Grain Market View - Daily Update

Good morning Farmer Family ...

US farm markets were mixed, but mostly lower, on Monday.

Corn and soybean, were dragged down by crude oil falling by about $2/bbl.

Notably, soybean hit its lowest price since March 2, down 1.05%,.

Soymeal dipped by 1.36% lower, and soyoil closed 1.32% down.

Corn lost 0.61%, on the session.

Wheat prices, in contrast, found moderate improvements, with Chicago wheat prices closing up 0.77%, Kansas City HRW was 0.28% in the green, and MPLS spring wheat stronger by 0.97%.?

Yesterday's market volatility was prompted by uncertainty on renewal of the Ukraine Export deal, by rising global economic concerns around the stability of the U.S. banking sector and a poor outlook for Kansas' crop.?

Notably, earlier in the day, Russia suggested extending the U.N.-brokered Black Sea Grain Initiative.?

Renewal before the deal expires on March 18 could pressure prices of corn and wheat that come from the region down.

But Russia only suggested extending the agreement for a period of 60 days, half the term of the previous renewal.

U.S. regulators were forced to step in with a series of emergency measures to maintain confidence in the system after Silicon Valley Bank and Signature Bank collapsed.?

Also, the crop outlook for U.S. hard red winter wheat remained poor.

Indeed, in its weekly crop report, the USDA rated 17% of the winter wheat in top producer Kansas in good to excellent condition, unchanged from the previous week.

State topsoil moisture was short to very short in 66% of the state, the USDA said, up from 64% the previous week.

For Oklahoma, the USDA rated 30% of the winter wheat crop in good to excellent condition, a drop from 39% a week ago.

For Texas, the USDA rated 17% of the crop as good to excellent, down from 19% the previous week, and 50% was rated as poor to very poor, unchanged from a week ago.

For Colorado, the USDA rated 40% of the winter wheat as good to excellent, an improvement from 29% in the state's previous report, released in late February.

In Arkansas, the USDA rated 61% of the state's wheat as good to excellent.

The USDA rated 64% of the Louisiana winter wheat crop and 57% of Mississippi's wheat as good to excellent.

On the weather side, more rain and/or snow is set to land on most of the Corn Belt between Tuesday and Friday, per the latest 72-hour cumulative precipitation map from NOAA.?

Iowa is likely to gather the largest amounts during this time.?

NOAA’s new 8-to-14-day outlook predicts seasonally cool, wet weather for almost all of the United States between March 20 and March 26.

Meantime, the Texas corn crop was 30% planted, ahead of the state's five-year average of 24%.

Corn planting was 78% complete in Louisiana and 3% complete in Mississippi.

In its weekly export inspections report, the USDA tallied corn shipments during the week that ended on March 9 at 999,388 MT.?

That was down 12.85% vs. the same week last year but was up 7.08% from last week and was the largest weekly total since last July.?

However, with inspections still at 16.32 MMT year to date, there is a lagging by 37.08% vs. 21/22.

As for soybean, the report showed soybean shipments of 618,803 MT.?

That was up 12.02% versus last week but still down 22.5% versus the same week last year.?

Export inspections year to date are now 43.329 MMT, which is 2.5% larger vs. last year.

As for wheat, the report totaled shipping for 249,017 MT.?

Compared to last week that was a 27% drop, and was also 19.05% smaller than the same week last year.?

Total inspections YTD are now 15.903 MMT, or 2% lower vs. last year.

Ahead of the next monthly report from the National Oilseed Processors Association (NOPA), out Wednesday morning, analysts expect to see a February soybean crush totaling 166.060 million bushels.?

That would be slightly higher year-over-year but considerably below January’s tally of 179.007 million bushels, if realized.?

Soyoil stocks are expected to rise 3.1% to 1.886 billion pounds through the end of February.

In this context, corn basis bids jumped 11 cents higher at an Indiana ethanol plant and inched a penny higher at an Illinois river terminal while holding steady elsewhere across the central U.S.

Soybean basis bids eased 2 cents lower at an Ohio elevator while holding steady elsewhere across the central U.S..

