Daily International Grain Market View

On Thursday, US farm markets has lean on the soybean that run-up to eight-year highs for momentum terms.

Soybean, indeed, added over 60￠ per bushel in only two sessions.

China rumors, according that they is buying U.S. beans, fueled this rally.?

Market, however, continues also to digest the Russia-Ukraine tensions with Biden stating that Russia ‘will move in’ to Ukraine and that a ‘major incursion’ will warrant a strict and swift response.

In this context, corn prices ended the day 0.08% lower.?

Soybeans gained another 2.48% addings to 2.2% of the previus day!

Soymeal prices closed the Thursday session 0.63% higher.?

Soy oil prices extended their rally another triple digits with 3.4% to 3.57% gains.?

The wheat complex was mixed.?

Winter wheat SRW and HRW futures indeed, were red at the bell, while spring wheat held fractionally gains into the close.?

Particularly, SRW gave back 0.78% in the front months.?

HRW prices closed 0.44% weaker, though new crop was a nickel premium to spot March contracts.?

Spring wheat prices closed 0.53% higher.

In energy market, oil prices fell on this morning, after rising to seven-year highs this week thougth overall sentiment remained solid due to concerns over tight supply and geopolitics.

Particularly, "an unexpected increase in U.S. crude stockpiles prompted investors to take profits".

Gasoline inventories in the United States, rose by 5.9 million barrels to their highest since February 2021, according to the U.S. Energy Information Administration (EIA).

Crude stockpiles rose by 515,000 barrels last week, against industry expectations.

The EIA also reported a slight decline in refinery runs, indicating lower demand for crude.

On the other hand, the International Energy Agency (IEA) said on Wednesday that oil supply will soon overtake demand as some producers are set to pump at or above all-time highs.

"Slumping stock markets amid concerns that the Federal Reserve may aggressively move to raise rates this year also weighed on sentiment".

"Still, losses were limited as expectations that supply tightness would continue amid recovering demand and geopolitical tensions between Russia and Ukraine and in the Middle East kept investors cautious about selling".

Thus, Brent crude futures were down $1.00, or 1.1%, to $87.38 a barrel by 07:47 GMT.?

The contract earlier fell by as much as 3%, the most since Dec. 20.?

A day earlier the global benchmark touched $89.50 a barrel, its highest since October 2014.

U.S. West Texas Intermediate (WTI) crude futures slid $1.16, or 1.4%, to $84.39 a barrel.?

The contract earlier fell as much as 3.2%, also the most since Dec. 20, after rising to its highest since October 2014 on Wednesday.

Both benchmarks have gained more than 10% this year and are headed for a fifth straight weekly gain.

On the freigth market, the Baltic Exchange’s dry bulk sea freight index fell for a tenth straight session on Thursday, touching its lowest level in about a year, on waning demand across all vessel segments.

Particularly, the overall index, which factors in rates for capesize, panamax and supramax vessels, fell 96 points, or 6.1%, to 1,474, its lowest since February 2021.

The capesize index dropped 195 points, or 15.9%, to 1,031, its lowest since Feb. 12 last year.

Average daily earnings for capesize vessels, which transport 150,000-tonne cargoes such as iron ore and coal, dropped by $1,622 to $8,547.

The panamax index slipped 71 points, or 3.4%, to its lowest since April at 2,024.

Average daily earnings for panamax vessels, which ferry 60,000-70,000 tonne coal or grain cargoes, fell by $632 to $18,220.

The supramax index eased 39 points to 1,773.

In contrast, on week 3 of the year 2022, freight rates continue increasing in the Azov Sea region for all destinations.?

Indeed, contracts for 3K wheat parcels from Azov to Marmara Sea ports are concluded at the level of $40 pmt.

The growth trend is to be explained by the shortage of spot tonnage caused by the adverse weather conditions in the Black Sea, Sea Lines shipbrokers say.?

In addition, due to the approaching introduction of export quotas for wheat and corn, charterers are trying to conclude and execute as many contracts as possible before mid-February.

At the same time, shipments of less popular crops, such as bran, safflower, beet pulp or peas, are being carried out quite actively.?

Turkish warehouses are still overflowed by cargoes, so charterers are more focused on buyers in Greece, Italy and Egypt.

