Good morning, Farmer Family …
US farm markets grabbed big gains again during the end week session.
Corn prices jumped 2.73%.
Soybeans climbed 2.68%, with soymeal bouncing 5.63%, and bean oil rallying 2.16%.
Wheat gains were variable, as Chicago SRW jumped 4.01%, Kansas City HRW climbed 3.60%, and MGEX HRS rose 2.49%.
Recently the weather was dry Both in the USA and Europe, thus the weather bull market was extended for another day, last Friday.
U.S. markets are closed today for the Juneteenth federal holiday, and ahead of a 3-day weekend, traders remained on edge as weather forecasts fluctuated.
Forecasts remain warm and dry over much of the US Corn Belt during the next week to 10 days.
The driest areas will be the central and eastern Corn Belt, as the central US remains blocked from Gulf of Mexico moisture.
Heat in the western Corn Belt could significantly increase stress on corn and soybeans, with Midwestern rainfall totals expected to be half an inch or less, except in a few locations across the southern and western Corn Belt.
That pushed corn, soybean and wheat prices all to multi-month highs during the end week session, as commodity funds were net buyers in 16,000 lots of corn, 23,500 lots of soybeans and 11,000 lots of wheat.
However, it should to note drought’s footprint looks very different this year versus a year ago.
Thus, this weekend actual rainfall, and this evening weather forecast will determine the price direction for the current week.
For wheat, gains were also spurred by ongoing geopolitical turmoil in the Black Sea region.
Russian officials said on Friday the pact allowing shipments from Ukraine could not be extended under current circumstances when it expires in mid-July.
A dollar setback, made US origins more competitive, raising hopes for a potential increase in demand.
For the week, July corn prices rallied 5.96% from the prior Friday.
New crop led the way, with Dec jumping 12.63%.
Soybeans rose 5.77%, with the products helping along the way as meal was up 4.83%, and bean oil was up another +9.34%.
The wheat complex joined the bulls’ party, with strong gains across the complex.
Chicago SRW led the charge, with a +9.16% move.
Kansas City HRW tagged along with a 5.55% gain, while MGE HRS was the weaker, up 5.14% on the week.
The weekly Crop Progress report on Monday tallied corn condition ratings weakening to 61% gd/ex, down 3% from a week earlier.
As for soybean, NASS reported the US soybean crop at 96% planted as of June 11, 10% ahead of the average pace.
However, condition ratings were tallied at 59% gd/ex, down 3%.
As for wheat, the report indicated the winter wheat crop at 8% harvested, lagging the 9% average pace.
Condition ratings improved another 2% at 38% gd/ex
Meanwhile, spring wheat conditions were down 4%, to 60% gd/ex.
Wednesday’s EIA report showed ethanol production slipping 18,000 barrels per day lower in the week ending on June 9, to 1.018 million bpd.
However, stocks dropped a large 722,000 barrels to 22.226 million.
Monthly NOPA data showed 177.92 mbu of soybeans crushed by members during May.
That was 4% above last year’s record for the month and 2.7% larger than the April crush.
Also, soy oil stocks slipped to 1.87 billion lbs.
Thursday’s Export Sales report showed bookings for old corn crop picking up to just 273,255 MT.
That was a 7-week high but below the pace needed to meet the USDA target, with commitments now at just 88% complete vs, the 5-year average of 99%.
Sales are the problem, with shipments at 75% of the forecast vs. the 78% normal pace.
New crop sales improved over last week’s net reduction to a positive 21,055 MT.
For soybean, the report indicated a large old crop book at 478,368 MT, with much of that known via daily announcements.
That was the largest weekly total for old crop since March 9.
New crop bookings were reported at just 48,544 MT.
Commitments for old crop are now 95% of the USDA forecast, compared to the 5-year average pace at 101%.
For wheat, the report showed 23/24 wheat bookings slipping to just 164,978 MT during the week that ended on June 8.
New crop export commitments were at 3.95 MMT.
That was 18% below a year ago and 19% of the USDA full year export projection, vs. the 25% average pace.
In this context, corn basis bids were steady to weak after dropping 1 to 15 cents lower across half a dozen Midwestern locations.
