LAST WEEK MARKET COMMENT

Good morning Farmer Family ...

US farm markets closed mixed but mostly lower, past Friday.

Corn price was 0.08% lower.?

Soybean price closed 0.44% higher.

Soymeal gained 1.69%.

Soy oil tumbled 0.72% lower.

The wheat complex ended the session with losses in all three markets.

Notabily, Chicago SRW closed 0.5% weaker.

Kansas City HRW dropped 1.92%.

Minneapolis spring wheat prices closed 1.01% in the red.?

First, also during the end week session, we saw a broad financial markets jitter.

Fears of a potential global recession in 2023, indeed, continued to spill over into the commodity space weighening both on corn and wheat.

Corn and wheat markets were supported, early in the session, by a potential slower Ukrainian export paces, as a result of the Friday's morning Russian missile strikes.?

Drought worries in Argentina also helped prop up the markets early in the session.

However, gains were limited by a stronger dollar.

Then, wheat prices faded, as a winter precipitation system, helped past week replenish depleted soil moisture levels across the U.S. Plains and Midwest.

Soybeans, on their part, were underpinned by a hot demand for soymeal, mainly due Argentina’s drought concerns.?

Also, a robust weekly export sales report from USDA, which highlighted a 69% weekly increase in 2022/23 soybean export sales orders, surprised market watchers.

Soy oil, meantime, tumbled, as money managers liquidated their long positions, on global recession fears.

In this context, commodity funds were net sellers on Friday for 1,000 lots of corn and 1,500 lots of wheat.?

They were net buyers for 3,500 lots of soybeans.

For the week, corn prices achieved a 1.4% gain since the prior Friday, with much of the movement coming early in the week.?

Soybeans pulled back some on the week, down 0.25%.?

Meal was the weakness of the complex, down 1.82%.?

Soybean oil, in contrast, bounced back with a 5.58% move higher week over week.?

The wheat complex bounced after a multi-month low, with the three markets all higher.?

Chicago led the way, up 2.62%.?

Kansas City, had a 1.32% move higher,

Minneapolis spring wheat rounded out the strength, up 0.89% week over week.

The market begun to move into the holiday lull.

Meantime, Gulf HRW basis only changed marginally past week.?

Trade sources anticipate light demand and farmer selling until after the new year starts.?

Gulf HRS basis made a full return to pre-Thanksgiving values, following the resolution of the rail strike in mid-November.?

PNW HRW and HRS basis firmed with severe winter weather advisories and expected higher transportation costs for Montana, North Dakota, and Minnesota.?

SW prices and SRW basis continued to creep down, pressured by competition and a combination of low year-end demand and lack of farmer engagement.

Corn basis remained strong across the US past week, as farmer selling is slow and ethanol and feed demand remained strong.

After the sessions close, Friday's weekly CoT report showed corn spec funds were 127,106 contracts net long as of December 13.?

That was a 6,893 contract stronger net long through the week given short covering.?

Commercial corn traders closed out another 33k short hedges, reducing their net short by 11k to 367,770 contracts.

As for soybean, the report had the funds at 119,580 contracts net long in soybeans on 12/13.?

That was a 20k contract increase through the week – mainly fueled by net new buying.?

Commercial soybean hedgers added 24k new short hedges for a 160,124 contract net short as of 12/13.?

In the products, CFTC had the funds 15,977 contracts more net long at 114,486 contracts in meal.?

Soy oil spec traders dumped another 8.3k longs for a 9.2k contract weaker net long of 53,349 contracts as of 12/13.?

As for wheat, CFTC’s weekly CoT report showed managed money was 63,004 contracts net short in CBT wheat as of 12/13.?

That was 378 contracts less net short than the week prior.?

The funds’ net new selling offset their net new buying in KC wheat, reducing their net long by another 1.1k contracts to 8,540.?

In Spring wheat, managed money was 874 contracts more net short at 3,922 contracts.?

On this morning, Chicago soybean futures slid 1% to their lowest levels in almost one week, while corn lost ground as worries over a global economic downturn weighed on prices.

Wheat edged higher, recouping losses from the previous session with an escalating conflict between Russia and Ukraine fuelling concerns over supplies.

Notabily, the most-active soybean contract on the Chicago Board of Trade was down 1.1% at $14.63-1/4 a bushel, as of 04:06 GMT, the weakest since Dec. 13 while corn gave up 0.8% to $6.48 a bushel.

Wheat added 0.1% to $7.54-1/2 a bushel.

Global grain trader Archer Daniels Midland Co has closed "a few" grain elevators and edible bean facilities in North Dakota due to weather-related travel concerns, a company spokesperson said in an email statement on Friday.

