Good morning Farmer Family and Happy New Year …
Global grain markets have concluded their latest 2022’s wild session, past Friday!
This last year has been featured plenty of ups and downs dued geopolitical turmoil, significant drought in different parts of the world, mounting recession fears and much more.
Chicago wheat price was the highest since 2008.
Corn prices traded at the highest level since 2012, as did soybeans.
Cattle at year end were the highest since April 2015.
But now it’s time to toast, even if we don’t know whether to drink for having rediscovered old acquaintances, rather than just toasting their memory!
Going into the end week session analysis, on Friday, US farm markets saw corn price to easy slightly lower, as was 0.15% down.
Soybean prices added 0.7%.
Meal prices were up 3.10%.
Bean oil prices pulled back with triple digit losses of as much as 3.9%.
Wheat prices rallied back by double digits gains.
Chicago SRW prices were up 2.33%.
Kansas City HRW closed 2.48% higher.
Minneapolis spring wheat led the charge closing 2.71% higher.
Corn prices tested modest gains starting the session but ultimately eased on a technical trading.
Soybeans rose, as concerns over drought in Argentina, and strong export demand, kept the focus on supply tensions in the oilseed market.
That drove Chicago Board of Trade soymeal futures to the highest prices since March 31, and pushed January, March and May soymeal futures to new contract highs.
Meantime, bean oil slumped.
Ahead of the next monthly USDA soybean crushing report, out January 3, analysts expect to see the agency show a November crush of 5.706 million short tons, or 190.2 million bushels.
That would be moderately below October’s tally of 196.6 million bushels and slightly below year-ago results of 190.6 million bushels, if realized.
Soyoil stocks are expected to rise to 2.203 billion pounds through November 30.
If realized, the supply would be up from 2.094 billion at the end of October and the most since end-July, but down from 2.406 billion lbs at the end of November last year.
NOPA members, crushed 179.184 million bushels of soybeans last month, down 2.9% from October and down 0.2% from November 2021.
Soyoil supplies held by NOPA members as of Nov. 30 rose to 1.630 billion lbs, up 6.7% from October.
Wheat, on its part, firmed on Friday, on concerns of winter storm damage to U.S. wheat crops.
However, over the first week of 2023, most parts of the Midwest and Plains will receive at least some measurable moisture, with the Mid-South to get the biggest soaking.
The outlook predicts more seasonally wet weather for the western Corn Belt and upper Midwest between January 6 and January 12, with widespread warmer-than-normal conditions across the central U.S. during this time.
Meantime, delayed Weekly Export Sales data on Friday showed 781,583 MT of old crop corn was booked during the week that ended 12/22, close to trade expectations.
That was up 22% for the week, but down 37% from the same week last year.
The report included 298k MT of previously announced business to Japan and Mexico.
Japan also booked 170k MT of new crop, and pushed total new crop commitments to 1.139 MMT.
That trails the forward sales pace into 22/23 by 25%.
Shipments for the week were marked at 1.012 MMT for a season total of 9.235 MMT.
As for soybean, the report showed 705,813 MT of soybeans were sold during the week that ended 12/22.
That was 6% higher wk/wk and was up 84% from the same week last year.
China was the week’s top buyer, though 334k MT of their 521 was switched from unknown.
The data has total old crop commitments 3.4% ahead of last year’s pace with 43.108 MMT.
For the products, USDA had 264,311 MT of meal sales.
Accumulated soymeal commitments reached 6.121 MMT as of 12/22.
Soy oil sales were 5,423 MT, compared to 822 last week and 9,302 MT during the same week last year.
Accumulated soy oil commitments were 36,690 MT as of 12/22.
As for wheat, the report had 478,122 MT of wheat sales for the week that ended 12/22.
That was up 43% on the week and more than double the same week last year.
Japan and Mexico were the week’s top buyers, and Mexico added 33k MT for new crop during the week as well.
Total commitments stood at 14.922 MMT as of 12/22, down by 6% from last year.
