Global Ag News for June 5.23

TOP HEADLINES

Mexico Could Raise Tariff on Grains From Non-US Countries: AMLO

Mexico could raise tariffs on grain imports from countries with which it does not have a free trade agreement in order to improve prices for Mexican corn and wheat farmers, President Andres Manuel Lopez Obrador said at a press briefing Friday.

• This would not be done with the US, since the countries do have a trade agreement
• Mexico could also reduce imports of these items from other countries
• Local governor of Tamaulipas State also proposed protections for sorghum
• Mexico formal-sector jobs surpassed 21.86 million in May, a record

FUTURES & WEATHER

Wheat prices overnight are up 1/4 in SRW, up 2 3/4 in HRW, up 3 in HRS; Corn is down 3; Soybeans down 2 1/2; Soymeal up $0.60; Soyoil down 0.31.

Markets finished last week with wheat prices up 3 1/4 in SRW, down 4 1/4 in HRW, down 7 1/4 in HRS; Corn is up 2; Soybeans up 12 3/4; Soymeal down $3.80; Soyoil up 0.37.

For the month to date wheat prices are up 25 in SRW, up 24 1/2 in HRW, up 30 3/4 in HRS; Corn is up 12; Soybeans up 50 1/4; Soymeal up $5.00; Soyoil up 2.99.

Year-To-Date nearby futures are down 21.8% in SRW, down 8.2% in HRW, down 13.6% in HRS; Corn is down 10.7%; Soybeans down 11.1%; Soymeal down 16.7%; Soyoil down 22.9%.

Chinese Ag futures (JUL 23) Soybeans up 35 yuan; Soymeal up 62; Soyoil up 96; Palm oil up 98; Corn up 12 — Malaysian palm oil prices overnight were up 102 ringgit (+3.11%) at 3381.

There were no changes in registrations. Registration total: 2,389 SRW Wheat contracts; 2 Oats; 0 Corn; 0 Soybeans; 1,114 Soyoil; 47 Soymeal; 97 HRW Wheat.

Preliminary changes in futures Open Interest as of June 2 were: SRW Wheat up 4,586 contracts, HRW Wheat up 2,164, Corn up 7,189, Soybeans down 658, Soymeal up 1,157, Soyoil down 9,534.

Northern Plains: Widespread showers developed over the weekend, but many areas have been missed. Periods of showers should continue all week long and likely into next week as well, though the coverage may not be totally favorable. Most areas should get a drink, however, favorable for developing crops.

Central/Southern Plains: Showers and thunderstorms continued to develop over the weekend, causing some flooding again in the Texas Panhandle. Many areas in the west picked up some moderate or heavy rainfall, favoring drought reduction for developing crops. Periods of showers will continue to develop across the region through next week, though coverage may be lower next week.

Midwest: Isolated showers fell over western areas over the weekend, but most areas stayed dry while temperatures eclipsed the 90-degree mark in most areas. A couple of fronts will move through over the next couple of weeks, bringing temperatures down to more seasonable levels while providing some chances for rainfall elsewhere. Coverage is forecast to be low, so the developing dryness and drought may expand even with the semi-frequent showers. Temperatures will be less stressful going forward.

Delta: Some isolated showers popped up over the weekend, but most areas stayed dry. Soil moisture continues to drop in the area and showers are would be most welcome. Showers continue to be very limited, though will pop up in some areas at times, but more widespread heavy rainfall is going to be needed soon to stave off the building dryness.

Canadian Prairie: Scattered showers moved through all three provinces over the weekend, helping to build soil moisture, though not all areas were hit or hit equally. Showers will remain in the region just about every day for the next two weeks, with a few fronts moving through and building heat that should lead to some isolated activity in the interim. The heat is starting to be a concern where showers have been absent, especially in the east.

Argentina: Some showers went through eastern areas over the weekend, but many areas stayed dry. Several fronts moving through will bring some isolated showers over the next couple of weeks. Soil moisture is still sub-optimal, but the recent run of showers have been helping in some spots. A stronger cold front will move through next week, which may spread frosts and freezes to parts of the region.

