Grain Market View - Daily Update

Good morning, Farmer Family ...

US farm markets were mixed but mostly lower on Wednesday.

Corn prices faced double-digit losses, down 0.62%.

Soybean managed modest gains, up 0.55%, with soymeal jumping 2.14%, while soyoil slumped 0.88%.

Wheat prices were shocked, as Chicago SRW dropped 1.75%, Kansas City HRW tumbled 3.93%, and MGEX HRS fell 2.76%.

We are in a "Weather Market".

Forecasts for more rains coming to the central U.S., and a squaring positions by traders ahead of Friday WASDE report from USDA, drove overall trend.?

Notably, wheat prices had showed some strength during the overnight trading session on support from concerns over safe shipment of Black Sea supplies and lower output in Australia.

However, Chicago wheat prices fell, snapping a five-session rally that had pushed prices to their highest in nearly three weeks, as concerns about export demand for U.S. supplies weighed on the market, and high-protein offerings notched the biggest declines.

The monthly Census data had April wheat exports at 1.51 MMT.?

That was up 0.13 MMT from March, but was 0.24 MMT lighter than April ’22.?

The season’s total was 18.97 MMT with May shipments to add.?

The season’s pace was at 93% of the WASDE forecast.?

Corn prices fell, with contracts that track the recently seeded crop posting the biggest declines on forecasts for some rains in key growing areas of the Midwest this weekend.

EIA data showed ethanol producers averaged 32k barrels per day more output during the week that ended 6/2 with average daily production of 1.036m bpd.?

However, ethanol stocks increased by 616k barrels to 22.948 million.?

Also, the monthly Census data had 5.06 MMT of corn exports for the month of April.?

That was a MY high, but still 27% below April ’22.?

The season’s total reached 27.25 MMT, or 60% of USDA’s forecasted 45.09 MMT.?

The data also showed 778k MT of DDGS exports, which has the MYTD pace running at a 9-yr low.?

Ethanol exports were 125.7m gallons in April.??

As for soybeans, the market ended mixed, with the most-active contract firming as traders staked out positions ahead of the U.S. Agriculture Department's closely watched World Agricultural Supply and Demand Estimates report on Friday.?

But the rainy outlook weighed on new-crop soybean contracts, which closed in negative territory.

Also, soybean export in April was 1.09 MMT according to Census data.?

That was the lowest for the month since 2015.?

The full year’s total reached 50.57 MMT, or 92% of USDA’s estimate.?

Census also showed 1.128 MMT of soymeal exports and 27,498 MT of soy oil exports for April.?

In this context, corn basis bids were steady to weak after spilling 10 cents lower at a Nebraska elevator and dropping 2 to 5 cents across three Midwestern ethanol plants.

Soybean basis bids were mostly steady across the central U.S., but did tilt 5 cents lower at an Iowa river terminal while firming a penny at an Ohio elevator.

Commodity funds were net sellers of CBOT corn, wheat and soyoil contracts.?

The funds were net buyers of CBOT soybeans and soymeal futures.

On this morning, Chicago corn prices slid more than 1% and soybeans fell for the first time in three sessions.

Wheat lost more ground, trading near a one-week low.

From Canada, the provincial Manitoba Agriculture, Food and Rural Development crop report, for the week ending 6 June saw below normal rains in much of the Central and Interlake regions and isolated storms in other areas.?

2023-24 spring crop plantings reached 97pc complete.?

Generally warm weather saw good emergence of spring cereals, aside from some later-seeded fields due to topsoil dryness, while winter cereals remained in good to excellent condition.?

Canola plantings advanced to 97pc complete, although there is concern that dry weather may make crops more susceptible to insect damage.

Also, the impact of high temperatures and fires supported canola prices.

Meantime, the Bank of Canada unexpectedly raised its key rate by +25 bp to 4.75% from 4.50% and said demand “looks to be more persistent” than it expected, and “concerns have increased” inflation may get stuck above 2%.

Statistics Canada reported a 2.5% increase in April merchandise exports and a 0.2% drop in imports in April, with Canada's trade balance with the world jumping from $230.9 million to $1.940 billion, the largest trade surplus reported since June 2022.?

