Global Ag News for Jan 13.22
Grain, Soy Outlook Revives Food-Inflation Worry: WASDE Takeaways
Here are the key takeaways from the January USDA World Agricultural Supply and Demand report, released Thursday.
- Food inflation: Hold the phone on the deflation in agricultural commodities. Grains and soy prices jumped after the US government showed surprisingly low estimates for American corn and soy output. The rally could throw a wrench in crop markets that started the year with a bearish tilt.
- Egg pain: The worst-ever outbreak of bird flu is ravaging the egg industry, and USDA once again lowered its estimate slightly. Record prices for eggs mean food inflation is raging still, even as prices for some foods like bacon are coming down.
- Ukraine export rebound: The deal to allow exports of crops out of Ukraine is helping the key shipper to get closer to normal levels despite the invasion from Russia. USDA estimated Ukrainian corn exports at 20.5 million tons, more than double than the outlook in July for only 9 million, before the deal was inked.
- Wild weather: US farmers planted the most winter wheat since 2015, and yet prices for the grain rallied as drought could mean some of those planted fields will eventually be abandoned.
- South America: Argentina is experiencing severe drought, and USDA slashed soybean and corn output for the country with more declines potentially forthcoming. That puts the onus on Brazil, which is currently harvesting its soybean crop — those supplies are now desperately needed to offset lackluster crops elsewhere.
FUTURES & WEATHER
Wheat prices overnight are up 3 1/2 in SRW, up 6 3/4 in HRW, up 2 in HRS; Corn is up 3 1/2; Soybeans up 9 1/4; Soymeal up $0.34; Soyoil down 0.35.
For the week so far wheat prices are up 2 3/4 in SRW, up 9 3/4 in HRW, up 12 1/2 in HRS; Corn is up 20 1/2; Soybeans up 35 1/4; Soymeal up $0.72; Soyoil down 0.27.
For the month to date wheat prices are down 45 3/4 in SRW, down 46 1/4 in HRW, down 24 1/2 in HRS; Corn is down 4; Soybeans up 3 3/4; Soymeal up $13.70; Soyoil down 1.17.
Year-To-Date nearby futures are down 5.8% in SRW, down 5.2% in HRW, down 2.6% in HRS; Corn is down 0.6%; Soybeans up 0.7%; Soymeal up 8.0%; Soyoil down 0.9%.
Chinese Ag futures (MAR 23) Soybeans up 61 yuan; Soymeal up 42; Soyoil up 16; Palm oil down 14; Corn up 9 — Malaysian palm oil prices overnight were down 70 ringgit (-1.79%) at 3841.
There were no changes in registrations. Registration total: 2,788 SRW Wheat contracts; 0 Oats; 154 Corn; 665 Soybeans; 479 Soyoil; 0 Soymeal; 280 HRW Wheat.
Preliminary changes in futures Open Interest as of January 12 were: SRW Wheat up 4,295 contracts, HRW Wheat down 555, Corn up 7,025, Soybeans up 11,282, Soymeal up 3,240, Soyoil up 2,377.
Brazil Grains & Oilseeds Forecast: Rio Grande do Sul and Parana: Scattered showers through Saturday, north Sunday-Monday. Temperatures near normal through Monday. Mato Grosso, MGDS and southern Goias: Scattered showers through Monday. Temperatures near normal through Monday.
Argentina Grains & Oilseeds Forecast: Cordoba, Santa Fe, Northern Buenos Aires: Mostly dry through Monday. Temperatures near to below normal Thursday-Friday, near to above normal Saturday-Monday. La Pampa, Southern Buenos Aires: Mostly dry through Monday. Temperatures near to below normal Thursday-Friday, near to above normal Saturday-Monday.
Northern Plains Forecast: Mostly dry through Saturday. Isolated showers Sunday-Monday. Temperatures near to above normal Friday, above normal Saturday-Monday. Outlook: Isolated showers Tuesday-Friday. Mostly dry Saturday. Temperatures above normal Tuesday-Thursday, near to above normal Friday-Saturday.
Central/Southern Plains Forecast: Mostly dry through Saturday. Isolated showers Sunday night-Monday. Temperatures near to above normal Friday, above to well above normal Saturday-Monday. Outlook: Isolated to scattered showers Tuesday-Friday. Mostly dry Saturday. Temperatures above normal Tuesday-Wednesday, near to above normal Thursday-Friday, near to below normal Saturday.
Western Midwest Forecast: Mostly dry Friday-Saturday. Scattered showers Sunday night-Monday. Temperatures near to below normal Friday, above normal Saturday, well above normal Sunday-Monday.
Eastern Midwest Forecast: Scattered showers Friday. Mostly dry Saturday-Sunday. Scattered showers Monday. Temperatures above normal through Sunday, well above normal Monday. Outlook: Scattered showers Tuesday-Saturday. Temperatures above to well above normal Tuesday-Friday, near to above normal Saturday.
The player sheet for Jan. 12 had funds: net buyers of 2,000 contracts of SRW wheat, buyers of 10,500 corn, buyers of 10,500 soybeans, buyers of 2,500 soymeal, and buyers of 3,000 soyoil.
