Global Ag News for Oct 13.22

TOP HEADLINES

US Wheat Exports Expected to Plunge: WASDE Takeaways

Here are the five key takeaways from the October USDA World Agricultural Supply and Demand report released Wednesday.

• US WHEAT WOES: Just as the US is grappling with export-shipping woes due to a drought-struck Mississippi River, USDA is forecasting the lowest US wheat exports in half a century on reduced supplies, slow pace of export sales and uncompetitive export prices. The continued strength of the US dollar won’t help the situation going forward.
• MORE ON WHEAT: Following a big price spike just two days ago, Chicago futures continued to fall after the report amid the outlook for historically low US demand and bigger-than-expected stockpiles. Also, no changes were made in the Russia or Ukraine balance sheets. That took out some of the risk premium amid Russia’s escalating attacks in Ukraine.
• CORN: The outlook for Ukraine corn exports was raised, reflecting progress made under the Black Sea crop-export corridor that was opened in early August. But the fate of the passageway could be key to meeting the latest forecast. The fragile pact stands to expire in about a month unless officials reach an agreement to extend it.
• TIGHT SOYBEANS: After the USDA’s September estimate called for shockingly tight soybean supplies amid drought, the latest WASDE took the market off guard again by keeping ending stocks the same at 200 million bushels. The average Bloomberg survey estimate had called for a bump-up of 45 million. Futures touched above $14 a bushel following the report.
• FOOD INFLATION: The mixed crop prices post WASDE reflects the ongoing questions around where the market is headed amid geopolitical and economic headwinds. It’s safe to assume volatility will continue as traders consider the war disruptions against the prospects of global recession. That means there’s no real handle yet on the direction of food prices going into 2023.

FUTURES & WEATHER

Wheat prices overnight are up 7 in SRW, up 6 1/4 in HRW, up 6 1/4 in HRS; Corn is down 1/2; Soybeans down 4 3/4; Soymeal up $0.04; Soyoil down 0.33.

For the week so far wheat prices are up 9 in SRW, up 7 1/2 in HRW, up 5 in HRS; Corn is up 9 1/4; Soybeans up 23 3/4; Soymeal up $1.39; Soyoil down 1.29.

For the month to date wheat prices are down 32 1/4 in SRW, down 15 1/4 in HRW, down 9 in HRS; Corn is up 15; Soybeans up 26 1/2; Soymeal up $11.70; Soyoil up 3.70.

Year-To-Date nearby futures are up 15% in SRW, up 22% in HRW, down -1% in HRS; Corn is up 17%; Soybeans up 5%; Soymeal up 2%; Soyoil up 23%.

Chinese Ag futures (JAN 23) Soybeans down 33 yuan; Soymeal up 40; Soyoil up 164; Palm oil up 16; Corn up 10 — Malaysian palm oil prices overnight were down 67 ringgit (-1.79%) at 3669.

There were no changes in registrations. Registration total: 3,084 SRW Wheat contracts; 0 Oats; 0 Corn; 5 Soybeans; 39 Soyoil; 247 Soymeal; 40 HRW Wheat.

Preliminary changes in futures Open Interest as of October 12 were: SRW Wheat up 648 contracts, HRW Wheat down 954, Corn up 7,383, Soybeans up 7,522, Soymeal up 1,618, Soyoil up 3,124.

Northern Plains Forecast: Mostly dry Thursday. Isolated showers Friday-Saturday. Mostly dry Sunday. Temperatures near normal Thursday, near to above normal Friday-Saturday, near to below normal Sunday. Outlook: Mostly dry Monday-Friday. Temperatures above normal west and below normal east Monday-Tuesday, near to above normal Wednesday, above normal Thursday-Friday.

Central/Southern Plains Forecast: Mostly dry Thursday-Saturday. Scattered showers south Sunday. Temperatures near to above normal through Sunday. Outlook: Scattered showers south Monday. Mostly dry Tuesday-Friday. Temperatures near to below normal Monday-Wednesday, near to above normal Thursday-Friday.

Western Midwest Forecast: Mostly dry Thursday. Isolated showers north Friday, south Saturday. Mostly dry Sunday. Temperatures near to below normal Thursday-Saturday, below normal Sunday.

Eastern Midwest Forecast: Isolated showers Thursday-Sunday, mostly north. Temperatures above normal Wednesday, near to below normal Thursday-Sunday. Outlook: Lake-effect showers Monday-Tuesday. Mostly dry Wednesday-Friday. Temperatures below normal Monday-Wednesday, near to below normal Thursday, near to above normal Friday.

The player sheet for Oct. 12 had funds: net sellers of 6,000 contracts of SRW wheat, sellers of 500 corn, sellers of 8,000 soybeans, buyers of 3,500 soymeal, and unchanged soyoil.

