Global Ag News for May 1.23

TOP HEADLINES

Argentina secures initial irrigation funding after withering drought

Argentina’s government announced the approval of a $394 million loan for irrigation projects, officials said in a statement on Friday, following steep farm losses from a historic drought that has deepened an already severe economic crisis in the country.

The approved loan is part of irrigation development plan that aims to ultimately invest some $2.07 billion in public spending and nearly double the amount of farmland with irrigation systems in place.

The South American nation is a top global exporter of processed soybeans, as well as a major corn and wheat supplier.

Argentina’s economy, South America’s second biggest, is especially dependent on its massive agricultural sector, which in turn is a major source of hard currency needed to pay off debt and finance many imports.

Due to devastating drought conditions last year and earlier this year, Argentina’s 2022/2023 soybean and corn crops will likely end the season with only half the output harvested during the previous cycle, according to the latest forecast from the Buenos Aires grains exchange.

The government’s irrigation plan “will allow the development of the country’s productive potential” by adding 1.9 million hectares (4.7 million acres) to its total irrigated areas, said Jorge Neme, the country’s development planning secretary.

Argentina currently boasts around 2.1 million hectares of irrigated farmland, said Neme in the economy ministry statement.

Over 30 irrigation projects are already underway in the country’s trio of top agricultural provinces Buenos Aires, Santa Fe and Cordoba, which have seen the worst drought impacts.

The irrigation projects will be financed by local funds, as well as multilateral organizations including the World Bank, the Inter-American Development Bank and the Development Bank of Latin America, according to the statement.

FUTURES & WEATHER

Wheat prices overnight are down 8 3/4 in SRW, down 13 in HRW, down 10 1/4 in HRS; Corn is down 1 1/2; Soybeans up 3/4; Soymeal down $0.40; Soyoil down 0.31.

Markets finished last week with wheat prices down 28 3/4 in SRW, down 49 3/4 in HRW, down 45 1/4 in HRS; Corn is down 24 1/2; Soybeans down 16; Soymeal down $6.10; Soyoil down 1.25.

For the month to date wheat prices are down 79 1/4 in SRW, down 13 in HRW, down 10 1/4 in HRS; Corn is down 1 1/2; Soybeans up 3/4; Soymeal down $0.40; Soyoil down 0.31.

Year-To-Date nearby futures are down 21.7% in SRW, down 9.1% in HRW, down 16.3% in HRS; Corn is down 6.6%; Soybeans down 4.9%; Soymeal down 9.2%; Soyoil down 19.2%.

Chinese Ag futures (JUL 23) Soybeans down 56 yuan; Soymeal up 21; Soyoil down 88; Palm oil down 118; Corn down 30 — Malaysian palm oil prices overnight were down 117 ringgit (-3.39%) at 3338.

China markets are closed for holiday.

There were changes in registrations (250 Soyoil). Registration total: 2,389 SRW Wheat contracts; 54 Oats; 11 Corn; 0 Soybeans; 848 Soyoil; 1 Soymeal; 1 HRW Wheat.

Preliminary changes in futures Open Interest as of April 28 were: SRW Wheat up 2,939 contracts, HRW Wheat up 6,928, Corn up 4,012, Soybeans up 3,366, Soymeal up 51, Soyoil up 1,706.

Northern Plains Forecast: Temperatures are on the rise, favoring the melting of the last remaining piles of snow in the east while also warming soils. Temperatures will continue to rise this week and be quite warm, favoring some planting. Scattered showers will likely move in late in the week, offering some increase in soil moisture for some of the dry areas.

Central/Southern Plains Forecast: It was frosty Saturday morning as far south as the Texas Panhandle, and a couple of frosty mornings are expected Monday and Tuesday, but temperatures should be on the rise this week. After some favorable rains last week, this week should offer periods of showers as well, though less organized in nature. Still, the additional rains will be beneficial to wheat and early corn and soybeans.