Canada exported 157,382 metric tons of lentils in April, up from the previous month.?

Cumulative exports of lentils total 1.7 million metric tons (mmt), up 63% from one year ago, 16% higher than the five-year average and accounts for 75.6% of the current 2.250 mmt forecast set by AAFC, equal to the steady pace needed to reach this forecast. AAFC revised their forecast lower by 50,000 mt in May.

Chickpea exports totaled 21,617 mt, the smallest volume shipped in four months.?

Cumulative exports of 184,019 mt are up 75% from the previous year, 79% higher than the five-year average and represent 78.3% of the 235,000 mt forecast released by AAFC.?

Exports are ahead of the steady pace needed to reach this forecast.?

AAFC revised its export demand forecast higher by 10,000 mt in May.

Dry pea exports in April totaled 247,162 mt, up from the previous month.?

Based on the value of the exports, 63% of exports was shipped to China, the largest volume shipped to this country since October 2022 or six months.?

Cumulative exports to all destinations total 2.170 mmt, up 42.8% from last year while 91.6% of the five-year average.?

Exports have reached 80.4% of the 2.7 mmt export forecast set by AAFC, well-ahead of the steady pace needed to reach the current export forecast of 2.7 mmt.?

AAFC revised this forecast higher by 100,000 mt in May.

Flaxseed exports in April reached 24,062 mt, the largest volume shipped in 16 months, with 49% of the dollar value shipped to the U.S. and 42% of the value shipped to China, with the volume shipped to China the largest in 23 months.?

The cumulative volume of flax shipped totals 140,627 mt, down 22.7% from one year ago and down 51.7% from the five-year average.?

Exports have reached 93.8% of the 150,000 mt AAFC forecast, which suggests exports will exceed this forecast with data for three shipping months left in the crop year.

April data shows soybean exports of 105,255 mt, close to the smallest monthly volume shipped this crop year and the smallest April movement seen in four years.?

Cumulative exports of 3.839 mmt is up 6.6% from one year ago and 5.2% higher than the five-year average.?

After eight months of the row-crop crop year, exports have reached 80% of AAFC's 4.5 mmt export forecast, a forecast that was revised 100,000 mt higher in May.

Corn exports were reported at 318,637 mt, the largest volume shipped in one year.?

After eight months, corn exports have reached 1.366 mmt, up 16.7% from last year and 71.2% higher than the five-year average.?

Cumulative exports have reached 73.9% of the current 1.85 mmt export forecast, ahead of the steady pace needed to reach this volume with four months remaining in the crop year.

Canada imported 207,961 mt of corn in the month of April, down from the previous month while the second-largest monthly imports seen this crop year.?

Cumulative imports are calculated at 1.267 mmt, down 70% from the same period last crop year and 30% below the five-year average.?

AAFC continues to hold to its import forecast of 2 mmt.

Canola oil exports in April totaled 266,210 mt, the smallest volume shipped in four months.?

Cumulative exports total 2.407 mmt, up 24.7% from the same period in 2021-22 and 2.5% higher than the five-year average.

Canola meal exports are reported at 449,714 mt in April, down from the previous month.?

Cumulative exports of 4.038 mmt are up 20.8% from last year and 10% higher than the three-year average.

Ethanol imports totaled 172 million litres in April, down from the 2023 high of 210 million litres imported last month.?

Cumulative imports of 715 million litres in 2023 are up 45.6% from one year ago while 83% higher than the three-year average for the January through April period.

From South America, Brazil’s Anec expects the country’s June corn exports to reach 1.66 MMT.?

That would be a year-over-year increase of 10.4%, if realized.

Brazil’s Anec estimates that the country’s soybean exports in June will reach 13.11 MMT, which would be a year-over-year increase of nearly 32%, if realized.?

Anec also anticipates Brazilian soymeal exports will see modest increases in soymeal exports this month, which it estimates will reach 2.27 million metric tons.

In Europe, grain prices fell on ample global supplies, while rapeseed lost ground after sharply rising early in the week.

