LAST WEEK MARKET COMMENT

Chicago Board of Trade will be closed on this morning to observe the Martin Luther King Day holiday, so we don’t get a look at market sentiment until Tuesday.

Meantime, US farm markets were mixed last Friday but mostly lower.?

Indeed, corn prices after felling 4% below prior six-month highs, have attracted some bargain buyers with the result to gain around 1.5% on Friday session.?

Other crop prices were not so fortunate as soybeans eased more than 0.5%.

Soymeal closed 0.81% weaker.?

Bean oil was substantially unchanged in the front months.?

Meanwhile the latest selloff in wheat caused some contracts to lose more than 2%.

Particularly, CBOT SRW futures gave back 0.70%.?

KC wheat closed with double digit losses losing 1.94%.?

HRS prices ended the week ending session down by as much as 1.9%.?

For the week, corn prices closed out the week with March dropping 1.73%, but only thanks Friday's session which helped to limit those losses.

Soybeans fell 2.87% since last Friday on the late week weakness.?

Soybean meal was the weight on the entire market, down 4.56%.?

Soy oil slipped as week albeit the loss of 0.54% were minimal.?

The wheat complex, posted sharp losses for the week, with MPLS on the first line, down 4.88%.?

KC wheat slipped by 3.87%.

CBOT was down 2.24% on the week.?

In energy market, oil prices settled higher last Friday, boosted by supply constraints and worries of a Russian attack on neighbouring Ukraine, pushing prices toward their fourth weekly gain despite sources saying China is set to release crude reserves around the Lunar New Year.?

Indeed, Brent crude futures settled $1.59, or 1.9%, higher at a 2-1/2-month high of $86.06 a barrel, gaining 5.4% in the week.

U.S. West Texas Intermediate crude gained $1.70 , or 2.1%, to $83.82 per barrel, rising 6.3% in the week.

Both Brent and U.S. futures entered overbought territory for the first time since late October.

Meantime, oil prices continued to rise also on this morning, with Brent futures touching their highest in more than three years, as investors bet supply will remain tight amid restrained output by major producers with global demand unperturbed by the Omicron coronavirus variant.

Thus, Brent crude futures gained 40 cents, or 0.5%, to $86.46 a barrel by 06:41 GMT.?

Earlier in the session, the contract touched its highest since Oct. 3, 2018 at $86.71.

U.S. West Texas Intermediate crude was up 58 cents, or 0.7%, at $84.40 a barrel, after hitting $84.78, the highest since Nov. 10, 2021, earlier in the session.

On the freight market, the Baltic Exchange’s dry bulk sea freight index fell for a sixth straight session last Friday, weighed down by weaker rates across vessel segments.

The overall index, which factors in rates for capesize, panamax and supramax vessels, fell 109 points, or 5.8%, to 1,764, its lowest since early March 2021.

The index has lost nearly 23% this week.

The capesize index dropped 250 points, or 14.3%, to 1,496, its lowest since late Feb. 2021.?

The index is down 38% this week.

Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, dropped by $2,070 to $12,407.

The panamax index slipped 77 points, or 3.1%, to 2,375, its lowest since Dec. 21.

Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, fell by $693 to $21,376.

The supramax index fell 18 points to its lowest level since April at 1,897.

On equities markets, U.S. stock indexes last Friday settled mixed.??

Strength in energy and technology stocks on Friday supported gains in the S&P 500 and Nasdaq 100.??

Losses in mega-cap U.S. bank stocks kept the Dow Jones Industrials in negative territory the entire day after JPMorgan Chase and Citigroup reported disappointing Q4 earnings results.??

Friday’s U.S. economic data was weaker-than-expected and bearish for stocks.

Indeed, U.S. U.S. Dec retail sales fell -1.9% m/m and -2.3% m/m ex-autos, weaker than expectations of -0.1% m/m and +0.1% ex-autos m/m and the biggest decline in 10 months.

U.S. import prices ex-petroleum rose +0.3% m/m, weaker than expectations of +0.6% m/m.

U.S. Dec manufacturing production unexpectedly fell -0.3% m/m, weaker than expectations of +0.3% m/m

The University of Michigan U.S. Jan consumer sentiment fell -1.8 to 68.8.?weaker than expectations of 70.0.

In this context, the S&P 500 eked out a 0.1% gain, closing at 4,662.85.?

It surged in the final minutes of trading after having been down about 1% earlier in the day.?

The tech-heavy Nasdaq posted a 0.6% gain, closing at 14,893.75.?

The Dow Jones Industrial Average fell 0.6% to 35,911.81.

Smaller company stocks also bounced back from an early slide.?

The Russell 2000 index rose 0.1%, to 2,162.46.

For the week, the S&P 500 fell 0.3%, the Dow fell by 0.9% and the Nasdaq fell 0.3%.

