GRAIN MARKET VIEW
December 28, 2023 – Market Focus
Good morning, Farmer Family …
Main Markets
USA
US farm markets were mixed but mostly lower, on Wednesday.
Corn prices dropped 0.78%.
Soybeans picked up 0.27%.
The rest of the soy complex was mixed as soymeal faded 1.07% lower, while soyoil rose 0.69%.
Wheat prices gave back most of the previous session’s gains, as Chicago SRW tumbled 2.08%, Kansas City HRW lost 1.21%, and Minneapolis spring wheat fell 1.03%.
Wheat prices fell amid weak demand in the physical market.
For soybeans and corn, weather charts showed uneven showers in the week ahead in dry parts of central and northern Brazil, before widespread heavy rain expected in early January.
Precipitation in the coming weeks will also influence corn crop yields in the upcoming first-crop harvest and impact planting prospects for the larger second crop in Brazil.
However, the U.S. dollar index sinking to the lowest level in five-months underpinned the markets, though lacking export demand despite a weaker dollar and down trending prices, evidenced by no daily sales, weighed on markets.
On this wake, grain traveling the US railways totaled another 21,237 carloads last week, bringing cumulative totals for 2023 to 966,391 carloads.
In this context, corn basis bids were mostly steady to firm across the central U.S., after trending 3 to 10 cents higher at three Midwestern locations. An Illinois ethanol plant bucked the overall trend after sliding 2 cents lower.
Soybean basis bids were steady to firm after trending 10 cents higher at Indiana processor and 7 cents higher at an Ohio river terminal.
Commodity funds were net sellers of CBOT corn, wheat and soymeal contracts, and net buyers of soybeans and soyoil contracts.
This morning, Chicago wheat prices edged higher, recouping some of the previous session’s losses, although gains were limited by a lack of demand in international markets at the year’s end. Corn and soybeans lost ground with improved weather in Brazil weighing on prices.
Corn prices dropped 0.78%.
Soybeans picked up 0.27%.
The rest of the soy complex was mixed as soymeal faded 1.07% lower, while soyoil rose 0.69%.
Wheat prices gave back most of the previous session’s gains, as Chicago SRW tumbled 2.08%, Kansas City HRW lost 1.21%, and Minneapolis spring wheat fell 1.03%.
Wheat prices fell amid weak demand in the physical market.
For soybeans and corn, weather charts showed uneven showers in the week ahead in dry parts of central and northern Brazil, before widespread heavy rain expected in early January.
Precipitation in the coming weeks will also influence corn crop yields in the upcoming first-crop harvest and impact planting prospects for the larger second crop in Brazil.
However, the U.S. dollar index sinking to the lowest level in five-months underpinned the markets, though lacking export demand despite a weaker dollar and down trending prices, evidenced by no daily sales, weighed on markets.
On this wake, grain traveling the US railways totaled another 21,237 carloads last week, bringing cumulative totals for 2023 to 966,391 carloads.
In this context, corn basis bids were mostly steady to firm across the central U.S., after trending 3 to 10 cents higher at three Midwestern locations. An Illinois ethanol plant bucked the overall trend after sliding 2 cents lower.
Soybean basis bids were steady to firm after trending 10 cents higher at Indiana processor and 7 cents higher at an Ohio river terminal.
Commodity funds were net sellers of CBOT corn, wheat and soymeal contracts, and net buyers of soybeans and soyoil contracts.
This morning, Chicago wheat prices edged higher, recouping some of the previous session’s losses, although gains were limited by a lack of demand in international markets at the year’s end. Corn and soybeans lost ground with improved weather in Brazil weighing on prices.
South America
Brazil
Weather in Brazil remains on the focus.
Forecasts differ as to the extent of the upcoming rains, which some see as reassuring while others consider the situation worrying.
Soybean production estimates continue to decline.
Some private analysts are therefore increasingly falling below the level of 155 Mt in production potential.
Brazilian farmers in Mato Grosso began harvesting soybeans with the earliest date on record, as 1% of the state was harvested as of 12/27.
Some farmers in Mato Grosso are still planting (/replanting) soybeans.
Dr. Michael Cordonnier lowered his Brazilian soybean estimate to 153.0 MMT, citing variable coverage & amounts of rainfall over the past week.
He noted while the forecast is calling for more rain, models have been overly optimistic, so it’s important to see if the rains verify.
Abiove adjusted their outlook on Brazil’s soy situation, including a 1.6 MMT production cut to 160.3 MMT.