The player sheet for 6/2 had funds: net buyers of 3,000 contracts of SRW wheat, buyers of 6,500 corn, buyers of 6,500 soybeans, sellers of 3,000 soymeal, and  buyers of 5,000 soyoil.

TENDERS

• FEED WHEAT PURCHASE: South Korea’s Major Feedmill Group (MFG) purchased about 55,000 to 65,000 tonnes of animal feed wheat in a private deal on Friday without issuing an international tender which is expected to be sourced from the Black Sea region or east Europe.
• WHEAT PURCHASE: Saudi Arabia bought 624,000 tonnes of wheat in an international purchasing tender for September-October shipment, the state buyer said on Monday.
• VEGETABLE OILS TENDER CANCELED: Egypt’s state grains buyer, the General Authority for Supply Commodities (GASC), said on Friday it had canceled an international vegetable oils tender that had a deadline for offers on June 6. On Thursday, GASC had changed the deadline for offers from June 1 to June 6. GASC did not give a reason for the cancellation.
• RICE PURCHASE: South Korea’s state-backed Agro-Fisheries & Food Trade Corp in May purchased an estimated 26,800 tonnes of rice expected to be sourced from Vietnam and Thailand in an international tender for up to 43,500 tonnes which closed on April 25

 PENDING TENDERS

• HARD MILLING WHEAT TENDER: Saudi Arabia’s General Food Security Authority (GFSA) issued an international tender to buy 480,000 tonnes of hard milling wheat for delivery in September and October 2023. The deadline for submission of price offers is June 2, the agency said. Traders said results are expected on June 5.
• RICE TENDER: South Korea’s state-backed Agro-Fisheries & Food Trade Corp has issued an international tender to purchase an estimated 62,200 tonnes of rice, European traders said. The deadline for submissions of price offers in the tender is June 8.

TODAY

US Export Sales of Soybeans, Corn and Wheat by Country

The following shows US export sales of soybeans, corn and wheat by biggest net buyers for week ending May 25, according to data on the USDA’s website.

• China was the top buyer of soybeans in the week with 272k tons
• Mexico was the top buyer of corn and South Korea led in wheat
• Cancellations of corn purchases from unknown buyers was 234k tons

 US Export Sales of Pork and Beef by Country

The following shows US export sales of pork and beef product by biggest net buyers for week ending May 25, according to data on the USDA’s website.

• Mexico bought 9.3k tons of the 22.6k tons of pork sold in the week
• Japan led in beef purchases

Ukraine 2023 spring grain sowing mostly complete – ministry

Ukraine’s 2023 spring grain sowing is almost complete at near 5.5 million hectares on June 2, agriculture ministry data showed on Friday.

The ministry has said the overall spring grain sowing area could shrink to 5.5 million hectares from 5.9 million in 2022 because of Russia’s invasion and occupation of a significant part of the country.

The total sown area at June 2 included 269,500 hectares of spring wheat, 766,100 hectares of barley, 136,100 hectares of peas, 145,600 hectares of oats and 3.9 million hectares of corn.

The ministry gave no comparative figures.

It said the 2023 grain harvest could drop to about 44.5 million tonnes from 53 million tonnes while oilseed output could rise to 19.2 million tonnes from 18.2 million tonnes.

Strategie Grains raises EU rapeseed crop forecast again

Crop consultancy Strategie Grains has increased its forecast for this year’s European Union rapeseed harvest for the second month in a row due to favourable growing conditions, reinforcing its expectation of large supplies and weaker prices next season.

The French firm has raised its outlook for 2023 production of rapeseed, the EU’s main oilseed crop, to 20.4 million tonnes from 20.0 million forecast a month ago, it said in a report.

In its previous oilseed report, it had already upped the harvest estimate from 19.5 million tonnes.

The latest forecast was about 5% above the 2022 rapeseed crop that Strategie Grains put at 19.4 million tonnes.

Expected production this year in Germany, Poland, France and Romania had been revised upwards due to beneficial spring conditions, the consultancy said.

Rapeseed prices which have fallen steeply in the past year following record highs at the start of Russia’s invasion of Ukraine, were likely to face further pressure when this summer’s harvest comes in, it said.

