From: Terry Reilly
Sent: Thursday, March 19, 2020 1:49:34 PM (UTC-06:00) Central Time (US & Canada)
Subject: FI Evening Grain Comments 03/19/20

PDF attached

 

Higher
ag prices driven by soybean meal and high protein wheat.  USD was screaming higher. Global import tender demand remains strong with SK picking up at least 3 cargoes of corn and South Korean millers buying 136,000 tons of US wheat.  Short covering in corn seen
after funds sold an estimated net 143,000 corn contracts previous 6 business days. Soybean crush margins were on fire again with May hitting an intraday high of 1.39. 

 

May
Chicago wheat

Source:
Reuters and FI

 

 

Weather

2020
Winter/Spring Flood Outlooks

https://www.weather.gov/marfc/WinterSpring_Flood_Outlook

 

Chances
for a weak la Nina during the OND period, at 40 percent, was precited by CPC/IRI. 

 

 

MARKET
WEATHER MENTALITY FOR CORN AND SOYBEANS: 

Today’s
weather will not provide much bullish support except from the United States where a wet bias will continue in the Delta and Tennessee River Basin as well as in parts of central and eastern crop areas of Texas into late this month. South Texas moisture will
be welcome and dry conditions in the far southeastern U.S. will support planting.

World
Weather, Inc.’s outlook for April and May were released today and offers some hope for better planting conditions in the second half of spring.

South
America weather is still advertised to be mostly good for Argentina and southern Brazil, although the distribution of rain over the next two weeks will have much to say about second season corn production in Brazil. Argentina has had enough rain in central
and southern areas recently that many crops will finish out the growing season without much potential for additional losses even though the next two weeks look dry and some warmer than usual weather will be returning.

South
Africa weather will be favorably mixed over the next two weeks supporting late season crop development. Limited rain in eastern Australia will be supportive of early season sorghum and other coarse grain and oilseed crop maturation and harvesting.

India
winter crops are still poised for excellence this year and drier weather will be needed in late March and especially April to protect crop quality.         

China’s
winter weather has spring planting prospects looking very good. Rain in Spain and Portugal will improve spring planting potentials and support improved winter crop conditions.

Rain
is still needed throughout Southeast Asia, but mostly in the mainland areas and in some of the northern palm oil and coconut production areas of Indonesia. Peninsular Malaysia also needs a boost in rain.

Overall,
weather today will maintain a mixed influence on market mentality, although a bullish move in the markets will likely continue for other reasons.

 

MARKET
WEATHER MENTALITY FOR WHEAT:
 

Weather
conditions around the world have not changed much and will not likely change much for a while. U.S. Plains crop areas have benefited from recent precipitation and will help improve early season crop development, although more rain is needed in the west central
parts of hard red winter wheat country. Some areas in the Midwest are too wet.

            Canada’s
Prairies are expected to experience a good start to spring planting this year, but May could trend wetter.

            Europe
winter crops are quite mixed with some areas in the northwest too wet. Improving soil moisture is expected in southeastern Europe which may improve crops after a poor environment for establishment last autumn. Lower area planted in parts of Europe will still
pull down production, but crops that did get planted may perform better than previously expected. That statement also pertains to Ukraine.

            Dryness
in Kazakhstan and eastern parts of Russia’s Southern Region will need to be closely monitored.

            China
has huge potential for crop improvements this spring. India’s winter crop will be very large as well. Rain is needed in southern Australia to improve planting potentials for late April through June.

            North
Africa’s rain and that in Spain will help improve some crops, but Morocco’s production losses because of drought will not be fully recoverable.

            Overall
weather today will likely contribute a mixed influence on market mentality, although recent reports of lower production because of dryness last autumn may give the market a little boost.

Source:
World Weather Inc. and FI

 

Bloomberg
Ag Calendar

THURSDAY,
MARCH 19:

  • USDA
    weekly crop net-export sales for corn, soybeans, wheat, cotton, 8:30am
  • Port
    of Rouen data on French grain exports
  • USDA
    total milk, red meat production, 3pm

FRIDAY,
MARCH 20:

  • ICE
    Futures Europe weekly commitments of traders report on coffee, cocoa, sugar positions ~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
  • AmSpec,
    Intertek, SGS release palm oil export data for March 1-20
  • U.S.
    cattle on feed, 3pm

Source:
Bloomberg and FI

 

USDA
export sales

        
US sorghum sales were 366,000 tons with China taking 202,300 and unknown 128,000 tons.

        
Pork sales were 35,700 tons (China 15,700 tons).

        
Soybean sales were 631,600 tons, low end of trade expectations.

        
Soybean meal sales slipped to 129,100 tons but shipments were 291,400 tons.

