FI Evening Grain Comments 06/10/20

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US
FED may leave interest rate unchanged through 2020.  China buys Q4 US PNW soybeans (up to 10 for week), record US corn production prospects pressure futures, and wheat is higher from an uptick in global import demand.

 

 

Weather

MARKET
WEATHER MENTALITY FOR CORN AND SOYBEANS:  Once remnants of Tropical Depression Cristobal leave the Corn Belt, net drying is expected for a while. Soil moisture will be favorable for good crop development in most areas, although slowly declining soil moisture
in the eastern Midwest, the far southwestern Corn Belt and parts of the Tennessee River Basin will be closely monitored. Timely rain will be very important for all of these areas late this month and in July.

            Canada’s
Prairies are too wet in the west and a little too dry in parts of the south-central and east.  Some canola and other late season planting has stopped in the wetter areas of Alberta and those fields may be abandoned because of too much moisture and the lateness
of the season. Rain in the eastern Prairies late this weekend into early next week may offer some relief.

            South
America weather remains mostly good for maturing crops and their harvest. Dryness in some eastern and northern Safrinha crops may have harmed late season yields. Argentina’s harvesting will continue aggressively.

           
Rain is needed in South Africa and Australia to improve canola planting conditions. Some rain is expected in Australia beginning in the west today and Thursday and reaching the east Friday into Saturday.

           
Philippines rainfall has become erratic and light and needs to be bolstered in a major way. A tropical disturbance will bring relief to Luzon Island over the next few days.

Most
of Malaysia and Indonesia rainfall is still rated favorably and likely to prevail for a while.

            Europe
weather will remain mostly good for coarse grain and oilseed development, although some additional warming is needed in Eastern Europe and a boost in rain is still needed in France, parts of the U.K. and Germany. Some of that needed rain is coming.

           
Drying in Russia’s Southern Region, Kazakhstan and central and eastern Ukraine will raise some interest for soybeans, corn and sunseed development, but the region is not too dry today except in parts of Kazakhstan and eastern parts of Russia’s Southern Region.

            The
bottom line will make weather a growing interest for coarse grain and oilseed development around the world, although it does not seem like there is an immediate threat to production. Just enough concern may help induce some rising market premium as time moves
along.

 

MARKET
WEATHER MENTALITY FOR WHEAT:  Too much rain recently in Alberta, Canada has raised concern over small grain conditions, but drying over the next few days will bring some improvement. More rain this weekend will induce some additional concern and crop damage.
Eastern parts of the Prairies may get some needed rain late this weekend into early next week, as well.

            U.S.
hard red winter wheat is finishing out relatively well, but dryness and frost damage in the southwestern Plains has left production low in some areas. Rain in Nebraska, parts of Kansas and a few Colorado locations Tuesday will benefit late season crop development.

            Rain
in Europe has improved small grain conditions in recent weeks, although there is need for more rain in France, the U.K. and parts of Germany. Eastern Europe would benefit from some warmer temperatures.  Spring cereals are still rated favorably in many areas
outside of northwestern Europe with little change expected through the coming week. There will be some interest in eastern Russia’s spring wheat as time moves along this summer, but for now the environment is still mostly good. Net drying in central and eastern
Ukraine will raise some concern over small grain crop conditions later this month, but conditions today are still good.

            Australia’s
rain event expected from west to east over the next few days should improve some crops, but there will be an ongoing need for greater moisture.  South Africa and parts of Argentina still need greater rainfall to support wheat planting and establishment.

            Overall,
weather today will likely provide a mixed influence on market mentality.

