Global Ag News for July 31.24

TOP HEADLINES

Rain boosts Australia’s wheat production outlook but weak Chinese demand looms

Rainfall across much of Australia has improved the outlook for the country’s 2024/25 wheat production but demand for the crop from China could be very weak, analysts and traders said.

Australia is the world’s fourth-biggest wheat exporter. A bigger harvest would add pressure on prices that are already the lowest since 2020 due to plentiful global supply.

Cropping zones in west and south Australia were very dry when farmers planted seeds in May and June but rain has since fallen in most areas.

“The wheat crop is on track for 30 million (metric) tons,” Stefan Meyer, who heads a grains trading team at brokers StoneX, said on the sidelines of the Australian Grains Industry Conference in Melbourne.

“It’s had a massive turnaround. A while ago I was thinking closer to 25 million tons,” he said.

Australia produced 26 million tons of wheat in 2023/24, a relatively dry year, and 40.5 million tons in the much wetter 2022/23 season, government data showed.

While rain has fallen, root zone soil moisture remains low in some parts of Victoria, South Australia and Western Australia, leaving those areas vulnerable if rain does not continue.

“Probably there’s a slight downside risk from 30 million tons,” said Tim Crowe, head of Asian wheat and barley research at trader Louis Dreyfus.

The biggest risk for Australia is low Chinese demand, he said: “Record imports have been going on in the last few years but they could drop off drastically.”

He said there was no replacement market for China.

“It is going to have a significant impact on Australian prices at harvest.”

Adam Clarke, director of brokers AC Grain, said Australia had, to the best of his knowledge, not sold any new-crop wheat to China.

Many farmers and analysts anticipate that a La Nina weather event will form later this year, bringing wetter weather to eastern Australia, but Crowe said that was now unlikely.

No La Nina would decrease the risk that rainfall during the harvest, which ramps up around October, would lower the quality profile of Australian wheat.

FUTURES & WEATHER

Wheat prices overnight are down 3 in SRW, down 4 1/4 in HRW, down 2 1/4 in HRS; Corn is unchanged; Soybeans up 7 3/4; Soymeal up $2.80; Soyoil up 0.22.

For the week so far wheat prices are down 2 in SRW, up 2 1/4 in HRW, down 7 in HRS; Corn is down 4 1/4; Soybeans down 19 1/4; Soymeal down $3.40; Soyoil up 0.25.

For the month to date wheat prices are down 52 1/2 in SRW, down 40 1/4 in HRW, down 30 3/4 in HRS; Corn is down 15 3/4; Soybeans down 75; Soymeal down $14.70; Soyoil down 1.67.

Year-To-Date nearby futures are down 17.0% in SRW, down 14.7% in HRW, down 19.6% in HRS; Corn is down 17.3%; Soybeans down 19.0%; Soymeal down 8.0%; Soyoil down 10.2%.

Chinese Ag futures (SEP 24) Soybeans down 3 yuan; Soymeal down 12; Soyoil down 8; Palm oil down 8; Corn down 2 — Malaysian Palm is down 6.

Malaysian palm oil prices overnight were down 6 ringgit (-0.15%) at 3909.

There were no changes in registrations. Registration total: 424 SRW Wheat contracts; 6 Oats; 50 Corn; 44 Soybeans; 1,166 Soyoil; 0 Soymeal; 0 HRW Wheat.

Preliminary changes in futures Open Interest as of July 30 were: SRW Wheat up 4,340 contracts, HRW Wheat up 1,274, Corn up 8,711, Soybeans down 3,156, Soymeal up 1,870, Soyoil down 81.

August Deliveries:

• Soybean Oil: 936 Issued
• Soybeans: 44 Issued

 

Northern Plains: Scattered showers continue with another front moving through Tuesday and Wednesday, though mostly in the Dakotas. Another front drops into the region over the weekend and will be pushed through the region early next week. Temperatures will be above normal this week, creating stress for those that do not see much rainfall. Cooler conditions develop at least briefly behind the front moving through next week.