        
Soybean oil sales were down from the previous week at 18,900 tons but shipments were good at 39,100 tons. 

        
Corn export sales fell to 904,500 tons, below 1.471 million tons last week.

        
All-wheat sales were 338,300 tons, below 452,300 tons last week. 

 

 

 

 

 

 

 

Macros

        
US Crude Oil Futures Settle At $25.22/Bbl, Up $4.85 Or 23.81%

        
USD was sharply higher. 

        
US Initial Jobless Claims Mar 14: 281K (est 220K ; prev 211K)

US
Continuing Claims Mar 7: 1701K (est 1738K ; prevR 1699K; prev 1722K)

        
US Tsy Sec Mnuchin: Tsy, Fed Working Around Clock On COVID-19 Response

                 
-Wants $1000 Per Person, $500 Per Child In Direct Checks

        
(Reuters) – The U.S. Department of Energy said on Thursday it will buy an initial 30 million barrels of oil for the Strategic Petroleum Reserve as an initial step to fulfill President Donald Trump’s directive
to fill the reserve to help domestic crude producers.

 

Corn.

        
Corn prices rallied on short covering after funds sold an estimated net 143,000 contracts over the previous six business days.  May corn ended 10.75 cents higher at $3.4550 and July up 9.25 cents to $3.5100.  
There
were rumors China may have bought four cargoes of US corn, but we could not confirm that. 

        
South Korea was active again overnight picking up three cargos. 

        
US sorghum export sales were 366,000 tons with China taking 202,300 and unknown 128,000 tons.  Pork sales were 35,700 tons (China 15,700 tons).  Corn export sales fell to 904,500 tons, below 1.471 million
tons last week.

  • The
    US generated 1.16 billion D6 blending credits in February, down from 1.25 billion in January. 
  • USDA
    Attaché estimated Mexico will produce 27.1 million tons of corn and import 18.25 million tons, up from 25.6MMT and 17.3MMT, respectively. 
  • Japan’s
    usage of corn in animal feed fell to 48.6% in January, compared with 48.8% a year earlier.
  • IEG
    Vantage reportedly updated acreage numbers for the US.  Below is what we retrieved from the trade.  Corn was estimated at 95.2 million acres, up 1.8 million from previous. Soybeans were revised lower by about 900,000 acres to 85.6 million. All wheat was taken
    down around 300,000 acres to 45.2 million.  We think all wheat will be higher based on some of the northwestern Corn Belt area getting switched from corn to high protein wheat.   Their combined corn, soybeans and wheat area was upward revised 0.5 million acres
    to 226.0 million acres, below 5-year 2014 through 2018 average of 227.2 million.  Look for a change in recent area estimate that were released this week taking into account moves in the wheat/corn and soybean/corn relationships. 

        
Yesterday Allendale estimated the corn area at 94.6 million acres and soybean area at 83.7 million acres.  All wheat was pegged at 44.5 million acres. 

  • Rosario
    Exchange: March-Feb corn exports projected at 33.5MMT, down from 37.0 in 2019-20.

        
South Korea’s imports of pork declined about 22% to 26,300 tons in February from a year earlier.

        
China number of breeding sows increased 1.7% in February from January, its 5th consecutive monthly increase.  Hog inventories rose 2.8% from January. 

        
China’s poultry production was up 12% last year to 22.39 million tons and for 2020, the AgMin looks for production to be near unchanged from last year. 

        
China looks to auction off 20,000 tons of pork from state reserves on March 20.  They released 210,000 tons of pork from reserves since December.  It’s not a large amount compared to daily consumption rates
but is a positive indicator the country continues to move agriculture goods. 

 

 

Export
Developments

  • South
    Korea’s FLC bought 134,000 tons of corn at $192.41/ton and $191.20 c&f for August arrival. 
  • South
    Korea’s KFA bought 60,000 tons of corn at $190.99/ton c&f for around September 5 arrival.  Offers for a second cargo for late September arrival were rejected. 
  • Yesterday
    South Korea’s KOCOPIA bought 60,000 tons of corn at $206.98/ton c&f for June 10 arrival. 
  • Yesterday
    South Korea’s MFG bought 69,000 tons of corn at $1929.99/ton c&f for August 21 arrival. 
  • Results
    awaited:

    Algeria seeks 40,000 tons of corn from Argentina on March 19 for FL April shipment.

 

 

 

 

Updated
3/19/
20

 

Soybean
complex.

