FI Evening Grain Comments 10/07/20

PDF Attached

 

USDA
reported additional 24-hour sales this morning.  USDA Attaché issued a bullish China corn S&D. 

 

 

Weather
and Crop Progress

 

 

 

 

 

 

NORTH
AMERICA

• GFS
  model removed much of the rain previously advertised from hard red winter wheat country during the next ten days, although a few showers remained
• Some
  of the reduction was needed
• European
  model has greater rain in northern and eastern portions of hard red winter wheat areas, as well as eastern Colorado leaving the southwest half of the region mostly dry
• European
  model is a little too wet in Colorado, Nebraska and northwestern Kansas
• European
  model has greater rain for the western and central Midwest next week while the GFS has limited rainfall in the region
• The
  lighter and more limited rainfall outlook is correct, although the region may not be completely dry
• GFS
  model rain was increased in the lower and eastern Midwest mostly from the Ohio River Valley because of Hurricane Delta
• This
  change was needed
• European
  model run was wetter over a larger part of the central and eastern Midwest from the hurricane and a mid-latitude frontal system that follows
• The
  model is too wet

 

Overall,
the bottom line today is rain in hard red winter wheat is expected to be restricted during the next ten days to two weeks as was the official World Weather earlier this week. The models have been periodically overdoing rainfall in the region and today’s
GFS model run is preferred, although additional changes are probable. The European model is too wet for the Midwest over the next ten days, but World Weather, Inc. agrees with bringing moisture from
Hurricane Delta farther north into the lower Midwest than advertised Tuesday.

 

SOUTH
AMERICA

• GFS
  model outlook has not changed greatly for center west into center south Brazil for next week with rain expected in many areas
• Restricted
  rainfall occurs in Mato Grosso do Sul, western Parana and western Sao Paulo,
  although a little more rain falls in these areas than advertised Tuesday morning
• Rain
  in Brazil’s center south and center west crop areas is restricted from Friday of next week through October 21, although a few sporadic showers are expected – net drying is expected
• Far
  southern Brazil is still advertised to see a good mix of rain and sunshine during the next ten days to two weeks favoring crops and fieldwork
• No
  changes were noted in Argentina for the first ten days of the outlook with Buenos Aires and eastern La Pampa getting most of the nation’s significant rain – most of which occurs Saturday into Sunday of this week
• Argentina
  rainfall was advertised to increase Oct. 18-21, but the latest model run reduced rain in San Luis, La Pampa and western Cordoba relative to the 00z model run
  
• Some
  of this reduction was needed

 

The
generalities of the South America outlook have not changed much today relative to the previous model run or the overall outlook suggested Tuesday. Argentina is not likely to see much rain for ten days except in Buenos Aires and eastern La Pampa where some
rain will fall this weekend to maintain a good outlook for crops in that region. In Brazil, a period of beneficial moisture will impact center west and center south crop areas next week; although portions of Mato Grosso do Sul and western and northern Parana
as well as western Sao Paulo may not get much rain and will need more soon.

 

EUROPE/BLACK
SEA REGION

• Some
  rain fell in western Ukraine overnight with amounts to 0.75 and local totals to 1.34 inches, but this moisture did not reach into eastern areas
• No
  significant theme changes occurred overnight
• Rain
  will fall in most of Europe over the coming week to ten days to two weeks
• Areas
  from the Adriatic Sea region to southeastern Germany, western and southern Poland and parts of western Europe will be wettest
• Eastern
  Ukraine will continue to receive little to no
• Kazakhstan.
  The middle and lower Volga River Basin and Russia’s Southern Region will continue very dry

CHINA

• No
  general theme changes noted overnight
• Northeastern
  China may not get rain every day, but its frequency will still be high enough along with seasonably milder temperatures to slow the region’s needed drying and further delaying some of the region’s summer crop maturation and harvest progress
• A
  good mix of rain and sunshine in the Yellow River Basin and North China Plain will be perfect for wheat planting, germination and emergence while allowing some of the region’s summer crops to mature and be harvested
• Frequent
  rain near and south of the Yangtze River will slow farming activity and maintain some concern over crop conditions

China
still needs drier weather in most areas in the nation to promote summer crop maturation and harvesting and to support early season wheat and other winter crop planting. The northeastern Provinces are still much too wet, although the region has seen a little
less frequent and less significant rainfall recently.