Central/Southern Plains: With a couple of fronts moving through this week, some showers will move through, but coverage is likely to be quite low. Despite the fronts, temperatures should continue to be hot and stressful, reducing soil moisture and crop health.

Midwest: Another moves through Wednesday through Friday with more potential showers and thunderstorms. Both fronts are focal points for severe weather as temperatures rise and create stress where showers don’t occur. A cold front will drop into far northern areas this weekend with milder air and will be pushed through the region next week. Showers will occur along this front as well. Despite all the chances for showers, it will come in clusters and many areas are going to be missed. Those that are missed will see declining soil moisture and crop conditions.

Delta: Fronts moving through the Corn Belt are unlikely to keep the showers going for much of the region this week. Instead, temperatures should be high and stressful. Soil moisture is currently favorable in much of the region that could help sustain through the heat, but it will be declining.

Canadian Prairies: A couple of fronts will move through this week, but the coverage of precipitation is forecast to be low. Temperatures are increasing again, though potential for extreme heat is low with the fronts passing through. Soil moisture continues to decline and is becoming critical for wheat and canola in their critical stages of reproduction and fill. Milder air will move in behind a cold front this weekend and another burst of mild air moves across next week, especially across the east.

Europe: Southeastern areas continue to deal with heat and dryness concerns for small grains and cotton despite some irregular precipitation over the last few weeks. Spain and Italy have also been unfavorably dry for their summer crop prospects. A small disturbance will move through central Europe this week very slowly, getting some rain into needed areas but also more rain into France and Germany that do not need it. Several more fronts are lining up to move through this weekend and next week, with the focus for showers occurring mostly in the northwest that does not need more rain.

Black Sea: A system moving is slowly pressing through the region with areas of isolated showers through Wednesday. A disturbance moving through Europe will bring some additional showers this weekend into early next week as well. Rain may occur for some lucky areas, but will not be the widespread heavy rain that the region needs. Temperatures are also forecast to return to the hot conditions that have caused drought and stress over the last several weeks.

 

The player sheet for 7/30 had funds: net sellers of 2,500 contracts of SRW wheat, sellers of 11,000 corn, sellers of 7,000 soybeans, and sellers of 4,000 soymeal.

 

TENDERS

• CORN PURCHASE: Taiwan’s MFIG purchasing group bought about 65,000 metric tons of animal feed corn expected to be sourced from Brazil in an international tender on Wednesday
• WHEAT PURCHASE: Tunisia’s state grains agency is believed to have purchased about 125,000 metric tons of soft milling wheat and about 50,000 tons of durum in an international tender
• WHEAT PURCHASE: Jordan’s state grains buyer purchased about 50,000 metric tons of hard milling wheat to be sourced from optional origins in an international tender on Tuesday.
• WHEAT TENDER: Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) is seeking to buy a total of 119,145 metric tons of food-quality wheat from the United States, Canada and Australia in a regular tender that will close on Aug. 1.

PENDING TENDERS

• RICE TENDER: Indonesian state purchasing agency Bulog issued an international tender to buy about 320,000 metric tons of rice
• FEED BARLEY TENDER: Jordan’s state grains buyer issued an international tender to purchase up to 120,000 metric tons of animal feed barley.
• WHEAT TENDER: The Taiwan Flour Millers’ Association issued an international tender to purchase an estimated 105,650 metric tons of grade 1 milling wheat to be sourced from the United States.

 

 

TODAY

ETHANOL: US Weekly Production Survey Before EIA Report

Output and stockpile projections for the week ending July 26 are based on seven analyst estimates compiled by Bloomberg.

• Production seen lower than last week at 1.086m b/d
• Stockpile avg est. 23.764m bbl vs 23.723m a week ago

 

CROP SURVEY: US Soybean Crush and Corn for Ethanol

The following is from a Bloomberg survey of six analysts.

• Soybean crush seen at 184.8m bu in June, a 5.8% rise from a year ago
• Crude and once-refined soybean-oil reserves at end of June seen at 2.076b lbs, down from 2.203b
• Corn used in ethanol production seen up 1.8% y/y to 450m bu

 

EU Soft-Wheat Exports Fall 38% Y/y in Week to July 28

The EU’s soft-wheat exports in the season that began July 1 totaled 1.85 million tons as of July 28, compared with 3m tons by the same time a year earlier, the European Commission said on its website.

