Global Ag News for July 27.23

TOP HEADLINES

Severe Dry Spell Spurs Indonesian Rice Farmers to Switch to Corn

• Weather agency has warned of most severe dry season since 2019
• Government allows Bulog to import rice to keep prices in check

Some Indonesian rice farmers are planting corn and other crops that require less water as the country braces for its most severe dry season since 2019, partly due to the return of the El Niño weather pattern.

Farmers in Subang, West Java, one of the nation’s top rice-producing regions, have shifted from planting the grain to growing things like cabbage, chili and watermelon instead, in anticipation of drought, said Yadi Sofyan Noor, chairman of Andalan Fishermen and Farmers Community.

A farmer plants corn seeds on the dry bed of plantation field in Central Java on July 24.

The move shows how El Niño could worsen rice shortages in Asia, where billions of people depend on it as a staple food. Rice prices in the region have already surged to the highest in more than three years after top shipper India restricted exports to ensure local supplies. The increase in costs adds to inflationary pressures and boosts import bills for buyers like Indonesia.

Rice is a water-guzzling crop and thrives in places with a monthly rainfall of about 200 millimeters; corn requires just 85 millimeters. Indonesia’s weather agency has warned of the most severe dry season since 2019, with very low rain intensity of about 20 millimeters a month in some areas in the second half of the year. The Southeast Asian nation also flagged rising wildfire risks.

Indonesia aims to be self-sufficient in rice, and any significant drop in output puts that goal at risk. This year, the country has allowed Bulog, the state-owned food logistic company, to import 2 million tons, up from 500,000 tons the year before. This is seen as necessary as the government wants to keep food prices in check, especially ahead of general elections in 2024.

Farmers could fail to harvest rice from more than 200,000 hectares of paddy fields this year, out of a total of 7.5 million hectares planted to the crop, the agriculture ministry estimates. Meanwhile, local corn prices have climbed on improved demand for animal feed, increasing the crop’s appeal to growers.

FUTURES & WEATHER

Wheat prices overnight are down 3 in SRW, up 2 3/4 in HRW, up 7 1/4 in HRS; Corn is down 1 3/4; Soybeans up 4 3/4; Soymeal up $1.40; Soyoil unchanged.

For the week so far wheat prices are up 19 1/2 in SRW, up 7 3/4 in HRW, up 16 in HRS; Corn is up 10 1/4; Soybeans up 23; Soymeal up $11.50; Soyoil up 0.39.

For the month to date wheat prices are up 66 in SRW, up 68 in HRW, up 86 in HRS; Corn is up 51 3/4; Soybeans up 81 1/2; Soymeal up $22.70; Soyoil up 4.22.

Year-To-Date nearby futures are down 9.5% in SRW, down 2.3% in HRW, down 3.8% in HRS; Corn is down 20.7%; Soybeans up 2.6%; Soymeal down 2.1%; Soyoil up 9.4%.

Chinese Ag futures (SEP 23) Soybeans up 19 yuan; Soymeal up 84; Soyoil up 86; Palm oil up 40; Corn down 12 — Malaysian palm oil prices overnight were down 35 ringgit (-0.86%) at 4027.

There were changes in registrations (-18 Soyoil). Registration total: 1,398 SRW Wheat contracts; 448 Oats; 0 Corn; 11 Soybeans; 169 Soyoil; 0 Soymeal; 147 HRW Wheat.

Preliminary changes in futures Open Interest as of July 26 were: SRW Wheat up 2,330 contracts, HRW Wheat down 1,230, Corn up 9,274, Soybeans down 548, Soymeal up 5,769, Soyoil up 1,156.

Northern Plains: Areas of showers and thunderstorms continue in the Northern Plains this week with systems moving through Canada. Temperatures will be hot for the next couple of days, but moderate with a cold front moving through Thursday and Friday. Additional rain may be possible this weekend and next week in a few waves, but that is uncertain. Any rainfall will be helpful for keeping temperatures down and providing needed moisture to crops in the region.

Central/Southern Plains: Heat continues across the Southern Plains through next week, with many days in the 90s and some 100-degree readings, exacerbating dryness issues in parts of the region. A front settling south into the region is more likely to bring showers and thunderstorms Friday through the weekend. Additional disturbances could bring showers through next week. Precipitation is most likely to occur over northern areas, which could help lessen the effects of the heat there and provide needed rainfall to some of the drought areas.