- WHEAT PURCHASE: Turkey’s state grain board TMO provisionally purchased some 565,000 tonnes of wheat in an international tender on Thursday, traders said. Much of the wheat with 12% protein content was expected to be sourced from the Black Sea region, especially Russia and Ukraine
- WHEAT PURCHASE: A group of South Korean flour mills bought around 80,000 tonnes of milling wheat to be sourced from the United States in an international tender on Thursday.
- WHEAT PURCHASE: Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) bought a total of 89,735 tonnes of food-quality wheat from the United States and Canada in a regular tender that closed on Thursday.
- WHEAT PURCHASE: South Korea’s Major Feedmill Group (MFG) purchased about 130,000 tonnes of animal feed wheat in two private deals this week, without issuing an international tender
- CORN PURCHASE: South Korean animal feed maker Nonghyup Feed Inc. (NOFI) bought around 133,000 tonnes of animal feed corn in an international tender on Thursday.
- SOYMEAL PURCHASE: Two South Korean importers purchased a total of 12,000 tonnes of soymeal from China in private deals on Wednesday without an international tender being issued.
- WHEAT PURCHASE: The Taiwan Flour Millers’ Association purchased an estimated 45,200 tonnes of milling wheat to be sourced from the United States in a tender on Friday
- RICE TENDER: South Korea’s state-backed Agro-Fisheries & Food Trade Corp issued an international tender to purchase an estimated 113,460 tonnes of rice to be sourced from the United States. The deadline for submissions of price offers was Dec. 29.
- SUNFLOWER OIL TENDER: Turkey’s state grain board TMO issued an international tender to purchase about 24,000 tonnes of crude sunflower oil.
- SOYBEAN TENDER: South Korea’s state-backed Agro-Fisheries & Food Trade Corp issued international tenders to purchase around 19,000 tonnes of food-quality soybeans free of genetically-modified organisms (GMOs).
Argentine Soy, Corn, Wheat Estimates Jan. 12: Exchange
The Buenos Aires Grain Exchange releases weekly report on website.
- 2022-23 soybean production est. cut to 41m tons
- Planting area cut to 16.2m ha from 16.7m ha
- Corn planting area cut to 7.1m ha vs 7.3m
Argentine Soy, Corn, Wheat Estimates Jan. 12: Exchange
The Buenos Aires Grain Exchange slashed its official soybean production estimate by 15% to 41m metric tons from 48m, according to a weekly report.
- NOTE: The bourse said on Wednesday that should there be no letup in the drought, production may plummet to 35.5m metric tons
- NOTE: The Rosario Board of Trade said it now sees output at 37m
- With some fields too dry to plant, Buenos Aires analysts cut the soy area estimate by 3% to 16.2m hectares (40m acres) from 16.7m
- 56% of soy plants are in a poor or very poor condition; 40% are categorized as fair; only 4% are good or excellent
China December Imports: Customs
General Administration of Customs says on website.
- Soybean in Dec. Imports 10.555m
- Soybean imports YTD fell 5.6% y/y to 91.081m tons
- Edible vegetable oil imports in Dec. 915,000 tons
- Edible vegetable oil imports YTD fell 37.6% y/y to 6.481m tons
- Rubber imports in Dec. 762,000 tons
- Rubber imports YTD rose 8.7% y/y to 7.36m tons
- Meat (including offal) imports in Dec. 703,000 tons
- Meat (including offal) imports YTD fell 21% y/y to 7.404m tons
- Fertilizer exports in Dec. 2.443m tons
- Fertilizer exports YTD fell 24.6% y/y to 24.859m tons
NOPA December U.S. soy crush seen at 182.907 million bushels
The U.S. soybean crush in December likely dropped from the same month a year earlier as harsh winter weather curtailed processing at plants in parts of the Midwest and Plains, analysts said ahead of a monthly National Oilseed Processors Association (NOPA) report due on Tuesday.
NOPA members, which handle about 95% of all soybeans processed in the United States, were estimated to have crushed 182.907 million bushels last month, according to the average of estimates from 10 analysts.
If realized, the monthly crush would be up 2.1% from the 179.184 million bushels processed by NOPA members in November, but down 1.9% from an all-time record monthly crush of 186.438 million bushels in December 2021. It would also be the smallest December crush in three years.
The estimate implies a daily crush rate of 5.900 million bushels, which would be down from 5.973 million bushels a day in November.
Frigid temperatures and heavy snow across parts of the central United States curbed operations and disrupted transportation around several facilities, some analysts said.
Estimates for the December 2022 crush ranged from 174.380 million to 188.000 million bushels, with a median of 184.107 million bushels.
The monthly NOPA report is scheduled for release at 11 a.m. CST (1700 GMT) on Tuesday. NOPA releases crush data on the 15th of each month, or the next business day.
Soyoil supplies held by NOPA members as of Dec. 31 were projected at 1.725 billion pounds, according to the average of estimates gathered from seven analysts.