Soybean basis bids were mostly steady to soft after eroding 10 to 20 cents lower at five Midwestern locations.
An Ohio elevator bucked the overall trend after firming 3 cents higher.
For wheat, basis ended the week mixed as Friday’s futures rally generated selling interest from farmers.
HRS ended the week steady in both the Gulf and the PNW.
Increased farmer sales were a welcome sign, though export demand remains light.
HRW basis was down in the PNW and Gulf.
Gulf HRW has fallen in line with historical averages while PNW HRW basis continues to fall, driven by the contrast between the promising Montana HRW crop and the drought afflicted Southern Plains.
SRW basis remained steady, propped by domestic demand, and SW prices followed the up-trend in Chicago.
As a result, as for June 15, 2023, FOB prices for US wheat No 2 Hard Red Winter (HRW) were at $341/mt, down $6/mt week on week.
US wheat No 2 Soft Red Winter (SRW) was valued at $263/mt, up $13/mt from prior week.
Northern Durum offers from the Great Lakes, for June 2023 delivery were at $10.07/bu ($370.00/mt, unch), unchanged.
As for corn, US corn 3YC (Gulf) was at $268/mt, down $4/mt.
As for soybean, US soybean 2Y (Gulf) quoted at $551/mt, up $18/mt.
USDA’s weekly Ethanol report had cash ethanol prices averaging $2.32 to $2.47/gal regionally, with most markets 1 to 4 cents higher for the week.
DDGS were quoted $10 to $35 lower for the week, from $176 to $230/ton. Regional corn oil cash prices were reported 2 to 5 cents higher from 58 to 62 cents.
USDA reported the MN B100 cash price 99c higher at $4.81/gal.
After the sessions close, CFTC’s weekly Commitment of Traders report showed major short covering from corn spec funds during the week that ended 6/13.
CME’s data included an 11% increase for December corn OI for the week Friday-Thursday.
Managed money funds closed out 43.5k shorts and flipped back to 2,145 contracts net long.
Commercial corn traders were 207,452 contracts net short after new short hedges were added.
As for soybean, the weekly CoT data from CFTC had the spec funds rolling shorts to longs during the week that ended 6/13.
Net OI decreased by 1.2k contracts, but the group’s net long increased by 34k contracts to 47.8k.
CME data showed November soybean OI increased 11% from Friday through Thursday.
The CoT report also had commercial soybean hedgers adding new short hedges which took their net short to 98.5k contracts as of 6/13.
For the products, CFTC’s data release had the funds as net sellers in soymeal via long liquidation through the week of 6/13.
The group was 60,608 contracts net long.
Bean oil spec traders were covering shorts through the week, which flipped the group back to net long.
For wheat, CFTC reported managed money funds were 6k contracts less net short at 113k for Chicago wheat on 6/13.
The KC wheat spec traders were shown at a 3,616 contract net long for 6/13, which was a 3.5k contract weaker net long after long liquidation.
The managed money funds were shown with short covering through the week in Minneapolis wheat, which left their net short at 7.4k contracts.
From Canada, Saskatchewan Agriculture’s weekly Crop Report as of June 12 showed crops faring well overall, despite drier conditions faced during the week earlier.
Provincial crop inspectors have rated the crop condition for all crops to range from fair to excellent overall.
Of the 14 crops monitored, the provincial condition ratings range from 64% good to excellent for chickpeas to 92% G/E for the soybean crop.
The largest crops show condition at 81% G/E for spring wheat, 72% G/E for durum, 82% for barley and 77% G/E for canola.
Favourable ratings remained while soil moisture deteriorated over the week.
An estimated 66% of the province was rated as having adequate topsoil moisture, down from 78% a week earlier and the lowest percentage reported in three weeks.
The area rated short-to-very-short topsoil moisture has increased from 15% of the province to 32%, the highest percentage reported in three weeks.
The driest areas were mostly seen in the western half of the province.
An estimated 85% of the winter crops (69%), 76% of the spring cereals (50%), 76% of the oilseeds (41%) and 83% of the pulse crops (60%) were viewed as being at normal growth stages, which compares to the 2022 estimate, found in brackets.
