New season is coming. This one was full of memes and unpredictable, so we should be ready for the new challenges. The market is in a downtrend, which has been intensified after the publication of reports on grain stocks and the structure of planted areas in the United States. The demand is low. Sowing in the Northern Hemisphere lags behind last year's rates, the condition of winter crops is mostly satisfactory. Prices are also in most cases under pressure from the decline in the value of the currencies of the main supplying countries. In general, over the past 10 years, commodity markets have been the most unattractive for investment: in total for 10 years, the return on investment is negative.
Elena Faige Neroba
Business Development Manager
China's activity is weak. The southern hemisphere has been stabilized. The market is bearish, but bulls inspired by lower than expected planting areas in the US. EU demand is still weak and Brazil sharply increased in shippings, shifted Ukraine.
The safrinha corn 2020/21 in Brazil is 100% planted, which is extremely late. In a more normal year, the vast majority of corn is usually planted by the end of February, with a small percentage in early March. In the future, dry weather is the biggest potential problem for safrinha maize, with the states of Mato Grosso do Sul, Parana and São Paulo being the main problem. FAS USDA maintains its corn production forecast for 20/21 at 105MMT based on the smaller-than-expected first crop of corn paired with widespread delayed planting of second-crop “safrinha” corn. This is one of the lowers expectation on the market. For MY 2021/22 (March 2022–February 2023), they set its initial corn production forecast at 114 MMT.
Argentina's recent rainfall appears to be sufficient to stabilize the crop at slightly lower levels, at least for now. The provinces of Buenos Aires and La Pampa received some good rains over the weekend, with up to 5 inches in some areas. Weekend rains were usually confined to the extreme north and far south of Argentina, while the central region remained largely arid. Rainfall in Argentina has been very irregular during this growing season, so we should expect irregular yields. The forecast requires only a limited amount of precipitation, so crops are not immune to renewed deterioration if precipitation disappoints in the future. Argentina's corn crop made 7% late last week, up from 15.8% last year and 14% on average.
South Korea temporarily lifts import duties on corn to stabilize prices. China is calm, still doesn’t make any official announcement about import quota, but sells wheat from state reserves for feed consumption. ASF again on the floor.
The demand for old-crop wheat is low. Past tenders have increased pressure on prices, which continue to decline rapidly. SAGO, Saudi Arabia, purchased 95kMT of 12.5% durum wheat in a tender. Wheat was purchased at an average price of US $ 271.05 per tonne from C&F for May-June delivery. Ethiopia, which announced a tender for 400kMT of milling wheat on April 20, has announced the need to buy another 30kMT of grain, StoneX reported. Algeria bought 480kMT of wheat at an average price of $ 279 for delivery in May, which is in line with the current price offer and also did not support the market and few days later booked 30kmt of milling wheat in its tender at $280 CFR . Tunisia's state grains agency has issued an international tender to purchase 75k of soft wheat from optional origins The tender closes on Thursday, April 8, wheat is sought in three 25k consignments for shipment May 15- June 25 depending on origin supplied. These were probably the last tenders for the current crop.
Egypt held its first wheat tender in the new marketing year, having bought 5 boats of Russian and 1 boat of Ukrainian origin at prices in line with expectations of Russian exporters for August. The cost of wheat on the FOB basis is $ 233-234 per ton, while the freight cost is higher than in previous tenders - over $ 19 / t for a Panamax from Ukraine and from $ 18 for shipment from Russian ports. Such activity of Russian exporters caused slight bewilderment in the market since a floating duty on grain should be in effect in the country at the time of shipment, which is unlikely to be calculated before the moment of shipment. This could be a reason why Egypt announced tender in advance.
The index, which began calculating the Moscow Exchange in test mode, will be averaged weekly and adjusted by the amount indicated by the government (for wheat - $ 200), 70% of this value will be the duty. The index itself is calculated on the basis of deals made for certain ports (for wheat - deep-water ports of the Black Sea), which were accomplished not earlier than 60 and no later than 4 days before the date of the index calculation, and the shipment will be carried out within the next 60 days. Thus, in a falling market, the duty will be higher than the estimated value at the current moment, and in a growing market, it will be lower. The inability to include the size of the duty in the value of the transaction in advance pushes the majority of exporters not to conclude contacts for the future, but to trade mainly on the spot. As the shipment rates are low, SovEcon has lowered its forecast for Russian wheat exports in the current season to 38.9MM.
