FI Evening Grain Comments 07/15/20

PDF Attached includes crush, ethanol, and funds

 

Higher trade in soybeans and sharply higher trade in wheat on good global import demand.  Corn traded two-sided, ending unchanged to slightly higher due to ideal US weather.

 

 

Weather and Crop Progress

 

MARKET WEATHER MENTALITY FOR CORN AND SOYBEANS:  U.S. weather is advertised to be unsettled enough over the next two weeks to limit problems with moisture stress to small parts of the production region. However, watch closely, some very warm temperatures are expected in southern areas this weekend into next week that might accelerate drying and surprise some traders how quickly the ground has firmed back up again after recent rain. The majority of Midwestern crop areas will see a favorable mix of weather during the next ten days, but that does not mean a little moisture stress will not take place in a few pockets.

            Concern over crop conditions in France and neighboring areas of the U.K, and Germany will continue as well as in the Balkan Countries and from eastern Ukraine to Russia’s Southern Region, despite some recent shower activity.

           Worry over Russia’s central New Lands where sunseed is produced may continue this workweek, but relief is expected briefly this weekend into next week.  China’s biggest threat is due to flooding, but only a minor amount of corn, soybean and groundnuts are being lost from that event.

            Australia and Canada’s canola crops are improving with little change likely. There are still some notable concerns about too much moisture in parts of Alberta and northwestern Saskatchewan and not enough in parts of the eastern Canada Prairies. Southern parts of the Prairies will be drying out soon.

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

 

MARKET WEATHER MENTALITY FOR WHEAT:  Most of the damage to world wheat has likely been swallowed by the market with recent USDA and other agency reports. Dryness continues in northwestern and southeastern Europe, Russia’s Southern Region and now Russia’s central New Lands, although rain is expected in the central New Lands this weekend into next week.

            China’s spring wheat crop is likely developing well and Australia’s crop looks a little better as each weak moves along. Western Argentina, however, is still too dry. Argentina will get some rain late this weekend into early next week to offer “some” relief. South Africa has received some welcome rain recently to improve its western wheat crop, but small grains farther east are still quite dry.

            Spring wheat in the northern U.S., Plains, Pacific Northwest and Canada’s Prairies varies greatly with too much moisture in western Alberta and some pockets of notable dryness from North Dakota into eastern Saskatchewan.

            Overall weather today will likely have mixed influence on market mentality.

Source: World Weather Inc. and FI

 

Bloomberg Ag Calendar

WEDNESDAY, July 15:

• EIA U.S. weekly ethanol inventories, production, 10:30am
• Brazil chicken, pork group ABPA’s press conference on output, exports
• International Sugar Organization’s online conference on Covid-19 impact on sugar and alcohol
• Malaysia’s palm oil export data for July 1-15

THURSDAY, July 16:

• USDA weekly crop net-export sales for corn, soybeans, wheat, cotton, pork, beef, 8:30am
• Port of Rouen data on French grain exports
• North America 2Q cocoa grindings
• European Cocoa Association 2Q grind data

FRIDAY, July 17:

• 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
• Cocoa Association of Asia releases 2Q cocoa grind data

Source: Bloomberg and FI

 

 

Macros

US Empire Manufacturing (Jul): 17.2 (est  10, prev -0.2)

Canada Manufacturing Sales (M/M) May: 10.7% (est 9.8%, prev -28.5%)

US Import Price Index (M/M) Jun: 1.4% (est 1%, prev 1%)

US import Price Index (Y/Y) Jun: -3.8%(est -3.7%, prev -6%)

US Export Price Index (M/M) Jun: 1.4% (est 0.8%, prev 0.5%)

US Export Price Index (Y/Y) Jun: -4.4% prev 6%)

 

Corn.

• September corn snapped a three-day losing streak.  Nearly all the contracts traded two-sided from higher soybeans.  USDA reported additional corn sales to China, but traders again shrugged off the news.  The US weather outlook this morning was largely unchanged but some of the models disagree for the US with changes in the distribution of rain for week one and week two.  The southwestern areas may end up the driest over the next couple of weeks.  Bottom line is US weather looks good.  
• Funds were even in corn. 
• US ethanol production increased from the previous week and stocks were down slightly. 
• We heard China was also in for Black Sea corn yesterday.  Ukraine exported about 3 million tons of corn to China during FH 2020. With 3.2+ million tons sold from the US recently, the 7.2-million-ton import quota by China could be fulfilled by the end of this month, assuming all of what was sold reaches China by the end of 2020, in my opinion. 
• APK-Inform: Ukraine’s grain exports 50.6 million tons, up from 48.9 million tons a month earlier.  Ukrainian corn production 36.6 million tons from 35.4 million tons. 

·         The USD was 40 lower by 7:24 am CT.  

• Traders should monitor central Iowa, northern Indiana and Ohio, where those states are expected to get rain over the next couple of weeks. 

 

The weekly build in US ethanol stocks stalled with a draw of 12,000 barrels to 20.608 million barrels.  Production was higher than expected at 17,000 barrels to 931,000 barrels.  Traders were looking for a 226,000 barrel increase in stocks and production to increase 14,000 barrels.  US corn crop year ethanol production to date is running 10.3 percent below the same period a year ago.

 

 

 

 

Corn Export Developments

• Under the 24-hour announcement system, US exporters sold 132,000 tons of corn and 389,000 tons of soybeans to China.