However, the continuation or not of a ban on Ukrainian imports in five eastern EU countries, which currently expires on June 5, could affect prices within the EU, it added.

Strategie Grains increased its outlook for this year’s EU sunflower seed crop by around 100,000 tonnes to a record 11.3 million, as good prospects in Romania and Hungary offset drought problems in Spain and planting setbacks in France due to cool, wet weather.

Projected soybean output in the bloc this year was cut by about 200,000 tonnes to 3.0 million tonnes, reflecting disruption in Italy from torrential rain.

Giant Brazil Crop to Push Fertilizer Sales Back to Pre-War Level

• Good crop margins for farmers to keep input demand high
• Lavoro sees opportunities for more M&A ahead, CEO says

Record corn and soybeans harvests in agriculture powerhouse Brazil are set to push demand for crop nutrients back to pre-war levels, according to the nation’s largest farm retailer.

Fertilizer sales will rise 11% in Brazil in the 2023-24 season, bringing demand back to levels seen prior to Russia’s invasion of Ukraine, Lavoro Chief Executive Officer Ruy Cunha said in an interview. Pesticide, fungicide and others agrochemical sales are forecast to expand as much as 9%, he said.

Farmers around the world slashed fertilizer use after the war in Ukraine temporarily cut off nearly a fifth of the world’s nutrient exports, sending prices skyrocketing. As costs have fallen back to more normal levels, growers expanding plantings in the world’s largest corn and soybean exporter are starting to stock up again.

“For the upcoming crops, we see a return to normality when it comes to the application of fertilizers in Brazil,” Cunha said on Thursday. “Sales have already accelerated over the last three months.”

Fertilizer prices could still fall further, but the market is now closer to the bottom, he said. Sales for future delivery have gathered pace since March, but are still 10 to 20 percentage points behind levels achieved last year.

“Farmers are still cautious and are waiting to see commodities and inputs prices stabilize further,” Cunha said.

The Brazilian fertilizer market has been more resilient than in many other countries as farmers selling crops in US dollar are making a bigger margin than American growers, for instance.

That’s helped Lavoro, a Sao Paulo-based company listed on the Nasdaq. Gross profit jumped 35% to $285 million in the nine months ended March 31, while revenue gained 25% in the period, the firm reported on Thursday.

Lavoro, which also operates in Colombia and Uruguay, has expanded quickly after striking 24 deals since 2017, and more acquisitions are on the table. The company has a 10% market share in Brazil.

“Consolidation is only at the beginning, we see a huge opportunity,” Cunha said.

SOYBEAN/CEPEA: Brazil exports the highest volume of soybean since Apr/21, but prices drop

Soybean sales – which were high in early May – increased even more at the end of the month, when the US dollar surpassed BRL 5.00. This scenario added to international soybean valuations led Brazilian sellers to raise supply. Importers were also attracted by the currency exchange rate and the decrease in the export premium in Brazil.

According to Secex, Brazilian soybean exports increased 8.8% between April and May and a staggering 47% between May/22 and May/33, to 15.6 million tons last month. This is the highest monthly volume shipped by Brazil since April/21 and a record for a month of May. The average FOB price received in May for soybean exports closed at USD 521.32/ton (BRL 155.82/bag), the lowest since Feb/21, both in dollar and Real.

For the coming months, the export parity points to prices even lower, due to decreases in the export premium and high soybean supply in Brazil. At the port of Paranaguá (PR), bids for the export premium for soybean were at -80 cents of dollar/bushel and asks at -70 cents of dollar/bushel on Thursday, June 1st. Last week, bids were at -50 cents of dollar/bushel and asks, at -35 cents of dollar/bushel.

Soybean FOB price for shipment in June/23 dropped 2.7% in the last seven days. In Reais – based on the future dollar traded at B3 –, the export parity for soybean for shipment in June/23 is calculated at BRL 141.22/60-kg bag, and for shipment in July/23, at BRL 142.33/bag at the port of Paranaguá.

