in this week which will help assist with early harvest.
On the international trade scene, a South Korean animal feed maker has passed on all offers in its tender to purchase 60,000 metric tons of soymeal.
Prices were regarded as too high.
The grain would have been for arrival in mid-April.
Iraq’s state grains buyer purchased about 150,000 tonnes of hard wheat expected to be sourced from Canada, Lithuania and Australia in an international tender.
The purchase was believed to involve at least 50,000 tonnes of Canadian wheat, said to have been bought at the lowest price of an estimated $489.80 a tonne c&f.
Trading house Viterra was said to be the seller.
About 50,000 tonnes of wheat sourced from Lithuania was also said to have been bought at about $499 a tonne c&f from trading house Hanalico.
Some 50,000 tonnes of Australian wheat was purchased at about $480 a tonne c&f from trading house Tiryaki.
The wheat could be sourced from optional origins but Russian wheat could not be offered.
Volumes in Iraq’s tenders are nominal and the country often buys more than sought.
Iraq said on Oct. 17 the country needs to import 5 million tonnes of wheat in 2023, including at least 2 million in the first four months of the new year.
Egypt returned to purchases and calls for tenders for loadings 15/30 December 2022 and 1/15 January 2023.
Egypt has strategic wheat reserves sufficient for five months, the supply minister said on the ministry’s Twitter account on Monday.
Algeria also returned to purchases and calls for tenders in wheat.
Watching this week’s market …
The week starts with Export Inspections report from USDA out this afternoon and the Crop Progress report overnight after the sessions close.
Wednesday is busy starting off with the EIA weekly ethanol production and stocks reports.
We will also get the monthly update to the Nov WASDE and Crop Production reports.
The weekly Export Sales report will be released on Thursday.
On Friday, the government will be closed in observance of Veterans Day, but the markets will be open.
That’s all, thank you.
We wish you a good day and a good start to the week.
Author: Sandro F. Puglisi