These were the most favourable ratings found for this week shown in at least nine years.
Meantime, the Grain Statistics weekly report showed producers’ deliveries of common wheat at 423,6k mt in the week 45 of this shipping season.
That was noticeably up from 404,6k mt posted prior week.
Deliveries of durum wheat, were also higher at 89,2k mt, compared with 58,9k mt showed in prior week.
Canada exported 292,2k mt of common wheat in week 45.
That was up from 271,4k mt of a week earlier.
Durum wheat exports, in contrast were weaker, moving down from 75.9k mt to 35.9k mt.
Total Commercial Stocks of common wheat stood at 2.117,4k mt, up from 2.110,8k mt in the previous week.
Total durum commercial stocks also were higher, moving up from 285,2k mt a week earlier, to 304,3k mt.
Cumulative exports for common wheat were at 17.030,1k mt.
That is compared 9.842,7k mt a year ago.
Durum cumulative exports reached 4.610,0k mt vs 2.254,2 a year ago.
In this context, as of June 16, the 1CWAD (Canadian durum wheat with 13,5% protein) average regional price was at C$391.18/t, down C$1.07/t.
Meanwhile durum wheat price –CA St Lawrence (CWAD) was offered at US$365/t FOB, unchanged from a week earlier.
The 1 CWRS (Canadian common wheat with 13,5% protein) average regional price was at 388.01/t, up C$15.35/t.
(USD/CAD = $1.3196 down from $1.3335 the prior week).
From South America, Brazilian farmers have harvested 4.33% of their 2022/2023 second corn crop this season, less than the 14.72% harvested at this time last year, according to a survey by Patria Agronegonegocios.
Brazil’s CONAB estimated their corn production at 125.7 MMT, compared to 125.5 MMT last month and 132 MMT from the USDA.
CONAB set the 2nd crop output at 96.3 MMT from 96.2 last month.
As for soybean CONAB estimated the soybean crop 900k MT higher at 155.7 MMT.
USDA went with 156 MMT in the June WASDE.
Meantime, Brazil ANEC have revised up their June soybean export estimate by 1.7Mt, to 14.8Mt, soymeal exports lifted by 0.2Mt, to 2.5Mt, while corn exports were revised down by 0.1Mt, to 1.6Mt.
In Argentina, the Rosario grains exchange cut its forecast for the country’s 2022/2023 soybean harvest to 20.5 million metric tons down from 21.5 million metric tons previously, it said on Wednesday.
Poor corn yields in Cordoba province mean the exchange may have to cut its current estimate of 36 million tonnes.
The Buenos Aires Grain Exchange has said that dryness in the west of the key wheat crop region means fieldwork is delayed and farmers may miss the planting window altogether.
Planting was 40pc complete, compared to 47pc complete at the same time last year and the five year average of 52pc.
Area estimate unchanged at 6.3m hectares (Rosario Board of Trade 5.6m ha).
In this context, as of June 15, price for Argentina wheat Grade 2 quality, delivered Up River was at US$354/t, down $16/t from the prior week.
Price for Argentina feed corn (Up River) was at US$234/t, down $6/t w.o.w..
Price for Argentina feed barley (Up River) was at US$230/t, down $10/t.
Price for Argentina soybean (Up River) was at US$543/t, up $24/t.
Price for Brazilian feed corn (Paranagua) was at US$237/t, up $5/t.
Price for Brazilian soybean (Paranagua) was at US$481/t, up $13/t.
In Europe, wheat rose but ended well below a session high as traders set a weather-fuelled rally, against forecast rain for European crops and export competition from Russian supplies.
Notably, September wheat on Paris-based Euronext settled 1.6% up at 238.75 euros per metric ton.
It earlier touched its highest in nearly six weeks at 243.25 euros but failed to hold above chart resistance at 240 euros.
Some traders saw the rally as overdone in wheat, viewing it as driven by investments funds covering short positions in grains.
In southern Europe, harvests are getting under way thanks to ongoing dry weather.
Dry, hot weather this month in northern Europe has stirred worries about crop stress, though widespread showers were expected.
On this wake, Stratégie Grain cut 1.3Mt from the EU wheat crop forecast given the dryness in Germany and Poland.