According to Sea Lines, on week 3, freight rates for wheat parcels from Azov make $38 to the Black Sea, $40 to Marmara, $60 to Mersin and $65 to Egypt.

Freight rates from Rostov AB (after bridge) are $1 above, from Rostov BB (before bridge) the same, from Yeisk and Taganrog $1 below, and from Temryuk $3 below those from the port of Azov.

In the Caspian region, the situation remains stable, freight rates are at the last week level.?

The water level in Astrakhan is still low, which prevents shipowners from taking cargo up to fcc.?

Grain shipments are becoming significantly fewer in the market, which may lead to a drop in freight rates in the coming weeks.

On week 2, freight rates for shipping corn by 3,000 dwt bulkers to Iran make $23 from Aktau, $37 from Makhachkala, and $47 from Astrakhan.

On equities markets, U.S. stock indexes yesterday gave up an early rally as they sold off through the afternoon and closed lower.??

The sharp about-face for the broader market was once again directed by technology stocks, which have been behind choppy trading throughout the week.

More than 500 Nasdaq stocks hit 52-week lows Thursday, including Starbucks and T-Mobile.?

Apple fell 1% and chipmaker Nvidia shed 3.7%.

Meta Platforms dropped 1% and Lowe’s lost 4.6%.

In this context, the S&P 500 dropped to a 3-month low, the Dow Jones Industrials fell to a 1-month low, and the Nasdaq 100 slumped to a 3-1/4 month low.??

Stocks initially moved higher after a decline in T-note yields gave technology stocks a temporary boost.??

Stronger-than-expected quarterly earnings results from Alcoa, Signet, and Travelers bolstered optimism about Q4 corporate earnings and was an early positive factor for equities.?

But in the meantime, Thursday’s U.S. economic data was mixed.??

Weekly initial unemployment claims unexpectedly rose +55,000 to a 3-month high of 286,000, showing a weaker labor market than expectations of a decline to 225,000.??

The job market has had a rocky recovery from the virus pandemic though the unemployment rate fell last month to a pandemic low of 3.9%.

Investors are closely watching to see how employment data might affect the Federal Reserve approach to weaning the economy of its support by raising interest rates.

The Fed, indeed, is now expected to raise rates earlier and more often than it had previously signaled to fight inflation that is threatening the economic recovery.?

But supply chain problems and higher raw materials costs have prompted businesses to raise prices on finished goods, leading consumers to eventually rein in spending.

About this, the latest round of corporate earnings is also giving investors a clearer picture of where Americans are spending money and how inflation is impacting the economy.

American Airlines fell 3.2% and United Airlines slipped 3.4% after warning investors that the latest surge in COVID-19 cases will hurt their finances early in 2022.?

Both airlines reported losses for the fourth quarter, though they were smaller than analysts’ expected.

Peloton shares lost nearly 24% after CNBC reported the company is temporarily halting production of its treadmills and exercise bikes after seeing demand for the equipment fall.

Meantime, Dec existing home sales fell -4.6% m/m to a 4-month low of 6.18 million, weaker than expectations of 6.42 million.??

On the positive side, the U.S. Jan Philadelphia Fed business outlook survey, was the only star light in the nigth, rose +7.8 to 23.2, stronger than expectations of 19.0.

In this context, the S&P 500 lost 1.1% to 4,482.73, a three-month low, with nearly 85% of stocks in the index falling.?

It’s now down 6% for the year.

The Nasdaq composite index fell 1.3% to 14,154.02, after rising as much as 2.1%.?

By Wednesday, the index’s recent losses had left it in what Wall Street considers a market correction, or 10% below its peak.

The Dow Jones Industrial Average sank 0.9% to 34,715.39.

The yield on the 10-year Treasury fell to 1.78% from 1.83% late Thursday.

Meantime, shares were lower in Asia on this morning after the late afternoon sell-off wiped out gains for stocks on Wall Street.

Particularly, Tokyo fell 0.9% after Toyota Motor Corp announced production cuts due to parts shortages.?

Particularly, Toyota, Japan’s top automaker, said it will suspend production at 11 plants in Japan for three days, on top of reductions planned in February.?

Those cuts mean it will fall short of the 9 million vehicles planned for the fiscal year through March, despite healthy demand.?

Consequentially, its shares fell 2.5% on Friday.

