FI Evening Grain Comments 06/24/20

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During
the trading day we heard China bought an unknown quantity of US corn and the Philippines may have bought soybean meal.  Lower WTI added downward pressure to soybean oil.  Corn basis for Seneca, IL was down 40 to 45 under due in large part to upcoming river
lock repairs. 

 

 

Weather
and Crop Progress

MARKET
WEATHER MENTALITY FOR CORN AND SOYBEANS: 
U.S. weather is expected to be nearly ideal over the coming two weeks with periodic showers and thunderstorms intermixing with periods of sunshine and warm temperatures over this first week while drying and warming occurs in the second week. Crop development
will advance aggressively.

            Summer
crops in Europe may trend drier in the west, but some rain will return in early July to prevent dryness from becoming a big issue. Eastern Europe and the western CIS will continue favorably moist throughout the next two weeks. Most of China’s summer coarse
grain and oilseed crops will also stay in good shape along with much of India’s crops. Some dryness will occur north of the Yellow River in China while the Northeast Provinces in China are a little too wet, but the impact on corn and soybeans should be low.

           
Drying in Russia’s Southern Region will continue a concern.

            Canola
production potential in Australia is looking good, but rapeseed in China has suffered from too much moisture this year. Europe’s winter rapeseed has likely yielded a little poorly, but summer crops are poised to perform well.

            Brazil
Safrinha corn is maturing relatively well and harvesting in Argentina has gone well also.

            The
bottom line will likely lead to a bearish bias for market mentality today, although there is some evidence that ridge building will occur in early July over some key U.S. crop areas.

 

MARKET
WEATHER MENTALITY FOR WHEAT: 
Weather conditions in U.S. hard red winter wheat in the Plains and soft red wheat areas in the Midwest will be wet enough this week to raise some concern over crop quality, but drier weather should evolve in time to limit the impact of too much moisture.

            Canada’s
wheat will remain in good condition in Ontario and Quebec while varying from fair to good condition in the Prairies. Dryness remains a concern from eastern Montana and the western Dakotas into southwestern Manitoba and eastern Saskatchewan where some relief
is possible next week, but confidence is low.

            Wheat
conditions in Europe vary greatly with some concern over crop conditions in parts of France, Germany and the United Kingdom from dryness earlier this year. Some rain in southeastern Europe has improved winter crop production potentials as well as in Ukraine
and southwestern Russia. Rain this week in the eastern CIS New Lands should translate into improved soil moisture for better spring wheat development near the Kazakhstan border.

           
Argentina wheat conditions have been improving except in the western parts of the nation where La Pampa, Cordoba, far western Buenos Aires and western Santa Fe need more rain. Brazil wheat conditions are fair to very good with rain needed in the north and
some drying in the south.  Rain in Brazil during the next week to ten days will fix the moisture deficits and may make parts of the south too wet.

            Overall,
weather today may have a mixed influence on market mentality.

Source:
World Weather Inc. and FI

 

 

Bloomberg
Ag Calendar

WEDNESDAY,
June 24:

• EIA
  U.S. weekly ethanol inventories, production, 10:30am
• U.S.
  poultry slaughter, 3pm

THURSDAY,
June 25:

• USDA
  weekly crop net-export sales for corn, soybeans, wheat, cotton, pork, beef, 8:30am
• International
  Grains Council monthly report
• Port
  of Rouen data on French grain exports
• Malaysia’s
  palm oil export data for June 1-25
• USDA
  hogs and pigs inventory, red meat production, 3pm

FRIDAY,
June 26:

• 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
• FranceAgriMer
  weekly update on crop conditions

Source:
Bloomberg and FI

 

 

Macros

US
DoE Crude Oil Inventories (W/W) 16-Jun: 1442K (est 1500K; prev 1215K)

–
Distillate Inventories (W/W): 249K (est -500K; prev -1358K)

–
Cushing OK Crude Inventories (W/W): -991K (prev -2608K)

–
Gasoline Inventories (W/W): -1673K (est -1728K; prev -1666K)

–
Refinery Utilization(W/W): 0.80% (est 0.50%; prev 0.70%)

 

 

 

 

 

 

Corn.

·        
Corn futures traded higher by mid-morning on talk China bought an unspecified amount of corn from the US and Ukraine, but that was not enough to allow September to trade above its 20-day MA.  Prices
drifted lower on favorable weather, sharply lower equity markets & WTI crude oil, and higher USD.  September closed 2.0 cents lower.  July was down only 0.25 cent on strong demand for spot US corn. 

·        
Last time China imported more than 2 million tons of corn from the US was back in 2013-14.  They have about 1.5 million tons on the export sales book for 2019-20. 

·        
Funds sold an estimated net 5,000 corn contracts on Wednesday.  Previous two days they sold 28,000 contracts. 

• US
  weekly ethanol production was up 52,000 barrels to 893,000 and stocks fell 312,000 to 21.034 million.  A Bloomberg poll looked for production to be up 32,000 at 811,000 barrels (and stocks to decrease 14,000 barrels. 
  

·        
Corn basis in Seneca, IL, fell 40 cents to 45 under.  Morris, IL was down by the same amount yesterday.   
Lock
closers for repairs along the IL will start July 1.  US
corn is starting to flow out of the Great Lakes region. Some of it was thought to be bound for the UK. 

·        
Note CBOT corn registrations stand at zero, in part to country basis. 

• China
  sold another 4MMT of corn out of auction at an average price of 1,871 yuan per ton (nearly 20MMT total).  Yesterday China’s Sinograin sold 1.1MMT of corn out of auction (1.7MMT total so far this season). 
  