Notably, the consultancy now anticipates EU soft wheat production of 128.7 million tonnes in the 2023/24 season, down from 130.0 million forecast in May though nearly 3% above 2022/23 output.
They also lowered outlook for the EU barley harvest by 2 million tonnes to 47.9 million tonnes, putting the forecast more than 6% below last year’s production.
The consultancy reduced its maize 2023/24 production outlook to 61.2 million tonnes from 62.1 million in May, though that would be 17% above last year level.
On the same wake, latest data from the farm office FranceAgriMer showed the condition of French soft wheat has declined for the third week in a row.
Notably, an estimated 85% of soft wheat was rated in good or excellent condition in the week to June 12, compared with 88% the previous week.
The score, however, was well above the 65% registered a year earlier and remains near the highest for the time of year in FranceAgriMer records going back to 2011.
Durum wheat was rated at 81pc good/excellent (82pc a week earlier, and 61pc last year).
For winter barley, the score fell to 85% from 87% the previous week, while the spring barley rating dropped more sharply, to 83% from 89%.
For grain maize, the good/excellent score shed 2 percentage points to 86%.
However, FranceAgriMer also said that winter crops such as wheat were maintaining good yield potential in the run-up to harvesting, while weather concern are centred on spring crops.
On the geopolitical side, senior Russian officials said on Friday the Black Sea grain deal allowing shipments from Ukraine could not be extended under current circumstances when it expires in mid-July.
However, traders have already factored in a possible breakdown of the corridor after repeated criticism from Moscow, while also anticipating continued large exports from Russia.
Meantime, Poland has already bought around 60 percent of surplus grain to aid farmers affected by a large inflow of Ukrainian crops to Poland, agriculture minister has announced, on Sunday.
At the same time Polish government is encouraging farmers to sell their grain and take advantage of government aid including subsidies of PLN 3,000 (EUR 670) per hectare of wheat.
The Ministry said between March to May over 3 million tons of grain were exported from Poland.
As for rapeseed, August delivery on Euronext ended 6.4% higher at 473.50 euros a metric ton, near an earlier two-month top, buoyed by weather-fuelled gains in soybeans and other oilseed markets.
From the Middle East, Iraq has achieved wheat self-sufficiency for this season, with supply exceeding expectations, Trade Minister Atheer Daoud Al-Ghurairy said on Saturday.
Earlier this month, an Iraqi agriculture ministry official said the wheat harvest was expected to yield between 4.0 and 4.5 million tonnes this season.
From Ukraine, Ukraine’s grain exports for the 2022/23 season stood at 47.5 million metric tons as of June 16, two weeks before the end of the marketing year, Agriculture Ministry data showed on Friday.
The volume in the current July-to-June season so far includes 16.3 million ton of wheat, 28.2 million ton of corn and about 2.7 million ton of barley.
The ministry said grain exports in June had reached 1.8 million tons.
From Russia, “exports of Ukrainian grain under the safe corridor are not helping to resolve Africa’s problems with high global food prices”, Russian President Vladimir Putin said to African leaders on Saturday.
“Only 3% those grains have gone to the poorest countries”, Putin said.
“The food crisis had been caused by the actions of Western countries, not by what Russia calls a “special military operation” in Ukraine”, he added.
The leaders from South Africa, Senegal, Egypt, Zambia, Uganda, Congo Republic and the Comoro islands were meeting Putin at the government’s 18th-century Konstantinovsky Palace in the hope of mediating in the conflict with Ukraine, after visiting Kyiv on Friday.
Meantime, SovEcon expects Russian wheat exports to reach between 2.8 and 3.2 million tonnes in June.
Despite the typical seasonal slowdown in exports, the overall export volume is expected to triple compared to last year.
Russia continues to actively export wheat amid record-high stocks.
From the Middle Kingdom, China is redirecting some resources into improved rural financing in hopes to meet the financing demand of its major grain producers and help them expand their production potential, according to a statement from the People’s Bank of China.
Among other things, the moves will help restructure rural banks and step up loan support for its agriculture industry.
