Daily International Grain Market View

WASDE report on Wednesday had pushed up all grain prices in spite cuts were lower then trade expectations.

On Thursday morning corn and soybean prices tried to extend the rally the day before.

However, after new inflation data USA published, US farm markets were shocked and triggered a broad sell off on a range of commodities.?

Thus, corn prices faded more then 0.75% lower.?

Soybeans were briefly trading over $16 per bushel but ultimately fell 1.29% lower.?

Soymeal prices went home with 1.71% losses.?

Bean oil held on, ending the day more than 0.6% higher.

Most wheat contracts, meantime, finished the session down more then 1.7%.

Particularly, CBT SRW left 1.72% on the table ending back below the $8/bu mark.?

KC wheat prices also closed 1.72% in the red, though having held above the $8/bu mark.?

MPLS dropped 1.21%, meantime.

In energy market, oil prices also eased on this morning as hot U.S. inflation fanned worries about aggressive interest rate hikes and investors await the outcome of U.S.-Iran talks that could lead to increased global crude supply.

Thus, Brent crude futures fell 58 cents, or 0.6%, to $90.83 a barrel at 07:30 GMT, adding to the losses of 14 cents posted in the prior session.

U.S. West Texas Intermediate crude declined 45 cents, or 0.5%, to $89.43 a barrel on this morning while it picked up 22 cents to $89.88 per barrel on Thursday.

Both benchmark oil prices are in line for their first weekly decline after seven consecutive weekly gains, though both contracts had earlier climbed to a seven-year high.

"The oil market is still very tight".

Indeed, tight supply was seen in U.S. crude oil stockpiles, which unexpectedly fell 4.8 million barrels in the week to Feb. 4 to 410.4 million barrels as overall refined product demand reached an all-time record, said the Energy Information Administration.?

This compares with an analyst forecast of a 369,000-barrel rise.

Meanwhile, the OPEC said that world oil demand might rise even more steeply this year.?

The group forecast a gain of 4.15 million barrels per day (bpd) this year, as the global economy posts a strong recovery from the pandemic.

However, seems that rally in the crude price is exhaustioned and if the dollar continues to rally, oil prices could continue to decline further.

In the freight market, the Baltic Exchange’s dry bulk sea freight index rose to a near one-month high on Thursday, helped by a jump in rates across vessel segments.

The overall index, which factors in rates for capesize, panamax and supramax vessels, indeed, rose 229 points, or 13.4%, to 1,940, its highest level since Jan. 12.

Particularly, the capesize index jumped 401 points, or 26.7%, to 1,904.

Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, increased by $3,321 to $15,789.

The panamax index gained 180 points, or 8.4%, to 2,333.

Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, rose by $1,621 to $20,998.

The supramax index climbed 146 points to 2,057.

In contrast, on week 6, freight rates continue to fall in the Azov and Black Sea region.?

The rate for a shipment of 3,000 tons of wheat from Azov to the Marmara Sea ports is $34 per ton.

According to Sea Lines shipbrokers, the wheat and corn market is still in a deplorable state, there are practically no deals from Russian ports.?

Ukrainian wheat is trading somewhat better, so some shipowners prefer cargoes from the ports of the Black Sea.?

That prevents the Sea of Azov freight market from collapsing.

Most active trade is observed for subcultures now, and the most popular destination is Italy.?

As a result, rates to the Adriatic ports do not fall as quickly as to other destinations.

Importantly, this week quota distribution for wheat, corn and barley shipment for the period starting February, 15 till the end of June, 2022 has been published.?

Thus, now charterers can start planning shipments of these grain products for the upcoming months.

According to Sea Lines, on week 6, freight rates for wheat parcels from Azov make $32 to the Black Sea, $34 to Marmara, $54 to Mersin and $59 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, freight rates went up.

On week 6, freight rates for shipping corn by 3,000 dwt bulkers to Iran make $29 from Aktau, $33 from Makhachkala, and $40 from Astrakhan.

In equities markets, U.S. stock indexes on Thursday posted moderate losses.??

Stocks were under pressure on concern that rising U.S. price pressures will prompt aggressive rate hikes from the Fed.??

Particularly, U.S. Jan CPI rose +0.6% m/m and +7.5% y/y, stronger than expectations of +0.4% m/m and +7.3% y/y, with the +7.5% y/y gain being the largest year-on-year increase in nearly 40 years.??

