Global Ag News for June 22.23

TOP HEADLINES

Ukraine Worried About Crucial Grain Deal’s Chances of Extension

Ukraine is “not optimistic” that the grain-export corridor that has allowed it to ship more than 30 million tons of crops amid the war with Russia will be extended beyond July, the country’s infrastructure minister said Wednesday.

The efficiency of the Black Sea corridor is faltering and crop volumes are declining, said Oleksandr Kubrakov, who signed the deal when it was first agreed almost a year ago. Even if prolonged, it won’t be as helpful in offloading the nearing 2023 harvests in its current state, he said at the Ukraine Recovery Conference in London.

“We are doing our best in order to maintain this initiative,” Kubrakov said. “For us, it is critical.”

The deal — which was brokered by the United Nations and Turkey — has helped lower world food prices and maintain a sector that is vital for Ukraine’s economy. It is next up for renewal on July 17. Russian President Vladimir Putin already signaled that his nation may quit the pact, though the UN has urged all parties to press on.

The deal has recently been plagued by a persistent slowdown in ship inspections, and Russia’s refusal to approve vessels headed to one of the three ports it covers. Some 1.3 million tons of crops were shipped via the corridor in May, less than a third of the peak in October, UN figures show.

FUTURES & WEATHER

Wheat prices overnight are down 5 1/4 in SRW, down 3 1/2 in HRW, down 2 in HRS; Corn is down 4 1/4; Soybeans down 16 1/2; Soymeal down $5.20; Soyoil down 1.37.

For the week so far wheat prices are up 44 in SRW, up 31 1/2 in HRW, up 22 3/4 in HRS; Corn is up 27 1/2; Soybeans up 20 3/4; Soymeal up $22.00; Soyoil down 4.93.

For the month to date wheat prices are up 135 in SRW, up 83 1/4 in HRW, up 99 1/4 in HRS; Corn is up 102 3/4; Soybeans up 214; Soymeal up $62.40; Soyoil up 6.14.

Year-To-Date nearby futures are down 7.6% in SRW, down 1.9% in HRW, down 6.8% in HRS; Corn is down 1.4%; Soybeans down 0.7%; Soymeal down 9.0%; Soyoil down 14.4%.

Malaysian palm oil prices overnight were down 49 ringgit (-1.36%) at 3565. China’s markets are close for its Dragon Boat Festival holiday.

There were changes in registrations (-12 Soyoil). Registration total: 2,389 SRW Wheat contracts; 2 Oats; 0 Corn; 0 Soybeans; 1,076 Soyoil; 11 Soymeal; 97 HRW Wheat.

Preliminary changes in futures Open Interest as of June 21 were: SRW Wheat down 6,332 contracts, HRW Wheat down 3,451, Corn up 18,825, Soybeans down 2,537, Soymeal up 8,165, Soyoil down 4,856.

Northern Plains: A slow-moving front is providing some strings of showers in the Northern Plains until a system goes through on Saturday that is forecast to bring more widespread showers and thunderstorms. Ahead of this front, temperatures are hot with many areas eclipsing 90 degrees F. If showers disappoint, crop conditions will continue to decline and drought will expand. Temperatures should be more variable after the system moves through this weekend. Another system is forecast for next week that may bring widespread showers as well.

Central/Southern Plains: Heat has built in over Texas and has expanded north, a consistent feature until a system moves through this weekend, which will bottle the heat closer to Texas for the following week. More rounds of showers and thunderstorms are forecast until that system moves through, and may even continue next week as well, most likely farther north. Conditions for developing corn and soybeans are dependent on rainfall frequency. Those areas with consistent rainfall are more able to withstand the heat stress.

Midwest: Hot and mostly dry conditions continue in the Midwest the next few days, sapping soil moisture and damaging corn. A system continues to spin over the Southeast and though uncertain, may spread some showers into eastern areas at times. Following that, a system will move through with more widespread showers and thunderstorms this weekend into early next week, with potential for continued showers for a couple of days and another system late next week or weekend to do something similar. Areas missing out are seeing stress increase for both corn and soybeans, though not all areas are dealing with harsh conditions. The coming rainfall is forecast to only be a stopgap in the poorer conditions, but the pattern does favor better chances for rain after this week.

Delta: Several disturbances brought heavy showers and severe weather through the Delta over the last week. Though damage has been reported, the increased soil moisture is turning around dryness concerns. Though less active for the next week, there will be some additional chances for showers and thunderstorms in the region.