Meantime, US Secretary of State, Antony Blinken arrived in China yesterday in the hope of improving relations between Beijing and Washington.
It is the first visit by a secretary of state to China since 2018.
From South East Asia, Malaysian palm prices soared on Friday for a fourth day, recording an 11 percent weekly jump.
Notably, the benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange gained 234 ringgit, or 6.67%, to 3,742 ringgit ($811.54) a metric ton, its highest close since May 9.
Palm oil estates in Sabah, Malaysia’s largest producing state of the commodity, are experiencing water stress from early signs of El Nino, cutting yields and exacerbating the impact of under-fertilising and labour shortages seen over the past three years.
In the United States, a stretch of dry weather following planting season has stressed crops across the Midwest, raising concerns that the forecasted record soybean harvest will fall below expectations.
“Palm also got support from a rally in South American Soy oil FOB markets and bullish undercurrent in European rapeseed oil and Sunflower oil cash markets” analysts said.
On the physical front, bullish palm oil purchases from top buyer India this week have helped the palm oil to find much-needed support and India’s latest sharp cut in base import prices of palm oil gave it an import duty advantage.
From Australia, local markets finished the week stronger on new crop and old crop markets were also a touch firmer.
Canola bids also found some more strength and continue their rally with Matif and Winnipeg markets both up on Friday.
Southern cropping regions have another 5-25mm of rain on the forecast this week with SA and Vic and southern NSW looking to be the winners.
The rest of NSW is looking at 5-10mm and parts of the northeast 5-15mm.
Qld looks like it will miss out again, with less than 5mm on the radar for southern Qld.
Port congestion increased in most major ports last week with average number of days waiting now over 10 days.
Wait time at Port Kembla went from 12 to 23 days while at Kwinana it went from 14 to 16 days.
There are currently 18 vessels anchored at Australian ports with 9 currently loading.
On the international trade scene, Algeria’s state grains agency OAIC has issued an international tender to buy soft milling wheat to be sourced from optional origins.
The tender sought a nominal 50,000 metric tons (tonnes) but Algeria often buys considerably more in its tenders than the nominal volume sought.
The deadline for submission of price offers in the tender is today, June 19, with offers having to remain valid until Tuesday, June 20.
The wheat is sought for shipment in two periods from the main supply regions including Europe: Aug. 1-15 and Aug. 16-31.
If sourced from South America or Australia, shipment is one month earlier.
In other news …
U.S. grains merchant Bunge and Glencore-backed Viterra are merging to create an agricultural trading giant worth about $34 billion including debt, the companies said on Tuesday, in a deal that will likely draw close regulatory scrutiny.
The deal brings the combined company closer in global scale to leading rivals Archer-Daniels-Midland and Cargill, valuing Bunge and Viterra at about $17 billion each.
Bunge shareholders, however, will own about 70% of the company, because Bunge will pay for a significant chunk of the deal with cash.
In outside markets …
Energy markets saw oil rising and posting a weekly gain, on higher Chinese demand and OPEC+ supply cuts, despite expected weakness in the global economy and the prospect for further interest rate hikes.
Brent crude indeed gained 94 cents to settle at $76.61 a barrel. U.S. West Texas Intermediate (WTI) crude rose $1.16 to $71.78.
Brent posted a weekly gain of 2.4% and WTI rose 2.3%.
Oil has gained past week on hopes of growing Chinese demand, as China’s refinery throughput rose in May to its second-highest total on record, with analysts expecting Chinese demand to keep climbing during the second half of the year.
On the supply side, Russian Energy Minister Nikolai Shulginov, Russian oil and gas condensate production is expected to fall by around 20 million tonnes (400,000 barrels per day) this year, reiterating Russia’s expectations.
However, in Iran, crude exports and oil output have hit new highs in 2023 despite U.S. sanctions.
On the other hand, U.S. oil rigs fell by four to 552 past week, their lowest since April 2022, while gas rigs fell by five to 130, their lowest since March 2022, energy services firm Baker Hughes Co said.
Capping oil price gains was the prospect of rising interest rates, which could slow economic growth.
Meantime, according to the U.S. Commodity Futures Trading Commission (CFTC), money managers cut their net long U.S. crude futures and options positions by 13,191 contracts to 73,273 in the week to June 13.