Commodity funds were net sellers of CBOT soybeans, corn, soy meal and soy oil contracts.?

Meanwhile, funds were net buyers of CBOT wheat contracts.

On this morning, wheat prices were largely flat.

Corn prices eased on pressure from estimates of record Brazilian crop, while soybeans were little changed.

Notably, the most-active wheat contract on the Chicago Board of Trade fell quarter of a cent to $6.84-1/4 a bushel, as of 03:29 GMT.?

Corn lost 0.2% to $6.12-1/2 a bushel and soybeans added quarter of a cent to $14.91-1/2 a bushel.

In energy markets, oil prices fell over 2% on Monday.

Notably, Brent crude futures settled down $2.01, or 2.4%, to $80.77.?

The global benchmark earlier fell to a session low of $78.34, its lowest price since early January.

U.S. West Texas Intermediate crude futures (WTI) dropped $1.88, or 2.5%, to $74.80 a barrel.?

WTI earlier declined to $72.30 a barrel, its lowest price since December.

The collapse of Silicon Valley Bank roiled equities markets and raised fears of a fresh financial crisis, though a recovery in Chinese demand provided some support.

Investors also weighed a possible pause in interest rate hikes by the Federal Reserve in March.

The sudden shutdown of SVB Financial triggered concerns about risks to other banks resulting from the Fed's sharp rate hikes over the last year, but has also spurred speculation about whether the central bank could slow the pace of its monetary tightening.

The dollar index fell nearly 1% making oil cheaper for holders of other currencies and this typically supports oil prices.

However, high U.S. crude oil inventories could hit the market, as crude oil production in the seven biggest U.S. shale basins is expected to rise in April to its highest since December 2019, the Energy Information Administration said.

On this morning, oil prices fell more than $1, extending the previous day's slide.

Brent crude futures, indeed, were down 82 cents, or 1%, at $79.95 a barrel at 07:00 GMT.?

U.S. West Texas Intermediate crude futures (WTI) dropped 82 cents, or 1.1%, to $73.98 a barrel.?

Beyond the Silicon Valley Bank shockwaves, oil prices were also under pressure due to signs of a weaker-than-expected economic recovery in China.

China's statistics bureau released data last week showing consumer inflation slowed to the lowest rate in a year in February as shoppers remained cautious.

In U.S. supply news, the American Petroleum Institute is expected to release industry data on U.S. oil inventories on Tuesday.

Analysts estimated on average that crude inventories rose by about 600,000 barrels in the week to March 10.

In ocean freight markets, the Baltic Exchange’s main sea freight index, tracking rates for ships carrying dry bulk commodities, rose to an over 11-week high on Monday, propelled by stronger rates across all vessel segments.

The overall index, indeed, was up 41 points, or about 2.9%, at 1,465 – its highest since Dec. 23.

Notably, the capesize index gained 77 points, or about 4.4%, to a more than 11-week high of 1,821.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, increased $633 to $15,099.

The panamax index rose 26 points, or about 1.6%, to a near four-month high of 1,680.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, increased $237 to $15,121.

Among smaller vessels, the supramax index was up 26 points at 1,225.

In equity markets, US stock indexes Monday recovered from sharp early losses to settle mixed.?

The broader market found support on emergency measures announced Sunday by U.S. government agencies to guarantee all depositors’ money and to provide easier loan terms to banks facing liquidity troubles.??

The Treasury, Federal Reserve, and FDIC introduced a new backstop for banks to protect all U.S. bank depositors above the $250,000 limit.??

In addition, the Fed announced a new "Bank Term Funding Program" that offers 1-year loans to banks up to $25 billion under easier terms than it typically provides.??

The Fed also relaxed terms for lending through its discount window, its main direct lending facility.

However, bank stocks still settled sharply lower on contagion concerns.

Shares of First Republic Bank fell 61.8%.

Huge banks weren't down as much, but JPMorgan Chase fell 1.8%, and Bank of America dropped 5.8%.