New crop forward sales were 64k MT, trailing the forward sales into 21/22 by 21%.
Separately, on Friday private exporters reported to the USDA having sold 186,000 metric tons of soybeans for delivery to unknown destinations during the 2022/2023 marketing year.
For the week, corn prices rose 1.85% past week.
Soybean traded at the highest price since June 21st, before profit taking kicked in.
However, prices were still up 2.72% for the week.
Soymeal regained its position as bull leader, up 5.1% for the week.
Bean oil gave back 3.22% past week mainly on unwinding of oil/meal spreads.
The wheat complex added to prior week’s gains, with all three classes moving higher.
Chicago SRW was the leader of the week, up 2.06%.
Kansas City got a 1.52% gain.
Minneapolis spring wheat joined the bull party, with a 0.75% gain for the week.
Notably, corn prices closed the week $0.123 higher at $6.79/bu.
Soybean prices finished $0.403 firmer at 15.19/bu.
Soymeal jumped $23.2/smt, closing at $478.5 smt.
Soy oil fell $2.120, to close at $63.81.
CBOT soft red winter (SRW) prices gained $0.160 for the week to close at $7.92/bu.
KCBT hard red winter (HRW) prices rose $0.133, ending at $8.88/bu.
MGE hard red spring (HRS) prices were $0.070 higher to close at $9.39/bu.
For the month, corn price ended Dec with 1.72% gains.
Soybean, rose 3.39% for the month, with soymeal up 14.53%, while soy oil slumped by 11.23%.
Chicago wheat was down 0.44% on the month.
Kansas City was down 1.31%, and Minneapolis was down 0.45%.
For the year, corn prices ended the year nearly 14.4% higher, underpinned by war disruption in Ukraine and dryness in Argentina.
Soybeans ended up nearly 13.8%, a fourth straight annual gain.
Wheat ended the year up nearly 2.8%.
In this context, spot basis bids for corn and soybeans were mostly steady to softer in the U.S. Midwest on Friday in subdued trade ahead of a three-day weekend, with freight shortages slowing grain movement in some northern states, merchandisers said.
Union Pacific Corp said it embargoed rail traffic on its lines in Iowa, Minnesota and Wisconsin starting Dec. 29 due to recent severe weather and forecasts for snow and ice for this week.
Along with Union Pacific, CSX Corp warned of delays earlier past week.
The rail corn basis fell 3 cents Friday at the Evansville, Indiana, terminal and 5 cents at an elevator in Council Bluffs, Iowa.
But the basis firmed 10 cents at Toledo, Ohio.
The soybean basis fell 15 cents at a Des Moines, Iowa, processing plant.
A few locations have rolled their soybean basis to post against the CBOT March futures contract SH3 as the January contract SF3 nears its Jan. 13 expiration.
Spot basis bids for hard red winter (HRW) wheat held steady in the southern U.S. Plains.
Protein premiums for hard red winter wheat delivered by rail to or through Kansas City rose by 25 cents a bushel on Friday for wheat with 11.8% protein, while premiums for all other grades were unchanged.
Dry conditions remained a concern for the dormant 2023 HRW crop.
Mostly dry weather was expected in the HRW wheat belt, before another storm system brings snow to the central Plains, space technology company Maxar said in a daily weather note.
Meantime, as at December 29, 2022, FOB prices saw US wheat No 2 Hard Red Winter (HRW) valued at $388/mt (unchanged from prior week).
US wheat No 2 Soft Red Winter (SRW) was valued at $341/mt (up $4/t from prior week).
Northern Durum offers from the Great Lakes for January 2023 delivery, were not available.
The prior week were at $11.70/bu, ($430.00/MT).
As for corn, US corn 3YC (Gulf) was at $320/mt (up $7/mt from prior week).
As for soybean, US soybean 2Y (Gulf) quoted at $613/mt (up $13 from prior week).
USDA’s weekly Ethanol Report showed the average cash ethanol prices were mostly 10 to 28 cents higher through the week to $2.15 – $2.34/gal regionally.
