Update- Commodity Snapshot - The ongoing drone and missile attacks on shipping vessels in the Red Sea by Yemen-based Houthi rebels are starting to significantly impact dry bulk shipments, including grain, after being mainly limited to the container segment during the first stages of the crisis, an International Grains Council (IGC) analyst told World Grain
The Houthis have been attacking vessels in the region since late October, shortly after Hamas’ surprise attack on Israel, which elicited a powerful Israeli counterattack from Israel on the Gaza Strip, where Hamas is based. The Houthis claim that their attacks on the Red Sea are in response to Israel’s counteroffensive.
The United States was also hit by cold weather, affecting major wheat-growing areas. “Cold temperatures in the Northern Plains coupled with the snow cover kept conditions constant, while further south in the central US the lack of snow left the topsoil exposed to the harsh conditions, drying it out,” USW said. In its Jan. 11 Grain Market Report, the International Grains Council (IGC) noted a net 1% decline since the mid-November report, but with “mixed changes across underlying origins.” “Amid ample nearby availabilities and weakness in row crops, values dropped to a fresh two-and-a-half-year low in late-November, but rebounded sharply thereafter, led by gains in the US, where exporter sentiment was spurred by an upsurge in Chinese demand for SRW wheat,” the IGC said. “However, there were divergent trends across US wheat classes, as steady to firmer winter wheat quotations contrasted with net declines for spring wheat, amid talk of competition from Canada, where offers have also eased in recent weeks.”
COMMODITY
The S&P GSCI Agriculture Index rose 1.7% WOW as the escalation of the Red Sea crisis more than offset US dollar strength (+1% WOW) and South American moisture. It’s also possible that we are seeing some technical buying in this week's price action, as G&O Non-Commercial positioning was at its lowest level since 2019 as of last week (week ending January 16).
- ICE Robusta futures rose 7.5% WOW. Robusta futures continued to rally last week, and prices now sit at a contract high of USD 3,197/metric ton (March 2024). The market focus is once again primarily on trade flow issues. The Red Sea crisis continues to intensify with no signs of resolution on the horizon. As a result, Asian coffee imported into Europe is becoming more expensive.
- ICE #11 Sugar is up 3.6% this week. Weather in Brazil was decent and there is rainfall in the forecast, but slightly below normal levels. As we mentioned last week, we seem to be entering a weather market, but for as long as there are some rains, we will not see an immediate impact.
- The CBOT Corn bear party showed signs of overcrowding last week, after the active contract rebounded 0.85% from three-year lows to touch USD 4.48/bushel. Following USDA’s January WASDE, which raised 2023/24 yields 3 bushels per acre and stockpiles near 2.2bn bushels, speculators have continued to pile into the largest CBOT Corn short position in 3.5 years (-226,000 net lots, -36,500 lots WOW).
World Farming Agriculture Commodity news - Short update - January 2024
SALMON
The salmon industry will again be the most profitable aquaculture sector in 1H 2024. High prices, albeit slightly less high than in 1H 2023, will combine with marginally lower feed costs and lower biological costs to support strong farmer profitability.
It is hard to see when the shrimp industry will stabilize. Without a supply reduction, prices will remain at low levels. A key concern is weakness in Chinese import demand. While Chinese demand may still be positive, high inventory levels and a slightly lower renminbi will dampen a shrimp price recovery. With El Niño conditions expected to be weakening throughout 1H 2024, we can also expect that fishing in Peru will improve. Consequently, better fish meal supply should enable normalization of the price as terrestrial commodity alternatives such as soybean meal have been easing in price throughout 2023, with further mild softness expected for 1H 2024.
Brazilian Coffee
Brazil exported 39.2m bags (60 kg) of coffee in 2023, almost unchanged from 2022 (-0.4%). Shipments rebounded in 2H 2023 after a slow start. According to Cecafé, the performance could have been up to 2m bags higher if it weren't for logistical challenges at the Santos port (delays in boarding procedures).
- Conilon exports excelled, reaching 4.7m bags, a remarkable 212% YOY increase. The demand for Brazilian conilon will amplify in the coming weeks with limitations in the global supply, more attractive prices (in Brazil), and the current incidents in the Red Sea (the main maritime route between Asia and Europe).
- The barter ratio in January slightly worsened, requiring 2.2 bags (60 kg) of coffee to purchase 1 metric ton of fertilizer (blend 20-05-20), 5% higher MOM. However, it's still 21% lower than in January 2023 (when 2.8 bags of coffee were needed to buy 1 metric ton of fertilizer).
- Local coffee prices remain at high levels. In December, arabica and conilon coffee prices increased by 9.7% and 12.5% MOM, respectively. In January, arabica and conilon grew by 1.1% and 6.4% MOM. In the case of arabica, volatility revolves around the Brazilian weather and low certified stocks (however, the pending quantity for approval continues to rise – as of Jan 24th, it was 54,000 bags). For conilon, prices appreciated due to the growing domestic and global demand, driven by the refusal of Vietnamese producers to sell their coffees, and recent incidents in the Red Sea, crucial for trade between Asia and Europe.
