Good morning Farmer Family …
US farm markets rallied past Friday.
The wheat complex led the rally, supported by concerns the Black Sea grain deal could splinter amid escalations in the war between Ukraine and Russia.
Russia’s ambassador to the United Nations said Moscow has not been able to export any grain as part of the Black Sea grain deal.
This was the second time in a week a Russian official has complained about the Grains Initiative.
That was raising doubts about how much longer Russia will be willing to cooperate in the Black Sea.
That, could slow the Ukrainian exports and the planting for the 2023 crop and it could also lead to increased sanctions against Russia.
Meantime, Ukraine’s agriculture ministry on Friday has proposed increasing the minimal tonnage of ships which carry grain and vegetable oil from the country via the grain corridor, aiming to boost exports despite opposition from Russia.
Some strength for grain markets was also derived from stronger energy markets following Russia’s announcement that it would be making drastic production cuts in the coming weeks.
As a result, Chicago wheat prices were pushed up to its highest level since Jan. 3.
Corn and soybean prices also were strong, following the gains in wheat.
As for soybean, products largely drove the rally.
U.S. soymeal supplies are tightening, meantime, more production cuts forecasted for Argentina added even more supply pressure to the soymeal market.
Soyoil prices surged as rains in Malaysia disrupted harvest progress for competing palm oil production.
Also, markets are increasingly uncertain about Indonesia’s palm oil export allowances going forward, creating more supply pressure for the edible oils market as China begins to return to elevated demand levels following its release from COVID restrictions.
Traders were also monitoring forecasts projecting rain in South America in the coming days.
Expectations of a record soybean crop in Brazil have tempered worries over Argentine losses.
However heavy rains there threatened to delay the harvest and push seeding of the country’s safrinha corn crop beyond the ideal time frame.
Thus, the Friday session ended for corn with 1.45% gains.
The soybean market was 1.53% higher.
Meal prices bounced at the close posting 0.79% gains.
Soybean oil closed up by 2.54%.
Chicago SRW was up by 3.8%.
Kansas City wheat ended the day 3.41% higher.
Minneapolis spring wheat settled Friday with 1.42% gains.
For the week, corn prices rallied back 0.44% higher thanks Friday’s move.
Ditto for the soy complex, with soybeans closed 0.69% higher from prior Friday, while the products saw meal up 0.58%, and bean oil up 2.51%.
The wheat complex was still more bolstered thanks Friday rally.
Notably, the Kansas City HRW market was the leader, up 4.12%.
Chicago SRW was 3.87% higher.
Minneapolis was behind, but still rallied 0.95% on the week.
The CFTC again not had CoT data past week.
No announcements have been made regarding when the report will resume.
Meantime, commodity funds were net buyers of CBOT soybean, corn, wheat, soyoil and soymeal futures contracts on Friday.
The rally in grain futures in response to Russian criticism of the Black Sea export corridor pressured basis past week.
As for wheat, HRS basis was down in both the PNW and Gulf, weighed by futures prices.
Weaker rail freight prices also helped draw down basis, though some regions still have poor performance.
HRW basis was up in the Gulf and down in the PNW.
Farmer selling has increased slightly; however, grain movement remains slow and demand light, especially as the U.S. Plains HRW crop condition remains uncertain.
SRW basis and SW prices were steady, bouncing from lows in late January.
On this morning, Chicago wheat gained more ground to hit its highest since early January.
Soybeans jumped to a seven-month high.
Notably, the most-active Chicago Board of Trade (CBOT) wheat contract was up 0.1% at $7.87 a bushel, as of 04:51 GMT, after climbing earlier in the session to $7.91 a bushel, its highest since the early days of the year.
Soybeans rose 0.3% to $15.46-1/2 a bushel, having earlier jumped to $15.53 a bushel – the highest since June, while corn gave up 0.3% to 6.78-3/4 a bushel.
Increased concerns about the Black Sea region and the impact on exports and production from the region due to escalating tensions between Russia and Ukraine late last week helped to support the market.
Soybeans jumped on worries about dryness in Argentina and excessive rains in Brazil.
In energy markets, oil prices rose more than 2% on Friday.
Brent crude futures indeed rose to settle at $1.89, or 2.2%, to $86.39 a barrel.
