FI Evening Grain Comments 07/08/20

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Attached are our updated US soybean complex S&D’s. 

 

Conab soybean production came in below expectations. The US will see localized rain bias Midwest this week before net drying occurs during the 6-10 period. The soybean complex ended lower led by soybean oil amid profit taking and Egypt passing on vegetable oils.  Corn ended higher following sharply higher wheat that has been trading lower production estimates for the EU and Black Sea region.  Global Grain Asia is July 9-10

 

 

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 net drying is expected.

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.

Source: World Weather Inc. and FI

 

 

Bloomberg Ag Calendar

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 DoE Crude Oil Inventories (W/W) 03-Jul: 5654K (est -3250K; prev -7195K)

– Distillate Inventories (W/W): 3135K (est 287K; prev -593K)

– Cushing OK Crude Inventories (W/W): 2206K (prev -263K)

– Gasoline Inventories (W/W): -4839K (est 550K; prev 1199K)

– Refinery Utilization (W/W): 2.00% (est 0.60%; prev 0.90%)

 

Corn.

• Corn started the day lower on a less than threatening US weather outlook, then traded higher after wheat rallied by most for a one-day period since March 19.  Yesterday there was talk China was a large buyer of US and Ukraine corn over the last two weeks.  EIA ethanol figures showed a less than expected increase in production and stocks increased from the previous week. 

·         Conab reported the 2019-20 Brazil corn production at 100.6 million tons, at the average trade guess and 0.4 million below the previous month. 

·         The USD was 39 points lower by late afternoon. 

·         Anec revised higher their July Brazil corn export projection to 5.16 million tons from 3.9 million tons. 

·         Ukraine exported a record 57 million tons of grain in 2019-20, 6.8 more than year earlier- Ministry for Economic Development. 

·         Global Grain Asia is July 9-10.

·         China is looking for sell 20,000 tons of pork out of reserves. 

• Platts – Brazilian June ethanol exports highest in seven years: SECEX  “Brazil’s total ethanol export in June was at 298.84 million liters, up 75% from June 2019 and the highest for any June since 2013 when the country exported 280 million liters, according to data released late July 6 by the Secretariat of International Trade, or SECEX. From total exports, 129 million liters or 43.2% shipped to the US and South Korea was the second highest importer, receiving 82 million liters. Accumulated exports in the first six months of 2020 were at 843.6 million liters, up 20% on the year. Considering exports since April 1, when the CS crop period 2020-21 started total volume was at 526 million liters, up 56% from the same period of 2019.”

·         US weekly ethanol production increased 14 million barrels per day to 914,000 barrels, up 10 consecutive weeks, highest level since March 27.  A Bloomberg poll looked for weekly US ethanol production to be up 18,000.  Ethanol stocks increased 456,000 barrels to 20.620 million.  This snapped a 10 consecutive week decline.  A poll looked for a 148,000-barrel increase. Days of inventory were 22.1, down from 26.9 a month ago and compare to 21.8 year ago.  Year to date production is down 10.2 percent from the same period a year ago.  At 914,000 barrels, implied corn use is finally back over 5.0 billion bushels.  Note there were imports of 36,000 barrels, first weekly import record since February 21. 

 

 

 

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 finished 2.5-5.75 lower led by soybean oil.  Meal was $1.30-$1.70 lower.  Soybean oil settled 32 points lower basis August in part to Egypt passing up on soybean oil and sunflower oil.  See the export development section. 

·         Conab reported the 2019-20 Brazil soybean production at 120.9 million tons, 1.8 million below an average trade guess and 0.5 million above the previous month.  The area was slightly higher.  They increased 2020 soybean exports to 80 million tons from 77 million tons. 

·         Anec revised higher their July Brazil soybean export projection to 8 million tons from 7.25 million tons.

·         China’s Sinograin sold 65,520 tons of soybeans out of auction, 100 percent of what was offered.  255,700 tons had been sold to date. 

·         We hear state owned Chinese crushers bought 1 cargo for 2021 out of Brazil on Tuesday. 

·         Thursday is a holiday in Argentina.   

 

Oilseeds Export Developments

• Egypt passed on 30,000 tons of soybean oil and 10,000 of sunflower oil for September 1-20 arrival.  Traders said the prices were too high.  Lowest offer for soybean oil was $735.45/ton and sunflower oil at $768/ton.  A couple weeks ago Egypt bought 59,000 tons of soybean oil at $675.63/ton and passed on sunflower oil.  Last time they bought sunflower oil was March 19 where they paid $676.50/ton.
• The Philippines are in for feed wheat which means they could be in for soybean meal. 

 

 

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 sharply higher on production woes for the EU, SA and Black Sea region.  Hot temperatures forecast for the US also supported prices.  The Rosario Grains Exchange lowered their outlook for the 2020 Argentina wheat crop to 18-19 million tons from 21-22 million tons previously, based on a lower area.  UK’s Agriculture and Horticulture Development Board estimated the soft wheat area down 9.4% from a February estimate to 1.363 million hectares (1.504 in Feb) and compares to 1.808 million sowed in 2019.  This area is very low compared to average.  The UK saw heavy rain late into 2019 followed by dry weather early spring.  According to AgriCensus, they calculate a 10.1-million-ton crop for the winter crop, well below an above average crop year before of 16.2 million tons.  Could this translate into more Canadian and US wheat shipments to UK this year?  It might.  Yesterday ProAgro lowered their outlook for Ukraine wheat production and IKAR decreased their estimate for the Russian grain/wheat crops. 

·         September Chicago wheat traded through its 50-day MA and settled at 5.1650. That is the highest level since June 9.  The 100-day is sitting at 5.25 and we think it’s heading there over the next week. 

·         Funds bought an estimated net 15,000 Chicago contracts.  That might be the most they bought in a single day since December 16^th when they bought the same amount. 

·         Note trade estimates look for the USDA to reduce new crop stocks and lower US production on Friday.  The US crop could end up below 2019 and well below a ten-year average. Below 2020 FI estimate.

 

·         FranceAgriMer:  French soft wheat shipments outside the EU projected at 7.75 million tons, down 43% from 2019-20 (13.6MMT) and the lowest volume in four years.  2019-20 was a record. 

·         Paris wheat traded 2.00-2.50 euros higher to a 4-week high.  

 

Export Developments.

·         Thailand passed on 193,300 tons of feed wheat.  Prices were about $10/ton over what they wanted to pay.

·         Jordan seeks 120,000 tons of wheat, optional origin, on July 14. 

·         No word yet for Thailand seeking 44,400 tons of feed barley. 

·         The Philippines seeks 110,000 tons of feed wheat on July 9. 

·         Yesterday Egypt bought 230,000 tons of Russian wheat for August 8-18 shipment.

• Japan received no offers for 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 7/8/20 – short term

• Chicago September is seen in a $4.90-$5.25 range, over the short term.
• KC September$4.10 support; $4.25-$4.75 range over the medium term. 
• MN September $5.10-$5.40 range.  ($5.40 was not revised)