TENDERS

• SOYBEAN SALES: The U.S. Department of Agriculture confirmed private sales of 526,000 tonnes of U.S. soybeans to China for delivery in the 2022/23 marketing year that began Sept. 1.
• CORN PURCHASE: Taiwan’s MFIG purchasing group bought about 65,000 tonnes of animal feed corn, expected to be sourced from Brazil, in an international tender which closed on Wednesday, European traders said. The corn was purchased at an estimated premium of 189.00 U.S. cents a bushel c&f over March corn futures, they said. Traders said only Brazilian corn was offered in the tender.
• WHEAT PURCHASE UPDATE: Algeria’s state grains agency OAIC is believed to have bought about 480,000 tonnes to 510,000 tonnes of milling wheat in an international tender which closed on Tuesday, European traders said, above the upper end of initial trade estimates of 400,000 to 480,000 tonnes. The purchase was expected to be largely sourced from Russia and possibly some from Romania and Bulgaria, although technically supplies are optional origin, they said. It is thought one seller will provide about 60,000 tonnes sourced from France. Traders said they believed the bulk of the wheat was traded at between $382 and $384 a tonne c&f.
• FEED BARLEY TENDER PASSED: Jordan’s state grain buyer made no purchase in an international tender for 120,000 tonnes of animal feed barley which closed on Wednesday and is re-tendering to buy the same volume next week, an official source said. A new tender for 120,000 tonnes of barley seeking March and April shipment will close on Oct. 19. Two trading houses, Cargill and Olam, participated on Wednesday, European traders said.
• FEED WHEAT AND BARLEY TENDER: Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) said it will seek 70,000 tonnes of feed wheat and 40,000 tonnes of feed barley to be loaded by Jan. 31 and arrive in Japan by Feb. 24 via a simultaneous buy and sell (SBS) auction that will be held on Oct. 19.

PENDING TENDERS

• WHEAT TENDER: The World Food Programme, a United Nations agency, issued an international tender to purchase about 100,000 tonnes of milling wheat, European traders said. The deadline for submission of price offers in the tender was Sept. 28, with an award expected on Sept. 30.
• WHEAT TENDER: Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) is seeking to buy 94,140 tonnes of food-quality wheat from the United States, Canada and Australia in regular tenders that will close on Oct. 13.
• WHEAT TENDER: Jordan’s state grain buyer issued an international tender to buy 120,000 tonnes of milling wheat, an official source said, closing on Oct. 18.
• RICE TENDER: South Korea’s Agro-Fisheries & Food Trade Corp issued an international tender to purchase an estimated 90,100 tonnes of rice sourced from the United States, Vietnam and other origins, European traders said. The deadline for submissions of price offers in the tender is Oct. 19, they said.

TODAY

ETHANOL: US Weekly Production Survey Before EIA Report

Output and stockpile projections for the week ending Oct. 7 are based on six analyst estimates compiled by Bloomberg.

• Production seen higher than last week at 924k b/d
• Stockpile avg est. 21.701m bbl vs 21.685m a week ago

China Set to Import Brazilian Corn in Challenge to US Supply

China may start importing corn from Brazil as early as December, part of a drive by the world’s top buyer to reduce dependence on the US and replace supplies from Ukraine cut off by the Russian invasion.

Some 45 facilities owned by companies including Bunge Ltd., Cargill Inc. and Archer-Daniels-Midland Co. have been pre-approved by Brazil to export to China, a list seen by Bloomberg shows. The final total will be higher because of a large number of requests, said a person familiar with the matter, who asked not to be identified as talks continue. The final list is likely be sent to China in November.

China is taking steps to accelerate imports of Brazilian corn, diversifying supply at a time when the war in Ukraine has disrupted trade and tensions with the US are high. A rally of more than 20% in Chicago corn futures in less than three months, compounded by a surging US dollar, has increased the urgency of finding alternative cargoes. China is also curbing corn starch exports, in a sign the country’s fretting about supply.

US agricultural giants Archer-Daniels-Midland Co. and Bunge Ltd. slid as much as 2.9% on the news, and corn futures spiked.

While Brazil is the second-biggest corn exporter, China almost never bought from the agricultural powerhouse in the past nine years due to phytosanitary concerns. At a meeting this year in Brasilia, the two nations finally agreed on sanitary guidelines after years of talks, paving the way for purchases. The move threatens the US share of Chinese purchases.

Bunge leads the list seen by Bloomberg with 20 sites approved by Brazil to export corn to China. Once Beijing approves the list, those companies will then negotiate directly with buyers in the Asian country.

China already buys most of Brazil’s soybeans, another feed ingredient for its massive hog herd. The Asian nation has a history of shifting away from US agricultural supplies at a time of escalating tensions, such as in 2018-19 during a trade war, and has a broader goal to reduce reliance on a single supplier.

Global Palm Oil Output Growth is Set to Slow Down, Mielke Says

Palm oil’s annual production growth is expected to slow down to 2.3-2.5m tons in 10 years to 2030, from an average growth of 2.9m tons in the previous decade, according to David Mielke, a director of Hamburg-based Oil World.

