Daily International Grain Market View

Good afternoon Farmer Family ...

US farm markets were mixed but mostly lower yesterday.?

Old corn crop prices and the cash corn market stayed firm, with July's contract, up 0.75%.

New corn crop prices, meantime, faded into the close to end the session fractionally mixed.?

Operators, indeed, assessed the latest weather forecasts, which featured some hot and dry conditions for the Midwest.?

Also, corn finds support in ethanol production this week.

But, traders will closely scrutinize the USDA report for June 30, with a consensus that seems to be established on an upward revision of corn acreage to the detriment of soybean acreage compared to the figures announced on March 31.

Meantime, technical selling pushed soybeans and wheat lower again yesterday.?

Particularly, soybean losses were minimal, at around 0.28%, with prices supported by soy meal which closed with 1.58% gains.?

Soybean oil prices were down, on the wake of other oils, and went home with 0.78% losses.?

Wheat prices closed the midweek session off the lows, but still in the red.?

CBOT SRW wheat contract ended with fractional losses by 0.02%.?

Kansas City wheat went home with losses of as much as 0.79%.?

HRS wheat prices on the MGE closed 0.6% lower, but held above the $12/bu mark.?

In energy markets, oil prices fell more than $3 on Wednesday as markets worried about a fall in demand after the Federal Reserve hiked interest rate by three-quarters of a percentage point.

Brent crude futures for August settled down $2.66, or 2.2%, at $118.51 a barrel, having fallen as low as $117.75.?

U.S. West Texas Intermediate crude for July fell $3.62, or 3.04%, to $115.31 a barrel, after dropping to a low of $114.60.

Higher oil prices and weakening economic forecasts are dimming futures demand prospects, the International Energy Agency said.?

A stronger greenback makes U.S. dollar-priced oil more expensive for holders of other currencies, curtailing demand.

But persistent concerns about tight supply meant oil prices were still holding near $120 a barrel.

U.S. crude production, which has been largely stagnant over the last few months, edged up 100,000 barrels per day last week to 12 million bpd, its highest level since April 2020, data from the Energy Information Administration showed.

The data also showed a build in U.S. crude stocks and distillate inventories, while gasoline posted a surprise drawdown on the back of the summer driving season.

Drivers around the world, indeed, are tolerating record-high prices for road fuels, data showed.?

In freight markets, the Baltic Exchange’s main sea freight index extended gains on Wednesday on a jump in the capesize segment, while strength in panamax and supramax vessels also lent support.

The overall index, which factors in rates for capesize, panamax and supramax shipping vessels, increased by 103 points, or 4.5%, to 2,387.

The capesize index gained 243 points to 2,551, a rise of about 10.5%.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, rose by $2,019 to $21,157.

The panamax index added 77 points, or 2.9%, to 2,706 points.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, increased by $698 to $24,355.

The supramax index edged up 3 points to 2,454.

In equity markets, US stocks on Wednesday rallied moderately.

U.S. stocks garnered support from Wednesday’s rally in the Shanghai Composite to a 3-1/4 month high.??

Better-than-expected Chinese economic data Wednesday was supportive of global growth prospects and stocks.??

China's May industrial production unexpectedly rose +0.7% y/y, stronger than expectations of -0.9% y/y.??

Also, China's May retail sales fell -6.7% y/y, a smaller decline than expectations of -7.1% y/y.

Meantime, a decline in European government bond yields pushed US T-note yields lower sparked short-covering in stocks.??

The 10-year German bund yield Wednesday, indeed, fell from an 8-year high of 1.772% and dropped -11.4 bp to 1.644%.?

As a consequence, the US 10-year T-note yield fell -10.1 bp to 3.372%.?

The European Central Bank promised fresh support and a new tool on Wednesday to temper a market rout that had fanned fears of a new debt crisis on the euro area's southern rim.

Meanwhile, US stock indexes extended their gains in the afternoon, after the Fed hiked interest rate by 75 bp, because Fed Chair Powell downplayed expectations for more aggressive Fed rate hikes in the future and said 0.75 percentage point rate hikes wouldn’t be common.

On this wake, the two-year Treasury yield fell to 3.21% from 3.45% late Tuesday.