Consequentially, yields jumped most for shorter-term Treasurys, on the news.?

The two-year yield leaped to 1.62% from 1.36% late Wednesday.?

That rate tends to track expectations for what the Fed will do.

The 10-year yield also rose, up to 2.05% from 1.93%.?

It was at 2.02% early Friday.

That undercut technology stocks, meantime.??

Thus, the S&P 500 fell 83.10 points to 4,504.08, with more than 85% of its stocks ending lower after another day of sharp swings.?

The benchmark S&P 500 has fallen three out of the last five weeks and is now 6.1% below the all-time high it set Jan. 3.

The Dow Jones Industrial Average fell 1.5% to 35,241.59 and the Nasdaq composite slid 2.1% to 14,185.64.

The Russell 2000 small cap index dropped 1.6% to 2,051.16.

On the bullish side, a separate report Thursday said fewer workers filed for unemployment last week than expected.?

Indeed, weekly initial unemployment claims fell -16,000 to 223,000, showing a stronger labor market than expectations of 230,000.

That’s encouraging for workers, but it could add to upward pressure on inflation.

Meantime, shares fell on this morning in Asia, after yesterday Wall Street retreated.

Hong Kong’s Hang Seng slipped 0.6% to 24,787.73, while in Sydney, the S&P/ASX 200 lost 1% to 7,217.30.?

The Kospi in Seoul dropped 0.9% to 2,747.71.?

Shanghai gave up early gains, sinking 0.7% to 3,462.95.?

In Tokyo, markets were closed for a holiday.

India's Sensex lost 1.3% to 58,133.99.

Asian economies also are feeling the heat of sharp price increases, with some like New Zealand already moving to raise interest rates.?

Others are holding off — central banks in Thailand, Indonesia and India opted this week to keep their benchmark rates unchanged.

Some countries in the region, such as China and Japan, are contending with both higher prices and slow growth and some are still entangled in coronavirus outbreaks that are clouding the outlook for their recoveries from the pandemic.

The inflation readings will out for China next week.

It will be to watch considering its impact on global prices.

On the weather side, the latest updates to the U.S. Drought Monitor showed 91.4% of the High Plains is experiencing overly dry conditions through February 8, up from 91.0% a week earlier.?

In the Midwest, drought’s footprint is covering 45.1% of the region, up from 43.2% a week ago.?

Meantime, NOAA’s 8-to-14-day outlook predicts seasonally wet weather is likely for the eastern half of the country between February 17 and February 23, with warmer-than-normal conditions likely for most of the U.S. during that time.

Meantime, there is a 77% chance of La Nina conditions continuing during the Northern Hemisphere spring, a U.S. government weather forecaster said on Thursday.

The La Ni?a weather pattern, characterized by unusually cold temperatures in the equatorial Pacific Ocean, was expected to transition to more neutral conditions during the May-July period, it added.

On the demand side, weekly FAS data showed corn bookings totaled 589,080 MT during the week of 2/3.?

That was within the range of pre report estimates.?

Corn shipments were reported at 1.149 MMT.?

Accumulated shipments were tallied at 20.715 MMT on the weekly data.?

USDA reported milo export bookings at 140,729 MT.?

FAS reported accumulated sorghum exports at 2.24 MMT, with another 4.11 MMT of sales on the books.?

As for soybean, USDA reported old crop soybean bookings as 1.59 MMT for the week that ended 2/3.?

New crop sales were 894k MT, led by 316k MT to China and 433k to unknown.?

Soybean shipments were tallied at 1.3 MMT for the week and 37.66 MMT for the MYTD.?

Soymeal export sales were reported at 241,413 MT from the week that ended 2/3.?

Soymeal shipments were 2778,470 MT for a MYTD shipment of 44.5 MMT.?

Soybean oil sales were at 2,900 MT.

That was down 31 percent from the previous week and 74 percent from the prior 4-week average.?

Bean oil shipments were 11,907 MT for a 318,244 MT accumulated total.?

That only trails 20/21 shipments by 7%.?

As for wheat, the report showed 133,183 MT were sold during the week that ended 2/3.?

That was split between 84.7k for old crop and 48.4k MT for new crop delivery.?

The trade was looking for at least 100k MT for old crop going in.?

Wheat shipments were reported 380,935 MT.?

