Global Ag News for Aug 7.23

TOP HEADLINES

Heavy Rains Devastate Crops in China’s Northeastern Grain Basket

Heavy rains lashing China’s northeast are ravaging crops in some areas of the country’s grain basket, threatening to increase imports at a time of rising food insecurity across the globe.

Recent flooding has destroyed rice planted in parts of Jilin and Heilongjiang provinces, local media reported. The rains are expected to continue across most of the region this week as typhoon season continues to wreak havoc, raising the risk that more agricultural land will be inundated, according to the National Meteorological Center.

The northeastern region, which also includes the province of Liaoning and Inner Mongolia, produces almost 30% of China’s grains, accounting for 45% of the national corn harvest, 60% of soybeans and 20% of rice.

Farmers have already been forced to contend with heat waves over the summer, and the latest evidence that climate change is provoking extreme weather could prove devastating for the world’s top agricultural market.

“The flood has completely inundated rice crops for two days already and has caused total crop failure,” said an official at a village in Shulan, a district in Jilin, according to one local report.

Chinese farming companies soared on Monday amid concerns that flooding could restrict supply, with shares of Hunan Jinjian Cereals Industry Co., a rice producer, and Hainan Shennong Technology Co., a seed company, surging 10% or more.

Beijing has increased aid to storm-affected areas as fatalities and evacuations have mounted. For farmers, ongoing rains will make it difficult to drain inundated fields, raising the risk of disease and infestations that will compound crop losses.

Global grains markets have become more vulnerable to supply disruptions after Russia’s invasion of Ukraine choked off a significant portion of exports.

FUTURES & WEATHER

Wheat prices overnight are up 12 3/4 in SRW, up 11 1/4 in HRW, up 2 1/4 in HRS; Corn is down 1/4; Soybeans down 24; Soymeal down $6.10; Soyoil down 0.76.

Markets finished last week with wheat prices down 20 in SRW, down 49 in HRW, down 31 1/4 in HRS; Corn is down 16; Soybeans down 22 1/2; Soymeal down $4.30; Soyoil up 0.77.

For the month to date wheat prices are down 20 in SRW, down 49 in HRW, down 31 1/4 in HRS; Corn is down 16; Soybeans down 22 1/2; Soymeal down $4.30; Soyoil up 0.77.

Year-To-Date nearby futures are down 18.5% in SRW, down 14.0% in HRW, down 12.2% in HRS; Corn is down 28.5%; Soybeans down 5.9%; Soymeal down 7.4%; Soyoil up 6.6%.

Chinese Ag futures (SEP 23) Soybeans down 3 yuan; Soymeal up 23; Soyoil up 30; Palm oil up 18; Corn up 10 — Malaysian palm oil prices overnight were down 86 ringgit (-2.23%) at 3773.

There were no changes in registrations. Registration total: 1,398 SRW Wheat contracts; 448 Oats; 0 Corn; 11 Soybeans; 71 Soyoil; 0 Soymeal; 147 HRW Wheat.

Preliminary changes in futures Open Interest as of August 4 were: SRW Wheat up 4,536 contracts, HRW Wheat up 3,318, Corn up 5,743, Soybeans up 538, Soymeal down 2,319, Soyoil up 4,475.

Northern Plains: A system went through over the weekend, bringing areas of heavy rain through the region and most of the Dakotas, favorable for filling corn and soybeans. The pattern remains active and cool for the region for the next two weeks. Precipitation may not be as widespread or heavy as it was over the weekend, but multiple chances in the next two weeks for periods of rain is a favorable forecast.

Central/Southern Plains: A system passed by to the north this weekend, but brought widespread to all areas but Texas, where heat continued as well. The front to the system has set up around Oklahoma and will be active for most of the week in that area. Systems will pass by off to the north all week long as well, with chances for precipitation continuing there as well as cooler temperatures. It continues to be hot and fairly dry in Texas into next week, otherwise, the forecast is favorable for filling corn and soybeans in the region.

Midwest: A system came by in more than one piece over the weekend, spreading areas of heavy rain across a widespread area of the region, including drier spots in southern Minnesota, Iowa, and central Illinois. Only small sections of the region and Wisconsin were missed by the system, which continues to move through on Monday. Several other systems will move through over the next two weeks with more favorable rainfall. Temperatures will be variable but generally near to below normal through the period as well, favorable for filling corn and soybeans.

