Highlights of the week in the grain market
With prices remaining mostly stable for coarse grains and falling for wheat, the acceleration of international sales of wheat and new crop maize stands out. Anticipated business for winter cereal reaches record levels.
New campaign wheat kicked-off the year making headlines due to the high volume of exports. In the first five months of 2021, more than 2.3 Mil MT of the cereal had already been allocated, far exceeding the rate exhibited in previous campaigns. The upward rally shown of international wheat prices had strongly pushed the market and boosted these sales. However, as the months went by, the cereal prices fell from the relative highs of the first semester, which led to a slowdown in the volume of exports. With this, the 2021/22 campaign lagged behind and was overtaken by what happened in 2018/19.
However, the downtrend in prices drew to a halt, bouncing back by end of July. As reference, the FOB price reported by the MAGyP for shipment in December, indicative of wheat from the new harvest, was 247 USD/MT on July 30, while on July 12 it reached 285 USD/MT, meaning an increase of 15% in less than three months.
This improvement in the cereal’s FOB values has strongly boosted trade: exports of new creop wheat have resumed from the end of September to date. In the last three weeks, 2021/22 wheat sales were declared for more than 3.5 Mil MT, and the accumulated amounts to 9.1 Mil MT, a historical record for the time of year. In addition, this volume is more than double the new crop wheat traded at this point last year (4.2 Mil MT) and more than 2 Mil MT than the previous record (7 Mil MT), held in the 2019/20 season.
In any case, there is yet another factor that influences this high volume of new wheat sold abroad: the higher estimated production of the new season. The rains at the beginning of the month have been key for the crop, and production is projected at 20.7 Mil MT, raising the export floor to 13 Mil MT.
In relation to the levels that the current season wheat is offered at, it is interesting to note that in recent sessions the prices of wheat in Chicago and the local price have taken divergent paths. In the Chicago market, prices were underpinned by certain concerns about a tight global supply of the cereal, added to solid international demand. On Wednesday, the wheat contract with the nearest expiration was adjusted by USD 275.31, registering an increase of more than USD 10 compared to the same day of the previous week. However, during Sunday, the price traded downwards, pushed by some weakness in oil prices and the firmness of the US dollar in international markets, although it still remained above the values of the previous week.
On the other hand, prices in the local market exhibited a bearish trend in that period. Taking the equivalent price in dollars of the CACR as a reference, prices fell slightly more than 10 USD/MT between the 13th and the 20th of the current month, hand in hand with the better production prospects brought by the recent rains and the fall in the FOB export prices of Argentine wheat, which is transferred to the prices offered in the cash market. The official FOB price reported by the MAGyP for close shipment fell from 308 USD/MT on October 12th to 296 USD/MT on the 20th. The FOB market price reported by brokers, which is usually below the official, also fell from 290 USD/MT that was trading on October 5th, to 282 USD/MT on the 20th of this month.
Furthermore, an additional element is added since, being close to the beginning of the harvest, prices in the local market begin to suffer the traditional harvesting pressure as the new grain starts coming in to the markets, in what is commonly called the splicing of crops.
In the local grain cash market, the export sector concentrates its interest on the new season, with delivery possibilities as far as August of next year. Regarding the open purchase prices, the offers followed continued a bearish path. The offer for cereal with unloading in the available tranche was 220 USD/MT on Sunday, registering a drop of 8.33% compared to the same day of the previous week.
But wheat is not the only cereal that saw a jump in export volumes in recent weeks. Something similar happened with maize and in the last three weeks, foreign trades were declared for the 2021/22 campaign of 2.9 Mil MT, thus exceeding the export volume for the new campaign that was registered on the same date in 2020. However, this is below the 2019/20 record, when at this point in the year 10.8 Mil MT had already been traded. Nonetheless, it’s worth highlighting that the political uncertainty generated by the election process that took place in 2019, at that time, provoked a high volume of foreign sales of the cereal.
In the reference market of Chicago, meanwhile, the price of maize remains relatively stable, fluctuating between 202 and 215 USD/MT. In the last week, after hitting a low in just over a month on Wednesday, October 13, the price of the nearest future jumped 11 USD/MT, reaching 213 USD/MT on the 20th, underpinned by a greater dynamic in external demand. In addition, it was also supported by oil prices, as this is expected to lead to an increase in the demand for maize, for ethanol production.
In the local market, maize showed stable price levels for spot cargo and with slight improvements for positions with deferred deliveries for both the current campaign and the next, accompanied by a similar number of active participants during the week.
Finally, concerning the prices of oilseed grains, during the last week in the local cash market, the business rounds operated between stable and bullish in terms of the number of active buyers and open purchase positions. In soy, the local factories are stationed in the positions with discharge, contractual, and fixations. In itself, the open purchase values were above those registered in the previous week, showing an increase of up to 15 USD/MT and reaching 360 USD/MT on Wednesday for delivery with discharge, which indicates a 4.35% increase. However, Sunday’s bearish trend in Chicago continued and the offer for spot cargo was at 350 USD/MT.
In the Chicago market, meanwhile, SB futures tended to rise between November 13th and 20th, accumulating a bump of more than 4% (↑ 18 USD/MT.). Among the main reasons are estimates of an increase in international demand for the oilseed. In this sense, after the USDA reported that 60% of the area has been harvested in the United States and estimated that final stocks will be higher than expected by analysts, more activity in export demand is expected, mainly by China. However, on Sunday the price rally was interrupted with SB contracts closing the day in negative territory, pressured by favorable weather conditions for the development of the oilseed in the southern area.
Finally, and regarding the sunflower market, there were no variations in terms of offers. For the available positions, offers remained at 450 USD/MT while with the deliveries between December and March 2022, 400 USD/MT was openly offered, with hints of improving. It should be noted that offers for both barley and sorghum remain empty at the moment.
Source: https://bcr.com.ar/
Photo: REUTERS/Stringer
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