Good morning Farmer Family …
US farm markets made moderate inroads last Friday.
Corn and soybeans were, each one firmer by 0.87% and 0.77% respectively.
Meal prices closed 0.73% higher.
Soybean oil prices were 0.2% stronger.
The wheat complex also closed higher with Chicago SRW up 1.8%.
Kansas City HRW closed up by 1.01%.
Minneapolis spring wheat ended the day 1.03% higher.
For the week corn prices rallied by 2.03%.
Soybeans got help from a late week rally.
However, January was still down by 0.07% at the week’s close, due Monday and Thursday weakness.
Meal was again the weakness of the complex, with nearby Jan down 1.66%.
Bean oil had a nice 4.06% rally on the Jan contract and held up the complex.
The wheat complex rose again past week.
All three classes moved higher with Kansas City the leader thanks a 3.64% rally from Friday to Friday.
Chicago was right behind, with 2.99% gains on the week.
Minneapolis spring wheat joined the bull party, with a 2.45% jump since the prior Friday.
A shift to slightly wetter forecasts for Argentina had pressured corn and soybean markets early in the week.
However, it was leaning drier as the week moved on.
On Wednesday, EIA reported US ethanol production dropped 32,000 barrels per day to 1.029 million bpd during the week of December 16.
Stocks backed off during the week by 342,000 barrels, to 24.067 million barrels.
That was the first reduction in 5 weeks.
Thursday’s Export Sales report tallied old crop corn bookings at 636,811 MT for the week that ended on 12/15, a 33.6% reduction from the previous week.
Total export commitments (shipped and unshipped sales) were at 20.64 MMT.
That was down 48% vs. a year ago.
As for soybean, Thursday’s report showed soybean bookings dropping hard from the previous week to 736,023 MT.
That was still 40.5% above the same week last year.
Total soybean export commitments were 42.473 MMT, 4% larger than last year.
As for wheat, the USDA reported export bookings slipping 28.73% on the week to 334,207 MT in the week that ended on December 15th.
That took total export commitments of all wheat and wheat products to 14.526 MMT.
However, on Friday corn and soybean were spurred by export optimism.
Private exporters, indeed, during the end week session, reported to the USDA having sold 124,000 metric tons of soybeans for delivery to unknown destinations during the 2022/2023 marketing year and 150,000 metric tons of corn for delivery to Mexico during the 2022/2023 marketing year.
Meantime, markets reacted to some concern about how widespread severe cold and wind across the US Plains states and Midwest may affect U.S. winter wheat.
In the North, temperatures reached 40 degrees F below normal with lifethreatening wind chills as low as 50 degrees below zero F (-46 degrees C).
Sub-zero to single-digit F temperatures hit the central Plains, Midwest, Great Lakes, Ohio Valley and Midsouth.
Thus, wheat prices earned healthy gains on lingering concerns that the cold snap in the Midwest and Plains will lead to some winterkill issues for the 2022/23 winter wheat crop.
However, the major winter storm brought heavy snow to much of the High Plains that helped improve drought conditions across the Dakotas, Nebraska, northeast Colorado, and Montana.
Despite expansive improvements in other areas, drought persists in western Kansas, central and western Oklahoma and the Texas Panhandle.
On the other hand, according to the Quarterly Hogs and Pigs report published on Friday by the U.S. Department of Agriculture’s National Agricultural Statistics Service (NASS), as of Dec. 1, there were 73.1 million hogs and pigs on U.S. farms, down 2% from December 2021 and down 1% from Sept. 1, 2022.
Of the 73.1 million hogs and pigs, 67.0 million were market hogs, while 6.15 million were kept for breeding.
Between September 2022 and November 2022, 33.7 million pigs were weaned on U.S. farms, down 1% from the same time period one year earlier.
From September 2022 through November 2022, U.S. hog and pig producers weaned an average of 11.22 pigs per litter.
U.S. hog producers intend to have 2.95 million sows farrow between December 2022 and February 2023, and 2.98 million sows farrow between March and May 2023.
Iowa hog producers accounted for the largest inventory among the states, at 23.6 million head.
Minnesota had the second largest inventory at 8.60 million head.
North Carolina was third with 8.20 million head.
In this context, corn basis bids were steady to firm on Friday after improving 2 to 15 cents across four Midwestern locations.
Soybean basis bids were unchanged across the central U.S..
As for wheat, Gulf HRW and SRW basis held steady, while PNW HRS increased slightly, supported by the serve winter weather and cold temperatures.
