Global Ag News for July 11.23

TOP HEADLINES

Rice Soars to Two-Year High in Asia on El Niño Drought Risks (1)

• Dry weather in Asia likely to hurt output of the food staple
• Buyers have been stocking up on concerns over supplies

Rice prices in Asia have surged to the highest level in more than two years as importers build up stockpiles on fears that the onset of El Niño will parch plantations and damage crops.

A benchmark grade in the region, Thai white rice 5% broken, has climbed about 15% in the past four months to $535 a ton, the strongest since early March 2021, according to data from the Thai Rice Exporters Association.

El Niño conditions have developed in the tropical Pacific for the first time in seven years, according to the World Meteorological Organization, threatening to bring drought to Southeast Asia. That comes just as three days of record global temperatures last week increased concerns over the pace of climate change.

While monsoon rains have brought relief to rice fields in parts of India, the top exporter, dry weather is threatening crops in No. 2 shipper Thailand, with the country facing widespread drought conditions from early 2024. The government has already asked farmers to restrict their planting to just one crop this year.

“With El Niño, we’ll start to clearly see the effects of dry weather later around September and October,” said Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association. “This being said, we’ll see stockpiling continue as El Niño looks set to drag on into next year.”

FUTURES & WEATHER

Wheat prices overnight are up 12 1/2 in SRW, up 14 in HRW, up 14 3/4 in HRS; Corn is up 6 1/4; Soybeans up 16; Soymeal up $7.30; Soyoil down 0.35.

For the week so far wheat prices are up 9 1/4 in SRW, up 7 in HRW, up 17 1/4 in HRS; Corn is up 11 1/4; Soybeans up 44; Soymeal up $9.90; Soyoil up 2.13.

For the month to date wheat prices are up 7 3/4 in SRW, up 25 1/4 in HRW, up 48 in HRS; Corn is up 11; Soybeans up 18 1/4; Soymeal down $1.10; Soyoil up 1.49.

Year-To-Date nearby futures are down 17.9% in SRW, down 8.7% in HRW, down 10.7% in HRS; Corn is down 16.1%; Soybeans down 0.2%; Soymeal down 13.8%; Soyoil up 7.3%.

Chinese Ag futures (SEP 23) Soybeans down 10 yuan; Soymeal up 76; Soyoil up 100; Palm oil up 132; Corn down 10 — Malaysian palm oil prices overnight were down 32 ringgit (-0.82%) at 3888.

There were changes in registrations (7 Oats, -22 Corn, -16 Soyoil). Registration total: 1,455 SRW Wheat contracts; 444 Oats; 99 Corn; 0 Soybeans; 749 Soyoil; 0 Soymeal; 147 HRW Wheat.

Preliminary changes in futures Open Interest as of July 10 were: SRW Wheat up 628 contracts, HRW Wheat up 1,076, Corn down 7,374, Soybeans up 1,360, Soymeal up 1,346, Soyoil up 5,349.

Northern Plains: Isolated showers and storms moved across the area this past weekend, offering spotty rainfall. Fronts moving through this week will bring more scattered precipitation, but precipitation looks to remain spotty. Near- to below-normal temperatures are expected to reduce stress on developing crops.

Central/Southern Plains: A few rounds of severe weather hit the south-central U.S. this past weekend, providing some pockets of heavy rain, damaging winds, and large hail. Rainfall looks likely across the Central Plains this week, which will help some drought-stricken areas. Less rainfall is expected across Oklahoma and Texas. Temperatures are also mild for most areas, though will be increasing across Texas this week. Conditions are mostly favorable for much of the region despite the continued drought, though rain may disrupt the wheat harvest.

Midwest: Portions of the Eastern Corn Belt received some decent rainfall over the weekend. Additional fronts will drop out of Canada this week with potential for more showers while temperatures stay mild to cool. Rain is coming at enough of a frequency to maintain or boost soil moisture in some areas, though there are plenty that are also seeing disappointment and low soil moisture, creating mixed conditions for developing corn and soybeans.

Delta: Systems will develop along frontal boundaries throughout this week, offering daily chances for showers and thunderstorms. Some pockets of heavy rain are possible across Illinois and Missouri over the next five days. The widespread rainfall will continue to benefit crop growth, but areas that receive heavy rain may need to watch for flooding.

The player sheet for 7/10 had funds: net sellers of 1,000 contracts of SRW wheat, buyers of 4,500 corn, sellers of 10,000 soybeans, buyers of 2,000 soymeal, and  buyers of 8,000 soyoil.

PENDING TENDERS

• RICE TENDER: South Korea’s state-backed Agro-Fisheries & Food Trade Corp has issued an international tender to purchase an estimated 43,000 metric tons of rice. The deadline for submissions of price offers in the tender is July 10.
• WHEAT, BARLEY TENDER: Japan’s Ministry of Agriculture, Forestry and Fisheries will seek 60,000 metric tons of feed wheat and 20,000 metric tons of feed barley to be loaded by Oct. 31 and arrive in Japan by Dec. 21 via a simultaneous buy and sell auction that will be held on July 12.