Delta: A front was pushed south deeper into the region over the weekend and started to bring temperatures down for the northern half of the region, as well as provide some heavier rainfall for filling cotton and soybeans. The front will be a focal point for shower development for most of the week while systems moving through the Corn Belt could provide additional precipitation for northern areas as well. Dry areas in the south will remain hotter and drier, unfavorable for soybeans and cotton there.

Canadian Prairies: Isolated showers moved through over the weekend. Systems will be moving through over the next couple of weeks, which may provide some decent precipitation for late-developing wheat and canola, but most of the crop is too mature to take much advantage of any incoming precipitation. Temperatures will continue to be cooler as well.

Europe: A deeper storm system developed over the weekend across eastern areas and will pull north on Monday and Tuesday. The storm is pulling in cooler air, and the generally favorable soil moisture is favorable for corn and summer grain growth, but unfavorable for the remaining winter wheat harvest. A few disturbances may still move through northern areas over the week, but the continent will go through a generally drier pattern coming up. Cooler temperatures will moderate slowly over the course of the week.

Black Sea: An active pattern in Europe has been keeping Ukraine active as well over the last couple of weeks. Southwest Russia has been hotter and drier by contrast, leading to mixed conditions. A front moving in from a strong storm system in eastern Europe and potential for developing systems along it will make for chances for better precipitation over southwest Russia later this week. If the rain does not occur, heat will be unfavorable for filling corn.

The player sheet for Aug. 4 had funds: net buyers of 3,000 contracts of SRW wheat, buyers of 2,500 corn, buyers of 4,500 soybeans, sellers of 2,000 soymeal, and  buyers of 3,500 soyoil.

TENDERS

• CORN PURCHASE: Algerian state agency ONAB is believed to have bought one consignment of about 40,000 metric tons of animal feed corn expected to be sourced from Argentina or Brazil in an international tender. It was believed to have been purchased at around $239 to $240 a metric ton c&f.

PENDING TENDERS

• WHEAT TENDER: Bangladesh’s state grains buyer issued an international tender to purchase 50,000 metric tons of milling wheat, European traders said. The deadline for submission of price offers is Aug. 13, they said.

TODAY

SOYBEAN/CEPEA: Supply higher than demand presses down prices in both BR and the US

Cepea, August 4 – The prices for soybean and its by-products are fading in both Brazil and the United States this month. Pressure comes from the current high inventories in Brazil. Although sales have been at record levels this season, supply has been higher than demand because of the high harvest in Brazil in the 2022/23 crop.

Besides, recent rains in areas with soybean crops in the US have brought some relief to the agents in the soybean sector, however, many of them are focused on crop activities, since August is a crucial month for the productivity of North-American crops.

It is important to consider that, although the Brazilian exports of soybean have been high, the price paid for the national product is currently the lowest in two years. According to Secex (Foreign Trade Secretariat), between January and July, Brazil exported 72.46 million tons of soybean, a record and 19.73% more than the volume shipped in the same period last year. In July, although the volume exported was 29% lower than that shipped in June, it was still 29.17% higher than that from Jul/22. The price paid for the exported bag of soybean averaged BRL 141.63 in July, the lowest since July/21.

In that scenario and in light of higher road freight costs in Brazil, many agents opted for keeping the remaining of the 2022/23 crop to trade it along the second semester. The cost of road freight tends to drop in Brazil, due to the end of the corn harvest and more options of return trips because of the flow of inputs imports for the 23/24 season.

As for purchasers, agents have not been selling high amounts either, since they are aware of the nearness of the season in the US, high supply in BR and estimates pointing to an even higher output in Brazil in the 23/24 season.

Between July 27th and August 3rd, the ESALQ/BM&FBovespa Paranaguá (PR) Index decreased 2.7%, to BRL 147.30/bag (USD 30.13) per 60-kg bag on Thursday, 3. The CEPEA/ESALQ Index Paraná dropped 2.3% in the last seven days, to BRL 138.72 (USD 28.37) per 60-kg bag on August 3rd. On the average of the regions surveyed by Cepea, soybean prices decreased 2.5% in the over-the-counter market (paid to farmers) and 2.7% in the wholesale market (deals between processors).

CORN/CPEEA: Index is at the lowest level since August 2020

Cepea, August 4 – Corn prices are still fading in Brazil, being currently at the lowest levels of the year in many regions. In Campinas (SP), the ESALQ/BM&FBovespa Index is the lowest since August 2020, in nominal terms. Higher supply and steep devaluations abroad this week have put pressure on domestic quotations.