Notably, Euronext wheat fell 1.0% at 228.00 euros ($243.98) a tonne, with the contract easing from Tuesday's three-week peak of 236.50 euros after the breaching of the Kakhovka dam in southern Ukraine that had revived worries about an escalating war between grain exporters Ukraine and Russia.

News of damage to a pipeline used to transport ammonia fertilizer from Russia via Ukraine, which Moscow has made a condition for maintaining an export corridor for Ukrainian grains, drew little reaction given protracted negotiations over the issue.

Tuesday's tender by Egyptian state buyer GASC confirmed ample availability of Russian supplies.

However, Refinitiv Commodities Research have revised downward the EU wheat production forecast by 0.8Mt to 130.4Mt (125.7Mt previous year) citing rain deficits across most of Europe.?

The latest satellite imagery analysis shows a drop in crop vegetation densities in a number of countries, including in Germany.?

While southern Europe received significant rainfall surpluses, especially in Spain, although more rainfall is needed.?

In France, a stormy episode is expected for the weekend, with its share of beneficial rains and disappointments as usual with storms.?

However, widespread favourably warm and wet weather is predicted to develop over the coming weeks.

Despite mixed weather Refinitiv kept the rapeseed production forecast unchanged at 20.4Mt (19.5Mt previous year). It noted the recent dry trend was predicted to reverse in the coming weeks, with warmer temperatures and additional rains seen benefiting crops in the late-development stages, potentially underscoring yield potential.

Meantime, financial investors raised their net short position in Euronext's wheat futures and options last week, data published by Euronext showed.

From Ukraine, following the destruction of the Kakhovka dam, the impact would relate to the irrigation potential wiped out on 500,000 ha according to the Ukrainian Minister of Agriculture, and around 10,000 ha would be flooded.?

However, negotiations on the extension of the corridor will continue tomorrow in Geneva.

According to the State Statistics Service, since the beginning of 2022/23, as of June 7, Ukraine exported 45.994 mln tonnes of grains and pulses, of which 657 thsd tonnes in June.?

This was reported the press service of the Ministry of Agrarian Policy of Ukraine.

Last season, as of June 6, the total export amounted to 47.407 mln tonnes.

In particular, since the beginning of the current season, Ukraine exported:

- wheat – 15.704 mln tonnes (previous season – 18.622 mln tonnes);

- barley – 2.655 mln tonnes (5.726 mln tonnes);

- rye – 19 thsd tonnes (161.5 thsd tonnes );

- corn – 27.313 mln tonnes (22.59 mln tonnes ).

The total export of flour from Ukraine as of June 7 is estimated at 144?thsd tonnes (69,5?thsd tonnes in 2021/22 MY), including wheat flour - 138?thsd tonnes (68.1?thsd tonnes).

Meantime, Ukraine's agricultural ministry considers it "inappropriate" to extend restrictions on Ukrainian food imports to some European states until September 15, the ministry said on Wednesday.

The EU liberalised all imports from Ukraine for an initial 12 months from June 2022 to help Kyiv.

But five countries saw a huge rise in imports from Ukraine following the suspension of tariffs.

However, the Ministry of Agrarian Policy and Food of Ukraine considers it impractical to extend the decision of the European Commission on limiting the import of Ukrainian agricultural products until September 15, 2023.?

This statement by the head of the department, Mykola Solskyi, was distributed by the press service of the Ministry of Agrarian Policy on June 7.

On the other hand, the movement of cargo by road from Ukraine through the Sheghini checkpoint is currently blocked due to the protest actions of farmers in Poland.?

The State Border Service of Ukraine announced on its Telegram channel on June 7.

At the same time, the other transit through the territory of Poland continues as usual.?

As well, trucks going into Ukraine are moving freely.

From Russia, cheaper offers of Russian supplies continued to be cited.?

A seller was offering up to 60,000 tonnes of Russian 12.5%protein wheat on Wednesday at $226 a tonne fob Black Sea for August shipment from Novorossiysk.

From Australia, trade remains thin in feed wheat and barley as growers hold off on sales in the last weeks of the 2022-23 financial year, and consumers buy hand to mouth in the hope eastern Australian prices will soften.