In this context, Tokyo's Nikkei 225 index lost 537 points to 27,522.26.

Other major regional markets also fell.?

The Hang Seng in Hong Kong gave up 0.6% to 24,812.76.?

The Shanghai Composite index shed 0.8% to 3,526.19.

Hong Kong-traded shares in e-commerce giant Alibaba fell 4.2% after a Chinese-made documentary suggested its financial arm might be implicated in a corruption probe.

The S&P/ASX 200 in Sydney dropped 2.3% to 7,175.80.?

South Korea's Kospi slid 1.1% to 2,830.82.?

Thailand's benchmark fell 0.5%.

On the weather side, significant icing across the coastal plains of the Carolinas today and tonight.

Wintry weather this morning from southern Texas to the western

Gulf Coast.

Arctic chill continues across much of the central and eastern U.S..

Light snow across the northern Plains will move toward the upper Great Lakes as snow showers across central Rockies move toward the southern Rockies.

In this context, Commodity Weather Group is indicating that up to 20% of the U.S. winter wheat crop could be exposed to winterkill this week as a result of the recent cold snap and further net drying.?

Canada’s southwestern Prairies continue to miss badly needed precipitation and snow events as the drought conditions remain very serious from here southward into Montana along with the western-more regions of the Dakotas.

However, wheat markets took a step back, with Minneapolis the exception.?

It put on more gains, indeed, as the market starts to realise the impact on elevated row crops, and it will have to keep up to get area in the upcoming spring.??

On the demand side, U.S. Secretary of Agriculture (USDA) Tom Vilsack told a U.S. House of Representatives committee yesterday that China has so far not honored its commitments to purchase raw materials at the end of Phase 1 of the trade agreement signed under the Trump administration.

"Work is clearly unfinished with China on Phase 1 of the agreement and we continue to press China to increase its purchases," the minister said.

He said Beijing was $13 billion behind in agricultural purchases.

At the same time, rumors were swirling in the market that China had bought some soybeans in recent days.?

Market operators are talking about ongoing negotiations with Beijing to "possibly eliminate certain tariffs on imported Chinese goods (in the United States) if China meets the conditions of the agreement".

In this context, oilseed prices ended up nearly 2.5%.

Meantime, the weekly EIA Ethanol report showed 1.053 mbpd, up 47 week-to-week and 40 K more than the trade average.?

Inventories again surged, rising 681 K to 23.592, more than 400 K above the trade.

Going into the USDA weekly Export Sales report, the trade is looking for corn bookings between 500k and 1 MMT from the week that ended 1/13.?

New crop bookings are expected to be blow 200k MT.

As for soybean, pre-report estimates for US soybean export sales range from 600,000 MT to 1.2 MMT for the week that ended 1/13.?

New crop bean sales are expected to be reported between 100k and 300k MT.?

For the products, the trade is looking for FAS to report 100k-300k MT of soymeal was sold and less than 15k MT for soy oil.?

As for wheat, traders surveyed estimate wheat bookings from the week that ended 1/13 were between 175,000 and 400,000 MT.?

New crop wheat sales are estimated below 50k MT.

Meantime, funds were neutral in corn, net buyers in soybeans for 19,000 lots and net sellers in wheat for 4,000 lots.

From South America, strong heat and limited rainfall affect southern Brazil, Paraguay, and far-northern Argentina over the next week as upper-level high pressure persists, followed by occasional t-storms within Jan. 27 - Feb. 3 after a cool front dislodges the high (marking a slightly faster end to heat).?

The setup causes energies to flow around the high and produce heavy rain in central and southern Argentina within the next three to seven days, followed by a drier but seasonable to slightly-cool-period for at least one week.?

Central and northern Brazil was very wet until recently and stays fairly dry through Tuesday, followed by a faster return of occasional t-storms next week.

Consequentially, this South American climate continues to push up corn and soybean prices.?

The recent rains have certainly been good for Argentine crops, but part of Brazil remains dry.?

The medium-term forecasts are also observed with concern despite good rainfall still expected in the coming days in Argentina.

The USDA’s office in Brazil trimmed its estimate of the soybean crop by 3, down to 136 MMT which is 3 less than last week’s WASDE figure.?

Perhaps more significant, the attaché’s 88 MMT export estimate is 6 less than the WASDE total.?

