Global Ag News for Aug 29.23

TOP HEADLINES

Australia Sends Barley Shipment to China After Tariffs End

  • CBH CEO says first cargo about 55,000 tons of maximus variety
  • Trade minister confident other trade curbs will be removed

Australia has sent its first shipment of barley to China after Beijing scrapped tariffs this month, with the nation’s trade minister confident that restrictions on other products will be removed as relations improve.

“The first shipment has been dispatched from Kwinana and it’s gradually working its way towards China,” Agriculture Minister Murray Watt said during a press conference in Western Australia on Tuesday. Kwinana is a major export terminal for grains south of Perth that’s operated by CBH Group.

China was the biggest export destination for Australian barley prior to tariffs of more than 80% being slapped on the trade in 2020, with deteriorating relations impacting other commodities such as coal and wine. Traders started booking cargoes of the grain shortly after the duties were scrapped.

Prior to the tariffs wiping out the trade, the China market was worth as much as A$1.5 billion ($966 million) to Australia in 2017-18, according to data from the nation’s agriculture department. The country’s exporters turned to other buyers, ramping up shipments to Saudi Arabia, Japan and Vietnam.

The first shipment to China will be around 55,000 tons of the Maximus variety, CBH Chief Executive Officer Ben Macnamara said at the press conference. The company’s Chairman Simon Stead added that there had been an immediate move in the barley price of around A$50-A$60 a ton since tariffs ended.

“Having China back in the market is definitely supportive of Australian barley pricing,” said Dennis Voznesenski, an analyst with Rabobank. It’s “likely to keep local pricing above average for another year,” he added.

The Majestic Island loaded about 49,000 tons of barley at Kwinana and is sailing toward Esperance, according to a shipping roster on the CBH website, which doesn’t list the final destination of the vessel.

FUTURES & WEATHER

Wheat prices overnight are down 1 1/4 in SRW, down 4 3/4 in HRW, unchanged in HRS; Corn is down 1 1/4; Soybeans down 7; Soymeal down $1.50; Soyoil down 0.21.

For the week so far wheat prices are down 6 in SRW, down 19 1/2 in HRW, down 10 1/2 in HRS; Corn is up 7; Soybeans up 11; Soymeal up $2.30; Soyoil down 0.12.

For the month to date wheat prices are down 76 in SRW, down 84 1/2 in HRW, down 78 in HRS; Corn is down 18; Soybeans up 67; Soymeal up $21.40; Soyoil up 3.25.

Year-To-Date nearby futures are down 25.9% in SRW, down 17.5% in HRW, down 18.4% in HRS; Corn is down 29.7%; Soybeans down 8.5%; Soymeal down 11.2%; Soyoil up 4.7%.

Chinese Ag futures (NOV 23) Soybeans up 9 yuan; Soymeal up 15; Soyoil down 58; Palm oil down 26; Corn up 24 — Malaysian palm oil prices overnight were up 18 ringgit (+0.46%) at 3928.

There were no changes in registrations. Registration total: 1,398 SRW Wheat contracts; 448 Oats; 0 Corn; 0 Soybeans; 67 Soyoil; 0 Soymeal; 147 HRW Wheat.

Preliminary changes in futures Open Interest as of August 28 were: SRW Wheat down 3,056 contracts, HRW Wheat down 4,654, Corn down 14,218, Soybeans up 8,011, Soymeal up 1,476, Soyoil down 1,764.

Northern Plains: Above-normal temperatures will be filling into the Northern Plains by late in the week. Some disturbances will be moving from the Pacific Northwest into the Canadian Prairies, which may produce some isolated showers, but most of the region will be dry. That will favor the remaining wheat harvest, but not filling corn and soybeans.

Central/Southern Plains: A front moved through the Central and Southern Plains over the weekend with scattered showers and some areas of heavy rain, along with cooler temperatures. The cooler readings will be brief with above-normal temperatures returning by Friday and significant heat possible again in early September. Any rainfall will be limited or nonexistent, not a good way to end the season for filling corn and soybeans.

Midwest: A front pushed south through the Midwest this weekend and brought some areas of heavier rain to parts of Missouri and southern Illinois. A front passing through early this week may bring a few showers and another burst of milder air before temperatures start to rise again this weekend. Significant heat could be possible again for early September with little precipitation, a poor way to end this year’s corn and soybean crops. Early harvest should find some good conditions, however.