Amid the peak of harvest of a record season, purchasers are waiting for prices to drop in order to buy larger volumes. Sellers, on the other hand, have not been willing to trade corn at the current price levels. This scenario resulted in low liquidity.

Between July 27th and August 3rd, the ESALQ/BM&FBovespa Index for corn (Campinas, SP) dropped 2.5%, closing at BRL 53.47 (USD 10.94)/bag on Thursday, 3. Between June 30th and July 31st, the Index decreased 3.1%, averaging BRL 54.98/bag last month, the lowest since Aug/20, in nominal terms.

The steepest devaluations were observed in the over-the-counter market (paid to farmers). In the last seven days, prices dropped 12% in Sorriso (MT), 8.9% in Rio Verde (GO) and 7.1% in Western Paraná. On the average of the regions surveyed by Cepea, corn prices dropped 5% in the over-the-counter market (paid to farmers) and 2.3% in the wholesale market (deals between processors).

CROPS – The dry weather in most corn-producing regions in Brazil is favoring the harvesting. According to Conab, 54.7% of the national crop of corn had been harvested by July 29th, with activities most advanced in Mato Grosso, Tocantins and Maranhão.

PORTS – At Brazilian ports, corn prices have decreased this week too, reflecting the devaluations abroad. At the port of Paranaguá (PR), quotations averaged BRL 57.98/bag on August 3rd, 3.8% lower than that on July 27th. As for shipments, Brazil exported 4.3 million tons of corn last month, 4% more than that shipped in July/22, according to data from Secex (Foreign Trade Secretariat).

Brazil July Corn and Soybean Exports by Country: MDIC

Brazil’s Trade Ministry updates its website with exports by country of destination for July.

• Soybean shipments to China rose 32% in July vs the same period last year
• Jan.-July shipments to China reached a record 50.4m tons
• China was also the leading destination for corn shipments at 902,000 tons

EU Soft-Wheat Exports Fall 13% In Season Through July 30

The European Union’s soft-wheat exports in the season that began July 1 reached 2.35m tons as of July 30, compared with 2.7m tons in a similar period a year earlier, the European Commission said on its website.

• Leading destinations included Morocco (557k tons), Algeria (425k tons) and South Africa (215k tons)
• EU barley exports were at 390k tons, down 69% y/y
• Corn imports stood at 1.17m tons, down 28% y/y

Heavy Rains Devastate Crops in China’s Northeastern Grain Basket

Heavy rains lashing China’s northeast are ravaging crops in some areas of the country’s grain basket, threatening to increase imports at a time of rising food insecurity across the globe.

Recent flooding has destroyed rice planted in parts of Jilin and Heilongjiang provinces, local media reported. The rains are expected to continue across most of the region this week as typhoon season continues to wreak havoc, raising the risk that more agricultural land will be inundated, according to the National Meteorological Center.

The northeastern region, which also includes the province of Liaoning and Inner Mongolia, produces almost 30% of China’s grains, accounting for 45% of the national corn harvest, 60% of soybeans and 20% of rice.

Farmers have already been forced to contend with heat waves over the summer, and the latest evidence that climate change is provoking extreme weather could prove devastating for the world’s top agricultural market.

“The flood has completely inundated rice crops for two days already and has caused total crop failure,” said an official at a village in Shulan, a district in Jilin, according to one local report.

Chinese farming companies soared on Monday amid concerns that flooding could restrict supply, with shares of Hunan Jinjian Cereals Industry Co., a rice producer, and Hainan Shennong Technology Co., a seed company, surging 10% or more.

Beijing has increased aid to storm-affected areas as fatalities and evacuations have mounted. For farmers, ongoing rains will make it difficult to drain inundated fields, raising the risk of disease and infestations that will compound crop losses.

Global grains markets have become more vulnerable to supply disruptions after Russia’s invasion of Ukraine choked off a significant portion of exports.

Russia says JPMorgan stops processing its grain payments

U.S. bank JPMorgan JPM.N this week stopped processing payments for the Russian Agricultural Bank, Russia said on Friday, as it demanded action, not promises, from Washington to help Russian grain and fertilizer reach global markets.

JPMorgan had handled some Russian grain export payments for the past few months with reassurances from Washington. However, that cooperation stopped this week, Russia’s Foreign Ministry said on Friday.