In the Brazilian spot market, the ESALQ/BM&FBovespa Paranaguá (PR) Index dropped 2.3% between May 25 and June 1, to BRL 133.77 (USD 26.68)/bag on Thursday, 1. The monthly average in May closed at BRL 138.11/bag, the lowest since February/20, in real terms (values were deflated by the IGP-DI from Apr/23), 4.9% lower than that in April/23 and a steep 26.2% down from that in May/22.

The CEPEA/ESALQ Index Paraná decreased 1.5% in the same period, to BRL 127.43 (USD 25.42) per 60-kg bag on Thursday, 1. The monthly average in May, which closed at BRL 131.16/bag, is the lowest since March/20, in real terms, 5.7% lower than that from April and a steep 30.6% below that in May/22.

On the average of the regions surveyed by Cepea, soybean prices decreased 1% in the over-the-counter market (paid to farmers) and 0.6% in the wholesale market (deals between processors) in the last seven days. Between April and May, the monthly averages decreased 7.5% and 6%, respectively, and in a year’s time, 31.8% and 30.9%.

2023/24 SEASON – For the coming crop, liquidity was higher in the last days too. At the port of Paranaguá (PR), considering the future dollar traded at B3, the export parity for soybean for shipment in Mar/24 is calculated at BRL 133.80/bag, near the level traded in the spot market. This price level has been underpinned by higher export premiums for next year and the higher future dollar traded at B3.

CORN/CEPEA: Liquidity is low; agents focus on crops

Corn sales have been sporadic in the Brazilian market, and prices are weak. Consumers are only buying the cereal when necessary, expecting steeper devaluations – based on the progress of the harvesting, which is expected to be a record. Sellers have been cautious about sales because of the current price levels; some of them have been more willing to lower asks and/or extend payment due dates. In general, agents are focused on the harvesting in Brazil and in Argentina and on sowing activities in the United States.

PRICES – In Campinas, the ESALQ/BM&FBovespa Index for corn dropped 2% between May 25 and June 1, to BRL 53.9 (USD 10.75) per 60-kg bag on Thursday, June 1. In May, this Index decreased a steep 18%. The monthly average was 22.3% lower than that from April.

On the average of the regions surveyed by Cepea, quotations rose a slight 0.1% in the over-the-counter market (paid to farmers) but dropped 2.1% in the wholesale market (deals between processors). From April to May, values decreased 20.6% and 21%, respectively.

CROPS – According to Conab, by May 27th, the harvesting of the national second crop of corn had totaled 0.4%, with activities taking place majorly in Mato Grosso. In the remaining regions that produce second crops, the return of rains this week brought some relief to farmers and favored crops development – still, some agents believe more rainfall is needed.

On the other hand, for the first crop, the harvesting has advanced more this week, reaching 81.8% of the national area (by May 27th), according to Conab. Activities have ended in São Paulo and Santa Catarina, while in Maranhão and Piauí, they are late, at 34% and 35%, respectively.

India Imposes Stock Limits on Some Pulses to Prevent Hoarding

The government imposed limits on stockpiles of pigeon peas and black gram to “prevent hoarding and unscrupulous speculation,” according to a statement by the food ministry late Friday.

• The rules apply to wholesalers, retailers, millers and importers of pulses
• The restrictions are effective immediately and valid until Oct. 31
• Stockpile limits of each of the food grain for wholesalers set at 200 tons; 5 tons for retailers; 200 tons for warehouses of big chain retailers
• For millers, last three months of production or 25% of annual installed capacity, whichever is higher
• Importers cannot hold stocks for more than 30 days from the date of customs clearance
• NOTE: India’s 2022-23 total pulses production likely at 27.5m tons, compared with 27.3m tons a year earlier

Mexico Received US Consultations Request on Gen. Modified Corn

Mexico received the US Trade Representative Katherine Tai dispute settlement consultations request, under the USMCA agreement, about genetically modified corn imports, the Economy Ministry said in a statement late Friday.

