Daily International Grain Market View

US farm markets were back in the green yesterday, with winter wheat leading the charge – rising around 2%% higher, as fear on possible Russian invasion into Ukraine came back into focus.

A additional support was garnered from a solid round of export sales data released by USDA.?

Consequentially, operators strengthened their long positions on the eve of a long weekend, since the US markets will be closed Monday for President's Day.?

However, the geopolitical risk on the Black Sea basin is priced in and traders are reluctant to take a short position during this long weekend.

Consequentially, on this morning, wheat is losing some ground in Chicago in the pre-opening with profit taking before the weekend.

Thus, yesterday corn and soybeans moved modestly up, 0.46% and 0.28% higher respectvily.

Soy meal also bounced back, but ended the day fractionally lower (-0.04%).?

Bean oil closed 0.24% in the red.

Winter wheat prices ended the day with double digit gains.?

Particularly, Chicago SRW ended 2.24% strongher, with March at $7.98 and the other nearbys above the $8/bu mark.?

KC wheat closed with 1.86% gains.?

Spring wheat closed 0.55% higher.?

In energy market, oil prices extended losses on this morning, and were headed for a weekly fall, as the prospect of extra supply from Iran returning to the market eclipsed fears of a possible supply disruption arising from a Russian invasion of Ukraine.

Thus, Brent crude futures fell 65 cents, or 0.7%, to $92.32 a barrel at 0725 GMT, extending a 1.9% drop from the previous session.

U.S. West Texas Intermediate (WTI) crude futures shed 71 cents or 0.7%, to $91.05 a barrel, after sliding 2% in the previous session.

The draft accord outlines a sequence of steps that would eventually lead to granting waivers on oil sanctions, bringing about 1 million barrels a day of oil back to the market.

However the timing is unclear.?

Still, analysts do not expect prices to fall much in the near term, even with the prospect of more Iranian oil.

On the freight market, the Baltic Exchange’s dry bulk sea freight index fell to a one-week low on Thursday, as the larger capesize vessel index posted losses for a fifth straight session due to lower volumes.

The overall index, which factors in rates for capesize, panamax and supramax vessels, indeed, slid 10 points, or 0.5%, to 1,886, the lowest level since Feb. 9.

Particularly, the capesize index fell 29 points, or nearly 2%, to 1,447, its lowest level in more than a week.

Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, fell by $239 to $12,000.

The panamax index eased 10 points, or 0.4%, to 2,365.

Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, dropped $86 to $21,288.

The supramax index, in contrast, was up 6 points at 2,326, as there was a strong demand for coal shipments on the Indonesia-India routes.

Meantime, on week 7, freight rates continue to decrease in the Azov-Black Sea region.?

Thus, the rate for a 3K wheat parcel from Azov to Marmara Sea ports is $33 per ton, Sea Lines shipbrokers report.

Many traders expected February 15, the date when export quotas were introduced on, in a hope that the market situation would change for the better and there would be more active trade for other grain crops.

However, at the moment there is no significant improvement in the situation, the number of new contracts still remains at a low level.?

Charterers who have received a quota for the export of wheat and corn begin to plan shipments, but without much haste, so as not to warm up the freight market.

Regarding the main destinations of shipments, according to Sea Lines, the most frequent requests are to Greece, and demand has also started to recover in the Turkish market.

According to Sea Lines, on week 7, freight rates for wheat parcels from Azov make $31 to the Black Sea, $33 to Marmara, $51 to Mersin and $54 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 down to some destinations.

On week 7, freight rates for shipping corn by 3,000 dwt bulkers to Iran make $28 from Aktau, $32 from Makhachkala, and $40 from Astrakhan.

In equities markets, U.S. stock indexes on Thursday moved lower the entire day, with the Dow Jones Industrials falling to a 2-1/2 week low.??

Stock indexes were under pressure on concerns about escalating Russia-Ukraine tensions after the U.S. and Britain said that Russia continues to bolster its troop presence along Ukraine’s border.??

President Biden also warned Thursday that the probability of Russia invading Ukraine is “very high.”??

Weaker-than-expected U.S. economic data also weighed on stocks.?

Weekly initial unemployment claims, indeed, unexpectedly rose +23,000 to 248,000, showing a weaker labor market than expectations of a decline to 218,000.?

Also, the Feb Philadelphia Fed business outlook survey fell -7.2 to 16.0, weaker than expectations of 20.0.?

In addition, Jan housing starts fell -4.1% m/m to 1.638 million, weaker than expectations of -0.4% to 1.695 million.?