U.S. West Texas Intermediate crude futures (WTI) were up $1.66, or 2.1%, at $79.72.
Brent posted a weekly gain of 8.1%, while WTI gained 8.6%.
Russia announced it would reduce its oil production by 5% (about half a million barrels) in March 2023.
The production cut is a retaliatory response from the Kremlin towards recent Western sanctions on Russian energy products.
The sanctions capped Russia’s oil price at $60/barrel, so Russia’s retaliation likely reflects growing challenges for Russia to sell its oil at a profitable level internationally.
The Wall Street Journal’s Georgi Kantchev notes that “Friday’s move was the first in which Moscow has telegraphed a specific oil-markets response to the Western measures, raising the specter that it was now brandishing oil as a weapon in the economic war playing out between Russia and the West.”
There were conflicting statements from the Russian government regarding whether this move had received OPEC+’s blessing.
Meanwhile, Russian Deputy Prime Minister Alexander Novak said Russian state media – “We will not sell oil to those who directly or indirectly adhere to the principles of the ‘price ceiling’”.
In U.S. supply, energy firms cut the number of natural gas rigs by the most in a week since October 2017, while adding the most oil rigs in a week since June, energy services firm Baker Hughes Co said.
The total oil and gas rig count, an early indicator of future output, rose two to 761 in the week to Feb. 10.
On this morning, oil prices eased around 1%, as investors focused on short-term demand concerns stemming from crucial upcoming U.S. inflation data and refinery maintenance in Asia and the United States.
Brent crude futures, indeed, fell 86 cents, or 1%, to $85.53 a barrel by 07:15 GMT.
U.S. West Texas Intermediate crude was at $78.83 a barrel, down 89 cents, or 1.1%.
Energy traders anticipate a potentially weakening crude demand outlook.
U.S. consumer price data due on Feb. 14, could force the Fed to tighten policy much more aggressively.
Additionally, the resumption of Azerbaijani oil exports on Sunday at Turkey’s Ceyhan terminal also relieved supply concerns.
Stefano Grasso, a senior portfolio manager at 8VantEdge in Singapore, said the 500,000 bpd cut would bring Russia back in line with its OPEC+ quota as Moscow is currently over-exporting.
In ocean freight markets, the Baltic Exchange’s main sea freight index, which measures the cost of shipping goods worldwide, rose about 1.7% to 602 points on Friday, but still hovering close to 2020-lows.
Notably, the capesize index, which tracks iron ore and coal cargos of 150,000 tonnes, increased about 7.5% to 486 points; and the panamax index, which tracks coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, was up for the second day, rising 0.4% to 864 points.
Meanwhile, the supramax index shed 8 points to 628 points.
For the week, the benchmark index lost 3.1%, notching its sixth consecutive weekly fall, reflecting a combination of sluggish demand and an over-abundance of ships.
In equity markets, the Nasdaq ended lower on Friday as megacap growth stocks came under pressure by Treasury yields higher.
U.S. equities, indeed, were rattled over the week by strong jobs data, investors are waiting for January consumer inflation data for clarity on the Fed’s rate-hike path.
Meantime, yields on the benchmark 10-year Treasury note rose to their highest in more than a month following an auction on Thursday of 30-year bonds that saw weak demand.
Notably, the yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, rose to 3.73% from 3.66% late Thursday.
The two-year yield, which moves more on expectations for the Fed, ticked up to 4.50% from 4.48%.
It was at 4.08% just over a week ago and is near its highest level since November.
The Russell 1000 Growth index that houses many large-cap growth names fell 0.33%.
Lyft Inc plummeted 36.44% as it lowered prices, raising concerns it was falling behind bigger rival Uber Technologies Inc.
Uber shares also dropped 4.43%.
But the rally in energy stocks as oil prices climbed helped push up the Dow and the S&P 500.
Most of the 11 major S&P 500 sectors edged higher with the energy sector jumped 3.92%, although the consumer discretionary sector fell 1.22%.
More than half of the firms listed on the S&P 500 have reported earnings.
U.S. consumer sentiment improved further in February month-on-month.
However, the University of Michigan’s preliminary February reading, showed households expected higher inflation to persist over the next 12 months.
