FI Morning Grain Comments 06/10/20

PDF attached

 

Morning. 
China buys Q4 US PNW soybeans, record US corn production prospects pressure futures, and wheat is higher from an uptick in global import demand.

 

 

 

Weather

UNITED
STATES

• No
  significant theme changes were noted for the first week of the outlook
• In
  Canada’s Prairies, however, rain was increased in eastern and central Saskatchewan; some of this increase extended into parts of Montana
• The
  increase was needed, but a little overdone
• GFS
  reduced rain from Montana top southern Manitoba for late next week and increased it from North Dakota to northern Minnesota
• Some
  of this change was needed, but too much rain was removed from southeastern Canada’s Prairies
• Rain
  was shifted southeast from NW Iowa, eastern Nebraska and central Kansas late next week to southeastern Kansas, Missouri, northeastern Oklahoma and parts of the lower Midwest and Tennessee River Valley
• Some
  of this rainfall shift may verify, but some of the rainfall in Kansas and Missouri was overdone
• GFS
  removed rain in Virginia, the Carolinas and northeastern Georgia for late next week
• Some
  of this reduction was needed
• Rain
  was increased in Iowa June 20-22 while it was reduced from North Dakota into Wisconsin
• Some
  of the change was needed
• Scattered
  showers in the lower eastern Midwest June 20-22 were reduced while rain was increased in the interior southeastern states
• The
  reduction was needed, but the boost in rainfall might have been a little overdone
• GFS
  reduced northern Midwest rainfall and increased the lower Midwest, Delta and southeastern states rainfall June 23-24
• Some
  of this change was not expected to verify

 

The
06z GFS model run has a greater amount of cold air pushing southward through the eastern United States during the June 20-24 period and that is the primary reason for some of the changes noted this morning. That cool air is overdone.  The bottom line should
be a relatively good mix of weather for key U.S. Midwest crop areas during the next two weeks, although some of the rainfall may be light in the lower Midwest, Delta and southeastern states where some net drying should still be expected. The southern U.S.
Plains were advertised to have a little better opportunity for rain in the second week of the outlook on this latest model run, but that was likely overdone, and the region should continue to struggle with heat and dryness. Some timely rainfall will occur
in the northern Plains and northern Midwest during much of the outlook, but in particular during the second week of the outlook, June 18-24.

 

EUROPE/BLACK
SEA

• No
  tremendous change was noted in the first week of the outlook
• Rain
  was increased in Belarus and a few immediate neighboring areas while it was reduced in eastern Poland
• Some
  of the increase was overdone
• France
  rainfall was increased late next week
• Some
  of the increase was overdone
• Rain
  was shifted to the east late next week from southern Poland to far northwestern Russia to the region from NW Ukraine into a larger part of northwestern Russia
• Some
  of the reduction in Poland was needed, but too much rain has been suggested for northwestern Russia
• GFS
  suggested greater rain from France, northern Spain and western Germany June 20-22
• Some
  of this increase was overdone
• GFS
  increased rainfall from Ukraine into Poland June 20-22 and reduced it in Belarus
• The
  increase was not necessary, but these areas will receive scattered showers and thunderstorms
• GFS
  increased rain from northern Italy to eastern Germany and northwestern Poland Jun 23-24
• The
  increase was overdone
• GFS
  increased scattered showers in eastern Europe and removed rain from Russia’s Southern region and immediate neighboring areas

 

The
bottom line remains about the same as recent past days. Most of the European continent gets scattered showers and thunderstorms during the next ten days to two weeks with some return of rain to parts of eastern Ukraine during the June 20-24 period. The first
ten days of the outlook includes net drying from eastern Ukraine into Russia’s Southern Region raising some concern over crop moisture for long term crop development. The European model run is a little more generous with rainfall in eastern Ukraine during
a part of that same period, but it has central Ukraine and Russia’s southern region drier biased during the same ten days. The divergence in the models over Ukraine rainfall will be closely monitored.