Bean exports were trimmed by 900k MT to 99.3 MMT, though crush was left alone at 54.5 MMT.
Meal and oil production were 41.7 MMT and 11 MMT respectively.
Argentina
An increase in precipitations in Argentina has raised production prospects from the Rosario Grains Exchange, which estimates the country’s grain production for 2023-24 at 137 MMT, which would be the 2nd largest harvest in history for the country.
The Exchange said 95% of early planted corn and 75% of soybeans are in “excellent to very good” conditions, thanks to rains since the end of Oct’ across the country’s Pampas region.
Dr. Michael Cordonnier left his estimate for Argentina’s soybean production unchanged at 50.0 MMT.
In other news, today, Argentinian Govt sent the bill increasing export taxes for corn wheat barley from 12 to 15%, soybean by-products from 31 to 33%, and sunflower by-products from 5/7 to 15%.
The oilseed industry negatively reacted to this proposal.
Weather in Brazil remains on the focus.
Forecasts differ as to the extent of the upcoming rains, which some see as reassuring while others consider the situation worrying.
Soybean production estimates continue to decline.
Some private analysts are therefore increasingly falling below the level of 155 Mt in production potential.
Brazilian farmers in Mato Grosso began harvesting soybeans with the earliest date on record, as 1% of the state was harvested as of 12/27.
Some farmers in Mato Grosso are still planting (/replanting) soybeans.
Dr. Michael Cordonnier lowered his Brazilian soybean estimate to 153.0 MMT, citing variable coverage & amounts of rainfall over the past week.
He noted while the forecast is calling for more rain, models have been overly optimistic, so it’s important to see if the rains verify.
Abiove adjusted their outlook on Brazil’s soy situation, including a 1.6 MMT production cut to 160.3 MMT.
Bean exports were trimmed by 900k MT to 99.3 MMT, though crush was left alone at 54.5 MMT.
Meal and oil production were 41.7 MMT and 11 MMT respectively.
Argentina
An increase in precipitations in Argentina has raised production prospects from the Rosario Grains Exchange, which estimates the country’s grain production for 2023-24 at 137 MMT, which would be the 2nd largest harvest in history for the country.
The Exchange said 95% of early planted corn and 75% of soybeans are in “excellent to very good” conditions, thanks to rains since the end of Oct’ across the country’s Pampas region.
Dr. Michael Cordonnier left his estimate for Argentina’s soybean production unchanged at 50.0 MMT.
In other news, today, Argentinian Govt sent the bill increasing export taxes for corn wheat barley from 12 to 15%, soybean by-products from 31 to 33%, and sunflower by-products from 5/7 to 15%.
The oilseed industry negatively reacted to this proposal.
Europe
European wheat prices eased, corn was flat, while rapeseed offered a new technical rebound above the support zone of €430/t.
The markets reacted more to the rise in the euro/dollar than to the rebound in prices the day before in Chicago, though many operators were absent.
French and European wheat exports are lagging, while the euro/dollar breaking the resistance of 1.10 to jump to 1.1110 at its highest since mid-July, weighing on prices.
Coceral estimated the 2024 European (+UK) grain production at 139.4 MMT.
That is a 100k MT increase from this season.
The markets reacted more to the rise in the euro/dollar than to the rebound in prices the day before in Chicago, though many operators were absent.
French and European wheat exports are lagging, while the euro/dollar breaking the resistance of 1.10 to jump to 1.1110 at its highest since mid-July, weighing on prices.
Coceral estimated the 2024 European (+UK) grain production at 139.4 MMT.
That is a 100k MT increase from this season.
Ukraine
The Ukrainian wheat market is experiencing a price lull due to a slowdown in global business activities between December 25 and around January 5 during the New Year holidays.
Until the end of the week, conditional prices for wheat will range between 185-190 USD/t CPT Danube, 178-185 USD/t CPT Odesa, and 225-230 USD/t DAP Romania.
In December-January, prices for feed wheat on the DAP Italy basis may be 215-218 USD/t.
As of January, traders have already contracted about 1 mln tonnes of Ukrainian wheat.
Until the end of the week, conditional prices for wheat will range between 185-190 USD/t CPT Danube, 178-185 USD/t CPT Odesa, and 225-230 USD/t DAP Romania.
In December-January, prices for feed wheat on the DAP Italy basis may be 215-218 USD/t.
As of January, traders have already contracted about 1 mln tonnes of Ukrainian wheat.