- December saw a return of rains in key coffee-producing regions, but the volume remained below historical averages. Concerns are rising, particularly in Espirito Santo state, the largest conilon producer, despite high irrigation rates that mitigate significant production drops.
- January weather presented a mixed scenario, with some regions experiencing above-average precipitation and others below. Despite recent rains, accumulated volumes remain below historical averages.
Wine
Packaging is the number one source of GHG emissions associated with the wine industry, and cutting the weight of their glass bottles is the best way for the industry to reduce their impact. However, according to Rabobank, fewer than 50% of US wineries have started the lightweighting process. Here’s why.
Earlier this year, Rabobank worked with WineBusiness Monthly to develop the magazine’s 2023 packaging survey. More than 200 wine industry professionals, most of them with intimate knowledge of their organization’s packaging strategy, completed the survey. It touched on a wide range of topics, including costs, lead times, sustainability, and alternative packaging materials and formats.
To better understand the survey results, we shared the key findings with more than a dozen industry leaders, packaging suppliers, retailers, recycling operators and lobbyists across the US and Europe. In the coming months, we will leverage the results of this survey and subsequent industry discussions to produce a series of reports on wine packaging.
Cheese
The China cheese market was valued RMB 48.77 billion in 2021 and it is expected to reach RMB 130.1 billion at the CAGR of 9% during the forecast period between 2022 and 2032. The market research report consists of an analysis, size, price trends, share, and growth rate, market segmentation, forecast for the emerging markets, company profiles, and sales statistics across the country.
According to Sheer Analytics and Insights data, the cheese market is anticipated to grow in China over the upcoming years. Consumers are more prone to use cheese snacks in their daily breakfast. Although, according to the Chinese Nutrition Society cheese is considered a healthy food in China, and it is proven that annually 32% of consumers are growing their interest in consuming cheese as dairy intakes in the last two years.
WHEAT
The USDA’s Foreign Agricultural Service (FAS) in its Jan. 12 Grain: World Markets and Trade report noted a decline in US prices since the December World Agricultural Supply and Demand Estimates report, which was published on Dec. 8. The move reflected “adequate global supplies, increased competition as Southern Hemisphere crops come to market, and a strong US dollar,” it said.
“Soft Red Winter (SRW) dropped $14 to $259/tonne on slowing demand from China,” the FAS said. “Hard Red Spring (HRS) prices declined $14 to $304/tonne, reflecting stronger competition from Canadian spring wheat.” The FAS also reported Hard Red Winter (HRW) down $9 to $285/tonne, “reflecting recent precipitation in the HRW belt and favorable growing conditions compared to last year.” “Major exporter quotes are largely unchanged since the December WASDE,” the FAS said. “EU and Russian quotes have converged in tight competition. EU quotes eased by $5/tonne, while quotes from Russia edged $5/tonne higher amid strong overseas shipments.”
General -
Global grain production is expected to reach a record 2.307 billion tonnes in 2023-24, mostly due to a solid rebound in corn output, the International Grains Council (IGC) said at its 59th council session convened in New Orleans, Louisiana, US, on Jan. 24. The meeting was chaired by Anita Katial, USDA’s Agricultural Counselor for the United Kingdom and Republic of Ireland, US Embassy London. Grain production will increase 2% year-over-year, the IGC said, as will consumption at 2.314 billion tonnes. Global inventories may contract 1% to 590 million tonnes for a seventh consecutive drawdown. World trade is expected to drop 3% to 415 million tonnes, with smaller wheat, corn and barley shipments. After the prior year’s solid expansion, world trade was predicted to retreat by 2% year-over-year to 168 million tonnes, as China and Argentina likely will buy less, with Brazilian exports also forecast to decline. Amid lower prices and less-than-ideal sowing weather in some countries, the IGC noted that global wheat harvested area was predicted to drop by 1% in 2024-25. While rapeseed/canola plantings were likely to contract, they would remain well above average. Tied to prospects for a rebound in Argentina, global soybean production in 2023-24 was seen at a record of 392 million tonnes, a 6% year-over-year gain. Also linked to gains in Argentina, consumption was pegged at a peak, while aggregate inventories were set to climb for a second successive year, including accumulation in key exporters. After the prior year’s solid expansion, world trade was predicted to retreat by 2% year-over-year to 168 million tonnes, as China and Argentina likely will buy less, with Brazilian exports also forecast to decline. Global rice output is predicted to decline 1% year-over-year to 511 million tonnes with reduced yield potential in Asia outweighing gains elsewhere. Softening in demand was anticipated, while stocks were set to tighten, including in key exporters. Trade was projected to contract by 2% in 2024, mostly on weaker buying interest from Asian importers, including Indonesia. India was seen as the world’s biggest exporter despite another sizeable fall in shipments.
