Global Ag News for July 18.23

TOP HEADLINES

Russia Pulls the Plug on Ukraine Grain Export Agreement

• Moscow says its terms haven’t been met in nearly year-old pact
• Move heightens uncertainty over global food supplies

Russia ended the Ukraine grain-export deal nearly a year into the agreement, heightening uncertainty over global food supplies and escalating tensions in the region.

The pact, previously extended in May, will cease to be effective as of Tuesday, the foreign ministry in Moscow said in a statement. Russia had repeatedly threatened to leave the deal, which had marked a rare example of cooperation during its war in Ukraine. The corridor’s shutdown will hit key buyers like China, Spain and Egypt.

“Unfortunately, the part concerning Russia in this Black Sea agreement has not been fulfilled so far,” Kremlin spokesman Dmitry Peskov said, according to Russian news agency Tass. “Therefore, it is terminated.”

The move jeopardizes a key trade route from Ukraine, one of the world’s top grain and vegetable oil shippers, just as its next harvest kicks off. It also comes after Russia on Monday said Ukrainian drones damaged a key bridge to Crimea.

The pact — brokered by the United Nations and Turkey — has ensured the safe passage of almost 33 million tons of crop exports via the Black Sea since it was signed in July 2022, helping world food-commodity prices ease from the record levels reached after Russia invaded. However, it has been bogged down by issues including slow vessel inspections in recent months.

Following repeated disruptions, the shipping corridor was nearly empty before the deal ended, tempering the immediate interruption to world crop flows. The bigger risk lies longer-term, as fractured and costly export logistics could spur Ukrainian farmers to further cut harvests already shrinking under the weight of the war.

Russia cited obstacles to its own shipments and a bias toward Western interests as reasons for discontinuing the pact, though the nation is the world’s top wheat shipper. It said it would be willing to reconsider the deal when its terms are met.

Moscow’s withdrawal from the deal will have multiple implications, according to its foreign ministry. Those include the end of guarantees for navigation safety, the collapse of the maritime humanitarian corridor, and the disbandment of the Joint Coordination Center in Istanbul.

UN Secretary General Antonio Guterres said he deeply regretted Russia’s decision to end the initiative and the assurances over Black Sea shipping security. He also noted that Russian grain and fertilizer exports have normalized, citing industry groups from the country.

Turkish President Recep Tayyip Erdogan said he would discuss the export deal with Russian President Vladimir Putin during their planned meeting in August, or perhaps sooner by phone.

The European Union will continue to help facilitate food exports from Ukraine, European Commission President Ursula von der Leyen said on Twitter. She condemned the “cynical move” by Russia.

When the deal was inked, the UN agreed in parallel to improve access to Russian food and fertilizer exports. Russia has demanded several obstacles be removed to bolster trade — including reconnecting an agricultural bank to the SWIFT international payments system.

No new vessels have been approved to join the Ukraine grain deal since late last month and Russia had blocked one of the three open ports. Ship inspection times have progressively grown longer, with fewer than one cleared per day in the first half of this month.

A lone vessel remained in the corridor Monday — the TQ Samsun — which departed over the weekend from the port of Odesa. The UN said its outbound inspection is underway.

Its closure will heighten reliance on alternate trade routes via the Danube River and Ukraine’s European Union neighbors, although those paths remain expensive and some countries have pushed back against the inflow.

The routes come “at a much higher cost of transport,” said Carlos Mera, head of agricultural commodities market research at Rabobank. “That poses questions about the future production out of Ukraine. Most of the exports will flow, but some stock build-up domestically is unavoidable.”

Some traders have previously signaled interest in continuing Black Sea shipments without the deal, although that would require military and government approval — plus, international support.

“Even without the Russian Federation one needs to do everything to allow us to use this Black Sea corridor. We are not afraid,” President Volodymyr Zelenskiy said during an interview on Monday, according to his spokesman Serhiy Nykyforov.

FUTURES & WEATHER

Wheat prices overnight are up 3 1/2 in SRW, up 2 3/4 in HRW, down 5 in HRS; Corn is up 6 1/4; Soybeans up 7 1/4; Soymeal up $2.30; Soyoil up 0.13.

For the week so far wheat prices are down 4 1/4 in SRW, down 11 in HRW, down 11 in HRS; Corn is down 1 3/4; Soybeans up 14 1/2; Soymeal up $10.70; Soyoil down 0.29.