Particularly, FOMC raised the fed funds target range by 75 bp to 1.50%-1.75% and projected that the funds rate will rise to 3.4% by year-end, implying another 175 bp of tightening this year.

The committee is strongly committed to returning inflation to its 2% objective.

Stocks rose Wednesday despite weaker-than-expected U.S. economic data.

The FOMC cut its U.S. 2022 GDP estimate to 1.7% from a March projection of 2.8% and raised its 2022 personal consumption expenditures price index to 5.2% from a March estimate of 4.3%.

U.S. May retail sales unexpectedly fell -0.3% m/m, weaker than expectations of +0.1% m/m.??

May retail sales ex-autos rose +0.5% m/m, weaker than expectations of +0.7% m/m.

The U.S. Jun Empire manufacturing survey general business conditions index rose +10.4 to -1.2, weaker than expectations of 2.3.

The U.S. May import price index ex-petroleum unexpectedly fell -0.1% m/m, weaker than expectations of +0.6% m/m and the first decline in 19 months.

The U.S. Jun NAHB housing market index fell -2 to a 2-year low of 67, right on expectations.

In this contex, the S&P 500 climbed 1.5% to 3,789.99.

The Dow Jones Industrial Average swung between gains and losses before finishing 1% higher, at 30,668.53.?

The Nasdaq composite jumped 2.5%, to 11,099.15.

However, some analysts cautioned the rally could be short-lived given how deeply and broadly high inflation has seeped into the economy.

Even without recession, higher interest rates hurt prices for investments.?

The hardest-hit have been those that soared the most in the easy-money era of ultralow interest rates, including high-growth technology stocks and cryptocurrencies.

Meantime, Asian shares were mixed on Thursday.

The Bank of Japan is holding a two-day policy meeting, starting Thursday.?

The Japanese central bank is under pressure to act given downward pressures on the yen from U.S. rate hikes and super-low rates in Japan.

Investors have been selling yen and buying dollars in anticipation of higher yields from dollar-denominated holdings.?

Japanese politicians and the central bank chief have expressed worries about the declining yen, but no dramatic policy changes are expected.

The Finance Ministry reported Japan recorded a nearly 2.4 trillion yen ($17.9 billion) trade deficit last month, its 10th straight month of a red ink.?

Japan racked up its highest imports for the month of May since 1979, as surging energy prices and a weak yen sent the value of imports soaring.?

Resource-poor Japan imports almost all its energy.

In this context, Japan's benchmark Nikkei 225 added 0.5% in afternoon trading to 26,453.91.?

Australia's S&P/ASX 200 lost earlier gains, falling nearly 0.2% to 6,591.10.?

South Korea's Kospi inched up almost 0.1% to 2,448.65.?

Hong Kong's Hang Seng shed 1.3% to 21,029.07, while the Shanghai Composite fell 0.6% to 3,286.60.

In currency trading, the U.S. dollar edged up to 134.19 Japanese yen from 133.82 yen.?

The euro cost $1.0431, down from $1.0447.

On the weather side, some additional rains will fall across parts of the eastern Corn Belt between today and Sunday, but very few areas will gather more than 0.25” through the end of this week, per the latest 72-hour cumulative precipitation map from NOAA.?

The agency’s 8-to-14-day outlook predicts abundant hot, dry weather for the central U.S. between June 22 and June 28.

Meantime, on the supply side, IHS Markit raised their projected corn planted acreage by 455k to 90.965m acres.?

That’s also well above USDA’s March 31 planting intentions estimate of 89.490 million acres.?

They have the national average yield 2.5 bpa above USDA at 179.5 bushels per acre, that would bring a total production of 14.930 billion bushels this season.

The consultancy, in contrast, lowered its estimates for 2022 soybean plantings by 280,000 acres from a month ago, with a new projection of 88.735 million acres.?

Assuming average yields of 52.0 bushels per acre, that would put 2022 production at 4.570 billion bushels.

On the demand side, weekly ethanol production data from the EIA showed producers averaged 1.06m barrels per day through the week that ended 6/10.?

That was a 21k bpd increase from week to week, but was still below the CY high 1.071m barrels per day during 5/27.?

