TOP HEADLINES
Surprise Tax Change Upends Trading in Crop Powerhouse Brazil
- Top agriculture traders withdrew offers from the market
- Measure is a blow for sector’s troubled relationship with Lula
A surprise tax change in agriculture powerhouse Brazil is disrupting business and drawing the ire of groups representing some of the world’s top crop traders including Cargill Inc. and Bunge Global SA.
Companies including Archer-Daniels-Midland Co. and Amaggi Importacao e Exportacao Ltda withdrew new offers for commodities such as soybeans and corn, according to people familiar with the matter, who asked not to be identified because the information is private. Traders were taken by surprise and need more clarity on the new policy, which limits the ability of some companies to monetize tax credits, the people said.
The provisional measure, signed by President Luiz Inacio Lula da Silva on Tuesday, threatens to raise costs for commodity exporters and processors in the world’s largest supplier of everything from soybeans to sugar and beef. If approved by Congress, it would be another blow for the troubled relationship between Lula and the agribusiness sector at a time when his approval rates are eroding.
Abiove, an industry group that represents major crop merchants including the storied ABCDs — an acronym for ADM, Bunge, Cargill and Louis Dreyfus Co. — said the decision is “disrespectful” and would slash profits for soybean processors. Crushers would need to pay $12 per metric ton less for their soy to keep current margins, according to Andre Nassar, who heads the Sao Paulo-based group.
Unica, the lobby for sugar and ethanol producers including Raizen SA, said the measure will erode cash flow for companies and increase their debt. ABPA and Abiec, which count meat giants JBS SA and BRF SA among members, said the initiative violates World Trade Organization rules as it amounts to a tax on exports.
The agribusiness sector, Brazil’s fastest growing, is more impacted than others by the new restrictions — part of Finance Minister Fernando Haddad’s efforts to shore up the country’s budget. That’s because of existing rules that already make it harder for food processors and exporters to use tax credits.
Still, industries including energy will also be harmed. Total losses across different sectors are forecast at 29.2 billion reais ($5.6 billion) this year, according to the Brazilian National Confederation of Industry. The impact could double in 2025, the group said.
The measure may struggle to pass. Nearly two dozen industry caucuses are asking Lower House Speaker Arthur Lira and Senate President Rodrigo Pacheco to reject the rule, which has immediate effect for 120 days.
FUTURES & WEATHER
Wheat prices overnight are down 12 1/2 in SRW, down 14 in HRW, down 5 1/2 in HRS; Corn is down 1 3/4; Soybeans down 7 1/4; Soymeal down $2.30; Soyoil down 0.19.
For the week and month so far wheat prices are down 51 1/2 in SRW, down 44 3/4 in HRW, down 38 1/2 in HRS; Corn is up 4; Soybeans down 12 1/4; Soymeal down $4.20; Soyoil down 1.36.
Year-To-Date nearby futures are down 0.2% in SRW, up 3.4% in HRW, down 3.1% in HRS; Corn is down 4.5%; Soybeans down 7.8%; Soymeal down 6.6%; Soyoil down 7.7%.
Chinese Ag futures (SEP 24) Soybeans up 14 yuan; Soymeal up 24; Soyoil up 130; Palm oil up 162; Corn up 17 — Malaysian Palm is up 26. Malaysian palm oil prices overnight were up 26 ringgit (+0.66%) at 3986.
There were no changes in registrations. Registration total: 1,479 SRW Wheat contracts; 39 Oats; 747 Corn; 469 Soybeans; 2,589 Soyoil; 0 Soymeal; 0 HRW Wheat.
Preliminary changes in futures Open Interest as of June 6 were: SRW Wheat down 1,000 contracts, HRW Wheat up 33, Corn down 1,424, Soybeans up 1,999, Soymeal down 374, Soyoil down 2,524.
Northern Plains: Despite some isolated showers being possible at times, drier weather is expected for most areas through the weekend. The drier weather is preferred in some areas of the eastern Dakotas for the remaining planting and boosting crop conditions. A system will go through early next week with some showers but should be patchy rainfall. The pattern gets more active again late next week as temperatures rise.
Central/Southern Plains: Recent precipitation has been more widespread and gone through some of the drought areas with good rainfall amounts. After a couple of dry days, a stalled front in the region will produce showers and thunderstorms on Friday with potential continuing into early next week as it drifts south. Though some areas of flooding have developed, and those left to plant may have some difficult conditions, the rainfall is good for early growth in most areas.
Midwest: An upper-level low that will park itself in the region may continue showers around the Great Lakes through the weekend, and a small system may move through early-to-mid next week, but amounts look to be light and widely scattered, allowing many areas to dry out for the remaining planting or replanting. Temperatures will also be cooler than normal by a couple of degrees for the next week before rising. Soil moisture remains high in most areas for early growth.
