Over the past week, the currency pair EUR/USD fell by 0.0099 to 1.1698. The price of US WTI crude oil decreased by 6.07 USD/barrel to 62.14 USD/barrel.
On Friday, oil price fell, suppressed by Fed protocols, which showed that central bank employees are almost unanimous that monthly purchases of assets should be reduced by 120 billion dollars and this is likely to happen as early as the next meeting in September. At the same time, Chinese oil imports shrank by 20% in June and July on an annual basis, according to the Nikkei Asia Review.
Throughout the previous week, CBOT December SRW wheat futures prices fell by 46 cents to close at $7.28 1/4 a bushel.
Over the previous week, Chicago December corn futures prices decreased by 36 cents to close at $5.37 a bushel.
For the past week, CBOT November soybean futures prices dropped by 74 1/4 cents to close at $12.90 3/4 a bushel.
US Export Sales for the week ended August 12:
|Total Export Commitments|
|million tons||August 12||August 13||August 15|
There has been rainfall in the entire US Corn Belt over the previous week, even in the most drought-stricken western and northern regions. Rainfall also fell in Canada, Western Europe, Ukraine and Russia, (including the central parts) and Australia. It remained dry in the central parts of Brazil and Argentina. The new moisture will help stabilize the yield of late crops in these areas. Drought now affects wheat and sunseed crops in Argentina. Over the next 10 days, good rainfall is expected fall in the US Corn Belt and temperatures will remain relatively high. In the US Wheat Belt, weather will be hot without precipitation. In Canada, good rainfall will continue and temperatures will gradually decrease. In Western Europe - cool weather with moderate rainfall. Hot and dry weather is predicted on the Balkans over the next week. In the southern parts of Ukraine, temperatures will be moderate without precipitation. In the central and northern parts of Ukraine, weather is expected to be cold and rainy. It will rain in the southern parts of Russia and the temperatures will remain normal for the season. In the central regions - weaher will be warm but without precipitation. In Indonesia and Malaysia - light to moderate precipitation. In Australia - cool weather with good rainfall. In the central parts of Brazil, weather will be very hot and dry - the drought continues. In the southern regions, lower temperatures with good rainfall. In Argentina, weather will be cool without precipitation.
In the northern hemisphere, the areas affected by drough have generally received rainfall and some will receive additional precipitation. No surprises are expected. In the southern hemisphere, the drought remains in place in central Brazil, where the new soybean crop is sown. In Argentina, wheat crops are affected by prolonged drought. Wheat crops in Australia are in excellent condition.
|thds. tons||ended 12.08||21/22||20/21|
|thds. tons||ended 15.08||21/22||20/21|
|thds. tons||ended 12.08||21/22||20/21|
|thds. tons||ended 20.08||21/22||20/21|
* US (September - August)
* Russia, Ukraine and EU (July - June)
Last week, US wheat sales reached 306,700 tons which is considered below average. US corn sales were 216,500 tons of the old crop and 510,000 tons of the new corn crop. Weekly US soybean sales reached 67,700 tons of the old soybean crop and 2,142,100 tons of the new crop. Corn exports will not reach those planned in the August forecast of the USDA and the quantities sold will continue to be exported in the new season. EU wheat exports are at last year's level. Last week, wheat exports from Russia and Ukraine exceeded 2 million tons for the first time this season - 2.11 million tons.
What is happening on the wheat market? Demand is still high - throughout the Black Sea region. Ukraine and Russia exported more than 2.1 million tons of wheat during the week.
- The authorities in Russia have temporarily suspended the daily reports on the harvested areas, the harvested quantities and the average yield. Following the reported rapid decline in average wheat yields over the past two weeks, authorities have decided to suspend daily updates. Previous reports led to a wheat production of 74-75 million tons, perhaps weaker, while at the same time analysts from Russia predicted 76.5 - 78.5 million tons. The updates of the production forecasts were also stopped suspended.
- From 18.08.2021, the export tax on Russian wheat is 30.4 USD ton compared to 31 USD/ton a week earlier. The export tax for barley is 26.1 USD/ton (27) and 49.6 USD/ton for corn. During the week, there were rumors that the Russian tax will be increased to 70 USD/ton in order to limit exports. For the second week in a row, the export of wheat from Russia exceeds 1 million tons. It should be noted that Russia has mainly milled wheat this season. The grain quality in Russia is now excellent. Thus, the country will keep up exporting wheat as long as possible.
- Wheat in France is harvested in 91% of the areas. The quality of wheat is very variable, but due to precipitation it is mostly feed wheat.
- The recent rainfall in Canada are more in favor of corn, canola and soybeans, but for wheat it is quite late. We expect a poor production with high quality.
The wheat market is looking good for now, but there are limitations that will sooner or later appear more significant. This is the direct competition of feed wheat with corn. At the end of the year, Australia will not be able to provide as much quality wheat to cover the deficit.
