FI Evening Grain Comments 02/03/21

PDF Attached

 

CBOT Corn settled above $5.50 for the first time since 2013.  Egypt’s bought 58,000 tons of soybean oil following yesterday’s wheat tender. 

 

 

Weather

MARKET WEATHER MENTALITY FOR CORN AND SOYBEANS: 

            Not much has changed overnight. Brazil weather will remain well mixed supporting full season crops and late season soybeans. Enough dry weather will support soybean harvesting and Safrinha crop planting. Excessive rain noted in Paraguay and a few other areas recently induced some flash flooding, but most crops likely “weathered” the situation relatively well. There have been local areas of crop quality declines because of recent wet weather in Brazil, but the nation’s crop is mostly rated favorably.

            Central Argentina soil moisture was bolstered in a major way late last week and during the weekend. Crop development in Cordoba, northern Buenos Aires, central and southern Santa Fe and parts of Entre Rios will advance favorably during the next two weeks, despite net drying for a while. Crop areas in the far south may struggle for moisture at times, but the remainder of the nation will either receive timely rain or crops will feed off of favorable subsoil moisture. Some rain in southern Buenos Aires and La Pampa Sunday into Monday will offer some short-term relief from dryness.

            South Africa summer crop conditions remain very good with little change likely. Australia’s dryland sorghum and other crops would benefit from more routine rainfall, especially in Queensland, but that is not likely for a while.

            India winter crops are beginning to reproduce and timely rain is needed to support the best possible yields. Crop conditions are rated favorably. Rain this week is not likely to seriously bolster soil moisture, but every drop of moisture will be good for reproduction. More rain is desired, though.

            China and Europe crops are dormant and will remain in favorable condition for the next few weeks. Western Europe has become a little too wet.

            Overall, weather today will likely provide a neutral to slightly bearish bias to market mentality.

 

MARKET WEATHER MENTALITY FOR WHEAT: Concern remains over snow free areas in southwestern Canada’s Prairies and the northwestern and west-central U.S. Plains as colder air settles into those areas for a while late this week and through the weekend. Snow should precede the bitter cold to adequately protect dormant winter crops from winterkill. A close monitoring of the region will be warranted when the coldest conditions arrive to make sure snow cover is adequate to protect all crops.

            Snow cover in northern Russia and northeastern Europe is sufficient to support crop needs during the colder periods that may evolve later this week and deeper into February. Snow free areas in southern Europe, Ukraine and Russia’s Southern Region should not be threatened by damaging cold weather in the next week.

            China, India and Europe winter crops are in mostly good condition. Rain is needed in India during reproduction in February and a close watch on rain potentials is warranted over the next few weeks. Showers later this week over the next few days in the far north and extreme east will be welcome, but greater volumes of rain will still be desired.

            Morocco rain expected Thursday into the weekend will improve topsoil moisture for better wheat development potential in the spring. However, drought during the planting season may have permanently cut production in a small part of the nation. A boost in precipitation is still needed across all other areas in northern Africa, but no area is drier than southwestern Morocco.

            Recent increases in Middle East rainfall has improved field condition so that some improvement in crop conditions may follow.

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

Source: World Weather Inc. and FI

 

 

Bloomberg Ag Calendar

Thursday, Feb 4:

• FAO World Food Price Index; cereals supply/demand brief
• USDA weekly crop net-export sales for corn, soybeans, wheat, cotton, pork, beef, 8:30am
• Port of Rouen data on French grain exports

Friday, Feb 5:

• US Trade Balance
• Statcan reports on wheat, soy, durum, canola and barley stockpiles in Canada
• ICE Futures Europe weekly commitments of traders report, 1:30pm (6:30pm London)
• CFTC commitments of traders weekly report on positions for various U.S. futures and options, 3:30pm
• China’s CNGOIC to publish soybean and corn reports

Source: Bloomberg and FI

 

 

 

Macros

US ADP Employment Change Jan: 174K (est 50K; prevR -78K; prev -123K)

US Markit Services PMI Jan F: 58.3 (est 57.4; prev 57.5)

– Markit Composite PMI Jan F: 58.7 (prev 58.0)

 

Corn.

• Corn futures rose today on the high expectations for tomorrow’s USDA’s export sales report.   Corn also settled at the highest levels in 8 years, finally holding gains above $5.50/bu for the prompt month. 
• US weekly ethanol production increased 3,000 barrels per day to 936,000 barrels and stocks increased 714,000 barrels to 24.318 million, largest since May 1, 2020. 
• Mexico’s AgMin sees 2020 corn imports dropping 9%, or about 1.5MMT, as they plan to scale back on genetically modified grains and increase local corn plantings. In the “Corn for Mexico program”, aims to replace 30% of Mexico’s current volume of imports with national production by 2024.  Mexico imported 13 million tons of corn recently from the US. Mexico produced about 25 million tons of white corn and about 3 million tons of yellow corn.
• Reuters noted (commercial) stocks of corn held by Chinese feed makers and other end users reached multi-year highs in some areas, and indication of stockpiling amid concerns over future shortages.  Local corn prices increased 50% higher during 2020. 
• From October 1 through January 10, commercials purchased 62.79 million tons of corn from farmers, up from 50.77 million tons previous year, according to National Food and Strategic Reserves Administration, effectively pulling the amount of commercial corn stocks to a 15-year high.  Dalian Commodity Exchange warehouses receipts hit 100,000 tons for the first time last month. Imports are driven by shortages, poor local quality, and supply fears amid rebound in the pig crop.   
• Bulgaria found a case of H5N8, first in seven months. 
• German plans to cull 14,000 turkeys after H5N8 bird flu was discovered in the eastern German state of Brandenburg. 
• Argentine had some disruptions to grain exports after protestors set up roadblocks at some Buenos Aires terminals, according to CIARA chamber of export companies.  We heard there are some disruptions in the south, an area were vessels top off commodities before they set sail.  A source mentioned wheat and barley was at least affected.  Some think the strike will expand. 