For the month to date wheat prices are up 6 1/4 in SRW, up 18 in HRW, up 56 1/4 in HRS; Corn is up 17 1/2; Soybeans up 42; Soymeal up $14.40; Soyoil up 1.50.

Year-To-Date nearby futures are down 17.0% in SRW, down 7.9% in HRW, down 7.0% in HRS; Corn is down 25.5%; Soybeans down 1.9%; Soymeal down 8.4%; Soyoil up 1.5%.

Chinese Ag futures (SEP 23) Soybeans down 19 yuan; Soymeal up 20; Soyoil unchanged; Palm oil up 72; Corn down 38 — Malaysian palm oil prices overnight were down 24 ringgit (-0.61%) at 3906.

There were no changes in registrations. Registration total: 1,398 SRW Wheat contracts; 448 Oats; 44 Corn; 11 Soybeans; 353 Soyoil; 0 Soymeal; 147 HRW Wheat.

Preliminary changes in futures Open Interest as of July 17 were: SRW Wheat up 223 contracts, HRW Wheat up 1,218, Corn up 732, Soybeans down 167, Soymeal down 3,961, Soyoil up 673.

Northern Plains: A trough will enter the Canadian Prairies and eventually move into the Northern Plains during the first half of this week, providing some isolated to scattered showers. Near- to below-normal temperatures are expected to reduce stress on developing crops, but overall, below-normal precipitation is expected through this week as any heavier rainfall will likely be isolated.

Central/Southern Plains: A fairly active weather pattern will remain in place throughout this week as systems pass through. Though the areas receiving rainfall are somewhat disorganized, the frequency is very good for this time of year. Temperatures are also mild for northern areas but will be above normal across Texas through this week. Conditions are mostly favorable for much of the region despite the continued drought, though the scattered rain may disrupt those finishing up their wheat harvest.

Midwest: Widely scattered showers and storms will continue through the middle of this week as a trough moves out of the area early this week while another trough from the Canadian Prairies moves across the region by midweek. Drier conditions return for the weekend. Rain is coming at enough of a frequency to maintain or boost soil moisture in some areas, though there are plenty that are also seeing disappointment and low soil moisture, creating mixed conditions for developing corn and soybeans.

Delta: Scattered showers and thunderstorms provided some moisture to the region this past weekend. More showers and storms are expected through the end of this week as systems work east from the Rockies. Any rainfall will benefit crops entering their reproductive stages, but for those who miss the more measurable rainfall, yield potential may decrease.

Europe: A low-pressure system brought scattered showers to the continent this weekend. More scattered showers are expected through this week as low-pressure systems continue to enter northern Europe. Temperatures will be above normal across southern areas and near to slightly below normal for the north throughout this week. There may be some downtime between showers, but the pattern is overall favorable for most areas.

The player sheet for 7/17 had funds: net sellers of 2,500 contracts of SRW wheat, sellers of 6,500 corn, sellers of 4,500 soybeans, buyers of 3,500 soymeal, and  sellers of 2,000 soyoil.

TENDERS

• CORN TENDER: Algerian state agency ONAB issued an international tender to purchase up to 240,000 metric tons of animal feed corn to be sourced from Argentina or Brazil.
• WHEAT TENDER: Bangladesh’s state grains buyer issued an international tender to purchase 50,000 metric tons of milling wheat.
• CORN TENDER: Iranian state-owned animal feed importer SLAL has issued an international tender to purchase up to 180,000 metric tons of animal feed corn with Ukrainian supplies still included among grain sources which can be offered, European traders said on Tuesday.

PENDING TENDERS

• WHEAT TENDER: Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) is seeking to buy a total of 106,366 tonnes of food-quality wheat from the United States, Canada and Australia in a regular tender that will close on Thursday.
• RICE TENDER: South Korea’s state-backed Agro-Fisheries & Food Trade Corp issued an international tender to purchase an estimated 43,000 metric tons of rice. The deadline for submissions of price offers in the tender was July 10.

TODAY

USDA CROP PROGRESS: Corn Conditions 57% G/E, Soybeans 55%

• Corn 57% G/E vs 55% last week, and 64% a year ago
• Corn dough 7% vs 3% last week, and 5% a year ago
• Corn silking 47% vs 22% last week, and 34% a year ago
• Soybeans 55% G/E vs 51% last week, and 61% a year ago
• Soybeans blooming 56% G/E vs 39% last week, and 46% a year ago
• Spring wheat 51% G/E vs 47% last week, and 71% a year ago
• Winter wheat harvest 56% vs 46% last week, and 69% a year ago
• Cotton 45% G/E vs 48% last week, and 38% a year ago
• Sorghum 58% G/E vs 55% last week, and 35% a year ago

US Inspected 364k Tons of Corn for Export, 156k of Soybean

In week ending July 13, according to the USDA’s weekly inspections report.