Source:
World Weather Inc. and FI

 

Bloomberg
Ag Calendar

WEDNESDAY,
June 10:

• EIA
  U.S. weekly ethanol inventories, production, 10:30am
• International
  Grains Council virtual conference
• FranceAgriMer
  crop report and press briefing
• Malaysia
  MPOB palm oil stockpiles, export, production data for May
• Cargo
  surveyors release Malaysia export numbers for June 1-10

THURSDAY,
June 11:

• USDA’s
  monthly World Agricultural Supply and Demand (Wasde) report, noon
• USDA
  weekly crop net-export sales for corn, soybeans, wheat, cotton, 8:30am
• China
  CASDE monthly crop supply and demand report
• Vietnam’s
  coffee, rice and rubber export data for May
• Malaysian
  Palm Oil Council webinar: Palm oil in post- pandemic
• HOLIDAY:
  Brazil

FRIDAY,
June 12:

• ICE
  Futures Europe weekly commitments of traders report on coffee, cocoa, sugar positions
• CFTC
  commitments of traders weekly report on positions for various U.S. futures and options, 3:30pm
• FranceAgriMer
  weekly update on crop conditions
• New
  Zealand food prices
• Shanghai
  exchange’s weekly commodities inventory
• HOLIDAY:
  Russia

Source:
Bloomberg and FI

 

 

 

 

 

 

 

Macros

·        
US CPI (M/M) May: -0.1% (est 0.0%; prev -0.8%)

US
CPI Ex Food, Energy (M/M) May: -0.1% (est 0.0%; prev -0.4%)

·        
US CPI (Y/Y) May: 0.1% (est 0.3%; prev 0.3%)

US
CPI Ex Food, Energy (Y/Y) May: 1.2% (est 1.3%; prev 1.4%)

·        
US Real Avg Hourly Earnings (Y/Y) May: 6.5% (prevR 7.6%; prev 7.5%)

US
Real Avg Weekly Earnings (Y/Y) May: 7.4% (prevR 7.0%; prev 6.9%)

·        
US DoE Crude Oil Inventories (W/W) 05-Jun: 5720K (est -1850K; prev -2077K)

–
Distillate (W/W): 1568K (est 3500K; prev 9934K)

–
Cushing (W/W): -2279K (prev -1739K)

–
Gasoline (W/W): 866K (est -1000K; prev 2795K)

–
Refinery Utilzation (W/W): 1.30% (est 0.60%; prev 0.50%)

·        
EIA-U.S. WEEKLY ETHANOL OUTPUT UP 72,000 BPD TO 837,000 BPD

·        
EIA-U.S. WEEKLY ETHANOL STOCKS OFF 674,000 BBLS TO 21.8 MLN BBLS

·        
EIA-U.S. WEEKLY GASOLINE OUTPUT UP 360,000 BPD TO 8.14 MLN BPD

 

Corn.

·        
Although US ethanol production increased by most since at least 2010, CBOT corn ended lower on favorable weather prospects.  USD was down 40 points after the close amid Fed leaving interest rates
unchanged for the rest of the year.  Feds also warned of a 6.5 percent contraction for GDP, near expectations.  WTI turned higher ending up moderately.   There were a lot of corn call buying early during the day session. 

·        
Funds
sold an estimated net 8,000 corn contracts. 

·        
Based on the latest US crop rating, we are using 178.6 bushels per acre, above a 20-year trend of 174.6 bushels and one-tenth of a bushel above USDA May. Production is projected at a record 15.534
billion bushels, above 15.148 billion previous record in 2016-17. 

·        
Goldman Roll ends Thursday. 

·        
A Reuters story mentioned China bought Argentine sorghum. At least two cargoes were bought for July arrival.  This is on top of 32,716 tons bought earlier this year.  In all of 2019, shipments were
139,564 tons, up from 1,045 in 2018.  In comparison, China imported 783,393 tons of US sorghum during the Jan-Apr period. 

·        
State-run Brazilian Institute of Geography and Statistics estimated 2020 grain & oilseed production at 245.9 million tons, 1.8% higher than 2019 (241.5MMT). 92.2% of the 2020 production consists
of soybeans, corn and rice. 