In this context, the Dow Jones Industrial Average ended up 169.52 points, or 0.5%, to 33,869.4, the S&P 500 gained 8.98 points, or 0.22%, to 4,090.48 and the Nasdaq Composite dropped 71.46 points, or 0.61%, to 11,718.12.
The Nasdaq posted its first weekly fall this year, down 2.41%, while the S&P 500 ended the week lower 1.11% and the Dow Jones lost 0.17%.
That comes after a stellar performance by stocks in January.
On this morning, Asian stocks sank.
Tokyo, Hong Kong and Seoul declined. Shanghai advanced.
Notably, the Nikkei 225 in Tokyo sank 0.9% to 27,427.32 while the Shanghai Composite Index advanced 0.6% to 3,279.94.
The Hang Seng in Hong Kong lost 0.4% to 21,099.65.
The Kospi in Seoul declined 0.6% to 2,453.89 and Sydney’s S&P-ASX 200 shed 0.2% to 7,417.80.
India’s Sensex opened down 0.5% to 60,386.40.
New Zealand and Singapore retreated while Jakarta and Bangkok gained.
In currency trading, the U.S. Dollar Index closed the week at 103.63 up from prior week’s 102.5.
Notably, the yen broadly moved higher after reports that the Japanese government was set to appoint academic Kazuo Ueda as the central bank’s next governor.
The Japanese yen, indeed, strengthened 0.14% at 131.50 per dollar on Friday.
In Europe, the euro fell 0.55% to $1.0672.
On this morning, the dollar gained to 132.10 yen.
The euro declined to $1.0666.
Going back to analyzing the other agricultural markets …
In Canada, the Grain Statistics weekly report, had producers’ deliveries of common wheat at 412,8k mt for week 27 of this shipping season.
That was down from 432,4k mt posted prior week.
Deliveries of durum wheat, were at 106,5k mt, down from 141,5k mt showed in prior week.
Meantime, Canada exported 354,7k mt of common wheat in week 27.
That was down from 395,7k mt of a week earlier.
Durum wheat exports, were also weaker moving down from 192,6k mt to 97,1k mt.
Total Commercial Stocks of common wheat stood at 2.841,8k mt.
That was down from 2.863,7k mt posted in week 26.
Durum total commercial stocks, were also weaker from 685,4k mt a week earlier, at 644,6k mt.
Cumulative exports for common wheat were at 10.278,5k mt.
That is compared 6.065,8k mt a year ago.
Durum cumulative exports reached 2.793,0k mt vs 1.342,7 a year ago.
From South America, Buenos Aires Grain Exchange reports that for the week ending 8 Feb, corn crop ratings edged lower to 66pc fair/excellent (68pc previous week, 75pc previous year), with more moisture needed to aid crop development.
Total production outlook maintained at 44.5Mt.
Soybean production outlook cut by 3Mt, to 38Mt reflecting the impact of generally suboptimal conditions, which have led to anticipated yield losses despite recent rains.
In Europe, the euro’s downward movement against the dollar, below 1.07, and renewed tension over the conflict in Ukraine pushed prices up sharply at the end of the week.
Euronext wheat prices rose to a one-month high.
Notably, March milling wheat on Paris-based Euronext settled 1.8% higher at 297 euros ($316.93) a tonne.
The contract earlier reached 298.25 euros, its highest since Jan. 9, after breaking chart resistance, though it remained shy of the psychological 300 euro threshold.
Over the week, it posted a 4.4% gain.
A dry February so far in Europe was also being monitored as the key spring growing season approaches.
Meantime, traders said a Spanish importer had this week sought about 12,000 tonnes of 12.5% protein milling wheat from the Baltic region for March shipment to Valencia, though the offer was 7-8 euros below selling ideas.
Corn prices also rose on Euronext, posting a +4 €/t.
In rapeseed, meantime, there was a less upward movement.
From UK, Britain’s wheat imports picked up in December from the month before but arrivals in the season so far are still running behind the previous year’s pace, customs data showed on Friday.
Notably, wheat imports for the month totalled 155,353 tonnes, the highest monthly total so far this season, up from 67,899 tonnes in November.
Cumulative imports since the start of the 2022/23 season on July 1 totalled 707,700 tonnes, down from 1.08 million in the same period a year earlier.
Canada was the largest supplier in December, shipping 97,235 tonnes, and has also been Britain’s largest supplier in the 2022/23 season so far, with shipments of 287,934 tonnes.