However, fears of demand destruction are weighing on prices of agricultural commodities.

The U.S. Federal Reserve, the Bank of England and the European Central Bank last week revived investors' recession worries by signalling more interest rate rises to contain inflation.

For the wheat market, Russia-Ukraine war remains the key issue, which could disrupt supplies.

A colder-than-usual spell in parts of Europe is not expected to cause much harm to winter grains and may benefit crops after a very mild autumn.

In energy markets, oil fell by more than $2 per barrel past Friday.

Brent crude futures, indeed, settled at $79.04 per barrel, down $2.17 or 2.4%, while West Texas Intermediate futures fell by $1.82, or 2.4%, to settle at $74.29 per barrel.

As we said, the U.S. Federal Reserve, the Bank of England and the European Central Bank revived investors' recession worries by signalling more interest rate rises to contain inflation.

However, both benchmarks finished the week higher, aided by rallies in the first three days.?

Heavy crude benchmarks, indeed, have strengthened early the week, as the Keystone pipeline shutdown continued without a timetable for restart.?

Oil prices were also supported past week, as officials said the U.S. Energy Department will repurchase 3 million barrels of domestic crude oil for the Strategic Petroleum Reserve.

On this morning, oil rose as the prospect of demand recovery, led by China's loosening of COVID-19 curbs and the United States' decision to buy back oil for its state reserves, gained the upper hand over global recession fears.

Thus, Brent crude futures gained 42 cents, or 0.5%, to $79.46 a barrel by 07:53 GMT while U.S. West Texas Intermediate crude was at $74.67, up 38 cents, or 0.5%.

Despite a surge in COVID cases, the reopening optimism and accommodative policy improve oil's demand outlook by China.

Average jet fuel demand jumping by 75%, or nearly 170,000 barrels per day, in two weeks, according to satellite data firm Kayrros.

On Friday, news outlet Caixin reported that China plans to increase flights with a goal to restore the country's average daily passenger flight volumes to 70% of 2019 levels by Jan. 6.

China also pledged to focus on stabilising its economy in 2023 and step up policy adjustments to ensure key targets are hit.

The main tools for growth will be fiscal stimulus and stable monetary policies.?

The announcement by the U.S. Energy Department on Friday that it will begin repurchasing crude oil for the Strategic Petroleum Reserve for delivery in February next year also supported the outlook for stronger prices.

In ocean freight markets, the Baltic Exchange’s dry bulk sea freight index rose on Friday and posted its biggest weekly percentage gain since late-September, buoyed by strong demand for capesize vessels.

The overall index, indeed, rose 32 points, or about 2.1%, at 1,560, its highest since Oct. 27.

The main index gained 12.6% for the week, its biggest weekly gain since Sept. 23.

Notabily, the capesize index was up 113 points, or about 5.4%, to its highest in more than eight weeks at 2,208.?

It posted a weekly gain of 31.2%.

Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes of coal and steel-making ingredient iron ore, increased $938 to $18,312.

The panamax index lost 6 points, or about 0.4%, at 1,652.?

It was down 0.4% for the week.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, decreased $55 to $14,869.

The supramax index shed 10 points at 1,157, although it gained 0.4% for the week.

In equity markets, US stocks Friday extended Thursday’s rout on concern that the resolve of the Fed and ECB to keep raising interest rates to fight inflation will tip the global economy into recession.??

Stocks remained lower Friday after economic news from S&P Global showed U.S. manufacturing activity contracted more than expected.?

The U.S. Dec S&P Global manufacturing PMI, indeed, unexpectedly fell -1.5 to 46.2, weaker than expectations of an increase to 47.8 and the steepest pace of contraction in 2 years.

Thus, the S&P 500 fell 1.1%, its third straight drop.?

The Dow Jones Industrial Average dropped 0.8% and the Nasdaq composite lost 1%.?

Notabily, the S&P 500 fell 43.39 points to 3,852.36.?

It's now down about 19% this year.?

The Dow dropped 281.76 points to finish at 32,920.46.?

The Nasdaq slid 105.11 points to 10,705.41.

Small company stocks had more moderate losses than the broader market.?

The Russell 2000 fell 11.19 points, or 0.6%, to 1,763.42.

The major indexes marked their second straight weekly loss.

For the week, indeed, the Dow lost 1.66%, the S&P fell 2.09% and the Nasdaq declined 2.72%.

Technology and health care stocks were among the biggest weights on the market.?

Microsoft fell 1.7% and Pfizer slid 4.1%.

Bond yields were mixed.?