• Palm oil has lost its growth dynamics due to declining yields, lack of new plantings, and shortage of workers, Mielke said in slides prepared for a Bursa Malaysia Derivatives industry conference in Sabah.
  • Area expansion in top grower Indonesia has slowed down considerably in recent years, while insufficient replanting will keep average yields below their potential in the years ahead
  • Soaring input costs and strict sustainability criteria are also discouraging investment into the sector
• Global palm oil output seen at 80.2m tons in the current year that started in October, compared with 77.2m tons in 2021-22
  • Output in Indonesia is likely to rise by 2.2m tons in 2022-23, and by just 0.4m tons in Malaysia
  • Closing stockpiles in Indonesia estimated at 6.3m tons in 2022, against 4.8m tons a year earlier
• Malaysian RBD palm olein prices may bottom at around $780-$810 a ton free-on-board in the October-December quarter
• “Huge discounts” of palm oil vis-a-vis soyoil are boosting consumption in price-sensitive markets
  • However, palm’s large discount to rival vegetable oils is not sustainable as prices of sunflower, soy and rapeseed oils may see further declines in 1H next year
  • NOTE: Soybean oil’s premium over palm ~$645/ton Thursday, vs avg of ~$284 in past year

BIODIESEL

• Improved price competitiveness of palm oil in Indonesia and its effect on discretionary blending a “swing factor” to watch
• Indonesia’s biodiesel production may reach a record high of 8.7m tons in 2022, compared with 7.5m a year ago
• Global biodiesel output seen rising to 50.5m tons in 2022, from 48.3m tons a year earlier

Indonesia’s Palm Oil Exports Climb 68% M/m in August: Intertek

Exports rose to 4.04m tons in August from 2.41m tons a month earlier, cargo surveyor Intertek Testing Services says in an emailed statement.

• August shipment by grade:
  • 638,292 tons of crude palm oil
  • 1.45m tons of RBD palm olein
  • 854,333 tons of RBD palm oil
• August vs. July sales by destination:
  • India and subcontinent 1.35m tons vs. 704,660 tons
  • China 630,850 tons vs. 331,150 tons
  • EU 709,558 tons vs. 388,618 tons

India’s September Vegoil Imports Rise to 1.64m Tons: SEA

India’s vegetable oil imports rose to 1.64m tons in September from 1.4m tons in August, according to the Solvent Extractors’ Association of India.

• Palm oil imports rose to 1.17m tons from 994,997 tons in August
  • NOTE: India’s Palm Oil Imports Hit One-Year High in September: GGN
• Soybean oil imports rose to 261,815 tons from 244,697 tons in August
• Sunflower oil imports rose to 159,810 tons from 135,308 tons in August
• The government should consider increasing import duty on crude palm oil and RBD palm olein by at least 10% to help farmers fetch remunerative prices for their crops during harvesting of monsoon-sown crops: SEA
  • Sharp falls in global edible oil prices in the last five months dragged down domestic oilseed rates

Argentina Mulls Tighter Wheat Export Controls as Crop Withers

• Local millers are concerned about domestic supply shortfalls
• More restrictions could add to global wheat market tightness

Argentina is considering tightening the screws on wheat exports as a drought withers plants that are harvested at year-end and food inflation spirals, according to people with knowledge of the matter.

A combine harvests wheat near Balcarce, Argentina.

The government has convened a meeting with exporters because of concerns among domestic millers that there won’t be enough wheat available locally, said the people, who asked not to be identified discussing confidential emails.

A brutal season of drought and frosts appears to be forcing the government’s hand as it juggles efforts to shield local consumers from surging prices with the need to replenish hard currency reserves. Further restrictions on Argentine wheat would add to global tightness with US exports at the lowest in 50 years and the war in Ukraine continuing to hamper shipments.

The Agriculture Secretariat didn’t immediately comment. The nation’s crop export and crushing group Ciara-Cec confirmed the government had convened a meeting amid worries by millers.

Authorities want to discuss what can be done to ease demand from international buyers, including pushing back shipments of 8.8 million metric tons of wheat already on an official crop-export register. Another option would be to stop traders from surpassing 9 million tons on the register until the extent of production losses is fully known.

Argentina — a top-seven global wheat supplier whose biggest customer is neighboring Brazil — previously applied an export quota to the 2022-2023 harvest of 10 million tons.

The Rosario Board of Trade, which once predicted a crop of 19 million tons, now says plants will yield less than 16 million tons.

Egypt to Supply Wheat to Mills, Bakeries, Pasta Factories

Egypt will provide private sector mills, bakeries, sweet and pasta factories with wheat at EGP 8,700 per ton and flour to pasta factories which supply quantities to ration cards at EGP 10,000 a ton, supply ministry says in statement.