FI Morning Grain Comments 07/10/20

PDF attached

 

Morning.  

 

Higher
trade on follow through weather rally, an upward revision to China demand, and positioning ahead of the July USDA S&D report.  US weather for this weekend appears to be not as hot as previous.  Second week remains hot. China futures ended mixed. In its monthly
S&D update, China increased 2019-20 corn and soybean imports by 2 and 3 million tons respectively.  China cash crush are slightly higher.  Palm was up 9MYR.  Malaysian palm oil production during June was reported at an unusually high 1.886 million tons, 102,000
above trade expectations, a marketing year high, while end of June palm oil stocks were reported 34,500 tons below expectations at 1.9 million tons.  This bullish undertone was partially offset by a decline in July exports.  Cargo surveyors ITS and AmSpec
reported a 17.8 percent and 16.8 percent decrease in June 1-10 palm oil shipments from month earlier.  Corn is higher while US wheat mixed.  US soybean conditions are expected to decline 1-2 on Monday and corn 2-4.  Spring wheat could be down 1 and winter
wheat will not be reported. French wheat futures are higher after France reported a one-point decline in crop conditions.  Argentina is on holiday.  FI snapshot for the USDA report is attached.

 

 

 

Weather
and Crop Progress

·        
US soybean conditions are expected to decline 1-2 on Monday and corn 2-4.  Spring wheat could be down 1 and winter wheat will not be reported. 

 

 

CHINA

• Additional
  torrential rain has occurred south of the Yangtze River overnight
• Rain
  totals since Sunday morning have ranged from 4.00 to more than 32.00 inches in much of the Yangtze River Basin perpetuating serious flooding
• European
   and GFS model runs continue to perpetuate excessive rain in the Yangtze River Basin during the coming ten days, although the daily rainfall will become a little less intensive and less broad-based in the region during the weekend with next week trending wetter
  again
• 06z
  GFS model run is wetter in the North China Plain in the second weekend of the two week outlook

 

The
bottom line for China is flooding in the Yangtze River Basin will subside over the next few days, but damage in the region has likely been substantial since June 1 and more flooding will occur as rain increases near and north of the river next week. In the
meantime, other areas in China will see a good mix of rain and sunshine to support crop needs. There will be some locally heavy rain in northern parts of the nation, but no area will be subjected to widespread serious flooding like that of the Yangtze River
Basin. Some near term drying is expected in northeastern China.

 

EUROPE/BLACK
SEA

• Not
  much change occurred in the first ten days out of the outlook today
• France,
  southern parts of the U.K., portions of Germany, Belgium, Netherlands and a few areas east into western Poland experience net drying
• France
  has been and will continue to be driest with high temperatures Thursday reaching into the 80s and lower 90s Fahrenheit to accelerate the drying and to more seriously stress some of the nation’s crops
  
• Temperatures
  will be seasonable in the coming week and warmer than usual in the July 18-24 period
  
• Light
  rain advertised last evening for France remains in the forecast for a very short period of time in the July 20-22 period
• 06z
  GFS model did increase some of the rainfall from France into eastern Europe during the July 20-24 period and some of this increase was needed, although the expected rain will be brief

 

Short
term relief from dryness in France July 20-22 will prove to be more of a tease than a big break, but any moisture will be better than none. Southeastern Europe will continue drying out with the Balkan region already becoming too dry except in central Romania.
The lower Danube River Bas has been and will continue to be the driest region and a great need for rain will continue.