 

INDIA

• No
  general theme changes were noted overnight
• A
  better mix of rain and sunshine will occur in northeastern China during the next two weeks allowing for better harvest progress
• The
  best weather will continue in the Yellow River Basin and North China Plain where a favorable mix of rain and sunshine is expected to support winter crop planting and summer crop harvest progress

 

AUSTRALIA

• No
  big changes were noted overnight in the coming ten days
• Western
  Austr4alia is still not advertised to receive much significant rain
• Only
  a few showers near the southern and lower western coasts are expected
• Rain
  will fall often enough in Victoria, South Australia and southern New South Wales to maintain a very good crop outlook
• Rain
  was increased in southeastern Queensland and northeastern New South Wales after October 18 and through Oct. 21
• Some
  of this increase was needed, but it might also be a little overdone

 

Limited
rainfall in Western Australia continues to raise worry over potential wheat, barley and canola yields in unirrigated areas away from the coasts where reproduction might occur without sufficient moisture to support the best yields. There is still time for improved
rain, although none is expected for the next two weeks.  Rain in southeastern Queensland and northeastern New South Wales should translate into favorable sorghum and cotton planting conditions, but the event is still more than ten days away which warrants
a little caution since changes can still occur over time.

Source: 
World Weather Inc. 

 

Bloomberg
Ag Calendar

WEDNESDAY,
Oct. 7:

• EIA
  U.S. weekly ethanol inventories, production, 10:30am
• HOLIDAY:
  China

THURSDAY,
Oct. 8:

• USDA
  weekly crop net-export sales for corn, soybeans, wheat, cotton, pork, beef, 8:30am
• UN
  FAO World Food Price Index
• India
  SEA-Globoil webinar with Dorab Mistry, Thomas Mielke and James Fry
• Brazil’s
  Conab releases first report on 2020-21 planted area, output and yield of soy and corn
• Port
  of Rouen data on French grain exports
• EARNINGS:
  Suedzucker, Agrana
• HOLIDAY:
  China

FRIDAY,
Oct. 9:

• USDA’s
  WASDE report with world supply/demand crops update, stockpiles noon
• 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
• China’s
  CNGOIC to publish monthly soy and corn reports
• China
  agriculture ministry (CASDE) to release its monthly data on supply and demand
• FranceAgriMer
  weekly update on crop conditions
• Brazil
  Unica cane crush, sugar production (tentative)
• HOLIDAY:
  Korea

Source:
Bloomberg and FI

 

 

 

 

 

 

Macros

 

US
DoE Crude Oil Inventories (W/W) 02-Oct: 501K (est -1200K; prev -1980K)

–
Distillate Inventories (W/W): -962K (est -1100K; prev -3184K)

–
Cushing Inventories (W/W): 470K (prev 1785K)

–
Gasoline Inventories (W/W): -1435K (est -500K; prev 683K)

–
Refinery Utilization (W/W): 1.30% (est 0.10%; prev 1.00%)

 

Corn.

• CBOT
  corn was higher Wednesday on technical buying and sharply higher wheat.  December corn is at its highest level since January 2020.  USDA Attaché issued a bullish China corn S&D earlier. 
  
• Funds
  bought an estimated net 15,000 corn contracts. 
• Producers
  in parts of the Delta are bracing for another large tropical storm this week.  Much of the corn down there had been collected but late planted summer crops may not fair to well. 
  
• China
  bought $10.7 billion of US agriculture and related products during the first eight months of 2020.  Yet the US trade deficit is at a 14-year high. 
  
