Good morning Farmer Family …
US farm markets ended mixed on Friday, but mostly lower after December’s WASDE published.
Corn traded both sides of even for most of the end week session, however, despite an increase in U.S. stockpiles, managed to close up 0.23%
Soybeans eased by 0.17%.
Soymeal prices were stronger again on Friday, posting 1.11% gains.
Soybean oil, in contrast, slid some more on Friday, closing 2.12% lower.
The wheat market continued to slide lower through Friday, giving back another double digits on the USDA report day.
Chicago SRW price, indeed, settled 1.61% down.
Kansas City HRW closed 1.39% in the red.
Minneapolis spring wheat ended 0.88% weaker on the day.
Commodity funds were net buyers of Chicago Board of Trade corn and soymeal futures contracts on Friday and net sellers of wheat, soyoil and soybean futures.
December’s WASDE report was mostly in line with market expectations, so did little to move prices.
The short-term gains in corn were likely a result of delayed Ukrainian corn supplies.
And that, despite an increase in U.S. stockpiles in December’s WASDE.
Soybean eased, and not only because the USDA increased its estimate of global ending stocks.
Soybean prices, indeed, struggled to regain traction after a rough week for China’s live hog futures contracts, which tumbled down 9% on the week.
Easing retail demand, dued an unusually high price, and high slaughter rates have keep Chinese pork supplies plentiful at least in the short term.
Strong exports and South American weather concerns underpinned the soy market limiting losses, however.
Soybean exports from Argentina could be hampered by an unwillingness by growers in the country to sell old crop at least until they see the condition of the upcoming harvest.
On this wake, soymeal contracts surged to notch three-month highs especially on worries about Argentina’s production.
Argentina, indeed, is the world’s largest soymeal exporter.
Soybean oil, on its part, continued to suffer on global recession fears which dragged down also crude oil prices.
Historically low export sales, added more pressure on prices.
Wheat prices, on their part, tumbled lower following USDA’s WASDE report release, which pointed to shrinking global usage rates and stiff international competition for U.S. wheat exporters.
For the week, meantime, corn prices saw slightly stronger action in the last half of the week, helping ease early losses to just -0.36% from Friday to Friday.
Longer-term losses in corn, indeed, reflected lackluster corn export outlooks for U.S. producers, especially amid forecasts for a record-breaking Brazilian corn crop expected later next year.
Soybeans, in contrast, saw a week of strength on strong export demand and weather concerns in South America.
Thus January contract closed 3.15% higher vs. prior Friday.
Much of the rally was due to the meal market, which was 11.2% higher for the week.
Bean oil, meantime, was down another 7.99%, with a 2-week move at -16.32%.
The wheat complex was lower again past week.
Strong global supplies, especially from Black Sea basin and more competitive price in Russian wheat, dragged down the market.
Also, a record wheat harvest is expected in Australia, meantime in spite an exacerbate flouding season.
Thus, Kansas City led the way to the downside, with March down 4.34% from the prior Friday.
Chicago was right behind, losing 3.52%.
MPLS spring wheat held up better but was still down 2.15%.
Though recent futures price action on corn has seen some selling pressure past week, cash prices and basis remained strong overall, especially along the river system and in the eastern Corn Belt.
Basis bids, indeed, have been averaging 14 cents over March futures (14H) for the week, steady with prior week but well above the -10H recorded this time last year.
As for wheat, HRW basis remained steady in both the PNW and the Gulf past week.
Despite declines in the futures price over the last few weeks, trade sources indicated that HRW basis wasn’t ready to soften due to low farmer engagement and slow overseas demand.
They also noted lower internal freight may help draw basis down some, though overall it remains firm.
In the PNW HRS basis stayed flat, while dropping in the Gulf, correcting course after the immediate threat of a rail strike was averted.
Recent HRS demand from typical buyers helped keep basis firm in the PNW.
Both SW and SRW fell below competing origins past week, stimulating demand, particularly for traditional buyers in the PNW.
After the sessions close, Weekly CFTC data showed on Friday managed money firms reduced their net long by 71.5k contracts during the week that ended 12/6.
That was the largest net bear move from the specs since the week that ended August 2019 – fueled by 43k fewer longs and 28.5k new shorts.
As of 12/6, managed money was 120,213 contracts net long in corn – the lowest since Sep of 2020.
Commercial corn hedgers had their largest net bull move since May of 2021 during the week.