Russia
Sovecon has slightly lowered its forecast for Russia’s 2023/24 wheat exports to 48.6 million metric tons.
Sovecon also sees overall grain exports at 62.7 mmt.
In the period from December 1 to 25, 3.1 mln tonnes of grain were shipped from the Russian Federation for export, which is 27.5% lower y-o-y, Interfax reports with reference to monitoring data of the Russian Grain Union.
As the director of the RGU analytical department, Elena Tyurina, clarified, the main part of the indicated volume was wheat (2.605 mln tonnes), the shipment of which decreased by 31% y-o-y.
Export of barley in December decreased by 7.5% to 150.000 tonnes.
At the same time, corn shipments increased by 2.4% to 362.000 tonnes.
“In total, about 3.85 mln tonnes of major grains will most likely be shipped in December, which is 26% down y-o-y (compared to 5.2 mln tonnes in December 2022).
The export of wheat will decrease by 25%, to 3.2 mln tonnes,” E. Tyurina added.
In this context, prices for Russian wheat remain at the level of 230-235 $/t FOB, amid market saturation with wheat supply from Argentina and Australia in December, though in the first half of 2023/24 MY, Russia exported a record 30.8 mln tonnes of grain, including 23.7 mln tonnes of wheat.
In general, according to the RGU estimate, for the first half of the current season, due to the high rates of shipment at the beginning of the season, about 34 mln tonnes of major grains will be exported, which is 3 mln tonnes more than last year’s figure.
Meantime, from February 15 to June 30, 2024, Russian authorities set a quota of 24 mln tonnes for wheat, corn and barley exports to countries outside the Eurasian Economic Union, while in 2022/23 MY the quota was 25.5 mln tonnes for all crops.
Before the quotas came into effect, wheat exports would have amounted to 28-30 mln tonnes out of the projected 50 mln tonnes, so the new restrictions will not significantly affect Russian supplies in the 2nd half of the season.
Sovecon also sees overall grain exports at 62.7 mmt.
In the period from December 1 to 25, 3.1 mln tonnes of grain were shipped from the Russian Federation for export, which is 27.5% lower y-o-y, Interfax reports with reference to monitoring data of the Russian Grain Union.
As the director of the RGU analytical department, Elena Tyurina, clarified, the main part of the indicated volume was wheat (2.605 mln tonnes), the shipment of which decreased by 31% y-o-y.
Export of barley in December decreased by 7.5% to 150.000 tonnes.
At the same time, corn shipments increased by 2.4% to 362.000 tonnes.
“In total, about 3.85 mln tonnes of major grains will most likely be shipped in December, which is 26% down y-o-y (compared to 5.2 mln tonnes in December 2022).
The export of wheat will decrease by 25%, to 3.2 mln tonnes,” E. Tyurina added.
In this context, prices for Russian wheat remain at the level of 230-235 $/t FOB, amid market saturation with wheat supply from Argentina and Australia in December, though in the first half of 2023/24 MY, Russia exported a record 30.8 mln tonnes of grain, including 23.7 mln tonnes of wheat.
In general, according to the RGU estimate, for the first half of the current season, due to the high rates of shipment at the beginning of the season, about 34 mln tonnes of major grains will be exported, which is 3 mln tonnes more than last year’s figure.
Meantime, from February 15 to June 30, 2024, Russian authorities set a quota of 24 mln tonnes for wheat, corn and barley exports to countries outside the Eurasian Economic Union, while in 2022/23 MY the quota was 25.5 mln tonnes for all crops.
Before the quotas came into effect, wheat exports would have amounted to 28-30 mln tonnes out of the projected 50 mln tonnes, so the new restrictions will not significantly affect Russian supplies in the 2nd half of the season.
Kazakhstan
The Food Corporation of Kazakhstan is negotiating the export of non-grade grain with a number of countries, including China.
China has already put forward requirements for the quality of such wheat and announced prices at 150 USD/t, taking into account transportation to the border (Alashankou DAP).
Notably, China requires non-grade grain with a germination share of no more than 30% with a price of about 50`000 tenge/t at the elevator (with delivery to Alashankou station the cost will be 150 USD/t).
On this wake, the Food Corporation announced a direct purchase of 4-, 5-grade and non-grade wheat of the 2023 harvest in the amount of 350 thsd tonnes.
Bid prices are set at market levels. For this purpose, 31.3 billion tenge was allocated from the republican budget.