• China
  feedgrains update.  The USDA Attaché sees 2020-21 China corn production at a low 250 million tons, well below 260 million tons for USDA’s official forecast and below 260.77 million tons in 2019-20.  On the demand side, they see corn for feed at 190 million
  tons, up from 187 million in 2019-20 and 184

Million
previous season. 

https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Grain%20and%20Feed%20Update_Beijing_China%20-%20Peoples%20Republic%20of_09-27-2019

• Brazil
  domestic corn prices reached record highs for some locations, according to Sao Paulo university price index. 
  
• Germany
  ASF:  49 cases since September 10 

 

Weekly
US ethanol production increased 42,000 barrels to 923,000, highest weekly rate since early September.  Stocks decreased 19,000 barrels to 19.672 million.  A Bloomberg poll looked for ethanol production to be up 14,000 and stocks down 42,000 barrels. Production
is still well down from a year ago.  September through October 2 ethanol production is averaging 7.4 percent the same period a year ago.  Gasoline stocks fell 1.4 million barrels to 226.7 million.  The ethanol blend rate fell to 90% from 90.4% previous week,
lowest blend since Aug 14.  Implied corn use would be 5.05 billion bushels if weekly production increases slightly and averages about 925 million for the rest of the crop year. 

 

 

 

Corn
Export Developments

• SK’s
  NOFI bought 59,000 tons of soybean meal at $451.49/ton c&f for Dec shipment and 206,000 tons of corn, expected to be from South America, at $239.80/ton c&f for LH No/FH Dec shipment. 
  

 

Updated
9/30/20

• December
  corn is seen in a $3.60-$4.00 range. 2020-21 to average $3.75 for corn and $2.85 for oats. 
  

 

Soybean
complex.
 

• China
  demand dominated the trade in soybeans today.  Soybean oil was under pressure from bull spreading in soybean oil.  China September soybean imports were estimated at 7.1 million tons, down 32 percent from a month ago, with 5.5 million tons originating from
  Brazil, according to Refinitiv.  They pegged October imports at 8.4 million tons, including 3.4 million tons from the US.  We look for the bulk of the 17.5 million tons that are sitting on the US sales book will be import by China through early February. 
  This is the main reason soybean bull spreading took off today. 
• Soybeans
  started higher in all month through 2021 but by afternoon trading, bull spreading dominated the market, keeping November and January sharply higher and back months lower.  November settled 7.0 cents higher, Jan 5 higher and March 2.75 cents lower.  New lows
  were established for the back months near or during the modified session. 
  
• Funds
  bought an estimated net 6,000 soybean contracts, bought 6,000 soybean meal and sold 1,000 soybean oil. 
  
• 900
  SX/SH traded in late afternoon trading at 16 to 18.5. The spread went out +21.50. 
  
• Soybean
  meal prices have rallied for several reasons, including slowing Brazil and Argentina exports, surge in DDGS prices at the Gulf (up 21% since July), and soybean meal/corn relationship (ratio converted to tons below)

• Malaysian
  palm oil prices appreciated for the third straight day, up 54 ringgit or nearly 2% to 2,872/ton.  Traders are looking for Sep MPOB palm production to increase 3.1% from Aug. Report will be out October 12. 
  
• Brazil’s
  Parana state soybean plantings have seen their slowest start in five years. 
  
• There
  was talk of disappointing yield results across selected Midwest locations on Tuesday.
  
• Traders
  are now expecting a friendly USDA S&D update with lower US yield and possible increase in US exports due to planting delays in Brazil.  
  
• CBOT
  soybean open interest hit a record 1,023,637 contracts on Tuesday +7,987.
• Egypt:
  Vegetable oil reserves are sitting at a 6-month high after buying 86k tons on Tuesday. 
  

 

Oilseeds
Export Developments

• Under
  the 24-hour announcement system, private exporters reported to the U.S. Department of Agriculture the following activity:
• Export
  sales of 132,000 metric tons of soybeans for delivery to China during the 2020/2021 marketing year
• Export
  sales of 120,000 metric tons of soybeans for delivery to unknown destinations during the 2020/2021 marketing year

• SK’s
  NOFI bought 59,000 tons of soybean meal at $451.49/ton c&f for Dec shipment and 206,000 tons of corn, expected to be from South America, at $239.80/ton c&f for LH No/FH Dec shipment. 
  