• Leading destinations included Egypt with 257k tons, Nigeria with 255k tons and Morocco with 174k tons,
• Barley exports were 690k tons, down 39% y/y
• Corn imports totaled 1.74m tons, up 31% y/y

 

Ukraine’s grain exports jump 59% to 3.44 mln tons in July y/y, agriculture ministry says

Ukraine’s grain exports in the 2024/25 July-June season exceeded 3.4 million metric tons by July 31, up sharply from around 2.2 million at the same date a season earlier, agriculture ministry data showed on Wednesday.

The volume included 1.44 million tons of wheat, 1.51 million tons of corn and 477,000 tons of barley.

 

China Allocates Another 2B Yuan to Ensure a Bumper Harvest

China allocated another 2 billion yuan ($277 million) on Wednesday to bolster the upcoming harvest, as part of its disaster relief funding to ensure agricultural production, China Central Television reported.

• Corn, soybeans and rice will benefit from the funds, which will be mainly used to subsidize measures to enhance crop growth, including fertilizer usage
• Funds will be available in more than a dozen regions, with over 40% going to the northeastern grains basket that includes Inner Mongolia and the provinces of Liaoning, Jilin and Heilongjiang
• Drought and flooding has hit various crop hubs across China, threatening output
• Beijing has launched multiple disaster relief funds to help with agricultural production

 

Malaysia July Palm Oil Exports +22.8% M/m: Intertek

Following is a summary of Malaysia’s July palm oil exports according to Intertek Testing Services.

• Total exports for July 2024: 1.605m tons
• Crude palm oil exports: 395,000 tons, 24.6% of total

 

Malaysia July Palm Oil Exports Rise to 1.556m Tons: AmSpec

Malaysia’s palm oil exports rose to 1.556m tons in July from 1.188m tons in June, according to AmSpec Agri.

Palm oil exports rose 30.92% m/m versus -15.42% in June

 

China’s Sinograin to increase scale of domestic wheat storage

China state grains stockpiler Sinograin on Wednesday said it will continue to increase the scale of domestic wheat storage in main producing areas in 2024.

It will also work with local governments to provide services for farmers to sell grain, it said in a statement.

 

French Farmers Facing ‘Catastrophic’ Harvest Seek State Help

• Wheat harvest is on track for worst output in a decade
• Bad weather battering crops in France, other major exporters

French farmers are calling on the government to provide financial aid as there’s a high risk that this year’s wheat harvest will be the lowest in at least a decade because of heavy rains.

Three weeks into the season, field surveys show a drop of at least 15% for wheat production from a year earlier, but it could be as much as a 28% decline, according to lobby group AGPB. That would indicate production of as little as 26 million tons this season.

“The drop in harvests is catastrophic for cereal growers,” AGPB President Eric Thirouin said in a statement, adding that their aggregated loss of income may exceed €1.6 billion ($1.7 billion).

The slump in one of Europe’s top grains exporters comes as bad weather also batters crops in other major shippers, including Russia. That risks reviving food inflation ahead.

Crop Damage

AGPB on Monday invited Agriculture Minister Marc Fesneau to meet farmers in a bid to see urgent action taken by the government. His ministry is assessing the damage before they can provide farmers with insurance support, he said.

The farmers are seeking compensation, tax relief, deferral of loan payments of loans payments, the group said.

This spring was the nation’s fourth wettest ever, with rainfall at 45% higher the 10-year average, according to Meteo France. Floods and landslides across the country have caused severe damage to agricultural areas. Sunshine has also been almost 20% lower than the seasonal average.

The damage can be seen already. Just 41% of the French soft wheat crop was harvested as of July 22, down from 76% a year earlier, according to FranceAgriMer. Soft wheat in a good to very good condition also declined.

 

New Top Russian Grain Trader Emerges as Rival Falls Out of Favor

A new trader has emerged as Russia’s biggest exporter of grain, after a long-time market leader became entangled in a rift with the country’s agriculture regulator.

