GRAIN & PRICE WEEKLY REPORT

US grain markets posted major moves this week. 

Old crop corn and soybean stocks are tight, and global demand is stout. 

Consequentially, the ag markets are primed to pay early and close attention to any hints of 2021 yield losses.  

Really, the Drought Monitor shows few concerns in the Corn Belt right now, but a few weeks of hot and dry can change that, thus, we are living a summer weather market.

In this context, wheat futures posted solid gains in all three markets.  

Minneapolis was the bull leader, up 11.7% as that market tried to deal with a mixture of frost, drought and high temp impacts on the recently emerged crop.

Chicago SRW was up 3.7%.

KC HRW up 3.8% for the week. 

Also corn futures bulls finished the week with a flourish, posting a July contract net gain of 4% from the previous Friday. 

December corn was up 45 cents per bushel for the week, with 25 of that coming only on Friday. 

Soybean futures rallied 3.5% per bushel in nearby July this week. 53 ? cents. 

November futures were up 62 cents since last Friday. 

Soy Meal was up 0.2% for the week, with bean oil up 8.5%. 

On macro markets, oil extended gains on Friday, topping $72 a barrel for the first time since 2019, as OPEC+ supply discipline and recovering demand countered concerns about patchy COVID-19 vaccination rollout around the globe.

The Organization of the Petroleum Exporting Countries and allies on Tuesday said they would stick to agreed supply restraints. 

A weekly supply report on Thursday showed U.S. crude inventories dropped more than expected last week.  

Oil extended gains after U.S. jobs figures showed nonfarm payrolls increased by 559,000 jobs last month. 

The U.S. dollar weakened after the report, making oil cheaper for holders of other currencies and lending support to oil prices. 

Consequentially, Brent crude was up 29 cents, or 0.4%, at $71.60 a barrel by 11:12 a.m. (1512 GMT), after earlier touching $72.17, its highest since May 2019.

U.S. West Texas Intermediate crude was up 51 cents, or 0.7%, at $69.32, and earlier hit $69.76, its highest since October 2018.

In this context, Brent was on track for a weekly gain of more than 2.5% and U.S. crude headed for a 4% rise. 

It is the second week of gains for both contracts.

Also boosting oil this week was a slowdown in talks between the United States and Iran over Tehran's nuclear programme, which reduced expectations of a return of Iranian oil supply.

Meanwhile, U.S. crude output is likely to grow more slowly than previously expected.

While rising demand and the fast pace of vaccinations in countries such as the United States have boosted oil demand, even if a slower inoculation rollout and high infections in the likes of Brazil and India are hitting demand in high-growth oil markets.

Also global stocks rallied on Friday and closed near all-time highs, after U.S. jobs data was strong but not as robust as expected, easing investor worries that the Federal Reserve would soon rein in monetary stimulus.

The pan-European STOXX 600 index rose 0.39% after hitting a record high this week. 

MSCI's all-country world index, which tracks shares in 50 countries across the globe, gained 0.71%.

On Wall Street, Microsoft lifted the S&P 500, followed by Apple, as the index gained 37.04 points, or 0.88%, to 4,229.89, marking an overall near-record jump of more than 12% this year. Those technology firms account for more than 5% of the MSCI's all-country index's weight.

Shares for Amazon.com Inc, Facebook, Alphabet's Google and Tesla also were up.

The Dow Jones Industrial Average rose 179.35 points, or 0.52%, to 34,756.39 while the Nasdaq Composite added 199.98 points, or 1.47%, to 13,814.49.

The U.S. Dollar Index increased slightly from last week’s 90.02 to close at 90.15, while euro closed yhe week to $1.2168. 

The Baltic Dry Index (BDI), an assessment of the average cost to ship raw materials such as grains, coal and iron ore, dropped 8% on the week to end at 2,472.

Spot gold added 1.1% to $1,890.65 an ounce after a 2% tumble on Thursday, its biggest since February.

Investors have been parsing economic data to gauge whether inflation could force the Fed to change course.

