FI Morning Grain Comments 07/08/20

PDF attached

 

Morning.  

 

Conab
soybean production came in below expectations. The US will see localized rain bias Midwest this week before net drying occurs during the 6-10 period. The evening model runs did put rain in the second week of the outlook but compared to what region you look
at for the WCB, it varies.  Soybeans traded at a 4-day low below the psychological $9.00 level but remain near a 4-month high on US weather concerns.  China’s Sinograin sold 65,520 tons of soybeans out of auction.  We hear state owned Chinese crushers bought
1 cargo for 2021 out of Brazil on Tuesday.  Lowest offer Egypt: soybean oil $735.45/ton and sunflower oil at $768/ton.  Global vegetable oil prices are rebounding with Argentina and Brazil latest to appreciate.  Wheat is higher on follow through buying after
production cuts to Black Sea and French wheat.  Thailand
passed on 193,300 tons of feed wheat.  The Philippines seeks 110,000 tons of feed wheat on July 9.  Japan received no offers for 80,000 tons of feed wheat. 

 

 

 

Weather
and Crop Progress

 

 

 

UNITED
STATES

• A
  boost in rainfall was suggested on the 06z GFS model run from eastern South Dakota through the heart of central and southern Minnesota early next week
• Some
  of this increase was overdone
• Some
  reduction in rainfall was suggested for southern Michigan, Ohio and northern Indiana over the coming week along with parts of Iowa and Illinois
• This
  reduction was needed
• The
  European model run was mostly unchanged during the first ten days of the outlook – at least relative to the general theme of weather expected
• The
  GFS second week outlook was a little drier today relative to that of Tuesday’s model runs
• Southeastern
  states were advertised wetter July 21-22
• The
  change was needed
• Greater
  monsoon moisture was suggested in the July 21-22 period coming northward from Mexico through the central Rocky Mountains to a part of the Dakotas and Minnesota (rainfall was increased during this period of time relative to the last model run)
  
• This
  change was been anticipated and may not be correctly timed, but the trend change bringing in this moisture feed is expected during the last ten days of this month
• Most
  of the computer forecast model runs are in agreement that the July 16-22 period will be warmer biased relative to this first week and that rainfall will be more restricted
• World
  weather, Inc. agrees with this general idea, but still looks for some westward shift in the mean ridge position in the latter part of this month, although it may only be temporary it should occur
• For
  now, though, the only models onboard with this theme today is the CFS – be alert for the change
  
• When
  the change occurs it may take down the heat a notch or two, but any boost in precipitation will still be somewhat restricted by the amount (or lack thereof) of Gulf of Mexico moisture streaming northward into the Midwest)

 

Overall,
today’s forecast remains favorable for summer crop development across the Midwest in this first week of the outlook despite areas of drying. Erratic rainfall will offer sufficient rain many areas that will slow the drying rates and buy a little time for reproducing
corn protecting its pollination. The few areas of greater moisture stress could threaten yield potentials, but as of today the driest areas are in Michigan and parts of Ohio and northern Indiana which are not quite as important as Illinois, the remainder of
Indiana, Iowa and Minnesota. The second week of drier and warmer weather will accelerate drying rates, but subsoil moisture will likely remain favorable for crop development – at least for a little while longer. Additional rain will be needed in the latter
part of July to protect late season crops.

 

EUROPE/BLACK
SEA REGION

• No
  significant change was noted over the coming week
• Some
  increase in rainfall was suggested in far eastern Ukraine and neighboring areas of northwestern portions of Russia’s Southern region during the latter part of next week
• Some
  increase was needed
• GFS
  model run was quite dry in the middle two-thirds of Ukraine today through the end of next week while the European model run has rain in most of Ukraine with some moderate amounts
• The
  European model run seems to be too wet
• Canadian
  model has yet another solution for the coming ten days that produces erratic showers in Ukraine and then some greater rain in a part of Russia’s Southern region
  
• GFS
  model keeps France in a limited rainfall pattern through the next two weeks
  
• Germany
  is advertised to receive rain late next week as well as western Poland and northwestern Czech Republic

 

Today’s
forecast is wetter in Germany, Poland and Czech Republic late next week and into the following weekend. Some of this increase in precipitation was needed and should verify. In the meantime, France will stay in a dry weather pattern through much of the coming
ten days as will portions of Ukraine while some scattered showers will occur in other parts of Ukraine and in some Russia New Lands locations. Confidence in these latter forecast declarations in Ukraine and Russia’s Southern Region is low, but there does seem
to be some reason to expect at least a little rainfall during the latter part of next week into the week of July 20. Much more rain will still be needed.