The turmoil in the U.S. banking sector has fueled a surge in safe-haven demand for government debt and knocked global bond yields sharply lower.?

Thus, the 10-year T-note yield Monday sank to a 5-week low of 3.412%, and ultmately it closed at 3.56%, still down from 3.70% late Friday.?

Otherwhere, the 10-year German bund yield fell to a 5-week low of 2.167%, and the 10-year UK gilt yield fell to a 1-month low of 3.253%.??

The two-year yield, which moves more on expectations for the Fed, fell to 3.99% from 4.59% Friday.?

It was above 5% earlier this month.

The plunge in bond yields supported technology stocks and pushed the Nasdaq 100 Stock Index higher.??

The sharp drop in yields also boosted debt security prices and improves the balance sheets of banks that are holding long-term government bonds and agency debt.?

Meantime, Federal funds futures now show the Fed will stand pat and not raise interest rates at the March 21-22 FOMC meeting.

In this context, on Wall Street, the S&P 500 dipped 0.2% to 3,855.76 after whipsaw trading, where it careened from an early loss of 1.4% to a midday gain of nearly that much.?

The Dow Jones Industrial Average fell 0.3% to 31,819.14, while the Nasdaq composite rose 0.4% to 11,188.84.

On this morning, Asian shares declined, with heavy selling of banks shares in Tokyo and some other markets.

Japan's benchmark Nikkei 225 dropped 2.2% to finish at 27,222.04, extending losses from the day before.

Bank shares plunged.?

MUFG fell 8.6%, Mizuho Financial Group sank 7.1% and Sumitomo Mitsui Financial Group’s shares dropped 9.8%.?

Tech sector companies also were sold, with SoftBank shares losing 4.1% and Sony Group down 2.8%.

Banks in South Korea and Australia also declined.

Australia's S&P/ASX 200 dipped 1.4% to 7,008.90.?

South Korea's Kospi fell 2.6% to 2,349.19.?

Hong Kong's Hang Seng fell 2.4% to 19,233.51.?

The Shanghai Composite declined 0.6% to 3,247.81.

There is escalating tension in the global financial world.

Investors are worried that a relentless rise in interest rates meant to get inflation under control are approaching a tipping point and may be cracking the banking system.

U.S. financial stress could lead banks of all stripes to retrench lending to the real economy and tighten broader financial conditions, amplifying risk to the broader markets.

In currency trading, on this morning the U.S. dollar rose to 133.51 Japanese yen from 133.20 yen.?

The euro cost $1.0697, down from $1.0734.

Going back to analyzing the other agricultural markets ...

From South America, agribusiness consultancy Safras & Mercado Brazil estimated that as at 10 Mar, the 2022-23 soybean harvest was 49pc complete (43pc previous week, 61pc previous year).

Brazil’s soybean harvest is now 53% complete according to AgRural.?

That’s up from 43% during the prior week but moderately behind last season’s pace of 64%.

Brazilian farmers are expected to produce the highest volume of corn in history in spite of risks associated with planting delays in some areas.

AgRural pegged Brazil’ second crop corn at 82% planted in the center-South region, compared to 94% for the same date last year.?

Brazil's total corn production will reach 126.63 million tonnes in the 2022/2023 cycle, up 11.93% from the previous year.

Large corn and soybean crops in Brazil are expected to provide ample supplies, weighing on prices.

In Europe, we saw a net recovery for grain prices yesterday.

While Russia wants to extend the agreement for only 60 days, traders were expecting a much longer period.

That leaved uncertainty in the markets.?

The financial sector is facing a turmoil, reviving the spectre of the 2008 crisis.

Prices were also underpinned by chart support, and new export demand.

Algeria had started buying wheat in a tender which closed on Monday, with some volume thought to have been booked at around $312 a tonne cost and freight, though details were unclear.

Russian and EU Black Sea exporters were expected to gain a large share of a tender purchase of 1.043 million tonnes of wheat on Monday by Saudi Arabia.

Russian wheat prices fell last week but less than on Euronext, allowing European origin to regain competitiveness.