That left the MYTD export program at 12.83 MMT through 2/3.?

That aligns with 58% of the USDA’s updated forecast for the season.?

Commitments were up to 79% if the new forecasted 810 mbu as of 2/3 with 637.4 mbu.?

Meantime, private exporters reported to the USDA sales of 299,700 metric tons of soybeans received during the reporting period for delivery to unknown destinations.??

Of the total, 233,700 metric tons is for delivery during the 2021/2022 marketing year and 66,000 metric tons during the 2022/2023 marketing year.

In this context, corn basis bids were mostly steady to weak, after dropping 2 to 6 cents lower across five Midwestern locations.?

An Illinois river terminal bucked the overall trend after firming a penny higher.?

Soybean basis bids were mostly steady but did trend 5 cents higher at an Illinois river terminal while sliding 2 cents lower at two other Midwestern locations.

The funds were net sellers yesterday for 5,500 lots of corn, 9,000 lots of soybeans and 8,000 lots of wheat.

From Canada, Canadian trucker strike is gaining momentum, protesting against the mandate that requires truckers entering Canada to be vaccinated or else be subjected to testing and quarantine requirements.

From South America, Brazilian food supply and statistics agency Conab on Thursday slashed its estimate for soybean production by some 15 million tonnes in the 2021/2022 cycle, citing dry whether in the South American nation.

Conab now expects farmers in Brazil, to harvest 125.4 million tonnes of the oilseed.?

This compares with projected production of 140.5 million in January and well below USDA’s new 134 MMT figure.?

Conab raised Mato Grosso’s output by 649k MT on a 0.94 bpa yield bump – to 53.22 bpa.?

Parana’s yield was cut a steep 16.1 bpa to 33.6, RGDS was cut 18.3 bppa to 31.13, and the national yield dropped 5.75 to 45.97.?

USDA’s forecast was a 1.78 bpa trim.?

Planalytics revised their estimate to 50.41 bpa for Brazilian soybeans.?

The revised figure led to a reduction of Brazil's overall grain production projection, which was lowered by 5.7% to 268.2 million tonnes in relation to January's estimate.

While the drought hurt soy fields in southern states and also caused losses in Brazil's summer corn crop, Conab remains optimistic about the country's total corn output for the season.

According to Thursday's report, indeed, Conab kept its forecast for Brazil's second corn production, which farmers plant after soy is harvested and represents 70%-75% of overall output in a given year.

Consequentially, Brazil will harvest a second corn crop of 86 million tonnes, Conab predicts, up nearly 42% from the previous year.

Particularly, they cut the average yield for the South by 6.49 bpa to 85.1, with a 28 bpa trim in Santa Catarina.?

Still, Conab believes Brazil will need to import 1.7 million tonnes of corn in the present cycle, up from 1.3 million tonnes in its January forecast, because dry weather reduced the country's summer corn output.

A drop in Brazil's soybean production will affect exports of the commodity, with sales in foreign markets now estimated to reach 80.1 million tonnes, down from 86 million tonnes exported in the previous cycle, according to Conab data.

In Argentina, the Buenos Aires Stock Exchange has also revised down its estimate of maize production for Argentina to 51 million tonnes against 57 previously estimated.

Meantime, in its monthly report the Rosario grains exchange held its estimate for 2021/22 corn harvest at 48 million tonnes, but warned that low yields from some unusually early harvests because of the dry weather were "not a good sign."

Last month the exchange lowered its estimate for corn production by 8 million tonnes due to the December-January drought.?

On this wake, "we need to wait for the corn harvest to be further advanced in order to have a clear picture of results," the exchange said.

Meanwhile, dry weather in recent weeks and scant hopes of significant rains for the rest of the month in Argentina's soy belt are igniting fears of a "productive disaster" akin to that in 2018, the Rosario grains exchange said on Thursday.

The current forecast, already cut sharply in January, is for 40.5 million tonnes.

Farmers and weather forecasters had hoped for stronger rains in the second half of February, though concern is growing they may not materialize, with large swathes of Argentina's normally lush Pampas grasslands already dry.

In the provinces of Santa Fe, Cordoba and Entre Rios "the situation is still very delicate, with soil conditions ranging from scarce (humidity) to drought," the exchange said, adding northern Buenos Aires province had received adequate rains.

In Europe, markets continue to display their nervousness over geopolitical considerations.