• Soybeans: 156k tons vs 301k the previous wk, 439k a yr ago
• Wheat: 253k tons vs 419k the previous wk, 194k a yr ago
• Corn: 364k tons vs 350k the previous wk, 1,087k a yr ago

 US Corn, Soybean, Wheat Inspections by Country: July 13

Following is a summary of USDA inspections for week ending July 13 of corn, soybeans and wheat for export, from the Grain Inspection, Packers and Stockyards Administration, known as GIPSA.

• Soybeans for Germany-bound shipments made up 65k tons of the 156k total inspected
• Mexico was the top destination for corn inspections, Chile led in wheat

Drones Target Crimea After Putin Vows Revenge for Bridge Blast

• Russia said it repelled Ukrainian strike on peninsula
• Ukraine said Russia also targeted southern regions with drones

Ukraine and Russia accused each other of overnight drone attacks hours after Russian President Vladimir Putin vowed revenge for a strike that damaged his flagship bridge to Crimea.

Russia’s Defense Ministry said 28 Ukrainian drones attempted to attack facilities in Crimea, one of the most intense drones strikes against the peninsula since the war began. All the unmanned aerial vehicles were repelled and there were no reports of damage or injuries, according to a statement on the ministry’s Telegram channel.

Ukrainian officials said they downed a total of 31 drones in the southern regions of Odesa and Mykoliayiv and also intercepted six Kalibr missiles launched from the Black Sea. An industrial facility in the southern Mykolayiv region was hit during the Russian attacks and debris from one of the intercepted missiles damaged port infrastructure facilities in Odesa, regional officials said.

The attacks happened hours after Putin on Monday threatened to strike at Ukraine in retaliation for explosions that damaged Russia’s 19-kilometer (12-mile) bridge connecting Russia to Crimea across the Kerch Strait, the most serious attack against the roadway since a massive blast in October. Officials suspended road and rail services after the blasts, though rail transport resumed later Monday. Ukraine didn’t directly claim involvement.

The bridge blasts occurred hours before Russia announced it was halting a deal permitting Black Sea grain exports from Ukraine nearly a year into the agreement brokered by the United Nations and Turkey. The move heightened uncertainty over global food supplies, but Kremlin spokesman Dmitry Peskov said the decision was unrelated to the bridge incident. Russia indicated last week that it was likely to withdraw from the agreement.

Putin called construction of the bridge a “historical mission” for Russia before it opened in 2018, four years after he annexed Crimea from Ukraine. After the October strike on the bridge, Russia unleashed some of the most intense barrages of attacks against Ukraine since the first days of its February 2022 invasion.

NOPA June soybean crush drops to 9-month low of 165.023 million bushels

U.S. soybean processors crushed fewer beans than expected in June as the monthly crush slumped to a nine-month low, according to National Oilseed Processors Association (NOPA) data released on Monday.

NOPA members, which account for around 95% of soybeans crushed in the United States, processed 165.023 million bushels of soybeans last month, down 7.2% from the 177.915 million bushels processed in May and the lowest monthly crush since September 2022.

The crush was up 0.2% from the 164.677 million bushels processed in June 2022, but fell short of the June record set in 2020.

The June 2023 crush was more than 5.5 million bushels below the average trade estimate of 170.568 million bushels in a Reuters survey of eight analysts. Estimates ranged from 165.580 million to 172.763 million bushels, with a median of 171.400 million bushels.

Processing plant maintenance and repair downtime slowed the crush pace last month. Some facilities were also unable to restart production as scheduled due to lingering mechanical issues or other problems, further eroding the monthly crush volume, analysts said.

Soyoil supplies among NOPA members as of June 30 fell to a seven-month low of 1.690 billion pounds, down from 1.872 billion pounds at the end of May and 1.767 billion pounds in NOPA stocks at the end of June 2022.

Soyoil supplies had been expected to drop to 1.816 billion pounds, according to the average of estimates gathered from five analysts. Estimates ranged from 1.750 billion to 1.916 billion pounds, with a median of 1.825 billion pounds.