Midwest Forecast: A big storm system moved into the region over the weekend and produced widespread precipitation, though amounts have been mostly light. The system will remain over or near the Great Lakes through Wednesday with showers continuing in spots, and may be mixed with snow during the overnight periods. Some cold air will remain in place early this week with a gradual rise later in the week. Frosts are expected over northern areas and may dip down through parts of Iowa to Ohio over the next few mornings. Outside of that risk, conditions should be improving for planting. Another system moves through this weekend into next week with some showers being possible.

Delta Forecast: A system brought scattered showers and thunderstorms through on Saturday, leaving most areas with good soil moisture, but somewhat difficult planting conditions. Though cool, conditions are mostly favorable for development. Scattered showers will move through later this week and again over the weekend with another couple of systems moving through.

Canada Prairies Forecast: Rising temperatures over the weekend helped to melt the remaining snowpack across the far north and east. Temperatures will continue to rise across eastern areas this week, favoring an increase in soil temperatures and planting activities. Most of the week should be dry, with a chance for showers over the weekend, which are needed for some of the drier areas in the west.

Ukraine Forecast: Showers have been consistent across much of the region over the last several weeks, favoring winter wheat development and corn planting. Showers will become less common by midweek, but the dry period is likely to be short-lived. Most areas have good weather conditions.

Argentina Forecast: A front moved through the country on Sunday with scattered showers. The rains are helpful for conditioning soils for winter wheat planting, but more are needed. Outside of the far north early this week, it should remain drier, unfavorable for winter wheat, but favorable for corn and soybean harvest.

The player sheet for 4/28 had funds: net buyers of 2,000 contracts of SRW wheat, buyers of 1,000 corn, buyers of 5,500 soybeans, buyers of 3,000 soymeal, and  buyers of 3,500 soyoil.

TENDERS

• UKRAINE GRAIN EXPORTS: The European Commission said on Friday it had reached a deal in principle to allow the transit of Ukrainian grain to resume through five European Union countries that had imposed restrictions.
• PAYMENTS FOR RUSSIAN GRAIN: Turkish state lender Ziraat Bank may mediate in payments for Russian grain and fertilisers, Turkish Foreign Minister Mevlut Cavusoglu said on Friday, adding that Ankara was still in negotiations with the deal’s participants. The deal, brokered by the United Nations and Turkey last July, allows Ukrainian grain trapped by the conflict to be safely exported from the country’s Black Sea ports.

PENDING TENDERS

• RICE TENDER: South Korea’s state-backed Agro-Fisheries & Food Trade Corp issued an international tender to purchase an estimated 43,500 tonnes of rice
• WHEAT TENDER: Jordan’s state grain buyer issued an international tender to buy up to 120,000 tonnes of milling wheat that can be sourced from optional origins
• BARLEY TENDER: Jordan’s state grains buyer issued an international tender to purchase up to 120,000 tonnes of animal feed barley.
• TENDER FOR U.S. WHEAT: The Taiwan Flour Millers’ Association has issued an international tender to purchase an estimated 51,925 tonnes of grade 1 milling wheat to be sourced from the United States.

TODAY

CROP SURVEY: US Soybean Crush and Corn for Ethanol

The following is from a Bloomberg survey of five anlaysts.

• Soybean crush seen at 197.2m bu in March, a 2.3% rise from a year ago
• Crude and once-refined soybean-oil reserves at end of March seen at 2.417b lbs, down from 2.434b
• Corn used in ethanol production seen down 4.2% y/y to 434.2m bu

SOYBEAN/CEPEA: Monthly averages of soybean Indexes are the lowest since Mar/20

This week, the ESALQ/BM&FBovespa – Paranaguá (PR) and the CEPEA/ESALQ – Paraná Indexes for soybean have dropped to the lowest daily levels, in nominal terms, since August 2020. The monthly averages in April, in real terms (deflated by the IGP-DI from Mar/23) are the lowest since Mar/20.

