Global Ag News for Mar 22.24

TOP HEADLINES

Iowa’s drought conditions have farmers budgeting water use

As Iowa heads toward its fourth year of drought, grain farmers prepping for planting next month are facing mandatory water restrictions and livestock producers are searching for supplies. The nation’s top corn-producing state is seeing one of its driest periods going into a growing season, according to Thursday’s update from U.S. Drought Monitor.

Such dry conditions will allow farmers to plant quickly this season, a bearish move for grain futures that have already been trending downward this year. The U.S. last year harvested a record corn crop despite drought conditions in some areas, and corn prices have hovered around the lowest in more than three years due to plentiful global supply. Iowa had enough sub-soil moisture that farmers were able to produce a bountiful yield last fall with timely rains, said Don Roose, president of Iowa-based U.S. Commodities.

“This year, we’re running on empty, moisture-wise,” Roose said.

About 23% of Iowa’s corn acres and 19% of its soybean acres are in an extreme drought, according to Gro Intelligence, a New York-based data and analytics firm that analyzed Thursday’s drought update and U.S. Department of Agriculture data for Reuters. In comparison, less than 2% of the state’s corn and soybean acres were in an extreme drought during the same time a year earlier, Gro Intelligence found.

Though forecasts for spring rains could temporarily improve Iowa’s situation, weather models predict that drought conditions in northern and eastern parts of the state will intensify going into the summer, said Brad Pugh at the National Weather Service’s (NWS) Climate Prediction Center. Drought concerns prompted Iowa’s Poweshiek Water Association to issue a mandatory water conservation order this month to customers in eight counties and surrounding areas. Among other things, it warned that, starting April 1, crop farmers wanting to spray diluted chemicals or other inputs on their fields may need to source water from private wells or outside the service area.

That order will impact Cordt Holub. Last year, his cattle were able to drink at a nearby stream – until it ran dry. Water restrictions could mean shifting his crop farming practices later this season, which may impact yields.

“Come summertime, if the water isn’t there, we’re going to have to skip on a fungicide pass, maybe an insecticide pass,” Holub said. “We need water to farm.”

NWS scientists also are tracking how a potential shift to a La Nina weather pattern this summer may impact interior river levels this fall – when U.S. grain harvests hit the global markets.

FUTURES & WEATHER

Wheat prices overnight are down 4 1/2 in SRW, down 5 3/4 in HRW, down 3 in HRS; Corn is down 2 3/4; Soybeans down 13 1/4; Soymeal down $3.60; Soyoil down 0.52.

For the week so far wheat prices are up 13 3/4 in SRW, up 9 3/4 in HRW, up 7 in HRS; Corn is up 1 1/4; Soybeans up 1/2; Soymeal up $6.00; Soyoil down 1.15.

For the month to date wheat prices are down 34 in SRW, down 11 1/4 in HRW, down 5 1/2 in HRS; Corn is up 8 1/2; Soybeans up 58; Soymeal up $11.50; Soyoil up 3.06.

Year-To-Date nearby futures are down 13.7% in SRW, down 10.3% in HRW, down 9.7% in HRS; Corn is down 7.1%; Soybeans down 7.3%; Soymeal down 11.7%; Soyoil up 0.9%.

Chinese Ag futures (MAY 24) Soybeans down 27 yuan; Soymeal down 25; Soyoil down 46; Palm oil down 32; Corn down 14 — Malaysian Palm is down 62. Malaysian palm oil prices overnight were down 62 ringgit (-1.46%) at 4187.

There were changes in registrations (-22 Soybeans). Registration total: 438 SRW Wheat contracts; 0 Oats; 37 Corn; 499 Soybeans; 710 Soyoil; 26 Soymeal; 0 HRW Wheat.

Preliminary changes in futures Open Interest as of March 21 were: SRW Wheat down 1,439 contracts, HRW Wheat up 2,321, Corn up 3,170, Soybeans up 7,632, Soymeal up 682, Soyoil up 4,455.

Brazil: A strong front will move through Thursday and settle into central states on Friday, where it will enhance showers through next week. That should leave some good rain for much of the safrinha corn that has had very little over the last week. It will be drier behind the front across the south, which is not exactly a good thing for immature crops there, but it has been raining recently.

Argentina: A stronger front moved through with a round of good showers on Wednesday and will exit early Thursday. Conditions will be drier behind it through at least the weekend. A burst of cooler temperatures will reduce stress, though. Disturbances will resume moving through the country next week, which should keep the overall good conditions going for filling corn and soybeans, however.

Europe: An upper-level low brought some limited showers to Spain on Wednesday. A larger system dives down through Europe this weekend with widespread showers and next week looks pretty active as well with another system moving into western Europe that looks to barrel through the continent. In other words, precipitation will be pretty widespread through the end of the month, favorable for winter wheat in most areas, but still too wet in France and the UK.

Black Sea: An upper-low has moved into the Black Sea and will keep some showers going across southwestern Russia into the weekend. A front should move into the region next week with potential for more showers. Wheat conditions are in good shape as the crop continues to green up early. Rainfall has been more limited lately, and more would be preferred.