As the winter weather persists rail performance will continue to deteriorate, with some traders saying trains are up to a week delayed in some locations with no resolution in sight until after temperatures warm.
Export demand also lent support to HRS basis and SW prices out of the PNW.
PNW HRW softened slightly as demand remained quiet.
Meantime, Commodity funds were net buyers on Friday for 3,000 lots of corn, 5,500 lots of soybeans and 7,000 lots of wheat.
After the sessions close, the weekly Commitment of Traders report indicated spec traders slicing their net long position in corn futures and options by 13,291 contracts.
That left them net long 113,815 contracts for week ending on December 20, the smallest since September 2020.
As for soybean, the report indicated money managers at a net long position of 123,569 contracts in soybean futures and options on Tuesday.
That was a 3,989 contract increase from prior week.
As for wheat, the report showed managed money spec traders cutting their net short position in Chicago wheat futures and options by 3,693 contracts in the week of 12/20.
That took the net short position to 59,311 contracts.
In KC wheat, they slashed 7,295 contracts from their net long position as of last Tuesday, taking it to just 1,245 contracts.
CFTC reported spring wheat spec traders were 505 contracts more net short to 4,427 contracts.
In energy markets, oil prices settled about $3 per barrel higher last Friday for a second straight week of gains.
Brent crude settled at $83.92, up by $2.94 or 3.6%, while U.S. West Texas Intermediate (WTI) crude settled at $79.56 a barrel, up $2.07, or 2.7%.
Both benchmarks recorded their biggest weekly gains since October.
Russia may cut oil output by 5% to 7% in early 2023 as it responds to price caps, the RIA news agency cited Deputy Prime Minister Alexander Novak as saying on Friday.
Russia’s Baltic oil exports could fall by 20% in December from the previous month after the European Union and G7 nations imposed sanctions and a price cap on Russian crude from Dec. 5, according to analysts calculations.
Meantime, both crude oil demand and output could slump over the next few days due to shut-ins from a massive winter storm that cascaded across a broad swath of the United States.
Several of the largest U.S. refineries shut down due to the extreme cold while output shut in Texas and North Dakota.
Airlines cancelled nearly 2,700 U.S. flights as of Saturday afternoon after the weather snarled airport operations around the country.
Frigid cold and blowing winds on Friday knocked out power and cut energy production across the United States, driving up heating and electricity prices.
U.S. gasoline and ultra-low-sulfur diesel futures both rose more than 5% on anticipated refining production cuts and a surge in heating oil demand.
However, the U.S. weather is forecast to improve this week, which means the rally may not last too long.
Swiss bank UBS expects prices could move back above $100 per barrel next year on Russian output cuts and easing of COVID-related restrictions in China.
However, the road for higher prices will however stay bumpy.
On this morning, oil prices rose to three-week highs.
Notabily, Brent crude was up 88 cents, or 1.1%, at $84.80 a barrel by 02:53 GMT, while U.S. West Texas Intermediate crude was at $80.44 a barrel, up 88 cents, or 1.1%.
The two benchmarks touched their highest since Dec. 5 earlier in the session.
China will end its quarantine requirements for inbound travellers starting on Jan. 8, the National Health Commission said on Monday, dropping a rule in place since the start of the pandemic three years ago.
That spurred optimism of higher demand from the top crude oil importer.
The greenback softened on Tuesday following this announcement.
A weaker dollar makes oil cheaper for holders of other currencies and usually reflects greater investor appetite for risk.
In ocean freight markets, the Baltic Dry Index, slumped 8.2% to an over one-week low of 1,515 points on Friday, the second day of losses.
Notabily, the capesize index, which tracks iron ore and coal cargos of 150,000 tonnes, tumbled 13.9% to mark its worst day since late August at 2,261 points; and the panamax index, which tracks about 60,000 to 70,000 tonnes of coal and grains cargoes, fell 1.8% to 1,535 points.
At the same time, the supramax index shed 21 points to 1,062 points.
The main index plunged 13.9% this quarter and 31.7% for the year, the most since 2015, on worries about the impact of fresh covid-19 outbreaks in China on demand.
The Baltic Exchange will not publish data for the main index from December 26th until January 2nd, 2023.
In equity markets, on Friday was a choppy day on Wall Street.
The session ended with broad gains for stocks, though most of the major indexes wound up with their third weekly loss in a row.
Mixed economic news weighed on stocks early on, but the indexes rebounded by late afternoon amid relatively light trading due the long holiday weekend.
Thus, the S&P 500 reversed a 0.7% loss to close 0.6% higher.
The Dow Jones Industrial Average rose 0.5% and the Nasdaq composite eked out a 0.2% gain.