The U.S. Dollar Index fell 0.59% at 95.161, its worse weekly performance in eight months.

Meantime, Asian shares were mixed on this morning after China reported that its economy expanded at an 8.1% annual pace in 2021, though growth slowed to half that level in the last quarter.

In this context, the Shanghai Composite index gained 0.6% to 3,542.74, while Hong Kong's Hang Seng dropped 0.7% to 24,2207.75.

South Korea's Kospi sank 1.1% to 2,890.10 after North Korea fired two suspected ballistic missiles into the sea early Monday in its fourth weapons launch this month, South Korea’s military said, with the apparent goal of demonstrating its military might amid paused diplomacy with the United States and pandemic border closures.

In Tokyo, the Nikkei 225 advanced 0.7% to 28,333.52 as the government reported machinery orders rose in November as private investment and manufacturing activity improved during a lull in coronavirus outbreaks.?

Shipbuilders orders surged 170%.

Australia's S&P/ASX 200 climbed 0.3% to 7,417.30.

On the weather side, much of the continental U.S. received rainfall last week, except for Texas and Oklahoma, improving conditions.?

Kansas, Colorado, and Wyoming remained dry.?

Washington, Oregon, Idaho, and Montana all benefited from above normal precipitation, improving drought conditions.?

Meantime, heavy snow for parts of the Lower Great Lakes, Central Appalachians, and the Northeast on Monday.

Heavy snow for parts of the Upper Great Lakes on Tuesday.

There is an Elevated Risk of fire weather over parts of the Southern High Plains and the Southern Rockies on Monday.

Meantime, uncertainty weighs on spring planting intentions in the US, particularly in view of the increase in fertiliser prices.

On the demand side, ahead of the NOPA crush data, analysts are on average expecting 185 mbu of soybeans were processed in December.?

The full range of estimates is to see between 181.7 to 188.7 mbu.?

The average estimate for BO stocks is 1.892 billion lbs.?

Meantime last Friday private exporters announced to USDA the sale of 100,422 metric tons of corn for delivery to Mexico during the 2021/22 marketing year, which began September 1.

Also, private exporters announced to USDA the sale of 100,000 metric tons of soymeal for delivery to Spain during the 2022/23 marketing year, which begins October 1.

On the other hand, the CFTC reported managed money corn traders at 344,379 contracts net long as of 1/11’s settle.?

That was down 21k contracts from the week earlier mainly driven by long liquidation into the USDA reports.?

The commercials were seen 2,27 contracts more net short as they added 8.8k contracts of hedge OI wk/wk.?

As for soybeans, Commitment of Traders data showed soybean spec traders extended their net long during the week that ended 1/11.?

The 7,960 contract stronger spec position was fueled by net new buying into the USDA reports and left managed money 106,879 contracts net long.?

Commercial bean traders added 17,710 shorts and lifted 1.8k long hedges during the week that ended 1/11.?

That left the PMPUs 252,226 contracts net short soybeans going into the reports.?

As for the products, CFTC showed soymeal spec traders were 2,152 contracts more net long through the week to 72,920 contracts. Managed money was 55,907 contracts net long in bean oil as of the 1/11 settle.?

That was a 2,719 contract stronger net position from the week prior.?

As for wheat, the weekly CoT report with data as of 1/11’s settle showed managed money funds were selling into the USDA reports.?

Spec traders were 7,919 contracts more net short in SRW to 27,7764 contracts.?

That was the spec’s largest net short position since July of 2020.?

For KC wheat the funds had closed 10k longs during the week leading into the reports.?

That left the group 42,674 contracts net long as of the 1/11 close.?

Spec traders were reported at 5,734 contracts net long for MGE wheat.?

That was down 3,747 contracts from the week prior mostly from long liquidation.?

In this context, corn basis bids were steady to slightly weak across the central U.S. after sliding 1 to 2 cents lower at four Midwestern locations last Friday.

Soybean basis bids held steady throughout the central U.S..

Funds were net sellers on Friday in 4,000 lots of soybeans and 4,000 lots of wheat.?

They were net buyers in 6,500 lots of corn.

From South America, the prospect of rain in Argentina at the start of this week put pressure on prices and prompted a number of traders, particularly financials, to take profits on their long positions.?

As for corn, on the other hand, the market has been cautious as long as planting conditions in Brazil for safrinha are not known.?

About this, Safras has a production estimate of 132.3 Mt of soybeans for Brazil and 115.64 Mt of corn.

The Buenos Aires Commodity Exchange, cut its Argentinian "good to excellent" corn ratings by 17 points, to 23%, while soybean ratings were reduced by the same amount, to 31%!

Very hot conditions over the weekend in Argentina and Uruguay will need balancing by the much-anticipated rain event.?

However, there is still time for the bean crop but 40 degrees with not much moisture under the crop will not help.

In Europe,?wheat prices continued to fall on Euronext to finally fall back to its lowest level since last October!?