Their 57.5k new longs and 26.8k covered shorts left the group 356,614 contracts net short – the weakest since Sep of 2020.
As for soybean, the report showed spec traders at 99,454 contracts net long as of 12/6.
That was a 2,650 contract lighter net long via more new sellers than new buyers during the week.
Commercial soybean hedgers were closing positions during the week, and reduced their net short by 11k contracts to 133k.
In soymeal, spec traders covered 7k shorts and added 16.5k new longs for a net long of 98,509 contracts.
The funds fled from bean oil through the week with 34k closed longs (30% of the existing longs), and added 9k new shorts for a 62,584 contract net long at the 12/6 settle – an 8-wk low.
As for wheat, the weekly CFTC Commitment of Traders report had CBOT wheat specs at 63,382 contracts net short as of 12/6.
That was a 9.3k contract stronger net short driven by 12.5k new shorts through the week and took them to their strongest net short since May of 2019.
In KC wheat, the CFTC had managed money funds 7,400 contracts less net long to just 9,724 contracts – a 15-wk low.
Managed money firms were selling short spring wheat through the week, and expanded their net short by 1,619 contracts to 3,048 as of 12/6.
On this morning, Chicago soybean prices lost more ground.
Corn and wheat, in contrast, rose.
Notabily, the most-active soybean contract on the Chicago Board of Trade (CBOT) slid 0.9% to $14.69-1/4 a bushel as of 04:57 GMT, after edging lower on Friday.
Wheat climbed 1.1% to $7.43 a bushel, and corn was up 0.4% at $6.47 a bushel.
Soybeans continued to be weighed down by the U.S. forecast of higher global inventories, though robust export demand and concerns over the weather in South America lent some support to prices.
As for corn and wheat, Ukrainian port of Odesa has not been operating past week due to a Russian attack on the region’s energy system.
However, on this morning, a spokesperson for the infrastructure ministry said in a statement “it has resumed operations”.
Belarus told the United Nations on Friday that it would accept, without preconditions, the transit of Ukrainian grains through its territory for export from Lithuanian ports.
Turkish President Tayyip Erdogan discussed the Black Sea grain export agreement on Sunday with the leaders of Russia and Ukraine, as both sides seek changes that would boost their exports.
In energy markets, oil price settled lower in volatile trading on Friday.
U.S. West Texas Intermediate crude settled 44 cents lower at $71.02 a barrel.
Brent crude settled 5 cents lower at $76.10 per barrel.
Both benchmarks posted weekly losses of around 10% each this week.
It was the biggest weekly decline since April for the U.S. WTI futures, and since early August for Brent.
Growing recession fears negated any supply woes after weak economic data from China, Europe and the United States.
Oil prices had found some support earlier in the session after Russian President Vladimir Putin said the country could cut output in response to a price cap on its crude oil exports.
However, according to a report from the U.S. Labor Department, the U.S. producer prices index (PPI) rose slightly more than expected in November amid a jump in the costs of services, .
That, may make it more likely that the Federal Reserve will “step on the accelerator” on interest rate hikes, furthering fears of a looming recession.
Meantime, news of a partial restart on the Keystone Pipeline undid early gains and pushed the benchmarks more than a dollar lower.
According to some analysts, if U.S. crude falls below $70 per barrel, it could enter a freefall and hit the low $60s range over the upcoming sessions.
On this morning, oil prices rose as much as more than 1%, as a key pipeline supplying the United States remained shut while Russian President Vladimir Putin rethreatened to cut production in retaliation for the Western price cap on its exports.
Thus, Brent crude futures were up 41 cents, or 0.5%, at $76.51 a barrel by 07:30 GMT.
U.S. West Texas Intermediate crude was at $71.55 a barrel, up 53 cents, or 0.8%.
On the other hand, seems, queues formed outside fever clinics on Monday in the cities of Beijing and Wuhan, where COVID first emerged three years ago, a sign of the rapid spread of symptoms after authorities began dismantling stringent measures against the disease.
In ocean freight markets, the Baltic Exchange’s dry bulk sea freight index firmed on Friday near its highest in more than four weeks and posted a weekly gain, buoyed by strong demand for capesize vessels.
The overall index, indeed, inched 1 point higher at 1,386, its highest since Nov. 10.
The main index has gained 4.68% for the week.
Notabily, the capesize index was up 8 points, or about 0.5%, at 1,683. It has posted a weekly gain of 10.8%.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes of coal and steel-making ingredient iron ore, increased $69 to $13,957.