This highlights that the current soybean prices account for those from three years ago. The effect of this context on farmers’ profitability will be significant, majorly for those who did not close early deals, opting to sell soybean during the harvesting, when prices usually fade.

With the nearness of the due date for installments and need of cash flow for expenses related to the harvest, the interest in sales increased high, surpassing demand and resulting in steep price drops in the Brazilian spot market.

Estimates for a record output in the 2022/23 season in Brazil are being confirmed, offsetting the losses in Argentina and in Paraguay and raising supply in South America. Besides, in the United States, the 23/24 harvest is expected to be good too, majorly because sowing progressed fast, while China has reduced imports.

The recent dollar depreciation against the Real puts even more pressure on Brazilian soybean prices. In the last seven days, the American currency dropped 1.8%, to BRL 4.983 on Thursday, 27. The monthly average in April is currently 3.6% lower than that in March.

CROPS – In Brazil, 89% of the national soybean crop had been harvested by April 22nd, according to Conab. The 2022/23 output is estimated at 153.63 million tons.

PRICES – Between April 19-27, the ESALQ/BM&FBovespa Paranaguá (PR) Index for soybean dropped 5.4%, to BRL 136.18 (USD 27.33) per 60-kg bag on Thursday (27). The monthly average of this Index decreased a steep 10.1%, and in the last 12 months, 20.6%, to BRL 145.73/bag this month. The CEPEA/ESALQ Paraná Index decreased 5.1%, to BRL 130.83 (USD 26.26) per 60-kg bag Wednesday. The monthly average in April is currently at BRL 139.61/bag, 10% lower than that in March and a steep 22.1% down from that a year ago.

On the average of the regions surveyed by Cepea, soybean prices dropped 6% in the over-the-counter market (paid to farmers) and 5.7% in the wholesale market (deals between processors). The monthly averages in April are currently 6.6% and 6.4% lower than those in March and 22.2% and 21.2% lower than that in April 2022, respectively.

Brazil to study raising ethanol content in gasoline to 30%

Brazil will create a working group to study raising the mandatory blend of ethanol content in gasoline to 30%, Mines and Energy Minister Alexandre Silveira said on Friday.

Speaking at a sugar and ethanol industry event in Minas Gerais, Silveira said the potential increase the biofuel blend should be predictable and transparent, calling for a “permanent dialogue”.

Brazil currently sets standard ethanol content in its gasoline at 27%.

The government would first have to raise the ceiling of the permitted ethanol content in gasoline, which currently ranges from 18% to 27.5%, but Silveira said the working group will also study increasing the ceiling “very responsibly”.

Brazil has one of the world’s largest ethanol industries, and most cars in the country can run on 100% biofuel made from sugarcane or corn.

Earlier, Vice President Geraldo Alckmin told Reuters that Brazil’s ability to produce and sell hybrid cars that can run on 100% ethanol is a huge asset for its auto industry as global economies push for decarbonization to tackle climate change.

“Increasing the ethanol content will undoubtedly contribute to our country’s energy security, by reducing gasoline imports,” Silveira added at the event, “and to the energy transition, by reducing greenhouse gas emissions.”

Brazil does not produce as much gasoline as it consumes and relies on imports to fulfill domestic demand.

Tyson Foods shuts Nebraska pork plant until second week of May, after fire

Tyson Foods Inc TSN.N does not expect to resume production until the second week of May at a Madison, Nebraska, pork plant following a weekend fire, the meatpacker said on Friday.

The closure after the April 23 fire is causing ripple effects in the Midwest as Tyson diverts pigs to other processing plants in a bid to prevent animals from backing up on farms.

The facility typically slaughters roughly 8,250 hogs a day, according to industry estimates. That is not among Tyson’s biggest plants, but represents about 2% of daily U.S. hog slaughtering.