Australia: A front is stalling in Queensland where showers are forecast to last into next week, favorable for adding to soil moisture there. Cotton and sorghum are maturing and seeing some early harvest activity. Soil moisture is not favorable ahead of winter wheat and canola planting in most areas, which usually starts up in mid-April. The demise of El Nino and eventual turn to La Nina should favor the winter crops later this year, however.

Northern Plains: Cold air will likely last through most of next week. In the colder air, there will be a clipper that moves through on Thursday with at least one band of moderate snow and a system this weekend is forecast to bring areas of heavy snow and strong winds, which may produce blizzard conditions. Another system may move through later next week as well.

Central/Southern Plains: Scattered showers and thunderstorms continue for Thursday as an upper-level low moves through. A strong system will move through this weekend and early next week that at least has a chance for meaningful precipitation across the southwestern wheat areas, even if that occurs as snow. A burst of arctic air will likely flow down through the region next week behind that system, which could be damaging for some wheat. Another system could follow for late next week, at least keeping up the chances for meaningful precipitation.

Midwest: Colder air in the region sets up another clipper to move through Thursday and Friday with a burst of snow across the north and rain for the south. But the big story will be a major spring storm system that will have multiple effects this weekend through the middle of next week including heavy snow, freezing rain, strong winds, and severe storm potential. Another system may move through later next week as well.

Delta: Recent precipitation has helped to maintain overall good soil moisture in much of the region. A system moving through Thursday and Friday and another early next week should continue that trend. Wetter and cooler conditions may put the brakes on thoughts of early planting in some areas, especially north.

The player sheet for 3/21 had funds: net buyers of 2,000 contracts of SRW wheat, buyers of 1,000 corn, buyers of 2,500 soybeans, buyers of 2,000 soymeal, and sellers of 1,000 soyoil.

TENDERS

• FOOD WHEAT PURCHASE: Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) bought a total of 119,345 metric tons of food-quality wheat from the United States, Canada and Australia in a regular tender that closed on Thursday.

PENDING TENDERS

• WHEAT TENDER: Bangladesh’s state grains buyer issued an international tender to purchase 50,000 metric tons of milling wheat
• RICE TENDER: South Korea’s state-backed Agro-Fisheries & Food Trade Corp issued an international tender to purchase an estimated 100,800 metric tonnes of rice mainly to be sourced from the United States and China
• RAW CANE SUGAR TENDER: Egypt’s General Authority for Supply Commodities (GASC) said it was seeking 50,000 metric tons of raw cane sugar from any origin in a tender on behalf of the Egyptian Sugar & Integrated Industries Company. The deadline for offers is March 23.
• WHEAT TENDER: Jordan’s state grain buyer issued an international tender to buy up to 120,000 metric tons of milling wheat which can be sourced from optional origins.
• RICE TENDER: An international tender from Indonesian state purchasing agency Bulog to buy 300,000 metric tons of rice seeks arrival of the grain in Indonesia by May 31.
• FEED BARLEY TENDER: Jordan’s state grains buyer issued an international tender to purchase up to 120,000 metric tons of animal feed barley.

 

 

TODAY

US Export Sales of Soybeans, Corn and Wheat by Country

The following shows US export sales of soybeans, corn and wheat by biggest net buyers for week ending March 14, according to data on the USDA’s website.

• Top buyer of soybeans: China with 304k tons
• Top buyer of corn: Japan with 546k tons
• Top buyer of wheat: Mexico with 70k tons

 

US Export Sales of Pork and Beef by Country

The following shows US export sales of pork and beef product by biggest net buyers for week ending March 14, according to data on the USDA’s website.

• Mexico bought 9.2k tons of the 33.8k tons of pork sold in the week
• South Korea led in beef purchases

Argentine Corn Production Estimate March 21: Exchange

The Buenos Aires Grain Exchange releases weekly report on website.

• 2023-24 corn production est. lowered by 2.5m tons
• Corn harvest at 3.7% complete

 

Hidrovias do Brasil Doesn’t See Drought in Amazon Rivers in 2024

Hidrovias do Brasil is operating barges in rivers in the Amazon region in regular conditions since January, CFO Ricardo Fernandes Pereira said in an earnings call on Thursday.

• El Niño should end in the second semester, and river draft expected for October must follow historical seasonality
• Company already traded 100% of Northern operation capacity, despite losses in soy and corn fields in Mato Grosso
• In the South, company mapped 25 spots in Paraná-Paraguai waterway and started dredging
• Company expects to operate in a more perennial way next year

SovEcon Raises 2024 Russian Wheat Crop Estimate to 94m Tons

SovEcon raised its estimate for Russia’s wheat crop by 400k tons to 94m tons on below-average winter kills, CEO Andrey Sizov said by email.

