LAST WEEK MARKET COMMENT

Good morning Farmer Family ...

U.S. farm markets ended lower last Friday!

A stronger dollar and hopes of progress in negotiations to maintain the Ukrainian Black Sea grain export corridor pressured down wheat prices.

Corn and soybeans followed wheat lower, were dragged by lackluster demand and by lower energy and equities markets.

Particularly, Chicago SRW wheat contract was 3.64% lower, flipping on red for the week and closing on a 2.33% loss from the prior Friday.?

Kansas City HRW wheat contract settled 3.05% lower for the session, and ended the week down by 1.7%.?

Minneapolis spring wheat price was 2.53% lower on Friday and settled a net red by 1.42% from Friday to Friday.?

The corn market closed on a 1.15% loss on Friday.

That limited the week’s move to a 0.95% gain.

Soybean price was down 0.86% on the last trading day of the week.?

However, for the week, posted a net 1.23% higher.?

Meal closed with just a 0.02% gain on Friday, but was around 2.6% higher for the week.

Bean oil price dropped 1.7% during the end week session, that send the contract 1.95% lower from the prior Friday.

Wheat prices surged during the past week after Russia's Geneva U.N. ambassador had said Moscow could reject a renewal of the Ucraine grain deal.

However, by the end of the week, came some hopes of progress in negotiations after the Russian President Vladimir Putin meet the Turkish counterpart Tayyip Erdogan.

Then, Friday's strengeten dollar, and poor export demand saw in the delayed weekly export sales report, weighed still more on grain prices.

Particularly, the dollar firmed on higher bond yields and weak stocks (read more below).

On the other hand, poor export demand, pressured both corn and soybean price, as corn net sales were below trade expectations, while soybeans sales were tepid, although in line with estimates.

Indeed, USDA’s weekly Export Sales data showed 200,191 MT of corn was sold during the week ending 10/6.?

That was down from prior week’s sale and was just 20% of the same week last year.?

USDA had 422,590 MT shipped for a season’s total of 2.67 MMT.?

That trails last year’s campaign by 22%.?

Total corn commitments trail last year’s pace by 51% at 13.423 MMT.?

As for soybean, FAS data had soybean bookings as 724k MT for the week that ended 10/6.?

That was down 7% on the week and was just 26% of the same week last year.?

Several large daily soybean export sales announcements by USDA past week totalling 1.622 million tonnes, mostly to top importer China, offered little support to futures as the deals were considered routine sales.

Meantime, soybean shipments were a MY high of 888k MT taking the accumulated total to 2.72 MMT.?

Total soybean commitments were 28.2 MMT, down by 3% from the same week last year.?

In the products, USDA finished out the 21/22 meal season with weekly total shipments of 11.7 MMT.?

Meal sales on the books then began the 22/23 season with 2.98 MMT.?

Bean oil finished weekly reporting with 678,426 MT for the 21/22 season.?

CMY bookings are at 19,798 MT.?

As for wheat, USDA reported 212k MT of wheat was sold for export during the week that ended 10/6, dropping to a 3-week low.?

That was down from 229k MT prior week and from 567k MT during the same week last year.?

Wheat commitments trail last years sluggish pace by an additional 4% at 11.127 MMT.?

After the sessions close, weekly CFTC data showed managed money corn spec traders were net buyers through the week that ended 10/11.?

Particularly the report indicated managed money spec funds increasing their net long position in corn futures and options by 23,649 contracts.?

That took them to net long 267,377 contracts as of Tuesday.

Commercials added 51k new hedges through the week, extending their net short by 23k contracts to 463,633.?

As for soybean, report had sell pressure from spec traders via 8k contracts of closed longs and 3.8k new shorts through the week of 10/11.?

That reduced the managed money net long to a 44-wk low of 65,738 contracts and was down 11,750 contracts from the prior week.

Commercial soybean traders were adding hedges, with 27.4k new longs and 16.4k new shorts.?

The commercial net short was reduced to 95,875 contracts as of the 10/11 settle – that is their weakest net short since Feb 2020.?

On the products side, CFTC showed long liquidation, reducing the managed money net long in soymeal by 9.3k contracts to 70.4k and their net long in bean oil by 1,770 to 60,984 contracts.?

As for wheat CFTC data showed the managed money wheat traders were selling SRW through the week that ended 10/8.?

The 7.5k new shorts left the group at a 19.5k contract net short.?

In the hard red wheats the funds were closing shorts.?

For KC wheat that left the group 877 contracts more net long to 26,508, and in MPLS wheat that left the group 328 contracts more net long at 4,116.?