 

RUSSIA
NEW LANDS

• Little
  change was suggested during the first week of the outlook
• Net
  drying is expected in the Ural Mountains region  while showers occur to the east in the eastern  Russia New lands
• Rain
  was increased during the second week of the outlook across portions of the Ural Mountains region, although central and south-central parts of the region do not get enough rain to counter evaporation while most other areas get sufficient rain to improve soil
  moisture
• This
  increase in rainfall still seems to be overdone

 

Overall,
net drying will occur in the Ural Mountains region (central New Lands) over the coming week. World Weather, Inc. believes much of this drying trend will continue in the second week of the outlook and the GFS model run has exaggerated the potential rainfall.
Future model runs will likely reduce some of this second week rainfall.  Crop conditions remain favorable today except near the Kazakhstan border where dryness may be interfering with the best possible crop development. Production potentials are still favorable
and if timely rain occurs later this month and in August crops will perform well. There is potential for some net drying during a part of this period of time and the situation will need to be closely monitored.

 

CHINA

• Heavy
  rain was reported in the Yangtze River Valley again overnight with rainfall of 3.50 to more than 9.00 inches occurring in the heart of the valley
• Not
  much change was noted overnight
• Rain
  still occurs in most of China at one time or another during the next two weeks
• Some
  reduction in rainfall was suggested overnight for the southern parts of the North China Plain
• This
  change was needed
• The
  European model run is still advertising torrential rainfall in the Yangtze River Basin with amounts of 5.00 to more than 15.00 inches over the next ten days
• The
  GFS model run is not quite as wet as the European model run

 

Overall,
the bottom line for China remains good for most key grain, oilseed and cotton production areas over the next two weeks, but flooding will remain a big concern for the Yangtze River Basin where some rice and other crop damage has already occurred and more should
be expected.

 

AUSTRALIA

• Some
  reduction in rainfall was suggested for New South Wales and Queensland for next week
• This
  change was needed
• Otherwise
  there were very few changes over the two week outlook

 

Some
concern will remain over soil moisture and crop establishment in South Australia and in a few of the northern and eastern most wheat, barley and canola areas in Western Australia. Queensland will have need for additional rain, although the showers that occur
there and in New South Wales over the next few days will be welcome and beneficial for crop establishment. Overall, most of Australia’s winter crops are expected to be adequately established to support a good production year. Greater rain would still be welcome
prior to the start of spring.

 

Source:
World Weather Inc. and FI

 

Bloomberg
Ag Calendar

WEDNESDAY,
July 8:

• EIA
  U.S. weekly ethanol inventories, production, 10:30am
• Brazil’s
  crop agency Conab releases data on area, output and yield of corn, soybeans
• China’s
  CNGOIC releases monthly report on supply and demand of soy and corn
• FranceAgriMer
  monthly crop report

THURSDAY,
July 9:

• USDA
  weekly crop net-export sales for corn, soybeans, wheat, cotton, pork, beef, 8:30am
• Port
  of Rouen data on French grain exports
• Brazil’s
  Unica may release cane crush, sugar production during the week (tentative)
• EARNINGS:
  Suedzucker, Barry Callebaut, Agrana
• HOLIDAY:
  Argentina

FRIDAY,
July 10:

• USDA’s
  monthly World Agricultural Supply and Demand (Wasde) report, noon
• China
  farm ministry’s CASDE monthly crop supply- demand report
• Malaysian
  Palm Oil Board’s data on reserves, exports and production in June
• 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
• Malaysia’s
  palm oil export data for July 1-10
• Cherkizovo
  trading update
• HOLIDAY:
  Singapore (election day), Argentina

 

Source:
Bloomberg and FI

 

 

 

 

 

Macros

 

 

 

Corn.