• South Korea’s FLC bought 65,000 tons of corn at $188.74/ton c&f for November 20 arrival. Later we learned they also bought 65,000 tons for October 10 arrival at 184.78/ton. 
• South Korea’s MFG bought 65,000 tons of corn at $188.74/ton c&f for December 30 arrival. They passed on a second cargo. 
• Results awaited: Iran seeks 200,000 tons of corn and 200,000 tons of barley on Wednesday for Aug/Sep delivery. 

 

 

Updated 7/10/20

• September corn is seen in a $3.20 and $3.65 range over the short term.  December lows could reach $3.10. 

 

Soybean complex.

·         Chinese buying of US soybeans and a friendly NOPA soybean crush report lifted CBOT soybeans higher.  Soybean meal was up 0.60-1.10 and soybean oil rallied 24-34 points on higher global vegetable oil prices.  Funds bought an estimated net 8,000 soybeans, 1,000 meal and 4,000 soybean oil. 

·         Front month spreads were very firm against 2021 contracts in part to export demand, lack of producer selling and better than expected June crush indicating USDA might be on track after they lifted their crush estimate by 15 million bushels in the July S&D report. 

·         NOPA reported a US June crush at 167.3 million bushels, 5.1 million above an average trade guess.  NOPA end of June soybean oil stocks of 1.778 billion pounds were 35 million below a trade guess and down from 1.880 billion pounds reported at the end of May.   The June crush was a record for that month.  Daily adjusted it improved to 5.58 million bushels per day from 5.47 million last month.  Soybean meal exports were good at 835,400 short tons and were the second highest for the month of June in at least 15 years.  Soybean oil stocks for end of June were the highest for that month since 2019.  With a large crush, implied soybean oil demand was good.  June exports were likely high. 

• China soybean margins continue to improve.  We heard China bought at least ten US Sep-Nov soybean cargoes overnight out of the Gulf at 202-205 cents over the Nov.  Later Reuters reported China bought at least 5 cargoes of US soybeans, or 300,000 tons. 
• Anec increased their view for Brazil July soybean exports to 8.9MMT from 8.0 previously. 
• India’s soybean production was estimated above 10.7 million tons from 9.3 million in 2019 on good monsoon rains, according to the trade via Rueters.
• Malaysian palm oil is near a 5-1/2 month high. 
• AmSpec reported exports of Malaysian palm oil for July 1 – 15 fell 10.1 percent to 829,294 tons from 922,251 tons shipped during June 1 – 15 and compares to 18 percent decline for the first 10 days. ITS shows a 9.1 percent decline to 831,155 tons.  Note SGS reported a decline of 20.4 percent to 461,806 tons for the July 1-10 period. 
• Indonesia’s 2021 biodiesel consumption was estimated at 10 million kiloliters, assuming “normal” demand next year-bioenergy director at Energy and Mineral Resources Ministry.

 

NOPA reported a very good crush and lower than expected soybean oil stocks.  See text above. 

 

 

Oilseeds Export Developments

• Under the 24-hour announcement system, US exporters sold 132,000 tons of corn and 389,000 tons of soybeans to China.

·         Oil World noted combined US sales of sorghum, corn, wheat and soybeans (4) to China from March to mid-June total 18.3 million tons (18.8MMT after this morning) from 5.6 million year earlier, while actual exports remain low at 4.2MMT vs. 5.7 year earlier. 

 

Updated 7/10/20

• August soybeans are seen in a $8.60-$9.10 range, over the medium term (MT).
• August soybean meal is seen in a $275 to $310 range over the short term.  (ST)
• August soybean oil range is seen in a 27.00 to 28.50 range over the short term

 

Wheat

·         Chicago wheat hit a its highest level since April.  Short covering was a major feature. Talk of China buying US wheat, fresh import tender announcements, and rising global cash prices rallied all three US markets.  The weather forecast was slightly drier for the Canadian Plains.  Egypt yesterday paid $8/ton more for wheat that the previous week.  AgriCensus noted Black Sea feed wheat traders are struggling to cover shipping volumes. 

·         Funds bought 18,000 Chicago wheat contracts. 

• Germany’s association of farm cooperatives estimated the 2020 wheat harvest down 2.6% to 22.46 million tons, up from 22.21 million tons projected in June.
• Germany’s association of farm cooperatives estimated the 2020 winter rapeseed crop up 13.7% from last year to 3.21 million tons, up slightly from the 3.20 million tons estimated in June.
• ProZerno Director General Vladimir Petrichenko estimated Russia wheat production at 78.3 million tons in 2020, 5 percent higher than last year.  That is up from 77 million tons in May. 
• China’s 2020 “summer grain” production was increased to 142.81 million tons, up 0.9 percent from the previous year, according to the stats department.  Wheat was projected at 131.68 million tons, a 0.6% increase. 
• Global import tenders are picking up.  China bout about 7 cargoes of Australian wheat for December shipment, another indicator they are stockpiling.  They paid between $225 and $232 tons.  Pakistan bought Black Sea wheat. 

·         Paris December wheat was up 2.25 at 188.50, at the time this was written.

 

Export Developments.

• Jordan seeks 120,000 tons of wheat on July 21 for Sep-Nov shipment. 
• Japan in an SBS import tender seeks 80,000 tons of feed wheat and 100,000 tons of barley on July 22 for arrival by December 24.
• Ethiopia postponed an import tender for 400,000 tons of wheat to July 20 from July 10. 

·         Japan seeks 125,957 tons of food wheat from the US, Canada, and/or Australia. 

• Syria seeks 200,000 tons of milling wheat from Russia by July 28. 

 

Rice/Other

• None reported

 

 

Updated 7/15/20

• Chicago September is seen in a $5.30-$5.75 range.
• KC September; $4.40-$4.80 range. 
• MN September $5.25-$5.60 range.