Wheat and corn prices on Euronext stalled in the second half of the session.

Rapeseed prices ended in the green.

The markets were again heckled Thursday evening with quotations varying greatly during the session in the face of an increasingly critical geopolitical crisis in the Black Sea.?

Indeed, Russia / Ukraine tensions are seemingly at a standstill with US and Europe that have nothing on which to impose sanctions to Russia.?

The Biden administration would move to sanction Nord Steam 2, but this would have an impact not so much on Russian current account, but mainly would be to Europe who is desperately reliant on Russian gas.?

Around 40pc of Europe’s piped natural gas use is source from Russia and, once online, Nord Stream 2 would increase this percentage.

Meantime, France's farm ministry on Thursday lowered its estimate of the area sown with winter soft wheat for the 2022 harvest to 4.75 million hectares (mln ha) from 4.92 mln ha in its initial projection in December.

The reduced estimate was down 4.3% compared with the 4.96 mln ha harvested in 2021 and was also 1% lower than the average area of the past five years, the ministry said in a crop report.

Ditto for durum for which the projected area for the 2022 harvest is at 277.000 ha, down 2.5% compared with the 284.000 ha in 2021 and also lower than the average area of the past five years.

The expected winter barley area was increased to 1.25 mln ha from 1.23 mln ha previously, now up 4.6% from last year's harvest but 1.6% below the five-year average.

For winter rapeseed, France's main oilseed crop, the area for 2022 was revised up to 1.16 mln ha from 1.10 mln ha in December. That was now 18% above the 2021 level although 6.9% below the five-year average.

Wheat and rapeseed in France are almost exclusively winter crops, while barley production comprises a significant share of the spring crop.

Weather conditions were currently favourable for crop development, the ministry said.

For spring sowing in the coming months, it said a survey of farmer intentions carried out in December suggested that the spring barley area would be stable to lower compared with last year.

Among other spring crops, farmer plans pointed to a drop of at least 6% in the overall area of grain and fodder maize (corn).

For sugar beet, the area was seen stable to down 3%, while for sunflower seed sowings were expected to decline by at least 3%.

Meantime, Consultancy Strategie Grains lowered its estimates for 2021/22 EU soft wheat exports to 30,4 MMT, citing increased competition from South America and the Black Sea region, along with lower expectations for imports by Algeria and Egypt.?

Expectations for EU soft wheat production in 2022/23 is currently at 128 MMT.

Warm winter weather means wheat crops are in good condition in the four main European production countries with positive conditions created for the summer 2022 harvest, crop experts said on Friday.

Wheat in France, Germany, Britain and Poland has generally not suffered frost damage, although frost is still possible in coming weeks.

Wheat in top producer France benefited from moderate weather this winter while rainfall in the coming days may maintain favourable growth.

German wheat has not suffered significant frost damage so far. "Widespread rain in the past week was also welcome and water shortages are not a serious problem," one German grains analyst said.

Germany's winter wheat area for the 2022 crop was increased 0.4% on the year to 2.87 million hectares.

Britain’s wheat crop is in generally good condition and production could potentially rise slightly from last year although high fertilizer costs could limit the extent of any increase.

Britain's wheat area for this year’s harvest has increased 1.3% to 1.81 million hectares.

Poland’s winter wheat is in good condition with no major frost damage so far and rain has also been adequate, said Wojtek Sabaranski of analysts Sparks Polska.?

Poland’s winter wheat area is estimated to be little changed at over 2.1 million hectares.

From North Africa, wheat imports by Egypt's private sector have overtaken those by the state commodities authority, a trend that could continue as the government looks to reform bread subsidies and trim its import bill, industry experts say.

Particularly, Egypt's private sector imported 6.9 million tonnes of wheat in 2021, up 11% from 2020, while the state-run General Authority for Supply Commodities (GASC) imported 4.7 million tonnes, a 32% drop from the previous year, according to data from the U.N. Food and Agriculture Organisation (FAO) and two Middle Eastern traders.

Egypt is typically the world's biggest wheat importer.?

GASC increased imports in 2020 to boost reserves during the pandemic, before reducing them last year as wheat prices surged following export restrictions by Russia.?

As wheat prices strain the state budget, Egypt is studying an overhaul of the decades-old food subsidy programme that provides bread to nearly two-thirds of the population.