• Mexico will defend its position on genetically modified corn, the Economy Ministry said in the statement
• The Economy Ministry said it will prove that the exclusive use of its local corn for human consumption doesn’t affect trade with the US
• Mexico’s decree on modified corn from Feb. 13 allows to authorize the use of new genetically modified corn seeds and reassess previous denials, the Economy Ministry said
• Decree doesn’t include restrictions to trade, only a transition from the use of genetically modified corn to regular corn to feed animals
• “Corn imported from the US is complementary and is intended for industrial use and for feeding animals”
• The Economy Ministry said Mexico wants to build a constructive dialogue with the US and achieve satisfactory solutions to the dispute

U.S. Gulf UAN Nitrogen Fertilizer Price Drops 16.2%

Nitrogen fertilizer, represented by Urea Ammonium Nitrate (UAN) on the U.S. Gulf at NOLA, fell 16.2% to $220 per short ton in the week ended June 2, according to Green Markets data compiled by Bloomberg Intelligence.

• UAN U.S. Gulf NOLA dropped 20% during the last month and was down 16.2% during the last 3 months
• All major UAN nitrogen benchmark prices fell while UAN U.S. Gulf NOLA fell the most during the last week
• Shares of CVR Partners LP were up, while Nutrien Ltd. and CF Industries Holdings Inc. were down in the latest week
• Major Urea nitrogen benchmark prices were mixed
• Major Ammonia nitrogen benchmark prices were mixed
• Natural gas, which drives producer costs, has decreased 11% during the last week and was down 9% during the last month
• The price of corn, a driver of fertilizer purchases, increased 1.3% during the last week and was up 3.1% during the last month

India Monsoon Arrival Over Kerala Seen Delayed Further: IMD

Conditions are expected to become favorable in the next 3-4 days for the onset of monsoon over the southern Indian state of Kerala, according to Mrutyunjay Mohapatra, director general of the India Meteorological Department.

• The weather office will provide an update Monday, Mohapatra said in a text message
• NOTE: It predicted last month that monsoon arrival would occur June 4, compared with a normal onset of June 1
• The forecast had a margin of error of four days

Brazil poultry lobby sees little risk of nationwide export ban over bird flu

Revised trade accords with most of Brazil’s trade partners, including China, make it unlikely the world’s largest chicken supplier will impose a nationwide ban on exports should the virus that causes highly pathological avian influenza (HPAI) hit commercial flocks.

Ricardo Santin, head of a group representing firms like JBS JBSS3.SA and BRF BRFS3.SA, told Reuters the agreements with trade partners should limit any export restrictions to smaller geographic regions.

Still, the details of a 2004 bilateral sanitary protocol with China, Brazil’s top chicken buyer last year, could spell some pain for exporters.

The protocol, which the agriculture ministry said remains in force, requires immediate notification to Beijing of epidemic diseases and imposes temporary national and local bans depending on the type of illness threatening the health of poultry.

It also stipulates that exported meat must come from farms free of any avian disease-related restrictions for 12 months.

Santin declined to elaborate on how he expects Beijing and Brasilia to apply the 2004 protocol in the event of an outbreak in Brazil’s commercial flock.

This week, HPAI was detected in wild birds in the southern state of Rio Grande do Sul, raising the risk of infection on poultry farms, which are largely concentrated in southern Brazil. Rio Grande do Sul ships 16% of Brazil’s chicken exports.

Brazil has registered 19 outbreaks of HPAI in wild birds nationwide this year.

Santin said Brazil began renegotiating sanitary protocols in 2021 with around 70% of foreign markets.

He said in principle most of Brazil’s clients accept that “a containment zone” may be established for trade purposes, based on World Organization for Animal Health (WOAH) guidelines.

Those practices, however, may not satisfy buyers like Japan, Mexico and South Africa, who have not revised agreements with Brazil, he said.

WOAH outlines best practices for “zoning” and compartmentalizing HPAI infection to specific areas at risk in order to ease nation-wide restrictions, allowing countries to continue to sell and export of poultry.

The U.S., which competes with Brazil in poultry export markets, had HPAI outbreaks but continued to ship products.

U.S. turkey and egg production dropped 6% and 2% respectively in 2022 as avian flu wiped out flocks. Still, total poultry meat exports rose 3% by volume and 14% by value, as revised trade agreements limited trade restrictions compared with a previous record U.S. bird flu outbreak in 2015.

 

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