FI Morning Grain Comments 01/04/21

PDF attached includes EIA biofuel related charts (after text)

 

Morning. 

 

Eastern
Argentina missed out on rains over the weekend with precipitation limited to the western areas.  Southern and western Buenos Aires and La Pampa will see a few rain events today and continue into San Luis, Cordoba and Santiago del Estero thereafter.  Argentina
weather this week will include scattered showers and thunderstorms.  Brazil saw scattered showers over the long holiday weekend.  Brazil will see rain on and off over the next two weeks. Some areas will not receive adequate rainfall including the southern
and eastern Mato Grosso, Bahia, eastern Piaui, Pernambuco and northeastern Minas Gerais.

 

Sharply
higher commodity prices are seen this morning for the agriculture complex and metals. The USD is sharply lower and WTI crude slightly higher (OPEC meets today). 
CBOT
corn traded sharply higher overnight with the rolling nearby contract reaching a May 2014 high.   Much of the strength was related to ongoing South America weather concerns and Argentina shutting down corn registrations until February 28.  COT report will
be out later today.  US monthly EIA ethanol production came in slightly better than expected.  CBOT soybeans continued to climb into the New Year on concerns over Argentina transportation disruptions and ongoing South America dry weather conditions.  Late
on Thursday Reuters reported that the Argentina grain inspector union, Urgara, was going to extend their strike over the long holiday weekend.  Palm futures traded higher for the 4^th consecutive session, near a 10-year high with the rolling third
month contract highest since March 2011 (up 124 points on Monday and cash up $32.50/ton).  Recent flooding in Malaysia and Indonesia are thought to impact palm oil production.  US soybean oil for biodiesel feedstock during October 2020 was 723 million pounds,
higher than expected.  US wheat was higher earlier this morning despite the US Great Plains seeing welcome precipitation over the weekend.   Bangladesh is in for wheat. 

 

Reuters:
Most active rolling in 2020…

• Soybean
  contract up 37.1%, highest rise since 2007
• Corn
  up 25.3%, highest rise since 2010
• Chicago
  wheat up 14.9%, up four consecutive years

 

 

 

Weather

 

 

From
Sunday

1.      
Argentina rainfall Thursday into this morning was limited to the far west from San Luis to Santiago del Estero where rainfall varied from 0.12 to 0.79 inch most often

1.      
Local totals to 1.14 inches occurred in Santiago del Estero and to 1.92 inches in San Luis.

2.      
Dry weather occurred elsewhere and temperatures were warm

3.      
Highest afternoon temperatures Thursday through Saturday were in the 90s Fahrenheit with an extreme of 102 at Bahia Blanca in southwestern Buenos Aires and 104 in west-central Santiago del Estero

4.      
Lowest morning temperatures were in the upper 40s and 50s in the far south and in the 50s and 60s in most other areas

1.      
A few warmer readings occurred in Formosa

 

2.      
Argentina weather will not change much through Saturday, although a few thunderstorms will occur today and Monday in southern and western Buenos Aires and La Pampa while continuing in San Luis,
Cordoba and Santiago del Estero.

1.      
Rain totals this week will range from 0.50 to 1.50 inches in southwestern Buenos Aires and La Pampa while varying from 0.60 to 2.00 inches and locally more in the west-central parts of the nation

2.      
Heavy rain will fall in Salta

3.      
Net drying is expected in all other crop areas including the key grain and oilseed production areas in the heart of the nation

4.      
Temperatures will be seasonably warm, but not hot

 

3.      
Argentina weather next week will include scattered showers and thunderstorms in some of this week’s driest areas, but no general soaking of rain is expected

1.      
Daily rainfall will vary from 0.20 to 0.75 inch with coverage eventually reaching close to 85%, but day to day rainfall may not have nearly as great of coverage and intensity as that needed to seriously change soil moisture and crop
conditions

2.      
Many areas from eastern Buenos Aires through eastern Santa Fe and Entre Rios may struggle to get enough rain to counter evaporation leaving crops in notably stressed conditions

3.      
Argentina’s greatest rain will fall in the west where another 0.50 to 1.50 inches is possible during the week next week

4.      
Temperatures will continue a little warmer than usual

 

4.      
Argentina’s bottom line will remain one of concern for central and eastern crop areas in the nation where rainfall will be quite limited over the next two weeks and temperatures will continue warm. Some crop improvements are expected
from Salta through Santiago del Estero and portions of Cordoba to San Luis

5.      
Brazil’s weather pattern did not change greatly during the holiday weekend

1.      
Showers and thunderstorms maintained favorable crop and field moisture from parts of Mato Grosso through portions of Goias to Minas Gerais and some northern Sao Paulo locations