If realized, the soyoil stocks would be up 5.8% from the 1.630 billion pounds at the end of November but down 15.1% from the 2.031 billion pounds at the end of December 2021.
Soyoil stocks estimates ranged from 1.679 billion to 1.775 billion pounds, with a median of 1.725 billion pounds.
World 2022-23 Grain Stockpiles Cut on Improving Demand: IGC
Outlook for world grain stockpiles in the 2022-23 season cut to 577m tons, from November estimate for 580m tons, as rising demand offsets higher production, the International Grains Council said Thursday in a report.
- That would be an eight-year low and puts the stocks-to-use ratio at 25.3%, its lowest since 2012-13
- Wheat stockpiles estimate cut to 281m tons, from 282m tons
- Corn stockpiles estimate cut to 254m tons, from 257m tons
- Soybeans kept steady at 54m tons
- World wheat production could fall to 788m tons, down 1% y/y
- That’s based on steady acreage and a pullback in yields
- Agency says world stocks are expected to tighten, including in major exporters, without specifying a figure
Grain Shipments on Mississippi River Fell 12% Last Week: USDA
Barge shipments down the Mississippi river declined to 355k tons in the week ending Jan. 7 from 402k tons the previous week, according to the USDA’s weekly grain transportation report.
- Barge shipments of corn fell 36% from the previous week
- Soybean shipments up 3% w/w
- St. Louis barge rates were $21.57 per short ton, a decline of $7.36 from the previous week
Ukraine Says 85% of 2022-23 Corn Area Harvested as of Jan. 12
Ukrainian farmers have harvested 23.5m tons of corn from 3.6m hectares (8.9m acres), according to government figures posted Friday.
- That accounts for 85% of the area that was sown for the 2022-23 season
- Sunflower harvest is 99% done, with 10.5m tons of seeds threshed
- Sugar beet harvest is 99% done, with 9 million tons collected
El Nino’s Chances of Replacing Fading La Nina Are Shrinking
- Lingering La Nina phenomenon has 73% chance of fading by April
- There remains a ‘high uncertainty’ on a transition to El Nino
The odds that a weather-roiling El Nino will replace the lingering La Nina phenomenon across the Northern Hemisphere this summer are slipping.
There’s a 39% chance that El Nino — a warming of the Pacific Ocean that can shut down the Atlantic hurricane season — will arrive between June and August, according to the US Climate Prediction Center. That’s down from 40% a month ago.
La Nina phenomenon usually means a continuation of drought in California.
El Ninos are known to spark heavy rains and flooding across California as storm paths are pushed further south across North America. The phenomenon is also noted for bringing droughts across parts of Southeast Asia and India, impacting coffee and other crops. A powerful El Nino in 1997-1998 was blamed for causing $100 billion in damages and losses, along with deaths of 30,000 people around the world.
Meanwhile, there’s a 73% chance La Nina will fade between February and April, bringing an end to the third consecutive such pattern in as many years. If La Nina exits, temperatures in the Pacific will normalize ahead of a possible warming that would trigger an El Nino.
Conditions across the Pacific “do not support an imminent transition,” the agency said. “Uncertainty remains high.”
Predictions that call for changes to the larger pattern and those that extend through March to May tend to be less accurate.
La Nina still holds sway across the Pacific and has been blamed for less snow for the large cities of the eastern US, as well as dry conditions across the crop areas of Brazil and Argentina. The phenomenon usually also means a continuation of drought in California, however other weather patterns this year have bucked that trend, leaving the state drenched with flooding rain.
Nitrogen Supply Squeeze Could Ease as Chinese Urea Piles Up
A return to profitable European ammonia production and rising Chinese urea supply portend relief in nitrogen prices. Global nitrogen supply could loosen more quickly if Russia and Ukraine agree to reopen the TOAZ pipeline, which handles 20% of the global ammonia trade
Growing Demand to Extend Urea Tightness for Years
The global urea market should remain tight until at least the middle of the decade as high prices for inputs — especially gas and coal — keep production offline. Farmers can’t skip the nutrient, supporting 2% average annual demand growth, fueled by rising food needs. Yet supply expansion will slow in 2023-24, tightening the balance. A new facility can take up to four years to build and is prone to cost and construction overruns. Given that natural gas is the key input for urea, gas-to-urea price spreads pose a key risk to utilization rates.
Investment in green ammonia production is growing, though growth in grey ammonia for urea production is stagnant, further extending market tightness into the latter half of this decade.
End to Chinese Urea Export Ban in Sight
Further nitrogen price relief is likely when the marginal producer, China, return to the export market, which we expect after 2Q. Rising production and limited exports support growing urea stockpiles in China. The country’s operating rates rose this winter, pushing inventory to a five-year high. The export-to-domestic price spread is $75 a metric ton. Chinese farmers are benefiting from urea prices in-line with seasonal norms and could expand plantings and fertilization rates in 1H. We expect China to keep limiting urea exports though 2Q to ensure spring tons.
Global nitrogen prices fall when China exports and rise in its absence. Most Chinese companies are closely held or state-owned. Yara, CF Industries and Nutrien are the largest publicly traded nitrogen producers.
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