FI Evening Grain Comments 08/20/21

PDF Attached

 

USDA’s
24-hour sales streak ended today. Sales were announced over the past 11 business days. 
https://www.fas.usda.gov/newsroom 

 

CBOT
agriculture markets fell hard in a risk off session, weekend rain forecast for the upper Great Plains & Canadian canola areas, and headlines that the EPA sent a proposal to the White House that recommends lowering biofuel mandates. 

 

Pro
Farmer projected higher corn and soybean yields and production relative to USDA. 

 

 

We
look for corn conditions to decline 1 in the combined good and excellent categories, and soybeans to remain unchanged.  At 61 and 57 for corn and soybeans respectively, if realized, they both would be at a season low.  Since more than 50 percent of the spring
wheat crop had been collected, USDA will not issue a crop progress update.  Spring wheat G/E last week settled at 11 percent.  Note the range this season was 9 to 45 percent, 45 at the beginning of the season.  September MN rallied about $1.43 since April
30. 

 

 

 

Weather

 

WORLD
WEATHER INC.

MOST
IMPORTANT WEATHER OF THE DAY

• Grace
  has been upgraded to hurricane status again this morning and will be moving to Veracruz, Mexico tonight

o  
Damaging wind and flooding rain is expected central and northern parts of the state where rainfall of 4.00 to 12.00 inches is likely along with wind speeds gusting over 80 mph at times.

o  
Damage to citrus, sugarcane and rice is expected along with at least some concern over coffee, although that crop is not likely to be seriously impacted

• Tropical
  Storm Henri will reach hurricane intensity today and then reach New England Sunday into Monday

o  
The storm will  produce serious flooding from the coastal storm surge and inland heavy rainfall  of more than  8.00 inches

o  
Power Outages are expected along with considerable coastal damage from flooding and excessive wind.

o  
Henri will likely weaken while over New England becoming a tropical storm and then losing its tropical characteristics; however, it will remain a nasty storm and impact New Hampshire, Maine and Nova
Scotia, Canada into early next week.

• Rain
  is still expected to evolve heavily tonight and Saturday in interior western and north-central North Dakota before moving through Manitoba, Canada.

o  
Rainfall of 1.00 to 3.00 inches will occur in these areas while the remainder of North Dakota and western Minnesota receive 0.30 to 0.90 inch with local totals to 1.30 inches

o  
Western South Dakota and eastern Montana will not receive nearly as much moisture, although some of these areas received rain in the most recent 24 hours

• Rain
  from this weekend’s storm in the northern U.S. Plains will shift to the east and dissipate across the  Midwest, but some areas in western  Iowa, eastern Nebraska and a few neighboring areas will get some welcome moisture
• Central
  and eastern Midwest locations may dry out into early next week and then gradually see periodic showers and thunderstorms later in the week and during the following weekend resulting in some relief from recent drying
• The
  bottom line for U.S. Midwest crop areas is still mostly good with enough rain over the next ten days to support crop development. There will still be some areas of dryness that will need to be watched, but a huge expansion of dryness or drought into the region
  is not very likely. More rain will still be needed, however, and the weather should certainly not be interpreted as ideal in the western Corn Belt. Rain that falls in a part of the region is still going to be limited. Drier and warmer weather that comes around
  next week and into the early days of September will accelerate drying and return some concern over dryness, but crops will be just a little closer to maturity before stress becomes an issue once again.
  
• U.S.
  west-central and southwestern Plains will experience net drying conditions for a while leaving some dependency upon irrigation for normal crop development; however, some areas (like West Texas) have received significant moisture recently and crop development
  will be good during the drier period
• West
  Texas cotton, corn and sorghum areas would benefit from greater heat units, but the moisture profile is very good for ongoing crop development

o  
Cotton needs the heat more than the other crops

• South
  Texas harvest weather will remain ideal over the next ten days
• A
  good mix of weather will occur from the U.S. southern Plains into the southeastern states
• U.S.
  Northern Plains high temperatures Wednesday contrasted from the upper 40s and 50s in central Montana to the 60s and 70s in eastern Montana while in the 90s to 101 in central parts of the Dakotas
• U.S.
  Pacific Northwest and California will continue drier biased for a while
• Monsoon
  rainfall in the U.S. Rocky Mountain region and southwestern desert region will continue favorably over the next ten days
• Autumn
  coolness in western Canada is expected to prevail through the weekend and into early next week with some of the cooler conditions getting into the northwestern U.S. Plains, the far northern U.S. Rocky Mountain region and the eastern Prairies at times through
  the first half of next week