Meantime, Friday’s commitment of Traders report showed spec funds getting more bullish on corn, adding 21,845 contracts to their net long in corn futures and options in the week ending 6/1. 

That put them net long 289,936 contracts, but still a far cry from the peak position of 401,993 net long held on April 13.

Spec traders in CBT wheat futures and options cut 1,3-07 contracts from their CFTC net long position in the week ending 6/1, taking it to 3,227 contracts. 

In KC wheat, they cut another 4,415 contracts from their net long during the week to bring it down to 19,086 contracts. 

Weekly Commitment of Traders data showed managed money spec funds in soybean futures and options trimmed their net long position by 602 contracts in the week ending June 1. 

They were still net long 138,788 contracts at that time. 

Specs in soy oil held their biggest net long position since April 27 on June 1, at 86,084 contracts.

Coming back on U.S. grains market, corn Crop Progress data showed planting 95% complete, with emergence at 81%. 

Average emergence would be 70% by this date. 

The initial Crop Condition ratings had 76% good or excellent, with a Brugler500 Index of 385.  

Soybean planting across the US has moved right along with 84% of the crop in the ground as of last Sunday, vs. 67% average. 

On June 1, USDA reported U.S. winter wheat conditions at 51% good to excellent, gaining four points from last week. 

The USDA also reported 79% of the winter wheat crop headed. 

The U.S. spring wheat crop is 97% planted, ahead of last year on this date. 

The spring wheat crop is 80% emerged.

Spring wheat ratings dropped 2 % to 43% gd/ex. 

Weekly old crop corn export sales through May 27 were better than expected at 531,100 MT, with new crop business at 439,500 MT. 

Unshipped old crop sales commitments are both an opportunity and a liability, with more than 17.843 MMT still on the books. 

About soybean, export sales during the week of 5/27 were only 17,800 MT for old crop soybeans. 

New crop sales were 180,300 MT. 

This week’s US wheat commercial sales for the marketing year 2020/21 were up slightly from last week to 33,300 metric tons (MT), in line with trade expectations of 25,000 MT to 100,000 MT. 

Year-to-date commercial sales for delivery in 2020/21 total 25.6 million metric tons (MMT), 5% lower than last year. 

USDA expects the total 2020/21 U.S. wheat exports to reach 26.2 MMT, even with the previous year if realized.

This week’s US wheat commercial sales for delivery in 2021/22 totaled 398,300 MT. 

Total U.S. wheat sales to date for 2021/22 are 4.34 MMT.

In this context, CBOT soft red winter (SRW) futures gained 24 cents to close at $6.87/bu. 

KCBT hard red winter (HRW) futures were up 23 cents to end at $6.36/bu. 

MGE hard red spring (HRS) futures rose 85 cents to close at $8.10/bu. 

CBOT corn futures gained 26 cents to end at $6.82/bu. 

CBOT soybean futures gained 53 cents to close at $15.83/bu.

Wheat basis bids in the Gulf was little changed from last week as export inquires remained thin. 

In the Pacific Northwest, soft white (SW) basis was up due to weather concerns. 

Farmer selling remains slow in both export regions ahead of harvest.

Meantime, corn basis bids fell 7 cents on Friday at an Ohio elevator and tilted 3 to 5 cents lower at three interior river terminals while holding steady at most other Midwestern locations.

Soybean basis bids were steady to mixed across the central U.S., moving as much as 10 cents higher at an Indiana processor while sinking as much as 5 cents lower at an Illinois river terminal.

From South America, IHS Markit is now estimating Brazil’s total corn crop production for 2020/21 will reach 3.464 billion bushels, a moderate decline from the group’s prior estimate of 3.661 billion bushels as the country has recently faced widespread drought conditions.

Brazil’s 2020/21 soybean crop its estimated at a bin-busting 5.107 billion bushels, one of the most bullish estimates any group has given to date.

Meantime, the group projects Argentina’s 2020/21 soybean production will reach 1.635 billion bushels, while Argentina’s corn crop is estimated at 1.850 billion bushels.

