FI Morning Grain Comments 12/30/20

PDF attached

 

Morning. 

 

Today
is position day for CBOT January deliveries

 

The
Argentina strike was settled late Tuesday and futures markets in Chicago are softer on the news.  The agreement includes a two-part 25% increase in pay from January to August. Increases for the rest of the year are to be determined by the inflation rate. 
Look for traders to shift their focus back to South American weather, especially Argentina where they badly need rain.  Trade estimates for the January USDA reports are starting to trickle out and bottom line is the trade expects the US corn carryout and soybean
ending stocks to shrink from the previous estimate, based on lower SA production estimates and robust US shipments. 

 

Today
is position day for CBOT January deliveries, FND is Thursday.  Soybean meal registrations declined 25 to 175.  SBO registrations stand at 1,313 and soybeans at 100.  We see light deliveries, if any, on Thursday.  Full carry % is at zero for the products. 
Expect zero to up to 50 soybeans, zero to +200 for soybean oil and zero for soybean meal. 

 

Algeria
seeks wheat today. Taiwan bought 82,325 tons of US wheat this week.  Bangladesh saw offers for 50,000 tons of rice.  A Bloomberg poll looks for weekly US ethanol production to be down 10,000 at 982,000 barrels (952-975 range) from the previous week and stocks
up to 453,000 barrels to 23.622 million. USDA export sales will be out on Thursday.  There will be no shortened trading session on Thursday. 

 

 

We
raised most of our projected price ranges for corn and soybeans.  FI 2020-21 nearby crop-average price change outlook:

• Soybeans
  11.25 to 11.50
• Soybean
  meal $370 to $380
• Soybean
  oil 37.50 to 38.40
• Corn
  $4.20 to $4.35
• Chicago
  wheat $6.00 unchanged
• KC
  wheat $5.90 to $5.75
• MN
  wheat $5.70 unchanged
• Oats
  $3.25 unchanged

 

 

 

Weather

MARKET
WEATHER MENTALITY FOR CORN AND SOYBEANS: 

            Erratic
rainfall in Argentina in this coming week might benefit some crop areas, but the bulk of the nation remains on a watch list for possible crop stress and production threats. The distribution of rainfall will be such that some areas will see deteriorating conditions
while a few others experience either status quo or a temporary improvement.

            Brazil
crop weather will be more favorable, although Rio Grande do Sul and immediate neighboring areas will dry down once again. Net drying is also expected in the northeast, but some showers will occur briefly this weekend into early next week offering a temporary
reprieve from drying.

            South
Africa weather will be mostly good, but greater rain will soon be desired. Australia’s sorghum areas will benefit from a boost in precipitation soon.

            China’s
rapeseed is dormant and in mostly good shape. India’s late summer crop harvest will continue into January in the far south while rapeseed and mustard areas in the north and central parts of the nation will be looking for rain in the next few weeks.

            Winter
oilseeds in Ukraine and other European production areas are dormant with little change likely for a while.

            Southeast
Asia oil palm production areas are getting sufficient rain to support normal crop development.

            The
bottom line remains mostly mixed today with concern over Argentina weather remaining high and mostly favorable conditions in Brazil and South Africa. Weather today may not likely provide much reason for a change in market mentality.

 

MARKET
WEATHER MENTALITY FOR WHEAT:  Winter crops are mostly dormant or semi-dormant in the Northern Hemisphere. Some small improvements in soil moisture have occurred recently and more will occur prior to spring in parts of Russia’s Southern Region, Ukraine and
the central U.S. Plains. China and India crops are favorably rated and the same is true for parts of Europe.

            Argentina’s
harvest is advancing around brief bouts of rain. Fieldwork in both South Africa and Australia will be winding down soon if not already.

            Overall,
weather today does not offer much support for higher prices, although the trade will probably follow corn and soybeans. There is no threat of damaging cold in Russia, Europe or North America, but a close watch on northern China may be warranted as cooler than
usual weather prevails while snow cover is limited.

 

Bloomberg
Ag Calendar

Thursday,
Dec. 31:

• U.S.
  Export Sales Report will be released on Thursday, December 31, 2020.

Source:
Bloomberg and FI

 

 

 

 

Macros

 

Corn.

• After
  CBOT corn surged on Tuesday on talk China bought US corn, today futures are slightly lower in the front months after late on Tuesday Argentina unions agreed to end their strike after reaching a deal with exporters/crushers.  Back month corn futures were higher. 
  