The panamax index lost 2 points at 1,659. The index has risen 2.5% during the week, its second straight weekly gain.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, decreased $23 to $14,927.
The supramax index shed 1 point at 1,152.
In equity markets, Wall Street ended lower on Friday.
The S&P 500 declined 29.13 points or 0.73%, to end the session at 3,934.38 points.
The Nasdaq declined 77.39 points or 0.70%, to 11,004.62 points.
The Dow Jones Industrial Average declined 305.02 point or 0.90%, to 33,476.46 points.
The Russell 2000 dropped 21.63 points or 1.2%, to 1,796.66.
For the week, the S&P 500 dropped 3.4%, the Dow lost 2.8% and the Nasdaq shed 4%.
The indexes marked their first losing week in the last three.
While investors assessed economic data and awaited a potential 50-basis point interest rate hike by the U.S. Federal Reserve at its policy meeting this week, the U.S. government reported that prices paid at the wholesale level were 7.4% higher in November than a year earlier.
That’s a slowdown from October’s wholesale inflation rate of 8.1%, but it was still slightly worse than economists expected.
Overall sentiment among consumers was also stronger than economists expected, according to the University of Michigan’s preliminary reading.
Notabily, households are forecasting inflation of 4.6% in the year ahead.
That’s the lowest such reading in 15 months, however it still well above where it was two years ago.
Meantime, expectations for longer-run inflation remain stuck in the 2.9% to 3.1% range where they’ve been for 16 of the last 17 months, at 3%.
Data this week also showed initial jobless claims rose only modestly last week.
Thus, Treasury yields climbed, as traders stepped up bets for how high the Fed will ultimately take interest rates.
Notabily, the yield on the two-year Treasury, which tends to track expectations for Fed action, rose to 4.36% from 4.26% just before Friday’s inflation report was released.
It was at 4.31% late Thursday.
The yield on the 10-year Treasury, which helps dictate rates for mortgages and other loans, rose to 3.58% from 3.49% late Thursday.
The last big piece of data on inflation before the Fed’s next decision arrives tomorrow, when economists expect the consumer price index to show that inflation slowed to 7.3% last month from 7.7% in October.
Meantime, roughly 75% of the stocks in the S&P 500 closed lower, with health care, technology and energy among the sectors that weighed down the market most.
Lululemon Athletica Inc tumbled almost 13% after the Canadian athletic apparel maker forecast lower-than-expected holiday-quarter revenue and profit.
The energy index recorded a seventh straight session of losses, its longest losing streak since December 2018, with oil prices posting weekly losses on recession concerns.
On this morning, shares slipped in Asia, after last week’s decline on Wall Street.
Hong Kong’s Hang Seng sank 2.1% to 19,475.16 and the Shanghai Composite index shed 0.9% to 3,179.04.
Tokyo’s Nikkei 225 index gave up 0.2% to 27,842.33 while the Kospi in Seoul lost 0.7% to 2,373.02.
Australia’s S&P/ASX 200 declined 0.5% to 7,180.80.
Markets in Thailand were closed for a holiday.
China was setting up more intensive care facilities and trying to strengthen hospitals as it rolls back anti-virus controls that confined millions of people to their homes, crushed economic growth and set off protests.
However, signs of a s urge in coronavirus infections suggested progress may be bumpy.
In currency trading, the dollar was broadly weaker Friday overnight, but reversed some of its losses after the PPI report.
Notabily, the euro fell 0.27% to $1.0528 and the yen was flat to 136.68 per dollar.
In addition to the Fed, the European Central Bank and the Bank of England are also set to announce rate hikes this week as policymakers continue to brake the economy to curb inflation.
Meantime, the world’s largest investment banks expect global economic growth to slow further in 2023.
On this morning, the U.S. dollar rose to 136.80 Japanese yen.
The euro slipped to $1.0518.
Going back to analyzing the other agricultural markets …
In Canada, producers’ deliveries of common wheat in week 18 of the shipping season, were at 446,5k mt.
That was weaker from 669,9k posted a week erlier.
Deliveries of durum wheat, were also weaker at 105.1k mt, compared to 170.6k mt a week earlier.
Canada exported 302.5k mt of common wheat in week 18 of the shipping season.
That was down from 421.1k mt posted a week earlier.
Durum wheat exports, also were weaker at 152.4k mt, down from 193.5k mt a week earlier.
