Global Ag News for Sept 20.23

TOP HEADLINES

Egypt Swaps Out Russian Wheat After Moscow Objects to Pricing

• State-owned buyer struck deal below Moscow’s price floor
• Egypt to source wheat from France and Bulgaria instead

Egypt will switch to sourcing almost half a million tons of wheat from France and Bulgaria, after Moscow blocked the supply of Russian grain, according to people familiar with the matter.

Moscow objected to the pricing of the bumper deal, the people said, asking not to be identified as the matter is private. It’s the second time in the past few months that the purchase of Russian wheat by Egypt’s state-run buyer has been thrown into turmoil as authorities in Moscow try to enforce an unofficial price floor.

Egypt’s General Authority for Supply Commodities agreed to buy 480,000 tons of Russian wheat in direct negotiations, Supply Minister Ali El-Mosilhy said at the beginning of September. That deal was booked at $270 a ton including freight — lower than the unofficial price floor Russian officials were trying to implement at the time. Days later, Egypt said that crop trader Solaris would be allowed the option to supply grain from any origin.

FUTURES & WEATHER

Wheat prices overnight are up 10 in SRW, up 8 in HRW, up 7 1/4 in HRS; Corn is up 2; Soybeans up 3 1/4; Soymeal up $2.50; Soyoil up 0.01.

For the week so far wheat prices are down 10 1/4 in SRW, down 7 1/2 in HRW, down 2 in HRS; Corn is up 2; Soybeans down 21 3/4; Soymeal down $0.40; Soyoil down 1.76.

For the month to date wheat prices are down 8 in SRW, up 11 3/4 in HRW, up 20 1/4 in HRS; Corn is unchanged; Soybeans down 50; Soymeal down $12.40; Soyoil down 2.18.

Year-To-Date nearby futures are down 25.0% in SRW, down 16.8% in HRW, down 16.2% in HRS; Corn is down 29.5%; Soybeans down 13.2%; Soymeal down 17.5%; Soyoil down 3.1%.

Chinese Ag futures (NOV 23) Soybeans down 2 yuan; Soymeal down 3; Soyoil down 32; Palm oil up 20; Corn up 13 — Malaysian Palm is down 26.

Malaysian palm oil prices overnight were down 26 ringgit (-0.69%) at 3723.

There were changes in registrations (-12 Soymeal). Registration total: 3,005 SRW Wheat contracts; 741 Oats; 4 Corn; 220 Soybeans; 67 Soyoil; 63 Soymeal; 402 HRW Wheat.

Preliminary changes in futures Open Interest as of September 19 were: SRW Wheat up 2,220 contracts, HRW Wheat up 604, Corn up 13,738, Soybeans up 7,625, Soymeal up 619, Soyoil down 3,118.

Northern Plains: A system will move into the region on Wednesday with scattered showers through the weekend. Some areas of heavy rain will be possible, which may have some benefit for late-filling corn and soybeans, but will delay any remaining wheat harvest and early corn and soybean harvest.

Central/Southern Plains: Isolated showers and thunderstorms will be possible for the next couple of days, but a system moving into the region on Thursday will be slow to move east with multiple rounds of precipitation through the weekend before it leaves. Areas of heavy rain will be beneficial for winter wheat establishment, but not corn and soybean harvest.

Midwest: Clusters of showers and thunderstorms will be possible the next couple of days mostly across western areas of the region. A system will slowly move into the region Friday but be slow to move out next week. Rain should be heavier for western areas as opposed to eastern ones. Rain is largely too late to be a benefit and will delay early harvest plans in some areas instead.

Delta: It should be dry for most of the week. A system will move into the region this weekend or early next week with potential for limited rain. Cotton is running out of time for rainfall to be helpful and the coming rains may be heavy enough to disrupt harvest progress for soybeans.

Brazil: A front in the south will continue with periods of showers for most of the week and possibly into next week as well. It does not look as heavy as last week’s forecast. However, there could be additional flooding concerns for Rio Grande do Sul. Early soybean planting should otherwise go well this week as restrictions lift.