• Lower
  trade in corn on less than threatening US weather.  Yesterday there was talk China was a large buyer of US and Ukraine corn over the last two weeks. 
  

·        
Conab reported the 2019-20 Brazil corn production at 100.6 million tons, at the average trade guess and 0.4 million below the previous month. 

·        
The USD was near unchanged.  

·        
Anec revised higher their July Brazil corn export projection to 5.16 million tons from 3.9 million tons. 

·        
Ukraine exported a record 57 million tons of grain in 2019-20, 6.8 more than year earlier- Ministry for Economic Development. 

·        
Global Grain Asia is July 9-10.

·        
China is looking for sell 20,000 tons of pork out of reserves. 

·        
A Bloomberg poll looks for weekly US ethanol production to be up 18,000 at 918,000 barrels (903-950 range) from the previous week and stocks to increase 148,000 barrels to 20.312 million.

• CBOT
  deliverable corn stocks are extremely low for this time of year at 448,000 bushels and compares to 3.6 million a year ago.  Toledo was zero and Chicago 80,000.  One broker can’t recall Toledo going to zero, for both corn and soybeans. 
  

 

Corn
Export Developments

• None
  reported

 

 

Soybean
complex.

·        
Soybeans traded at a 6-day low below the psychological $9.00 level but remain near a 4-month high on US weather concerns.  Products are lower but soybean oil is seeing limited losses on stronger
SA soybean oil. 

·        
Conab reported the 2019-20 Brazil soybean production at 120.9 million tons, 1.8 million below an average trade guess and 0.5 million above the previous month.  The area was slightly higher.  They
increased 2020 soybean exports to 80 million tons from 77 million tons. 

·        
China’s Sinograin sold 65,520 tons of soybeans out of auction, 100 percent of what was offered.  255,700 tons had been sold to date. 

·        
We hear state owned Chinese crushers bought 1 cargo for 2021 out of Brazil on Tuesday. 

·        
Anec revised higher their July Brazil soybean export projection to 8 million tons from 7.25 million tons.

·        
Thursday is a holiday in Argentina.   

·        
Rotterdam values this morning showed soybean oil for the August/September position was up 8-9 euros from this time previous session, rapeseed oil up 6 in the nearby, and soybean meal when imported from South America 3-6 euros
lower. 

• Offshore
  values this morning was leading CBOT soybean oil 24 lower and meal $0.70 lower.   
  

·        
Malaysia:  Closed at two-week high

• China:

·        
China cash crush margins as of this morning, using our calculation, were 86 cents per bushel (86 previous) and compares to 63 cents a week ago and 47 cents around this time last year.

 

Oilseeds
Export Developments

• Lowest
  offer: soybean oil $735.45/ton and sunflower oil at $768/ton…Egypt seeks 30,000 tons of soybean oil and 10,000 of sunflower oil for September 1-20 arrival.  A couple weeks ago Egypt bought 59,000 tons of soybean oil and passed on sunflower oil. 
  
• The
  Philippines are in for feed wheat which means they could be in for soybean meal. 
  

 

Wheat

·        
US wheat is higher on follow through bullish sentiment over crop production cuts for France and the Black Sea region. 

·        
India monsoon rains are 7 percent above average for the week ending July 8.

·        
FranceAgriMer:  French soft wheat shipments outside the EU projected at 7.75 million tons, down 43% from 2019-20 (13.6MMT) and the lowest volume in four years.  2019-20 was a record. 

• Paris
  December wheat was up 1.50 at 187.00 at the time this was written.

 

Export
Developments.

·        
Thailand passed on 193,300 tons of feed wheat.  Prices were about $10/ton over what they wanted to pay.

·        
No word yet for Thailand seeking 44,400 tons of feed barley. 

·        
The Philippines seeks 110,000 tons of feed wheat on July 9. 

·        
Yesterday Egypt bought 230,000 tons of Russian wheat for August 8-18 shipment.

• Japan
  received no offers for 80,000 tons of feed wheat and 100,000 tons of barley on Wednesday, July 8, for arrival by December 24. 
  
• Ethiopia
  seeks 400,000 tons of wheat on July 10 for shipment within two months.    
  
• Syria seeks 200,000 tons of milling wheat from Russia by
  July 28. 

 

Rice/Other

• None reported