Midwest: Heat will continue to spread through the Midwest over the next few days. Most areas will see temperatures in the 90s for at least a few days while some 100s will be possible in the southwest. With drought in place, any rainfall will be welcome and potentially bring down temperatures at times, which looks to occur in sporadic fashion the next couple of days. A frontal passage should bring some more widespread rainfall for the weekend and less extreme temperatures for next week. Stress should be very high for this week, coming at a critical time for corn especially, but should relax next week.

Delta: Temperatures are increasing well into the 90s for the Delta through next week, causing stress to areas with more limited soil moisture. Some 100-degree readings will be possible at times. A front sagging south through the Corn Belt will likely stall to the north, though some limited showers may be possible across the north.

Canadian Prairies: A storm system will spin through the Canadian Prairies for the next few days, but models continue to favor northern areas with precipitation. Temperatures will fall behind a cold front moving through Wednesday. A secondary impulse may bring showers to southern areas that are in more desperate need this weekend, but that is still uncertain. Crops across southern Alberta and Saskatchewan are begging for rain, while wheat and canola are in reproductive to filling stages but are continuing to be plagued by drier conditions.

The player sheet for 7/26 had funds: net sellers of 12,500 contracts of SRW wheat, sellers of 13,500 corn, sellers of 4,000 soybeans, buyers of 4,500 soymeal, and  sellers of 3,500 soyoil.

TENDERS

• SOYBEAN SALES: The U.S. Department of Agriculture (USDA) confirmed private sales totaling 501,000 metric tons of U.S. soybeans to unknown destinations for shipment in the 2023/24 marketing year.
• WHEAT PURCHASE: The Taiwan Flour Millers’ Association purchased an estimated 108,000 tonnes of milling wheat to be sourced from the United States in a tender on Thursday
• WHEAT TENDER: Bangladesh’s state grains buyer has issued another international tender to purchase 50,000 metric tons of milling wheat.
• VEGETABLE OILS PURCHASE: Egypt’s state grains buyer, the General Authority for Supply Commodities, said it bought 47,000 metric tons of vegetable oils in an international tender on Wednesday.

PENDING TENDERS

• 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 or Brazil
• CORN, SOYMEAL TENDER: Iranian state-owned animal feed importer SLAL has issued international tenders to purchase about 120,000 metric tons of animal feed corn and 120,000 metric tons of soymeal
• WHEAT TENDER: Bangladesh’s state grains buyer issued an international tender to purchase 50,000 metric tons of milling wheat.

TODAY

US Ethanol Stocks Rise 0.3% to 23.228M Bbl

According to the US Department of Energy’s weekly petroleum report.

• Analysts were expecting 23.17 mln bbl
• Plant production at 1.094m b/d, compared to survey avg of 1.058m

GRAIN EXPORT SURVEY: Corn, Soy, Wheat Sales Before USDA Report

Estimate ranges are based on a Bloomberg survey of six analysts; the USDA is scheduled to release its export sales report on Thursday for week ending July 20.

• Corn est. range 400k – 1,000k tons, with avg of 600k
• Soybean est. range 350k – 1,200k tons, with avg of 660k

CROP TOUR DAY 2: North Dakota Wheat Potential Hit by Drought

Drought conditions in the spring will limit the yield potential for the spring-wheat crop in North Dakota, the biggest US producer. The second day of the tour averaged 36 bushels per acre for spring wheat in central North Dakota and 33.3 for durum wheat after five stops.

• Early seeded fields performed slightly below average compared to late planted fields and quality will be good, but bushels won’t be stellar, according to participants
• Crop quality is expected to be high, but yields will trail or be in line with last year
• Wednesday’s data will include west-central and north-central North Dakota; data from state-wide crop yields will be presented on the tour’s final day on Thursday morning
• On Tuesday, the first day of the tour, yields for spring wheat were 48.1 bushels per acre, slightly below last year’s 48.9 bpa for the first day. For durum wheat, yields were 56.3 bpa, way above the 41.4 bpa seen last year during the first day of the tour

CROP TOUR: North Dakota Spring Wheat Yield Lower Than Last Year

The spring wheat yield in the top US producing state is seen at 45.7 bushels per acre, according to an estimate on the second day of the Wheat Quality Council tour.