Canadian Prairies: Another system moved into the Canadian Prairies over the weekend and brought heavy rain to parts of the region, including drier areas in Manitoba this time. The system will be in place through Thursday, though showers are now isolated. Soil moisture is still reported to be low across much of the region, leaving some areas in desperate need of rainfall. Temperatures will be more pleasant as this system passes through, keeping stress down for those drier areas, however. A front going through early next week is the next best chance at widespread showers in the region.

Black Sea: Some drier spots have started to show up in some areas of the Black Sea region, most notably in central Ukraine and the Volga Valley of western Russia. But conditions continue to be mostly favorable in the region. A couple of fronts moving through the region will bring some showers to these areas and the forecast is wetter next week with a larger system moving through.

The player sheet for 6/21 had funds: net buyers of 14,500 contracts of SRW wheat, buyers of 22,500 corn, buyers of 20,000 soybeans, buyers of 14,000 soymeal, and  sellers of 11,000 soyoil.

TENDERS

• CORN PURCHASE: Taiwan’s MFIG purchasing group bought about 65,000 metric tons of animal feed corn, which was expected to be sourced from Brazil, in an international tender on Wednesday
• FEED WHEAT PURCHASE: An importer group in Thailand is believed to have purchased about 55,000 tonnes of animal feed wheat expected to be sourced from the Black Sea region or Australia.
• RICE PURCHASE: South Korea’s state-backed Agro-Fisheries & Food Trade Corp. purchased an estimated 16,800 metric tons of rice largely to be sourced from Vietnam in an international tender for up to 62,200 metric tons which closed on June 8
• CORN TENDER: Algerian state agency ONAB has issued an international tender to purchase up to 120,000 metric tons of animal feed corn to be sourced from Argentina.

PENDING TENDERS

• FOOD WHEAT TENDER: Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) is seeking to buy a total of 92,529 tonnes of food-quality wheat from United States, Canada and Australia in a regular tender that will close on June 22.
• RICE TENDER: The state purchasing agency in Mauritius has issued an international tender to buy 6,000 metric tons of long grain white rice sourced from optional origins.

TODAY

ETHANOL: US Weekly Production Survey Before EIA Report

Output and stockpile projections for the week ending June 16 are based on seven analyst estimates compiled by Bloomberg.

• Production seen higher than last week at 1.023m b/d
• Stockpile avg est. 22.134m bbl vs 22.226m a week ago

Argentina becomes second largest buyer of Brazilian soy in 2023

Argentina became the second main destination for Brazilian soybeans in the first five months of 2023, as it had to boost imports in response to a historic drought that severely affected its crop.

Brazil’s soy exports to its neighbor from January to May reached 1.92 million metric tons, while the volume shipped in May alone was 978,500 metric tons, official data showed, while analysts still see room for more.

Argentina, the third largest global soybean producer behind Brazil and the United States, saw its crop shrink 43% to 25 million metric tons in 2022/23, according to figures from the U.S. Department of Agriculture (USDA). Argentina’s Rosario grains exchange estimated an even smaller harvest, closer to 20.5 million metric tons.

With a large export industry for soy oil and meal, Argentina had to increase imports of the raw bean, which are expected to double to about 9 million metric tons in the current season.

Although it was expected that Brazil would meet much of this demand, the volume exported in May was enough for Argentina to overtake Spain as the second largest buyer of Brazilian soy, behind China, the data showed.

The increase in shipments of Brazilian soy helped improve supply to Argentina’s crushers, which also began to buy more beans from local producers following the government’s so-called ‘soy dollar’ program, said Gabriel Faleiros, analyst at S&P Global Commodity Insights.

This tends to limit, in the very short term, the need for a new avalanche of imported Brazilian soybeans, he added, while also agreeing that volumes imported by Argentina are still expected to increase throughout the year.

S&P Global Commodity Insights reduced its forecast for total soybean imports by Argentina this year to 9 million metric tons, from 10 million previously.

Argentina should import about 5 million metric tons from Paraguay this year. Brazil is still expected to export an additional 2 to 3 million metric tons to the neighboring country, Faleiros said.

India’s wheat output 10% lower than government estimates- trade body

• Government pegs 2023 output at record 112.74 mln metric tons
• Output seen between 101 and 103 mln metric tons – trade body
• Falling supply, price rise indicate lower output – trade body

India’s wheat harvest in 2023 is at least 10% lower than the government’s estimate, a leading trade body told Reuters on Wednesday, amid a sharp rise in local prices during the past two months.

