© Reuters. Fields of barley and wheat are seen outside Caledon near Cape Town, South Africa, October 20, 2021. REUTERS/Mike Hutchings
By Karen Braun
FORT COLLINS, Colo. (Reuters) – Global wheat production is expected to reach a high-water mark this year, but the stocks situation for major exporters will be far from secure, potentially dropping to all-time lows.
The global corn harvest is also set for new highs, which unlike wheat is expected to build stocks, though relative tightness may also stick around in the corn market and it is uncertain whether the complete sigh of relief will arrive in 2022 or later.
Chicago wheat futures this week marked fresh nine-year highs and pushed more than $2.50 per bushel above Chicago corn futures, the largest wheat-corn premium for the most-actively traded contracts in more than eight years.
Corn futures are below highs set earlier in the year but are trading at nine-year highs for the date, and these elevated grain prices are driving the large spread. The price ratio of wheat to corn at 1.43 is a bit more normal in a historical context and has been observed a handful of times in recent years.
However, the wheat-corn futures ratio is above recent averages, and it fits in with what should be expected given global stockpiles of the two grains and especially when comparing their production and consumption trends.
WHEAT VS. CORN
U.S. Department of Agriculture projections for the 2021-22 marketing year suggest that wheat stocks-to-use among major exporters, including Russia and the United States, will fall to a collective 12.1%, the lowest in USDA records back six decades. That is down from 14.8% in the previous year and a five-year average just above 17%.
That is despite total global wheat stocks pegged at historically high levels, driven largely by China’s intentional hoard that will account for a record 51% of all wheat supply this year. China’s numbers have often been excluded from global grain analyses, though its recent surge in imports brings scrutiny to that process.
Globally, corn stocks-to-use is pegged below recent averages but slightly above the year-ago levels. The ratio of 8.7% when excluding China is among the lowest on record, though 22% with China is closer to the longer-term mean.
Most of the world’s exportable wheat for 2021-22 has already been harvested whereas a larger portion of the corn supply is still in the early stages in South America. But current predictions suggest wheat and corn are on differing paths when it comes to production versus consumption.
The global 2021-22 corn harvest is seen rising nearly 8% on the year to a new record, and that rise is a little stronger if excluding China. That comes after two years of fractional declines in annual output despite a continued increase in consumption, and it would be the first year in five where the crop over-satisfies demand.
On the other hand, wheat production is forecast nearly flat on the year, and it is the second consecutive season where demand growth should outpace the crop. In fact, global consumption is seen up 6% in the latest two years with only a 2% rise in output, the largest disparity in nearly a decade.
LOOKING TO 2023
Relief for the sinking wheat supply should be on its way and North America could lead that effort. Both U.S. and Canadian farmers are expected to boost plantings for 2022-23, and that will go a long way for the global wheat outlook into 2023 assuming that a second disastrous drought is avoided.
Those supplies would come online in mid-2022, just before the first 2022-23 corn becomes available and simultaneously with 2021-22 South American corn offerings, so grain deficits might be short-term given strong or even normal output levels over the next year.
The 2022-23 corn situation is already being hotly debated when it comes to U.S. plantings. High fertilizer prices have spurred the idea that corn acres could be down significantly in the top producer and exporter, possibly maintaining relative tightness in global stocks.
The opinions expressed above are those of the author, a market analyst for Reuters.
U.S. increased forecasts for crude oil and natural gas production in the country in 2022
Crude oil and natural gas production will be raised. The U.S. Energy Department raised its 2022 domestic crude oil production (excluding other liquid hydrocarbons) forecast from 11.83 million to 11.87 million barrels per day, the Energy Information Administration (EIA) said in its monthly forecast. The forecast is 0.62 million bpd higher than the 2021 result.
The agency also slightly increased its 2023 production forecast by 30,000 bpd, to 12.34 million bpd. It is close to the annual average. This figure is close to the average annual record for oil production in the United States, set in 2019, – 12.3 million bpd.
Also, the Department of Energy slightly raised its 2022 and 2023 U.S. gas production forecasts. Gas production will be 98.13 Bcf/d in 2022 and 100.38 Bcf/d in 2023 (nearly 1.2 trillion cubic feet of gas per year).
