Global Ag News for May 15.23

TOP HEADLINES

Farmers Set to Abandon US Wheat Crops at Highest Rate Since 1917

• Prolonged drought has plagued fields across US Plains
• Hard red winter wheat futures advance as much as 6.9%

America’s wheat fields have become so plagued by drought that farmers are now poised to abandon crops at the highest rate in more than a century.

Producers are expected to harvest about 67% of their planted acres, the US Department of Agriculture said Friday. If realized, that would be the lowest harvest ratio since 1917, the agency said in a monthly report.

Years of dry conditions on the US Plains have taken their toll on America’s famed fields of grain. The USDA forecast that the high rate of abandonment will drag US wheat supplies to lower levels than analysts were expecting. That could keep domestic prices elevated, even with rival producers such as Canada and Argentina likely to boost output.

Futures of hard red winter wheat, the variety grown in drought-struck states including Kansas and Oklahoma, surged as much as 6.9% after the data was released. That’s the biggest intraday gain for the most-active contract since October.

Meanwhile, corn production in the US is expected to rise to a record, bringing up global grain supplies and giving relief to livestock producers hit by rising feed costs.

Corn futures were little changed. Traders were forced to exit short positions after the “shocker” wheat-production estimate, Charlie Sernatinger, head of grains at Marex Capital, said in a note.

FUTURES & WEATHER

Wheat prices overnight are up 14 in SRW, up 23 1/4 in HRW, up 17 1/4 in HRS; Corn is up 3 1/4; Soybeans up 7; Soymeal up $5.10; Soyoil down 0.12.

Markets finished last week with wheat prices down 5 in SRW, up 56 in HRW, up 19 1/2 in HRS; Corn is down 7; Soybeans down 36 3/4; Soymeal up $11.10; Soyoil down 4.25.

For the month to date wheat prices are up 15 1/4 in SRW, up 124 in HRW, up 59 1/2 in HRS; Corn is up 4 1/2; Soybeans down 22 1/4; Soymeal up $5.60; Soyoil down 2.27.

Year-To-Date nearby futures are down 18.1% in SRW, up 1.4% in HRW, down 8.0% in HRS; Corn is down 13.1%; Soybeans down 8.0%; Soymeal down 8.5%; Soyoil down 22.6%.

Chinese Ag futures (JUL 23) Soybeans up 60 yuan; Soymeal down 7; Soyoil down 32; Palm oil down 22; Corn unchanged — Malaysian palm oil prices overnight were down 31 ringgit (-0.85%) at 3617.

There were changes in registrations (44 Corn, 66 Soybeans, 46 Soyoil). Registration total: 2,389 SRW Wheat contracts; 22 Oats; 55 Corn; 66 Soybeans; 1,191 Soyoil; 130 Soymeal; 97 HRW Wheat.

Preliminary changes in futures Open Interest as of May 12 were: SRW Wheat up 3,331 contracts, HRW Wheat down 1,674, Corn up 10,690, Soybeans up 1,494, Soymeal up 882, Soyoil up 6,322.

Northern Plains:  Heavy rain fell across the region late last week and weekend, improving soil moisture for some areas, but also interrupting planting progress. Outside of a front bringing scattered showers through Wednesday and Thursday, the region will be drier and mostly warmer. That should improve planting progress and early development for crops.

Central/Southern Plains: Waves of showers went through the region over the last week, helping to improve soil moisture and reduce drought in some areas. Some areas of flooding were noted, however. Showers continue on Monday and a front moving through later this week should bring additional showers to much of the region, which may further improve soil moisture, including some of the deepest drought areas in the southwest.

Midwest: Widespread showers went through late last week through the weekend, and continue Monday and Tuesday across the south. Drought areas found some rainfall. A front will move through later this week with additional scattered showers and thunderstorms. Temperatures will be up and down this week, but nothing too drastic. Conditions are mostly favorable for early development, though there are some wet pockets that could use some dry weather to continue planting.

Delta: Scattered showers went through over the weekend and will be possible through most of the week. Wetter soils in the region are mostly favorable for developing crops. Drier conditions are likely to set in by the weekend and continue next week.