• We
  have not heard updates if the China buying rumored yesterday (up to 2 million tons US corn) was related to government buying or Cofco buying internal US corn.  Note barge corn is up slightly at the Gulf, so a private purchase of 25 plus US corn cargoes would
  have likely increased Gulf premiums by more than a couple cents. 

 

• March
  corn charged 9.50 cents higher to a new contract high. 
• CBOT
  corn open interest (OI) increased 15,931 (March down 2,378). 
• A
  Bloomberg poll looks for weekly US ethanol production to be down 10,000 at 982,000 barrels (952-975 range) from the previous week and stocks up to 453,000 barrels to 23.622 million.
  

 

Below
is what the 2020-21 nearby corn crop futures price range looks like through December 29.  Note the crop-year average is up in the air and depends on swings in soybean futures and possible additional Chinese buying of US corn and other feedgrains. 

 

 

IFES
2020: 2021 Market Outlook for Corn and Soybeans

Irwin,
S. and J. Janzen. “IFES 2020: 2021 Market Outlook for Corn and Soybeans.” Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, December 29, 2020.

https://farmdocdaily.illinois.edu/2020/12/ifes-2020-2021-market-outlook-for-corn-and-soybeans.html?utm_source=farmdoc+daily+and+Farm+Policy+News+Updates&utm_campaign=a18a22eb79-FDD_RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_2caf2f9764-a18a22eb79-173649469

 

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.  

• The
  Argentina strike was settled late Tuesday and futures markets in Chicago are softer on the news.  The agreement includes a two-part 25% increase in pay from January to August. Increases for the rest of the year are to be determined by the inflation rate. 
  The main strike started December 9^th.   An
  estimated 162 grain/oilseed ships have been delayed according to the Rosario Grains Exchange.  The exchange estimated $1.458 billion in exports have been held up. 
  
• Look
  for traders to shift their focus back to South American weather, especially Argentina where they badly need rain. 
  
• Soybeans
  nearly hit the $13/bu mark and some think another leg up could be achieved if Argentina production continues to get downgraded.
  
• Today
  is position day for CBOT January deliveries, FND is Thursday.  Soybean meal registrations declined 25 to 175.  SBO registrations stand at 1,313 and soybeans at 100.  We see light deliveries, if any, on Thursday.  Full carry % is at zero for the products. 
  Expect zero to up to 50 soybeans, zero to +200 for soybean oil and zero for soybean meal. 
  
• Argentina
  will see hot temperatures this week. Argentina will not likely receive enough rain during the next two weeks to ease crop stress. 
  
• Trump
  Administration plans to block palm imports from Sime Darby Plantation over labor abuse. 
  
• CBOT
  OI: Soybeans up 2,101, SBO down 4,673 and SBM down 3,188.
• Offshore
  values this morning were leading CBOT soybean oil 14 points lower and meal $3.60 lower.
  
• Rotterdam
  soybean oil values were about 10 euros higher, rapeseed oil up 3 euros, and Rotterdam meal mostly 5-15 euros higher. 
  
• Malaysian
  palm oil: 

• China
  cash crush margins were 100 cents on our calculation (104 previous), compared to 145 last week and 131 year ago.
  
• China
  futures

 

 

Below
is what the 2020-21 nearby soybean crop futures price range looks like through December 29.  Note the crop-year average is up in the air.  Average will depend on SA production, but sticking with 100-105 Chinese soybean import demand for 2021.

 

 

 

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 futures are mixed on lack of direction and mixed trade in corn. 

• Algeria
  seeks wheat today. Taiwan bought 82,325 tons of US wheat this week.  Bangladesh saw offers for 50,000 tons of rice.
  
• USDA
  export sales will be out on Thursday. 

• EU
  March milling wheat was up 1.00 at 212.00 euros.
• CBOT
  March SRW wheat OI was down 359 contracts and all contracts fell 1,181 lots. 
  
• 90%
  of Ukrainian winter grains are in good condition, according to Ukraine’s economy.

 

Export
Developments.

• Taiwan
  bought 82,325 tons of US wheat for LH Feb through March shipment. 
• 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. 
  
• Algeria’s
  OAIC seeks 50,000 tons of wheat on December 30 for Feb shipment (Jan is from SA). 
  
• Bangladesh
  floated an imported tender for 50,000 tons of wheat, set to close Jan 4. 

 

Rice/Other

• Bangladesh
  received offers for another 50,000 tons of rice and lowest offer was $408.28/ton ($405.60/ton lowest yesterday).