Analysts expect NOPA members processed 161.3 mbu in September to start the 22/23 season.?

The full range of estimates is from 152 – 170.4 mbu.?

Soybean oil stocks are expected at 1.522b lbs, which would be down from 2.7% from August.?

In this context, basis were mixed in the Gulf and Pacific Northwest (PNW) past week.?

Gulf HRS basis experienced the most significant drop in basis, after navigation along the Mississippi River was restored.?

Rising rail rates, reflected in the secondary rail market and the large soybean purchase by China also kept basis firm across wheat classes as the additional business squeezed available export capacity.

Meantime, commodity funds were net sellers of CBOT wheat, corn, soybean and soyoil futures on Friday and net even in soymeal futures.

On this morning, Chicago wheat prices gained ground, with prices rising on concerns over supplies from the Black Sea region and crop damage from widespread rains in parts of Australia.

Corn and soybeans, on the other hand, slid for a second consecutive session.

Particularly, the Chicago Board of Trade most-active wheat contract added 0.5% to $8.64-1/4 a bushel, as of 04:22 GMT, recouping some of previous session's deep losses.

However, corn fell 0.5% to $6.86-1/4 a bushel and soybeans gave up 0.4% to $13.78-1/2 a bushel.

In energy markets, oil prices plummeted more than 3% past Friday as global recession fears and weak oil demand, especially in China, outweighed support from a large cut to the OPEC+ supply target.

Brent crude futures, indeed, dropped $2.94, or 3.1%, to settle at $91.63 a barrel, while U.S. West Texas Intermediate (WTI) crude futures fell $3.50, or 3.9%, to $85.61.

The Brent and WTI contracts both oscillated between positive and negative territory for much of Friday but fell for the week by 6.4% and 7.6%, respectively.

The International Energy Agency (IEA) last Thursday cut its oil demand forecast for this and next year, warning of a potential global recession.

In U.S. supply, energy firms past week added eight oil rigs to bring the total to 610, their highest since March 2020.

Meanwhile, money managers raised their net long U.S. crude futures and options positions by 20,215 contracts to 194,780 in the week to Oct. 11, the U.S. Commodity Futures Trading Commission (CFTC) said.

On this morning, oil prices rose, after China rolled over liquidity measures to help its pandemic-hit economy, igniting hopes for a better fuel demand outlook (read more below).

The country also vowed to greatly increase domestic energy supply capacity and step up risk controls in key commodities including coal, oil and gas, and electricity.

Thus, Brent crude futures rose 81 cents, or 0.88%, to $92.44 a barrel by 06:42 GMT.?

U.S. West Texas Intermediate crude was at $86.33 a barrel, up 72 cents, or 0.84%.

In ocean freight markets, the Baltic Exchange’s dry bulk sea freight index edged up past Friday to snap a six-session losing streak, but posted its worst week since late August on sombre demand for all its vessel segments.

The overall index, indeed, rose 20 points, or about 1%, to 1,838.

However, the main index was down 6.3% for the week, its worst since late August.

Particularly, the capesize index, which also snapped a six-session declining streak, rose 72 points, or 3.4%, to 2,166.?

However it was down 9.6% for the week.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as coal and steel-making ingredient iron ore used in construction, were up $600 to $17,965.

The panamax index, in contrast, lost 7 points, or 0.3%, to 2,081 and marked a weekly fall of about 7%.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, dropped $67 to $18,729.

The supramax index was down 6 points at 1,690.

In equity markets, last Friday the S&P 500 fell 86.84 points, or 2.37%, to 3,583.07.?

The Dow dropped 403.89 points, or 1.34%, to 29,634.83.?

The Nasdaq slid 327.76 points, or 3.08%, to close at 10,321.39.

For the week, the Dow gained 1.15%, the S&P 500 lost 1.56% and the Nasdaq fell 3.11%.

Small company stocks also fell sharply on Friday.?

The Russell 2000 gave up 46.01 points, or 2.7%, to close at 1,682.40.

The pan-European STOXX 600 index rose 0.56% and MSCI's gauge of stocks across the globe shed 1.30%.

Emerging market stocks rose 1.03% as Latin American currencies fell due to the dollar strength.

US inflation was a headline item past week.??

CPI was down in September, but is still at 8.2%.??

Core inflation, ex-food and energy, was a 40 year high 6.6%.?

The US equity markets struggled with that Thursday news, initially sharply lower, closing sharply higher by Thursday night, and then selling off in a bad case of buyer’s remorse ahead of the weekend.?

The sell off has been somewhat justified, as core inflation tends to spill over into wages and can feed a self-reinforcing spiral.?