Corn oil was within 1-3 cents of last week’s prices from 65 to 70 cents/lb regionally.
DDGS were also stronger by $5-$20/ton, with regional prices ranging $230 – $310/ton.
DDGS prices to the Export Point averaged between $260 to $365/ton, unchanged from prior week.
USDA cited the week’s average B100 price as $5.89/gal in MN – up by 4 cents.
After the sessions close, the weekly Commitment of Traders report indicated the managed money funds closed 11.4k short contracts in corn and added over 34k new longs during the week that ended 12/27.
That left the group 159,315 contracts net long – a 4-wk high.
Commercial corn hedgers closed 22k longs and added 22.5k new short hedges for a 44,890 contract stronger net short of 388,045.
As for soybean, spec traders were 128,616 contracts net long as of 12/27.
That was 5,047 contracts higher through the week on net new buying.
Commercial soybean hedgers closed 33,591 contracts during the week, leaving them 1,703 contracts more net short at 163,130.
In the products, spec traders bought 9k new meal longs and were 129,989 contracts net long.
CFTC’s data had managed money rolling +3k contracts from short to long in soybean oil – leaving them 65,587 contracts net long as of 12/27.
Commercials were 8k contracts more net short via long liquidation.
As for wheat, the report showed managed money funds closed 3.6k shorts through the week that ended 12/27.
They were still net short 56,212 contracts.
In KC wheat the funds were 606 contracts more net long through the week, also via light short covering.
Spec traders were 1,128 contracts less net short as of 12/27 for Minneapolis wheat.
In energy markets, U.S. crude oil futures registered a second straight annual gain after a wildly volatile year marked by tight supplies due to the Ukraine war and then sliding demand from China.
For the end week session, U.S. crude settled up 2.4% or $1.86 at $80.26 per barrel and Brent finished at $85.91, up $2.45 or 2.94% on the day.
Oil prices swung wildly in 2022.
Prices surged in March when war started in Ukraine, with international benchmark Brent reaching $139.13 a barrel, highest since 2008.
Then, prices cooled rapidly in the second half as central banks hiked interest rates and fanned worries of recession.
For the year, Brent gained about 10%.
U.S. crude rose nearly 7% in 2022.
Investors in 2023 are expected to keep taking a cautious approach, wary of interest rate hikes and possible recessions.
A survey of 30 economists and analysts forecast Brent would average $89.37 a barrel in 2023, about 4.6% lower than the consensus in a November survey.
U.S. crude is projected to average $84.84 per barrel in 2023, down from the prior view.
While a jump in year-end holiday travel and Russia’s ban on crude and oil product sales has supported crude, tighter supply will be offset next year by declining fuel consumption due to a deteriorating economic environment.
Additionally, While China’s oil demand is expected to recover in 2023, a recent surge in COVID-19 cases has dimmed hopes of an immediate boost in barrel buying.
Meantime, in an indicator of future supply, the U.S. oil and gas rig count rose 33% for the year, energy services firm Baker Hughes Co said in its latest report.
In equity markets, U.S. stocks closed out 2022 lower on Friday, capping a year of sharp losses.
Notably, the Dow Jones Industrial Average fell 73.55 points, or 0.22%, to 33,147.25.
The S&P 500 lost 9.78 points, or 0.25%, at 3,839.50.
The Nasdaq Composite dropped 11.61 points, or 0.11%, to 10,466.48.
Small company stocks also fell Friday.
The Russell 2000 shed 5 points, or 0.3%, to close at 1,761.25.
Wall Street’s three main indexes, indeed, booked their first yearly drop since 2018.
The benchmark S&P 500 has shed 19.4% during the year, marking a roughly $8 trillion decline in market cap.
The tech-heavy Nasdaq was down 33.1%, while the Dow Jones Industrial Average has fallen 8.9%.
The annual percentage declines for all three indexes were the biggest since the 2008 financial crisis.