The weight of harvests in the southern hemisphere and insufficient export activity with another risk of seeing the French origin boycotted by Algeria in its latest tender, continued to weigh on the trend.?

Rapeseed, on the other hand, rebounded spectacularly, still in a context of extreme volatility, also fuelled by the close of February options last Friday.?

Meantime, Europe is seemingly heading back to lockdown with many countries restricting the movement of those who have chosen not to get vaccinated.?

Austria has taken these measures along with introducing mandatory shots from 1 February 2022.

From North Africa, Algeria will raise the purchase price of wheat and barley from local farmers to encourage production and achieve food security, the presidency said in a statement on Sunday.

The price for durum will increase to 6,000 dinars ($43.08) per quintal (100 kg) from 4,500 dinars, and soft wheat will fetch 5,000 dinars per quintal instead of 3,500 dinars.

The state will buy barley from local farmers for 3,400 dinars per quintal, up from 2,500 dinars previously.

($1 = 139.2680 Algerian dinars).?

From the Black Sea basin,?the Ukraine’s Ag Ministry publicly mentioned they have no intentions of restricting wheat exports later this year.?

Russia’s Ag Ministry reported next week’s export tax will be $97.50/MT, which is lower than $98.20/MT last week.?

In this context, last Friday, Ukrainian and Russian wheat prices continued to fall amid weak demand and closed down $2.75/t.

Even Iran's purchase of Russian wheat and Algeria's purchase of Ukrainian wheat did not support prices.?

On the local Ukrainian market, wheat prices fell sharply, pressured by weakening hryvnia against the dollar, as tensions rose amid a possible military confrontation between Russia and Ukraine.??

From the Middle Kingdom, Chinese customs data showed 8.866 MMT of beans were brought in during December.?

Chinese soybean imports in 2021 were down 3.8% from the previous year, with a total of 96.53 MMT, according to the latest customs data.?

That’s largely due to lower demand from the country’s livestock sector.?

On the other hand, China sold 501,283 tonnes of wheat, or 100% of the total offer put up for auction on Jan. 12, said a statement from the National Food and Strategic Reserves Administration.

The grain, targeted only at milling plants, was sold at an average price of 2,713 yuan ($427.43) per tonne.

The sale followed an auction from the reserves a week earlier where 506,568 tonnes of wheat, also 100% of the total offer, were bought out by millers.

($1 = 6.3472 Chinese yuan renminbi).

From Australia, the updated BOM 8-day forecast this morning has widespread 25-50mm falls for a large part of northern NSW, which will continue to boost summer crop potential.?

The forecast for southern NSW and into Victoria has backed off, since late last week, with 5-15mm forecast.?

South Australia forecast has been increased with moisture pushing down from the north.

Meantime, this new year weather issues, continue to cause headaches for growers as headers roll through the tail end of the program.

About this, Australia exported 1,630,698 tonnes of wheat in November 2021, up 10 per cent from 1,478,241t in October, according to the latest export data from the Australian Bureau of Statistics (ABS).

China was the biggest market for the month, taking 669,657t, followed by Indonesia on 256,929t and The Philippines on 176,365t.

Containerised exports at 237,349t were almost triple the 79,668t shipped in November 2020, and up 3pc from the 230,883t shipped in October 2021.

In bulk, November 2021 exports at 1,393,349t were more than triple the 425,263t shipped in November 2020, and up 12pc from the 1,247,358t exported in October 2021.

The big upswing in the year-on-year figures indicates the bumper crop harvested in Queensland last year, and the large carry-out, in New South Wales in particular.

The NSW carry-out buffered export programs against the impact of a rain-delayed 2021 harvest, as did Western Australia’s strong and early start in its record harvest.

NSW on 646,985t was the biggest exporter of wheat including durum by volume in November 2021, followed by WA on 360,828t and Victoria on 270,382t.

Durum exports for November at 1504t are down from 28,877t in October, and mark the rundown of durum stocks from the 2020-21 crop.

Meantime, Aussie local cash bids to growers rounded out the week relatively unchanged.

January ASX wheat fell $12.50/t as its expiry approaches and with large volume of Brisbane wheat being declared.

Barley continued to find its bid through the export and domestic pathway over the week.

Canola fell again on Friday on the bid side but markets remain thin for now.

Watching this week's market, US markets and Federal government offices will be closed on this morning due to Martin Luther King Jr. Day.?

That will push back the weekly reports back a day, starting with the Export Inspections report on tomorrow morning.?

Weekly EIA data will be released on Thursday morning.?

The weekly Export Sales report is expected to be delayed to a Friday morning release because of the Monday holiday.?

Monthly Cattle on Feed data will be released on Friday afternoon, with the Cotton Ginnings report out that morning.?

February serial options for the grains expire on Friday.

Author: Sandro F. Puglisi

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