China has already put forward requirements for the quality of such wheat and announced prices at 150 USD/t, taking into account transportation to the border (Alashankou DAP).
Notably, China requires non-grade grain with a germination share of no more than 30% with a price of about 50`000 tenge/t at the elevator (with delivery to Alashankou station the cost will be 150 USD/t).
On this wake, the Food Corporation announced a direct purchase of 4-, 5-grade and non-grade wheat of the 2023 harvest in the amount of 350 thsd tonnes.
Bid prices are set at market levels. For this purpose, 31.3 billion tenge was allocated from the republican budget.
China
China continues to make steps toward adopting GMO corn and soybeans.
In a recent announcement the Ministry of Ag and Rural Affairs listed 26 seed companies that may produce and sell seeds in China.
Note: all 26 listed companies are Chinese domestic.
In a recent announcement the Ministry of Ag and Rural Affairs listed 26 seed companies that may produce and sell seeds in China.
Note: all 26 listed companies are Chinese domestic.
South-East Asia
Malaysian palm oil prices rose for a second session in a row.
The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange rose 0.08%.
The market opened slightly higher on crude oil and Dalian strength.
Dalian’s most-active soyoil contract ticked up 1.29%, while its palm oil contract rose 1.56%.
However, weaker crude oil prices made palm a less attractive option for biodiesel feedstock.
Also, the ringgit rose 0.15% against the dollar, making the commodity more expensive for buyers holding foreign currency.
The benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange rose 0.08%.
The market opened slightly higher on crude oil and Dalian strength.
Dalian’s most-active soyoil contract ticked up 1.29%, while its palm oil contract rose 1.56%.
However, weaker crude oil prices made palm a less attractive option for biodiesel feedstock.
Also, the ringgit rose 0.15% against the dollar, making the commodity more expensive for buyers holding foreign currency.
Auctions
Wheat
Egypt’s state grain buyer GASC announced an international tender to purchase 60 thsd tonnes of wheat, FOB basis. The shipment of grains is sought between March 1-10, 2024, subject to payment by letter of credit within 180 days or 270 days. Sellers must offer both payment options. The closing date is December 28.
Jordan’s state grains buyer has issued an international tender to buy up to 120,000 metric tons of milling wheat sourced from optional origins. The deadline for submission of price offers is Jan. 4. A new announcement had been expected by traders after Jordan made no purchase in its previous tender for 120,000 tons on Tuesday.
Jordan’s state grains buyer has issued an international tender to buy up to 120,000 metric tons of milling wheat sourced from optional origins. The deadline for submission of price offers is Jan. 4. A new announcement had been expected by traders after Jordan made no purchase in its previous tender for 120,000 tons on Tuesday.
Vegoil
Egypt’s state grains buyer GASC said on Wednesday it had bought 35,000 metric tons of sunflower oil in an international tender. Importer booked the oil from Aston Agro Industrial – 17 thsd tonnes at 905 USD/t C&F with delivery on February 14-29, 2024, and Viterra – 18 thsd tonnes at 905 USD/t C&F with delivery on March 1-15, 2024. The oil was purchased subject to payment by letter of credit at sight.
Macroeconomics
Energy markets
Oil prices dropped nearly 2%, as investors monitored developments in the Red Sea, where shippers are returning despite further attacks on Tuesday.
Danish shipping company Maersk said it has scheduled several dozen container vessels to travel via the Suez Canal and Red Sea in the coming weeks.
France’s CMA CGM also said it was resuming passage through the Red Sea.
Oil loadings at the Russian Black Sea port of Novorossiisk were suspended because of a storm. However, the Caspian Pipeline Consortium (CPC) terminal near the port was open, Kazakhstan’s energy ministry said.
According to American Petroleum Institute figures, U.S. crude oil inventories rose last week by 1.84 million barrels.
Oil output in Russia is expected to be steady or even to increase next year.
Thus, the prospect of a prolonged Israeli military campaign in Gaza remained the major driver of market sentiment.
This morning oil prices steadied.
Brent crude futures inched up 0.1% by 0424 GMT, while U.S. WTI crude futures were trading 5 cents lower.
U.S. government data on fuel stockpiles is due later in the day, delayed by a day due to the Christmas holiday on Monday.
Danish shipping company Maersk said it has scheduled several dozen container vessels to travel via the Suez Canal and Red Sea in the coming weeks.
France’s CMA CGM also said it was resuming passage through the Red Sea.