On the positive side, Jan building permits, a proxy for future construction, unexpectedly rose +0.7% m/m to a 15-1/2 year high of 1.899 million, stronger than expectations of a -7.2% m/m decline to 1.750 million.

Meantime, stocks extended their losses in the afternoon on hawkish comments from St. Louis Fed President Bullard, who reiterated that he favors 100 bp of interest rate increases from the Fed by July 1 and favors starting reduction of the Fed's balance-sheet in Q2.

So far, indeed, consumers appear not to have pulled back on spending despite higher inflaction, as the Commerce Department reported that retail sales surged 3.8% in January.

In this context, technology stocks sold off and weighed on the overall market, along with communication stocks and companies that rely on consumer spending.??

About 85% of the stocks in the benchmark S&P 500 closed lower on Thursday.?

Particularly, Abermarle closed down more than -19% to lead losers in the S&P 500 after reporting Q4 gross profit of $236.6 million, weaker than the consensus of $263.2 million.

LKQ closed down more than -13%, Nvidia closed down more than -7%.

Marvell Technology, Intuit, and Dexcom closed down more than -6%.?NXP Semiconductors, Tesla, and Microchip Technology closed down more than -5%, and Adobe, Advanced Micro Devices, Meta Platforms, and Oracle closed down more than -4%.

Microsoft fell 2.9% and Nike fell 2.5%.

Consequentially, the S&P 500 fell 94.75 points to 4,380.26 and is now 8.7% below the all-time high it set on Jan. 3.

The Dow Jones slid 622.24 points to 34,312.03, while the tech-heavy Nasdaq lost 407.38 points to 13,716.72.

Small company stocks also fell broadly.?

The Russell 2000 index gave up 2.5% to 2,028.09.

Bond yields fell and dragged banks lower.?

The yield on the 10-year Treasury fell to 1.97% from 2.04% late Wednesday.?

Bank of America slid 3.4%.

However, some companies fared well thanks to strong earnings.?

Particularly Newmont Mining closed up more than +5% after ramped-up Russia-Ukraine tensions pushed gold prices up to an 8-1/4 month high, gaining 1.6% on the day.

Walmart , the world’s largest retailer, rose 4% after reporting strong fourth-quarter financial results.?

Kraft Heinz closed up more than +3%.?

Cisco Systems, which makes routers, gained 2.8% after raising its profit forecast for the year.

Meantime, stocks fell on this morning in Asia after the retreat on Wall Street.

Japan reported Friday that its core inflation rate, excluding volatile energy and food costs, rose 0.2% in January, way below the decades-high figures seen in most major economies and far short of the Bank of Japan's 2% target.

Thus, Tokyo's Nikkei 225 index lost 0.3% to 27,154.99, while the Hang Seng in Hong Kong gave up 0.4% to 24,685.44.?

The Kospi in Seoul lost 0.1% to 2,742.41. Australia's S&P/ASX 200 declined 0.7% to 7,242.30.

The Shanghai Composite index rose 0.3% to 3,478.46.

On the weather side, the upper Midwest and Northern Plains have the best opportunity to see some additional rain or snow between today and Monday, per the latest 72-hour cumulative precipitation map from NOAA.?

Cooler-than-normal conditions are likely for the Midwest and Plains between February 24 and March 2, per NOAA’s new 8-to-14-day outlook.?

Seasonally wet weather may be in store for the Ohio River Valley during this time.

However, according to the US weather service, NOAA, there is a 77% chance that the La Nina effect will persist over the March/May period leading to above normal temperatures over the Corn Belt.

On the demand side, USDA reported 820,041 MT of corn was sold during the week that ended 2/10.?

That was in-line with pre-report estimates and up 40% from last week.?

Japan was the largest buyer for the week.?

Corn exports from the same week were 1.618 MMT, which was up 40% from last week and 16% from the same week last year.?

Accumulated corn exports had reached 22.333 MMT as of 2/10, which is 3% lighter yr/yr.?

USDA reported new crop’s forward sales were 113,500 MT during the same week, which left total forward sales 44% above last year’s level at 1.565 MMT.?

Export Sales data for milo came in at 148,374 MT.?

That was up 8k on the week, and brought the season’s commitments to 6.505 MMT.?

As for soybean, report showed 1.362 MMT of soybeans were sold during the week that ended 2/10.?

That was within the range of expectations going in, and was 15% below last week’s 15-week high.?

The weekly update included 1.526 MMT for new crop sales, which brought the forward book to within 2% of last year’s pace at 4.5 MMT.?

As far as old crop exports, the USDA reported 1.213 MMT were shipped during the week, which was up 21% yr/yr.?