Canadian Prairies: Scattered showers went through over the weekend and were heavier in parts of Saskatchewan and Manitoba. Drier conditions are expected for at least this week with a ridge over most areas. A front will go through on Tuesday and Wednesday, but showers will be unlikely for most areas and the dip in temperatures that follows will be very short-lived. Conditions are mostly favorable for continued planting, though more showers are needed across the region’s drought, which is fairly widespread.

Argentina: It remains dry in Argentina, unfavorable for winter wheat planting and establishment. More rain is needed. A front may go through with showers late week, and the pattern will favor additional fronts moving through to end May. Precipitation coverage and intensity is uncertain, however.

The player sheet for 5/12 had funds: net buyers of 7,000 contracts of SRW wheat, sellers of 4,000 corn, buyers of 10,000 soybeans, buyers of 1,000 soymeal, and  sellers of 5,500 soyoil.

TENDERS

• CORN PURCHASE: Leading South Korean animal feed maker Nonghyup Feed Inc. (NOFI) has bought an estimated 132,000 tonnes of animal feed corn expected to be sourced from South America in an international tender for up to 138,000 tonnes on Friday, European traders said.

PENDING TENDERS

• RICE TENDER: South Korea’s state-backed Agro-Fisheries & Food Trade Corp issued an international tender to purchase an estimated 43,500 tonnes of rice.
• FEED WHEAT, BARLEY TENDER: Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) said on Wednesday that it will seek 60,000 tonnes of feed wheat and 20,000 tonnes of feed barley to be loaded by Aug. 31 and arrive in Japan by Oct. 26, via a simultaneous buy and sell (SBS) auction that will be held on May 17.

CROP SURVEY: US April Soybean Crush Seen at 174.3M Bushels

Projections are based on a survey of eight analysts conducted by Bloomberg News on May 11-12.

• Soybean crush seen 2.7% higher vs April of last year, and a decline of 6.2% vs a month ago
• Oil stocks at the end of last month seen at 1.829b lbs vs 1.814b a year earlier

SOYBEAN/CEPEA: Harvesting of soybean is over in BR; prices rise

The harvesting of soybean crops is practically over in Brazil. Although wareouses are full, Brazilian farmers are cautious when selling the beans from the 2022/23 season in the spot market. Part of these agents prefer the barter option (exchanging soybean bags for inputs and fertilizers for the 2023/24 crop). Besides, Brazilian farmers expect the international demand for the national soybean to increase, based on the crop failure in Argentina.

Thus, the ESALQ/BM&FBovespa Paranaguá (PR) and the CEPEA/ESALQ Paraná Indexes rose1.6% and 1.1% between May 4-11, to BRL 140.77 (USD 28.48) per 60-kg bag and BRL 133.65 (USD 27.04)/bag, respectively, on Thursday, 11.

On the average of the regions surveyed by Cepea, soybean prices rose 1.5% in the over-the-counter market (paid to farmers) and 1% in the wholesale market (deals between processors). Valuations were limited by the dollar appreciation (1%) against the Real, to BRL 4.943 on Thursday, 11.

CROPS – In a report released yesterday (May 11th), Conab revised up the production estimates for the Brazilian 2022/23 soybean crop, to 154.81 million tons, volume 23.3% higher than that produced in the previous season. By May 6th, 95.4% of the national soybean crops (43.83 million hectares) had been harvested, up from the 94.9% in the same period last year.

Exports and soybean processing are also expected to set records, estimated at 95.07 million tons and at 52.3 million tons, respectively, 20.76% and 5.89% up from those in the previous season. However, ending stocks may total 7.14 million tons on Dec. 31st, more than two-fold that at the end of the previous season (3.13 million tons).

CORN/CEPEA: Index closes below BRL 60/bag; estimates point to a record harvest

Corn prices have been fading in Brazil since the last week of March and are currently at the lowest nominal levels since September 2020. The second crop is developing well, and official estimates still point to a record corn harvest in the 2022/23 season. In this scenario, sellers have been more willing to lower asking prices, while purchasers are postponing acquisitions, expecting steeper valuations.

Since March 27th, the ESALQ/BM&FBovespa Index for corn (Campinas, SP) has dropped a steep 30.1% (25.31 Reais/bag), closing at BRL 58.69 (USD 11.87) per 60-kg bag on Thursday, 11. It is important to highlight that this Index had not closed below BRL 60/bag since September 22, 2020, in nominal terms.