Late-planted corn in Argentina is delivering higher-than-expected yields, with 34.1% of the 2020/21 crop already harvested, the Buenos Aires Grains Exchange said on Thursday.

The South American grains powerhouse is the world's No. 3 corn exporter.

The season's soy crop was 96.6% harvested, the exchange said, leaving its 43.5 million tonne crop estimate unchanged.

The country is the world's No. 1 supplier of soymeal livestock feed used to fatten poultry and hogs from Europe to Southeast Asia, as well as a major international wheat exporter.

Argentine wheat planting is progressing slowly due to dryness, particularly in northern areas of the country where lack of rain may end up reducing plantings of the 2021/22 crop.

Good rainfall in central Argentina will probably make up for any losses in northern farm areas, the exchange said.

The exchange kept its wheat planting estimate for the season unchanged at 6.5 million hectares.

To stay in Argentina, farm group Argentine Agrarian Federation (FAA) warned that a recent protest by cattle ranchers could expand to include grain producers. 

Argentine cattle ranchers blocked the sale of beef in protest of the government’s ban on beef exports. 

The export ban is an effort to curb inflation. 

The president of the farm group said that more protests might follow, and this time include cereal producers.

In this context, as of June 1, Argentina's wheat Grade 2, Up River was at $273/t, corn feed was at $256/t, soybean was at $552.

Brazil's corn feed (Paranagua) was at $296/t, soybean was at $562.

On European market, exports of French soft wheat outside of the European Union (EU) fell to their lowest in a decade last month. 

In May, soft wheat exports outside the EU and United Kingdom were 273.6 TMT, the lowest level since 2009/2010. 

Exports in May were down nearly 60% compared to April.

Soft wheat exports only from the European Union in the 2020/21 season that started last July had reached 24.46 million tonnes by May 30.

That was down from 32.68 million tonnes cleared by the same week last season.

EU 2020/21 barley exports had reached 7.01 million tonnes, against 7.03 million a year ago, while EU 2020/21 corn imports stood at 13.34 million tonnes, down from 18.66 million.

France’s soft wheat quality ratings rose two points this past week, with 80% of the crop rated in good-to-excellent condition, according to farm office FranceAgriMer.

That’s much better than ratings a year ago, when just 56% of the crop was rated in good-to-excellent condition.

France’s 2021 corn crop has started this season with stellar quality ratings, with 91% rated in good-to-excellent condition through May 31, per the country’s farm office, FranceAgriMer.

Warm June weather after widespread rain last month is helping European wheat crops recover from a chilly, dry start to spring, keeping the region on track for a rebound from last year's disappointing harvest, 

Forecasters have since late May increased estimates for soft wheat output in the European Union and Britain, with grain trade association Coceral now seeing the combined EU and British crop up nearly 14% from 2020.

Some analists sees the French crop at 38 million tonnes or above in light of the warm June weather, Bodart said, a level also cited by some traders.

France harvested just over 29 million tonnes last year, among its worst crops in decades.

In Germany, warm weather has also been beneficial and should limit any harvest delays.

Germany's farm cooperatives association in mid-May forecast the 2021 wheat crop of all types will increase by 2.4% on the year to 22.66 million tonnes.

In Poland, production could edge up to 12.2 million tonnes from 12.0 million last year.

In Britain, the improved weather has increased chances of a reasonable harvest following a rebound in sowing.

UK wheat crop pushing up toward 15 million tonnes.

The planted area is expected to be about 30% up from last season to return to a more average level.

Britain harvested just 9.66 million tonnes of wheat in 2020, the smallest crop in more than three decades.

Meantime, non-commercial market participants cut their net long position in Euronext's milling wheat futures and options in the week to May 28, data published by Euronext on Wednesday showed.

Non-commercial participants, which include investment funds and financial institutions, reduced their net long position to 60,757 contracts from 98,477 contracts a week earlier, the data showed.