Argentina: A front will produce areas of showers for northern areas at various points throughout the week. Southern areas may get in on some rainfall later this week and weekend. Recent and forecast rain is improving soil moisture for winter wheat and early corn planting.

The player sheet for Sept. 19 had funds: net sellers of 3,000 contracts of SRW wheat, buyers of 4,000 corn, sellers of 2,000 soybeans, buyers of 4,000 soymeal, and  sellers of 2,500 soyoil.

TENDERS

• CORN PURCHASE: Taiwan’s MFIG purchasing group bought about 65,000 metric tons of animal feed corn which is expected to be sourced from Brazil in an international tender on Tuesday.
• CORN PURCHASE: South Korea’s Major Feedmill Group (MFG) purchased an estimated 68,000 metric tons of animal feed corn expected to be sourced from South America or South Africa in a private deal on Tuesday without issuing an international tender.
• CORN PURCHASE: Leading South Korean animal feed maker Nonghyup Feed Inc. (NOFI) has bought an estimated 136,000 metric tons of animal feed corn in an international tender for up to 138,000 tons on Tuesday.
• SOYMEAL PURCHASE: Leading South Korean animal feed maker Nonghyup Feed Inc. (NOFI) purchased between 50,000 to 60,000 metric tons of soymeal in an international tender on Monday.
• CORN PURCHASE: Iranian state-owned animal feed importer SLAL is believed to have purchased animal feed corn in an international tender which closed on Sept. 13.
• WHEAT PURCHASE: Algeria’s state grains agency OAIC has started buying milling wheat in an international tender which closed on Tuesday.
• BARLEY PURCHASE: Algerian state agency OAIC is believed to have purchased about 30,000 metric tons of animal feed barley to be sourced from optional origins in a tender which closed on Thursday.
• WHEAT TENDER: Egypt’s state grains buyer the General Authority for Supply Commodities (GASC) is seeking wheat in an international purchasing tender. The deadline for offers is Sept. 20.
• WHEAT TENDER: A group of South Korean flour mills has issued a tender to purchase around 50,000 metric tons of milling wheat to be sourced Australia.
• CORN, BARLEY TENDER: Algerian state agency ONAB has issued international tenders to purchase at least 60,000 metric tons of animal feed corn and 30,000 metric tons of feed barley.
• WHEAT TENDER: Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) is seeking to buy a total of 89,940 metric tons of food-quality wheat from the United States, Canada and Australia in a regular tender that will close on Thursday.

PENDING TENDERS

• RICE TENDER: South Korea’s state-backed Agro-Fisheries & Food Trade Corp issued an international tender to purchase an estimated 21,700 metric tonnes of rice all to be sourced from China.
• VEGETABLE OILS TENDER: Egypt’s state grains buyer, the General Authority for Supply Commodities (GASC), said it was seeking vegetable oils in an international purchasing tender for arrival Dec. 15 – 31. GASC said traders should submit bids for payment at sight. The deadline for offers is Sept. 21.
• WHEAT TENDER: The Taiwan Flour Millers’ Association has issued an international tender to purchase an estimated 93,125 metric tons of grade 1 milling wheat to be sourced from the United States. The deadline for submission of price offers is Sept. 22.

TODAY

ETHANOL: US Weekly Production Survey Before EIA Report

Output and stockpile projections for the week ending Sept. 15 are based on seven analyst estimates compiled by Bloomberg.

• Production seen lower than last week at 1.025m b/d
• Stockpile avg est. 21.223m bbl vs 21.171m a week ago
• The EIA in Washington is scheduled to release the report at 10:30am Wednesday

EU Soft-Wheat Exports Fall 27% in Season Through Sept. 17

The European Union’s soft-wheat exports in the season that began July 1 reached 6.32m tons as of Sept. 17, compared with 8.7m tons in a similar period a year earlier, the European Commission said on its website.

• Leading destinations include Morocco (1.18m tons), Nigeria (643k tons), and Algeria (472k tons)
• Barley exports are at 1.87m tons, down 11% y/y
• Corn imports are at 3.31m tons, down 44% y/y

Brazil’s 2023/2024 grain production to shrink slightly -Conab

Brazil’s overall grain production in the 2023/2024 cycle is set to shrink 1% compared with the previous season, totaling 319.5 million metric tons, the food supply and statistics agency Conab predicted on Tuesday.