Between May 4-11, on the average of the regions surveyed by Cepea, quotations decreased 2.3% in the over-the-counter market (paid to farmers) and 4.1% in the wholesale market (deals between processors).

ESTIMATES – The rains from April and now the dry weather in May favored crops development, and agents expect high supply and quality. In a report released on Thursday, 11, Conab estimated the output of the 2022/23 second crop of corn at 96.13 million tons, 12% higher than that in the previous season. For the summer crop, estimates are at 27.04 million tons, 8% up, in the same comparison. For the third crop, estimates were revised up by 6.2%, to 2.3 million tons.

Thus, Conab estimates the output of the Brazilian 2022/23 crop of corn at 125.53 million tons, 11% higher than the previous and a record. If this is confirmed, the availability of corn (initial inventories + 1.9 million tons imported + output) would be of 135.53 million tons, also the highest in all times. Domestic consumption is forecast at 79 million tons, with 56 million tons available for export.

CROPS – As the sowing activities for the second crop are over and the harvesting has not begun yet, agents are monitoring crops development. As for the summer crop, 67.5% have been harvested, according to data from Conab released on May 6th.

Argentina’s Net Crop Exports in 2023 to Fall 51% Y/y to $19.4b

Net exports of oilseeds and grains are estimated to be worth $19.4b this year to central bank coffers versus $39.6b in 2022, following a brutal drought, the Rosario Board of Trade said in a weekly newsletter.

• NOTE: Argentina Is Going Broke to Stall a Full-On Currency Collapse
• NOTE: Argentina’s Epic Drought Sends Economic Crisis to New Extremes
• Farmers have so far traded 3.4m metric tons of soy to exporters under a government program that fixes a special, devalued FX rate
• NOTE: The program expires May 31

Impact of Argentina’s Drought Might Not Be Over Yet: Cresud

“The drought is not finished, it’s not done,” Alejandro Elsztain, CEO of Cresud, said on an earnings call.

• Should dryness persist, it would hurt upcoming wheat planting
  • “If it doesn’t rain in the next 30 days, wheat is going to be strongly affected”
  • NOTE: Argentina’s Net Crop Exports in 2023 to Fall 51% Y/y to $19.4b
  • NOTE: Argentina Soy Production Seen at 21.5m Tons Vs. Prior 23m
• A slower-than-expected shift in the Pacific climate pattern from La Nina to El Nino is holding off a return to wetter weather
  • “If Nino comes that would normalize rains, but today it’s not happening. We are waiting for those rains”
  • NOTE: Adecoagro executives said on a Friday earnings call that the likelihood of El Nino “should allow for an improvement in soil moisture, favoring the outlook for the 2023-2024 harvest season”
• Cresud expects Argentina’s next government to close the gap between official and parallel FX rates and to reduce export taxes

US Fertilizer Price Hikes Likely to Revert Lower as Demand Ebbs

A surge in spring fieldwork and near-term demand caused fertilizer supplies to tighten at New Orleans (NOLA) and inland, yet surging prices for urea, phosphates and potash show strain as consumption wanes and suppliers strive to empty bins by summer. US ammonia prices continue to fall as spring demand winds down.

NOLA Prices in Broad Ranges as Prompt Tons Garner Premium

New Orleans (NOLA) prices for urea and phosphates stretched widely this week as strong near-term demand kept prices high for prompt, loaded barges. NOLA urea remained at a premium of $440-$450 a short ton (st) for prompt tons, while late May or June barges fell to $300. A similar gap was seen for NOLA diammonium phosphate (DAP), with prompt tons fetching a high of $630/st vs. $500-$520 later in May. Firm demand and tight supply are holding inland prices high for urea, phosphates and potash, with ammonium sulfate also moving up amid tight supply in some markets.

US ammonia and urea ammonium nitrate (UAN) prices remained under pressure, however, with inland ammonia terminals falling $50/st or more as preplant applications wind down and sidedress demand remains light until later in May.

US Beef Production Up 3.5% This Week, Pork Down: USDA

US federally inspected beef production rises to 527m pounds for the week ending May 13 from 509m in the previous week, according to USDA estimates published on the agency’s website.

• Cattle slaughter up 3.7% from a week ago to 646m head
• Pork production down 3% from a week ago, hog slaughter falls 2.9%
• For the year, beef production is 4.7% below last year’s level at this time, and pork is 0.9% above

 

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