Delta: Scattered showers and heavy rain that have been moving through the region recently, but it will be a much drier pattern through next week. A stalled front could produce more rainfall this weekend into early next week for a few areas, but is not forecast to be widespread. Temperatures will trend mild to even a couple of degrees below normal for a few days next week, keeping stress low for developing crops.
Canadian Prairies: Eastern areas may see showers continuing for another couple of days, and isolated showers may dot the region through the weekend, but drier conditions are likely for more areas than not. A system may bring more scattered showers to eastern areas early next week. The storm track is likely to shift back into the region by the end of next week and keep it busy. Soil moisture is much improved and early growth should find mostly good conditions.
Brazil: Dry conditions with increasing temperatures continue to be unfavorable for safrinha corn areas that are still immature, but most of the crop is heading more toward maturity and early harvest has started. Southern areas are seeing flood waters recede and soils dry out. Some winter wheat planting may start up, but the damage to infrastructure and continued wet soils probably keep this slow.
Argentina: Dry conditions have continued to favor corn and soybean harvest, but not winter wheat planting and establishment. A couple of fronts could produce showers over southern areas later this week and weekend with more potential for next week, but generally look light and still unfavorable for wheat.
The player sheet for 6/6 had funds: net sellers of 2,000 contracts of SRW wheat, buyers of 10,000 corn, sellers of 10,500 soybeans, buyers of 6,000 soymeal, and buyers of 6,000 soyoil.
TENDERS
- CORN SALE: The U.S. Department of Agriculture confirmed private sales of 152,000 metric tons of U.S. corn for delivery to unknown destinations in the 2023/24 marketing year.
- CORN PURCHASE: South Korea’s Major Feedmill Group (MFG) purchased an estimated 68,000 metric tons of animal feed corn in a deal on Thursday
- CORN SALE: South Korea’s Major Feedmill Group (MFG) purchased an estimated 68,000 metric tons of animal feed corn in a deal on Wednesday.
- WHEAT SALE: Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) bought a total of 103,767 metric tons of food-quality wheat from the United States, Canada and Australia in a regular tender that closed on Thursday.
- WHEAT, BARLEY TENDER: Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) said it will seek 65,000 metric tons of feed wheat and 25,000 tons of feed barley to be loaded by Sept. 30 and arrive in Japan by Nov. 28, via a simultaneous buy and sell (SBS) auction that will be held on June 12.
- WHEAT, BARLEY TENDER: Tunisia’s state grains agency has issued an international tender to purchase about 50,000 metric tons of soft milling wheat and around 75,000 tons of animal feed barley.
PENDING TENDERS
- WHEAT TENDER: Jordan’s state grain buyer has issued an international tender to buy up to 120,000 metric tons of milling wheat which can be sourced from optional origins.
TODAY
US Export Sales of Soybeans, Corn and Wheat by Country
The following shows US export sales of soybeans, corn and wheat by biggest net buyers for week ending May 30, according to data on the USDA’s website.
- Top buyer of soybeans: Netherlands with 57k tons
- Top buyer of corn: Mexico with 471k tons
- Top buyer of wheat: Taiwan with 98k tons
US Export Sales of Pork and Beef by Country
The following shows US export sales of pork and beef product by biggest net buyers for week ending May 30, according to data on the USDA’s website.
- China bought 8.9k tons of the 29.9k tons of pork sold in the week
- South Korea led in beef purchases
China May Imports: Customs
General Administration of Customs says on website.
- Soybean Imports 10.222m Tons
- Soybean imports YTD fell 5.4% y/y to 37.369m tons
- Edible vegetable oil imports in May 558,000 tons
- Edible vegetable oil imports YTD fell 23.4% y/y to 2.86m tons
- Rubber imports in May 485,000 tons
- Rubber imports YTD fell 16.6% y/y to 2.814m tons
- Meat (including offal) imports in May 557,000 tons
- Meat (including offal) imports YTD fell 11.5% y/y to 2.78m tons
- Fertilizer exports in May 2.591m tons
- Fertilizer exports YTD fell 2.3% y/y to 9.648m tons
China May soybean imports fall 15% on year, customs data shows
China imported 10.22 million metric tons of soybeans in May, customs data showed on Friday, below the levels of a year ago but more than April’s shipment volumes, as good crush margins supported demand for cheaper Brazilian beans.
May imports by the world’s largest buyer of the oilseed were down 15% from a record 12.02 million tons in May 2023, and fell short of expected arrivals of 11-12 million tons.
