FI Evening Grain Comments 06/26/20

PDF Attached

 

Geopolitical
problems (US/China/Brazil), increase in coronavirus cases, and weak outside markets sent a bearish ripple through the CBOT agriculture markets.  We thought today was about positioning ahead of USDA’s Acreage and Grain Stocks reports, but outside factors sacked
wheat, and at the close the soybean crush got hammered due to a selloff in meal and oil.  Reasoning behind wheat could be explained, but the soybean products falling out of bed remains a mystery.  We thought the Hogs and Pigs report was viewed supportive for
corn and soybean meal.  This
limited losses for corn but not for meal.  Favorable weather also remained a driver. 

 

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. Some pockets of dryness will remain, and the second week of the forecast will trend a little drier and warmer making the second and third weeks in July important to watch.

           
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 remains north of the Yellow River in China, but that area will get some needed rain soon. Northeast China is a little too wet, but the impact on corn
and soybeans should be low.

           
Drying in Russia’s Southern Region will continue a concern with some expansion into eastern Ukraine now advertised as well.

            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. Canada’s canola crop will be improving
over the next two weeks.

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

            The
bottom line will lead to a bearish bias for market mentality today.

 

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 remain favorable as rain frequency slowly subsides and better drying conditions emerge. This change is already under way in the Plains, but the Midwest
will be slow to dry down.

           
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 late this weekend into next week.

            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. Drying from eastern Ukraine into Russia’s Southern Region will raise concern for
late season crop development.

           
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

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

MONDAY,
June 29:

• Canada
  Statcan data on seeded area for wheat, durum, canola, barley, soybeans, 8:30am
• USDA
  weekly corn, soybean, wheat export inspections, 11am
• U.S.
  crop progress, conditions — soybeans, wheat, cotton, 4pm
• Vietnam’s
  General Statistics data on coffee, rice, rubber exports
• EU
  weekly grain, oilseed import and export data
• Ivory
  Coast cocoa arrivals
• EARNINGS:
  Biosev

TUESDAY,
June 30:

• U.S.
  annual acreage planted – soybeans, wheat, cotton, corn
• USDA
  quarterly stocks of corn, wheat, barley, oat, sorghum and soybeans
• OECD
  annual agricultural policy monitoring and evaluation report
• U.S.
  agricultural prices paid, received, 3pm
• Malaysia’s
  palm oil export data for June 1-30

WEDNESDAY,
July 1:

• EIA
  U.S. weekly ethanol inventories, production, 10:30am
• Brazil
  soybean exports
• Australia
  commodity index
• U.S.
  soybean crush, DDGS output, corn for ethanol, 3pm
• Holiday:
  Canada, Hong Kong

THURSDAY,
July 2:

• UN
  FAO world food price index, 4am
• USDA
  weekly crop net-export sales for corn, soybeans, wheat, cotton, pork, beef, 8:30am
• Port
  of Rouen data on French grain exports
• AB
  Foods trading update

FRIDAY,
July 3:

• U.S.
  Independence Day Holiday
• 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

 

 

 

 

 

 

 

 

TABLE-Canadian
crop planting trade estimates – Reuters News

(Reuters)
– Statistics Canada is scheduled to release its estimates of Canadian crop plantings on Monday, June 29 at 7:30 a.m. CDT (1230 GMT)

The
following are trade estimates from 16 analysts and traders:

	Average estimate	Lowest estimate	Highest estimate	Statscan April 2020	Statscan 2019
	(mln acres)
All wheat	25.2	24.2	25.8	25.4	24.6
Durum	5.5	5.0	5.8	5.2	4.9
Canola	20.7	20.1	21.3	20.6	21.0
Oats	3.9	3.7	4.2	3.8	3.6
Barley	7.2	6.7	7.4	7.2	7.4
Corn	3.6	3.5	3.9	3.8	3.7
Soybeans	5.3	5.2	5.4	5.2	5.7
Lentils	4.2	4.0	4.7	3.7	3.8
Flax	1.04	0.880	1.4	0.942	0.937
Peas	4.2	3.8	4.4	4.3	4.3

Source:
Reuters and FI

 

 

CFTC
COT
showed no surprises this week.  Managed money and traditional funds were more long than expected in soybeans, corn and meal. 