Cumulative exports for common wheat are now at 6.704,6k mt.
That is compared with 4.329.1k mt year ago to date.
As for durum wheat, cumulative exports reached 1.628,8k mt, vs 1.119,8k mt year ago to date.
Meantime, total Commercial Stocks of common wheat stood at 2.839,8k mt, up from 2.810,4k mt a week earlier.
Durum total commercial stocks, in contrast, were weaker at 625,6k mt, down from 772,2k mt posted the prior week.
In this context, cash bids for durum wheat trended higher week over week.
From South America, Brazilian Conab has reduced yield estimates for the first full-season maize crop, with production cut by 600,000t from the November forecast to 125.8Mt.
The soybean production forecast was trimmed fractionally from November by a slight cut to yield prospects.
Buenos Aires Grain Exchange reports that for the week ending December 6, Argentina’s 2022-23 wheat harvest was 42pc versus 23pc in the previous week, and 53pc at this time last year.
Conditions were rated at 52pc fair to excellent vs 49pc in the previous week, 97pc in the previous year, with yields seen around 30pc below average because of dryness throughout the growing season and the impact of late frosts.
Maize planting was 33pc complete vs 25pc and 40pc, with conditions rated 74pc fair to excellent vs 75pc and 100pc.
Unfavourable conditions were beginning to affect crop quality in Santa Fe and Entre Rios, while recent rains maintained crop prospects in southern regions.
Rainfall over the past week allowed fieldwork to progress north and west of Buenos Aires.
However, hot and dry conditions over recent weeks continued to delay the start of sowing in the northeast and north-west of the country, where farmers hoped to commence planting from mid-December.
In Europe, Euronext given ground on Friday on all three markets.
The weather and geopolitics remain the key elements.
FranceAgriMer estimates that 97% of wheat is rated as good to excellent, as is the case with winter barley.
The fall in temperatures in Europe does not at the moment give rise to any specific fears despite the very early vegetative state observed at the end of autumn.
From a geopolitical point of view, tension remains high in Ukraine with, in particular, difficulties observed in the port of Odessa to operate satisfactorily due to the destruction of electrical installations.
However, competition from Black Sea sources remains high, although European exports are still seen as dynamic.
The fall in oil prices, likely will have a resulting in further pressure on rapeseed.
From North Africa, the cost of the subsidised bread programme in Egypt has increased from 51 billion to 76 billion Egyptian pounds per year, Egypt’s supply minister said during an interview with a local TV station on Saturday, adding that the programme covers 71 million people.
Meantime, he also said, the country’s wheat reserves were sufficient for 5.2 months while Sugar reserves were sufficient until March 2023.
From Russia, Russian wheat export prices fell last week.
Notabily, according to the IKAR, prices for Russian wheat with 12.5% protein content and for supply from Black Sea ports in late December-early January were at $314 a tonne free on board (FOB) on Friday evening, down $1 from a week earlier.
According to Sovecon, wheat prices for immediate delivery fell by $2 to $312-316 per tonne.
As for other products, price for domestic 3rd class wheat, European part of Russia, excludes delivery, was at 12,600 rbls/t ($201.3) -50 rbls (Sovecon).
Price for sunflower seeds was at 24,475 rbls/t +600 rbls (Sovecon).
Price for domestic sunflower oil was at 74,175 rbls/t +350 rbls (Sovecon).
Price for domestic soybeans was at 31,550 rbls/t +250 rbls (Sovecon).
Export price for sunflower oil was at $1,140/t -$40 (Sovecon).
Export price for sunflower oil was at $1,100/t unchanged (IKAR).
Price for white sugar, Russia’s south was at $730.4/t -$13.7 (IKAR).
Rains are expected to arrive to parts of Russia’s southern regions this week improving weather conditions for the major wheat producing area of the country which was dry in recent weeks.
Russia’s agriculture ministry has already bought 2.47 million tonnes of grain from the domestic market for the state stockpile in the current July-June season.
The ministry plans to buy up to 3 million tonnes this season.
Meantime, Russian grain exports fell to 550,000 tonnes last week from 1.0 million tonnes in previous week due to storms in the Black Sea and the lower water level in the Azov sea.
In this context, the Russian agriculture ministry revised the export tax for wheat, corn and barley.
Particularly, as of Dec. 14, the export duty on wheat will slightly increase to 3,143.4 from 2,806.8 rubles per ton a week earlier.