Commercial participants similarly lowered their net short position to 116,691 contracts from 139,003 a week earlier.

Commercials' short positions accounted for 59.2% of the total short position, while commercial long positions accounted for 41.4% of the total long positions.

Non-commercial short positions represented 40.8% of total short positions, while non-commercial net long positions accounted for 58.6% of the total longs.

The report covered almost all of the open short positions and the open long positions in the wheat derivatives.

In Euronext's rapeseed futures and options, non-commercial market participants edged down their net short position to 10,594 contracts from 10,649 contracts a week earlier.

Commercial participants lowered their net long position in rapeseed to 2,242 contracts from 4,765 contracts a week earlier.

In this context, Matif September wheat futures was 3,50 euros higer from last week, reaching to €214,75/t.

Matif corn June futures had gained 2,00 euros to closing the week at €269,75/t.

Matif rapeseed August futures, added 17,75 euros ending the week at €537,50/t.

From North Africa, grain importer Algeria expects its cereal production for 2020 to fall 35-40% from last year's 5 million tonnes because of drought.

Algeria has in recent years harvested the bulk of its needs for durum wheat and barley while depending on imports of soft wheat, in large part from France.

Algeria’s president is urging his government to increase durum wheat production while reducing soft wheat imports. 

In a statement to his cabinet, the president noted the “necessity to adopt” scientific methods to raise cereal production.

Algeria bought, just past week, some 200,000 tonnes of durum wheat around $380 e $ 385 per tonn c & f.

From Black Sea basin, Russia’s deputy prime minister said that the new formula-based grain export tax would remain in place if increased global demand for food remains. 

The new tax will update each week, complicating forward sales, according to traders. 

The tax is calculated from a formula that weighs the floating index price calculated by a panel of industry experts and published by the Moscow Exchange (MOEX). 

Exporters are responsible for 70% of that difference. 

This week, for example, the floor price is $200/MT and the seven-day average index price published by MOEX is $241.78/MT. 

Therefore, the June 9-15 export tax is $29.40/MT.

Black sea fob prices are not to been gone bad, as good demand for a new harvest on Russian wheat continued, despite the implementation of export taxes.

In a seemingly endless parade of Russian crop estimates, crop consultancy IKAR called the Russian crop up 500,000t to 79.5 million tonnes (Mt).

Meantime, Russian wheat exports could decline 2.9% for the 2021/22 marketing year to 36,6 million tonnes, according to the country's Sovecon consultancy, which cited an uptick in domestic consumption and increased competition from Ukraine and the European Union as reasons for the downgrade.

In add, Sovecon, forecasted that 2021 productin will reach only 80,9 million tonnes against 85,9 million tonnes of 2020.

Ukraine's grain exports, on the other hand, have fallen by 22.3% so far in the 2020/21 July-June season to 42.3 million tonnes, agriculture ministry data showed on Wednesday.

That included almost 16 million tonnes of wheat, 21.5 million tonnes of corn and 4.1 million tonnes of barley, the data showed.

Ukrainian farms have almost completed 2021 spring grain sowing, seeding 7.4 million hectares, or 98%, of the expected area as of June 3, agriculture ministry data showed on Friday.

The ministry has said that favourable weather could help Ukraine to harvest at least 75 million tonnes of grain this year, versus 65 million tonnes in 2020.

Ukrainian agriculture minister Roman Lyshchenko last month said that the country could harvest 100 million tonnes of grain and oilseeds in 2021.

The ministry said the overall grain area is likely to total 15.5 million hectares this year, including 7.6 million hectares of spring grains.

The ministry has said the 2021 area for sunflowers could total 6.4 million hectares, soy beans 1.4 million hectares and sugar beet 226,900 hectares.

From Australia, Aussie export have seen shipment for 155,083 tonnes of sorghum in April, more than triple the amount shipped in March, but total barley sales dropped to 689,182t, down from 964,792t exported in March, according to the latest export data from the Australian Bureau of Statistics (ABS).