Lower wheat production for a second straight year could complicate New Delhi’s efforts to keep a lid on prices of the staple and overall food inflation, a major concern amid forecasts of an El Nino weather pattern.

“Availability of wheat is very poor in the market. It suggests production was around 101 million to 103 million tons,” said Pramod Kumar S, president of the Roller Flour Millers’ Federation.

The industry estimate of this year’s wheat output has not been previously reported.

According to the government, wheat output rose to a record 112.74 million metric tons in 2023, up from 107.7 million metric tons a year earlier. India consumes around 108 million metric tons of wheat annually.

Farmers start harvesting wheat from March, selling most of their crop to state agencies and private traders by June.

Supplies from farmers have already dropped, suggesting the agriculture ministry’s production estimate is more optimistic than the reality, Kumar said.

Wheat prices in New Delhi have jumped 10% in the past two months to 24,900 rupees ($303) a metric ton, prompting the government to impose a limit on the amount of wheat stocks traders can hold for the first time in 15 years.

A New-Delhi based trader with a global trade house also said the farm ministry had overestimated this year’s wheat output, while a Mumbai-based trader said the government had failed to take into account heatwaves in February and March and untimely heavy rainfall in April.

“The government was forced to U-turn on exports last year because of the wrong estimate. This year, it could be forced to allow duty-free imports in the December quarter,” the Mumbai trader said.

The Ministry of Agriculture & Farmers Welfare did not immediately respond to a request for comment.

India, the world’s second biggest wheat consumer, banned exports in May 2022 after a sudden rise in temperature clipped output at a time when shipments were picking up to meet the global shortfall triggered by Russia’s invasion of Ukraine.

The government has bought 26.2 million metric tons of new-season wheat from farmers against initial projections of 34.15 million tons, indicating lower output.

Russia Wheat Crop Cut by 1.2m Tons on Dry Spring Wheat: SovEcon

Russia’s 2023 wheat harvest is now seen at 86.8m tons, down from an earlier estimate for 88m tons, consultant SovEcon said in an emailed note.

• Spring-wheat crop conditions are worsening across the main growing regions due to a rapid decline in soil moisture during May and June
• NOTE: Spring varieties make up about 30% of total Russian wheat harvest
• Barley crop estimate cut to 19.9m tons from 20.8m tons
• Corn crop estimate cut to 14.6m tons from 14.8m tons

Ukraine Worried About Crucial Grain Deal’s Chances of Extension

Ukraine is “not optimistic” that the grain-export corridor that has allowed it to ship more than 30 million tons of crops amid the war with Russia will be extended beyond July, the country’s infrastructure minister said Wednesday.

The efficiency of the Black Sea corridor is faltering and crop volumes are declining, said Oleksandr Kubrakov, who signed the deal when it was first agreed almost a year ago. Even if prolonged, it won’t be as helpful in offloading the nearing 2023 harvests in its current state, he said at the Ukraine Recovery Conference in London.

“We are doing our best in order to maintain this initiative,” Kubrakov said. “For us, it is critical.”

The deal — which was brokered by the United Nations and Turkey — has helped lower world food prices and maintain a sector that is vital for Ukraine’s economy. It is next up for renewal on July 17. Russian President Vladimir Putin already signaled that his nation may quit the pact, though the UN has urged all parties to press on.

The deal has recently been plagued by a persistent slowdown in ship inspections, and Russia’s refusal to approve vessels headed to one of the three ports it covers. Some 1.3 million tons of crops were shipped via the corridor in May, less than a third of the peak in October, UN figures show.

Dry weather to return in the west and east of Australia, lowering wheat production

2023/24 AUSTRALIA WHEAT PRODUCTION: 29.0 [24.5–33.3] million tons, down 2% from last update

Widespread above average rain (30-55 mm) fell across the key wheat production areas in Australia over the past two weeks, including western Australia (WA), Victoria (VIC), South Australia (SA) and southern portions of New South Wales (NSW). But dry conditions (5-15 mm precipitation deficits) continued in the central and northern NSW and Queensland (QLD). The recent rain in the west and south largely replenished soil moisture. Especially in SA and VIC, adequate soil moisture has greatly benefited crop vegetative growth. As a result, vegetation densities (NDVIs), extracted from satellite imagery, are well above the long-term medians in the south, indicating good to excellent crop conditions. Vegetation densities in WA are growing slower than last year, but faster than the long-term median.

