FI Morning Grain Comments 06/12/20

PDF attached

 

Morning. 
We
made a mistake in our PM comment leaving out AM prices in at the top of the comment.  Sorry for the confusion. 

 

Drier
weather forecast for the US growing areas will be in focus over the next week. News is light this morning. 

 

 

 

 

 

 

 

 

Weather

 

UNITED
STATES

• No
  serious changes to the first week of the outlook was noted overnight
• The
  second week forecast is advertised to be wetter bias for a large part of the Midwest, Delta and Tennessee River Basin
• The
  Gulf of Mexico coastal area is advertised to be drier biased and rainfall in the northern Plains rainfall is close to normal, according to the GFS Ensemble
• 06z
  GFS increased rainfall in the upper Midwest while shifting rain from the central Plains through Iowa to Michigan southward into the lower Midwest during the second weekend of the outlook
• Some
  of the southward shift in rainfall was overdone
• No
  change in the scattered showers and thunderstorms advertised for the southern Plains was noted for the second weekend; portions of West Texas and the Texas Blacklands get rain
• GFS
  reduced rain from West Texas through the lower two-thirds of the Delta to portions of the Tennessee River Basin June 22-24
• This
  change was needed
• GFS
  reduced Midwest and Delta rainfall for June 25-26
• Some
  of this reduction was needed
• GFS
  increased rainfall in the Southern Plains June 25-26 with significant rain for the heart of Texas, eastern portions of West Texas and areas north into western Oklahoma and the eastern Texas Panhandle
  
• This
  increase was overdone

 

The
bottom line to the GFS model run keeps precipitation in this first week of the outlook restricted and temperatures trending warmer. The second week turns a little cooler and wetter. This theme change is possible, although the precipitation may be a little
overdone during the second week of the outlook. The mix of weather if it verifies should prove supportive for U.S. summer crops preventing any areas that are drying out in this first week of the outlook from becoming too dry in the following week. However,
be sure to not that the European model run is much less wet through day ten and that is the better solution. World Weather, Inc.’s Trend Model still suggests the best time period for increased rainfall in the Midwest, Plains and Delta will be during the last
week of this month….June 23-30.  If the European model run is correct (and we believe it is) there will be warm conditions and net drying during the next ten to 11 days. Crop conditions should still be favorable in the Delta, Tennessee River Basin and Midwest
during the next ten days because of good subsoil moisture and for the Delta and western Corn because of good topsoil moisture following recent rain in many areas. Timely rain in late June should prove beneficial and supportive of crops in these areas. The
Great Plains will be quite dry until the last week of June when parts of the region may get some needed moisture.

 

 

EUROPE/BLACK
SEA

• No
  major theme changes were noted overnight
• Most
  of the European continent gets rain at one time or another over the next ten days from western Ukraine, Belarus and Baltic States to the U.K., France and northern Spain
• Net
  drying occurs from eastern Ukraine and parts of the middle and lower Volga River Basin into the Ural Mountains and Kazakhstan
• Temperatures
  will be quite warm in this first week of the outlook in western parts of the CIS, although the shower activity will temper the warmth

 

The
bottom line keeps most of Europe in a mostly favorable environment. There are still concerns about pockets that have not received abundant rain in recent weeks, but there are no broad-based areas of dryness that are expected for the next couple of weeks with
the exception of eastern Ukraine into Kazakhstan. There is a warm temperature bias in parts of eastern Europe and the western CIS that will dominate a part of the coming week to ten days and that may accelerate drying between rain events. The biggest area
of concern for warm and dry conditions would be eastern Ukraine into Kazakhstan, but temperatures will be less anomalous in these areas than farther to the west. Nevertheless, the drying tendency in these areas will need to be closely monitored.

 

EASTERN
RUSSIA NEW LANDS

• Eastern
  New Lands are advertised much colder by all three of the global models today for next week
• GFS
  model run is cold enough that there may be some frost and freeze potential for mid- to late week next week
• Some
  of this cold may be overdone, but with the Canadian and European on board with notable cool the situation will be closely monitored
• Most
  likely the cool air will be moderated somewhat before it gets into those areas
• Some
  rain in the eastern New Lands may precede the coolest conditions

 

The
cool off in the eastern New Lands might be a threat to Sunseed, but spring wheat would not likely be seriously impacted other than burning back some vegetative growth. Recent temperatures in the eastern New Lands have been warm and soil moisture remains a
little low near the Kazakhstan border. Some rain may precede the coolest conditions, but some of the region near Kazakhstan may remain a little drier biased. The driest weather in the New Lands during the next two weeks may be in the Ural Mountain region northwest
into the Volga-Vyatsk.

