Weather patterns turn the opposite, there is no news from the grain market and prices follow political issues…All eyes on northern hemisphere fields. European wheat prices consolidating above a 19-month low. Romania is expected to harvest 10.35 million tonnes of wheat this year in a sharp rebound from last year as farm belts recover from drought, consultancy Agritel said. France looks good, but summer is ahead and we flag a potential decrease in yields as per high temperatures at mid-summer. Spain is already strongly affected.
One of the main drivers behind the weather patterns was the La Nina. This is a cold phase of an oceanic oscillation called ENSO. It is found in the equatorial Pacific and alternates between warm and cold phases. The cold phase of ENSO is called a La Nina, and the warm phase is called an El Nino. Each phase has its specific influence on the pressure patterns and the resulting weather. Looking ahead, you can see the neutral phase continuing until summer. But during summer, the chances are increasing that an El Nino event (warm phase) is likely to emerge, creating a very different weather pattern for the winter of 2023/2024 as per SWE.
ALL EYES ON NORTHERN HEMISPHERE FIELDS
The first forecast trends for summer 2023 are emerging and show a different picture than last year. Some of that has to do with the La Nina now starting to disappear, with an El Nino forecast to emerge during summer, Severe Weather Europe reported.
European wheat prices consolidating above a 19-month low. Romania is expected to harvest 10.35 million tonnes of wheat this year in a sharp rebound from last year as farm belts recover from drought, consultancy Agritel said. France looks good, but summer is ahead and we flag a potential decrease in yields as per high temperatures at mid-summer. Spain is already strongly affected.
On Wednesday 26th April, the European Commission said soft wheat exports from the European Union in the 2022/23 season that started in July had reached 25.02 million tonnes by April 22, up 10% compared with 22.81 million a year earlier. On the other hand, EU barley exports so far in 2022/23 totaled 5.09 million tonnes, down 23% against 6.65 million a year ago.
In imports, flows of maize into the EU had reached 22.65 million tonnes, 72% higher than a year ago, while wheat imports were at 7.39 million tonnes, 243% above the year-earlier level. Total EU cereal imports were running 90% above the year-earlier volume at 33.85 million tonnes, but remained below total exports of 36.18 million, down 7% on year.
Russia’s envoy to the United Nations in Geneva said Moscow wanted the Rosselkhozbank to return to the SWIFT banking system and it was against “case-by-case” decisions on the bank’s ability to conduct transactions. Reconnecting the bank to SWIFT is one of Russia’s key demands in a negotiation over the future of the Black Sea grain deal. JPMorgan Chase & Co received permission from the United States to process payments for the Russian Agricultural Bank but this could not replace the reconnection of the bank to the SWIFT payment system. And that are the same people who previously announce that Russia doesn’t need foreign services, technologies, etc. Moscow has repeatedly manipulated the narrative that the deal will sink unless the West eases obstacles to Russian grain and fertilizer exports.
Canadian farmers intend to plant 10.9 million hectares of wheat, 22 years-record, a StatCanada said. Spring wheat was confirmed as the largest figure since 2001. The canola area was below the trade average guess but still exceed 2022/23.
USDA FAS in Brazil set their 23/24 soy preliminary output projection at 159 MMT which is a 6.5 MMT increase from this year’s record. The attaché forecasted that Brazilian producers will expand soybean planted area to reach 45.2 million hectares in the 2023/24 season, up from the estimated 43.5 mn ha planted in the 2022/23 season. Soybean exports are forecast to hit records this season and next at 95 MMT and then 98.1 MMT. Meantime, Anec expects Brazil’s soybean exports to reach 14.7 MMT for April, which is below their prior 15.15 MMT estimate. Anec expects 1.9 MMT for soymeal shipments.
Argentine FAS wheat production forecast to rebound to 19.5 million metric tons in 2023/24, resulting in wheat exports of 13.7 MMT (including wheat flour). However, after the severe drought in MY 2022/23, more rains are needed to recharge soil moisture profiles before the June planting window. Barley exports in MY 2023/24 are forecast up 13 percent at 2.6 MMT on higher production, though exporters are concerned that China may switch back purchases to Australia. That could break the barley market even with lower Ukrainian pipe. Corn production is up at 54.0 MMT on a return to El Nino.
On the global level, oil prices dropped by almost 4%, extending the previous session’s sharp losses, even after a report showed U.S. crude inventories fell more than expected, as recession fears grew for the world’s biggest economy. The EIA showed U.S. crude inventories fell last week by 5.1 million barrels to 460.9 million barrels. Gasoline and distillate stocks also drew down, sinking by 2.4 million barrels to 221.1 million barrels and almost 600,000 barrels to 111.5 million barrels, respectively, the EIA said. That helped to limit the fall in prices.
On the other hand, per the latest data from the U.S. Energy Information Administration, ethanol production lurched lower in the week ending April 21, with a daily average of 967,000 barrels. It was also just the fourth week in 2023 where production failed to reach the 1-million-barrel-per-day benchmark. Ethanol stocks, however, trended 4% lower last week, as were down by 987k barrels to a 14-week low of 24.306 million barrels. However, oil prices fell more than 2% on Tuesday as lingering economic concerns and expectations of further interest rate hikes that could curtail fuel demand growth countered signs of improving short-term consumption gains. The U.S. corn market has to pay attention to this as per lower demand from Chinese buyers who shifted to the Brazilian upcoming crop.
The dollar index fell by -0.39% dropping to a 1-1/2 week low on concerns about U.S. banking turmoil and weaker-than-expected U.S. Mar capital goods new orders. Notably, the EUR/USD rose by +0.58% and posted a 1-year high, garnering support also from positive comments from ECB Vice President Guindos, who said the Eurozone looks to avoid a recession. In addition, an increase in German May GfK consumer confidence to a 13-month high was bullish for the euro according to SWB report.
Meat consumption in Germany fell to its lowest level in over three decades in 2022 led by declining interest in pork, data shows. The average German ate 52 kilograms of meat last year, down around 4.2 kilograms from 2021 levels and the lowest since the government started tracking meat consumption in 1989. Meanwhile, production levels are falling in the country amid the slumping demand, preliminary numbers from the Federal Information Center for Agriculture reveal. In 2022, 9.8% less pork was produced than in 2021 and 8.2% less beef and veal. Net production of poultry meat fell by 2.9%.
Meat-processing companies are feeling the squeeze as they struggle to sell into the market – domestic meat production alone supplied enough volume to meet 116% of the demand in 2022. In poultry, domestic production met 97.4% of the market’s demands, JustFood pointed out. Weak feedstuff demand together with upcoming harvest pressure will face with Russian grain weaponizing and manipulations. Follow the trend!