FI Evening Grain Comments 07/07/20

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GFS model looked a little wetter for the heart of the Midwest this morning.  Corn was  mostly lower for the day.  Soybeans chopped around.  The talk today was about biodiesel demand and meal demand bias WCB.  We get ethanol numbers on Wednesday.  USDA report is Friday.  Wheat traded two-sided on a pickup in global import demand and cut to the French wheat crop.   

 

 

Weather

 

MARKET WEATHER MENTALITY FOR CORN AND SOYBEANS:  Concern over U.S. weather, northwestern Europe weather, eastern Black Sea weather and the central New Lands weather will maintain some bullishness to market mentality today. Weather in China may also be contributing some bullishness because of flooding, although most of the crop damage has not been in key corn and soybean production areas.

            India’s weather looks very good and canola establishment in southern Australia is advancing favorably. Canada’s Canola will receive some timely rainfall to provide some improvement to crop conditions.

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

 

MARKET WEATHER MENTALITY FOR WHEAT:  Wheat harvest weather in the U.S. will be fair to good over the next ten days. Very good conditions are expected in western and central Europe and the eastern Black Sea region as well. Rain may be threatening grain quality in Eastern Europe, including western Ukraine, Belarus and western Russia.  China wheat quality may have slipped a little in recent weeks because of some rainy weather.

Spring wheat in northeastern China is in good condition. Some improvement in wheat is expected in Canada as rainfall increases in the Prairies, although some of the crops in the driest areas in Saskatchewan have already advanced too far to benefit from rain.  Crop conditions may also improve in the U.S. northern Plains. Rain is needed in the U.S. Pacific Northwest, although much of that crop is irrigated.  Crop conditions in southeastern Canada are rated favorably.

There is some concern over future Russia spring wheat conditions in the central New Lands where heat and dryness are expected soon.

Australia winter grains are establishing relatively well, although more rain is needed in Queensland and South Australia. Rain is also needed in western Argentina. Too much rain may fall in southern Brazil soon that could result in some crop damage.

Overall, weather today is likely to produce a mixed influence on market mentality.

 

 

Bloomberg Ag Calendar

TUESDAY, July 7:

• U.S. Purdue Agriculture Sentiment, 9:30am
• New Zealand global dairy trade auction

WEDNESDAY, July 8:

• EIA U.S. weekly ethanol inventories, production, 10:30am
• Brazil’s crop agency Conab releases data on area, output and yield of corn, soybeans
• China’s CNGOIC releases monthly report on supply and demand of soy and corn
• FranceAgriMer monthly crop report

THURSDAY, July 9:

• USDA weekly crop net-export sales for corn, soybeans, wheat, cotton, pork, beef, 8:30am
• Port of Rouen data on French grain exports
• Brazil’s Unica may release cane crush, sugar production during the week (tentative)
• EARNINGS: Suedzucker, Barry Callebaut, Agrana
• HOLIDAY: Argentina

FRIDAY, July 10:

• USDA’s monthly World Agricultural Supply and Demand (Wasde) report, noon
• China farm ministry’s CASDE monthly crop supply- demand report
• Malaysian Palm Oil Board’s data on reserves, exports and production in June
• 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
• Malaysia’s palm oil export data for July 1-10
• Cherkizovo trading update
• HOLIDAY: Singapore (election day), Argentina

Source: Bloomberg and FI

 

 

 

 

 

 

 

Macros

US JOLTS Job Openings May: 5397 (est 4500; prev R 4996)

US Pres. Trump: ‘We Will Stay Open, We’re Not Closing’

 

Corn.

• Corn traded most of the day lower on a slight improvement for week one of the US weather outlook.  Rain is expected to fall across the heart of the Midwest where crop conditions are lagging top rated states.  The USD was higher.  Funds sold 10,000 corn. 
• CBOT deliverable corn stocks are extremely low for this time of year at 448,000 bushels and compares to 3.6 million a year ago.  Toledo was zero and Chicago 80,000.  One broker can’t recall Toledo going to zero, for both corn and soybeans. 

·         Brazil’s Mata Grosso IMEA department looks for the state corn crop to end up near 33.27 million tons, slightly higher than last month.  

·         Argo ethanol prices hit a 7-month high on Monday at $1.53/gal. 

·         A Bloomberg poll looks for weekly US ethanol production to be up 18,000 at 918,000 barrels (903-950 range) from the previous week and stocks to increase 148,000 barrels to 20.312 million.