The stockpile shrank by 439k barrels to 23.197 million.?

NOPA members reported May’s soy crushing was 171.07 mbu.?

Estimates averaged 171.55 mbu.?

That was up 0.76% from April and was an all time high for the month of May.?

Soybean oil stocks were 1.774b lbs.?

That was up slightly from the expected 1.765b lbs, as soy oil yields matched the record at 12 lbs/bu.??

Ahead today’s Export Sales report, corn bookings for 21/22 delivery are estimated to be 100 to 500,000 MT.?

Those surveyed also anticipate seeing between 50k and 400k MT of new crop sales.?

As for soybean, surveyed anticipate between 100k and 500k MT of soybeans were sold during the week of 6/9.?

New crop bookings are estimated between 100k and 600k MT.??

As for wheat, traders are looking for 200k to 600k MT in the week that ended 6/9.?

FAS will release the report in theafternoon.??

Meantime, USDA announced a private export cancelation yesterday, as unknown destinations removed 100k MT of old bean crop from their books.?

In this context, corn basis bids were steady to slightly weak after sliding 2 to 3 cents lower across four Midwestern locations.

Soybean basis bids were steady to weak after falling 5 to 12 cents lower across four Midwestern locations.

The funds were net sellers yesterday for 2,000 lots of soybeans and 1,000 lots of wheat.?

They were corn neutral.

From Canada, Refinitiv Commodities Research reports that it expects 2022/23 Canadian wheat production to reach 31 million tonnes amid generally favorable conditions.?

Planted acres are expected to increase nearly 6% from last season.

From South America, Argentina’s government is upping their biodiesel blend requirement to 12.5% during a 2 month window beginning immediately.

In Europe grain markets remained in a consolidation phase yesterday.

It is still vegetable oils that to struggle more, with a further decline in rapeseed prices, due the uncertainty about global demand and divergent policies in terms of biofuels.?

Cargill announced plans to cease operations with their rapeseed processing plant in Hull England.?

The plant currently processes 7,500 MT/day, and could lead to a 323k MT of canola oil deficit per year to be made up by other processors.?

Meantime, an unprecedented heat wave at the end of the cycle is hitting winter and spring crops in France.

However, it is still difficult to measure the impact of these high temperatures at this moment.

Meantime, per latest data from EU Commission, wheat exports stood at 25.94 million tonnes as of June 12 against 25.27 last year.?

Barley exports were posted at 6.85 million tonnes, against 7.21 last year.?

Meantime, the EU imported 15.60 million of corn against 14.54 in 2021.

Rapeseed imports were at 5.19 million tonnes, compared to 6.10 million last year to date.?

Soybean imports, reached 13,94 million tonnes through June 12, which is trending slightly below last year’s pace so far.?

EU soymeal imports are also down year-over-year, reaching 15.62 million metric tons through the same period.

Meantime, a vessel is due to call this week at the port of La Pallice on France's west coast to load barley for Iran, in a rare French grain shipment to the Middle Eastern country, Refinitiv data showed on Wednesday.

The ship will take around 63,000 tonnes of barley in what would be the first French barley export to Iran in almost three years, according to the data.?

It was unclear if the scheduled loading for Iran would be from 2021 barley harvest stocks or incoming supplies from the 2022 harvest, which is underway in southwestern zones near La Pallice.

The shipment was welcome in a barley market that has seen premiums fall as demand from China, the main overseas outlet for French supplies, has ebbed.

There was also market talk of possible French wheat exports to Iran this summer, in an expected wave of demand as importers seek alternatives to limited Ukrainian flows.

However, traders said it was uncertain given Iran's usual requirement for a high-protein wheat quality not widely available in France.

On the other hand, some shipments of feed ration from Russia landed into Irish ports in recent weeks, despite a ban on Russian-flagged ships docking in EU ports under EU sanctions over the war in Ukraine.

Two boats, indeed, were granted special permission to land in Ireland, the Minister for Agriculture confirmed to RTE?yesterday.?

The exemptions were given by the Department of Enterprise, Trade and Employment, RTE reported.