Imports in the first five months of the year totalled 37.37 million tons, 5.4% lower than the year-ago period, data from the General Administration of Customs showed.
Rising hog prices in the world’s largest pork market have supported demand for soybeans, which is crushed into soymeal for animal feed.
The imports are largely from top producer Brazil, which typically ships most of its soybean crop from March to June.
But floods have disrupted Brazil’s harvest this season, lowering the state’s production estimates and impacting delivery of freshly harvested soybeans to drying and storage units.
“Customs’ soybean import data of 10.22 million metric tons is slightly below our estimate of 12 million metric tons as some ships may have arrived, but (have) yet to complete customs clearance,” said Rosa Wang, analyst at Shanghai-based agro-consultancy JCI.
“We might see bigger arrivals in June import data, but considering the impact of the floods in Brazil, we anticipate a smaller figure of around 11 million metric tons for June.”
In No. 3 producer Argentina, farmers are speeding up delayed sales of soybeans, the latest government data shows, helped by higher global prices and better weather conditions for the ongoing harvest.
China took delivery of 50,000 tons of deforestation and conversion-free (DCF) Brazilian soybeans on May 31 and is looking to source more sustainable products, marking what industry players say is a milestone for a country that has prioritised price over sustainability in its farm imports.
China’s first food security law aimed at achieving “absolute self-sufficiency” in staple grains came into effect on Saturday, reinforcing efforts to lower its reliance on overseas purchases.
Brazil’s 2024/2025 wheat crop view cut to 7.79 mln T after floods – StoneX
Brazilian wheat farmers are expected to reap 7.79 million metric tons of wheat in the 2024/2025 cycle, 3.7% below the last season, as growers reduced plantings in all major suppliers in the south of the nation, consultancy Stonex said on Thursday.
Given all the problems faced by the second-largest grower Rio Grande do Sul, which was hit by deadly floods last month, farmers there are expected to plant on 900,000 hectares, 200,000 hectares below last year.
That state’s output will fall below 3 million tons, StoneX predicted.
In Argentina, dry weather boosts wheat planting
Argentina’s 2024/25 wheat planting tasks were carried out without difficulties last week, mainly due to dry weather conditions, the Buenos Aires Grains Exchange (BdeC) said in a report on Thursday.
Nearly 26% of the 6.2 million hectares projected for planting in the 2024/25 season have been sowed, the exchange said in its weekly crop report.
Wheat planting is expected to end between July and August.
Argentina is a key wheat exporter and harvested 15.9 million metric tons in the previous season, according to official data.
Meanwhile, the 2023/24 soybean harvest is nearing its end, with the crops waiting to be harvested showing yields higher than expected.
Harvesting of the 2023/24 corn crop is 35.1% complete, with production estimated at 46.5 million tons.
Argentina is one of the world’s two largest exporters of soybean oil and meal, and the third-largest supplier of corn.
Argentine Soy, Corn, Wheat Estimates June 6: Exchange
The Buenos Aires Grain Exchange releases weekly report on website.
- Corn and soybean production estimates maintained
- Corn harvesting advanced to 35% complete, while soybeans are 92% harvested
World Wheat Stockpiles Seen Falling 1.6% in 2024-25: FAO-AMIS
World wheat stockpiles are seen totaling 306.8m tons in 2024-25, according to the AMIS Market Monitor released Thursday, which outlined its first estimates for the upcoming season.
- Wheat production is forecast at 786.7m tons, down slightly y/y
- Says potential output declines in the EU, Turkey, the UK and Ukraine may be offset by increases in Australia, Canada, India, and the US
- “With many crops yet to be planted in the Northern hemisphere, there is a high level of uncertainty with these projections”
CORN
- Corn output seen declining 1.3% to 1.22b tons
- Expects decreases in Brazil, South Africa, Ukraine and the US. Harvests are likely to increase in Argentina and the EU
- Inventories are projected to rise 3.5% y/y to 324.5m tons
- Cites large build-up in the EU, with smaller increases in Brazil, China, and the US
SOY
- Soy production to climb more than 6% to a fresh record 419.2m tons, largely due to Argentina, Brazil and the US
- Stockpiles are seen increasing to 60.5m tons from 53.2m tons a year earlier
Major Wheat Buyer Turkey to Stop Imports for Four Months
- Purchases from abroad to halt from June 21 until mid-October
- Domestic prices to rise by 12%, but farmers’ costs are higher
Turkey will halt wheat imports for four months, potentially exacerbating price swings in an already volatile market.
The country, one of the world’s biggest buyers of the commodity, banned purchases from June 21 until mid-October to shield local producers from being hit by a decline in prices during the harvest, the Turkish Agriculture Ministry said in a statement late Thursday.