Delta: A front slowly pushed south through the Delta this weekend, and gradually pushed the heat out. Southern areas still have another day for the extreme heat, but hotter temperatures will return this weekend into next week, which could be extremely hot again. The front has been producing limited showers, which continue through Monday before the region goes drier again. Early harvest will find good conditions.

The player sheet for Aug. 28 had funds: net sellers of 2,000 contracts of SRW wheat, buyers of 6,000 corn, sellers of 6,500 soybeans, buyers of 2,500 soymeal, and  buyers of 500 soyoil.

TENDERS

  • CORN SALES: The U.S. Department of Agriculture (USDA) confirmed private sales of 123,000 metric tons of U.S. corn for shipment to Mexico in the 2023/24 marketing year that begins Sept. 1.
  • SOYBEAN SALES: The USDA confirmed private sales of 296,000 metric tons of U.S. soybean for shipment to unknown destinations in the 2023/24 marketing year that begins Sept. 1.
  • FEED WHEAT SALE: Leading South Korean animal feed group Nonghyup Feed Inc purchased around 55,000 metric tons of animal feed wheat in a private deal on Friday without issuing an international tender.

 PENDING TENDERS

  • RICE TENDER: South Korea’s state-backed Agro-Fisheries & Food Trade Corp issued an international tender to purchase an estimated 130,200 metric tons of rice all to be sourced from China
  • WHEAT TENDER: A Syrian state grains agency issued an international tender to purchase and import 200,000 metric tons of soft milling wheat.
  • FEED BARLEY TENDER: Jordan’s state grains buyer issued an international tender to purchase up to 120,000 metric tons of animal feed barley.

Hands Across The World

TODAY

USDA CROP PROGRESS: Corn Conditions 56% G/E, Soybeans 58%

Highlights from the report:

  • Corn 56% G/E vs 58% last week, and 54% a year ago
  • Corn dented 51% vs 35% last week, and 44% a year ago
  • Corn dough 88% vs 78% last week, and 84% a year ago
  • Corn mature 9% vs 4% last week, and 7% a year ago
  • Soybeans 58% G/E vs 59% last week, and 57% a year ago
  • Soybean drop leaves 5% vs 4% a year ago
  • Spring wheat 37% G/E vs 38% last week, and 68% a year ago
  • Spring wheat harvest 54% G/E vs 39% last week, and 48% a year ago
  • Cotton 33% G/E vs 33% last week, and 34% a year ago
  • Sorghum 45% G/E vs 51% last week, and 21% a year ago

US Inspected 597k Tons of Corn for Export, 322k of Soybean

In week ending Aug. 24, according to the USDA’s weekly inspections report.

  • Corn: 597k tons vs 511k the previous wk, 700k a yr ago
  • Wheat: 390k tons vs 311k the previous wk, 631k a yr ago
  • Soybeans: 322k tons vs 320k the previous wk, 510k a yr ago

US Corn, Soybean, Wheat Inspections by Country: Aug. 24

Following is a summary of USDA inspections for week ending Aug. 24 of corn, soybeans and wheat for export, from the Grain Inspection, Packers and Stockyards Administration, known as GIPSA.

  • Soybeans for China-bound shipments made up 111k tons of the 322k total inspected
  • Mexico was the top destination for corn inspections, Philippines led in wheat

Brazil C-S Winter Corn Harvest 83% Done as of Aug. 24: AgRural

Compares with 77% in the previous week and 94% a year earlier, consulting firm AgRural says in emailed report.

Summer 2023/24 corn planting reached 7.5% as of Aug. 24 in the Center-South region, compared to 4.6% a week earlier and 5.1% a year before

Grain Union Says Russia Exports Rose by 27% Y/y in August: IFX

Russia grain exports rose by 27% y/y to 6.4m tons from August 1 to 27, Interfax reports, citing Elena Tyurina, director of the analytics department at the Russian Grain Union.

  • Wheat shipments increased by 29% to 5.36m tons; barley exports rose by 15% to 910k tons
  • Grain exports for the whole of August could total 7.3m tons, including 6.1m tons of wheat

Brazil 2023/2024 Soybean Crop Seen At 162.8 Million Tns Versus 154.6 Million Tns In Previous Year – Hedgepoint

  • BRAZIL 2023/2024 SOYBEAN CROP SEEN AT 162.8 MILLION TNS VERSUS 154.6 MILLION TNS IN PREVIOUS YEAR – HEDGEPOINT
  • BRAZIL 2023/2024 TOTAL CORN CROP SEEN AT 133 MILLION TNS VERSUS 133.2 MILLION TNS IN PREVIOUS YEAR – HEDGEPOINT

WHEAT/CEPEA: Prices still fading in BR; monthly averages are the lowest since 2020

The progress of the harvest in Brazil, the current high domestic supply, occasional purchases and international devaluations have been putting more pressure on wheat prices in the national market.