Some pigs that would normally be slaughtered in Madison are instead being processed at a Tyson plant in Storm Lake, Iowa, farmers said. As a result, Tyson is also shifting some pigs to a plant in Waterloo, Iowa, that were initially destined for slaughter in Storm Lake, they said.

The shuffle has slightly delayed when some farmers deliver pigs to processing plants, growers said.

“Since the event and until the facility is back online, hogs have been diverted to other Tyson Foods pork facilities to mitigate disruption to our livestock producers and customers,” Tyson spokesperson Liz Croston said. She did not respond to questions about the Iowa plants.

Tyson is making repairs to damaged areas of the Nebraska plant, Croston said.

The fire was “determined to be accidental in nature with an electrical cause,” said Adam Matzner, chief investigator for the Nebraska State Fire Marshal.

Paraguay’s Ovetril takes over key port terminal as Brazil soy inflows surge

Paraguayan soy origination company Ovetril has taken over the administration of Paraguay’s Don Severo port terminal, in the town of Antequera, as surging Brazilian soy sales to Argentina tend to increase volumes passing through that strategic hub, the company said on Friday.

The port is located on the banks of the Paraguay River, which boasts the world’s third-largest barge fleet, and currently handles Paraguayan corn and soybean shipments destined mainly for Argentina, the company said.

Joao Paulo Barbieri, Ovetril’s port manager, told Reuters by telephone that Don Severo offers an option to Brazilian companies looking to ship soybeans to Rosario, in Argentina, where a drought destroyed the crop, sparking a rise in Brazilian soy imports.

Barbieri said Don Severo can be competitive in relation to Porto Murtinho, a barge port in the Brazilian state of Mato Grosso do Sul, as it is closer Rosario.

“Cost savings related to the use of barges offset the road freight cost,” he said, referring to the movement of grains directly on barges from Porto Murtinho to Argentina’s Rosario, whereas trucks would need to move Brazil’s soy southward for delivery at Antequera before they could be loaded onto barges.

Global grain traders including Cargill Inc CARG.UL and Bunge Ltd BG.N run facilities in the Rosario region, where the bulk of Argentina’s soybeans are crushed to make soyoil and soymeal for export markets.

Ovetril’s Don Severo terminal can store 110,000 tonnes of grains.

When operating at full capacity, it will handle around 1 million tonnes of bulk cargoes per year. That should happen soon, as investments were made to improve the port’s efficiency, according to Barbieri.

The terminal’s acquisition and initial investments exceeded $20 million, the company said.

US Fertilizer Prices Strengthen as Farmers Head Into Fields

A spike in spring fieldwork and near-term demand caused fertilizer supplies to tighten at New Orleans and inland, contributing to higher prices for urea, phosphates and potash. China’s return to the global market, with excess supply in tow, looks increasingly likely in late 2Q.

Tight Supply Drives US Urea, Potash Prices Higher

US fertilizer prices were mixed in late April, with tight supply and logistics issues pushing up urea and potash while ammonia and urea ammonium nitrate (UAN) prices dropped. As expected, the Tampa ammonia price for May fell again, to $380 a metric ton (mt) cost-and-freight vs. April’s $435. New Orleans (NOLA) urea covered a wide range at $340-$450 a short ton (st) vs. last week’s $338-$390, with the high confirmed late in the week, sparking a $50/st increase in Corn Belt urea prices. NOLA potash firmed to $380-$400/st vs. last week’s $370-$380, but new business was limited due to tight barge supply. Inland potash also moved up $10-$40/st, depending on location. Phosphate prices climbed in some inland markets as demand stretched supply, while UAN dropped in the Southern Plains amid drought-related demand delays.

US Crops in Drought Area for Week Ending April 25: USDA

The following shows the percent of US agricultural production within an area that experienced drought for the week ending April 25, according to the USDA’s weekly drought report.

• Corn area experiencing moderate to intense drought dropped a percentage point from the previous week to 27%
• Soybean area in drought also dropped a point
• Both corn and soybean areas are 4 points higher than they were at this time last year

 

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