TODAY

USDA CROP PROGRESS: Corn Conditions 55% G/E, Soybeans 51%

Highlights from the report:

• Corn 55% G/E vs 51% last week, and 64% a year ago
• Corn dough 3% vs 2% a year ago
• Corn silking 22% vs 8% last week, and 14% a year ago
• Soybeans 51% G/E vs 50% last week, and 62% a year ago
• Soybeans blooming 39% G/E vs 24% last week, and 30% a year ago
• Spring wheat 47% G/E vs 48% last week, and 70% a year ago
• Winter wheat harvest 46% vs 37% last week, and 62% a year ago
• Winter wheat 40% G/E vs 40% last week, and 31% a year ago
• Cotton 48% G/E vs 48% last week, and 39% a year ago
• Sorghum 55% G/E vs 55% last week, and 40% a year ago
• Sorghum planted 96% vs 92% last week, and 99% a year ago

US Inspected 341k Tons of Corn for Export, 238k of Soybean

In week ending July 6, according to the USDA’s weekly inspections report.

• Corn: 341k tons vs 676k the previous wk, 935k a yr ago
• Wheat: 419k tons vs 342k the previous wk, 310k a yr ago
• Soybeans: 238k tons vs 263k the previous wk, 360k a yr ago

US Corn, Soybean, Wheat Inspections by Country: July 6

Following is a summary of USDA inspections for week ending July 6 of corn, soybeans and wheat for export, from the Grain Inspection, Packers and Stockyards Administration, known as GIPSA.

• Soybeans for Germany-bound shipments made up 67k tons of the 238k total inspected
• Mexico was the top destination for corn inspections, Philippines led in wheat

WHEAT/CEPEA: Players continue focused on crop activities

Wheat sowing activities are nearing the end, especially in Southern Brazil, where the biggest producers are located. In Argentina, activities are advancing. In the United States, the winter harvest continues below 40% of the total area.

Conab says that 79.6% of wheat crops in Brazil had been planted up to July 1st, 10.8 percentage points more compared to that in the same period last year. Activities are advancing in Paraná (91%), Rio Grande do Sul (66%) and in Santa Catarina (45%). Moreover, the harvest has started in Goiás, reaching 26% of the area.

In Paraná, Seab/Deral indicates that sowing activities of the new crop had totaled 96% of the area until July 3rd. As for Rio Grande do Sul, according to Emater, sowing activities reached 82% of the total up to July 6th, 5 p.p. more than in the same period last year, but moving down 5 p.p. compared to the average over the last five years.

In Argentina, Bolsa de Cereales reports that sowing activities totaled 81.4% of the area until July 5th, for an advance of 9.5 p.p. in a week. In the United States, 37% of winter crops were harvested up to July 2nd, below the 52% registered in the same period last year and lower than the 46% observed on the average over the last five years (2018-2022) – data from the USDA.

PRICES – Cepea surveys show that, between June 30 and July 7, the prices paid to wheat farmers moved up 1.62% in Rio Grande do Sul and 0.05% in Santa Catarina, but decreased 0.21% in Paraná. In the wholesale market (deals between processors), values dropped 2.22% in PR, 1.45% in São Paulo and 2.52% in SC. On the other hand, quotations rose 0.98% in RS. In the same period, the US dollar increased 1.38%, closing at BRL 4.859 on July 7th.

Data from Secex show that 317.64 thousand tons were imported by Brazil in June, 12% up compared to May, but downing 49.3% in relation to June/22. As for exports, the total was 132.18 tons last month, a significant decrease compared to May/23 (71.04 thousand tons) and in relation to June/22 (47.02 thousand tons).

Malaysian analysts predict continued pressure on CPO prices

The price of crude palm oil (CPO) will remain under pressure due to high supply and low demand, analysts said on Tuesday.

AmInvestment Bank said in a note that it believes that higher supplies of palm and soybean would exert downward pressure on CPO prices.

The research house believes that palm inventory will continue rising as the industry enters the peak production period in the second half.

“We think that palm stockpiles may exceed 2 million tons in the second half. Barring an El Nino, CPO production is expected to be healthy in the second half as labor shortage has eased,” it said.

Its average CPO price assumptions are 3,000 ringgit (643 U.S. dollars) per ton for large planters and 3,500 ringgit per ton for pure Malaysian companies.

Meanwhile, MIDF Research said in a note that it forecasts that average local CPO delivery prices would close lower by 7.5 percent month on month to 3,260 ringgit per ton in July, or decline by 19.1 percent quarter on quarter to 3,112 ringgit per ton in the third quarter as a result of the peak crop seasonality amidst sluggish demand on no festival ahead.

In June, the local CPO delivery price jumped to 3,730 ringgit per ton but still averaged monthly lower at 3,525 ringgit per ton following the decrease of other vegetable oil prices trend.

The research house has maintained its neutral stance on the sector with a CPO target price of 3,500 ringgit per ton for 2023.