The yield on the 10-year Treasury, which influences mortgage rates, rose to 3.49% from 3.45% late Thursday.?

The yield on the two-year Treasury, which closely tracks expectations for Fed moves, fell to 4.21% from 4.24% late Thursday.

On this morning, in Asia, the Shanghai Composite Index lost 1.5% to 3,118.95 despite the ruling Communist Party announcing Friday it will try to reverse China's economic slump by stimulating domestic consumption and the real estate market.

The Nikkei 225 in Tokyo sank 1.1% to 27,226.12 and the Hang Seng in Hong Kong shed 0.5% to 19,359.03.

The Kospi in Seoul retreated 0.6% to 2,346.49 and Sydney’s S&P-ASX 200 was 0.2% lower at 7,133.90.

India's Sensex lost 0.8% to 61,337.81.?

Singapore and Bangkok advanced while New Zealand and Jakarta declined.

Fears that the Federal Reserve and European central banks might be willing to cause a recession to crush inflation, continued weighening on markets.

In currency trading, the dollar rose on Friday in choppy trading, extending sharp gains in the previous session, as risk appetite soured and investors grappled with the prospect that borrowing costs still have a long way to climb.

The greenback briefly fell after data showed U.S. business activity shrank further in December as new orders slumped to their lowest in more than 2-1/2 years.

Thus, the greenback fell 0.77% against the yen to 136.76 , after hitting a two-week high in the previous session.

However, the dollar index rose 0.2% to 104.74 on Friday, after rallying more than 0.9% on Thursday.

Sterling slipped 0.28% against the dollar to $1.2142, with the euro falling 0.38% to $1.0586.

The risk-sensitive Australian dollar was 0.24% lower at US$0.6685.?

The Aussie plunged more than 2% in the previous session - its biggest drop since March 2020.

The New Zealand dollar , however, rose 0.7% to US$0.6383.

Over all, the dollar index has surged around 9% this year.?

On this morning, the dollar declined to 136.18 yen.?

The euro gained to $1.0606.

Going back to analyzing the other agricultural markets ...

In Canada, producers' deliveries of common wheat in week 19 of the shipping season, were at 525,7k mt.

That was stronger from 446,5k posted a week erlier.

Deliveries of durum wheat, were also stronger at 172.9k mt, up from 105.1k mt a week earlier.

Meantime, Canada exported 336.6k mt of common wheat in week 19 of the shipping season.

That was up from 302.5k mt posted a week earlier.

Durum wheat exports, in contrast, were weaker at 96.4k mt, down from 152.4k mt a week earlier.?

Meantime, total Commercial Stocks of common wheat stood at 2.929,5k mt, up from 2.839,8k mt a week earlier.

Ditto for durum, total commercial stocks were stronger at 712,6k mt, up from 625,6k mt posted the prior week.?

Cumulative exports for common wheat are now at 7.041,1k mt.

That is compared with 4.519.0k mt year ago to date.?

As for durum wheat, cumulative exports reached 1.725,1k mt, vs 1.123,1k mt year ago to date.?

Meantime, cash bids for durum wheat trending higher week over week.?

Indeed, looking at the average regional price of C$496.19/mt as of Dec 16, that is C$0.32/mt stronger from the prior week.

From Central America, Mexico and the United States aim to reach an agreement in January over a pending Mexican ban on imports of genetically modified (GM) corn, the Mexican foreign ministry said on Friday after officials from the two countries held talks in Washington.

Mexican officials, however, have yet to announce formal modifications to the decree.

In a statement, the ministry said talks would continue in the meantime as the two sides worked to reach a "mutual understanding" that gives "legal certainty to all parties."

Mexican Foreign Minister Marcelo Ebrard told reporters the two sides were aiming to reach an agreement by the end of January.

Mexico's health regulator COFEPRIS has not authorized new strains of glyphosate-resistant GM corn seeds for import since 2018.

Biotechnology Innovation Organization (BIO), an industry group representing biotech companies including Bayer, said Friday it would urge the U.S. government to begin taking enforcement action over Mexico’s treatment of agricultural biotechnology should the country fall short of meeting "the commitments under the U.S.-Mexico-Canada Agreement".

From South America, StoneX reduced their corn crop estimate for Brazil’s Rio Grande do Sul to 4.51 MMT, from 5.38 MMT, citing a developing drought in the South.?

Private firm Planalytics estimates the Brazil’s average soy yield at 3.51 MT/HA compared to 3.54 from USDA.?

Brazil's grain exporters association increased Brazil's December wheat export estimates to 696.6 TMT, a 29% increase year over year.?