Britain’s wheat exports in December totalled 143,886 tonnes, bringing the total for the season to date to 576,134 tonnes, sharply up from 239,600 in the same period a year earlier.
From Ukraine, Ukrainian farms harvested 53.7 million tonnes of grain in bunker weight from 97% of the expected area, the agriculture ministry said on Friday.
The ministry said that as of Thursday, farmers had harvested 11.2 million hectares of crops, with the grain yield averaging 4.79 tonnes per hectare.
Farmers harvested 100,000 hectares over the past seven days, data showed.
The ministry said farmers had completed the 2022 wheat and barley harvests, threshing 20.2 million tonnes of wheat and 5.8 million tonnes of barley.
The total volume included 26.4 million tonnes of corn, harvested from 93% of the expected area, with a yield of 6.7 tonnes per hectare.
The ministry said that farmers also harvested 10.5 million tonnes of sunflower seeds from 99% of the planted area and 9.1 million tonnes of sugar beet from 100% of the area.
Meantime, Ukraine grain exports in the 2022/23 season, which runs through to June, are down 28.7% to 29.2 million tonnes so far.
The volume included about 10.4 million tonnes of wheat, 16.7 million tonnes of corn and about 1.9 million tonnes of barley.
The ministry said grain exports in February had reached 2.2 million tonnes as of Feb. 13, down from 2.4 million tonnes in the same period last year.
From Russia, as the Black Sea export corridor approaches its March 19, 2023 expiration date, Russian officials have voiced criticism of the agreement citing barriers to Russian exports in the form of sanctions.
Russia expressed hesitancy to extend the agreement and had a similar stance in November 2021 when the agreement approached its first expiry period.
However the initiative was extended for another 120 days.
Meantime, Russian wheat exports reached record levels in January at 3.5 MMT, 120% above the January 2021 pace.
SovEcon expects Russia to ship a record-high export pace in the coming months, with wheat exports during the first half of 2023 expected to reach 21.3 million metric tons, compared to 10.9 million metric tons during the same period last year.
In this context, the Russian agriculture ministry revised the export tax for wheat, corn and barley.
Particularly, as of Feb 15, the export duty on wheat will increase to 4,653.5 from 4,496.6 rubles per ton a week earlier.
Ditto for corn, rose from 1,505.7 rubles of a week earlier, to 1,670.0 rubles per ton.
Also for barley, the duty will be higher for this period, increasing to 3,209.1 rubles from 3,175.2 rubles per ton a week earlier.
This new duty rates will be in effect through Feb 21, inclusive.
The duties were calculated based on indicative prices: $306.2 per ton for wheat ($307.2 a week earlier), $261 for barley ($264), $230 for corn ($229.8).
From the Middle Kingdom, tensions with China have returned to the forefront after the U.S. government shot down the alleged Chinese spy balloon on Saturday, February 4, 2023.
Despite the recent friction, agricultural exports to China have reached a record $36.4 billion for the fiscal year 2022.
China is the 5th largest market for U.S. wheat in the marketing year 2022/23, with 750,000 MT purchased year-to-date.
However, U.S. chief agricultural trade negotiator Doug McKalip altough wants China to keep striving to meet U.S. farm goods purchase commitments under the 2020 “Phase 1” trade deal, said in a statement that he also is pushing to diversify exports beyond the biggest U.S. grain customer.
Meantime, in a sign of thawing tension between the two countries China’s ports have been clearing cargoes of Australian beef within one or two weeks since the start of this year.
That was much faster than the months taken during the last two years and comes after a visit to China by Foreign Minister Penny Wong, the first such trip by an Australian minister in three years.
Australia shipped 145,000 tonnes of beef to China in the first 11 months of 2022, up 19% on the prior year, according to MLA data, but sharply down from 300,000 tonnes in 2019 before the factory suspensions.
China imported 2.73 million tonnes of beef in 2022, up 65% since 2019, according to Chinese customs data, and worth 120 billion yuan ($17.64 billion).
From South East Asia, although wheat prices in India have remained elevated, the area planted with wheat in the world’s second-largest wheat producer remains steady, increasing by only 0.4% to 34.3 million hectares.
Indian farm ministry data showed that some farmers are shifting production to rapeseed to capitalize on higher returns.
