FI Evening Grain Comments 07/01/20

PDF Attached

 

Most US agriculture futures saw a higher trade on follow through buying amid USDA Acreage report. It’s also a new month and new quarter.  Chicago and KC wheat were higher following corn.  Rain forecast for the northern Plains pressured MN wheat.  Both USDA NASS soybean crush and corn use were below expectation, soybean oil stocks above trade average.  Not much market influence from these reports, IMO for Thursday.  SBO could see some pressure but soybean price movement amid changes in the US weather outlook should continue to dictate direction.  Estimated managed money fund positions below. Note corn F&O was net short 288,000 as of 6/23. 

 

 

Weather and Crop Progress

MARKET WEATHER MENTALITY FOR CORN AND SOYBEANS:  Concern over U.S. crop weather during the next few weeks is rising with many forecasters offering drier and warmer biased conditions for key corn and soybean production areas in the Midwest. This developing concern and worry over ongoing dryness in the eastern Black Sea region and developing dryness in France will raise some market interest.

            Good crop weather is occurring in India and northern China’s main corn, sorghum, soybean and groundnut production areas are seeing a good mix of weather to support crops. Weather in Brazil is not offering any major changes to unharvested corn.

            Canola conditions are improving in parts of Canada’s Prairies and Australia’s canola is establishing relatively well.

            Overall weather will likely begin contributing a more bullish bias to market mentality as a new drying trend gets under way in the U.S. while France and the eastern Black Sea region’s deal with dryness as well.

 

MARKET WEATHER MENTALITY FOR WHEAT:  Favorable wheat maturation and harvest conditions are occurring in the Black Sea region, but a little too much rain has been occurring in the Balkan Countries where drier conditions are needed to promote better harvest conditions and to protect grain quality.

            Weather in Western Europe is more favorable for small grain filling and maturation. Weather is also favorable in the United States for hard red winter wheat maturation and harvest progress. Portions of the Midwest soft wheat in the U.S. will experience some improving crop maturation and harvest weather after the next few days pass due to drier and warmer weather.

            Wheat conditions in Canada are improving with rainfall this week and Australia crops remain in mostly good condition. There is need for rain in western Argentina, in many South Africa crop areas and in both Queensland and South Australia.

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

Source: World Weather Inc. and FI

 

 

Bloomberg Ag Calendar

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

 

 

 

 

Macros

·         US ADP Employment Change Jun: 2369K (est 2900K; prev -2760K)

·         Positive Revision To Prior For US ADP: US ADP Employment Change Jun: 2369K (est 2900K; prevR+3065K; prev -2760K)

·         US DoE Crude Oil Inventories (W/W) 26-Jun: -7195K (est -500K; prev 1442K)

– Distillate Inventories (W/W): -593K (est 500K; prev 249K)

– Cushing OK Crude Inventories (W/W): -263K (prev -991K)

– Gasoline Inventories (W/W): 1199K (est -1500K; prev -1673K)

– Refinery Utilization (W/W): 0.90% (est 0.50%; prev 0.80%)

 

Corn.

·         Fund buying of an estimated net 35,000 contracts lifted September corn to its highest level since March 31.  New month/new month was seen today and follow through buying.  September is now trading well above its key 100-day MA, by ending 9.0 cents higher today at $3.5050. 

·         Hard to believe US summer is half complete as we enter July.  USD was lower and WTI crude were firmer and US equities mixed.  We don’t expect much in the way for Chinese demand for the remainder of the week.  US producer selling may increase on Thursday if corn finds additional support ahead of the long holiday weekend.  Gulf corn firmed about 2 pennies from yesterday.  Barge values were firm.  

·         For Thursday’s short session (close at noon), look for the trade to remain focused on the drier pattern for the WCB post July 4. 

·         Funds bought an estimated net 35,000 corn contracts on Wednesday after buying 40,000 on Tuesday 33,000 on Monday. 

·         China looks to sell another 4 million tons of corn from reserves on Thursday.  China corn prices remain near a 5-year high. 

·         China is seeing a reemergence in African swine fever that is sending domestic pork prices higher.

·         The USDA Broiler Report showed eggs set in the US up 1 percent and chicks placed up 1 percent from year ago.  Cumulative placements from the week ending January 4, 2020 through June 27, 2020 for the United States were 4.83 billion. Cumulative placements were down 1 percent from the same period a year earlier.

·         US weekly ethanol production was up 7,000 barrels per day, or 0.8% to 900,000 barrels and stocks were down a large 870,000 barrels or 4.1% to 20.164 million barrels.  A Bloomberg poll looked for weekly US ethanol production to be up 15,000 and stocks to decrease 65,000 barrels.  Cumulative crop year to date production is down 10 percent from the comparable period last season.  We are using 4.875 billion bushels for corn for ethanol usage, 25 million below USDA.  The week ending June 26 stamps the ninth consecutive week of expansion following the April 24 low of 537,000 barrels.  Stocks are down ten consecutive weeks to 20.164 since peaking at 27.689 million as of April 17, a 27 percent decrease. 