If the pace is realized, Brazil's 2022 wheat exports will surpass 3.2 MMT for a record volume and a 190% increase from 2021.?

Commercial U.S. wheat sales to Brazil in 2022/23 as of Dec. 8 are 282.1 MMT compared to 95,000 MT at the same time in 2021/22.

From Argentina, the Buenos Aires Grains Exchange reported 42.6% of the corn area was planted as of 12/15 – trailing last year’s pace by 5.1%.?

Refinitiv Commodities Research see Argentina’s 2022-23 maize production 500,000t higher from before at 48.5Mt, reflecting slightly improved soil moisture following good rains during early December.?

Eastern Cordoba, Santa Fe and northern Buenos Aires received near to above normal rainfall during the past seven days, but the Pampas experienced continued warm and dry weather, albeit at a lower intensity than before.?

Overall rains were insufficient to replace soil moisture levels.

BAGE reported 50.8% of the 2022/23 Argentina soy planting reached as of 12/15.?

That is down 14.2% from last year’s pace.?

Private firm Planalytics estimates the Argentina soy yield at 2.79 MT/HA – compared to USDA’s 3 MT/HA estimate.?

The Rosario Grains Exchange decreased its wheat production forecast by 3% to 11.5 MMT.?

Overall production estimates have fallen by 39% since May as Argentina continues to suffer from drought and-last season frosts at the start of the southern hemisphere spring.

In Europe, again a slight decline on grain markets on Friday.

From a climatic point of view, the low temperatures of the past week will end and should not have impacted the state of the crops.

A colder than usual spell in parts of Europe, indeed, is not expected to cause much harm to winter grains and may benefit crops in France after a very mild autumn.

Nearly all winter wheat and barley were in good condition by Dec. 5, according to FranceAgriMer's most recent crop report, reflecting regular rain and mild weather during autumn.

Rapeseed was also in good shape and not expected to suffer either from the cold spell.

French farmers have increased soft wheat, winter barley and rapeseed sowings from the previous harvest, the farm ministry estimated on Tuesday.

In Germany, frost as deep as minus-10 to minus-14 degrees Celsius in central and eastern zones this week may pose risks to barley, which is less resistant to cold than wheat and rapeseed.

However, it is too early to assess if the damage is serious enough to have an impact on the barley harvest.

Germany’s winter wheat sowed area for the 2023 crop should be little changed from 2.8 million hectares harvested in 2022, while winter rapeseed is seen up 4-5% at 1.13 million hectares, the analyst estimated.

In Poland, crop risks were also seen as limited.

Poland's winter wheat planted area for 2023 should be over 2.4 million hectares, against 2.3 million harvested in 2022, he estimated.

In this context, Strategie Grains forecasts 2023 EU soft wheat production at 128.7Mt, up 2.5pc from this year and corn up 26pc year-on-year to 63.7Mt.

Farm office FranceAgriMer increased its forecast for French soft wheat exports by 300.0 TMT to 10.3 MMT as recent shipments to China bolstered the already robust export activity.?

The firm kept its ending stocks estimate steady at 2.55 MMT while cutting its forecast for intra-EU exports by 3% and lowering feed use by 100.0 TMT.

Operators, also showed a little disappointment following the tender from Algeria, which should have been essentially of Russian origin.?

Rapeseed prices, on their part, despite a sligth rebound on Friday, remain impacted by significant imports from Australia and the weakness of vegetable oils such as canola or soybean oil.

From UK, the United Kingdom's wheat harvest this year is estimated to have increased to 15.5 million tonnes, up 11% from the previous season, Britain's farming ministry said last Thursday.

The rise was driven mainly by a 9.9% increase in yields.

Rapeseed production rose 39% to 1.4 million tonnes, boosted by a 18% increase in planted area and 17% rise in yields.

The ministry estimated the barley crop at 7.4 million tonnes, up 6.1%.?

From North Africa, Egypt's President Abdel Fattah al-Sisi called for the setting of a procurement price for the 2022/23 local wheat harvest that is lucrative for farmers and promotes increased supply, the country's supply ministry said.

The statement also said that strategic reserves for whet, surgar, corn, oil, and rice stand between four and six months.

The European Investment Bank, the lending arm of the European Union, has approved a 220 million euro loan ($233 mln) for Tunisia, including 150 million euros in emergency support for food security, the Tunisian Ministry of Economy said on Sunday.

Tunisia is in a deep financial crisis which has resulted in a shortage of many food commodities in recents weeks.?

Agriculture Minister Mahmoud Elyess Hamza said the loan will help Tunisia to regularly supply soft wheat.?