The Bureau of Meteorology on Tuesday issued its first El Nino Alert in this week, upgraded from an El Nino Watch status first issued in this cycle on March 14.

To counter concerns about dry weather it has brought has been widespread rain across southern Australia in the past week.

However, northern New South Wales, where only a fraction of intended wheat area has been planted to date in most districts, has had mostly single-digit falls.

We have seen some significant rainfall totals this week across WA, SA, Vic and southern NSW, with more rain on the way today for Vic and NSW.?

Parts of Vic have seen up to 100mm in the last 24 hours alone, with the front expected to move through by tomorrow.

Meantime, local markets were mixed yesterday.?

WA ASW1 current crop began the day bid a buck or two firmer, but by day’s end was relatively unchanged to a buck or two softer on account of a firming currency.?

Barley was also largely unchanged.?

Canola current crop bids also were left unchanged.?

Wide wheat and barley bid/offer spreads remained in track, delivered and grower markets.?

On the international trade scene, the Philippines purchased 50.800t of animal feed corn, likely sourced from South America, in a tender that closed earlier yesterday.

Algeria issued an international tender to purchase 35,000 metric tons of soymeal from optional origins that closes today, June 8.?

The grain is for shipment during the first half of July.

In outside markets ...

Energy markets saw oil prices rising about 1%, on weaker greenback and a fall in US crude stocks.??

Thus, Brent crude futures settled 66 cents, or 0.9%, higher at $76.95 a barrel, while U.S. West Texas Intermediate crude futures gained 79 cents, or 1.1%, to $72.53.

U.S. crude stocks fell by about 450,000, according to data from the Energy Information Administration, compared with estimates for a 1 million build.

However, diesel inventories rose by 5.1 million barrels, while markets had estimated a build of 1.33 million.?

Gasoline inventories also rose more-than-expected at 2.8 million barrels, compared with estimates for a build of 880,000 barrels.

The unexpected build in fuel inventories raised concerns over consumption, especially as travel demand grew during the Memorial Day weekend.

Also, prices had fell earlier in the session on weak Chinese economic data.

China's exports shrank much faster than expected in May and imports fell, albeit at a slower pace, as manufacturers struggled to find demand abroad and domestic consumption remained sluggish.

However, Wednesday's data also showed that crude oil imports into China, the world's largest oil importer, rose to their third-highest monthly level in May as refiners built up inventories.

Also, supporting prices, the dollar dipped as chances faded for a Federal Reserve rate hike next week.?

However, global economic growth will pick up only moderately over the next year as the full effects of central bank rate hikes are felt, the Organisation for Economic Cooperation and Development said.

As a result, on this morning, oil prices dipped.

Notably, Brent crude futures fell 21 cents, or 0.3%, to $76.74 a barrel at 0415 GMT, while U.S. West Texas Intermediate crude futures eased 21 cents, or 0.3%, to $72.32 a barrel.

In ocean freight markets, the Baltic Exchange’s main sea freight index rose on Wednesday to scale its highest in more than three months, on higher rates for capesize and panamax vessel segments.

The overall index, indeed, gained 4 points to 1,020 – hitting its highest level since March 1.

Notably, the capesize index was up 4 points, to its highest in three months at 1,387.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes for commodities such as iron ore and coal, increased $33 to $11,503.

The panamax index added 31 points, or about 2.8%, to 1,139.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, increased $279 to $10,252.

Among smaller vessels, the supramax index fell 15 points or about 2% to 766.

In equity markets, US stock indexes settled mixed.??

A jump in bond yields undercut mega-cap technology stocks and weighed on the overall market.??

Bond yields rose after the Bank of Canada unexpectedly raised interest rates.?

Stocks were also undercut by concern about slowing global demand after China’s May exports fell more than expected.?

Notably, the U.S. Apr trade deficit widened to -$74.6 billion from -$64.2 billion in Mar, the largest deficit in six months but smaller than expectations of -$75.8 billion.

U.S. Apr consumer credit rose +$23.01 billion, stronger than expectations of +$22.0 billion and the most in 5 months.