Some analysts are of the opinion that additional reductions of at laest 2.5 and 2.5 MMT are needed for the Argentine and Brazil crops, respectively.

Meantime, total South American soybean exports during January-March this year could be 30-35% greater compared to a year ago.?

This would equate to 200 mbu more vs. 2021.

This week’s corn vessel line-up, meantime, fell 31 to 51mbu but is still 21 million larger than in the year-ago period.?

In Europe, wheat suffers profit taking despite tensions at the Ukrainian border.?

Rapeseed and corn continue to rebound.

Wheat has indeed suffered profit taking after its recent recovery and the slowdown in French port activity has come to support the trend a little more.?

The bird flu is intensifying in France and no less than 2.5 million poultry will be slaughtered in the southwest.

On the other hand, the growing threat of a military conflict between Ukraine and Russia was, however, a significant factor of tension.

Energy prices was also being pushed up by the geopolitical situation in the Black Sea, thus supporting the entire biofuels sector.?

Consequentially, corn and rapeseed therefore remained oriented in the green on Thursday, while the Malaysian palm went to touch a new historic record on the Kuala Lumpur Stock Exchange.

From Soth Africa, South Africa’s agricultural regions have brought widespread flooding and raised fears of crop damage and planting delays for the key corn crop.?

Corn said to be 90% planted but in the Free State and North-West, the pace is 5-10 points behind normal.?

For what it’s worth, the USDA’s production estimate is 17.0, up 100 K from last year; exports are steady at 3.2 million.

From the Black Sea basin, according to Customs Service, Russia exported 2.3 mln tonnes of barley in July-November of 2021/22 MY (including deliveries to the Custom Union countries), down 30% y/y.

Turkey, Saudi Arabia and Libya were the key destinations for Russian barley with the common share at 58% of the overall volume exported.?

Turkey increased import of Russian barley by 18 times to 834.4 thsd tonnes in the reporting period, Libya raised purchases by 8% to 135.5 thsd tonnes.?

Saudi Arabia cut import by 80% to 370.6 thsd tonnes.

APK-Inform forecasts Russian export of barley at 3.2 mln tonnes in 2021/22 MY.?

Thus, Russia has already shipped 73% of its overall barley export potential.

Meantime, according to regional divisions of the Federal Service for Veterinary and Phytosanitary Surveillance (Rosselkhoznadzor) and the Federal State-Funded Institution “Federal Centre of Quality and Safety Assurance for Grain”, since the beginning of the season-2021/22 (July 1), and as of January 13, Russia exported 916 thsd tonnes of wheat to Saudi Arabia, up 7 times compared to the same period of the last year.

Russia supplied the first 60 thsd tonnes of wheat to Saudi Arabia in April 2020.?

Since that time, Saudi Arabia has imported about 1.1 mln tonnes of Russian wheat.

However, in January, Russia will export about 2.1-2.3 mln tonnes of wheat (including deliveries to the EAEU), down 36% compared to January 2020, declared the Head of the analytical center at Rusagrotrans JSC, Igor Pavensky.

He said that the Russian exporters raised sharply wheat shipments in January ahead of the quota that would come in force in February.?

“We estimate export of Russian wheat in the first half of 2021/22 MY at 21.7 mln tonnes, down slightly from initial expectations.?

The main reason is decline of shipments in December due to unfavorable weather conditions. Russia exported 3.26 mln tonnes of wheat in December”, – he said.

I. Pavensky added that Russia would export about 33.4 mln tonnes of wheat in 2021/22 MY, down from 39 mln tonnes year ago.

About this, according to Customs Service, in July-November of 2021/22 MY Russia exported 18.2 mln tonnes of wheat (including deliveries to the Customs Union countries), down 13% y/y.?

Iran, Turkey, Egypt, Nigeria and Azerbaijan remained the key importers of Russian wheat with the common share of the overall export at 66%.

Besides, Russia raised significantly export of wheat to Kazakhstan and Saudi Arabia.?

In July-November, Kazakhstan increased purchases of Russian wheat by 90% y/y to 568.9 thsd tonnes due to lower domestic production in 2021 estimated by APK-Inform at 12.9 mln tonnes, down 10% y/y.

Russia supplied 594.5 thsd tonnes of wheat to Saudi Arabia in July-November, up 10 times y/y and up 5 times compared to the result of full 2020/21 MY (123.5 thsd tonnes).?