The previous forecast had assumed production of 98.07 and 99.69 Bcf/d, respectively. In 2021, the country produced 94.6 Bcf/d of gas.
While the EIA still expects gas production in the Permian Basin to be constrained in early 2023, it anticipates that these constraints will be removed sooner than previously projected, although risks remain.
The Department of Energy expects natural gas prices to rise from their November level of $5.5 per MMBtu to over $6 per MMBtu in Q1 2023 because of both higher winter demand for natural gas and increased LNG exports. This will impact crude oil and gas prices.
U.S. LNG exports are expected to be 10.6 Bcf/d in 2022, up from 10.85 Bcf/d a month ago, and rising to 12.25 Bcf/d in 2023 (nearly 145 Bcf/d); the previous forecast of 12.33 Bcf/d.
Earlier we reported that the Expert revealed the reason for the sharp fall in oil prices.
The expert revealed the reason for the crude oil price chart dump
World oil prices have fallen to the level of early January, as expectations of a sharp decline in oil supplies from Russia after the start of the embargo and more aggressive actions by OPEC+ to maintain prices have not materialized. This is the reason for the crude oil price chart dump.
Live crude oil price in dollars – what’s going on?
On Wednesday, Brent crude oil prices fell below $78 a barrel for the first time since January 3. February futures are trading at $79.6 a barrel.
Prices were probably driven by expectations of a sharp drop in oil supplies from Russia due to the embargo, and more aggressive action by OPEC+ to maintain prices; i.e., production cuts. Neither of these things happened; OPEC+ decided on Sunday not to change its production quota and, judging by media reports, Russian companies prepared for the embargo, including tanker fleet acquisitions.
Meanwhile, the Financial Times newspaper reported on Monday, citing oil traders, intermediaries and vessel-tracking services, that a traffic jam of oil tankers has formed off the Turkish coast since the start of restrictions on oil prices from Russia due to Ankara’s requirements to provide insurance data. According to the expert, a delay in the passage of ships could have led to an increase in oil prices on expectations of a shortage, but this has not happened yet.
According to marinetraffic, a ship-tracking portal, there are about 30 tankers, mostly Turkish, off the Turkish coast near the strait. Five tankers out of this number are Russian. Russia is concerned about the situation off the coast of Turkey, where Russian oil tankers have piled up; this problem is now being discussed through transport and insurance companies. but it may also be taken up at a political level.
Western oil sanctions came into effect on December 5: The European Union stopped accepting Russian oil transported by, and so also the “Big Seven” countries. Australia and the EU, imposed a price cap on such oil at $60 per barrel. Deputy Prime Minister Alexander Novak said Sunday that Russia is considering possible mechanisms to ban the application of the price ceiling for Russian oil supplies.
Earlier, we reported that oil prices fell before the release of statistics on inventories in the U.S.
Crude oil prices today declined before the release of U.S. inventory statistics
World oil prices on Wednesday afternoon moved to some decrease, according to trading data. Markets are waiting for weekly statistics on commercial oil reserves in the U.S.
Brent crude oil prices were down 0.67% to $78.82 per barrel, while WTI January futures decreased 0.67% to $73.75. Oil prices were weak in the morning.
Later Wednesday, the U.S. Department of Energy will report data on the country’s commercial oil inventories for the week through December 2. Analysts believe the figure fell by 3.3 million barrels. On Wednesday night, the American Petroleum Institute (API) said it estimates a 6.4 million-barrel decline in inventories.
Crude oil prices today continue to be affected by uncertainty regarding the prospects of oil supplies. From December 5, the oil sanctions of the West came into effect: the European Union stopped accepting Russian oil transported by sea; also the G7 countries. Australia and the EU imposed a price cap on such oil at $60 per barrel.
The Russian authorities are developing three possible responses. The first one is a complete ban on sales to the countries that supported the restriction, including through intermediary countries or even their chain; the second one is a ban on exports under contracts that include a price ceiling condition; and the third one introduces an indicative price – the maximum discount of Russian Urals oil to the benchmark Brent grade, and a ban on selling at a higher discount.
Earlier we reported on the Big Tanker Jam in the Bosphorus due to the price cap on Russian oil.
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