  • CBOT
    soybeans

    traded higher again led by strength in soybean meal amid slowdown in Argentina meal shipments and good US domestic demand.  Soybean oil was higher led by higher WTI.  Soybean meal sold off during the modified close.  The official May settlement was $314.80/short
    ton, up $10.80.  The back months were not as strong. October meal settled $0.50 lower.  Soybeans were up 17.75 cents basis May and July up 15.25 cents.  May soybean oil was up 44 points. 
  • We
    heard that Timbúes, in southern Santa Fe province of Argentina, decided to suspend operations at the grains ports.  5 grain terminals are there, and its only 35km from Rosario. 
  • May
    crush hit an intraday high of 139.  May settled 8.50 cents higher at 127.25 and July crush was up 0.50 at 108.25. 
  • There
    was again talk of US widespread spring flooding, with a bias across the northern Great Plains.  This comes from the National Oceanic and Atmospheric Administration in its spring flood outlook. 
    https://www.weather.gov/marfc/WinterSpring_Flood_Outlook

        
Soybean US export sales were 631,600 tons, low end of trade expectations.  Soybean meal sales slipped to 129,100 tons but shipments were 291,400 tons.  Soybean oil sales were down from the previous week at
18,900 tons but shipments were good at 39,100 tons. 

        
China cash crush margins as of this morning, using our calculation, were 145 cents per bushel (135 previous), and compares to 128 cents a week ago and negative 28 cents around this time last year. 

  • We
    heard 5-6 cargos of Brazilian soybeans traded Wednesday into Thursday for mostly June/July shipment.  It was rumored China bought US soybeans out of the PNW but confirmation was lacking. 
  • The
    CNGOIC sees China importing more soybeans on a daily basis May onward.  March and April imports may be less than expected.  Inventories are expected to be tight through the end of April. 
  • USDA
    Attaché on China oilseeds

https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Oilseeds%20and%20Products%20Annual_Beijing_China%20-%20Peoples%20Republic%20of_03-15-2020

“China’s
soybean imports are forecast to reach 86 MMT in MY20/21, based on a recovery in crush volume for animal feed as the swine herd rebuilding continues. The MY20/21 forecast is up from an estimated 84 MMT in MY19/20 and 82.5 MMT in MY18/19.”

  • US
    generated 315.2 million D4 RINs during February, up from 296.9 million in January and compares to 293.0 million in February 2019.  We are using 609 million pounds for soybean oil for biodiesel use for the month of February, up from our working estimate of
    600 million pounds for January and compares to 560 million pounds used during February 2019. 

 

Oilseeds
Export Developments

  • Egypt’s
    GASC bought a combined 120,000 tons of soybean and sunflower oil, 60,000 tons each. Reuters noted the soybean oil was bought at $634.50 a ton c&f and the sunflower oil at $676.50 a ton c&f. 

    • 30,000
      tons of soybean oil for arrival between May 20 and June 10.
    • 60,000
      tons of sunflower oil for arrival between May 20 and June 10.
    • 30,000
      tons of soyoil for arrival between June 15 and July 5.

 

 

 

May
Crush

Source:
Reuters and FI

 

Updated
3/19/20

 

Wheat

        
CBOT Chicago wheat traded higher, above its 50-day moving average on Thursday.  CBOT SRW wheat was the leader for the majority of the session versus HRW and other spring wheat.  Note CBOT wheat price limits
for Chicago and KC wheat are set at 35 cents.
https://www.cmegroup.com/trading/price-limits.html

        
Chicago May wheat ended 26.75 cents higher at $5.3500, KC May up 19.0 cents at $4.6950, and MN May up 10.25 cents at $5.1950. 

        
EU wheat is back at a 3-week high.  May Paris wheat futures were up 5.25 euros to 189.25 euros.

        
Earlier we heard China was in buying around 5 cargoes of wheat out of TX Gulf since Wednesday. 

        
US all-wheat export sales were 338,300 tons, below 452,300 tons last week. 

        
We are using a 2019-20 US all-wheat projection that is slightly below USDA March S&D. 

        
Up in Canada, flour for bread baking is flying off the shelf. For one miller, they told us individuals are visiting milling plants asking for bags of milling wheat, which they can’t provide. 

        
Egypt said they have enough wheat to last 3.5 months.  Earlier this week they announced a temporarily suspension on wheat inspections until March 31. 

        
USDA Attaché pegged Egypt wheat imports for 2020-21 at 12.85 million tons, up from 12.80 million projected for 2019-20. 
https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Grain%20and%20Feed%20Annual_Cairo_Egypt_03-15-2020

        
Rain is need for the Black Sea region. 

        
Ukraine’s grain crop fell 10.3 percent to 67.4 million tons, in large part to a decrease in wheat production to 24.2 million tons, a 12.5% decrease from 2019, according to Ukraine’s national research institute
IAE. 

 

Export
Developments.