 

 

 

 

 

 

Macros

·        
US State Sec. Pompeo: US Imposes Visa Restrictions On Chinese Communist Party Officials Over HK Autonomy And Human Rights

·        
US CDC Reports 40,588 New Coronavirus Cases As Of Yesterday

–
Total Now 2,414,870 Cases Vs 2,374,282 In Previous Report

·        
US Crude Oil Futures Settle At $38.49/Bbl, Down $0.23, 0.59%

·        
US Personal Income (M/M) May: -4.2% (est -6.0%; prevR 10.8%; prev 10.5%)

·        
US Personal Spending (M/M) May: 8.2% (est 9.2%; prevR -12.6%; prev -13.6%)

·        
US Real Personal Spending (M/M) May: 8.1% (est 8.7%; prevR -12.2%; prevR  -13.2%)

·        
US PCE Deflator (M/M) May: 0.1% (est 0.0%; prev -0.5%)

·        
US PCE Deflator (Y/Y) May: 0.5% (est 0.5%; prevR 0.6%; prev0.5%)

·        
US Core PCE Deflator (M/M) May: 0.1% (est 0.0%; prev -0.4%)

·        
US Core PCE Deflator (Y/Y) May: 1.0% (est 0.9%; prev 1.0%

 

Corn.

·        
Rise in global coronavirus cases and geopolitical concerns sent grains lower.  Corn traded much of the day lower but nothing like the bloodbath in wheat, in part sellers were active in corn yesterday,
so limited losses were seen today in corn.   Spreads remain firm.  The net short position in corn for managed money futures and options stands more than 310,000 net short, while wheat is little over 60,000 net short. 

·        
Also limiting losses could have been tied to the quarterly US hogs and pigs report – viewed as bullish for corn. 

·        
Under the 24-hour reporting system, USDA reported export sales of 203,500 tons of sorghum received during the reporting period for delivery to unknown destinations. Of the total, 135,500 tons is
for delivery during the 2019-20 marketing year and 68,000 tons is for delivery during the 2020-21 marketing year.  Traders were disappointed no corn sales to China showed up.  But we have to remind people China is or was in the market.  The USDA export sales
report last week did show they bought one cargo of US corn during the previous week. 

·        
US weather forecast shows favorable rain for much of the rowing areas over the next week, then net drying for the lower and central Midwest, and part of the central and southern Great Plains for
the second week of the forecast.  Soil moisture levels should be sufficient enough to ride out a net drying period early July. 

·        
Funds sold an estimated net 8,000 corn contracts on Friday, or 66,000 contracts over the combined five days. 

·        
South Africa’s CEC estimated the 2019-20 SAf corn crop at 15.5 million tons, slightly below 15.6 million previous and compares to 11.275 million tons in 2019. 

·        
The USDA hogs and pigs report showed all hogs as of June 1 increased 5.2 percent from a year ago, compared to the trade looking for an increase 3.0 percent from a year ago.  Kept for breeding was
2.9 percentage points below expectations.  Kept for market came in 2.7 points above trade expectations.

 

Corn
Export Developments

• South
  Korea’s MFG bought corn at $184.22/ton, according to AgriCensus, for last half October arrival. 
  

 

Updated
6/25/20

September
corn is seen in a $3.10 and $3.45 range over the short term.  December lows could reach $2.90 if US weather cooperates. 

 

Soybean
complex.