From Russia, the Russian agriculture ministry revised the export tax for wheat, corn and barley.

Particularly, as of Dec. 21, the export duty on wheat will slightly increase to 3,333.8 from 3,143.4 rubles per ton a week earlier.

Ditto on barley, the duty will increase to 2,686.9 rubles from 2,603.1 rubles per ton a week earlier.

For corn, in contrast, decrease from 78.2 rubles a week earlier to 0 rubles per ton.

This new duty rates will be in effect through December 27, inclusive.

The duties were calculated based on indicative prices: $314.4 per ton for wheat ($313.4 a week earlier), $281.8 for barley ($282.9), $218.5 for corn ($224.9).

From South East Asia, the Indian government announced Dec. 15 that wheat stocks in fell to their lowest level in six years as prices skyrocketed due to increased demand.?

Wheat reserves fell to 19.0 MMT on Dec. 1, down from 37.8 MMT last year.?

The statement comes as wheat prices in the country have surged due to a drop in yields.?

The government blamed this on lower production last season and the fact that farmers sold the crop on the open market at prices higher than stateguaranteed prices.

Trade and industry officials from India report that higher prices are expected to result in 2022-23 rapeseed area expanding to 9.4-9.5Mha (9.1Mha previous year).?

Output could potentially reach a record high of 12Mt (compared to 11Mt).

The Indian government announces that wheat acreage would be up 3% compared to last year.?

From Australia, the country exported 42,997 tonnes of canola in October, 75pc below the September total of 170,970t,?according to the latest export data from the Australian Bureau of Statistics (ABS).

October is typically the low month for Australian canola exports, with the October 2021 figure totalling 14,418t, down from 102,597t shipped in September 2021.

In October 2022, Japan on 27,831t appeared to be the only bulk customer.

Australia’s 2022-23 (Oct-Sep) canola crop was forecast by ABARES at a record 7.3 million tonnes.

The flow of new-crop cargoes to Europe and other destinations has already started, and while consecutive rain events have limited New South Wales production, other states are on track for bumper years.

As for barley, Australia exported 84,776 tonnes of malting barley, 162,216t of feed barley and 271,497t of sorghum in October, according to the latest export data from the Australian Bureau of Statistics (ABS).

While the malting figure was double the tonnage shipped in September, feed barley exports plunged 76pc from 662,421t and sorghum fell 31pc from 395,447t.

The three biggest destinations for Oct0ber-shipped malting barley were Mexico on 33,002t, Japan on 28,750t and South Africa on 15,000t.

On feed barley, Japan 0n 100,013t and Qatar on 55,125t were the only volume bulk customers, with Saudi Arabia notable in its absence.

China was once again the dominant volume customer on sorghum, taking 264,958t, or 98pc, of the volume shipped.

On the international trade scene, Algeria’s state grains agency OAIC is believed to have bought around 500,000 tonnes of milling wheat in an international tender which closed on Wednesday.

Trader estimates of the purchase on Thursday were similar to Wednesday night, ranging from 480,000 tonnes to 540,000 tonnes.?

The top estimate on Wednesday night was slightly lower at 520,000 tonnes.

Price estimates on Thursday were again between $348 to $349 a tonne cost and freight (c&f) included, the same as reported on Wednesday night although some traders on Thursday said the highest price was around $350 a tonne c&f.

Technically supplies are optional origin, but it's expect a range of source countries in the Black Sea region including Bulgaria, Romania and Russia and some from the west EU including France.?

The wheat was sought for shipment in two periods in 2023 from the main supply regions including Europe: Feb. 1-15 and Feb. 16-28.?

If sourced from South America or Australia, shipment is one month earlier.?

Tunisia's state grains agency has purchased 125,000 tonnes of durum wheat.

The grain can be sourced from optional origins.?

The tender sought shipment in 2023 between Jan. 10 and Feb. 25, depending on origins supplied.

The purchases were:?

25k MT from RICHARDSON at $504.50/t C&F.

25k MT from RICHARDSON at $511.90/t C&F.

25k MT from CASILLO at $513.68/t C&F.

25k MT from VITERRA at $514,09/t C&F.

25k MT from AMBER at $514.29/t C&F.

Watching this week's market

This week is the week leading up to Christmas!

We will starts regularly with the Export Inspections report this afternoon.?

On Wednesday, we will get the weekly EIA ethanol production and stocks report.?

On Thursday we will see the usual Weekly Export Sales report.

Friday rounds out the week as January grain options expire.

We will also receive the Cattle on Feed and Hogs & Pigs reports on Friday.

The market will be closed the following Monday.

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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