• China will sell 30,000 tons of frozen pork from state reserves on February 4, and another 30,000 tons on Feb. 9.
• Funds were net buyers of an estimated 15,000 corn contracts on the session.

 

Corn Export Developments

·         None reported

 

US weekly ethanol production increased 3,000 barrels per day to 936,000 barrels and stocks increased 714,000 barrels to 24.318 million, largest since May 1, 2020.  A Bloomberg poll looked for weekly US ethanol production to be down 1,000 and stocks up to 83,000 barrels.  September 2020 to date US ethanol production is running 8.1 below the same period a year ago.  A few months ago, we thought there would be a good recovery in US gasoline demand by February, requiring higher ethanol production amid domestic blend rates, but this is not the case. However, the high US ethanol stock inventories are also due in part to lackluster ethanol exports.  If China decides to ramp up ethanol imports form the US (China corn prices up 50 percent in 2020), this might help, but historically they are a small player when it comes to US ethanol exports. 

 

 

 

Updated 1/29/21

March corn is seen trading in a $5.15 and $6.00 range. 

May corn is seen in a $5.00 and $6.00 range. 

July is seen in a $4.90 and $5.75 range. 

December is seen in a $3.75-$5.50 range. 

 

Soybean complex.  

• The soybean complex ended firmer today as traders position for the WASDE report next week.  This will be the monthly reminder that we are running a tight balance sheet as demand remains robust. 
• China has been quiet this for US soybeans and corn but should return ahead of the New Year’s holiday.  South America is expected to improve over the next week although parts of Brazil will continue to see harvest delays.  China was in yesterday buying at least three Brazilian soybean cargoes (May, June, July), but there was no US interest.  Malaysian palm oil futures fell 165 MYR and cash dropped 3.4%.  China soybean futures fell 1.3%, meal off 1.8% and SBO was down 1.9%. 
• Note the Brazilian trucker strike started yesterday.  This and a small Argentina strike should be monitored this week. 
• China cash crush margins were 200 cents on our calculation (199 previous), compared to 171 at the end of last week and to 84 year ago.
• Funds were net buyers of an estimated 15,000 soybean contracts, 6,000 soybean meal, and 5,000 soybean oil contracts on the session.

Oilseeds Export Developments

·         Egypt’s GASC bought 58,000 tons of soybean oil, of which it appears 30,000 tons international and rest local.  Reuters gave the following (for Feb 25-Mar 16 delivery)

• 8,000 tons of soyoil at 17,060 Egyptian pounds equating to $1083.76
• 4,000 tons of soyoil at 17,060 Egyptian pounds equating to $1083.76
• 10,000 tons of soyoil at 17,060 Egyptian pounds equating to $1083.76
• 3,000 tons of soyoil at 17,060 Egyptian pounds equating to $1083.76
• 30,000 tons of soyoil at 17,060 Egyptian pounds equating to $1083.76
• 30,000 tons of soyoil at $1,090

·         South Korea’s NOFI group bought 60,000 tons of South America soybean meal at $499.94/ton for arrival around August 10. 

Updated 1/26/21

March soybeans are seen in a $13.25 and $14.75 range 

March soymeal is seen in a $410 and $480 range

March soybean oil is seen in a 42.50 and 45.00 cent range

 

Wheat

• US wheat rose today on the firmer soy and corn markets. 
• Yesterday Egypt bought 480,000 tons of wheat from multiple destinations, but the US was not one of them.  They said today that they have enough supplies until July 31 to cover usage. 
• The US central areas and northern Great Plains will see two cold shots this week, raising the risk of some winterkill for uncovered snow areas. 
• EU March milling wheat was up 1.25 euros to 221.75 euros.

• Funds were net buyers of an estimated 2,000 wheat contracts on the session.

 

 

Export Developments.

• A group of South Korean flour millers bought around 29,000 tons of milling wheat from Australia on Wednesday for shipment between May 16 and June 15.
• South Korea’s SPC seeks 32,000 tons of milling wheat on February 4 sourced from the United States and Canada for arrival in June.
• Jordan revied three offers for 120,000 tons of wheat. 
• Jordan seeks 120,000 tons of animal feed barley on Feb. 9.
• Japan seeks 87,050 tons of food wheat this week. 

• 7 offers: Jordan is in for another 120k wheat on Feb 3 and 120k barley on Feb 2. 

 

Rice/Other

·         The lowest offer for Iraq seeking rice was from Pakistan at $560 per ton c&f for 30,000 tons. 

·         Syria is in for 25,000 tons of rice on February 9. 

 

Updated 2/2/21

March Chicago wheat is seen in a $6.35‐$7.15 range

March KC wheat is seen in a $6.00‐$6.70 range (lowered 25 low end)

March MN wheat is seen in a $6.00‐$6.55 range