The lower forecast was driven by an expected 9.1% drop in Brazil’s total corn crop, to 119.8 million tons, fueled by a predicted 4.8% drop in harvest area to 21.2 million hectares, Conab said in its first forecast for the 2023/2024 cycle.

Soybean output meanwhile is expected to increase by 5.1% to 162.4 million tons, with a 2.8% increase in its production area to 45.3 million hectares, it added.

Brazil’s cotton production is expected to reach 2.9 million tons, down 5.6% from the previous cycle.

Brazil’s oilseed processing capacity expected to grow by 9% in 2024 -Abiove

Brazil’s oilseed industry is expected to increase processing capacity by 9% in 2024 from this year, industry group Abiove estimated on Tuesday, after the sector announced 6 billion reais ($1.24 billion) in investments in the area.

Abiove, which represents major traders and processors in Brazil, such as ADM, Bunge and Cargill, expects capacity to increase by 19,000 metric tons per day next year, reaching a total of 228,600 tons/day.

Yearly capacity is projected to reach 75 million tons, it said.

In 2023, processing capacity sits at 69.2 million tons per year, or 5.6% above the previous year. Nearly all of that figure, 67.9 million tons, refers to soybean processing.

Brazil is the world’s largest soybean producer and exporter.

Abiove’s survey also showed that the number of industrial processing units in the country rose to 129 this year, from 122 in 2022, while the number of idle plants fell to 22 from 27.

Last week, Abiove said the country’s soybean exports in 2023 should reach nearly 100 million tons.

China’s Buying of Brazilian Soybeans Extends Into Peak US Season

• Buyers book cargoes for delivery during October into December
• Chinese soymeal demand may fall as farmers struggle to profit

China’s voracious appetite for South American soybeans has continued into a period typically dominated by the US, an ominous sign for that nation’s growers as their harvest begins.

Importers have booked at least 20 cargoes from Brazil and Argentina over the past two weeks for delivery to China during October, November and into December, according to people familiar with the matter. Chinese buyers were already snapping up Brazilian beans for delivery in the fourth quarter as far back as July.

Brazil has benefited from a bumper harvest, allowing the country to offer soybeans at lower prices than rival producers. That’s left US suppliers with a smaller-than-usual window in which to tap Chinese buyers.

“Brazil still has lots of cheap beans,” said Rosa Wang, an analyst at commodity consultancy Shanghai JC Intelligence. If prices remain low, importers are likely to keep buying cargoes from the South American producer, she added.

The peak period for US supplies to China has typically been from October to February, before the new Brazilian harvest starts. Chinese demand has been partially covered for November, but the import window remains mostly open for December and January, according to traders and analysts.

An additional constraint for US producers will be domestic. Water levels on the Mississippi River, which carries almost half of the nation’s agricultural exports, have been dropping since June, restricting the volume of crops allowed on each barge.

There are currently 105 vessels set to be loaded with Brazilian soybeans for delivery to China into the first days of November, according to shipping agency Alphamar Agencia Maritima. That’s equivalent to around 6.3 million tons.

“This is a huge increase compared to previous years, considering that the whole of Brazilian soy shipments to China in the last quarter of 2022 was 6.9 million tons,” said Arthur Neto, commercial director at Alphamar.

Less positive for Brazilian sellers and others is a well-supplied market, at a time when importers are grappling with falling margins to crush the beans into cooking oil and animal feed, particularly for pigs.

China has a massive pig herd that it needs to feed but farmers are struggling to make healthy profits, which may force some to cull numbers, denting soymeal consumption and increasing sensitivity to price.

A manager surnamed Zhang at a large crusher in northern China said there was no urgency to buy US soybeans and that it would stick with Brazilian supplies if prices were better. The plant has yet to book cargoes for November and December, said Zhang, who didn’t want to provide his full name as he is not authorized to speak to the media.