Bread subsidies cost the government about $3.2 billion, or around 2% of the 2021/2022 budget, with higher wheat prices expected to add $763 million this fiscal year, according to finance ministry data.

Reforming the subsidy - which could entail lifting the price, switching to cash subsidies or targeting it at fewer people - would reduce demand and cut the amount of wheat GASC would need to import each year.?

Wheat imports by the private sector, in contrast, have been rising on the back of population growth and increasing demand for flour, especially for making pasta and other baked goods, and that is set to continue.

Annual imports by the private sector are expected to increase by 5-7% per year.

From South Africa, yesterday South Africa's Crop Estimates Committee released its latest crop estimates.

As for white maize Area was 1,691,900, up from previus season when was 1,616,300 ha;?

Production is at 8,608,815 T vs. 8,547,500 T 2020 season.?

Yellow maize Area is at 1,063,500 ha vs 994,500 ha;?

Production is at 7,625,450 T vs 6,752,500 T.?

Total maize Area?was 2,755,400 ha vs. 2,610,800 ha;?

Production was 16,234,265 T vs 15,300,000 T.?

Sunflower seed Area was at 477,800 ha vs 500,300 ha previous year;?

Production was at 677,240 T vs. 788,500 T.?

Soya Beans Area was at 827,100 ha vs. 705,000 ha previous year;?

Production was at 1,890,450 T vs. 1,245,500 T.?

Sorghum Area was at 49,200 ha vs. 42,500 ha;?

Production was at 213,645 T vs. 158,000 T.?

Dry Beans Area was at 47,390 ha vs 51,150 ha;?

Production was 57,672 T vs 64,800 T.

From the Black Sea basin, according to the Ukrainian Foreign Ministry, Russia may block certain traffic lanes on the Black Sea, the Sea of Azov and the Kerch Strait from February 13 to 19, under the pretext of organizing regular naval maneuvers.?

The unprecedented scale of these exercises makes navigation on both seas virtually impossible, and will most likely limit the arrival of ships in Ukrainian ports.?

As a result, shipments at ports could be disrupted.

However, Russia's naval exercises in the Black and Azov Seas and the closure of traditional shipping routes have so far not affected the Ukrainian grain export market, traders said on Friday.

According to Svetlana Malysh, Balck Sea Agriculture Market Analyst from Refinitiv, "stiff competition with Ukrainian wheat and lack of demand from Turkish buyers undermined Russian wheat bids for coaster-size lots from Azov and returned prices to the October 2021 level.?

Russian 13.5% protein wheat offers fell by $5-10 to $330-335 per tonne CIF Marmara over the week, but Ukrainian offers remained below the Russian ones.?

High wheat stocks amid a record 2021 crop and no export restrictions enable Ukrainian exporters to respond to the market changes quickly and adjust their prices accordingly.?

Some hectic sales of Ukrainian wheat were done though on Russia-Ukraine tensions."

Meantime, Black Sea wheat yesterday was up US$0.25/t.?

The March-22 Black Sea wheat contract posted contract highs on the 23rd of November of USD$376/t – since then there has been potential war, speculation over subsequent export bans and general tightness in the export market.?

It closed overnight at US$315.25/t.

From Australia, weather has been kind to sorghum harvest after a rough start.?

Patterns remain dry for the next 15 days according to the longer-range forecasts.?

Out of season rainfall is due to fall through the northern wheat belt in WA with falls of over an inch forecast.

Meantime, local markets were quiet yesterday with the trade focused heavily on execution of existing business.?

Spreads between wheat and barley have moved significantly over the harvest period.?

The Pt Kembla spread between APW1 and F1 posted a high in mid Dec of AUD$176/t.?

Yesterday it was back to AUD$121/t.

Meantime, freight is still a major issue with domestic truck rates regularly quoted between 14-15c/km/t – pre-COVID, longer haul may have even been south of 11c.?

Diesel continues to post new highs – Melbourne’s average terminal gate price for diesel was quoted at 167c/lt vs 139c/lt at the start of Dec last year.

On the international trade scene, Japan purchased 117.000 t of food-quality wheat from the United States, Canada and Australia in a regular tender that closed yesterday.?

Of the total, 47% was sourced from the U.S..?

The grain is for shipment in June.

That's all, we wish you a good day.

Author: Sandro F. Puglisi

To read more,

www.bancadelgrano.it?

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