China was the top destination.

Accumulated exports were pegged at 38.81 MMT as of 2/10, which is still 14% behind last year’s pace. 24.148 MMT (62%) of that has been shipped to China, which compares to 33.94 MMT (67%) at the same time last year.?

For the products, USDA’s FAS reported soymeal bookings were 279,138 MT.?

That was up 15% from last week, 6% higher than the same week last year, and was in-line with estimates.?

Meal sales for 22/23 delivery was 40k MT for the week that ended 2/10.?

That has 174,709 MT on the books for NMY, which is 19% below last year’s pace.?

Bean oil bookings were reported at 35,379 MT – though 30k of that was previously announced.?

That was well above the 2.8k MT from last week, and the net cancelations from last year.?

USDA also reported 33,282 MT of soy oil was shipped taking the MY total to 351,526 MT.?

As for wheat, USDA reported a 3-week high for wheat export sales in their weekly data release.?

Of the 118,060 MT sold, Guatemala and Mexico were the top buyers (though Guatemala’s bookings were switched from previously unknown).?

HRW wheat accounted for 61% of the week’s total sale, followed by 21% for HRS and 12% for SRW.?

Wheat exports were an 18-week high 411,635 MT.?

That took the MYTD wheat shipment to 13.235 MMT, and HRW accounts for 39% of that total.?

The weekly Export Sales report also mentioned 10,500 MT of new crop wheat was sold, taking the forward book to 378,396 MT.

Meantime, private exporters reported to the USDA sales of 120,000 metric tons of soybeans for delivery to unknown destinations during the 2021/2022 marketing year.

In this context, corn basis bids trended 3 cents higher at an Ohio elevator and 6 cents higher at an Illinois river terminal while holding steady elsewhere across the Midwest.

Soybean basis bids were steady to mixed across Midwestern locations, moving as much as 10 cents higher at an Illinois processor and dropping as much as 2 cents at an Iowa river terminal.

The funds were net buyers yesterday for 1,000 lots of corn, 1,500 lots of soybeans and 10,000 lots of wheat.

From South America, in Argentina's agricultural heartland, hit by a drought that is affecting corn and soybean crops, is set for a week of scant rainfall before heavier precipitation towards the end of February, the Buenos Aires grains exchange said on Thursday.

Rainfall levels in the coming weeks will be critical.?

Fears over the drought in Argentina, Paraguay and Brazil have been driving up global grains prices.

The Buenos Aires exchange said that over the next week there will be some rainfall in the farming regions, although mostly moderate amounts between 10 and 25 millimeters, before heavier rains arrive in the last week of the month.

The drought led the Buenos Aires exchange to cut its 2021/22 soybean harvest estimates by 2 million tonnes to 42 million tonnes and corn by 6 million tonnes to 51 million tonnes. The rival Rosario exchange trimmed its outlook even further.

Esteban Copati, head of agricultural estimates at the Buenos Aires exchange, played down fears of a disaster akin to the drought-hit 2018 season, but said coming rains would be key.

"We will see what happens, depending on how much it rains in the coming weeks. Because sometimes the recovery can be surprising, although we are already in the advanced stages of all crops," he said.

In Europe, grain markets found support yesterday in a context of a dinamic international demand.

The accumulation of international tenders and resurgence of tension in the Black Sea, indeed, pushed up wheat and corn prices.?

Rapeseed, in contrast, retreated in the wake of canola and oil crude.

In its latest review of grain markets, FranceAgriMer pointed out that " cereal importers fear a default (by producing countries) in the Black Sea which would result in a transfer to American and European origins and very high prices in a context scarcity of supply”.

For the time being, “from commercial sources, grain exports have not been affected despite Russian naval exercises in the Black Sea and the Sea of Azov”, adds FranceAgriMer.

"Nevertheless, the activity slowed down at the beginning of the week, the participants were waiting to see the impact of these maneuvers and a possible blockage of the maritime corridors", said Agritel firm in a note.

In terms of demand, FranceAgriMer notes that the French origin was "twice ruled out of calls for tenders" from Algeria before being called upon again during the last "but the Black Sea offers were more competitive ".

The French agricultural office also notes that milling wheat prices are 52% higher “compared to the five-year average of the close (contract)”.

Regarding corn, prices in China "are down from last year's high level and demand is weakening as stocks of imported maize come onto the market?".

Meantime, nearly all soft wheat crops in France, the European Union's biggest producer, were in good shape in the week to Feb. 14, farm office FranceAgriMer said on Friday in its first cereal crop update of 2022.