 

AUSTRALIA

• No
  big changes were noted overnight
• Rain
  will fall today into the weekend from Victoria and southeastern South Australia to Queensland
• Amounts
  will be light, but all of the moisture will be welcome and beneficial
• Rain
  is also expected in Western Australia early next week with a similar impact of benefit expected to winter wheat, barley and canola
• Quiet
  weather is expected to follow for several days after the early week precipitation diminishes

 

INDIA

• No
  big changes were noted overnight; rain will continue widespread in much of the nation over the next couple of weeks
• A
  boost in rain would be welcome in the interior west and especially in the northwest

 

UNITED
STATES

• Today’s
  second week seems to be a little wetter than previously advertised especially in the two recent GFS model runs, but to some degree the European model has also trended a little wetter
• World
  Weather, Inc. stands by its comments from last evening with the southwestern part of the Corn Belt and the southern Plains along with parts of the northern Delta and parts of the Tennessee River Basin most likely to experience net drying for a while
  
• The
  outlook has certainly become more favorable for pollination – even if the rainfall is overdone, corn loves to have scattered showers warm temperatures and favorable subsoil moisture to promote reproduction and that is exactly what is expected through the next
  ten days
• Some
  of the rainfall will be erratic and light while other areas get a significant amount of moisture, but the bottom line will continue to be more supportive than detrimental to  corn pollination – at least through July 20
• There
  is still time for greater drying and as we have been saying for an extended period of time we are a little more concerned about soybean and late corn weather in August and September than we are for early corn – not that corn will be on easy street
• We
  also believe the southwestern Corn Belt (Kansas, Missouri, southwestern Iowa, southeastern Nebraska and southwestern Illinois) and northern Delta will be the areas to watch most closely over the potential for dryness along with the southern Plains

 

Source:
World Weather Inc. and FI

 

Bloomberg
Ag Calendar

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

MONDAY,
July 13:

• USDA
  weekly corn, soybean, wheat export inspections, 11am
• U.S.
  crop progress, conditions — soybeans, wheat, cotton, 4pm
• United
  Nations food security report
• EU
  weekly grain, oilseed import and export data
• Ivory
  Coast cocoa arrivals
• Vietnam
  Customs monthly data on exports of coffee, rice and rubber
• Malaysia’s
  2Q cocoa grind data
• New
  Zealand food prices

TUESDAY,
July 14:

• China
  trade data, incl. soybeans, edible oil, rubber and meat & offal imports
• HOLIDAY:
  France

WEDNESDAY,
July 15:

• EIA
  U.S. weekly ethanol inventories, production, 10:30am
• Brazil
  chicken, pork group ABPA’s press conference on output, exports
• International
  Sugar Organization’s online conference on Covid-19 impact on sugar and alcohol
• Malaysia’s
  palm oil export data for July 1-15

THURSDAY,
July 16:

• USDA
  weekly crop net-export sales for corn, soybeans, wheat, cotton, pork, beef, 8:30am
• Port
  of Rouen data on French grain exports
• North
  America 2Q cocoa grindings
• European
  Cocoa Association 2Q grind data

FRIDAY,
July 17:

• 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
• Cocoa
  Association of Asia releases 2Q cocoa grind data

Source:
Bloomberg and FI

 

 

 

 

 

China
CASDE

In
its monthly S&D update, China left its 2020-21 corn and soybean outlooks unchanged and increased 2019-20 corn and soybean imports.  China 2019-20 corn imports are predicted to end up near 6 million tons, up 2 million tons from last month.  China 2019-20 soybean
imports were lifted 3 million tons to 94 million tons.

 

 

 

Macros

·        
Canadian Net Change In Employment Jun: 952.9K (est 700K; prev 289.6K)

·        
Canadian Unemployment Rate Jun: 12.3% (est 12.1%; prev 13.7%)

·        
Canadian Hourly Wage Rate Permanent Employees (Y/Y) Jun: 6.8% (est 8.9%; prev 10.0%)

·        
US PPI Final Demand (M/M) Jun: -0.2% (est 0.4%; prev 0.4%)

·        
US PPI Ex Food, Energy (M/M) Jun: -0.3% (est 0.1%; prev -0.1%)

·        
US PPI Ex Food, Energy Trade (M/M) Jun: 0.3% (est 0.1%; prev 0.1%)

·        
US PPI Final Demand (Y/Y) Jun: -0.8% (est -0.2%; prev -0.8%)

·        
US PPI Ex Food, Energy (Y/Y) Jun: 0.1% (est 0.4%; prev 0.3%)

·        
US PPI Ex Food, Energy, Trade (Y/Y) Jun: -0.1% (est -0.2%; prev -0.4%)

 

 

Corn.