Thus the monthly averages in August (until the 25th) are the lowest, in nominal terms, since September 2020 in Paraná and since October 2020 in São Paulo and in Santa Catarina. In Rio Grande do Sul, the current average is still higher than that from June 2023, which is the lowest since October 2020.

Cepea surveys show that, between August 18-25, the prices paid to wheat farmers dropped 3.35% in Paraná, 3.3% in Santa Catarina and 2.57% in Rio Grande do Sul. In the wholesale market (deals between processors), values decreased 3.53% in São Paulo, 3.43% in SC, 3.13% in PR and 2.07% in RS. In the same period, the US dollar dropped 2% against the Real, closing at BRL 4.872 on August 25th.

CROPS – According to Conab, by August 19th, 70% of the wheat crop was harvested in Goiás, 47% in Minas Gerais, 23% in Mato Grosso do Sul, 3% in São Paulo and 1% in Paraná, accounting for 4.7% of the total harvested in Brazil. On the other hand, according to Deral, 4% of the wheat crop had been harvested in Paraná by August 21st.

Ukraine Agri Exports by Rail Seen Rising 50% in August: UAC

Ukraine’s agricultural exports by rail in August could rise by about half to as much as 980k tons, from levels over the previous four months, according to UkrAgroConsult, as farmers seek alternative ways to ship their produce with Russia blockading the nation’s ports.

  • NOTE: In July, Russia exited agreement allowing Ukraine to ship via Black Sea ports, and has stepped up attacks on river ports
  • “The grain corridor termination and the 2023 crop harvesting increased expectedly the demand for rail freight. At the same time, local rail transport is at a low level, mainly due to the lack of cargo to the ports of Big Odesa:” UkrAgroConsult analysts
  • It’s difficult to book wagons for the coming months, which is keeping freight rates high; exporting corn by rail is unprofitable at current rates: UAC

Argentina Moves to Improve Soy FX Rate to Spur Sales, Exports

Argentina will try to get farmers to sell their soy harvests in September by implementing a special temporary forex rate, according to crop export and processing group Ciara-Cec.

  • Economy Minister Sergio Massa announced a measure without details on Sunday night, saying only that processors would be able to keep 25% of soy meal/oil export revenues in dollars
  • NOTE: Argentina Lifts Wages, Welfare in Defiance of IMF Austerity Push
  • That would imply a better forex rate since 75% of revenues would be at the official FX of ~350 pesos/dollar, and the other 25% could be sold on parallel markets trading at more than 700 pesos/dollar: Ciara-Cec
  • The government will provide the measure’s full details to processors this week: Ciara-Cec
  • The Agriculture Secretariat didn’t reply to Bloomberg’s requuests for comment
  • NOTE: Farmers have sold and priced 7.9m metric tons of this year’s soy supplies, leaving 28.5m to trade between this year’s harvest and beginning stocks, according to government data

Erdogan Plans to Meet Putin Next Week to Discuss Grain Deal

Turkey’s President Recep Tayyip Erdogan is expected to meet Vladimir Putin in Russia next week to discuss reviving the Black Sea grain deal.

Erdogan could possibly go to Russia on Sept. 8, before traveling to India to attend the Group of 20 Summit in New Delhi, according two Turkish officials familiar with the matter. The Turkish presidency declined to comment.

Erdogan wants the deal, which allowed Ukraine to export grain via the Black Sea and which Russia pulled out of last month, to be restarted. Global wheat prices have been volatile since then and especially after Russia targeted some Ukrainian crop-export infrastructure with drones. Erdogan is working to make sure that the world doesn’t face a food crisis, Omer Celik, spokesman for Turkey’s ruling AK Party, said Monday.

President Erdogan “will soon pay a visit to Sochi,” Celik said after a party meeting chaired by Erdogan in Ankara. “We evaluate that there will be new developments on this issue and a new phase can be reached.”

Putin and Erdogan have maintained extensive contacts following Russia’s invasion of Ukraine in 2022. They’ve held at least 10 telephone conversations so far this year, according to the Kremlin website, as well as a videoconference marking the delivery of Russian nuclear fuel to Turkey’s Akkuyu plant in April.