However, weather forecasts indicate that dry conditions will return in early July, particularly in NSW and WA. Together with EC long-term weather outlooks for warm and dry condition during July-October, we lowered yield potentials in NSW and WA slightly. Australia wheat production is reduced to 29.0 million tons, 2.8 million tons above ABRES’s latest estimate of 26.2 million tons.

Strong Supply, Delayed Demand Pressure Brazil Phosphates, Potash

Brazil urea prices moved higher in the wake of India’s latest tender, though other fertilizers saw declines amid plentiful supply, delayed demand and competition between suppliers. China’s deal with Canpotex failed to firm potash prices in Brazil, while phosphate prices continued to fall on strong imports.

Brazil Urea Rebounds, Other Fertilizers Fall

Urea prices jumped in Brazil after the India tender, climbing to $300-$320 a metric ton (mt) vs. last week’s $275-$280 cost-and-freight, with reports of Iran-origin tons trading at the $290 level. However, some buyers are skeptical that higher prices will continue. Ammonium sulfate prices dropped slightly, to $140-$150/mt vs. last week’s $145-$150, with monoammonium phosphate (MAP) also falling to $420-$440/mt vs. $440-$450. Potash prices in Brazil continue to decline as well, slipping to $300-$320/mt vs. the prior week’s $310-$340, but reports of increased buying activity and interest prompted some to expect a price floor soon.

US Fertilizers Pressured, Trade Shifts to Southern Hemisphere

As farmers wrap up fieldwork, suppliers strive to empty bins and producers launch the first round of summer fill programs, US fertilizer prices continue to be squeezed. India’s first urea tender brought price relief as offers showed a decline of $50 a metric ton vs. the last tender. China has been diversifying its imported potash supplier base away from North America.

NOLA Rebounds, Inland Markets Flat

US fertilizer prices were mixed, with New Orleans (NOLA) urea and phosphates rebounding slightly vs. last week, while most inland terminals remained under pressure. New NOLA urea business is anticipated to be $275-$330 a short ton (st), depending on the time of shipment, up from last week’s $245-$320. NOLA phosphates were up $5-$10/st for prompt business, with inland warehouses stable or down slightly. Last week’s ammonia fill programs at $340-$370/st were still being offered in the Corn Belt, with expectations of another drop in the Tampa ammonia price for July. Potash prices were flat to lower as the industry awaits the launch of potash fill programs later in June.

Rain raises Rhine river water in Germany, north still too shallow

Water levels on the river Rhine in Germany have risen again after heavy rain but are still too shallow in northern and central areas for cargo vessels to sail fully loaded, traders said on Thursday.

Dry weather in June meant the river became too shallow for vessels to sail fully loaded and vessel operators imposed surcharges on freight rates to compensate for vessels sailing partly empty, increasing costs for cargo owners.

Heavy rain on Wednesday night has raised water to normal levels in more southern sections of the river, commodity traders said. More heavy rain in river catchment areas is forecast on Thursday which should also help raise water levels, they said.

The Rhine is still too shallow for normal sailings at the chokepoint of Kaub and northern areas around Cologne and Duisburg.

But water at Kaub is expected to return close to normal levels allowing full vessel loads on Friday, German navigation authority WSV forecasts.

The Rhine is an important shipping route for commodities such as grains, minerals, coal and oil products, including heating oil. German companies faced supply bottlenecks and production problems in summer 2022 after a drought and heat-wave led to unusually low water levels on the Rhine.

Bayer Sees More GMO Acceptance as War Stokes Food Insecurity

• Food-importing nations seeking to deploy more GMO options
• War in Ukraine has disrupted grain supplies on global market

Food security concerns stemming from the war in Ukraine are creating a more favorable environment for the adoption of genetically modified crops globally, according to the head of Bayer AG’s Crop Science unit.

The conflict, which has caused disruptions in grain supplies, was a “wake up call” for food-importing nations in Asia and Africa to seek more self-sufficiency, Bayer’s Rodrigo Santos said in a Tuesday interview in New York City.

“I got a lot of them coming to us and saying, ‘What do we need to do for you to deploy the highest technologies that you have in our country?’” Santos said. Typically, the response is predictable legal systems and respect for intellectual property rights, Santos said.

Bayer is currently exploring ways to supply its technologies in China, as well as Thailand and other Asian and African nations, the Brazilian executive said.

Bayer is one of the world’s largest suppliers of crops that are genetically modified to resist insects and tolerate the use of certain pesticides. The company is making a big bet in digital farming and other tools to help slash carbon emissions in the farming industry.

Interested in more futures markets?  Explore our Market Dashboards here.