An estimated 95% of soft wheat, France's main cereal crop, was in good or excellent condition, unchanged from a week earlier.

The latest rating was slightly below a 99% score in FranceAgriMer's previous report issued before winter but was above the 86% registered a year ago.

Wheat crops sown last autumn in western Europe have generally benefited from moderate winter weather and adequate moisture, according to analysts.

Growing conditions also remained favourable for French winter barley and durum wheat, with good/excellent ratings of 94% and 89% respectively, FranceAgriMer says.

Sowing of spring barley, the first major cereal crop to be drilled at the end of winter, was well under way with 27% of the expected area sown by Feb. 14, the office said.

That compared with 20% a week earlier and 16% a year ago.

From the Black Sea basin, Russian Min of Ag report Rostov region cropping of grain and leguminous crops will be 3.5MHA, including 2.9MHA of winter grains, and almost 100% of all sown winter crops have sprouted and are in good condition.

Meantime, the ministry has amended the export tax for wheat, barley and corn for the week of February 24, 2022 to March 2, 2022.

The export duty will be $91 on wheat, $73.3 on barley and $52.2 on corn.

Indicative prices will be $330.1 for wheat, $289.8 for barley and $259.6 for corn.

That is compared, with prior week (Feb 16-23) when the tax was $92.8 for wheat, $74.1 for barley and $52.7 for corn, while indicative price were $332.7 for wheat, $290.9 for barley and $260.3 for corn.

Meantime, the Duma, the lower house of the Russian Federal Assembly, comes out in favor of eliminating or reducing floating export taxes on grain in Russia.

However, the opinion of the market is that this tax will not be abolished in the short and medium term, but that a new calculation formula, more favorable to agricultural producers, could be adopted soon, Agritel firm said.

Meantime, Ukraine continue making headlines in the grain markets.

Today, Ukraine accounts for 16% of global corn exports and 12% of wheat.

Rapid growth in Ukraine’s corn industry allowed exporters to first capture China’s attention around 2013, and that relationship has taken off.?

China accounted for 36% of Ukraine’s 2020-21 corn exports, up from 19% a year earlier, despite an 18% decline in overall exports after a smaller harvest.

Ukraine produced a record 42 million tonnes of corn in 2021.?

In the last 10 years Ukraine had a 35% growth in oilseed area, three-quarters of which is sunflowerseed.?

Excess crush capacity in Ukraine, which grew to 23 million tonnes in 2020 from 15 million in 2015 and 10 million in 2011, supports its role as the top sunflower oil exporter.

Ukrainian wheat area has risen about 8% in the last decade as it continues increasing its export market share.

Ukraine produced a record wheat crop of 33 million tonnes last year, approaching the levels of Australia or the entire U.S. winter wheat crop.?

Just over two-thirds of Ukraine’s wheat crop ends up in the export market.

Meantime, Kazakhstan has hiked its projection on how much grain and flour it expects to export this year by 10 percent, despite the country enduring a punishing drought in 2021.

The planned 7.3 million tons of deliveries during this marketing year, which began on July 1, is higher than the 6.5 million tons sold last year, but short of the 9 million tons Kazakhstan hopes to export next year, according to Agriculture Ministry figures cited on February 17 by Interfax news agency.

Kazakhstan saw a poor harvest in 2021 as the result of a prolonged and intense drought.?

The amount of grain gathered, 17 million tons, was 18 percent less than what was harvested the previous year and culminated in the lowest yield Kazakhstan has seen in a decade, the agricultural sector monitoring agency APK-Inform has reported.

Plans to boost exports are being made possible by the import of inexpensive Russian wheat, which covers domestic needs.

From South East Asia, Indian traders have contracted to import a record 100,000 tonnes of soyoil from the United States because of limited supplies from drought-hit South America, at a time when prices of rival palm oil are scaling record highs, three dealers told Reuters.

The higher purchases from the United States are expected to support US soy oil prices, which have climbed nearly 20% this year to close to their highest in a decade, fuelling worries about food inflation.

The world's biggest edible oil importer traditionally buys soyoil from Argentina and Brazil, but lower bean output in these two leading exporters of the commodity forced New Delhi to turn to the United States, they said.

"Indian buyers have bought U.S soyoil vessels. Prices were attractive and supplies were not enough in South America," said the India head of a global trading firm, who sought anonymity because of the company's policy.

From Australia, liquidity of trade continues to trickle.?

Wheat markets were yet again relatively unchanged into the delivered port and domestic homes while the price spreads to depot sites continued to widen.

Barley BAR1 trade volume in the north has been thin while values have been a touch firmer in the past week.?