“We believe it is important to avoid taking any actions during this process that will exacerbate tension and disrupt the peace in the Black Sea,” Erdogan told a Crimean Platform summit in Kyiv last week.

A meeting “will take place soon,” Kremlin spokesman Dmitry Peskov told reporters on a conference call Monday, the Interfax news service reported. Peskov declined to say when it will happen.

China soybean crush margin turns positive after 2 months, headwind remains

Recovering crush economics

China soybean gross crush margins for October have rebounded from negative to positive territory, with Platts, part of S&P Global Commodity Insights, assessing it at $0.37/mt Aug. 25, up from minus $7.85/mt Aug. 24.

The gross crush margin was last seen positive on June 15 at $8.09/mt.

Soybean oil and meal, the byproducts of soybean crushing, posted gains of 5%-9% over the past two weeks.

Soybean meal January 2024 contract prices on the Dalian Commodity Exchange rose to Yuan 4,075/mt ($559/mt) Aug. 25, up 5% or Yuan 192/mt from Yuan 3,883/mt ($533/mt) on Aug. 14, due to tighter domestic supply in China.

For January soybean oil contract, prices closed at Yuan 8,486/mt ($1,164/mt) Aug. 25, up 9% or Yuan 698/mt from Aug. 14 when the contract was valued at Yuan 7,788/mt ($1,068/mt).

The Platts soybean crush margin at $0.37/mt is based on January 2024 contract prices of soybean oil and meal, but the market also demands on the economics of the replacement margin which calculates using spot byproduct prices rather than futures prices to guide decisions on crushing.

According to some crushers, the replacement crush margin is way higher at around Yuan 200/mt ($27/mt), based on spot calculations on Aug. 25. The figure varies for crushers, based on the scale of production and overhead costs.

Crushers face headwinds despite positive margins

“The replacement crush margin is quite healthy and with the increasing profits secured on the DCE, crushers would definitely do more, but there are limitations on machinery capacity and inventory levels,” a Chinese crusher said.

Market participants mentioned that some crushing plants might be facing potential shortages of the yellow oilseed and therefore, enterprises have to either reduce their run rates or shut the plant down.

“For now, the issue [of soybean tightness] exists, but not many plants are shutting down yet, and this could be the reason for increasing product future prices on the DCE. There could be units that have run at high operational rates that has led to stress breakdown,” a second Chinese crusher said.

Market sources estimated domestic crushing volume in China to hover at 1.8 million-2 million mt for the week of Aug. 28-Sept. 1.

Hog breeding

Meanwhile, hog breeders are trying to make ends meet as live hog prices were heard to maintain within Yuan 17-17.2/kg ($2.3/mt), improving from previous months, when some procurement of meal made earlier could be profit-making.

“The barriers to entry for hog breeding is relatively lower compared to other industries, the main thing is scale and financing that large corporations have in order to maintain a positive margin,” a Chinese hog breeder said.

Despite positive margins, crushers were heard to not be actively booking soybean cargoes in the market, as bidding ideas were not seen in the week ended Aug. 25.

As soybean meal and oil contract prices on the DCE increased, Platts SOYBEX October CFR North China prices found support on hot and dry weather concerns in the US planting regions continuing to push prices trends higher, on potential low yields creating a supply crunch situation.

Chinese Urea Futures Firm as Coal Prices Rise

The economic slowdown hasn’t hit the Chinese coal anthracite market, and urea prices are rising to keep pace. Meanwhile, urea demand from India pulled excess Chinese supply to the global market, tightening the domestic market. Chinese urea futures rose by $20 per metric ton (mt) on the week to $320/mt for December. Firming Chinese corn prices and a seasonal 4Q demand pull support our view that global urea prices will rise into 4Q. Through July, China exported 1.3 million mt of urea, a 52% increase from last year’s level. This year, we expect the producer to export 3.5 million mt, far below the 5.3-5.5 million done in 2020-21 before the export ban curtailed tradable supply.

Fertilizer Market Eyes China for Hint of Return

India’s Aug. 9 urea tender showed a price jump of over 40%, with China supplying most of the 1.7 million metric tons booked. Ammonia and phosphate prices were up slightly in the US, while urea was down and potash steady in the wake of recently closed summer fill programs. Chinese urea futures show upside as coal fails to cool.

 

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