Kazakhstan Plans to Cut Grain Exports on Lower Harvest Forecast

Kazakhstan sees lower grain export potential this year because the crop yield decreased, Agriculture Minister Aidarbek Saparov tells reporters in Astana.

• Kazakhstan grain export potential will decline by about 30%
• The nation sees about 7.2m tons of grain exports, including 1.2m tons of flour in grain equivalent, this marketing year (from July 2023 through June 2024), but the final results of harvest may change this forecast: Saparov
• “The volume of grain we plan for export will be enough to hold our positions on traditional markets”
• “We started the season with large volume of grain from last year’s harvest”
• The nation sees harvest at 16m tons this year; still has 3m tons from last year’s crop: Saparov
• Kazakhstan’s grain harvest was 6.6m tons as of Sept. 19, compared with 14.2m tons a year earlier, Saparov told a government meeting earlier Tuesday
• Harvest area totals 6.9m ha in the period vs 11.7m ha a year earlier
  • 40% of planted area has been harvested
  • Avg grain yield at 9.5 centners/ha vs 12.2 centners/ha
• NOTE: 1 centner is equivalent to 100kg

Russia Sees This Season’s Grain Export at 60M Tons: Minister

Russia may export 60m tons of grains in the current season, Agriculture Minister Dmitry Patrushev tells deputies during a speech in the parliament Wednesday.

• Russia also expects that its grain harvest this year will reach the level of 130m tons, 123 million tons harvested so far
• Russia exported 60m ton of grains in 2022/2023 season
• NOTE: Agricultural season runs from July 1 to June 30

Romanian Farmers Exported 8M Tons of Wheat in 2023: Minister

Romanian farmers have exported over 8 million tons of wheat so far this year and honored their commercial contracts despite an increase in traffic at Black Sea port of Constanta triggered by the transit of Ukrainian grains, Agriculture Minister Florin Barbu tells Digi24.ro news website.

Romania had a pretty good wheat harvest, compared with other parts of Europe, Barbu says, without giving exact figures

Russian Wheat Exports Remain Biggest Risk to U.S. Wheat Elevators

Profitability outlook for wheat storage improves, but tight global supplies bring risk of price volatility

A modest rebound in U.S. wheat production and supplies is improving the outlook for profitability among grain elevators that store wheat. Futures market carries have improved for all three major classes of wheat and the buy basis is widening following a bigger harvest. The larger harvest follows two years of poor production and a historic run of inverted futures markets that sapped profitability for storing wheat.

According to a new report from CoBank’s Knowledge Exchange, the major risk to elevators in the year ahead is a sharp rally in wheat prices. Wheat stocks among major exporters are historically tight, and any disruption to the flow of Russian exports through the Black Sea could trigger a sharp price run-up.

“The flood of cheap Russian wheat into the global market may have created a false sense of security in the world wheat market,” said Tanner Ehmke, grains and oilseeds economist for CoBank. “The greatest margin risk to storing wheat is the shrinking world wheat crop outside of Russia and China, which leaves the market vulnerable to supply shocks and extreme volatility in wheat prices.”

The cost of storing grains, including wheat, remains historically high due to the sharp rise in interest rates. As a result, elevators will still struggle to pencil in profit on the wider carries, particularly for the hard wheats. Elevators struggling to make margin on carries will be looking for opportunities to benefit from rising basis on company-owned grain through the marketing year.

U.S. Wheat Harvest

The rebound in the U.S. wheat harvest was largely driven by a substantial increase in soft red winter wheat yields in the Midwest, where farmers produced the biggest crop in nine years. This year’s soft red winter wheat harvest rose 31% year-over-year, based on USDA’s latest estimates.

With ample supply, elevators will benefit from exceptionally wide carries in the futures market and the variable storage rate that adds about 3 cents per bushel to the futures spread. Soft red winter wheat is a low-protein wheat typically used for snack food products like crackers and pastries.

In the Central and Southern Plains, production of hard red winter wheat lost significant yield under ongoing drought. Overall production rose 10% year-over-year, according to USDA estimates, with gains attributable to expanded acreage. The abundance of protein in the hard red winter wheat crop in recent years has resulted in protein premiums falling. Hard red winter wheat is typically used for bread, buns and rolls.