Thus, Euronext wheat prices rose sharply, recovering from a one-year low.

However, prices then gave back some gains after Russia proposed extending the agreement, though for a reduced period, as that would take us towards the end of the season.

Also, as for Saudi Arabia tender's, with July/August arrivals, there is still a lot of time for exporters to make the decision on their supplies and they may not decide until mid-May when the harvest outlook is clearer.

As a result, wheat prices on Euronext, settled 2% up at 267.00 euros ($286.76) a tonne, after earlier adding as much as 3.8% to reach its highest in almost a week.

Meantime, in Germany, standard 12% protein wheat for March delivery in Hamburg traded at a premium of around 3 euros under the Euronext May contract, against sales offers of 5 euros on Friday.

From the Black Sea basin, the office of the UN Secretary-General said talks between Russian and UN officials in Geneva occurred yesterday, and a more extensive statement would be released.?

“The United Nations remains totally committed to the Black Sea Grain Initiative, as well as our efforts to facilitate the export of Russian food and fertilizer,” it said.?

Ukraine Minister of Infrastructure tweeted “We’re waiting for the official position of the UN and Turkey as the guarantors of the initiative.”?

Russia’s Deputy Foreign Minister Sergey Vershinin said in a statement that Moscow wouldn’t object to extending the agreement when it expires on March 18, but only for a period of 60 days.?

His statement said Russia’s further stance would be determined upon the tangible progress on normalisation of our agricultural exports, not in words, but in deeds.?

It referenced issues including bank payments, logistics, insurance, and the reopening of a key ammonia pipeline.

From Ukraine, the country continues to face a bevy of agricultural production challenges amid the ongoing war.?

The latest is a sharp shortage of inputs – analyst APK-Inform reports that the country’s farmers only have around 35% of the pesticides they will need this season.?

“Farmers will not be able to buy everything they need - seeds, fertilizers, fuel, crop protection products."

Thus, "yields will be much lower and this will affect our export potential,” according to Denys Marchuk, deputy chair of the Ukrainian Agrarian Council.

The Ukraine Ministry of Agrarian Policy and Food projected 2023-24 spring grain sowing area at 5.7Mha (-3pc on previous year).

Meantime, Ukraine's grain exports were at 32.9 million tonnes in the 2022/23 season as of March 13.

The ministry gave no comparative data for the same date in 2022.?

It said Ukraine had exported 44.8 million tonnes of grain as of March 27, 2022.

The volume so far in the July to June season included about 11.9 million tonnes of wheat, 19.9 million tonnes of corn and 2.1 million tonnes of barley.

The ministry said grain exports in March had reached 1.9 million tonnes as of March 13.

From Russia, sowing campaign began a few weeks ago.?

Weather conditions for the crop in Russia's south, a major wheat-growing area, have improved due to ample rainfall, Sovecon said.

Russia harvested 157.7Mt of grain last year, 30pc higher than in 2021, Interfax reported, citing state statistics agency Rosstat.?

The total included 104.2Mt of wheat, 37pc more than in 2021.

Meantime, Russia exported 1 million tonnes of wheat last week, per latest?port data.

That was up from 770,000 tonnes the week before.

It estimates that Russia's wheat exports in March could reach 4.2 million tonnes, up from 2.1 million tons a year earlier and the highest level since March 2018.

However, Russian wheat prices continued to fall last week on the back of large supply volumes and rather limited demand compared with the big supply.

Thus, according to the IKAR, prices for Russian wheat with 12.5% protein content, delivered free on board (FOB) from Black Sea ports, indeed, fell $2 to $290 a tonne last week.

As for other products, price for domestic 3rd class wheat, European part of Russia, excludes delivery was at 12,100 rbls/t -50 rbls/t (Sovecon).

Price for sunflower seeds was at 27,925 rbls/t +175 rbls/t (Sovecon).

Price for domestic sunflower oil was at 78,175 rbls/t (Sovecon).

Price for domestic soybeans was at 33,600 rbls/t +900 rbls/t (Sovecon).

Export price for sunflower oil was at $990/t -$30 (IKAR).