The jump in sorghum shipments reflects the availability of new-crop sorghu, which is still being shipped out of Brisbane and Newcastle, and demand from China for the red grain.

Bulk cargoes to Mexico and Vietnam bolstered the malting number, while the feed figure fell, and Saudi Arabia on 186,604t dropped into second place behind Thailand on 208,437t.

The October-April shipment total is nearing 5 million tonnes (Mt), with another big month expected for May and, to a lesser degree, June.

This will likely result in initial export volume projections increasing.

Exports to China ramped up. 

Demand outside of China was fairly weak with Japan the only other country who stepped up for any real volumes. 

In barley, negotiations continue between Australia and China to end their disagreements and the taxes imposed by China on Australian origins.

Meantime, Australia is looking at a second consecutive near-record winter crop planting, as excellent prices and good seasonal conditions see planted hectares rise.

It is forecast at 22.93 million hectares (Mha).

This is up two per cent on last year – where planted area had soared on the back of a return to positive seasonal conditions around the country – and within 1pc of the nation’s record-high winter crop planting in 2016/17.

This acreage also represents an area 8pc above the five-year average.

Australia is on track to deliver an above-average winter grain crop for this season, with an estimated total wheat harvest of 28.9 million tonnes (Mt), barley 10Mt and canola 4.1Mt.

For specific commodities, its forecasted a 3pc increase in wheat planting this year (to 13.3Mha), while area planted to canola is expected to climb by 14pc (to 2.7Mha).

Meantime, barley planting is down an estimated 6pc (to 4.2Mha), with oats declining eight per cent (to 0.9Mha).

Domestically, Australian wheat track prices its expected to remain near to A$300 per tonne for the coming 12 months, with marginal strengthening in the first quarter of 2022.

Australian feed barley track prices its forecast to trade at around A$250/t over the same period, with some softening in quarter three 2021, and canola prices to remain elevated.

This week Fao released its monthly report, which indicated that world food prices rose in May at their fastest monthly rate in more than a decade, posting a 12th consecutive monthly increase to hit their highest level since September 2011.

FAO also issued its first forecast for world cereal production in 2021, predicting output of nearly 2.821 billion tonnes – a new record and 1.9% up on 2020 levels.

The Food and Agriculture Organization’s food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat, and sugar, averaged 127.1 points last month vs. a revised 121.3 in April.

The April figure was previously given as 120.9.

On a year-on-year basis, prices were up 39.7% in May.

FAO’s cereal price index rose 6.0% in May month-on-month and 36.6% year-on-year.

Corn prices led the surge and are now 89.9% above their year-earlier value.

However, FAO said they fell back at the end of the month, lifted by an improved production outlook in the United States.

The vegetable oil price index jumped 7.8% in May, lifted primarily by rising palm, soy, and rapeseed oil quotations.

Palm oil prices were boosted by slow production growth in southeast Asia, while prospects of robust global demand, especially from the biodiesel sector, drove up soyoil prices.

Meantime, FAO said also its forecast for record world cereal production this year was underpinned by a projected 3.7% annual growth in maize output.

Global wheat production was seen rising 1.4% year-on-year, while rice production was forecast to grow 1.0%.

World grain utilization in 2021/22 was seen increasing by 1.7% to a new peak of 2.826 billion tonnes, just above production levels.

“Total cereal food consumption is forecast to rise in tandem with world population,” FAO said.

Watching next grains market, June futures go into delivery status this week, although such are unlikely at the current weak basis. 

The weekly Export Inspections and Crop Progress reports will be back to their normal Monday release slots. 

EIA ethanol data will be out on Wednesday, with USDA weekly Export Sales data out on Thursday. 

Thursday will also feature USDA’s monthly Crop Production and WASDE Supply/Demand reports.

Have a good weekend.

N.B.: In Sicily its just began the wheat harvest, then we could have some delays in market updates.

The wheat is of excellent quality.

Has an average protein content of greater than 12% and a good test weight.

The average yield per hectare up to now fluctuates around 2.8 tons / hectare

Good luck to all.