Notabily, the S&P 500 rose 22.43 points to 3,844.82.
The Dow gained 176.44 points to 33,203.93.
The Nasdaq rose 21.74 points to 10,497.86.
Small company stocks also rose.
The Russell 2000 index picked up 6.85 points, or 0.4%, to 1,760.93.
However, the S&P 500 and Nasdaq posted their third straight weekly loss.
Oil and gas industry stocks were big gainers as energy futures prices closed broadly higher.
Hess climbed 4.7%.
Communications services and financial stocks also posted solid gains.
Disney rose 1.5% and American Express added 1.2%.
There is a relatively solid consumer spending and a strong employment market in the USA.
Nov real personal spending was unchanged m/m, slightly weaker than expectations of +0.1% and down from Oct’s +0.5%.
Nov personal income fell to +0.1% m/m from Oct’s revised +0.9% and was slightly weaker than expectations of +0.2%.
Nov new home sales rose by +5.8% to 640,000, which was much stronger than expectations for a drop to 600,000.
The report suggested that demand may be stabilizing after the 30-year mortgage rate has eased sharply by -88 bp to 6.20% from the late-October 20-year high of 7.08%.
That reduce the risk of a recession but also raise the threat of higher interest rates from the FED.
The US government reported Friday that a key measure of inflation is continuing to slow, though it’s still far higher than anyone wants to see.
Notabily, The Nov U.S. PCE deflator, the Fed’s preferred inflation measure, eased to +0.1% m/m and +5.5% y/y from Oct’s revised +0.4% m/m and +6.1% y/y and was in line with market expectations.
The Nov core PCE deflator of +0.2% m/m was in line with market expectations and was down slightly from Oct’s revised +0.3% m/m.
On a year-on-year basis, the Nov core deflator eased to +4.7% from Oct’s +5.0% but was slightly above expectations of +4.6%.
Friday’s Nov durable goods orders report of -2.1% m/m was weaker than expectations of -1.0%, and Oct was revised lower to +0.7% from +1.1%.
The Nov core capital goods orders report (ex-defense and aircraft) of +0.2% m/m was slightly stronger than expectations of unchanged, but Oct was revised lower to +0.3% m/m from +0.6%.
As a results, Treasury yields rose following the reports.
Notabily, the yield on the 10-year Treasury, which influences mortgage rates, rose to 3.75% from 3.69 late Thursday.
The yield on the two-year Treasury, which tends to track actions by the Fed, rose to 4.31% from 4.28%.
Helping to support the market was a separate report from the University of Michigan indicating U.S. households are lowering their forecasts for upcoming inflation.
Notabily, the final-Dec University of Michigan consumer sentiment index was revised higher by +0.6 points to 59.7 from the preliminary-Dec level of 59.1, which was stronger than expectations for an unrevised figure of 59.1.
The final-Dec figure of 59.7 was up by +2.9 points from November’s 5-month low of 56.8.
The final-Dec figure of 59.7 is only 9.7 points above the 42-year low of 50.0 posted earlier this year in June.
On this morning, shares advanced in Asia after China announced it would relax more of its pandemic restrictions.
As we said, China’s National Health Commission said Monday that passengers arriving from abroad will no longer have to observe a quarantine, starting Jan. 8.
They will still need a negative virus test within 48 hours of their departure and to wear masks on their flights.
Thus, the Shanghai Composite index jumped 0.8% to 3,089.39.
Hong Kong’s markets were closed for a holiday, as were those in Australia.
Tokyo’s Nikkei 225 added 0.2% to 26,447.87 and the Kospi in Seoul gained 0.7%, to 2,332.79.
In Bangkok, the SET index rose 0.8%, while the Sensex in Mumbai surged 1.2%.
In currency trading, on Friday the dollar fluctuated but remained essentially unchanged against a basket of world currencies after two days of gains.
Notabily, the dollar index fell 0.11%, with the euro up 0.22% toat $1.0616.
The Japanese yen weakened 0.36% versus the greenback at 132.85 per dollar, while Sterling was last trading at $1.2045, up 0.02% on the day.
On this morning, the U.S. dollar fell to 132.82 Japanese yen from 132.89 yen late Monday.
The euro rose to $1.0666 from $1.0638.
Going back to analyzing the other agricultural markets …
In Canada, producers’ deliveries of common wheat in week 20 of the shipping season, were at 593,6k mt.
That was stronger from 525,7k posted a week erlier.
Deliveries of durum wheat, in contrast, were weaker at 127.8k mt, down from 172.9k mt a week earlier.