France May See Worst Wheat Damage in Years Due to Non-Stop Rain
- Farmers could see damage to 12 to 20% of wheat areas
- Excess rain, lack of sunshine have also hurt wheat quality
French farmers are bracing for big hit to their wheat harvest as ceaseless rains and a lack of sunshine brings flashbacks of a weather-devastated crop eight years ago in Europe’s top producer.
“The situation is shaping up to be the worst we can imagine,” said Eric Thirouin, president of French grains growers’ group AGPB. “It is extremely difficult in the first week of June to make a prediction, but all the indicators are flashing red.”
The weather conditions are similar to 2016, Thirouin said, when France suffered its smallest crop in decades. He estimates that farmers could lose between 12% to 20% of the areas planted with soft wheat because of the non-stop heavy rain since October.
Australia Wheat Exports Curbed as Dry Weather Parches Fields
- Shipments may rise only slightly even as crop climbs
- Lack of rain has delayed planting in Western Australia
Weather-hit wheat production in Western Australia, the top exporting state, and dwindling stockpiles will limit the amount of the staple the nation can export in the coming year, further straining global supplies.
Wheat exports are likely to be 20.8 million tons in 2024-25, only marginally above the previous season and a third less than shipments of 31.8 million tons in 2022-23, according to data from government crop forecaster ABARES. That comes at a time when the agency expects production to increase by 12%.
Port strike suspended at Argentine grains hub, ensuring flow of goods
Port worker unions in Argentina cut short a planned strike in grains shipping ports in the Rosario region following government-ordered talks, a union head said on Thursday, in welcome news for the country’s farm exports.
The area north of the city of Rosario along the Parana River is Argentina’s main agricultural exports hub, where more than 80% of its processed soybeans, corn, wheat and other farm products are shipped to global markets.
The FESIMAF maritime workers federation, which groups several unions, announced plans to start a 48-hour strike earlier on Thursday, arguing that the Tugboat Owners Chamber (CAR) refused to negotiate an expired collective bargaining agreement.
“We’re all working normally,” said Raul Durdos, head of the SOMU union, a member of FESIMAF.
He added that government officials had ordered a stop to the strike from 1 p.m. local time, to allow for talks between workers and companies.
The brief strike did not alter operations at the bustling ports, particularly busy at this time of the year due to the ongoing soybean and corn harvests, Argentina’s top cash crops.
FESIMAF had allowed tugboats, which also guide vessels that supply power plants with liquefied natural gas, to continue operating to prevent energy shortages.
Brazil buys 263,370 tons of imported rice in rare auction amid floods
Brazil bought 263,370 metric tons of imported rice for 1.32 billion reais ($250.51 million) in a rare auction on Thursday to prevent a price hike after historic floods in the top producing state of Rio Grande do Sul, national crop agency Conab said.
The volume was lower than the 300,000 tons initially expected. About 36,600 tons will be acquired at a future auction, a Conab official said after the bidding ended.
The government’s plan to buy imported rice has faced opposition from growers in Rio Grande do Sul, which supplies about 70% of Brazil’s output, and national farm lobbies.
Chinese Agri Trader Cofco Has Emission Targets Validated by SBTi
Cofco International announced Thursday that its near-term emissions reduction targets have been validated and published by the Science Based Targets initiative (SBTi).
- Addressing deforestation associated with soy production in Latin America is a top priority, company says in emailed statement
- Among other goals, company committed to reducing Scope 3 greenhouse gas emissions related to Forest, Land and Agriculture (FLAG) by 46% per metric ton of soybean by 2033 from a 2021 base year
- Approval of these targets by SBTi ensures their robust nature and provides transparency to key stakeholders, Cofco says
Global Food Prices Rose in May on Higher Wheat and Dairy Costs
Global food prices rose 0.9% in May, as wheat and dairy costs increased, according to an index of food-commodity prices from the United Nations’ Food and Agriculture Organization.
- That marked a third month of gains
- Grain prices rose 6.3%, mostly on rising costs of wheat and corn as unfavorable weather curbs production
- Dairy costs were 1.8% higher
- Sugar prices were 7.5% lower, driven by a good start of the new harvest in Brazil
- Vegetable oil prices fell by 2.4%
US Miss. River Grain Shipments Rise, Barge Rates Decline: USDA
Barge shipments down the Mississippi river increased to 604k tons in the week ending June 1 from 548k tons the previous week, according to the USDA’s weekly grain transportation report.
- Barge shipments of corn rose 18.7% from the previous week
- Soybean shipments up 5.6% w/w
- St. Louis barge rates were $8.66 per short ton, a decline of $0.16 from the previous week
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