• The
  USDA Broiler Report showed eggs set in the US down slightly and chicks placed down 3 percent from a year earlier.  Cumulative placements from the week ending January 4, 2020 through June 6, 2020 for the United States were 4.26 billion. Cumulative placements
  were down 1 percent from the same period a year earlier.
• China
  said they are close to making an effective vaccine for African swine fever. 
  

 

US
ethanol production saw its largest weekly increase since EIA started reporting data June 2010.  Weekly ethanol production was up 72,000 barrels to 837,000 barrels, largest weekly rate since early April. A Bloomberg trade guess was looking for a 46k increase. 
Stocks declined for the 7^th consecutive week to 21.802 million barrels. It was off 674,000 barrels vs. a trade guess of off 221,000 barrels. 

 

 

 

Corn
Export Developments

• None
  reported

 

 

Updated
6/9/20

• July
  corn is seen in a $3.20 and $3.40 range.  December lows could reach $2.90 if US weather cooperates. 
  

 

Soybean
complex

• CBOT
  soybeans ended higher led by bull spreading and higher meal.  It was reported  China bought more cargoes for Q4 shipment. Meal gained on soybean oil.  Palm oil closed lower and so did soybean oil. 
  
• China
  soybeans were up 2.2 percent on Wednesday after appreciating 2.4 percent on Tuesday. 
  
• Funds
  bought an estimated net 2,000 soybeans, bought 3,000 soybean meal and sold 2,000 soybean oil. 
  
• It
  was rumored China bought several cargoes of US PNW soybeans (3-5 cargoes) for November and December shipment.  Reuters reported at least 2 yesterday.  Later it was said China week to date purchases of US soybeans were up to 10 cargoes. 
  
• See
  our China soybean import by country forecast below.
• Anec
  estimates Brazil soybean exports at 10.8 million tons for the month of June and corn exports at 689,000 tons.  They have 60.5 million tons of soybean exports for the first six months of the year, up 34 percent from the previous year. 
  
• Datagro
  reported 33.1% of Brazil’s new-crop soybeans have been sold, 20 points higher than average (as of June 5).  This is impressive and backs ideas of a 1.5-2.5 percent increase in soybean area for new-crop.  87.5% of the 2019-20 had been sold at this time of year,
  another record. 
• China’s
  Sinograin will sell 60,486 tons of domestic 2017 soybeans from reserves on Friday, out of Heilongjiang. 
  
• Downward
  revisions to the EU rapeseed crop over the past week have supported rapeseed prices. 
  
• USDA
  will update their world crop production estimates on Thursday. 
• Bloomberg:
  The nationalization of Argentina’s Vicentin is spurring fears that the firm will get unfair advantages in the grains market.

·        
SGS: Malaysian palm June 1-10 exports up 64% to 580,096 from 354,090 tons previous period in April.

o  
AmSpec: up 59.5% to 550,341 tons from 344,983 tons.

o  
ITS: up 61.7% to 545,360 tons from 337,255 tons

·        
Malaysia:
lower palm prices Wednesday despite less than expected end of May palm stocks and surge in early June palm shipments.

 

MPOB
reported a higher than expected increase in palm exports at 1.369 million tons, up 10.7 percent from April and stocks declined slightly from the previous month but were 213,000 tons below expectations. Exports reached a 5-month high but were still well below
a year ago.

 

 

China
soybean imports.  How
many US soybeans could be imported by China for the rest of 2020?  That really depends on the total imports from the top three suppliers, and if Argentina become the residual player this year due in part to lack of producer selling.  Based on 92 million tons
of China soybean imports for 2020 and a total 2020 Brazil export forecast of 77 million tons (up from 75.3 million in 2019), then adding Argentina, we look for January through December US soybean exports to end up around 16 million tons (13.5-14.0 adding in
“other” countries).  About 3.2 million tons of US soybeans were imported by China from January through April, so 12 to 13 million tons might be left for China to import during the June through December period or 6.8 million.  This assumes Argentina soybean
exports total 7 million tons in 2020 (lack of producer selling, economic woes, etc.), down from 8.9 million tons in 2019. In order for China to import an additional 11-12.5 million tons of US soybeans, China needs to ramp up purchases from the US, in larger
volumes seen over the past few weeks.  USDA US outstanding soybean sales for China (yet to ship) as of end of May totaled only 3.7 million tons for old and new crop, 6.8 tons if you add the “unknown” category.  Note below  is a simple trade flow and does not
include other countries. 