UkrAgroConsult Boosts Russia 2023-24 Wheat Export Estimate

UkrAgroConsult increases its estimate for Russia’s wheat 2023-24 exports by 2m tons to 47m tons, citing weaker ruble making Russian wheat more competitive and high opening stocks.

• 2023-24 corn export estimate increased by 0.7m tons to 4m tons; barley estimate steady at 6.5m tons
• 2023 wheat harvest estimate boosted by 0.4m tons to 85.2m tons
  • Barley 2023 harvest estimate increased slightly to 19.4m tons; corn harvest estimate boosted by 0.6m tons to 14.8m tons
  • Harvesting rates are high in the south, but in some places excessive precipitation could cause deterioration of grain quality
• Estimate for Russia’s wheat 2022-23 exports also increased by 4.8m tons to 46.8m tons
  • Barley and corn exports raised slightly to 4.25m tons and 5.3m tons respectively

Poland and Slovakia Push to Further Extend Ban on Ukraine Grains

• Five eastern EU nations to meet Wednesday to discuss extension
• Moscow has pulled the plug on grain export agreement with Kyiv

Poland and Slovakia justified their intention to extend bans on Ukraine grain imports until the end of the year, brushing off concerns that Russia’s decision to end a grain-export deal with Kyiv may disrupt food supplies.

The two countries — together with Bulgaria, Romania and Hungary — currently have restrictions in place on purchasing some of the country’s grain until mid-September, after declining prices spurred protests from local farmers. The European Union agreement still allows transit shipments to countries elsewhere.

“I see no substantive argument” for the current ban to expire in mid-September, Poland’s Agriculture Minister Robert Telus said in a radio interview on Tuesday. “I’m hoping the embargo won’t end, that we will be able to win its extension within our coalition of five EU nations.”

Ukraine has repeatedly called on the EU to end the ban on its crop exports, saying it was helping the Kremlin intensify pressure on the country’s economy. The tensions are only likely to grow after Russia said on Monday that its year-old deal allowing grain shipments from the war-torn country to leave through Black Sea ports will cease to be effective on Tuesday.

The European Commission has previously signaled that it would reduce and phase out the “exceptional and temporary” restrictions affecting the eastern European countries. After Russia ended the Black Sea deal on Monday, the EU said it would “spare no efforts” to support the stable delivery of agricultural products from Ukraine to global markets via so-called solidarity lanes.

Representatives from the five eastern EU nations will meet in Warsaw on Wednesday to “prepare a statement for the European Commission to consider our specific situation” and to extend the ban as well as expand it to other commodities, Slovak Agriculture Minister Jozef Bires told a news conference on Monday.

It was clear that the impact on prices from additional supply is affecting an increasing range of produce, such as strawberries and raspberries in Poland, he said. Still, the European Commission probably won’t be in favor of expanding the ban, according to Slovak minister.

“We support Ukraine in every way, but under the condition that food imports can’t distort the internal market,” Bires said. “We are in the process of harvesting, and some of our warehouses are full due to the past grain imports.”

WHEAT/CEPEA: 23/24 wheat harvest in BR expected to be lower than the previous

The 2023/24 wheat harvest in Brazil is expected to be lower than the previous (which set a record), despite the increase in the estimates released by Conab this month. On the other hand, in Argentina, Bolsa de Rosário forecasts the national output to rise – although estimates have decreased from June. As for the world output of wheat, it is expected to be higher in 23/24.

Data released this month by Conab show that the national wheat output is estimated at 10.42 million tons, 6.7% higher than that forecast in June but still 1.2% lower (-124.7 thousand tons) than the record set last season.

The area allocated to wheat crops in Brazil is 11.1% larger than that from last season, totaling 3.43 million hectares. Productivity estimates have increased to 3.04 tons/hectare compared to that reported in June, however, that is still 11.1% lower than that in 2022 (3.43 t/ha), according to Conab.

As for imports, Conab has reduced by 100 thousand tons the volume estimated in the previous report (from June), to 5.5 million tons (between Aug/23 and Jul/24). Exports estimates have been kept at 2.6 million tons. Consumption is forecast by Conab to total 12.43 million tons, a slight 0.4% higher than that from last season (Aug/22 – Jul/23). Domestic availability is estimated at 16.61 million tons (Aug/23 and Jul/24), 5.3% higher than the previous. Thus, by Jul/24, ending stocks would total 1.57 million tons.