The Fed has to put a stop to it, because it hurts those on a fixed income, and because wages tend not to keep up.?

As the Wall Street Journal pointed out in an article on Thursday night, real wages since President Biden took office have fallen more (-4.3%) than they did during the 2006-2009 financial crisis.

Meantime, bond yields rose after the Michigan report.?

Particularly, the yield on the 10-year Treasury, which influences mortgage rates, rose to 4.02% from 3.86% shortly before the report came out.?

It's trading near its highest level since 2008.

The yield on the 2-year Treasury, which tends to track expectations for future Fed action, rose to 4.51% from 4.40% just before the report came out.

Consequentially, in currency trading, the U.S. Dollar Index remained firm past week, increasing from prior week's 112.39 to close at 113.25.

The dollar kept rising against Japan's yen, hitting a fresh 32-year peak of 148.86.

Japanese Finance Minister Shunichi Suzuki on Thursday reiterated the government's readiness to take steps against excessive currency volatility.

The euro was down 0.55% at $0.9719.

The dollar rose also against the sterling after the British prime minister's firing of her finance minister.

Sterling fell sharply after Britain's Liz Truss fired finance chief Kwasi Kwarteng and scrapped parts of their economic package, which had caused an uproar in financial markets.?

Sterling was last trading at $1.1171, down 1.39%, after falling as low as $1.1149.

Last Friday was expected to be the last day of the Bank of England's bond buying program set up to stabilize government bond, or gilt markets, after investors were spooked by unfunded tax cuts announced in a "mini-budget" last month.

Investors appeared to have little confidence in the prime minister's position or the likelihood that her decisions on Friday could restore Britain's credibility in financial markets.

Clifford Bennett, Chief Economist at ACY Securities, noted the U.S. dollar will likely continue to rise as interest rates are pushed higher to counter inflation.

“The outlook is grim. The economic horizon is dark,” he said of the American economy.?

”The U.S. dollar will continue to strengthen for the moment, particularly against other Western currencies."

On this morning the U.S. dollar rose to 148.74 Japanese yen from 148.63 yen.?

That's a nearly 32-year low for the yen against the dollar.

Meanwhile, the euro cost 97.37 cents, up from 97.21 cents.

Meantime, Asian shares were mixed this Monday as investors kept their eyes on the weeklong Communist Party congress in China.

Chinese President Xi Jinping's comments at the Party Congress reassured accommodative policies for the economy.

China is expected to release trade and economic data this week.?

Although its third-quarter GDP growth could rebound from the previous quarter, the country is facing what will most likely be its worst performing year in almost half a century.

In this context, on this morning, China's central bank rolled over maturing medium-term policy loans while keeping the interest rate unchanged for a second month.

Analysts said the full rollover is a signal that the central bank would continue to maintain loose monetary policy.

Fresh updates from China’s Party Congress are being scrutinized, with the emphasis on technological advancement and national security seemingly brought up as high priorities for China’s longer-term direction.?

Further de-coupling f rom U.S. technology seems to be the story, analysts said.

It's expected to be reappoint Xi Jinping as leader for the next five years, reaffirming his grip on power and stronger state control over the economy.?

Analysts expect no change to the “zero-COVID policy.”

On the other hand, Japan's industrial production for August showed moderate signs of improvement, the government said.?

Industrial production rose 3.4% from the previous month, and 5.8% from the previous year, according to Ministry of Economy, Trade and Industry data released Monday.

In this context, benchmarks dropped in Tokyo, Sydney and Hong Kong, but they recovered in afternoon trading in Seoul and Shanghai.?

Mumbai gained.?

Particularly, Japan's benchmark Nikkei 225 slipped 1.2% in afternoon trading to 26,775.79.?

Australia's S&P/ASX 200 dipped 1.4% to 6,664.40.?

South Korea's Kospi rebounded to gain 0.3% to 2,219.71.?

Hong Kong's Hang Seng lost 0.2% to 16,561.97, while the Shanghai Composite rose 0.5% to 3,086.38.?

In Mumbai, the Sensex gained 0.5%.

Going back to analyzing the other agricultural markets, in Canada,?

producers' deliveries of common wheat in week 10 of the shipping season, were at 477,7k mt.

That was firmer from 459,8k posted a week erlier.

Deliveries of durum wheat increased to 149.6k mt down from 134.5k mt a week earlier.

Meantime, Canada exported 593.9k mt of common wheat in week 10 of the shipping season.

That was firmer from 380.4k mt a week earlier.