Thus, India may extend the ban on wheat exports, set to expire in April 2023, to preserve domestic supplies and help cap prices.
Wheat stocks are down 49.2 percent to a six-year low of 17.2 MMT, and the government hopes to replenish state wheat reserves after government purchases decreased by 53 percent in 2022.
From Australia, the country exported 1,061,321 tonnes of feed barley, 21,979t of malting barley and 47,791t of sorghum in December, according to the latest export data from the Australian Bureau of Statistics.
The feed barley figure is more than double the amount shipped in November, with Saudi Arabia the biggest customer by far on 534,716t, followed by Japan on 178,339t and Iran on 64,305t.
Malting shipments fell 89pc from the November total to reflect the rundown of stocks ahead of new crop, and South Africa on 15,000t followed by Singapore on 4883t, The Philippines on 1660t and Vietnam on 436t were the only customers for December-shipped malting.
Sorghum exports also tumbled to 47,791t in December, down 55pc from the November figure of 106,769t to reflect a rundown on stocks.
Buoyant demand from China, the destination for 45,708t, covered 96pc of shipments for December.
Meantime, by the close on Friday we had seen the market firmer for the week.
The trade is still noting poor grower selling liquidity but just enough keep the shorts happy.
A dry weekend has helped sorghum harvest gain momentum in southern Queensland.
Truckloads from western regions reportedly are delivering to container packers and bulk sites, with good yields and mostly good quality.
The 8-day forecast is also looking relatively dry with less than 5mm on the cards for most sorghum growing region.
On the international trade scene, an importer group in the Philippines is believed to have bought around 110,000 tonnes of animal feed wheat in an international tender which closed on Friday.
Most traders expected the wheat to be sourced from Australia but there was also market talk the wheat could be sourced from the United States.
It was bought in two 55,000 tonne consignments for expected shipment in June and July.
One consignment was purchased at around $332 a tonne c&f.
Seller was believed to be trading house CBH.
The second was purchased at about $335 a tonne c&f.
Seller was believed to be trading house ETG.
The Korea Feed Association (KFA) purchased about 64,000 tonnes of animal feed corn sourced from optional origins in an international tender on Friday.
It was bought an estimated outright price of $335.48 a tonne c&f plus a $1.25 a tonne a surcharge for additional port unloading.
The seller was believed to be trading house Posco.
The corn was sought for arrival in South Korea around May 20.
Ports in Russia and Ukraine cannot be used for ship loadings, the KFA tender said.
If Ukrainian corn is supplied, sellers have no right to declare force majeure on deliveries because of the war in the country.
The shipment was sought between April 16 and May 5 if the corn is sourced from the U.S. Pacific Northwest coast, between March 27 and April 15 if from the U.S. Gulf or eastern Europe, between March 22 and April 10 if from South America and between April 1 and April 20 if from South Africa.
The tender continues a series of South Korean corn purchases this week, with other buying reported from importers NOFI, the Major Feedmill Group and Feed Leaders’ Committee.
Algerian state grains agency OAIC is believed to have bought milling wheat in an international tender past week which sought limited shipment to two ports only.
Purchases reported were around $338 a tonne, cost and freight (c&f) included, and initial assessments put the volume at around 45,000 tonnes, thought to be for March shipment.
Algeria buys wheat on an optional-origin basis, which means the seller has until shipment to choose where to source the grain, but traders believed the wheat would come from the Black Sea region, possibly from Russia or European Union members Romania and Bulgaria.
In a separate tender for large-volume shipments past week, traders estimated that OAIC bought around 360,000 to 390,000 tonnes of milling wheat at between $329 and $332 a tonne c&f, with much of the purchase expected to be sourced from Russia.
Some traders said the purchase may have reached 450,000 tonnes.
OAIC does not release details of its tenders and further trade estimates of results are possible.
Watching this week’s market, the week will be sort of quiet on the report side of things.
On Monday, we start the week with the Export Inspections report released in the afternoon.
On Tuesday, February Lean Hog futures and options expire.
Skip ahead to Wednesday and EIA will release their weekly ethanol production and stocks data.
Thursday in the afternoon will see the release of weekly Export Sales report.
That’s all, thank you.
We wish you a nice day and a good start to the week.
Author: Sandro F. Puglisi