Price for white sugar, Russia's south was at $704.87/t -$8 (IKAR).

($1 = 75.27 roubles).

From the Middle Kingdom, China's new Premier Li Qiang said that the country's food security is guaranteed and that state policies to support food production will increase, at a news conference to mark the close of the annual sitting of parliament on Monday.

Premier Li also said that that rural areas should develop based on local conditions and that the government seeks to boost economic, cultural and ecological values in rural areas to further promote rural revitalisation.?

Meantime, Chinese President Xi Jinping plans to travel to Russia to meet his counterpart Vladimir Putin as soon as next week.

Chinese leader, also plans to speak with Ukrainian President Volodymyr Zelenskiy for the first time since Russia-Ukraine war started, the Wall Street Journal reported on Monday.

The call was likely to take place after Xi's visit to Moscow.

From South East Asia, Pakistan is likely to miss the wheat production target by 1.7 million tonnes for the current fiscal year, reported The News International.

Wheat production is likely to remain around 26.7 million tonnes as against the envisaged wheat production target of 28.4 million tonnes.

Officials said on Friday that wheat production in Punjab is set to witness a major blow during the current fiscal year 2022-23, amid negative impacts of climate change as well as crop substitution, sowing other crops than wheat for profitability, reported The News International.

“There will be no other option but to import 3-3.5 million tonnes of wheat for the next fiscal year in order to meet domestic as well as Afghanistan’s requirements. This is more than the import target of 2.6 million tonnes of wheat for the current fiscal year,” top official sources confirmed while talking to The News International.

Moreover, the Met office has forecast heavy rains for two weeks, starting from the third week of March that will affect wheat production.

Official data available with The News International disclosed that the government had sought a wheat sowing area target of 22.85 million acres in the country for the fiscal year 2022-23, including a sowing target of 16.48 million acres in Punjab.

But only 16.01 million acres could be sown in the province till the latest compiled estimates, witnessing an achievement of 97.17 per cent target.

Also, the heatwave had negatively impacted wheat production by at least 10 to 12 percent in the last financial year.

India is likely to import 1.5 million tonnes of duty-free sunflower oil during the current fiscal year to March 31, trade and government sources said, half a million tonnes less than the quota allocated by the government.

India has already imported 1.3 million tonnes of duty-free sunflower oil so far in the 2022-23 fiscal year, and another 200,000 tonnes are expected by March 31, the sources said.

India has allowed duty-free imports of 2 million tonnes of crude sunflower oil during the current and the next fiscal year to March 2024.

The lower imports reflect traders' growing concerns over sealing deals to import large volumes of the cooking oil from Russia and Ukraine.

But New Delhi has decided to halt duty-free imports of crude soyoil from the next fiscal year beginning April 1.

India's duty-free soyoil imports totalled 1.7 million tonnes and the shipments are likely to touch 2 million tonnes by March 31, the sources said.?

From the Rising Sun, Japan will raise the price at which it sells imported wheat to domestic flour mills from April by an average 5.8% from the previous year to reflect higher import prices over the past six months, the farm ministry said on Tuesday.

The price rise would have been 13.1% if calculated according to the standard formula, but it was lowered to soften the burden on households suffering from higher commodity prices, the ministry said.

Japan buys five types of milling wheat from the United States, Canada and Australia through import tenders and sells to domestic millers at prices set twice a year.

The government last year held off on raising the price for the October-March period.

For the six months starting April 1, the ministry's wheat selling price to local millers will average 76,750 yen ($575) per tonne, up from 72,530 yen the previous year.

The price was based upon average import prices over the past six months, but it would have been 82,060 yen if calculated under the standard formula using import prices over the past year, the ministry said.

"After considering the predictability of wheat prices, our policy of promoting domestic wheat production and burden on consumers, we have taken a measure to mitigate drastic changes to partially restrain the hike rate as a special case," Kenichi Hirano, director of the grain trade and operation division of the ministry, told a news conference.

Imports accounts for more than 80% of Japan's total wheat demand.