Meantime, Canada exported 517.0k mt of common wheat in week 20 of the shipping season.
That was sharply higher from 336.6k mt posted a week earlier.
Durum wheat exports, were also higher at 119.5k mt, down from 96.4k mt a week earlier.
Meantime, total Commercial Stocks of common wheat stood at 2.918,6k mt, down from 2.929,5k mt a week earlier.
For durum, total commercial stocks were stronger at 772,0k mt, up from 712,6k mt posted the prior week.
Cumulative exports for common wheat are now at 7.558,1k mt.
That is compared with 4.718.0k mt year ago to date.
As for durum wheat, cumulative exports reached 1.844,6k mt, vs 1.168,5k mt year ago to date.
Meantime, cash bids for durum wheat trending higher week over week.
Indeed, looking at the average regional price of C$499.11/mt as of Dec 23, that is C$2.92/mt stronger from the prior week.
From South America, Brazilian farmers are hoping for bumper soybean and corn crops for the 2022/23 season.
Brazil is set to produce a record soybean crop in 2023 because of larger acreage and more favorable weather, which may pull down prices and port differentials as Chinese demand remains uncertain.
Notabily, the soybean crop, which begins harvesting more vigorously in January, may reach 153.5mn t in the 2022-23 season, according to national supply company Conab.
Weather was more favorable for crops and the planted area increased to 43.4mn hectares (ha) from 41.5mn ha in the 2021-22 crop.
Corn plantings should reach 22.33 mn hectares (ha), for a total production of 125.73 MMT.
But this projection may change in the coming weeks if there is a lack of rain in southern Brazil and yield losses occur, as is happening in Argentina.
Meantime, total soybean exports may rise to 90mn t next year, from 78mn t in 2022, with greater participation of European and South Korean buyers, as lower premiums will make the Brazilian product more competitive in those markets.
In Argentina, the passage of a storm front produced rain across most of the agricultural area, bringing effective relief for the first time this season.
The rains would allow farmers to finish sowing 200,000 hectares of soybeans in the fertile Pampas plains.
Farmers have so far planted 60.6% of a planned 16.7 million hectares, putting them 12.6 percentage points behind their progress this time last year due to the dry soil.
Corn planting for the 2022/23 cycle has meanwhile fallen 8.4 percentage points behind last year’s level, with 51.8% of an estimated 7.3 million hectares sown.
The country’s estimated 12.4 million tonne wheat harvest is meanwhile 78.3% complete.
In Europe, the European Commission trimmed its estimates for 2022/23 EU corn production to 52.1 Mt from 53.3 Mt estimated last month after suffering through an abundance of hot, dry weather.
That makes this year’s crop the smallest in more than a decade, and its sharply below initial estimates, made back in June.
The Commission, has also slightly lowered its estimates for 2022/23 EU soft wheat production to 126.4 Mt.
Only rapeseed production has been revised upwards, to 19.6 Mt compared to 19.4 Mt estimated last month.
In the meantime, the group said its projection for EU soft wheat exports this marketing year were steady, at 34 MMT.
From North Africa, Egypt’s state grains buyer, the General Authority for Supply Commodities (GASC), announced on Saturday an invitation for a tender to buy wheat as part of a World Bank-funded food security programme.
GASC said the tender was to supply 30,000, 40,000, 50,000, 55,000 or 60,000 tonnes, plus or minus 5% at the sellers’ discretion, from the last crop on a C&F basis for shipment from Feb. 1-15 from any origin in the tenderbook.
The wheat will be paid for at sight.
The deadline for offers is today, Tuesday Dec 27.
The tender is within the framework of the Emergency Food Security and Resilience Support Project, funded by the World Bank, under loan number EG-9399, GASC said.
The World Bank board approved in June a $500 million loan to fund wheat imports for Egypt, one of the world’s biggest wheat importers.
“The Emergency Food Security and Resilience Support Project will help cushion the impact of the war in Ukraine on food and nutrition security in Egypt,” the World Bank said.
Meantime, Egypt’s strategic reserves of wheat are sufficient for 4.6 months of consumption, while reserves of vegetable oils are sufficient for 4.8 months, the country’s cabinet said in a statement on Monday
Reserves of rice are sufficient for 5.7 months, while sugar reserves are sufficient for 2.7 months, the statement said.
From Russia, last week rains arrived to part of country’s southern region, a major winter grain producer.
Thus, conditions for the sowings have improved after dry weather early in the season, while more precipitations are expected this week.
Meantime, high domestic supply due a record crop, and a weaker rouble currency, dragged down Russian wheat prices last week.