• Outlook is based on samples from 138 fields in Central and West North Dakota; estimate for the same time last year was 47.7 bpa, according to tour data
• The yield for durum wheat, used to make pasta and bread, is estimated at 40.5 bpa, based on 15 stops; that compares with 39.9 bpa on the second day of the tour a year ago
• On Tuesday, the first day of the tour, the yield for spring wheat was 48.1 bpa, slightly below last year’s 48.9 bpa for the first day. For durum wheat, the yield was 56.3 bpa, way above the 41.4 bpa seen last year during the first day of the tour
• The 2-day average for the spring wheat yield was 46.9 bpa in 268 fields, below the 48.3 bpa seen last year in 224 stops
• NOTE: The council will release final estimates for the tour on Thursday afternoon

Ukraine Recap: NATO Says Stepping Up Black Sea Surveillance

NATO said it’s stepping up surveillance and reconnaissance in the Black Sea region, including with patrol aircraft and drones, as the military alliance condemned Russian attacks on Ukrainian ports and grain storage facilities.

While officials gathered for a meeting of the new NATO-Ukraine Council, Kyiv said the nation’s air-defense forces shot down two cruise missiles launched by Russia. Sirens sounded across Ukraine again late Wednesday as the military reported Russian missile launches from the Caspian Sea area.

Russian President Vladimir Putin is due to meet with his Egyptian counterpart, Abdel-Fattah El-Sisi, after holding talks with Ethiopian Prime Minister Abiy Ahmed as delegations arrive for the second Russia-Africa summit. The two-day event in St. Petersburg opens Thursday and the Kremlin has said 17 heads of state are to take part, along with lower-level officials from as many as 49 countries.

Russia hits port infrastructure in Ukraine’s Odesa region – governor

Russian forces struck port infrastructure in Ukraine’s Odesa region in an overnight missile attack, killing a security guard and damaging a cargo terminal, the region’s governor said on Thursday.

Odesa’s ports have been regular targets for Russian attacks since Moscow withdrew on July 17 from a U.N.-brokered deal that allowed Ukrainian grain to be exported via the Black Sea.

Before the latest attack, Ukrainian Deputy Prime minister Oleksandr Kubrakov said Russian air strikes had damaged 26 port infrastructure facilities and five civilian vessels in the previous nine days. He gave no further details of the damage.

Odesa Governor Oleh Kiper said Russia fired Kalibr missiles at an unspecified port from a submarine in the Black Sea in the overnight attack. He said a security building had been destroyed and two cars damaged.

Ukraine’s air force said two missiles were fired in the attack, and that it had been unable to shoot them down, but that air defences had shot down eight drones that Russia launched to attack other regions of Ukraine overnight.

Natalia Humeniuk, spokesperson for Ukraine’s southern military command, said an overnight thunderstorm had helped Russia in the overnight attack on the Odesa region.

“The enemy took advantage of the weather conditions, and launched the missile during the thunder and wind and at an extremely low height in order to make spotting them more difficult,” she said.

Humeniuk said air defences had been strengthened in certain areas, but that further strengthening was still needed.

Shipping Ukraine Grain Via Baltics Would Double Costs: Ag Group

Exporting Ukrainian grain through ports in the Baltics and Germany — rather than via Romania and Poland — would double shipping costs, according to Roman Slaston, head of the Ukrainian Agribusiness Club.

• At the moment it costs about €40/ton to ship from the Ukrainian border to ports in Romania and Poland; it would cost €70-€80/ton to send grain from the border to the Baltics or Germany, he says by phone
  • “At the moment, there’s no economic sense in reaching these ports”
  • Those costs exclude the price of getting the grain to the border
• NOTE: Ukraine can no longer ship agricultural commodities by sea after Russia exited a deal allowing safe passage of ships; shipments by river are also under pressure after drone strikes on a key Danube port
  • Five Eastern European nations have banned purchases of Ukrainian grain due to discontent from local farmers, though transit is still allowed through those countries
• Ukrainian farmers are already planning winter crops and will soon start planting, Slaston said

Analysts raise 2024 palm oil prices on tight supply amid El Nino

UOB KayHian on Wednesday raised its crude palm oil (CPO) average selling price (ASP) for 2024 to 4,200 ringgit (921 U.S. dollars) per tonne on tight supply amid El Nino.

The research house said in a statement that with the expectation of tighter palm oil supplies going into 2024 and rising weather risks, it has revised up its 2024 CPO price assumption from 4,000 ringgit per tonne.

According to the research house, 2024 CPO supply growth is expected to be lower at 0.8 percent year on year versus 3.5 percent year-on-year in 2023 due partly to lower inventory carried forward from the end of 2023.

“Also, El Nino is not here yet and most of the producing regions are still receiving decent rainfall. Should any prolonged dryness occur, 2024 supplies could tighten further as CPO production could be flat or lower year-on-year,” it said.