The primary macro reasons, came from a combination of events: the ongoing supply chain disruption that started in 2020, the spike in inflation, the tardiness of the Fed beginning its rate tightening program in the attempt to corral the inflation.
Also, there have been economic indicators pointing to recession, geopolitical tensions including the Ukraine war, and China’s surging COVID cases and uncertainties over Taiwan.
Growth stocks have been under pressure from rising in Treasury yields for much of 2022.
Apple Inc, Alphabet Inc, Microsoft Corp, Nvidia Corp, Amazon.com Inc, Tesla Inc were among the worst drags on the S&P 500 growth index, down between 28% and 66% in 2022.
The S&P 500 growth index has fallen about 30.1% during the year.
Energy, in contrast, has recorded stellar annual gains of 59%.
On this morning, shares began the year mixed, with most markets closed for New Year holidays.
South Korea’s Kospi fell 0.5% to 2,225.80 and the Sensex in Mumbai gained 0.5% to 61,115.66.
Jakarta’s benchmark was lower.
The future for Germany’s DAX was down 0.3%.
Over the weekend, a report showed that Chinese manufacturing contracted for a third consecutive month in December, in the biggest drop since February 2020.
A monthly purchasing managers’ index declined to 47.0 from 48.0 in November, according to data released from the National Bureau of Statistics on Saturday.
Numbers below 50 indicate a contraction in activity.
Although China is in the process of removing strict COVID-19 policies that crimped production for raw materials and goods and discouraged travel, it’s uncertain what impact the reopening will have on the global economy.
During this week we will get employment data and minutes from the latest meeting of the Federal Reserve.
The minutes of the Fed’s meeting potentially will give investors more insight into its next moves.
The government will also release its November report on job openings Wednesday.
That will be followed by a weekly update on unemployment on Thursday.
Meanwhile, the closely-watched monthly employment report is due Friday.
Operators are also waiting on corporate earnings reports, which will start flowing in around the middle of January.
Companies have been warning investors that inflation will likely crimp their profits and revenue in 2023, even after they raised prices on everything from food to clothing to offset inflation, helping to pad their profit margins.
In currency trading, the dollar index fell 0.462%, with the euro up 0.39% to $1.0703 on Friday.
The Japanese yen strengthened 1.36% versus the greenback at 131.21 per dollar, while sterling was last trading at $1.2082, up 0.25% on the day.
The dollar, a beneficiary of rising U.S. interest rates, however, recorded its biggest annual increase since 2015.
Notably, the dollar has gained 7.8% over the year, although it was on pace for a loss of 7.7% this quarter for its biggest decline since the third quarter of 2010.
The U.S. 10-year Treasury yield rose on Friday and closed out the trading year with its biggest annual increase in decades, pushed higher by aggressive Fed rate hikes.
Benchmark 10-year notes on Friday were up 4.4 basis points to 3.879%, from 3.835% late on Thursday.
On this morning, the U.S. dollar rose to 130.94 Japanese yen from 130.89 yen.
The euro fell to $1.0697 from $1.0699.
Going back to analyzing the other agricultural markets …
In Canada, the Grain Statistics Weekly report has not been published past week.
The next report will include weeks 21 and 22 and will be published during this week.
As reminder, producers’ deliveries of common wheat in week 20 of the shipping season, had been at 593,6k mt.
Deliveries of durum wheat, had been at 127.8k mt.
Canada had exported 517.0k mt of common wheat in week 20 of the shipping season.
Durum wheat exports, were at 119.5k mt.
Total Commercial Stocks of common wheat stood at 2.918,6k mt.
Durum total commercial stocks were at 772,0k mt.
Cumulative exports for common wheat were at 7.558,1k mt.
Durum cumulative exports had reached 1.844,6k mt.
Meantime, Statistics Canada published its Milled wheat and wheat flour produced report for November 2022.
Notably, the report showed 284,876 metric tons (mt) of all-wheat milled during the month.
This is up from the 280,000 mt reported for October while below the 290,000 mt milled in September, the largest volume reported since July 2016.