The USDA forecasts Saudi Arabia’s wheat import at 3.5 mln tonnes in 2021/22 MY, up 24% y/y.?

Carry-over stocks were estimated at 2.7 mln tonnes at the start of 2021/22 MY, down 13% y/y, while the consumption was set at 3.6 mln tonnes, up 3% y/y.??

Thus, Russian wheat has covered 81% of Kazakh wheat import potential and 17% of Saudi Arabian import potential so far in 2021/22 MY.

In this context, Russian Black Sea wheat was quoted US$1.50/t lower.

Meantime, the Russian agriculture ministry on this morning has amended the export tax for wheat, barley and corn for the week of January 26, 2022?to February 01, 2022.

Particularly, the tax will be $95.8 on wheat, $74.4 on barley and $50.6 on corn.

Indicative price will be $336.9 for wheat, $291.3 for barley and $257.4 for corn.

That is compared, with prior week (Jan 19-25) when the tax was $97.5 for wheat, $79.0 for barley and $46.1 for corn.

Indicative price were $339.3 for wheat, $297.9 for barley and $250.9 for corn.

On the other hand, according to State Custom Service of Ukraine, since the beginning of 2021/22 MY and as of January 17 Ukraine exported 35.07 mln tonnes of grains and pulses, up by 7.502 mln tonnes y/y, reported the press-service of Ministry of Agrarian Policy and Food of Ukraine.

Particularly, Ukraine has exported 2.598 mln tonnes of grain in January.

In particular, Ukraine exported 16.345 mln tonnes of wheat (+3.589 mln tonnes y/y), 5.341 mln tonnes of barley (+1.455 mln tonnes), 146.8 thsd tonnes of rye (+145.1 thsd tonnes) and 12.99 mln tonnes of corn (+2.468 mln tonnes).

Moreover, Ukraine exported 61.8 thsd tonnes of flour (-20 thsd tonnes) including 60.8 thsd tonnes of wheat flour (-20.4 thsd tonnes).

In this context, wheat prices increased slightly in the local Ukrainian market as buyers continued to secure volumes at the ports, while farmers were still reluctant to sell.?

Traders are more active on milling wheat contracts than feed wheat.?

As a reminder, last week the Ukrainian Minister of Agriculture advised traders to buy feed wheat instead of milling wheat.?

According to the Ministry of Agriculture, the country has already exported 10.8 Mt of milling wheat, or 80%, of its export potential, while feed wheat exports amount to 5.3 Mt, or 45% of the export potential.

Local Ukrainian corn prices also rose yesterday, supported by strong demand.

Ukraine was the largest corn supplier to China in December, sending 920,000t, up from just 51,000t in November, but down from 1.07mn t a year earlier.

From the Middle Kingdom, China’s soybean imports from the US nearly doubled from November to December.?

As we have seen yesterday, the latest data showed China imported 6.09 million tonnes, and the surge came from some cargoes being rolled into December from November due to storm damage to southern US ports.?

Meantime, China’s imports from Brazil for December were down 43pc on the month.??

From Australia, we continue to see rain forecast for eastern states and SA. Eyre Peninsula is forecast to get falls of 25-50 millimetres, and some has already been recorded.?

Harvest is all wrapped up in SA now, and just parts of south-west Victoria are finishing the tail end, but look likely to run into more rain delays.

Meantime, Aussie markets saw more strength yesterday across the boards with gains in offshore markets.??

Wheat was firmer by A$5-$6/t, and liquidity picked up through the South Australia port zone.?

We saw more SFW feed wheat trade across the east coast, with values up $10-$15/t week on week.?

Barley markets continued to be supported, with nearby demand creating opportunity for trade and growers.?

Canola was a few dollars stronger, but largely remains quiet after the recent pullback in the Aussie market.

On the international trade scenario, Taiwan bought 49,000t of US milling wheat for late March shipment, while Turkey’s state grain organisation has started to buy feed barley, with around 175,000t purchased in the latest tender.?

Algeria’s state agency OAIC is also believed to have purchased about 205,000t of optional-origin feed barley in its latest tender.

Japan bought a little more than 72,000 t of milling wheat from the USA and Canada.

Author: Sandro F. Puglisi

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