What's new with corn? So far, the corn market here is relatively calm.
- The Pro farmer tour in the US Corn Belt ended a week ago. The results were rather a surprise to the market. The expected average yield of corn in the United States is projected at 177 bushels/acre - after the latest rainfall and cooling - a realistic forecast. The corn crop in the United States in 2021/22 will be 383.9 million tons with a USDA forecast of 374.7 million tons (+9.2 million tons). We can say that the difference goes directly to the ending corn stocks, because China may not be an aggressive buyer. The average soybean yield is expected to reach 51.2 bushels/acre and the soybean production will be 120.7 million tons (118.1 million USDA). Given that the corn productions in the EU, Ukraine, Romania, Bulgaria, Russia, India and China look either good or excellent, it is to be hoped that weak exports from Brazil will keep the market in tension.
- The Buenos Aires Grain Exchange raised its forecast for the corn production in Argentina in 2021 by 2.5 million tons to 50.5 million tons. AgRural has once again lowered its forecast for the corn production in Brazil to 82.2 million tons.
- Asian buyers, including China, are not active on the market and this raises a wave of concerns about the level of consumption in the new season. There is now a debate on the adequacy of the production and the demand. So far, China is not buying significant amounts of corn. They may need more than the already agreed over 16 million tons from the United Statesn, Ukraine and Brazil, but they are not in a hurry given the new huge production in the listed countries. The Chinese heated the market last year and now they can cool it. Going back to July 2020, the reason for China's large purchases in 2020/21 is the damage from the hurricanes this month of the year. China had pigs before the African plague, and now there are almost as many, but they were not the cause of the crisis. In the event that corn and soybean prices fall, China will buy to stock up. If they rise for some reason - they will buy in low volumes without pressure. At this stage, corn consumers around the world do not seem to be worried about anything and are shopping for current needs. Another important point is that it is assumed that the corn production in China will be 268 million tons and the corn consumption is projected at 294 million tons. The Chinese have already purchased about 16 million tons of corn from the new crop. Another 10 million tons are now needed. They can easily buy another 5-6 million tons from the United States, 2-3 million tons from Ukraine and another 2-3 million tons from Russia, Romania, Bulgaria and Argentina.
What has happened on the oilseeds market?
- In the last two weeks, China has been buying soybeans from the United States on a regular basis every day - quantities are not large. This is pleasing for producers, but traditionally now is the time for the Chinese to be on the market in the United States and buy 2-3 million tons of soybeans a week. As with corn, consumers now buy regularly for current needs, but without overstocking.
- Chinese soybean processors continue to operate at lower margins. Pig prices have fallen and with it the demand for soymeal. Another crucial factor is the replacement of part of the consumption of soymeal with wheat.
- Oil prices have plunged given the rise in coronavirus safety measures around the world. At the same time, OPEC+ is planning to increase the output and the market is rapidly moving from a cycle of shortages to a cycle of surpluses.
- Rapeseed maintained its high prices despite the decline in oil. The reason is the reduced production in Canada, which according to some forecasts will fall to 12 million tons (19 million tons in 20/21). During the week, soyoil prices in different markets moved in different directions, palm oil prices decreased slightly, sunseed oil prices rose in the Black Sea region (+60 USD/ton) and Argentina, but remained unchanged in Rotterdam. Rapeseed oil price increased in Rotterdam (+84 USD/tonne).
At the end of the week, all crop prices in China fell. The Chinese economy is slowing down. Iron ore prices fell by 40% from their peak in May. The price of copper is also declining. Investors are worried about a greater slowdown in the global economy. In parallel or before these declines, the FED announced that the bond purchase program will be reduced by the end of the year, ie. the inflow of money into the economy will decrease, and with it interest rates will rise. This process may be delayed if the world economy does not grow at the desired pace. With a decline in all commodity markets, we cannot expect significant increases in the prices of cereals and oilseeds.
Changes in FOB Prices of key exporters:
Over the past week, FOB prices fell significantly with few exceptions. The market is rapidly adjusting given the competition and the quantities exported at the beginning of the new and the end of the old season.
Wheat - FOB wheat prices were moving in both directions - a decline in the United States, a retention wheat prices in Argentina, a minimal decline in France and growth in Ukraine. It should be noted that the United States has good quality wheat and Ukraine exports mainly feed. The FOB price of Australian wheat with delivery in September increased by 2.25 USD/ton to 300 USD/ton FOB.
Corn - FOB corn prices were mostly declining. The FOB price of Brazilian corn with delivery in September rose by 13 USD/ton to 260 USD/ton FOB.
Soybeans - Over the previous week, FOB soybean prices fell sharply. The price difference between US and Brazilian production continues to be in favor of US, but it is growing up to 15 USD/ton from 5 USD/ton a week earlier.
Export prices Black Sea, USD/mt (compared to the previous week):