o  
Some pockets of frost may evolve briefly in a part of the Prairies early to  mid-week next week and a close watch is warranted

o  
No frost is expected in the United States

• Cool
  air will also slip through the U.S. Midwest during the middle and latter parts of next week with no threat of frost
• Western
  and southern Mexico will continue to receive frequent rain over the next ten days benefiting all crops
• Central
  America will be plenty wet over the next couple of weeks supporting most crop needs

o  
There may be some risk of flooding eventually

• Europe
  weather will be good for fieldwork and late season crop development from France to western Russia through the weekend

o  
Some cooling and a boost in shower activity is likely in eastern Europe next week

o  
France, the U.K. and Spain will likely stay dry and warm through the next ten days to possibly two  weeks

• Southeastern
  Europe remains too dry and warm, but some cooling and a few showers will evolve next week and into the following weekend offering a little relief

o  
Most of the rain will not be great enough to seriously ease dryness and crop stress will continue, although at a lower intensity because of cooler conditions in the second week of the  outlook

• Drying
  will continue in Kazakhstan and much of Russia’s New Lands for the next ten days speeding along spring and summer crop maturation, but maintaining worry over spring cereal and sunseed yield in Kazakhstan and southern parts of the New Lands

o  
No rain in these areas now can improve wheat or sunseed yields

• Western
  Ukraine, Belarus and western and northern Russia will see a good mix of shower activity and warm temperatures will occur in central and over the next ten days to maintain most crop needs

o  
Some cooling is expected in the second half of next week into the first days of September

• Showers
  that evolved in eastern Ukraine and neighboring areas Thursday will continue into Saturday
  

o  
The moisture will be light, but welcome as temporary relief from recent drying

o  
Drier biased conditions will resume after that for a little while

• Northwestern
  India will continue drier than usual, including Gujarat, western and northern Rajasthan and neighboring areas of Pakistan

o  
Punjab and Haryana should get some rain

o  
A few showers are also expected in Gujarat and Rajasthan, but resulting rainfall is not  likely to be great enough for a long-term benefit

o  
Central and especially eastern India will receive abundant rainfall during the next ten days keeping the ground saturated in many areas and inducing a little flooding

• West-Central
  Africa will continue to receive periodic rainfall with a boost in Ivory Coast and Ghana rainfall expected gradually during the next two weeks
• Ethiopia
  will be wetter than usual
• China
  will continue to see alternating periods of rain and sunshine over the next ten days with areas between the Yellow River Basin and the Yangtze Rivers wettest

o  
Some additional flooding may impact a part of the region

o  
A favorable mix of weather is expected in Northeastern China and near and north of the Yellow River

o  
Drier weather is needed in spring wheat areas of northeastern China where rain has been a little too frequent recently

o  
Temperatures will be seasonable

• Northeastern
  Xinjiang, China weather will improve after recent stormy weather and unusually cool condition

o  
Abundant rain and severe thunderstorms impacted many areas

o  
Weather conditions will improve over the next ten days with highs much closer to normal and only a few showers possible

• South
  Africa received more rain in interior southwestern winter crop areas Thursday after greater rain occurred in the west Wednesday

o  
The moisture continues to create an ideal environment for wheat development this season

• South
  Africa will experience some additional rain over the next ten days with southern and easternmost parts of the nation wettest
• Argentina
  southern and eastern crop areas will continue favorably rated with moisture, but rain is needed in the west

o  
Winter crops are dormant or semi-dormant right now making the moisture shortage in the west of little concern, but spring rainfall will be very important

• Brazil
  rainfall will continue limited to the far south over the next two weeks which is not unusual for this time of year

o  
Large moisture deficits remain in center south Brazil from 2020-2021 and could be a factor in spring crop development potential if La Nina delays the onset of season moisture

o  
River and stream flow remain critically low in much of the Parana River Basin

• Brazil
  temperatures will rise well above normal above normal in the west and south as well as in Paraguay and northern Argentina during the coming five days with some relief expected shortly after that, but in the south only. Central and northern areas will stay
  warm into early September

o  
Stress will be greatest in coffee production areas where crop damage has already occurred because of late July frost and freezes

• Southeast
  Asia nations will all receive sufficient rain to support crops during the next two weeks

o  
The forecast includes an improving rain distribution for Sumatra, Java, Kalimantan and the central and southern Philippines all of which have been trending a little too dry recently

• Thailand
  will be the one nation to watch for possible inadequate rainfall
• Australia
  weather will continue favorably for wheat, barley and canola which are semi-dormant at this time of year. Soil moisture is favorable and ready to support spring growth when warming comes along especially if timely rainfall continues as advertised

o  
Queensland and northern New South Wales still need significant rain to restore soil moisture after recent drying

• Some
  showers are expected in these areas briefly Sunday into Monday
• Southern
  Oscillation Index has reached +4.58 and it will move erratically over the next several days
• New
  Zealand rainfall during the coming week will be above average in western South Island and near to below average elsewhere; temperatures will be seasonable

Source:
World Weather Inc. 