The Prime Minister of Pakistan noted that this season the country produced 25.2MMT of wheat, another 3.56MMT was imported. In the next season, wheat production will amount to 26.2 MMT, but in order to form the necessary reserves, this value should be raised up to 28 MMT, according to the Business Recorder. This season Ukraine and Russia satisfied demand, and probably next season will do it again.
China sold 1,588MMT of wheat, or 39.48% of total supply, at a government reserve auction last week, the National Grain Trade Center said in a statement. Wheat is sold as fodder due to still high domestic corn prices. The Chinese government has once again announced that it has a sufficient amount of grain in the state reserve. But nobody trusts this announcement – domestic prices are weaker but still high.
In Tunisia, crops of wheat and barley received sufficient rainfall. USDA attache predicts wheat and barley production in 2021/22 MY at 1.2MMT and 650kMT, respectively, with imports at 2.1MMT and 700kMT, FAS USDA reports.
Oil complex under pressure of palm and soybean oil. Contrary to market expectations, an increase in oil production by OPEC countries supported prices, as investors saw in this a signal for a recovery in demand.
In Brazil, 78% of soybean acreage had been harvested at the end of last week, up from 83% last year and 78% on average, according to AgRural. The Mato Grosso soybean crop at the end of last week was 99.4% harvested, up from 99.8% last year and an average of 99.8%, IMEA said. Analysts expect soybean yields to range from 133MMT to 137MMT due to insignificant differences in area estimates and potential yields. At the same time, according to bathhouses CONAB, the cost of transporting grain to ports in February has been increased by 25% compared to last year. Soybean shipments from Brazil are at a record pace.
Sunseedman reports that the first 38.5kMT ship of the Argentine seed, Epiphania, is already on its way to Romania. The second boat, Tomini Liberty, is nominated with 25kMT sunflower and 10kMT soybeans also for Romania. The third 20kMT cargo on the Faneromeni was nominated from Portugal. The report says that the Romanian boats may also be intended for Moldovan buyers. It also became known that the shipped seeds had problems with oil content and weeds during loading.
Russia has officially set a duty of 50% but not less than $ 320 per ton per seed from June 1, 2021. In addition, the government approved the parameters of a floating duty on the export of sunflower oil from September 1, 2021, to August 31, 2022, 70% duty will be levied on the difference between the base price of USD 1,000 per tonne and indicative - the arithmetic average prices for the month, reduced by the value of the adjustment factor of USD 50 per tonne. The Ministry of Agriculture will monitor the market to establish the indicative price. The EAEU countries are not subject to this provision.
Soybean import margins in Dalian are declining, so soybean imports to China in June-August may be lower than forecast, but it should not be underestimated, according to Cofeed. According to them, farmers are reluctant to replenish pigs amid the resurgence of African swine fever in some regions, and aquaculture is now not in full swing, which has led to a decrease in food trade. Stocks of rapeseed meal have been increased by 3.2% to 74,300 tonnes as of the end of last week, which negatively affects meal prices. But critical margins on soybean and rapeseed futures were negative on domestic exchanges, which affected further purchases of rapeseed cargo by processors. In addition, there will be a downtime period for many creameries in April, which will spur the rapeseed meal market. The short-term rapeseed meal market is forecasted to fluctuate within a narrow range. However, soybean shipments to China still cannot be underestimated in the second quarter as sales of soybeans in Brazil have been on the rise since April. And because of the downward trend in pork prices, domestic producers are slowly replenishing stocks. Besides, feed manufacturers have adjusted their formulas due to excessively high corn prices and have used wheat and paddy rice instead of corn, so high protein wheat will also cut back on soybean meal.
Thus, the soybean meal market remains sluggish and stocks are growing, while processors are rushing to speed up shipments. Meanwhile, good performance in the oil market also has a negative impact on meal prices. In general, the short-term soybean meal market is projected to fluctuate in the short term and it is advisable to keep small stocks.
So, we started the new wave of calming on weather and planting pace. Maybe Evergreen will give us new memes – who knows?