Oil loadings at the Russian Black Sea port of Novorossiisk were suspended because of a storm. However, the Caspian Pipeline Consortium (CPC) terminal near the port was open, Kazakhstan’s energy ministry said.
According to American Petroleum Institute figures, U.S. crude oil inventories rose last week by 1.84 million barrels.
Oil output in Russia is expected to be steady or even to increase next year.
Thus, the prospect of a prolonged Israeli military campaign in Gaza remained the major driver of market sentiment.
This morning oil prices steadied.
Brent crude futures inched up 0.1% by 0424 GMT, while U.S. WTI crude futures were trading 5 cents lower.
U.S. government data on fuel stockpiles is due later in the day, delayed by a day due to the Christmas holiday on Monday.
Equity markets
US stock indexes closed moderately higher, with the S&P 500 posting a nearly 2-year high and the Dow Jones Industrials posting record highs.
The 10-year T-note yield dropped to a 5-1/4 month low of 3.782% and finished down -10.6 bp at 3.791%.
The Dec Richmond Fed manufacturing sentiment index unexpectedly fell -6 to an 8-month low of -11.
Japan Nov housing starts fell -8.6% y/y to a 7-month low of 775,000.
This morning, Asian shares rose, with Chinese benchmarks up more than 1%.
In Hong Kong, the Hang Seng index gained 1.5%, the Shanghai Composite index surged 1.1%, South Korea’s Kospi advanced 0.9%, the S&P/ASX 200 in Australia rose 0.5%, India’s Sensex gained 0.4% and Bangkok’s SET was up 0.3%.
Tokyo’s Nikkei 225 index was an outlier in the region, shedding 0.5%.
Speculation over whether and when the Bank of Japan might ease its longstanding lax monetary policy and raise its key interest rate from minus 0.1% has kept stocks wobbling.
The 10-year T-note yield dropped to a 5-1/4 month low of 3.782% and finished down -10.6 bp at 3.791%.
The Dec Richmond Fed manufacturing sentiment index unexpectedly fell -6 to an 8-month low of -11.
Japan Nov housing starts fell -8.6% y/y to a 7-month low of 775,000.
This morning, Asian shares rose, with Chinese benchmarks up more than 1%.
In Hong Kong, the Hang Seng index gained 1.5%, the Shanghai Composite index surged 1.1%, South Korea’s Kospi advanced 0.9%, the S&P/ASX 200 in Australia rose 0.5%, India’s Sensex gained 0.4% and Bangkok’s SET was up 0.3%.
Tokyo’s Nikkei 225 index was an outlier in the region, shedding 0.5%.
Speculation over whether and when the Bank of Japan might ease its longstanding lax monetary policy and raise its key interest rate from minus 0.1% has kept stocks wobbling.
Currency trading
The dollar index tumbled, and posted a 5-month low.
The dollar Wednesday was under pressure from lower T-note yields.
Also, expectations for the Fed to begin cutting interest rates in 2024 are weighing on the dollar.
The Dec Richmond Fed manufacturing sentiment index unexpectedly fell, vs expectations of an increase.
The EUR/USD rose, posting a 5-month high, though gains in the euro were limited after the 10-year German bund yield fell to a 1-year low.
The USD/JPY fell, with the yen recovering from early losses and rallying to a 1-1/2 week high against the dollar.
BOJ Governor Ueda said the BOJ could shift monetary policy before complete wage figures from small to medium-sized firms come out.
However, Wednesday’s news showed a decline in Japan housing starts to a 7-month low.
This morning, the U.S. dollar fell to 141.30 Japanese yen from 141.84 yen.
The euro rose to $1.1113 from $1.1106.
The dollar Wednesday was under pressure from lower T-note yields.
Also, expectations for the Fed to begin cutting interest rates in 2024 are weighing on the dollar.
The Dec Richmond Fed manufacturing sentiment index unexpectedly fell, vs expectations of an increase.
The EUR/USD rose, posting a 5-month high, though gains in the euro were limited after the 10-year German bund yield fell to a 1-year low.
The USD/JPY fell, with the yen recovering from early losses and rallying to a 1-1/2 week high against the dollar.
BOJ Governor Ueda said the BOJ could shift monetary policy before complete wage figures from small to medium-sized firms come out.
However, Wednesday’s news showed a decline in Japan housing starts to a 7-month low.
This morning, the U.S. dollar fell to 141.30 Japanese yen from 141.84 yen.
The euro rose to $1.1113 from $1.1106.