Durum wheat exports, in contrast, were lower at 48.6k mt, down from 75.k mt a week earlier.?

Consequentially, total Commercial Stocks of common wheat stood at 3.056,4k mt, down from 3.300,7k mt a week earlier.

As for durum, total commercial stocks were at 886,2k mt, up from 759,8k mt a prior week.?

From South America, USDA’s attaché had Argentina’s ‘soy dollar’ expanding September soybean export sales to the largest volume in recent years at 16 MMT.?

That makes up ~70% of their updated full year forecast, which is still below 17/18 and 18/19’s pace.?

According to the Rosario Grains Exchange, Argentina’s wheat harvest is likely the lowest in 7 years.?

The Exchange adjusted its forecast down 500,000 MT to 16.0 MMT.?

Analysts blamed cool weather and drought conditions for the crop

adjustment.?

The Buenos Aires Grains Exchange (BAGE) forecast the wheat harvest at 16.5 MMT, down 6% from their previous forecast of 17.5 MMT.

Meantime, Argentina corn planting is progressing at its slowest pace in six years due to a protracted drought, the Rosario grains exchange (BCR) said on Friday, which will drag down the amount of early-planted corn that normally has a higher yield.

In Europe, France has planted 21% of their 23/24 wheat crop through 10/10, which is up from 3% prior week and compares to 11% at the same time last year, FrancAgriMer said on Friday.?

French corn was 83% harvested through 10/10 according to FrancAgriMer.?

That is up from 14% last year.?

37% of winter barley was sown.

However, rain past week and persisting fuel shortages linked to oil refinery strikes may slow sowing progress.

Meanwhile, the very high temperatures currently prevailing in France allow the first sowings to emerge quickly.?

From Russia, Russia's Federal Security Service (FSB) has published information saying it believes the explosives used to blow up the Kerch bridge originated from Odesa before travelling to Bulgaria by sea on ships leaving Ukraine as part of the grain deal.?

This would violate the grain deal terms, and Russia would have grounds to terminate the agreement or not extend it beyond the initial 19 November term.?

Russian President Putin said “If it turns out that humanitarian corridors are being used to commit terrorist acts, then, of course, this will call into question the functioning of this corridor.”

Despite this, officials from the UN were in Moscow to discuss the agreement renewal yesterday.?

Russia and Ukraine are both seeking changes to the deal as part of discussions to extend the initiative beyond the current deadline.?

Russia wants to see a pipeline that transports its ammonia to Ukraine’s Odesa port reopened as part of the new terms, UN coordinator for the Black Sea Grain Initiative, Amir Abdulla, said in an interview in Istanbul on Friday.?

Ukraine is seeking to extend the deal by more than a year, and include Mykolayiv as a fourth exporting port, he said “It’s far too important to the rest of the world for it to be allowed to falter,” Abdulla said, adding that full negotiations are yet to start.?

“So, I think it will be extended. But there are no guarantees.”

Meantime, Russian kamikaze drones hit tanks with sunflower oil at one of the terminals in the Ukrainian port city of Mykolaiv late on Sunday, the city mayor said on this morning.

Russia has repeatedly complained that it faces difficulty exporting grain and fertilizer despite the third consecutive week of increased wheat exports.?

Russia has exported 13.2 MMT of wheat this season which runs from JulyJune.?

Meantime, past week the agriculture ministry revised the export tax for wheat increasing it by 34% to $46.53/MT.

Particularly, as of October 19, the export duty on wheat will increase to 2,934.3 from 1,926.8 rubles per ton a week earlier.

The duty on barley, also will increase to 2,479.9 rubles from 1,632.0 rubles per ton a week earlier.

For corn, in contrast, it will down to 2,410.1 rubles from 3,114.1 rubles,?a week earlier.

This new duty rates will be in effect through October 25, inclusive.

The duties were calculated based on indicative prices: $308.3 per ton for wheat ($307.7 a week earlier), $279.8 for barley ($280.9), $278.2 for corn ($317.6).

In Ukraine, the Ag Ministry showed the 3.7 MMT of wheat exports for the year trail last season’s pace by 63%.?

However, all grain exports out of Ukraine are down by 36% yr/yr through 10/12.?

The Ukrainian Ag Ministry released data showing corn exports unseasonably high at 5.6 MMT through 10/12.?

That is up by 263% yr/yr, likely driven by last years unshipped stocks and active exports ahead of a potential grain corridor loss threatened by Russia.??

From South East Asia, India has allowed export-oriented units and the firms set up in Special Economic Zones to export flour made from imported wheat, a government order said on Friday, conceding to the demands of food processors to allow shipments of value-added products.