 

EASTERN
RUSSIA NEW LANDS

• No
  changes were noted in the first week of the outlook
• GFS
  model was quite chilly for Russia’s eastern New Lands during mid- to late-week next week with some threat of frost and freezes in the northern parts of the region
• The
  cold may be overdone, but it will be closely monitored
• GFS
  model run finished the second week of the outlook (June 20-24) wetter biased than its previous model run and was wetter biased through day ten than the European model run
  
• World
  Weather, Inc. believes the GFS is too wet and possibly too cool in the second week of the outlook

 

The
European model run today continues to restrict precipitation in parts of the eastern Russia New Lands while the GFS is wetter biased especially in the second week of the outlook. The divergence is significant, but the GFS is most likely overboard on the rainfall.
The bottom line remains mostly neutral on crops near and east of the Ural Mountains where some showers will occur lightly and periodically, but no general soaking will result. An absence of hot weather will conserve soil moisture and preserve crop conditions.
There may still be an ongoing need for greater rain near the Kazakhstan border.

 

CHINA

• Rain
  fell significantly in parts of Henan and immediate neighboring areas overnight
• Rain
  was increased for today and Thursday in a larger part of western and southern Shandong and immediate neighboring areas
• This
  change will verify
• The
  second week of the outlook is void of significant rain from the Yellow River Basin, North China Plain and a few east-central China locations
• The
  model removed some rain from Inner Mongolia, Shaanxi and Shanxi and some of that may have been overdone

 

The
return of drier weather to east-central through northern China (excluding the northeast) during the June 18-24 period raises the potential for dryness to return in parts of this region after a temporary reprieve from dryness occurs over the balance of this
week. The region will need to be closely monitored, but World Weather, Inc. believes the general theme should be a slight northward shift in the driest conditions reducing concern for Henan and Anhui, but slowly increasing concern for unirrigated areas in
the Yellow River Basin and areas northward to central and western parts of Inner Mongolia. There is some potential that Liaoning and Hebei will trend drier over time as well.  Additional dryness relief in Henan and Anhui should be most concentrated on today
into Friday and then drying may resume for a while. Southern China flooding will remain a concern in this first week of the outlook with some improving conditions possible in the June 20-24 period.

 

AUSTRALIA

• No
  change in this first week of the outlook
• Greater
  rain was suggested for Western Australia during the middle to latter part of next week
• Some
  of the increase was overdone, but greater rain is likely, and it will prove to be beneficial for winter crops

Increased
rainfall in portions of southern Australia late this week and into the weekend will be welcome, but more so from the rain that falls in Western Australia in the latter half of next week. If the models are correct, and World Weather, Inc. believes the trend
is good, there will be some improved planting moisture in southeastern Queensland and northeastern New South Wales Friday and Saturday of this week and improvement in Western Australia crop conditions from light rain tonight and Thursday and especially that
which occurs in the second half of next week.

Source:
World Weather Inc. and FI

 

Source:
World Weather Inc. and FI

 

Source:
World Weather Inc. and FI

 

 

Bloomberg
Ag Calendar

WEDNESDAY,
June 10:

• EIA
  U.S. weekly ethanol inventories, production, 10:30am
• International
  Grains Council virtual conference
• FranceAgriMer
  crop report and press briefing
• Malaysia
  MPOB palm oil stockpiles, export, production data for May
• Cargo
  surveyors release Malaysia export numbers for June 1-10

THURSDAY,
June 11:

• USDA’s
  monthly World Agricultural Supply and Demand (Wasde) report, noon
• USDA
  weekly crop net-export sales for corn, soybeans, wheat, cotton, 8:30am
• China
  CASDE monthly crop supply and demand report
• Vietnam’s
  coffee, rice and rubber export data for May
• Malaysian
  Palm Oil Council webinar: Palm oil in post- pandemic
• HOLIDAY:
  Brazil

FRIDAY,
June 12:

• ICE
  Futures Europe weekly commitments of traders report on coffee, cocoa, sugar positions
• CFTC
  commitments of traders weekly report on positions for various U.S. futures and options, 3:30pm
• FranceAgriMer
  weekly update on crop conditions
• New
  Zealand food prices
• Shanghai
  exchange’s weekly commodities inventory
• HOLIDAY:
  Russia

Source:
Bloomberg and FI

 

 

 

 

 

 

Macros

US
CPI (M/M) May: -0.1% (est 0.0%; prev -0.8%)

US
CPI Ex Food, Energy (M/M) May: -0.1% (est 0.0%; prev -0.4%)

US
CPI (Y/Y) May: 0.1% (est 0.3%; prev 0.3%)

US
CPI Ex Food, Energy (Y/Y) May: 1.2% (est 1.3%; prev 1.4%)

US
Real Avg Hourly Earnings (Y/Y) May: 6.5% (prevR 7.6%; prev 7.5%)

US
Real Avg Weekly Earnings (Y/Y) May: 7.4% (prevR 7.0%; prev 6.9%)

 

 

Corn.

·        
Corn is lower on favorable weather prospects.  USD was down 19 points at the electronic close. WTI was lower by 79 cents. 

·        
Based on the latest US crop rating, we are using 178.6 bushels per acre, above a 20-year trend of 174.6 bushels and one-tenth of a bushel above USDA May. Production is projected at a record 15.534 billion bushels, above 15.148
billion previous record in 2016-17. 

·        
Goldman Roll ends Thursday. 

·        
A Reuters story mentioned China bought Argentine sorghum. At least two cargoes were bought for July arrival.  This is on top of 32,716 tons bought earlier this year.  In all of 2019, shipments were 139,564 tons, up from 1,045
in 2018.  In comparison, China imported 783,393 tons of US sorghum during the Jan-Apr period. 

·        
State-run Brazilian Institute of Geography and Statistics estimated 2020 grain & oilseed production at 245.9 million tons, 1.8% higher than 2019 (241.5MMT). 92.2% of the 2020 production consists of soybeans, corn and rice. 

• A
  Bloomberg poll looks for weekly US ethanol production to be up 46,000 at 811,000 barrels (796-842 range) from the previous week and stocks to decrease 221,000 barrels to 22.255 million.

 

Corn
Export Developments

• None
  reported

 

 

Soybean
complex.

• CBOT
  soybeans are higher after it was reported late yesterday China bought at least two cargoes of US soybeans out of the PNW for December shipment.  Meal is gaining on soybean oil.  Palm oil closed lower.
  
• It
  was rumored China bought several cargoes of US PNW soybeans (3-5 cargoes) for November and December shipment.  Reuters reported at least 2 yesterday. 
  
• China
  soybeans were up 2.2 percent on Wednesday after appreciating 2.4 percent on Tuesday. 
  
• China’s
  Sinograin will sell 60,486 tons of domestic 2017 soybeans from reserves on Friday, out of Heilongjiang. 
  
• Downward
  revisions to the EU rapeseed crop over the past week have supported rapeseed prices. 
  
• USDA
  will update their world crop production estimates on Thursday. 
• Bloomberg:
  The nationalization of Argentina’s Vicentin is spurring fears that the firm will get unfair advantages in the grains market.
• The
  BRL was slightly stronger against the USD early this morning. 
• Rotterdam
  values this morning showed soybean oil were around unchanged from this time previous session, rapeseed oil up 1 in the nearby, and soybean meal when imported from South America down 1-3 euros. 
  
• Offshore
  values this morning were leading CBOT soybean oil 6 points higher and meal $0.40 higher. 
  

·        
China: Soybean futures highest since April

·        
China cash crush margins as of this morning, using our calculation, were 53 cents per bushel (57 previous) and compares to 63 cents a week ago and 88 cents around this time last year.

·        
SGS: Malaysian palm June 1-10 exports up 64% to 580,096 from 354,090 tons previous period in April.

o  
AmSpec: up 59.5% to 550,341 tons from 344,983 tons.

o  
ITS: up 61.7% to 545,360 tons from 337,255 tons

·        
Malaysia:
lower despite less than expected end of May palm stocks and surge in early June palm shipments.