·         86 US meal plant workers perished to COVID-19 through the end of May, according to the CDC. 

 

Corn Export Developments

• None reported

 

 

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.

CBOT soybeans ended lower following weakness in soybean meal, higher USD, lower outlook for 2020-21 China soybean imports and lower corn futures.  Link to China Attaché : https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Oilseeds%20and%20Products%20Update_Beijing_China%20-%20Peoples%20Republic%20of_07-01-2020

·         We heard state owned Chinese crushers bought 3 cargoes out of the PNW on Monday.  Over in Argentina, we heard 90,000 tons of SME traded to Europe on Monday.  The Argentina SME purchase rallied Argentina soybean oil prices. 

·         CBOT SBO basis the August nearly filled gap of 2882 – 2903, established early March. 

·         There were questions and talk about biodiesel today as traders start looking forward at the 2020-21 US monthly US soybean oil balance sheet.  We will have ours out this week.  Our US soybean oil for biodiesel demand for 2020-21 is 8.0 billion pounds, same as USDA.  Not an unreasonable number. We factored in regular yearly growth (omitting 2019-20), increase in truck rates during the pandemic (trucks not cars use biodiesel/diesel), recent soybean oil monthly use numbers, reduction in reusable restaurant grease, and reduction in other feedstocks to arrive at 8.0 billion. 

·         The EU imported 15.36 million tons of soybeans during 2019-20 vs. 15.14 million year earlier, and 6.01 million tons of rapeseed vs. 4.23 million during 2018-19. 

·         There was talk about slowing US meal demand bias northwestern WCB and could be a reason for some oil/meal spreading today.  But be cautious as we look downtime later this month and August that could regionally tighten up supplies.  DDG prices are cheap and with the increase in ethanol production, more and more of the product is coming back online.  Corn basis is also cheap across much of the Dakotas. For some other US areas, meal demand remains good. 

·         September CBOT crush has been on a downward spiral since early April. 

·         India vegetable oil imports during June were 1.16 million tons, above 707,000 tons in May.  November-June imports are down 15 percent from year earlier.  June imports signal a recovery in stocks. 

 

Oilseeds Export Developments

• Egypt on Wednesday seeks 30,000 tons of soybean oil and 10,000 of sunflower oil for September 1-20 arrival.  A couple weeks ago Egypt bought 59,000 tons of soybean oil and passed on sunflower oil. 

 

 

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

·         US wheat traded two-sided, ending higher on an uptick in global import demand and cuts to the French Ukraine, and Russia wheat production estimates. 

·         Paris wheat traded near a 4-week high. 

·         Egypt bought 230,000 tons of Russian wheat for August 8-18 shipment. The lowest offer was $205 per ton FOB for 55,000 tons of Russian.

·         French farm ministry estimated the soft wheat production down 21% this year at 31.31 million tons versus  39.55 million in 2019, second smallest French soft wheat crop since 2004.  The area is lowest since at least 2003 at 4.41 million hectares. 

·         ProAgro: Ukraine wheat production estimate:  26.07 from 26.65MMT. 

·         IKAR: Russia 2020 grain crop 126MMT vs. 128 previous and wheat 78MMT vs. 79.5MMT previous. 

• Paris December wheat was up 1.50 at 185.50 at the time this was written.

 

Export Developments.

·         Egypt bought 230,000 tons of Russian wheat for August 8-18 shipment. The lowest price was $204.80 per ton FOB for 55,000 tons of Russian.  They last bought wheat on June 17 that included Ukraine, Russia and Romanian origin at $216.23 to $219.20 per ton. 

o   55,000 tons of Russian wheat at $204.80 FOB and $14 freight equating to $218.80 C&F

o   55,000 tons of Russian wheat at $204.80 FOB and $14 freight equating to $218.80 C&F

o   60,000 tons of Russian wheat at $205.60 FOB and $13.20 freight equating to $218.80 C&F

o   60,000 tons of Russian wheat at $205.60 FOB And $13.20 freight equating to $218.80 C&F

·         Thailand seeks up to 193,300 tons of feed wheat and 44,400 tons of feed barley on July 8. 

• Jordan bought 60,000 tons of wheat at $236.95/ton c&f for FH shipment. 
• 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.    
• Syria seeks 200,000 tons of milling wheat from Russia by July 28. 

 

Rice/Other

• None reported

 

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.