GBP/USD 1.3381    GBP/EUR 1.1964

GRAINS

Events in Ukraine completely overshadowed the USDA's Outlook Forum, and the numbers were largely irrelevant in yesterday's context. US wheat futures ended with limit/near limit gains, but having been up another 6-10¢ overnight, they are now down >15¢! Volatility will remain extreme. Matif closed up €20-30 having hit gains of €57 during the session. The wheat market is now about how long the war lasts and what it means for world trade: the Azov Sea has been blocked by Russia, Ukraine port operations have been halted by the Govt/military, and the USDA still has about 18 Mmt of wheat still to be shipped from the region in the remaining 4 months of the 21/22 season. This was wrong even before yesterday as their Russian number of 35 Mmt is 4 Mmt too high given shipments to date plus the Feb-June quota, and Ukraine only has about 3 Mmt of milling wheat left in its quota. CBOT corn tested limit-up gains overnight but cooled off as Thursday’s session progressed and traders digested as much news as they could about Russia’s invasion into Ukraine and ultimately closed 1% higher from a day ago. Some 15 Mmt of Ukraine exports are at risk - the world corn S&D simply can't stand the loss of even half of that. The European Commission raised its forecast for 2021/22 EU corn production to 72.5Mmt, up 5.1% from its prior projection. Imports were left unchanged, however it should also be noted that Ukraine is the EU’s top corn supplier. Elsewhere, export sales of US Corn are estimated within the range 0.5-1.2Mmt and ethanol production rose by 1.5% versus last week.

PROTEINS

CBOT beans saw a huge trading range yesterday as unitial limit gains of 90¢ morphed into a sharply lower close on both old and new crop. As expected, the USDA's Outlook Conference made no attempt to take account of massive S American production losses, as they raised US 22/23 bean exports by just 10 Mbu from the November Baseline estimate. Since November, the USDA has taken 20 Mmt (735 Mbu) off the S American crop, and even though this is seen as still 10 Mmt too high by the majority of the trade, US exports are up by just 10 Mbu. Bunge on Thursday said it had temporarily suspended its Ukraine-based operations at their crush plants in Nikoalev and Dnipro, and the company offices are closed across the country following Russia's full invasion in the early hours of the day. Bunge said it employs 1,000 people in Ukraine at two processing facilities and grain elevators in different parts of the country, as well as a grain export terminal in the Mykolaiv commercial seaport. CNGOIC reports that bean stocks at Chinese crushing plants dropped WoW by 0.5Mt to 3.5Mt vs 5.7Mt LY. Crush increased WoW by 0.7Mt to 1.7Mt (note that this is still low for the time of the year). Brazilian consultancy Céleres cut its estimates for Brazil soybean crop by 13.6% from the initial estimates to 125.8Mt. Rural Clima lowered it last week to 122.7Mt. While DatAgro raised it by 0.25Mt to 130.25Mt.

FX & ENERGY

The dollar index has pulled back overnight after trading to 20-month highs in the previous session, as safe-haven demand for the currency eased while traders took stock of geopolitical developments. The dollar index jumped 1.6% to its highest level since June 2020 on Thursday after Russia launched an attack on Ukraine, with president Putin warning other countries against interfering. Brent crude futures are also lower this morning after hitting $105 per barrel yesterday, although they still hold comfortably above $100 per barrel even as President Biden commented that the US will work with other major consuming nations on a coordinated reserves release. In other energy news, EU natural gas prices spiked higher by over 50% yesterday, but have given some of that back overnight, currently trading almost 20% lower.