According to the IKAR, indeed, prices for Russian wheat with 12.5% protein content and for supply from Black Sea ports in January were at $307 a tonne free on board (FOB) on Friday evening, down $5 from a week earlier.
According to Sovecon, wheat prices for immediate delivery fell by $1 to $307-311 per tonne.
Price for domestic 3rd class wheat, European part of Russia, excludes delivery was at 12,375 rbls/t -50 rbls (Sovecon).
Price for sunflower seeds was at 25,425 rbls/t +350 rbls (Sovecon).
Price for domestic sunflower oil was at 77,175 rbls/t +2,000 rbls (Sovecon).
Price for domestic soybeans was at 31,600 rbls/t +50 rbls (Sovecon).
Export price for sunflower oil was at $1,150/t +$10 (Sovecon).
Export price for sunflower oil was at $1,100/t unchanged (IKAR).
White sugar, Russia’s south was at $720.9/t -$25.6 (IKAR).
Meantime, the pace of sea shipping picked up after storms.
Iraq accepted the first batch of Russian wheat 26.3 KMT (private contract).
Vessel was unloaded on Dec 19.
Thus, Russian grain exports rose to 1.1 million tonnes last week from 840,000 tonnes in previous week.
In this context, the Russian agriculture ministry revised the export tax for wheat, corn and barley.
Particularly, as of Dec. 28, the export duty on wheat will slightly increase to 4,160.9 from 3,333.8 rubles per ton a week earlier.
Ditto on barley, the duty will increase to 3,420.4 rubles from 2,686.9 rubles per ton a week earlier.
For corn, also will increase, from 0 rubles of a week earlier, to 692.6 rubles per ton.
This new duty rates will be in effect through Jan 10, inclusive.
The duties were calculated based on indicative prices: $312.8 per ton for wheat ($314.4 a week earlier), $280.2 for barley ($281.8), $222.0 for corn ($218.5).
Meantime, Russia’s agriculture ministry has already bought 3.0 million tonnes of grain from the domestic market for the state stockpile in the current July-June season.
From Ukraine, Grain shipments from Ukraine’s Danube River ports reached record highs in 2022 at 6.1 MMT and overall sales increased by 294% to 14.5 MMT.
After the war started the ports of Izmail, Reni and Ust-Dunaisk provide the only export channel for Ukrainian grain until the Black Sea corridor agreement.
As Russia’s military offensive continues targeting energy infrastructure in Ukraine, the Ukrainian government has authorized
the agriculture ministry to identify critical food processing and export infrastructure to receive priority energy supplies.
The Ukrainian grain trader’s union UGA asked the government to ensure supplies of electricity to grain silos to reduce potential damage.
From the Middle Kingdom, president Xi Jinping wants China to accelerate efforts to achieve self-reliance in agricultural technology, identifying seed development and core equipment among areas to focus on, state media reported.
“It is necessary to keep an eye on the frontiers of the world’s agricultural science and technology,” the official Xinhua news agency quoted Xi as saying at the central rural work conference held in Beijing over Friday and Saturday.
The President urged China’s agricultural sector to “vigourously improve” its science and technology, with more efficient innovation.
Xi urged the sector to address issues with innovation, such as the rate of conversion into commercial applications and a lack of cooperation between research teams.
From South East Asia, officials in India are estimating that the country’s wheat production will climb to 112 MMT, due to favorable weather conditions and increased plantings.
India is one of the world’s top wheat producers, but the vast majority of that supply is consumed domestically rather than entering the export market.
India also announced it will spend the equivalent of $24.2 billion USD to provide food grains at no cost for more than 800 million poor citizens.
The program is a conglomeration of two prior programs that provided pandemic relief in the form of free or subsidized food grain.
Notabily, government sources in India announced that the state will offer 2.0 to 3.0 MMT of wheat from reserves to flour millers and biscuit makers to cool domestic prices.
As market prices increased state wheat purchases for the country’s food welfare program decreased 53% to 18.9 MMT.
Watching this week’s market
As a reminder, the market has been closed on Monday in observance of Christmas holiday.
Markets will reopen today Tuesday, Dec 27.
Thus, export inspections will be delayed until this afternoon.
On Thursday, the EIA will release their weekly ethanol production and stocks report.
The weekly Export Sales report will be delayed until Friday.
Friday is also first notice day for January soybean futures, as well as the last trading day for December live cattle futures.
Let’s ensure food security for all in 2023
That’s all, thank you.
We wish you a good day and a good start to the week.
Author: Sandro F. Puglisi