It said a key downside risk for CPO price remains due to a fragile demand outlook on the back of inflationary pressure coupled with tight household spending on high base interest rates locally and globally, narrowed price discount parity between CPO against soybean oil (SBO) averaged at 190.2 U.S. dollars per ton.

Maybank Investment Bank also said in a note that the anticipation of a seasonal pickup in the second half output will continue to keep CPO prices in check in the near term.

The research house opined that the market is still anticipating improving CPO production prospects as the industry enters into its seasonal peak output period in the second half.

According to the research house, the anticipated production recovery in Malaysia in the second half is also premised on the recent influx of guest workers since end-2022.

It also said the fragile global macroeconomic outlook will continue to be seen as a headwind for CPO prices in the immediate term, capping the upside of CPO prices.

Its full-year CPO price forecast stands at 3,400 ringgit per ton.

TA Securities also said in a note that it expects CPO production to grow in the second half of the year with the ease of labor shortages.

It also noted that macro risks and the impact of the global economic slowdown as well as high-interest rates will affect commodity prices.

All in all, it expects the second half of CPO prices to be in the range of 3,900 ringgit to 4,200 ringgit per tonne.

China’s customs issues rules for offshore trade of soybeans at Qianhai

China’s customs authority issued new rules on Monday aimed at standardizing management of the offshore trading of imported soybeans at the Qianhai Mercantile Exchange.

QME, a spot commodities trading platform set up by Hong Kong Exchanges and Clearing, began trading soybeans last year, according to its website.

Under the new rules, Qianhai will draw up a list of importers qualified to carry out offshore spot transactions of soybeans through the Qianhai exchange and submit it to the customs authority.

The regulations also outline requirements related to quarantine approval needed before the soybeans enter the country and warehousing.

Hungarian farm minister to visit Turkey for talks on Black Sea grain deal

Hungary’s farm minister will go to Turkey on Tuesday for talks with his Turkish counterpart about extending the deal that allows Ukraine to export grain from its Black Sea ports, the minister said on Facebook.

The deal is due to expire next week. Moscow has said it sees no grounds to extend it beyond July 17.

The United Nations and Turkey brokered the Black Sea deal between Russia and Ukraine in July 2022, aiming to prevent a global food crisis by allowing Ukrainian grain trapped by Russia’s invasion to be exported from Black Sea ports.

“Turkey is a key player in the long-term handling of market difficulties caused by Ukrainian grain imports (in Central Europe),” Hungarian Minister for Agriculture Istvan Nagy said.

Nagy said he was holding talks on behalf of countries in Central and Eastern Europe that have been affected by increased Ukrainian grains flows.

Ukraine has increased its reliance on routes through Eastern Europe. Five countries in Central and Eastern Europe (CEE) have sought import restrictions on the shipments, complaining cheaper Ukrainian grain was making domestic production unprofitable.

The European Union on May 2 allowed the five countries – Bulgaria, Hungary, Poland, Romania and Slovakia – to ban domestic sales of Ukrainian wheat, maize, rapeseed and sunflower seeds, while allowing grain shipments to transit through them for export elsewhere, including to other EU countries.

The European Commission last month extended these sales restrictions on Ukrainian grain for the five countries until Sept. 15.

Russian Drones Targeted Odesa Grain Terminal, Ukraine Says

Ukraine’s air defense shot down 22 drones overnight, that were sent in the direction of the Black Sea, the southern military command said on Facebook.

• “Air defense prevented a treacherous plan to attack a grain terminal in one of Odesa’s ports:” statement
• Attack included several waves of Iranian-made Shahed drones: Ukraine
• Two drones hit an administrative building, a part of the port infrastructure
• Debris of downed drones caused fire at two port terminals, including grain terminal
• No critical damage was done and no casualties reported after the fire was extinguished

Malaysia’s Palm Oil Stockpile May Remain Flattish in July

Malaysia’s palm oil stockpile may remain flattish in July, as seasonally higher cropping patterns may be offset by increased demand amid improved price competitiveness against soyoil, Hong Leong IB analyst Chye Wen Fei says in a note. She maintains her 2023 CPO price forecast at MYR4,000/ton, as the expected arrival of El Nino, potentially stronger demand amid attractive prices, weaker MYR and low palm oil stock levels in major consuming countries may support CPO prices in 2H. She keeps her CPO price estimates at MYR3,800/ton for 2024 as prices may decline after El Nino dissipates. The Bursa Malaysia Derivatives contract for September delivery last closed at MYR3,923/ton. Hong Leong maintains a neutral rating on Malaysia’s plantation sector, pegging IOI Corp. as its sector’s top pick.

India Cumulative Monsoon Rainfall 2% Above Normal as of July 10

India has so far received 254.1 millimeters of rains during the current monsoon season, which runs from June through September, compared with a normal of 248.3 millimeters, according to data published by the India Meteorological Department on July 10.

• Rainfall in the northwestern region was at 64% above normal
• The southern peninsular region got 23% below normal rains
• Cumulative seasonal rainfall data is compiled by the IMD

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