2.      
Rain also fell in Parana and a few eastern Paraguay locations

3.      
Amounts in each of these areas varied from 0.30 to 0.60 inch with local totals of 1.00 to 2.00 inches

1.      
As much as 3.54 inches of rain fell in eastern Minas Gerais

2.      
Net drying occurred elsewhere in the nation with Bahia, northern Minas Gerais, Rio Grande do Sul, Santa Catarina and southern Paraguay reporting little to no rain along with parts of Mato Grosso
do Sul

4.      
Highest temperatures during the weekend were in the 80s and lower 90s Fahrenheit except in Mato Grosso, Tocantins, northern Minas Gerais and western Bahia where upper 90s to readings near 100 were noted

 

6.      
Brazil’s weather is not expected to change greatly, although rain and thunderstorms will reach most crop areas at one time or another during the next two weeks

1.      
Resulting rainfall is expected to be erratic and some areas will not get enough rain to counter evaporation while others will be plenty wet

1.      
Southern and parts of eastern Mato Grosso may not receive much rain in this first week of the outlook with 0.40 to 1.50 inches resulting

1.      
Bahia, eastern Piaui, Pernambuco and northeastern Minas Gerais will not receive enough rain to counter evaporation

2.      
Most other areas will receive 0.65 to 2.50 inches of rain through Sunday with locally more

2.      
Week 2 rainfall (Jan. 11-17) will scatter across a large part of Brazil with the week’s total moisture varying from 0.60 to 2.00 inches and locally more

1.      
Driest in Rio Grande do Sul, southern Paraguay and a few far northeastern Brazil locations

2.      
Temperatures will be seasonable with highs in the 80s and lower to a few middle 90s most days followed by lows in the 50s and 60s south and the 60s and lower 70s north

1.      
A few extreme highs near 100 will occur in the drier areas

7.     
Brazil’s bottom line should remain mostly favorable for its reproducing and filling soybean and corn crops. Sugarcane, citrus and coffee will also experience improving conditions as will cotton and rice. The environment will be
good for production, but some of the dryness from earlier this year already hurt production and some of that loss cannot be made up by improved weather in January.

Source:
World Weather Inc. and FI

 

 

Source:
World Weather Inc. and FI

 

Bloomberg
Ag Calendar

Monday,
Jan. 4:

• USDA
  weekly corn, soybean, wheat export inspections, 11am
• U.S.
  winter wheat conditions, cotton harvested, 4pm
• USDA
  soybean crush, DDGS production, corn for ethanol, 3pm
• CFTC
  and ICE commitments of traders reports, delayed from Jan. 1, with data for week ended Tuesday Dec. 29
• EU
  weekly grain, oilseed import and export data
• Australia
  Commodity Index
• Ivory
  Coast cocoa arrivals
• HOLIDAY:
  Russia, New Zealand

Tuesday,
Jan. 5:

• New
  Zealand global dairy trade auction
• Purdue
  Agriculture Sentiment, 9:30am
• Malaysia’s
  Jan. 1-5 palm oil export data
• Virtual
  palm oil trade fair and seminar 2021, Jan. 5-7
• HOLIDAY:
  Russia

Wednesday,
Jan. 6:

• EIA
  weekly U.S. ethanol inventories, production, 10:30am
• China’s
  CNGOIC to publish soy and corn reports
• HOLIDAY:
  Russia, Poland

Thursday,
Jan. 7:

• FAO
  World Food Price Index
• USDA
  weekly crop net-export sales for corn, soybeans, wheat, cotton, pork, beef, 8:30am
• Port
  of Rouen data on French grain exports
• HOLIDAY:
  Russia, Ghana, Egypt

Friday,
Jan. 8:

• 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
• Trading
  of China’s hog futures to begin on Dalian Commodity Exchange
• HOLIDAY:
  Russia

Source:
Bloomberg and FI

 

 

 

 

 

Macros

 

Corn.

• CBOT
  corn traded sharply higher overnight with the rolling nearby contract reaching a May 2014 high.   Much of the strength was related to ongoing South America weather concerns and Argentina shutting down corn registrations until February 28. 
  We
  are hearing Argentina export restrictions were affecting offers beyond March, but it’s still early to tell what is seen today.  COT report will be out later today.  Funds bought an estimated net 10,000 corn contracts were bought on Thursday. 
  
• CBOT
  open interest for corn was up 14,235 contracts (March up 4,118).  Option volume was very high on New Year’s Eve in large part to spread rolling.  Roughly 323,600 corn options traded (weekly, short dated and regular) versus 299,944 futures. 
  