ARGENTINA – According to Bolsa de Rosário, the area allocated to wheat crops in Argentina has been reduced again, to 5.4 million hectares, the smallest since the 2015/15 season, due to the current dry weather. Thus, production estimates have been revised down too, to 15.6 million tons; however, that is still higher than that from last season.

WORLD OUTPUT – The USDA estimates the world output of wheat to total 796.66 million tons in the 23/24 season, 0.4% lower than that forecast in June but still 0.8% higher than the output from 22/23. In Argentina, the output is expected to increase 39.4%.

PRICES – Wheat prices dropped in the national wholesale market but rose slightly in the over-the-counter market (paid to farmers). Deals were sporadic in the last days. Cepea surveys show that, between July 7-14, the prices paid to wheat farmers rose 0.12% in Santa Catarina, but remained stable in Paraná and in Rio Grande do Sul. In the wholesale market (deals between processors), values dropped 1.02% in São Paulo, 0.93% in SC, 0.87% in RS and 0.1% in PR. In the same period, the US dollar decreased 1.3%, closing at BRL 4.794 on July 14th.

CROPS – According to Conab, by July 8th, 91.5% of the national area allocated to wheat crops had been sown, In Argentina, 86.2% had been sown by July 12th, according to the Bolsa de Cereales.

Malaysia, Petronas Collects Used Cooking Oil to Make Biojet Fuel

Malaysia’s Plantation and Commodities Ministry together with national oil company Petroliam Nasional Bhd. will collect used cooking oil for production of sustainable aviation fuel.

• Selected Petronas’ fuel stations will be used as collection points for the public to sell their used cooking oil, Deputy Prime Minister Fadillah Yusof said in a statement Tuesday
• Collection of waste oils will help Petronas prepare to commercialize sustainable aviation fuel, in line with Malaysia’s commitment to the Carbon Offsetting and Reduction Scheme for International Aviation
  • Petronas will build a bio-refinery plant in Johor, which will be completed in 2026, to produce sustainable jet fuel
• This initiative will boost Malaysia’s sustainability goals and add value to palm oil supply chains, as well as positively impact palm prices and lift earnings for smallholders, said Fadillah, who is also commodities minister
• Cooking oil that’s been repeatedly recycled for frying is unhealthy for consumption and needs to be disposed of carefully
  • Instead of pouring it down the sink or throwing it in bins, used cooking oil should be processed into a high-value product, he said

 Small U.S. refiners plan to challenge biofuel blending waiver denials

A group of refiners plan to file a lawsuit challenging the Biden administration’s rejection of waivers to exempt oil refiners from biofuel blending mandates which has left some on the hook for hundreds of millions of dollars, Par Pacific told Reuters on Monday.

The Environmental Protection Agency (EPA), which has the authority to issue the waivers, on Friday denied exemption requests from 15 small refineries in a move that corn farmers and ethanol producers welcomed.

Refiners including Par Pacific Holdings Inc PARR.N plan to join together in a legal challenge against the decision, a Par Pacific spokesperson told Reuters.

“We believe EPA’s decision is arbitrary, capricious, and contrary to law,” said Ashimi Patel with Par Pacific.

Under the Renewable Fuel Standard (RFS), oil refiners must blend billions of gallons of biofuels into the nation’s fuel mix or buy credits – known as RINs – from those that do. The EPA can, however, award exemptions to some small refiners if they prove that the obligations cause them undue harm.

“We will continue to fight for our rights that we believe Wynnewood (Oklahoma refinery) is entitled to,” CVR Energy Chief Executive David Lamp said during the company’s first quarter earnings call in May, before the EPA’s decision last week.

Par Pacific’s gross RINs and environmental credit obligations stood at $347 million at the end of the first quarter 2023, based on market pricing then, a company filing showed. CVR Energy’s outstanding liability was about $582 million at the end of the first quarter, another filing showed.

As the EPA under President Joe Biden has not granted any refiner an exemption, the EPA’s decision last week was not a surprise, Tudor, Pickering, Holt and Co’s Matthew Blair said in a note on Monday.

The American Fuel and Petrochemical Manufacturers (AFPM)refiner trade group assailed the EPA’s broad rejections.

“Congress understood from the get-go that RFS compliance could impose a disproportionate financial burden on small refineries,” said AFPM spokesperson Ericka Perryman.

Renewable fuel credits for the 2023 compliance year were at $1.54 per gallon on Monday, traders said.

 

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