Offers of lower grade barley have increased into end users able to use the lower quality at the discounted spread of $25-30/t for BAR2.?

Canola markets firmed by $3-4/t.

On the international trade scene, Algeria's state grains agency OAIC is believed to have purchased around 700,000/720,000 tonnes of optional-origin milling wheat in an international tender that closed on Thursday.

Algeria, one of the world's biggest wheat importers, does not disclose details of its tenders and reported results are based on assessments by traders.

Estimates for purchase prices in Algeria's tender were around $346.50 to $345.50 a tonne, cost and freight (c&f) included, traders said, with some citing a higher price of $347 for a part of the purchase.

Black Sea origins were expected to be among the sources, but with perhaps a smaller volume of French origin.

However, chances for French wheat to fill part of the order were seen as limited due to competitive Black Sea prices and potential penalties for a mixed quality French crop, traders said.

Algeria buys wheat on an optional-origin basis, which means the seller has until the subsequent shipment period to choose the source of the grain.

The wheat is sought for shipment on April 1-15 and April 16-30 from the main supply regions including Europe.?

If sourced from South America or Australia, shipment is one month earlier.

Egypt’s state grains buyer, the General Authority for Supply Commodities (GASC), said on Thursday it had bought 180,000 tonnes of Romanian wheat in an international tender for shipment April 1-10, 2022.

Supplier were Viterra,?Al Dahra and ADM for 60k tonnes each one, at $318 FOB, or $ 338.55 C&F.

However, it should to note that the lowest offer FOB presented was at $315.3 a tonne for 60,000 tonnes of Ukrainian wheat free on board (FOB).

The offer was presented by Posco International.

It was not choose, as the final C&F price, was higher.

Egypt's state grains buyer GASC said on Wednesday it had bought 34,500 tonnes of vegetable oils in an international tender for arrival April 5-25.

GASC added that it had bought 28,500 tonnes of sunflower oil and 6,000 tonnes of soyoil.

Supplier were: Aston for 5,500 t of SFO at $1,463; Agric SA for 11,000 of SFO at $1,463; Viterra for 12,000 t of SFO at $1,463; Belluno for 6,000 of SBO at $1,567.

The tender for local vegetable oils has been canceled, traders said.

GASC had set a tender for local vegetable oils, seeking at least 3,000 tonnes of soyoil and 1,000 tonnes of sunflower oil for arrival April 1-20.

Japan purchased 54.000 t of food-quality wheat from the United States in a regular tender that closed yesterday.?

The grain is for shipment between March 21 and April 20.

The Philippines purchased 46.000 t of animal feed wheat from Australia in an international tender that closed earlier this week.?

The grain is for shipment in June and July.

The Taiwan Flour Millers' Association purchased an estimated 54,920 tonnes of milling wheat to be sourced from the United States in a tender which closed on Friday.

The purchase involved a range of different wheat types in one consignment for shipment from the U.S. Pacific Northwest coast between April 4 and 18.

The purchase involved 32,360 tonnes of U.S. dark northern spring wheat of 14.5% protein content bought at $409.69 a tonne FOB U.S. Pacific Northwest coast, traders said.

Another 15,115 tonnes of hard red winter wheat of 12.5% protein was bought at $396.37 a tonne FOB and 7,445 tonnes of soft white wheat of 10.5% protein was bought at $406.29 a tonne FOB.

The consignment has an additional freight charge of $52.79 per tonne for ocean shipping from the U.S. Pacific Northwest coast to Taiwan.

Seller of all the wheat was trading house CHS, they said.

International Grains Council Monthly Outlook

The International Grains Council (IGC) yesterday trimmed its forecast for 2021/22 global corn production, partly driven by diminished outlooks for Brazil and Argentina.

In its monthly update, the inter-governmental body cut the forecast by 4 million tonnes to 1.203 billion.

Brazil's corn crop was seen at 111.5 million tonnes, down from a previous projection of 112.9 million, although still sharply above the prior season's 87.0 million.

The IGC also cut its forecast for Argentina's corn crop to 59.0 million tonnes from 61.0 million, slightly below the previous season's 60.5 million.

Dry weather in Argentina has raised concerns about the outlook for both corn and soybean production.

The IGC also noted "evidence of dwindling yield potential in South America", which had also led to a cut of 15 million tonnes in its forecast for global soybean production in 2021/22 to 353 million.

Global wheat production in 2021/22 was seen at 781 million tonnes, unchanged from the previous month's projection but slightly above the prior season's 774 million.

That's all.

To all of you I wish you a good day.

Author: Sandro F. Puglisi??

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