 

MPOB
reported a higher than expected increase in palm exports at 1.369 million tons, up 10.7 percent from April and stocks declined slightly from the previous month but were 213,000 tons below expectations. Exports reached a 5-month high but were still well below
a year ago.

 

 

 

 

Oilseeds
Export Developments

• None
  reported overnight. 

• Syria
  will retender for 50,000 tons of soymeal and 50,000 tons of corn on June 24 for delivery within four months of contract.

 

Wheat

• US
  wheat futures are rebounding after world import demand interest increased mid-week.  After yesterday’s close, Egypt announced they are in for wheat for July 12-22 shipment. 
  
• Paris
  December wheat was up 1.00 euros at 187.50 at the time this was written.
  
• SovEcon
  increased their estimate of the Russian 2020 grain production to 128.6 million tons from 126.3 million. Wheat was projected at 82.7 million tons from 81.2 previously. 
  
• Central
  Russia will be hot this workweek, through at least Friday, and the southern regions will be hot through Monday. 
  
• UGA
  predicted a 17 to 18-million-ton export cap for 2020-21 Ukraine wheat exports. 
  
• Yesterday
  Australia increased their wheat production forecast to 26.7 million tons from 21.3 million tons estimated in March, a 25 percent increase.  Favorable rain and an 8 percent increase in the area were noted.  USDA is using 24 million tons for 2020-21, up from
  15.2 million tons for 2019-20 and 17.3 million prior year,  In 2016-17 Australia produced 31.8 million tons. 
  
• Rains
  should return to southeastern Queensland and northeastern New South Wales states today and Thursday – Bloomberg
• France’s
  AgMin estimated 2019-20 soft wheat exports outside the EU at 13.45 million tons from 13.30 million last month. If realized that would be up 39.1 percent from 2018-19.  Yesterday France’s AgMin estimated the 2020 soft wheat area at 4.59 million hectares, down
  from 4.62 million last month and 8 percent lower than 2019. 

 

Export
Developments.

• Egypt
  is in for wheat for July 12-22 shipment.  Lowest offer presented was $216.90 for 60,000 tons of Russian grain (FOB).
• Tunisia
  seeks 134,000 tons of soft wheat and 100,000 tons of feed barley for shipment between July 15 and September 25 shipment, on June 11. 
  
• Japan
  in their SBS import tender bought 380 tons of feed barley but appears they passed on wheat.
  
• Japan
  seeks 80,000 tons of feed wheat and 100,000 tons of feed barley on June 17 for arrival by November 26. 
  
• Results
  awaited: The Philippines seek 168,000 tons of feed wheat on Wednesday for August 16-October 22 shipment, depending on origin. 
  
• Yesterday
  Thailand PASSED on 240,000 tons of feed wheat on June 10 for August and September shipment.  They bought an unknown amount of feed barley. 
  
• Pakistan
  seeks to import 500,000 tons of wheat sometime this year to boost inventories. 
  
• Jordan
  seeks 120,000 tons of wheat on June 17 for November-December shipment. 

 

Rice/Other

• CBOT
  July rice continued to weaken against the September contract.
• South Korea’s Agro-Fisheries
  and Food Corp seeks 80,605 tons of non-glutinous rice for October 2020 and March 2021 shipment.
  

    TONNES(M/T)   
GRAIN TYPE    ORIGIN    ARRIVAL/PORT

           
90     Milled Long   Thailand  Oct 31,2020/Busan

        
1,410     Milled Long   Thailand  Oct 31,2020/Busan

       
20,000     Brown Short   China     Jan 31,2021/Gunsan

       
20,000     Brown Short   China     Jan 31,2021/Ulsan

       
20,000     Brown Short   China     March 31,2021/Donghae

       
19,105     Brown Short   China     March 31,2021/Mokpo

• Results
  awaited: Lowest offer $489.25/ton from Myanmar.  The Philippines seeks 300,000 tons of rice.