Grain Gates LLC pushed past TD Rif in the 2023-24 season that ended in June, exporting 14 million tons, according to data from analysts ProZerno. TD Rif — which changed its name to Rodnie Polya in April — had held the top spot for nine seasons and the two firms were neck-and-neck at the season’s halfway mark.

TD Rif saw its export share tumble after its ships were blocked or delayed by the country’s agricultural watchdog. Owner Petr Khodykin told a local newspaper this month that the company’s losses could total as much as $50 million.

It’s the latest upheaval among traders in the Russian grain market, upended since Vladimir Putin’s 2022 invasion of Ukraine. Russia is the world’s biggest wheat exporter, and local companies — some with links to the state — have moved to take control since major Western traders stopped originating grain for export there last year.

That also means that the Kremlin has greater control over world grain and wheat supplies. Previously it had been using that to try and put a floor under Russian wheat prices for export, and to bolster its diplomatic efforts as it gives free grain cargoes to some allies in Africa.

 

China’s Poultry Prices Rise on Tight Supply of Chicks: Sec. News

Tight supply of breeding chicks is boosting prices of broilers, chicken feet and wings in China, according to the Shanghai Securities News.

Imported white feather breeding chicks are out of stock for supply before September, said Cao Jisheng, chairman of Shandong Yisheng Livestock and Poultry Breeding Co.

Chick prices jumped by 40% this month, fueled by tight supply and rebound in China’s pork price, said Cao

Prices of byproducts like chicken feet and wings have rallied on Brazil’s virus-led export curbs and may stay strong in 3Q, said Sun Yanan, analyst with Chinese consultant SCI99

Leading Chinese firms are increasing domestic breeding capacity and expanding sales to pre-prepared food items after suffering 1H profit slump

 

Limit Biofuel Tax Credit to US Producers, Lawmakers Tell Yellen

• Restriction seen as way to stem flood of cooking oil imports
• Yellen urged to include restriction in biofuel tax guidelines

A surge of Chinese used cooking oil flowing into the US to make biofuels is prompting a call for Treasury Secretary Janet Yellen to ensure that only domestic ingredients can benefit from a tax credit taking effect next year.

The push by a bipartisan group of senators, including Democrat Sherrod Brown of Ohio and Republican Roger Marshall of Kansas, underscores the mounting pressure on the Biden administration to halt the flood of foreign used cooking oil that lawmakers say threatens American farmers and the intention of President Joe Biden’s landmark climate law.

“Allowing US tax credits to fund the importation and use of foreign feedstocks to produce biofuels would put US agriculture at the back of the line, while foreign agricultural producers are subsidized by US taxpayers,” said a July 30 letter to Yellen signed by more than a dozen senators.

The senators are calling on Yellen to issue final guidelines for the Clean Fuel Production Credit, known as 45Z, under the Inflation Reduction Act before Jan. 1, when the tax incentive is set to take force. “As Treasury works to craft 45Z guidance, we urge you to restrict the eligibility to renewable fuels made from feedstocks sourced domestically,” the letter states.

The tax credit aims to encourage more production of climate-friendly fuels like renewable diesel and sustainable aviation fuel, or SAF, that can be made from crops including soybeans, canola and corn as well as waste products such as used cooking oil and tallow.

US crop processors say the flood of foreign biofuel ingredients, including sugarcane ethanol used to make green jet fuel, are undercutting American farm products, and some groups have pushed for higher levies on used cooking oil imports from China.

The lawmakers contend guidance for the current SAF tax credit known as 40B, which expires at the end of this year, is flawed because no domestically produced ethanol can meet its requirements.

The letter comes on the heels of a group of US House Republican lawmakers pressing the Environmental Protection Agency to confront the imports of possibly fraudulent UCO. They are highlighting the use of third-party certification to help block fake supplies from entering the US.

There has been widespread speculation used cooking oil from Asia is mixed with fresh vegetable oils, potentially distorting commodity values, undermining US biofuel laws and leading to deforestation.

 

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