• CBOT
  soybeans traded
  lower on good weather and lower outside markets and slightly firmer USD.  News was lacking for soybeans.  USDA announcement this morning did little to keep traders excited over export demand, but this may have been reflected in pressure in crush values during
  the close.  Products sold off late while soybeans, which were lower, remain steady at depressed values. The trade expects USDA to report an increase in US soybean planted area when updated on Tuesday.  A two million acre plus change to planted area should
  influence November soybean price movement, negatively, on Tuesday, and keep the July/November soybean spread inverted through delivery period.  We don’t expect China to one off buy a large amount of US soybeans anytime soon.  Political banter may escalate. 
  

·        
Funds sold an estimated net 6,000 soybeans contracts on Friday, sold 4,000 meal and sold 4,000 soybean oil.  

·        
Under the 24-hour reporting system, USDA reported export sales of 132,000 tons of soybeans for delivery to China during the 2020-21 marketing year. 

• US
  coronavirus cases surged on Thursday, a negative undertone for outside markets influencing CBOT ags. 
  
• China
  was on holiday and will be back on Monday. 
• Anec
  said Brazilian exporters cannot promise China that the soybeans will be coronavirus free.  Most US traders feel the same. 
  
• Dorab
  Mistry looks for India vegetable oil demand to return to normal in Q1 2021.  We agree global wide. 
  
• Offshore
  values this morning was leading CBOT soybean oil 26 points lower (27 lower for the week to date) and meal $0.20 lower ($0.10 lower for the week). 
  

·        
China cash crush margins as of this morning, using our calculation, were 47 cents per bushel and compares to 40 cents a week ago and 65 cents around this time last year.

 

Oilseeds
Export Developments

·        
Under the 24-hour reporting system, USDA reported export sales of 203,500 tons of sorghum received during the reporting period for delivery to unknown destinations. Of the total, 135,500 tons is
for delivery during the 2019-20 marketing year and 68,000 tons is for delivery during the 2020-21 marketing year. 

• 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
6/25/20

• August
  soybeans are seen in a $8.50-$8.90 range, over the short term (ST).
• August
  soybean meal is seen in a $275 to $300 range.  (ST)
• August
  soybean oil range is seen in a 26.75 to 29.00 range over the medium term

 

Wheat

• US
  wheat futures were slammed today to the downside on technical selling, harvest pressure, and global economic fears as coronavirus cases increase in multiple countries.  The selling shifted over into the wheat market after rattling corn on Thursday.  Chicago
  September wheat took out its contract low of $4.7675 established September 03, 2019.  That amplified selling pressure.  KC September saw a similar day taking out its September 4, 2019 all-time contract low of $4.3175, and MN also traded at a fresh contract
  low ($5.3125 previous May 4, 2020).  All three contracts failed to recoup losses to close above their respected contract lows during late trading when losses were partially paired. 
  

·        
Funds bought an estimated net 12,000 Chicago wheat contracts on Friday. 

• Early
  in the trade harvest pressure and improving Northern Hemisphere weather pressured wheat, along with forecasts for improving weather (rain) for the northern Great Plains and Canadian Prairies.  Yesterdays close favored Chicago wheat so today we might be seeing
  a reversal in direction for the three wheat markets amid positioning. 
• Export
  developments were light. 
• StatsCan
  is due out next week and traders are looking for about a 300,000 to 500,000-acre reduction in plantings for all-wheat, depending on which survey you follow.  Reuters estimates are above. 
  
• French
  soft wheat conditions were unchanged from the previous week at 56 percent.  Conditions remain well below average.  Rain across France was too late to boost crop prospects but at least production did stabilize.  Summer crop conditions look favorable. 
  
• Paris
  December wheat was down 1.25 at 178.75 euros.

 

Export
Developments.

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

 

Rice/Other

• None
  reported

 

Updated 6/26/20

• Chicago September is seen
  in a $4.60-$4.90 range, over the short term.
• KC September$4.10 support; $4.00-$4.50
  range over the medium term. 
• MN September $4.85-$5.25 range
  over the medium term with bias to upside.