“The direct channel between the Russian Agricultural Bank and JPMorgan … was closed on Aug. 2,” foreign ministry spokeswoman Maria Zakharova was quoted by Russian media as saying.

The United Nations, the U.S. State Department and JPMorgan declined to comment.

Moscow had allowed the safe export of Ukraine grain via the Black Sea for the past year under a deal it quit on July 17. Russia has a list of demands it wants met before it will return to the arrangement.

Under a related pact – also brokered in July 2022 – U.N. officials agreed to help Russian food and fertilizer exports reach global markets.

“As soon as this is done, this deal will immediately be renewed,” Kremlin spokesman Dmitry Peskov told reporters on Friday.

A key Russian demand has been the reconnection of the Russian Agricultural Bank to the SWIFT international payments system. It was cut off by the European Union in June 2022 following Russia’s invasion of Ukraine.

Zakharov, the foreign ministry spokeswoman, said the West and the United Nations “tried to present (payment processing by JPMorgan) as a working alternative to SWIFT.”

U.S. Secretary of State Antony Blinken told reporters on Thursday that Washington would continue to do “whatever is necessary” to ensure Russia can freely export food if the Black Sea grain deal was revived.

While Russian exports of food and fertilizer are not subject to Western sanctions imposed after Russia’s February 2022 invasion of Ukraine, Moscow has said restrictions on payments, logistics and insurance have hindered shipments.

India Considers Scrapping Wheat Import Tax to Cool Prices

• Nation once promised to feed the world but had to curb exports
• Government has also banned the export of some rice varieties

India, the world’s second-biggest wheat producer, may abolish an import tax so that buying the grain from overseas becomes more attractive, a move aimed at cooling domestic prices.

The government is considering cutting or scrapping a 40% duty on wheat imports, Food Secretary Sanjeev Chopra said Friday, confirming an earlier report by Bloomberg News. Wheat futures in Chicago extended gains to as much as 4.2%.

It would be a big move if India were to import wheat. After Russia’s invasion of Ukraine, Prime Minister Narendra Modi declared that his country was ready to “feed the world,” but changed course weeks later by restricting wheat exports to protect its own food supplies. Just two weeks ago, India, which dominates global rice trade, banned the export of some varieties to control domestic food costs, sending rice prices in Asia to a three-year high.

Chopra said the government is committed to controlling wheat prices. It has a few options under consideration, including lowering or scrapping the import duty, or tweaking stockholding limits.

The last time India imported significant amount of wheat was in 2017-18.

Any move to scrap import duty will likely benefit flour millers in southern India, especially those located near coastal areas. It would make it cheaper for them to buy overseas wheat such as from the Black Sea, where Russia is expected to ship record volumes for the second year in a row, and Australia.

While global wheat prices have dropped 18% in the past year, it’s become more expensive in India. Retail prices in New Delhi were 17% higher Thursday than a year ago, just months before Modi is due to seek re-election and rising prices are a top concern for voters. Soaring food costs pushed inflation to a three-month high in June and may even send it back above the central bank’s 6% target ceiling.

There are signs India’s most-recent wheat harvest suffered another year of weather damage. Excessive rain in March hit the crop at a vital grain-filling stage. While the farm ministry predicted that production would climb to an all-time high of 112.7 million tons, other forecasters were less upbeat. A flour miller group estimated that the harvest was just 102.9 million tons.

Separately, Chopra said the government has no plan to import wheat from Russia, refuting an Economic Times report that India was seeking to buy 9 millions from the top exporter to boost stockpiles.

Ukraine Reaps 16.6M Tons of Grains and Legumes, Ministry Says

Ukraine’s farmers have threshed 16.6 million tons of grains and legumes from more than 3.7 million hectares as of Aug. 4, the Agriculture Ministry says on its website.

Total includes:

• 12.5m tons of wheat
• More than 3.7m tons of barley

US Pork Production Falls 2.4% This Week, Beef Down: USDA

US federally inspected pork production falls to 489m pounds for the week ending Aug. 5 from 501m in the previous week, according to USDA estimates published on the agency’s website.

• Hog slaughter down 2.3% from a week ago to 2.338m head
• Beef production down 0.8% from a week ago, cattle slaughter falls 1%
• For the year, beef production is 4.8% below last year’s level at this time, and pork is 0.4% above

 

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