The boats were carrying barley, soya hulls and wheat on board, which are used for dairy, pig and poultry rations.

Some 3.5m tonnes of the 5.5m tonnes of feed rations are imported and there are concerns around the availability of animal feed this winter.

The Minister for Agriculture Charlie McConalogue earlier this year set up a feed and food security committee to address concerns over the availability of animal feed this winter.

"Such derorgations were something that the Government would only do in very exceptional circumstances...and we will be working to avoid and minimise any shch situations" the Minister added.

Asked if there was an ethical dilemma for Irish farmers that feed imports were coming in from Russia, McCormack said "it's well beyond the farmers' pay scale that ethical issue, that's an ethical issue for the Government, how comfortable the Government are, if they feel that it passes the various protocols of trade at this given time, then Irish farmers will use that feed. It's up to the Government."

Meantime, non-commercial market participants lowered their net long position in Euronext's milling wheat futures and options in the week to June 10, data published by Euronext on Wednesday showed.

Non-commercial participants, which include investment funds and financial institutions, dropped their net long position to 163,004 contracts from 177,663 a week earlier, the data showed.

Commercial participants lifted their net short position to 185,461 contracts from 183,920 a week earlier.

Commercials' short positions accounted for 66.6% of the total short position, while commercial long positions accounted for 34.7% of total long positions.

Non-commercial short positions represented 33.4% of total short positions, while non-commercial net long positions accounted for 65.3% of the total longs.

In Euronext's rapeseed futures and options, non-commercial market participants extended their net short position to 15,538 contracts from 12,467 a week earlier.

Commercial participants similarly expanded their net short position in rapeseed to 15,371 contracts from 14,759 a week earlier.

From North Africa, the Ambassadors of Canada, France, Germany, Italy, Japan, the United Kingdom, the United States, and the EU in Cairo issued a joint statement on the current grain crisis.

The statement indicated that the price for wheat in world markets is at an all-time high, at 160% of pre-crisis levels.?

All signs point towards even harder challenges to come.

The G7 ambassadors said that Russia is blaming the sanctions imposed by G7 countries and others for the imminent food crisis.

“This is false" they said.

“The G7 is standing by their commitment to support Egypt through this crisis, through increased support to the World Food Program’s activities in Egypt, regional frameworks such as the Global Alliance for Food Security (GAFS) or the Food and Agriculture Resilience Mission (FARM) or support to the Government of Egypt through bilateral assistance like the EU food facility and national frameworks" the statement said.

The statement added that the G7 are closely consulting with Egypt and other regional partners on this crisis.

Meantime, Egypt's imports of Russian wheat rose 84% in March-May from the same period last year, freight data showed, even though traders said there were some complications around payment and shipping.

Some Egyptian banks refused to facilitate payments to Russian entities because of Western sanctions but three traders said importers had made some purchases via suppliers in third countries including the United Arab Emirates and Switzerland.

Banks still require extra paperwork if the cargo was Russian.

In spite this in March-May this year, Egypt imported 1,056,290 tonnes of wheat from Russia, compared to 573,213 tonnes over the same three months in 2021, the freight data showed.

Over the January-May period Egypt's total wheat imports dipped 24% year on year to 3.3 million tonnes, and those from Russia by 30% to 1.66 million tonnes.?

But wheat imports from Russia still accounted for just over 50% of the total.

GASC has continued purchasing Russian wheat but faced challenges finding freight offers to transport it in its last tender this month.

The private sector and Egypt's state grains buyer, the General Authority for Supply Commodities (GASC), have tried to diversify their sourcing of wheat this year as prices have risen.

Most imports of Russian wheat have come through the private sector, with traders saying Russian grain was cheapest, while French, German and Lithuanian wheat was more expensive.

"Egypt is price-oriented. They look at it from an economic point of view. No one cares about the politics of it," said a trader.

From the Black Sea basin, Russia said on Wednesday it has offered "safe passage" for Ukraine grain shipments from the country's Black Sea ports, but is not responsible for establishing the corridors, as Turkey suggested that ships could be guided around sea mines.