In ocean freight markets, the Baltic Exchange’s main sea freight index snapped its nine-session winning streak on Friday, weighed down by lower capesize rates, but posted a second straight weekly gain.
The overall index, indeed, fell 18 points, or about 1.7%, to 1,076, its biggest fall in two weeks.
The index, however, climbed about 2% for the week.
Notably, the capesize index fell 71 points, or about 4.4%, to 1,528.
It gained 0.9% for the week.
Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, decreased $584 to $12,674
The panamax index was up 9 points at 1,193, its highest level since May 23.
The index gained 4.1% for the week.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, increased $80 to $10,738.
Among smaller vessels, the supramax index rose 8 points to 748.
In equity markets, US stock indexes gave up early gains and settled moderately lower.
An increase in bond yields pressured technology stocks and fueled long liquidation in the stock indexes.
Bond yields rose on hawkish comments from Richmond Fed President Barkin, who said inflation is “too high and stubbornly persistent,” and he’s comfortable tightening monetary policy further to reduce inflation and slow a resilient U.S. economy and labor market.
Stock indexes initially had moved higher, with the broader market rising early on carryover support from a rally in Asian markets after the BOJ maintained its ultra-loose monetary policy and China considers additional stimulus measures.
Also, a decline in the University of Michigan’s U.S. June 1-year inflation expectations to a 2-year low gave equities a boost.
However, market volatility increased as June stock futures and options contracts expired in the quarterly event known as Triple Witching.
In economic news, the University of Michigan U.S. June consumer sentiment index rose +4.7 to a 4-month high of 63.9, stronger than expectations of 60.0.
The University of Michigan’s June 1-year inflation expectations fell to 3.3% from 4.2% in May, better than expectations of 4.1% and the lowest in 2 years.
Also, the Jun 5-10 year inflation expectations fell to 3.0% from 3.1% in May, right on expectations.
In this context, market odds for the Fed to raise the fed funds target range by +25 bp at the July 25-26 FOMC meeting stand at 72%.
The 10-year T-note yield rose +5.2 bp to 3.769%.
The S&P 500 fell 0.36% to end the session at 4,409.77 points.
The Nasdaq declined 0.68% to 13,689.57 points, while the Dow Jones Industrial Average declined 0.31% to 34,301.03 points.
For the week, the S&P 500 rose 2.6%, the Dow added 1.2% and the Nasdaq gained 3.2%.
In currency trading, the dollar index recovered from a 5-week low and rose by +0.12%.
Hawkish Fed comments from Richmond Fed President Barkin and Fed Governor Waller pushed bond yields higher.
Also, the stronger-than-expected University of Michigan U.S. Jun consumer sentiment index supported the dollar.
Notabily, the EUR/USD retreated from a 5-week high and fell by -0.03%.
EUR/USD Friday initially moved up on hawkish comments from ECB Governing Council members Muller and Nagel both said the ECB needs to keep raising interest rates.
Eurozone Q1 labor costs eased to +5.0% y/y from +5.6% y/y in Q4.
As for the USD/JPY, it rose by +1.08%, with the yen tumbling to a 6-3/4 month low against the dollar after the BOJ maintained its ultra-loose monetary policy and kept its target for 10-year JGB yields unchanged.
Also, BOJ Governor Ueda said Japan hasn’t yet achieved sustainable and stable 2% inflation, signaling the BOJ will keep its stimulus measures in place, a bearish factor for the yen.
Watching this week’s market …
US markets are closed on Monday due to Juneteenth.
In the USA, grain trading opens back up on Monday night for the Tuesday session.
USDA’s Export Inspections and Crop Progress reports will be pushed back to Tuesday.
EIA’s weekly release of their production and stocks report including ethanol will be pushed back to Thursday in the afternoon.
Export Sales data will be out on Friday in the afternoon with the delay.
Friday is also the expiration of July grain options.
NASS will publish their monthly Cattle on Feed and Cold Storage reports on Friday overnight to round things out.
That’s all, thank you.
We wish you a nice day and a good start to the week.
Author: Sandro F. Puglisi
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