 

 

 

Oilseeds
Export Developments

• None
  reported overnight. 

• Syria
  will retender for 50,000 tons of soymeal and 50,000 tons of corn on June 24 for delivery within four months of contract.

 

Updated
6/9/20

• July
  soybeans are seen in a $8.35-$8.90 range. 
• July
  soybean meal is seen in a $280 to $310 range. 
• July
  soybean oil range is now seen in a 27.25 to 28.75 range. 

 

Wheat

• US
  wheat futures attempted to rebound after world import demand interest increased mid-week.  Most months in all three markets closed lower.  Positioning ahead of the USDA report was noted. 
  
• Egypt
  bought 120,000 tons of Russian wheat for July 12-22 shipment at $316.90 to $217.59 per ton plus freight. 
  
• Funds
  bought an estimated net 1,000 soft red wheat contracts. 
• Paris
  December wheat was up 0.50 euros at 187.00.
• SovEcon
  increased their estimate of the Russian 2020 grain production to 128.6 million tons from 126.3 million. Wheat was projected at 82.7 million tons from 81.2 previously. 
  
• Central
  Russia will be hot this workweek, through at least Friday, and the southern regions will be hot through Monday. 
  
• UGA
  predicted a 17 to 18-million-ton export cap for 2020-21 Ukraine wheat exports. 
  

 

Export
Developments.

• Egypt
  bought 120,000 tons of Russian wheat for July 12-22 shipment at $316.90 to $217.59 per ton plus freight. 
  
• The
  Philippines bought about 56,000 tons of optional origin feed wheat out of 168,000 tons sought for August 16-October 22 shipment, depending on origin. 
  
• Tunisia
  seeks 134,000 tons of soft wheat and 100,000 tons of feed barley for shipment between July 15 and September 25 shipment, on June 11. 
  
• Japan
  in their SBS import tender bought 380 tons of feed barley but appears they passed on wheat.
  
• Japan
  seeks 80,000 tons of feed wheat and 100,000 tons of feed barley on June 17 for arrival by November 26. 
  
• Yesterday
  Thailand PASSED on 240,000 tons of feed wheat on June 10 for August and September shipment.  They bought an unknown amount of feed barley. 
  
• Pakistan
  seeks to import 500,000 tons of wheat sometime this year to boost inventories. 
  
• Jordan
  seeks 120,000 tons of wheat on June 17 for November-December shipment. 

 

Rice/Other

• CBOT
  July rice continued to weaken against the September contract.
• South
  Korea’s Agro-Fisheries and Food Corp seeks 80,605 tons of non-glutinous rice for October 2020 and March 2021 shipment.
  

    TONNES(M/T)   
GRAIN TYPE    ORIGIN    ARRIVAL/PORT

           
90     Milled Long   Thailand  Oct 31,2020/Busan

        
1,410     Milled Long   Thailand  Oct 31,2020/Busan

       
20,000     Brown Short   China     Jan 31,2021/Gunsan

       
20,000     Brown Short   China     Jan 31,2021/Ulsan

       
20,000     Brown Short   China     March 31,2021/Donghae

       
19,105     Brown Short   China     March 31,2021/Mokpo

• Results
  awaited: Lowest offer $489.25/ton from Myanmar.  The Philippines seeks 300,000 tons of rice. 
  

 

Updated
6/9/20

• Chicago
  July is seen in a $4.90-$5.25 range
• KC
  July $4.45-$4.85
• MN
  July $5.10-$5.40