Turkish Foreign Minister Mevlut Cavusoglu said earlier on Wednesday that it would "take some time" to de-mine Ukraine's ports and a safe sea corridor could meanwhile be established in areas without mines under a U.N. proposal, adding that Ankara was still awaiting Moscow's reaction to the plan.

Turkey has said it is ready to take up a role within an "observation mechanism" based in Istanbul if there is a deal.

"Since the location of the mines is known, certain safe lines would be established at three ports," Cavusoglu said. "These (commercial) ships, with the guidance of Ukraine's research and rescue vessels as envisaged in the plan, could come and go safely to ports without a need to clear the mines."

However, Kyiv fears that de-mining its ports would leave it far more vulnerable to Russian attack from the Black Sea.

Lavrov said the onus was on Ukraine to clear mines around its ports for commercial ships to approach.

On this wake, Moscow denies responsibility for the food crisis, blaming Western sanctions.

Meantime, in an interview with Russian media RBC, Deputy Prime Minister Viktoria Abramchenko said Russia’s budget received about 175b rubles in additional revenues from grain export duties in 2021 and in the first months of 2022.

That confirm a strong export activity from Russia.

Kazakhstan is limiting their wheat exports to 550k MT until 9/30 of 2022.?

That is a sharper reduction than their initial 1 MMT limit for April 15 – June 1.?

From South East Asia, USDA’s Ag Attache in Mumbay estimates the average ethanol blend rate for India’s petroleum at 9.3% for the year of 2022.?

Their domestic production is derived from excess sugar supplies, but at that rate the Attache has India bringing in 635m L of ethanol through 2022 – mostly U.S. sourced.?

Indonesia has issued permits for shipment of 602,142 tonnes of the edible oil under its Domestic Market Obligation (DMO) scheme as of late Wednesday, trade ministry official Oke Nurwan said.

Separately, permits for 219,782 tonnes of palm oil exports have been issued for the government's export acceleration programme where 1.16 million tonnes worth of export quota was allocated.

From Australia, prices for feedgrain have fallen to reflect the disappearance of short positions and an improved flow of road transport during a week of very welcome dry weather for most districts.

While grower selling remains quiet ahead of the new financial year starting July 1, the trade appears to be unwinding some positions in the north especially.

Coupled with increased grower selling in the south, this week’s softer prices are encouraging consumers to advance coverage into August and beyond in some cases now that prices appear to have stabilised.

Sources in both the northern and southern regions say grain from the Port Kembla zone is not yet working into the northern domestic market, but this may change as unpriced stocks of sound wheat and barley run down in the north.

Meantime, Wednesday afternoon saw continued firmness in current crop wheat markets.?

KWI APW1 firmer $4-5/t by close of business.?

Delivered Geelong/Melbourne ASW1 and H2 also firmed by $5-6/t.?

Up country buyers along the east coast are still holding firm at their bids while grower offers are relatively unchanging, creating wide bid offer spreads in the market.

New crop markets rounded the day out also a touch firmer with softer AUD helping extract a bid.?

We saw small quantities trade on the Jan 23 ASX wheat contract which settled at $470/t, down $5/t.

On the international scene, Jordan's state grain buyer has purchased about 60,000 tonnes of animal feed barley to be sourced from optional origins in an international tender which closed on Wednesday.

It was bought at an estimated $428.50 a tonne c&f for shipment in the first half of September.?

The seller was believed to be trading house Viterra.

Four other trading houses participated in the tender, Ameropa which offered $439.00, TOI Commodities which offered $442.00, Bunge $444.00 and Cargill $449.85, all per tonne c&f.

Jordan’s tender sought offers for up to 120,000 tonnes.?

Jordan also bought 60,000 tonnes of wheat in a tender on Tuesday.?

Japan's Ministry of Agriculture, Forestry and Fisheries (MAFF) bought a total of 186,441 tonnes of food-quality wheat from the United States, Canada and Australia in regular tenders that closed on Thursday.

Bangladesh's state grains buyer has withdrawn an international tender to purchase and import 50,000 tonnes of wheat.

No reason was given.

The tender had been due to close on June 22.

That's all, thank you.

To all of you, I wish you a good day and ...

Good harvest 2022!?

Author: Sandro F. Puglisi??

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