 

Bloomberg
Ag Calendar

Friday,
Aug. 20:

• ICE
  Futures Europe weekly commitments of traders report (6:30pm London)
• CFTC
  commitments of traders weekly report on positions for various U.S. futures and options, 3:30pm
• China’s
  country-wise import data for farm goods such as soybeans, corn and pork
• FranceAgriMer
  weekly update on crop conditions
• Malaysia
  Aug. 1-20 palm oil export data
• U.S.
  Cattle on Feed, 3pm

Monday,
Aug. 23:

• USDA
  export inspections – corn, soybeans, wheat, 11am
• U.S.
  crop conditions – corn, cotton, soybeans, wheat, 4pm
• Monthly
  MARS bulletin on crop conditions in Europe
• Ivory
  Coast cocoa arrivals

Tuesday,
Aug. 24:

• EU
  weekly grain, oilseed import and export data
• U.S.
  poultry slaughter

Wednesday,
Aug. 25:

• EIA
  weekly U.S. ethanol inventories, production
• Malaysia
  Aug. 1-25 palm oil export data
• Unica
  cane crush, sugar production (tentative)

Thursday,
Aug. 26:

• USDA
  weekly crop net-export sales for corn, soybeans, wheat, cotton, pork, beef, 8:30am
• International
  Grains Council monthly report
• Port
  of Rouen data on French grain exports

Friday,
Aug. 27:

• ICE
  Futures Europe weekly commitments of traders report (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

78
Counterparties Take  $1111.905Bln At Fed’s Fixed-Rate Reverse Repo (prev $1109.938 Bln, 78 Bidders)

 

Corn

• Corn
  was lower in a risk off trade early during the day session, then made another leg down on rumors the EPA sent their biofuel mandate recommendations to the White House.  The EPA is expected to recommend to the White House lowering biofuel blending mandates
  below 2020 levels, according to a Reuters story at was released around 11:35 am CT.  We don’t have any details, but heard the EPA is looking to adjust the mandates that fit current production levels.  Note US gasoline demand is still running behind pre-COVID
  levels.  Hopefully the trade will see details sooner than later to squash speculation.  The way we look at it, if its profitable, the end product will be used. 
  
• Gasoline
  demand, when looking at the average for the last 4-weeks, is running 2.6% below mid-July to mid-August 2019 levels.
  
• USD
  fell by late morning after reaching a 9-1/2 high against a basket of currencies. 
  
• Global
  economic concerns continue to hang over the commodity markets.  It’s thought China’s markets saw a half a trillion dollars wiped out over the past week in part to China regulatory crackdowns. 
  
• Cattle
  on Feed was near expectations for August 1 on feed, but placements and marketings fell short of expectations. 
  

 

 

Export
developments.

• South
  Korea’s FLC bought 66,000 tons of corn at $319.99/ton for Sep 13-Oct 12 shipment.  Origin is South America or South Africa. 
  
• Results
  awaited:  Qatar seeks about 100,000 tons of barley on August 18 for Sep-Nov delivery. 
  
• Turkey
  bought 270,000 tons of barley at various prices ($284.80-$293.90/ton) for shipment between Sep 1 and Sep 25. 
  

 

 

Updated
8/20/21

September
corn is seen is a $5.20-$5.60 range. Down 20 cents both sides

December
corn is seen in a $4.75-$6.00 range

 

Soybeans

• The
  CBOT complex fell hard led by soybean oil, but meal rallied late presumably on meal/oil spreading.  CBOT SBO Dec futures traded its 350-point lower limit on news that the EPA will lower biofuel blending rates.  Contracts settled 261 to 329 points lower.  Mel
  was up $0.60-$1.80 higher and soybean settled 23.50-29.25 cents lower. 
• In
  a risk off session, prices made several legs down, in part to the news that the EPA will propose to the White House to lower 2021 selected biofuel and 2022 biodiesel mandates.  Adding the weakness was a forecast calling for rain across Canada’s canola areas. 
  Canola was down $30.90 basis November.  The US weather forecast is non-threatening. 
  