• Syria
  seeks 50,000 tons of soybean meal and 50,000 tons of corn on October 26 for delivery within four months of contract. 
  

 

 

Updated
10/6/20

• November
  soybeans are seen in a $10.00-$11.00 range; $9.60 average for 2020-21
• December
  soybean meal is seen in a $340-$380 range.   $305 average for 2020-21
• December
  soybean oil is seen in a 31.50-34.70 range.  34.00 cents average for 2020-21

 

Wheat

• US
  wheat futures traded sharply higher on talk of persistent dryness across the US southern Great Plains, Argentina and Black Sea region.  Traders need to be cautious with the recent appreciation in US wheat futures.  One good soaking for the US and/or Black
  Sea region will allow producers to rapidly plant their crops.  Note Russia is nearly three quarters complete on plantings. 
  
• Funds
  bought an estimated 12,000 SRW wheat contracts. 
• March/July
  Chicago wheat remains inverted on ideas global supplies will tighten during first half 2021 before northern hemisphere harvesting replenishes supplies. 
  
• Morning
  GFS model removed much of the rain previously advertised from hard red winter wheat country during the next ten days, although a few showers remained. 
  

• Russia
  plans to introduce grain export quotas for the January through June period.  Russia will remain in a drier bias pattern through FH October. 
  
• Russia’s
  Deputy Prime Minister projected Russian grain exports may reach 50 million tons for 2020-21, up from 45 million previously.  For the Jan-Aug period, nearly 20 million tons of wheat was exported.
  
• 70
  percent of Russia’s winter grain planting is complete as of October 5.    
  
• Second
  week of the US weather outlook was a little wetter for the Midwest but the Great Plains will remain drier bias.
  
• ProAgro:
  Ukraine 2020 grain production 69.44MMT, down from previous 71.34MMT, with corn at 31.74MMT from 34.02 last month. 
  
• Paris
  (Matif) December wheat was 0.50 higher at 200.50 euros.

 

Export
Developments.

• Pakistan
  bought 330,000 tons of wheat at $278.50/ton c&f, optional origin, for arrival by Jan 15. 
  
• Jordan
  passed on 120,000 tons of wheat, optional origin. 
• Japan
  is in for food wheat, 118,000 tons, including 61,985 from the US, 25,790 tons from Canada and 30,653 ton from Australia. 
  
• Turkey
  seeks 135,000 tons of 12.5% and 13.5% wheat on October 9 for oct 16 and Nov 2 shipment. 
  
• Jordan
  seeks 120,000 tons of wheat on October 13, optional origin, for Jan -late Feb shipment.
• Ethiopia
  seeks 400,000 tons of wheat by October 13.
• (new
  9/15) Ethiopia seeks about 200,000 tons of milling wheat on October 15.

 

Rice/Other

·        
The Philippines seek 300,000 tons of rice, a day after reports they were mulling over ideas to curb imports to prop up domestic prices.  The Philippines may halt rice imports for a couple months
to help support domestic prices. 

·        
Mauritius seeks 5,500 tons of white rice on October 20 for Dec 15-Mar 15, 2021 delivery.

·        
(Bloomberg) — U.S. 2020-21 cotton ending stocks seen at 6.79m bales, 411,000 less than USDA’s previous est., according to the avg in a Bloomberg survey of nine analysts.

o  
U.S. production seen at 16.74m bales vs 17.06m in September

o  
Global ending stocks seen 103,000 bales lower at 103.74m

 

Updated
10/6/20

• December
  Chicago wheat is seen in a $5.60-$6.25 range. Chicago 2020-21 average $5.55
• December
  KC wheat is seen in a $5.00-$5.60 range. KC 2020-21 average $5.05.   
• December
  MN wheat is seen in a $5.30-$5.55 range. MN 2020-21 average $5.45