·         USDA NASS reported corn use for ethanol production during May below our expectations ay 300 million bushels and well below 4.59 million year ago. 

 

 

 

 

Corn Export Developments

• None reported. 

 

China nearby rolling corn futures, monthly

Source: Reuters and FI

 

 

Updated 6/30/20

September corn is seen in a $3.20 and $3.65 range over the short term.  December lows could reach $3.05 if US weather cooperates. 

 

Soybean complex.

·         A higher trade in soybeans lifted the November contract over the $9.00 per bushel mark.  SX came close to filling the March 6-March 9 gap of $9.0350 and $9.0000.  Bear spreading was a feature from follow through bullish sentiment over the less than expected increase in the US 2020 soybean planted area. 

·         Brazil’s Paranagua port was knocked offline due to strong winds, delaying shipping.  Abiove sees Brazil’s soybean production at 125MMT, up 0.5 from previous.  StoneX (formally FC Stone) is at 122.61 million tons.  Conab (120.5 last month) is due out next week.  Brazil exported 13.750 million tons of soybean during June, up from 8.552 million tons year earlier.  The 13.75 million tons was about 1.5-3.0 million tons above some trade estimates we read late last month.  The quicker the Brazilian soybean stocks decline, the earlier US exports to China will increase later this summer. 

·         August soybeans traded at their highest level since March 30.  China cash crush margins improved from yesterday and China soybean meal futures were up 1.8 percent, an added supportive feature for US soybean meal futures, which ended $6.40-$9.30 higher (bear spreading).  Malaysian palm snapped a 5-day losing streak by trading 30 MYR higher.  Rotterdam vegetable oil and meal prices are sharply higher from this time yesterday morning.  US soybean oil finished 20-23 higher.  We don’t expect much in the way for Chinese demand for the remainder of the trading week so look for the trade to remain focused on change in the US weather forecast. 

·         The May soybean crush for the US came in 0.9 million bu below expectations at 179.5 million bushels and soybean oil stocks 48 million pounds above expectations at 2.447 billion.  See table below. 

·         The heat next week will impact the most the eastern Corn Belt with temperatures 3-5 F degrees above normal.  It will be dry across the eastern Midwest and southern Midwestern areas.  Wisconsin and Michigan will see the highest deviation for above normal temperatures. 

·         China’s Sinograin sold all of its soybeans out of auction.  49,550 tons were offered, bringing total sales at 190,200 tons. 

·         Anec sees Brazil June soybean exports at 11.9 million tons, 37 percent above year ago period.  They are using 78 million tons for the 2020 export season, up from 73 million tons in April. 

·         Funds bought an estimated net 11,000 soybeans contracts on Wednesday, bought 7,000 meal and bought 2,000 soybean oil.

• Offshore values this morning was leading CBOT soybean oil 9 points higher and meal $1.00 higher. 

·         ITS: June Malaysian palm exports 1.510 million tons, 21 percent above May.  AmSpec: Malaysian June exports for palm oil were 1.629MMT, up 28.7 percent mom.  ITS: up 29 percent to 1.622MMT. 

·         Malaysian palm oil snapped a 5-day losing streak on higher mineral oil. 

 

 

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 7/1/20 – soy and meal revised higher

• August soybeans are seen in a $8.75-$9.15 range, over the medium term (MT).
• August soybean meal is seen in a $280 to $315 range over the short term.  (ST)
• August soybean oil range is seen in a 27.50 to 29.00 range over the short term

 

Wheat

·         Similar to where direction was headed for each of the US wheat markets earlier this morning, Chicago and KC wheat ended higher following corn, and MN lower.  Rain forecast for the northern Plains is pressuring MN wheat.  Japan is in for feed wheat and Algeria bought 300,000 tons of food wheat. 

·         Funds bought an estimated net 7,000 Chicago wheat contracts on Wednesday. 

·         Serbia’s 2020 wheat production was seen up 5.3 percent from year ago. 

·         Union Grain shut its Washington Terminal after COVID-19 cases were confirmed. 

·         Ukraine exporters and government will meet in August (10) to set a target on export quotas. 

• Paris December wheat ended 1 euro higher at 181.50, a 2-week high. 

 

Export Developments.

• Thailand bought over 100,000 tons (sought 236,800 tons) of feed wheat for Aug-Jan 2021 shipment. (3 consignments).  $215.50-$219.00 / ton was noted. 
• Algeria bought 300,000 tons of milling wheat, optional origin, for Aug-Sep shipment, depending on origin.  $218/ton c&f was noted.
• Japan seeks 80,000 tons of feed wheat and 100,000 tons of barley on Wednesday, July 8, for arrival by December 24. 
• Ethiopia seeks 400,000 tons of wheat on July 10 for shipment within two months.    

 

Rice/Other

• Locust swarms are impacting India’s sugarcane crop.

 

Wheat minus corn

Source: Reuters and FI

 

Updated 6/30/20

• Chicago September is seen in a $4.70-$5.05 range, over the short term.
• KC September$4.10 support; $4.15-$4.55 range over the medium term. 
• MN September $5.00-$5.40 range over the medium term with bias to upside.