• USDA’s
  24-hour sales streak ended today. Sales were announced over the past 11 business days. 
  https://www.fas.usda.gov/newsroom 
  
• India
  lowered its base import taxes on crude and refined soyoil and sunflower oil to 7.5% from 15% for six weeks, paving the way for a good amount of imports during the month of September, just before the new crop crush increases. 
  
• Malaysian
  palm oil futures were up 27 points to 4,265 and cash was up $2.50/ton at $1,067.50/ton. 
  
• Cargo
  surveyor ITS reported month to date August 20 Malaysian palm exports at 781,291 tons versus 883,085 tons month earlier. 
  
• China
  crush margins improved on Friday and are higher from the previous week. 
  China cash crush margins were last positive 110 cents on our analysis (previous 89) versus 87 cents late last week and also 87 cents around a year ago.

 

Export
Developments

• Results
  awaited: South Korea’s Agro-Fisheries & Food Trade Corp. seeks 3,700 tons of non-GMO soybeans (August 19) for arrival between Oct. 20 and Nov. 19.
• Yesterday
  Egypt’s
  GASC got one offer in sunflower oil tender at 1,336 a ton c&f, and they bought 10,000 tons.  There were no soyoil offers.  This is for arrival Oct 5-25.  Payment is for 180-day letters of credit or at sight.  Last GASC tender for sunflower oil was 6/22 for
  10K @ $1133/ton.  Prior to that was on June 8, GASC paid $1368/ton for combined 40k tons of sunoil.

 

Updated
8/20/21

September
soybeans are seen in a $12.75-$13.50 range (down 35, down 50);
November $11.75-$15.00

September
soybean meal – $345-$370; December $320-$425

September
soybean oil – 56-60;
December 48-67 cent range

 

Wheat

• Wheat
  traded lower in all three US markets.  Sharply lower corn and soybeans pressured prices.  Initially wheat was lower, in our opinion, from a favorable weather forecast calling for rain across the upper Great Plains this weekend.  Chicago was lower from risk
  off and KC lower on harvest pressure.  MN held gains early from a sharply higher September Paris wheat contract but fell after soybeans collapsed. Remarkably the nearby MN wheat contracts rallied into the close and September settled 0.25 cent higher and December
  was off only 3.75 cents. 
• We
  are hearing more chatter over EU wheat quality problems.  France is 91 percent complete with soft wheat harvesting, up from 72% week earlier. 
  
• EU
  December wheat was up 0.75 euros at $244.50.  September was up 12.25 euros.  Sep-Dec spread settled at 25.75 euros, September premium (30.25 was today’s high). 
  
• The
  Euro is near a November 2020 low. 
• Algeria’s
  import tender included plans for Russia to send two vessels (120,000 tons) to Algeria in September.
• Ukraine
  is nearly complete with their wheat harvest.  Ministry has a 32-million-ton target.  The yield averaged 4.62/tons per hectare. 
  
• Ukraine
  has exported nearly 6.2 million tons of grain since July versus 5.6 million at the same last year, including 2.9 million tons of wheat. 
  
• Egypt
  said they have six months of strategic wheat reserves. 

 

US
Wheat Associates “The HRW harvest is all but complete with data holding steady. SW harvest is progressing quickly as testing data reflects a stressed crop. HRS harvest is nearly 70% complete and currently grades as U.S. #1 Dark Northern Spring. The northern
durum crop is more than 30% harvested with good quality but variable yields reported.”

 

Export
Developments. 

• The
  Philippines bought 165,000 tons of Australian feed wheat and barley for Octo/Nov shipment.  The wheat was bought at $340/ton and barley $287-$289/ton. 
  
• Bangladesh
  seeks 50,000 tons wheat on September 1.
• Pakistan
  seeks 400,000 tons of wheat on August 23 for Sep/Oct shipment. 
• Morocco
  seeks 363,000 tons of US durum wheat under a tariff import quota on August 24 for shipment by December 31. 
  
• Jordan
  seeks wheat on Aug 25.

 

Rice/Other

• None
  reported

 

Paris
September – December milling wheat spread peaked at 30.25 earlier today. 

 

Updated 8/17/21

December Chicago wheat is seen in a $6.80‐$8.25 range

December KC wheat is seen in a $6.60‐$8.00

December MN wheat is seen in a $8.45‐$9.80