Ditto on barley, the duty will increase to 2,603.1 rubles from 2,315.0 rubles per ton a week earlier.
For corn, also rose from 0 rubles a week earlier to 78.2 rubles per ton.
This new duty rates will be in effect through December 20, inclusive.
The duties were calculated based on indicative prices: $313.4 per ton for wheat ($313.1 a week earlier), $282.9 for barley ($283.0), $224.9 for corn ($215.4).
From Ukraine, as of December 8, Ukrainian farmers harvested grains and pulses throughout 9.7 mln ha or 87% of the planned area.
Production volume reached 43,6 mln tonnes with the average yield at 4.51 t/ha, the Ministry of Agrarian Policy informed.
Currently, farmers are harvesting late crops:
2.8 mln ha of corn for grain (66%; 17.2 mln tonnes, 6.19 t/ha);
115 thsd ha of buckwheat (98%; 157 thsd tonnes, 1.37 t/ha);
43.2 thsd ha of millet (97%; 99.5 thsd tonnes, 2.3 t/ha).
Moreover, farmers harvested 4.6 mln ha of sunflower seed area (98%).
Production volume reached 10 mln tonnes with the yield of 2.18 t/ha.
Agrarians reaped 1.5 mln ha of soybean (98%).
Production volume reached 3.7 mln tonnes of with the yield of 2.42 t/ha.
Farmers harvested 8.9 mln tonnes of sugar beet with the yield of 50.2 t/ha reaped from 176.7 thsd ha (98%)
As of December 9, Ukraine has exported 18.974 mln tonnes of grains and pulses, including 1.092 mln tonnes so far in December, the Ministry of Agrarian Policy informed.
The total included 7.162 mln tonnes of wheat (392 thsd tonnes in December), 1.503 mln tonnes of barley (36 thsd tonnes), 10.232 mln tonnes of corn (659 thsd tonnes), 12.2 thsd tonnes of rye.
Ukraine has exported 59.7 thsd tonnes of flour (4.4 thsd tonnes), including 56.5 thsd tonnes of wheat flour (4.3 thsd tonnes).
Currently, two ports of Great Odesa have resumed cargo operations after Russia launched missile strikes on energy infrastructure in Odesa oblast at the end of last week, Ukrainian Sea Ports Administration announced on December 11.
Head of USPA Oleksiy Vostrikov noted that the Russian attacks on energy infrastructure facilities also had completely cut off power to critical infrastructure facilities.
Thus, the ports of Odesa and Pivdennyi were unable to carry out cargo operations, and the Chornomorsk port was functioning partially.
“Today, thanks to energy workers that work 24/7, the energy supply is gradually being restored”.
Meantime, the first container terminal has launched in Reni port.
This is the only container terminal in Reni and the only one operating today in Ukraine.
The conteiner terminal is connected with mainline container carriers in Romanian Constanta and Turkish Istanbul.
From the Middle Kingdom, China’s 2022 soybean crop jumped almost 24%, while corn and wheat output also saw small increases, official data showed on Monday.
Notabily, Soybean output rose 23.7% to 20.3 million tonnes, as the acreage planted with the oilseed jumped 21.7%.
Corn output was up 1.7% to 277.2 million tonnes, even as the acreage sown with corn shrank slightly and less high-yield corn was planted due to the change in planting more soybeans.
Wheat output rose 0.6% from a year earlier to 137.72 million tonnes.
Rice output, in contrast, fell 2% to 208.5 million tonnes due to declining acreage and severe drought and high temperatures in southern China that hurt yields, said the National Statistics Bureau.
From Australia, local cash markets rounded out the week lower overall as harvest pace ramped up.
Some rain in parts of Victoria, South Australia and New South Wales slowed progress for some growers.
Further rainfall has been forecast for today across parts of NSW and Victoria will create further delays, but the rest of this week is forecast to be dry.
On the international trade scene, Egypt’s GASC is understood to have purchased 260,000t of milling wheat from Russia at US$354/t c&f, for December-January shipment via private transactions.
Watching this week’s market …
The week starts out with the weekly Export Inspections report on Monday in the afternoon.
The Fed will meet next Tuesday and Wednesday, with most expecting another rate hike to come out of it.
On Wednesday the EIA will publish its weekly ethanol production and stocks report.
On Thursday we will see the Export Sales report, and NOPA releasing November crush data.
That’s all, thank you.
We wish you a good day and a good start to the week.
Author: Sandro F. Puglisi