• Corn
  turned lower around 7 am on a less threatening US weather outlook.  At the pause it was down 1.75-2.25 cents.  The outlook for week two was a little wetter for both GFS and European models. 
  
• We
  don’t think USDA will change its US corn yield in its S&D report.
• Approximately
  10% of the US corn crop is in drought area, compared to 6% last week according to the USDA weekly drought report.
  

·        
The USD was slightly lower.  

·        
China was to sell 20,000 tons of pork out of reserves on Friday.  Results are awaited.

 

Corn
Export Developments

• None
  reported

 

Soybean
complex.

·        
Soybeans are were mixed early this morning.  The outlook for week two was a little wetter for both GFS and European models. 

·        
We look for corn and soybean conditions to decrease when reported on Monday

·        
We heard China bought at least 2-3 soybean cargoes from the US for fall shipment.  We are not sure if it was Gulf or PNW. 

·        
Meal was down $0.30-$0.50. 

·        
SBO turning slightly higher by the electronic pause. 

·        
Friday is a holiday in Argentina.

• Roughly
  5% of the US soybean crop is in drought area, compared to 2% last week according to the USDA weekly drought report.
  

·        
Rotterdam values this morning showed soybean oil for the August/September position was up 2 euros from this time previous session, rapeseed oil up 2 in the nearby, and soybean meal when imported from South America 3-4 euros higher. 

• Offshore
  values this morning was leading CBOT soybean oil 20 higher (93 higher for the week to date) and meal $1.20 lower ($2.80 higher for the week).   
  

·        
Cargo surveyors ITS and AmSpec reported a 17.8 percent and 16.8 percent decrease in June 1-10 palm oil shipments from month earlier.  Traders were looking for a 15 percent decline.  ITS reported
448,516 tons vs. 545,360 same period month ago.  AmSpec reported 458,173 tons vs. 550,341 same period month ago. 

·        
Malaysia:  Supportive S&D partially offset by bearish July exports. 

• China:

·        
China cash crush margins as of this morning, using our calculation, were 89 cents per bushel (87 previous) and compares to 63 cents a week ago and 47 cents around this time last year.

 

Malaysian
palm oil production
during June was reported at an unusually high 1.886 million tons, 102,000 above trade expectations, a marketing year high, while end of June palm oil stocks were reported 34,500 tons below expectations at 1.9 million tons, down from 2.030 million tons at the
end of May.  Exports and implied use were better than expected. June exports were highest in at least 4 years and a high for the marketing year.  See our attached tables. 

 

 

 

Oilseeds
Export Developments

• None
  reported

 

Wheat

·        
Non expiring Chicago wheat was unchanged to lower on positioning after futures hit a 2-month high on Thursday.  KC was 2-3.75 cents lower and MN turned lower before the pause after trading higher overnight following Paris wheat. 

·        
FranceAgriMer estimated the soft wheat crop was 55% G/E as of July 6, down from 56% a week earlier and the lowest since 2016. 
Ten percent of the crop had been harvested. 

·        
Paris December wheat was up 1.50 at 189.25, at the time this was written.

·        
Russia’s AgMin sees the 2020 grain crop at 122.5 million tons, including 75 million tons of wheat, and exports for grain at 43 million ton.  They want to increase grain reserves but added that will not happen until the completion
of the 2020-21 crop year, meaning exportable supplies could end up larger than expected. 

• Around
  11% of the US spring wheat crop is in drought area, compared to 27% last week according to the USDA weekly drought report. This reflects the beneficial rains we saw in the Northern Plains the past week.
  

 

Export
Developments.

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

·        
Jordan seeks 120,000 tons of wheat, optional origin, on July 14. 

• 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

• As
  of July 10, China sold a total of 64,445 tons of cotton from state reserves