 

CHINA

• No
  serious changes were noted over the next ten days
• Some
  rain fell again in Henan and northern Anhui overnight which further improved soil moisture and eased drought conditions
  
• This
  region has now received rain twice this week and some of it has been heavy enough to greatly curb any concerns over dryness
• 06z
  GFS reduced rain north of the Yellow River and in parts of neighboring Inner Mongolia early to mid-week next week leaving the region from northern Shaanxi to northern Henan and parts of Shandong  and Hebei with limited rainfall over the next two weeks
• Some
  of this change was needed
• Rain
  still falls abundantly to excessively during the late weekend and next week from western Guangdong and Guangxi into Guizhou and in the Yangtze River Basin
  
• Scattered
  showers and thunderstorms are still advertised in Northeast China throughout the two week forecast period with Heilongjiang wettest
• Temperatures
  will be warmest relative to normal in northeastern China in the June 20-26 period and warmest in the North China Plain and Yellow River Basin relative to normal in this first week of the outlook
• Some
  of the rainy areas in the Yangtze River Basin will have a cooler tendency at times next week

 

The
bottom line will remain one of concern for net drying near and north of the Yellow River; including parts of the North China Plain. Flooding rain may threaten some of the unharvested rapeseed and wheat in the Yangtze River Basin and a tropical cyclone expected
in western Guangdong and eastern Guangxi late this weekend will contribute enough rain to induce some flooding. Wind damage should be confined to the coast. Good crop weather is expected in northeastern China over the next couple of weeks.

 

AUSTRALIA

• No
  major changes occurred to the two week outlook overnight
• Rain
  is expected today into Saturday in eastern Queensland and northeastern New South Wales offering a short term increase in soil moisture for better wheat and barley establishment
• Western
  Australia will get some rain during mid-week next week that will help improve winter crop establishment

 

Rain
in the extreme east and southwest parts of the nation over the next week will certainly be welcome and beneficial to crops. However, much more rain is still needed throughout all wheat, barley and canola areas. There is plenty of time for more moisture and
it should come in sufficient time to support favorable emergence and establishment.

 

SOUTH
AMERICA

• Needed
  rain is still advertised for parts of Buenos Aires next week – that should benefit wheat emergence and future planting
• Western
  areas in Argentina still need rain
• Portions
  of center west Brazil also need rain for Safrinha cotton

Source:
World Weather Inc. and FI

 

Source:
World Weather Inc. and FI

 

Source:
World Weather Inc. and FI

 

 

 

Bloomberg
Ag Calendar

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

MONDAY,
June 15:

• Monthly
  MARS bulletin on crop conditions in Europe
• USDA
  weekly corn, soybean, wheat export inspections, 11am
• USSEC’s
  Asia Trade Exchange 2020, day 1
• U.S.
  crop progress — corn, soybean plantings, winter wheat conditions, 4pm
• EU
  weekly grain, oilseed import and export data
• Ivory
  Coast cocoa arrivals
• Malaysia’s
  palm oil export data for June 1-15

TUESDAY,
June 16:

• New
  Zealand global dairy trade auction
• Abares
  agricultural commodities report for June quarter 2020
• Asia
  Trade Exchange 2020, day 2

WEDNESDAY,
June 17:

• EIA
  U.S. weekly ethanol inventories, production, 10:30am
• Asia
  Trade Exchange 2020, day 3

THURSDAY,
June 18:

• USDA
  weekly crop net-export sales for corn, soybeans, wheat, cotton, 8:30am
• Brazil
  Conab releases 2nd estimate for 2020 coffee crop, Sao Paulo
• Port
  of Rouen data on French grain exports
• USDA
  total milk production, 3 pm

FRIDAY,
June 19:

• 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
• U.S.
  Cattle on Feed, 3pm

SATURDAY,
June 20:

• Malaysia’s
  palm oil export data for June 1-20

Source:
Bloomberg and FI

 

 

 

 

 

Macros

·        
US Import Price Index (M/M) May: 1.0% (est 0.6%; prev -2.6%)

o  
US Import Price Index ex Petroleum (M/M) May: 0.1% (est -0.2%; prev -0.5%)

o  
US Import Price Index (Y/Y) May: -6.0% (est -6.4%; prev -6.8%)

·        
US Export Price Index (M/M) May: 0.5% (est 0.5%; prev -3.3%)

o  
US Export Price Index (Y/Y) May: -6.0% (prev -7.0%)

·        
Canadian Capacity Utilization Rate Q1: 79.8% (est 80.0%; prev 81.2%)

 

 

Corn.