• China
  plans to increase its corn planted area across the main growing regions in efforts to reverse several years of contraction.  They will focus on expanding corn acreage in the northeast as well as areas around the Yellow, Huai and Hai rivers.  China planted
  41.264 million hectares of corn in 2020, yielding 260.67 million tons.  Note last week China’s National Energy Administration (NEA) warned local provinces to use more ethanol. 
  
• France’s
  Bird Flu Outbreak Rises to 61 Cases as of Jan. 1 (Bloomberg)
• Vietnam
  pork prices hit a 20-year record high in 2020.  6 million pigs were culled last year. 
  
• Trade
  News Service reported the following latest Argentina registrations:

• US
  monthly EIA ethanol production came in slightly better than expected.  We remain at 5.150 billion bushels of corn use, 50 above USDA. 
  

 

 

Corn
Export Developments

• Qatar
  seeks 100,000 tons of bulk barley on January 12.

• Qatar
  seeks 640,000 cartons of corn oil on January 12.

 

 

Soybean
complex.  

• CBOT
  soybeans continued to climb into the New Year on concerns over Argentina transportation disruptions and ongoing South America dry weather conditions.  Soybean prices hit a July 2014 high overnight.  Late on Thursday Reuters reported that the Argentina grain
  inspector union, Urgara, was going to extend their strike over the long holiday weekend. 
  
• USDA
  NASS US crush will be released after the close (estimates below). 
• Looking
  ahead, USDA will release its December 1 grain stocks report and crop annual on January 12.  Note the last component we use in determining US stocks will be November trade data, which will be released on Thursday, January 7.  Our trade estimates for 2020 US
  supply and 2021 canola & winter wheat acreage will be (re-released) in tonight’s comment. 
  
• Nearby
  rolling soybean meal reached its highest level since September 2014.
• Nearby
  rolling soybean oil traded at a March 2014 high. 
• CBOT
  open interest for soybeans was down 1,798 contracts (Jan down 1,803 to 4,198). 
  
• Last
  we heard as of late last week IL SBO basis was 150 over, East 175 over, West 100 over and Gulf 750 over, all unchanged from the previous week.  Brazilian basis levels were nominally 815 over, fob.
• Offshore
  values this morning were leading CBOT soybean oil 95 points higher and meal $0.80 higher.
  
• Rotterdam
  soybean oil values sharply higher, rapeseed oil up about 10 euros, and Rotterdam meal widely mixed. 
  
• Malaysian
  palm oil futures:  Palm futures traded higher for the 4^th consecutive session, near a 10-year high with the rolling third month contract highest since March 2011.  Recent flooding in Malaysia and Indonesia are thought to impact
  palm oil production. 

• China
  cash crush margins were 98 cents on our calculation, compared to 113 last week and 133 year ago.
  
• China
  futures

• U.S.
  production of biodiesel was 160 million gallons in October 2020, 1 million gallons higher than production in September 2020. There was a total of 1,170 million pounds of feedstocks used to produce biodiesel in October 2020. Soybean oil remained the largest
  biodiesel feedstock during October 2020 with 723 million pounds consumed.  We raised our 2020-21 US soybean oil for biodiesel production to 8.020 billion pounds from 8.000 billion, 80 million below USDA. 
  

 

 

 

 

Oilseeds
Export Developments

• The
  USDA/CCC seeks 2,000 tons of vegetable oil, packaged in 4 liter cans, for export to Kenya on January 5 for February 1-28 shipment (Feb 16 to Mar 15 for plants located at ports).

 

Wheat

• US
  wheat was higher earlier this morning despite the US Great Plains seeing welcome precipitation over the weekend.
  
• Nearby
  rolling Chicago wheat reached its highest level since December 2014. 
• CBOT
  Chicago wheat open interest was up 595 contracts (March down 75). 
• Funds
  were estimated net even in Chicago wheat on Thursday (not +10k as reported). 
  

• Iran
  pegged wheat production at 13 million tons of during the next Iranian year beginning on March 20.
• Australia’s
  northern Queensland will continue to see a tropical low storm system, moving further inland, bringing widespread flooding rainfall.
  
• EU
  March milling wheat was up 2.25 at 215.50 euros. 

 

Export
Developments.

• Bangladesh’s
  lowest offer for 50,000 tons of wheat was $326.92 a ton CIF liner floated. 
  
• Jordan
  will be back in for animal feed barley (120k) on January 5.  Possible shipment combinations are in 2021 for June 1-15, June 16-30, July 1-15 and July 16-31. 
  

 

Rice/Other

·        
None reported