The all-wheat volume milled during the first 11 months of the year is 3.031 million metric tons (mmt), similar to the 3.4 mmt forecast released by Agriculture and Agri-Food Canada (AAFC) for the August-to-July 2022-23 crop year.
During the first 11 months, this volume is 5.5% higher than the same period in 2021 and 3.8% higher than the five-year average.
The monthly volume milled remains above the 10-year (2012-2022) trend.
Data for durum shows a volume of 19,000 mt milled in November, the highest monthly volume in eight months.
During the first 11 months of 2022, 199,000 mt of durum has been milled, up 4.7% from last year while 2.1% lower than the five-year average.
The monthly grind remains active despite Statistics Canada’s price data released this week in their Consumer Price Index report for November.
As seen in this month’s report, prices for bread, rolls and buns continue to rise, up 18.2% from a year ago and a high for the year.
The rate of inflation for the breakfast cereal and other cereal product category fell from the high reached in October, falling from a 17.8% year-over-year increase in October to 14.4% in November.
The rate in inflation for the dry or fresh pasta category fell sharply in November, but remains at a price level that is 27.9% above one year ago.
This is down from a 44.8% year-over-year price increase reported in October.
Prices for these categories have risen at a significantly faster pace than for food overall.
Food prices continued to rise overall in November, with Statistics Canada reporting that prices for food from stores rose by 11.4% year-over-year in November, up from 11% reported in October.
In this context, cash bids for Canadian durum wheat trended higher week over week.
Indeed, looking at the average regional price of C$499.39/mt as of Dec 30, that was C$0.28/mt stronger from the prior week.
(1USD=Cnd$1.3543 down from 1.3596 a week earlier).
From South America, Brazil is expected to have a record trading volume in marketing year 2022-23 (January-December 2023) on the back of an all-time high harvest forecast, according to government agencies and commodity analysts, likely easing the supply concerns of 2022.
Backed by an all-time high harvest projected at 153.5 million mt in MY 2022-23, Brazil is expected to export 96.6 million mt of the yellow oilseed, up 18 million mt on the year, national agricultural supply company Conab said Dec. 8.
Total domestic crush was projected 4.5% higher on the year at 50.68 million mt.
In Argentina, the Buenos Aires Grains Exchange showed 500k HA (~1.2m acres) of soy area could go abandoned due to drought.
BAGE maintained the 16.4m HA area as their forecast, but mentioned planting pace is 9.2% points behind last year at 72% finished.
Argentina was 91.4% harvested for their 22/23 wheat crop according to BAGE.
The Rosario Grains Exchange recently lowered their output forecast by 2.5% to 11.5 MMT citing the drought.
USDA’s Dec WASDE had Argentina with a 12.5 MMT crop compared to 15.5 MMT in November and 22.15 MMT in 21/22.
Thus, traders were monitoring weather forecasts pointing to high temperatures and light showers in coming days, along with concerns over planting delays.
In this context, as at December 29, 2022 – Argentina Wheat Grade 2 export price, (Up River) was at $380, down $7/t from prior week.
Argentina corn feed was down $6/t for the week, closing at $312.
Brazilian corn feed (Paranagua) was valued at $313, was up $8/t from prior week.
Argentina feed barley, was unchanged for the week to $350.
Argentina soybean was down $10 at $615.
Brazilian soybean was up $18, finishing the week at $598.
“It’s a true weather market,” said Don Roose, president of Iowa-based broker U.S. Commodities.
“Going into next year, weather will still be the big thing,” Roose said.
“The question is whether the current La Nina cycle will change into an El Nino cycle so that we can get more normal rains in South America and the U.S., that will allow us to rebuild U.S. and world stocks.”
In Europe, March wheat prices on Euronext closed the week at 309.25 euros a tonne, down €2.5/t for the week.
March’s European Durum Wheat, settled at €477.25/t, down €11/t for the week.
March corn price, was down €0.5/t for the week, closing at 295.5 euros per ton.