The hard red spring harvest in the Northern Plains is expected to fall 7% year-over-year despite expanded acreage, according to USDA. Late planting followed by persistent drought limited yields. The smaller harvest is compounded by a drop in Canadian hard red spring wheat production that is expected to hold prices at a significant premium in the year ahead. Hard red spring wheat is a high-protein wheat used for products like bagels and pizza crust.

Blending this year’s wheat crop will be a tightrope for elevators, millers and bakers that are challenged to find low- to medium- protein hard wheat in a market saturated with high protein. With the hard wheats trading at a sizable premium, millers and bakers will be motivated to blend more soft red wheat with hard wheat. However, blending will be limited due to stark differences in mixing and baking performance.

World Wheat Supplies

The flood of cheap Russian wheat into the global market, combined with a strong U.S. dollar continue to be major headwinds for U.S. wheat exports. Russia’s currency has fallen sharply, down 30% year-to-date, putting Russian exports on sale and pushing down world wheat prices. Russia is currently harvesting a near-record wheat crop with substantial carryover inventories from last year’s record-sized harvest.

In China, wet weather during harvest damaged a substantial portion of the Chinese wheat crop, which likely result in China increasing wheat imports.

Excluding Russia and China, the world’s wheat stocks-to-use ratio is nearly the tightest on record. Drought has substantially reduced wheat supply in Argentina, Canada and Australia. Ukraine’s wheat harvest faces numerous obstacles to being delivered to the world market due to the ongoing Russia-Ukraine war.

Weak performance with the North African wheat crop will also translate into greater demand for imports, as will India’s ban on white rice exports. The ban is shifting food demand from rice to wheat in major importing regions like Southeast Asia and Africa.

LIVESTOCK SURVEY: US Cattle on Feed Placements Seen Falling 5.7%

August placements onto feedlots seen falling y/y to 1.99m head, according to a Bloomberg survey of ten analysts.

• That would be the lowest August placements since 2019
• Estimates range from -8.2% to -1.9% y/y change
• Feedlot herd as of Sept. 1 seen falling by 2.2% y/y to 11.09m head
• Marketings seen falling 5.6% y/y
• The USDA is scheduled to release its cattle on feed report at 3pm ET on Sept. 22

Strong winds fan bushfires as Australia battles spring heatwave

Strong winds and a rare, intense heatwave in early spring fanned dozens of bushfires across Australia’s southeast, prompting extreme fire danger warnings on Wednesday for the greater Sydney region, home to more than 5 million people.

More than 600 firefighters and emergency personnel were battling to control 68 fires burning across New South Wales (NSW) state as of Wednesday morning, with 17 not yet contained, NSW Rural Fire Services said in its latest update.

“With hot, dry and windy conditions forecast throughout the day, the Greater Sydney Region … will experience extreme fire danger, while several other areas will experience high fire danger,” fire services said.

Parts of Australia are sweltering in an unusual five-day burst of spring heat, forecast to last until Wednesday, pushing temperatures well above the September average.

Total fire bans are in place for large swathes of New South Wales, with Sydney on Wednesday set to post its fifth consecutive daytime maximum temperature of more than 30 degrees Celsius (86 degrees Fahrenheit) in September, a record. But a cold front from Thursday will push temperatures down to the low 20s.

Residents of a popular holiday town in the island state Tasmania were told on late Tuesday to move to a safer location due to an uncontrolled bushfire fuelled by strong wind gusts. There have been no reports of property damage or injuries though more than 100 people had to sleep in their cars, media reported.

After three years of heavy rains and frequent flooding, Australia is bracing for a warm and dry southern hemisphere spring and summer in 2023. On Tuesday, Australia’s Bureau of Meteorology declared an El Nino weather pattern, typically associated with wildfires and droughts, was underway.

Fire crews have rushed to conduct hazard-reduction burns in Sydney’s west to prepare for the looming bushfire season, which authorities have said could be the worst since the 2019-2020 “Black Summer” fires that destroyed an area the size of Turkey and killed 33 people.

 

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