UOB Kayhian also said heat and dryness continue to pose a risk to the North American planting season, which could lead to downward revisions of the United States soybean production and Canada’s canola production for the 2023-24 season.

However, UOB Kayhian is maintaining its 2023 CPO price assumption at 4,000 ringgit per tonne.

According to UOB Kayhian, CPO prices have recovered 20 percent from June 1 as CPO production came in lower than expected in the second quarter.

UOB Kayhian has revised down 2023 global palm oil production by 2 percent after taking into consideration lower production.

This revision was prompted by its recent visits and channel checks which revealed that the peak production in the second half is not going to be a strong as older trees’ yields have yet to reach their full potential, while some young mature areas are not meeting production targets.

RHB Investment Bank on Monday raised its 2024 and 2025 price assumptions to 3,900 ringgit per tonne and 3,800 ringgit per tonne respectively.

“We believe prices could be higher in the second half of 2024 versus the first half of 2024, as the impact of El Nino would only be seen from May-June onwards,” said the research house.

“For 2024, if the El Nino is a moderate one, there would be an impact on supply – although not very significant – while prices could continue to be held back by lackluster demand,” it said.

The research house’s 2023 price assumptions, however, were unchanged at 3,900 ringgit per tonne.

“While there is a high chance El Nino will be confirmed soon, we expect the impact on palm oil output to only be seen in 2024,” it said. (1 ringgit equals 0.22 U.S. dollar)

Agritel Sees France Soft-Wheat Production Up 3% YoY in 2023

Agritel sees 2023 France soft-wheat production at 34.8m tons, 1.1m tons higher than last year, it says in a report.

That’s 1.3% above 5-year average

2-3m tons of potential production was lost due to late frosts in April and lack of rain from May-June: Agritel

Says French exports have been modest so far as Russian wheat has dominated the market, but uncertainty over Black Sea shipments may change that

Russia to Supply Some Free Grain to Six African Countries: Putin

Russia is ready to send 25,000-50,000 tons of grain each to Burkina Faso, Zimbabwe, Mali, Somalia, Central African Republic, and Eritrea for free in the next three to four months, President Vladimir Putin said at the Russia-Africa summit in St. Petersburg.

• Russia will also cover transport costs, Putin said
• NOTE: Russia is expected to ship record volumes of wheat again in the next season after a bumper harvest

India Cumulative Monsoon Rainfall 5% Above Normal as of July 26

India has so far received 420.3 millimeters of rains during the current monsoon season, which runs from June through September, compared with a normal of 399.2 millimeters, according to data published by the India Meteorological Department on July 26.

Rainfall in the northwestern region was at 34% above normal

The eastern and northeastern region got 25% below normal rains

Just-in-Time Farmers Defer Fertilizer Purchases; Inventory Rises

Capturing demand from US plantings will be key for Nutrien and fertilizer peers. Farmers are deferring purchases, leaving North American potash inventories at a seven-year high. Corn prices 4% above the five-year average should support farm incomes and spending in 2H. US acres of corn, a nutrient-hungry crop, have risen 6% in 2023.

Fertilizer Trends Higher as Stubborn Supply Shocks Persist

Fertilizer prices were mixed in the US and Canada as producers launch more summer programs, with potash weakening slightly and ammonia, urea and phosphates trending higher. Ammonia’s prepay at $410-$450 a short ton hints at a winter natural gas ceiling for European ammonia profitability. Chinese phosphate inventory is at a five-year low.

US Nitrogen, Phosphate Prices Jump in Wednesday Whisper

Nitrogen and phosphate prices were moving up in the US after months of decline, fueled by snug supply and firming international markets. Tampa ammonia firmed to $295 a metric ton (mt) cost-and-freight for August, up $10 from July and the first monthly increase since October 2022, when the price reached $1,175/mt. New Orleans (NOLA) urea moved to $395-$400 a short ton (st) vs. last week’s $335-$365, and a new round of urea ammonium nitrate (UAN) prices from CF were up $25-$35/st from mid-July fill offers. AdvanSix raised Midwest ammonium sulfate by $5-$15/st, while NOLA phosphates surged on reports of tight supply, pushing new prices up $60/st in the western US.

Brazil Fertilizer Prices Strengthen on Global Supply Concerns

As demand for summer crops improves in Brazil, global supply concerns over nitrogen and potash have boosted uncertainty and will likely drive fertilizer sellers to seek still higher margins. Thin supply is also driving phosphate prices up as suppliers rebuild inventories.

 

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