"We need to reduce dependence on wheat imports and strengthen the domestic production base by switching from imported wheat to domestic wheat and rice flour," Hirano said.

($1 = 133.5700 yen).

From Australia, the country exported 417,215 tonnes of feed barley, 55,720t of malting barley and 50,115t of sorghum in January, according to the latest export data from the Australian Bureau of Statistics.

January’s feed barley exports represent a drop of 61 percent from the December total, with Saudi Arabia on 115,219t, Jordan on 91,280t and The Philippines on 56,332t the biggest customers.

Malting barley exports in January were up 154pc on the December total, with Mexico on 33,000t, South Korea on 11,027t and Singapore on 5536t the largest markets.

January sorghum exports rose 12pc from the December total, with Japan being the surprise volume customer on 31,564t, ahead of China on 17,223t and The Philippines on 904t.

Meantime, local markets were quiet with the public holiday Monday in SA and Victoria.

The forecast rainfall event over the last 4 days certainly delivered, particularly for Qld and northeast NSW with 25-100mm recorded over a wide area with Qld picking up the higher totals as expected.?

Patchy totals over central and southern NSW also resulted in 15-50mm, with isolated falls over 100mm in the Riverina leading to flash flooding in some areas.

On the international trade scene, Algeria’s state grains agency OAIC has started buying milling wheat in an international tender which closed on Monday.

Initial purchases reported were around $312 a tonne cost and freight (c&f) included.?

There was also market talk of trades above and below this level, with purchases at $310 a tonne c&f and even as low as $308 made earlier on Monday afternoon.

There was also market talk of trades as high at $319 a tonne c&f, but with the bulk made at $312 a tonne c&f.

Tonnage bought was initially unclear, but report showing at least 420,000 MT purchased.?

The wheat was sought for shipment in two periods from the main supply regions including Europe: May 1-15 and May 16-31. If sourced from South America or Australia, shipment is one month earlier.

Saudi Arabia’s General Food Security Authority reportedly purchased 1Mt milling wheat via tender for Jul-Aug arrival.?

Saudi Arabia bought 1.043 mln tonnes of wheat for July-August arrival, in its first tender in 2023, the Saudi state purchasing agency General Food Security Authority (GFSA) said on Monday.

It was bought at an average price of $316.86 a tonne c&f, the GFSA said.

Tunisia got offers in an international tender to purchase 234.000t of soft milling wheat from optional origins that closed on Tuesday.?

The purchases are financed by the EIB and therefore the offers should be in EURO.

The grain is for shipment between March 20 and May 30, depending on the source.

South Korea's Major Feedmill Group (MFG) has purchased an estimated 135,000 tonnes of animal feed corn in two consignments in an international tender on Tuesday.

The first consignment of about 66,000 tonnes was bought from trading house Cargill at an estimated premium of 244.87 U.S. cents a bushel over the Chicago September 2023 corn contract CU3 plus a $1.50 a tonne surcharge for additional port unloading.

Arrival of the first consignment in South Korea was expected around Aug. 14, slightly later than sought in the tender.

Traders expected the first consignment to be sourced optionally either from South America or South Africa.?

Shipment was sought in the tender between June 12-July 1 from South America or June 22-July 11 from South Africa.

The second consignment of around 69,000 tonnes to be sourced from optional worldwide origins was bought at an estimated outright price of $309.85 a tonne c&f from trading house Al Ghurair plus a $1.50 a tonne surcharge for additional port unloading.

Arrival of the second consignment in South Korea was sought around Aug. 22. Shipment was sought between June 29-July 18 if sourced from the U.S. Gulf or east Europe/Black Sea, between July 19-Aug. 7 from the U.S. Pacific Northwest coast, between June 24-July 13 from South America or July 4-July 23 from South Africa.

South Korea’s Major Feedmill Group (MFG) reportedly purchased around 125,000t feed wheat from optional origins with 60kt at US$309.90/t c&f and 60kt at $305.00/t c&f, both for Sep arrival.

That's all, thank you.

We wish you a nice day.

?Author:?Sandro F. Puglisi??

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