• Along with a lack of winter damage, “the majority of regions have sufficient moisture reserves. This often leads to above-average yields”
• Conditions for new crop are starting to deteriorate due to lack of rains
• SovEcon says Russia harvested 92.8m tons in 2023

Egypt Halts Buying Wheat Through Private Deals Outside Tenders

• State buyer began using private deals a couple of years ago
• Before that, Egypt traditionally only bought wheat via tenders

Egypt’s state buyer has for now stopped purchasing wheat through private negotiations with traders, marking a return to sourcing supplies solely in tenders.

The country’s General Authority for Supply Commodities halted the process of seeking direct offers earlier this year, according to Nomani Nomani, an adviser to the supply minister. He didn’t elaborate on whether GASC may resume private talks in the future.

The government began booking some wheat cargoes privately a couple of years ago, after traditionally only importing via tenders. Bloomberg reported at the time that Egypt wanted to seek more ways to secure supplies amid disruption from Moscow’s invasion of Ukraine.

Louis Dreyfus upbeat about China’s agri-food demand, CEO says

Louis Dreyfus Company (LDC) remains positive about Chinese demand as a source of growth for agricultural markets, despite rebalancing in other parts of the Asian nation’s economy, the CEO of the global commodity merchant told Reuters on Thursday.

China is the world’s biggest buyer of farm goods, but slowing economic growth and a real-estate crisis have raised doubts about its commodity demand.

“China has a level of rebalancing going on at this point, predominantly in other sectors. But as related to the agricultural sector, we’re still quite confident and bullish China,” Michael Gelchie said in an interview after the release of LDC’s annual results.

Cereal and oilseed imports in China will remain near record highs this year, encouraged by lower global prices and a domestic crop shortfall, according to traders and analysts.

China has been a focus of investments for LDC as the company looks to combine bulk handling of staple crops with a greater presence in food manufacturing. LDC’s profits last year held close to bumper 2022 levels despite falling commodity prices. Gelchie declined to give a financial outlook for this year, but said the group was in a “solid position” to continue expanding through organic growth and acquisitions. Gelchie said LDC is considering its options after Singapore-based Olam Agri announced on Thursday an indicative offer for Australia’s Namoi Cotton above a previous deal agreed between LDC and Namoi.

Regarding European Union rules on deforestation due to take effect next year, it “probably makes sense” to give actors in the supply chain more time to implement a requirement to prove imported agricultural goods do not cause deforestation, he said.

LDC is well-advanced in complying with the so-called EUDR legislation, particularly for soybeans and coffee, as part of a commitment to reach zero deforestation in 2025, but to ensure the standards were adopted widely timing would be key, Gelchie added.

Faced with criticism from companies and exporting countries, sources have said the EU could implement the rules more gradually.

RIN Supply Expands in February; Eyes on Final 2023 Balances

Increasing RIN generation keeps the pressure on renewable-diesel margins after maintenance and operational snags likely hit January generation. The timing of new capacity looms over March and April data, while 2023 compliance could partially extend the runway if fuel sales are above EIA figures. Imports jumped sequentially, led by record renewable-diesel inflows, and may hold steady ahead of a tax-credit shift.

US Red Meat Production Rose 6.8% Y/y in February

Commercial beef and pork production rose to 4.55b pounds in Feb., according to the USDA’s monthly livestock slaughter report.

• Beef production up 3.6% y/y to 2.17b pounds
• Feb. cattle slaughter totaled 2.61m head, a 2.5% increase from a year ago
• Avg live weight rose by 10 pounds from last year to 1,384 pounds
• Pork production up 9.9% y/y to 2.37b pounds
• Hog slaughter increased 10.1% y/y to 10,986m head
• Avg live weight was 290 pounds vs 291 pounds a year ago

US Miss. River Grain Shipments Fall, Barge Rates Increase: USDA

Barge shipments down the Mississippi river declined to 464k tons in the week ending March 16 from 593k tons the previous week, according to the USDA’s weekly grain transportation report.

• Barge shipments of corn fell 18% from the previous week
• Soybean shipments down 25% w/w
• St. Louis barge rates were $10.81 per short ton, an increase of $0.28 from the previous week

Drought Threatens to Shrivel Mississippi River for a Third Year

• Reduced water levels can create shipping bottlenecks
• River is a critical transportation route for US agriculture

The Mississippi River is at risk of bottlenecks for a third straight year as warm, dry spring weather and low winter snowpack limit the amount of water feeding into it, according to the National Oceanic and Atmospheric Administration.

The US will get warmer-than-average spring temperatures from April through June, and for the first time since 2021 there is no region at risk of major flooding, according the agency’s Spring Outlook report issued Thursday. Drought conditions are expected to persist or worsen across parts of the Great Plains and Rocky Mountains.

More than a trillion pounds of freight per year travel on the Mississippi and the rivers that flow into it. It’s a critical transport route from a region that produces 92% of US agricultural exports. But the waterway, like other vital trade conduits including the Panama Canal, is increasingly vulnerable to climate change.

Low flows on the Mississippi “could have potential impacts on those navigation and commercial interests that depend on water” from the river, Ed Clark, director of NOAA’s National Water Center, said in a statement.

Still, NOAA experts stressed that it’s not certain what will happen with Mississippi water levels later in the year and that conditions need to be monitored over the next several months.

 

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