India will allow food processors to import duty-free wheat against a commitment to export flour, the order said.

After banning wheat exports in May, the government of Prime Minister Narendra Modi restricted wheat flour exports in August to keep a lid on local prices.

The ban on wheat exports boosted demand for Indian wheat flour and the country's flour exports jumped 200% during April-July 2022 from a year earlier, lifting prices in the local market.

From Australia, markets remained practically unchanged at the end of last week.?

Harvest delivery slots remained standoff-ish and old crop rallied.?

It has become a logistical nightmare to get grain from upcountry to ports and mills.

The impact of the rainfall last week is still being assessed but it is certainly not good for large parts of NSW and Victoria where crops are under water.?

Whilst the tonnage may still be there the impact on quality will be significant and the ability to harvest some of these crops will be the next big question.

Unfortunately, the 8-day forecast is ugly with a widespread 50-100mm expected in Qld, NSW and parts of Vic and heavier localised falls of 100-150mm are possible over recently impacted areas.?

While totals might change in the lead up to this event, rainfall is pretty much guaranteed, and it won’t take much to see rivers rise again.?

However, Athe county is on track to harvest a near-record winter grain crop of 61.9 million tonnes (Mt).

Excessive rainfall will impact certantily outcomes for growers in parts of the country, according to Rabobank’s 2022-23 Australian Winter Crop Forecast but, inspite the weather challenges, the nation is set to harvest its third consecutive bumper winter crop.

Forecast indeed to be down only one per cent on last year – which broke all-time production records – the total grain crop is estimated to be 41pc above the five-year average.

Particylarly, nationally, Rabobank forecasts wheat production to come in at 35.5Mt – down 2pc on last year, but 47pc above the five-year average.

Barley production is expected to reach a record 14.8Mt, up 7pc on last season and 31pc above the five-year average.

The canola crop is forecast to reach a record 7.2Mt, also a 7pc increase on the previous year and a whopping 81pc up on the five-year average.

The exportable surplus in Australia from the 2022/23 harvest is expected to exceed the nation’s official estimated 2021 national export capacity of 47.5Mt.

Adding an approximate figure for still unsold 2021/22 crop, the exportable surplus could rise to 53.5 million tonnes, and this does not include an unknown volume of grain owned by the grain trade itself, Rabobank analysts said.

For Australia’s grains and oilseeds, the report sees the strong local supply limiting the potential of prices.

Particularly, locally for wheat, Rabobank forecasts national average APW1 Track/Free-In-Storeprices to trade at $390-420 per tonne over the next 12 months, “with upside towards the end of quarter one and the beginning of quarter two 2023”.

For feed barley, national average Track/ Free-In-Store prices are expected to trade at $320-350/t.

Strong global and local supply of canola is bearish for prices.

Thus, prices for non-GM canola, track/FIS are expected to trade at $700-830/t in 2023.

Meantime, Australia exported 152,452 tonnes of canola in August, down 55 per cent from the 335,929t shipped in July, according to the latest data from the Australian Bureau of Statistics (ABS).

Japan on 82,963t was the biggest market by far for August-shipped canola, followed by 51,020 and the United Arab Emirates on 10,841t.

The August 2022 figure is little different from August 2021, when 151,763t of canola was shipped, and Japan was the biggest market on 85,824t.

On the international trade scene, an importer group in the Philippines is believed to have bought around 165,000 tonnes of animal feed wheat expected to be sourced from Australia in an international tender which closed late last week.

It was sought in three 55,000 consignments for shipment in 2023 in January, February and March.

It was purchased at about $345 a tonne c&f.?

Sellers were believed to include trading houses ETG and CBH.

South Korea's Major Feedmill Group (MFG) purchased about 65,000 tonnes of animal feed wheat expected to be sourced from Australia in a private deal on Friday without issuing an international tender.

It was purchased at an estimated $354.49 a tonne c&f including a surcharge for additional port unloading.

Shipment is in 2023 between Feb. 7 and March 17. Seller was believed to be trading house CJ International.

Watching this week's market, the week begins with the weekly Export Inspections report today in the afternoon, then with the Crop Progress report overnight after the sessios close.?

NOPA will also release the monthly update to their crush report for September.?

Skip ahead to Wednesday and EIA will publish their weekly update for ethanol production and stocks.?

The weekly Export Sales report will be back on normal schedule with a Thursday morning release.?

Finally on Friday, NASS will put out the monthly Cattle on Feed report.?

That's all, thank you.

We wish you a good day and a good start to the week.

Author: Sandro F. Puglisi??

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