·        
Corn
is lower on very light news. 

·        
Weather should be in focus for today and for the upcoming week.  Warmer and drier weather may stress some of the crop that missed rain across the far western Corn Belt.

·        
We look for soybean and corn crop conditions to improve when reported by USDA on Monday, but with dry weather on horizon, they could decline the following two to three weeks.  Conditions are already at high levels for this time
of year for both crops. 

·        
APK-Inform increased its forecast for Ukraine corn production to 35.4 million tons from 35.1 million a month ago and compares to 35.8 million tons in 2019.  They will likely dominate the Chinese import market for at least three
years running. 

 

Corn
Export Developments

• None
  reported

 

Soybean
complex.

• CBOT
  soybeans are higher after USDA announced additional soybeans were sold under the 24-hour system.  Poor China crush margins should be monitored as they are in focus for Q4 interest. Note China sold all of its 60,486 tons of soybeans overnight at auction.  Fundamentals
  appear bearish for US soybeans today but weather dominating.  Look for positioning by the end of the session. 
  
• Later
  today we will see a trade estimate for the US May NOPA crush indicating how strong the demand was. 
  
• If
  soybean prices were to rise over the next week due to unfavorable US weather, we are under the opinion meal will appreciate over soybean oil after USDA pegged new-crop soybean oil ending stocks at a phycological 2.0 billion pounds.  Coupled with Argentina
  crushing woes, we look for US soybean meal export interest to remain high. 
  
• Our
  carryout for the 2019-20 US soybeans balance stands at 517 million bushels and new-crop at 509 million.  Reason we have a large new-crop carryout is we look for exports to total 1.975 billion bushels, less than USDA.  We believe with more than 30 percent of
  the Brazil new-crop soybeans sold, area will expand around 1.5-2.5 percent, and Brazil, if weather permitting, will realize a record 2021 production, and again suppress the US soybean export potential. 
  
• The
  BRL was weaker against the USD early this morning, back over 5.0 time this was written. 
  
• Rotterdam
  values this morning showed soybean oil were around unchanged from this time previous session, rapeseed oil up 10 in the nearby, and soybean meal when imported from South America 1-3 euros higher. 
  
• Offshore
  values this morning was leading CBOT soybean oil 41points higher (60 higher for the week to date) and meal $0.30 higher ($0.90 higher for week to date). 
  

·        
China:

·        
China cash crush margins as of this morning, using our calculation, were 50 cents per bushel (48 previous), and compares to 63 cents a week ago and 88 cents around this time last year.

·        
Malaysia: 
Palm prices rise for the fifth consecutive week

 

 

Oilseeds
Export Developments

• Under
  the 24-hour announcement system, US exporters sold 120,000 tons of soybeans to unknown for 2020-21 delivery.
  
• Sold
  all @ 4,679 yuan per ton: China’s Sinograin will sell 60,486 tons of domestic 2017 soybeans from reserves on Friday, out of Heilongjiang. 
  

• 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 bounced after 20 min of day trading, in part to short covering in part to Canada’s weather outlook for net drying across the Prairies.  KC is leading the charge.  
  
• French
  wheat conditions were unchanged from the previous week at 56 percent G/E, well down from 80 percent year ago and lowest level since they started reported just over a decade ago. 
  
• France
  experienced their second warmest spring on record behind the 2011 calendar year. 
  
• Paris
  December wheat was up 0.25 euros at 185.00 at the time this was written.
  
• We
  look for no change in the US spring (very high rating) and winter wheat rating on Monday.
  

 

 

Export
Developments.

• Yesterday
  Tunisia bought only 25,000 tons of soft wheat and 50,000 tons of feed barley.  They were in for 134,000 tons of soft wheat and 100,000 tons of feed barley for shipment between July 15 and September 25 shipment.  The soft wheat was bought at $215.90 a ton c&f.
  The barley was bought at $194.89 and $196.25 a ton c&f.
• Saudi
  Arabia seeks 960,000 tons of barley for arrival between August and September. 
  
• Japan
  seeks 80,000 tons of feed wheat and 100,000 tons of feed barley on June 17 for arrival by November 26. 
  
• Jordan
  seeks 120,000 tons of wheat on June 17 for November-December shipment. 

 

Rice/Other

• CBOT
  July rice reversed course and surged against the September contract. This must be the chart of the month. 
  
• 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