The Organization for Economic Cooperation and Development (OECD) forecast 2023 global GDP of +2.7%, below the +3.3% pace in 2022.

China May exports fell -7.5% y/y, weaker than expectations of -1.8% y/y and the biggest decline in 4 months.?May imports fell -4.5% y/y, a smaller decline than expectations of -8.0%y/y.

As a result, global bond yields moved higher.??

The US 10-year T-note yield rose to a 1-week high of 3.799% and finished up +11.6 bp at 3.776%.??

The two-year yield, which moves more on expectations for the Fed, rose to 4.55% from 4.50%.

The 10-year German bund yield rose to a 1-week high of 2.456% and finished on that high, and the UK 10-year gilt yield rose to a 1-week high of 4.251% and finished on that high.

In this context, on Wall Street, the S&P 500 fell 0.4% to 4,267.52 even though the majority of stocks within the index rose.?

The Dow Jones Industrial Average gained 0.3% to 33,665.02, while the Nasdaq composite fell 1.3% to 13,104.89.

Microsoft, Amazon, Nvidia and Alphabet all sank at least 3% and were the heaviest weights on the S&P 500.?

The Russell 2000 index of smaller stocks jumped 1.8% to continue its hot streak since a stronger-than-expected report on hiring last week suggested a recession may be further off than feared.

On this morning, Asian shares fell after heavy selling of big-name tech stocks pushed benchmarks lower on Wall Street.

Stocks fell in Tokyo, Hong Kong, Seoul and Sydney but rose in Shanghai. U.S. futures were lower.

Notably, Japan’s benchmark Nikkei 225 sank 0.9% to 31,641.27. Australia’s S&P/ASX 200 shed 0.3% to 7,099.70.?

South Korea’s Kospi slipped 0.2% to 2,610.85.

Hong Kong’s Hang Seng edged less than 0.1% lower to 19,242.26.?

The Shanghai Composite gained 0.4% to 3,211.44.

Taiwan's Taiex lost 1.1%, while India's Sensex gave up 0.2%.

The declines came despite a sharp upward revision in Japan’s estimated economic growth rate for the January-March quarter, to 2.7%.?

That was above what analysts had expected.

The Japanese economy has been recovering since restrictions related to the coronavirus pandemic were lifted.?

The nation has seen a return of tourists, as well as other economic activity.

The focus is now on when Japan’s central bank may move away from the easy monetary policy it's stuck to for years.?

In the past year, the U.S. Federal Reserve and the world's other central banks have been raising interest rates.?

Japan's benchmark rate is minus 0.1%.

In currency trading,?the dollar index fell by -0.01%, with the dollar under pressure from expectations the Fed will pause its rate-hike campaign at next week’s FOMC meeting.??

The market expects only a 29% chance the Fed will raise its fed funds target range by +25 bp next week.??

However, the dollar recovered from its worst levels after the 10-year T-note yield rose to a 1-1/2 week high.

Notably, the EUR/USD rose by +0.10%.??

Hawkish comments Wednesday from ECB Executive Board member Schnabel and ECB Governing Council member Knot supported EUR/USD when they said they favored additional rate hikes from the ECB.

However, Wednesday’s Eurozone economic news was bearish for the euro.??

German Apr industrial production rose +0.3% m/m, weaker than expectations of +0.6% m/m.??

Also, Italy’s Apr retail sales rose +0.2% m/m, weaker than expectations of +0.3% m/m.

As for the USD/JPY, it rose by +0.36%, with the yen giving up an early advance.??

However, the yen initially had moved higher on signs of strength in Japan’s economy as Japan was the only G-7 country to see its manufacturing sector in expansion territory in May, according to PMI data.??

The Japan Apr leading index CI rose +0.7 to a 5-month high of 97.6, although weaker than expectations of 98.2.

A slump in Japanese stocks Wednesday also boosted safe-haven demand for the yen after the Nikkei Stock Index fell -1.8%.?

On this morning, the U.S. dollar fell to 139.73 Japanese yen from 140.10 yen.?

The euro cost $1.0708, up from $1.0698.

That’s all, thank you.

We wish you a nice day.

Author:?Sandro F. Puglisi

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