Rapeseed Feb contract closed at €584.25/t, up €17.5/t for the week.
UK wheat feed, Jan 23 contract, closed at £240.5, up £4/t week on week.
Meantime, as of December 29, 2022, FOB prices in US dollar for French wheat with 11.5% protein and Oct delivery, were at $337/mt, up $6 from prior week.
French durum wheat – delivered La Pallice Spot – July 2022 basis, this week was valued at $494.04/mt, up $5.84 from prior week.
Corn, delivered Bordeaux Spot – July 2022 basis, was at $317.9 per tonne, up $9.06/t from past week.
Corn FOB Rhin Spot – July 2022 basis, was up $9.04 to $315.76/t.
Feed barley delivered Rouen was at 296.42$/t, up $6.68 per tonne.
Malting barley FOB Creil Spot – July 2022 basis was at $338.31 per tonne, up $9.31/t from prior week.
Rapessed FOB Moselle – 2022 harvest was at 623.99$/ton, up $14.8 compared to prior week.
Standard sunseed FOB Bordeaux – 2022 harvest was up 12.99$ from prior week at $649.77 per tonne.
(Eur/USD = 1.0740 vs last week 1.0613).
From Russia, Russia’s Rosstat forecasted the ’22 wheat harvest there at 102.65 MMT.
In this context, Sovecon is anticipating record or near-record export volumes during the second half of this marketing year.
The consultancy indeed slightly raised its 2022/23 wheat export forecast to 44.1 MMT, citing high global prices, large domestic stocks and a weakening ruble.
Meantime, the Russian agriculture ministry revised the export tax for wheat, corn and barley.
Notably, as of Jan. 11, the export duty on wheat will slightly increase to 4,766.3 from 4,160.9 rubles per ton a week earlier.
Ditto on barley, the duty will increase to 3,870.6 rubles from 3,420.4 rubles per ton a week earlier.
For corn, also will increase, from 692.6 rubles of a week earlier, to 1,289.4 rubles per ton.
This new duty rates will be in effect through Jan 17, inclusive.
The duties were calculated based on indicative prices: $311.1 per ton for wheat ($314.8 a week earlier), $276.8 for barley ($280.2), $224.2 for corn ($222.0).
From South East Asia, Malaysian palm oil futures rose last Friday as top producer Indonesia tightened export rules, although the benchmark contract logged an annual loss after three years of gains.
Palm oil prices witnessed volatility this year due to the Ukraine conflict-led tight supplies and a pandemic-related demand slump in key market China.
Notably, the benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange ended the year higher by 88 ringgit, or 2.15%, at 4,178 ringgit ($949.55) a tonne.
It lost 11% for the year.
Indonesia will tighten export rules for palm oil from Jan. 1, allowing less shipments overseas for every tonne sold domestically, as it seeks to ensure sufficient domestic supply, a government official said last Friday.
Better demand from China for the forward months as it reopens borders and production issues are supporting palm oil prices.
India has extended its policy to allow imports of lentils and vegetable oils such as palm oil, soyoil and sunflower oil at lower taxes until March 2024, the government said in a notification.
The Malaysian Palm Oil Board (MPOB) said that 2022 palm oil prices will average at 5,100 ringgit ($1,155.94) a tonne.
In 2023, crude palm oil prices are expected to stabilise and average at 3,800 ringgit ($861.68) as supply improves, MPOB said.
Watching this week’s market, the first week of 2023 starts with a Monday trading holiday in the USA, extending the New Year’s celebration.
Euruopean markets are open regularly.
US Export Inspections will be delayed until Tuesday morning.
USDA will also release their month Grain Crushings, Fats & Oils and Cotton Consumption reports.
Skip ahead to Thursday, and the EIA will release their weekly ethanol production and stocks report.
The weekly Export Sales report will be delayed until Friday morning.
The entire “Banca del Grano” team joins me in wishing you a very happy new year 2023.
That’s all, thank you.
We wish you a nice day and a good start to the year.
Author: Sandro F. Puglisi