• India
  will allow imports of 500,000 tons of corn this year at 15% import tax, below the normal 60% import tax.

·        
The USDA hogs and pigs report will be out on Thursday.  All hogs as of June 1 is projected to increase 3.7 percent from a year ago.  Trade estimates are below the ethanol tables. 

• (Bloomberg)
  — The halting of a British pork plant’s sales to China after just a few workers contracted coronavirus highlights the risk that more facilities around the world could see exports disrupted. Meanwhile, China’s pork imports in May dropped from a record, while
  beef shipments decreased to the lowest in at least six months after the coronavirus hurt domestic demand.
• The
  USDA Broiler report showed eggs set in the US up 1 percent and chicks placed down 1 percent.  Cumulative placements from the week ending January 4, 2020 through June 20, 2020 for the United States were 4.64 billion. Cumulative placements were down 1 percent
  from the same period a year earlier.

 

Corn
Export Developments

• None
  reported

 

Nearby
rolling China corn futures last week traded at its highest level since January 2016. 

China
futures (top line) versus Guangdong cash corn (middle line) and CBOT corn currency converted to CNY.   

Source:
Reuters and FI

 

US
weekly ethanol production
was up 52,000 barrels to 893,000 and stocks fell 312,000 to 21.034 million.  A Bloomberg poll looked for production to be up 32,000 at 811,000 barrels (and stocks to decrease 14,000 barrels.  Production increased for the eighth consecutive week; a 66 percent
rebound since bottoming at 537,000 barrels for the week ending April 24.  Ethanol stocks have been decreased nine consecutive weeks to 21.034 million from 27.689 million peak in mid-April. 

 

 

 

 

Updated
6/18/20
(near the range low)

·       
September corn is seen in a $3.25 and $3.50 range over the short term.  December lows could reach $2.90 if US weather cooperates. 

 

Soybean
complex.

• CBOT
  soybeans ended
  4.25 cents lower for the July position and 4.50 cents lower for the September. 
  
• CBOT
  soybeans were on favorable US weather bias ECB and sharply lower CBOT soybean oil (down 52-55 points).  Soybean meal ended slightly higher.
  The
  GFS model is wetter than the European models. WCB will remain on the drier side over the next 7 days.  There are rising concerns over the recent spike in US Covid-19 cases. 
  

·        
Funds sold an estimated net 5,000 soybeans contracts on Wednesday, bought 2,00 meal and sold 5,000 soybean oil.  

• Overnight
  Tuesday China bought another 2 US cargoes of soybeans, both out of the Gulf for Q4 shipment, and at least one Brazilian cargo for Sep/Oct.
  
• Anec
  sees Brazil June soybean exports at 12.6 million tons, up from 8.55 MMT year earlier.  Other estimates are around 12 million tons. 
  
• China’s
  Sinograin sold  all of the 6,977 tons of soybean oil offered at auction
  and 48%
  of 15,640 tons rapeseed oil offered. Sinograin sold all the 32,613 tons of soybeans offered on Tuesday (total sales – 140,700 tons)
• Two
  refineries will add renewable diesel capacity to cut costs on compliance and product sourcing.  Renewable diesel is a small segment of the industry. 
  

·        
SGS: Malaysian palm exports 1-20 June period up 50 percent at 1.217MMT.  June 1-25 will be issued Thursday by AmSpec and ITS. 

 

Oilseeds
Export Developments

• Results
  awaited:  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
6/18/20

• August
  soybeans are seen in a $8.50-$8.90 range, over the short term (ST).
• August
  soybean meal is seen in a $285 to $300 range.  (ST)
• August
  soybean oil range is seen in a 27.00 to 29.00 range over the medium term

 

Wheat

• Harvest
  pressure and higher USD sent KC and Chicago wheat lower. MN rebounded to ended higher. Japan received no offers for feed wheat or barley. 
  

·        
Funds sold an estimated net 4,000 Chicago wheat contracts on Wednesday. 

• Paris
  December wheat was unchanged at 179.75 at the time this was written.
• USDA
  FAS sees the Philippines
  2020-21 wheat imports at 7 million tons from 7.2MMT a year earlier.
• Brazil
  granted a tariff-import exemption for 450,000 tons of wheat effective from July 1 to Nov. 17 but will not be allowed until 85% of the current tariff quota of 750,000 tons is filled. 
  

 

Export
Developments.

• Japan
  in its SBS import tender received no offers for feed wheat or barley for arrival by November 26. 
  

·        
Japan seeks 101,243 tons of food wheat later this week. 

• Ethiopia
  seeks 400,000 tons of wheat on July 10 for shipment within two months.    
  

 

Rice/Other

• South
  Korea bought 79,105 tons of rice from China for January through March arrival.
  

    TONNES(M/T)
GRAIN TYPE    PRICE($/T)  ARRIVAL/PORT

       
20,000  Brown Short   $857.00     Jan 31,2021/Gunsan

       
20,000  Brown Short   $859.00     Jan 31,2021/Ulsan

       
20,000  Brown Short   $858.00     March 31,2021/Donghae

       
19,105  Brown Short   $857.70     March 31,2021/Mokpo

 

 

Updated 6/18/20
(MN nearing the range low)

• Chicago September is seen in a $4.80-$5.10 range, over the short term.
  
• KC September$4.3750 initial support; $4.30-$4.60 range over the medium
  term. 
• MN September $5.20-$5.50 range over the medium term with bias to upside.