From: Terry Reilly
Sent: Wednesday, July 25, 2018 10:16:26 PM (UTC-06:00) Central Time (US & Canada)
Subject: FI Evening Grain Comments 07/25/18
· Brazil and Argentina were virtually dry.
· The ridge of high pressure is expected to stay centered over the southwestern United States throughout this week, creating a northwesterly flow aloft in the central U.S., Northern Plains and Corn Belt.
· It was hot again across the US southwest.
· The western Corn Beltwill see net dry this week. The eastern Midwest will see rain.
· Not all areas of the southwestern Corn Belt will remain dry this week. A very important event will occur this weekend with 0.30 to 0.80 inch of rain likely and local totals to 1.50 inches.
· Other U.S. weather late this week through the weekend will be wettest from the central Plains into the lower Ohio River Valley and far northern Delta.
· Warmer temperatures will evolve late in the first week of August, but no excessive heat is expected.
WORLD WEATHER AREAS OF GREATEST INTEREST THIS WEEK
· Japan’s heat wave continues with temperatures high into the 90s and over 100 degrees Fahrenheit expected to prevail into the weekend
· Tropical Storm Jongdari is expected to reach Honshu, Japan late in the weekend and could bring some relief to the recent hot, dry, weather, but might also bring some damaging wind and flooding rain to the region
· Western Europe continues to heat up with 90s reaching into Germany and France with extremes possibly reaching 100 briefly ahead of weekend showers
· France, Germany, the U.K. and Scandinavia will receive some rain this weekend and then trend drier and warmer again during the second half of next week into the following weekend.
· Stress is expected for many crop areas with losses in production likely
· Eastern Europe and the western CIS will see frequent rain maintaining concern over unharvested small grain quality for a few more days, but much less rain is expected in western Russia by the weekend and improving conditions will occur next week; Belarus, western Ukraine and eastern Poland will stay wet into next week
· Indonesia and Malaysia rainfall remains erratic and lighter than usual
· India’s Monsoon will take a short term break from mid-week this week into the end of next week, but sufficient moisture is present in most of the nation to support crops favorably as long as rain resumes in August
· Interior eastern and some central China areas will be drying in the coming week with temperatures rising well above average
· Extreme highs over 100 are expected
· East-central Australia drought was not eased by showers in Queensland Tuesday and drought will continue through the next ten days to two weeks
· New South Wales will get some rain Friday into Saturday and again late next week
· Temporary improvement is possible for some crops in the state
· U.S. Midwest weather will be mild to cool and net drying is still expected in the central and northeast with some weekend rain expected in the west.
· Southwestern Corn Belt crop areas are not likely to receive enough rain to fix long term moisture deficits
· Southern U.S. Plains livestock and crops are seeing some relief from excessive heat and some showers are expected
· Key Texas crop areas will stay dry this week, but some rain will fall in West Texas Thursday into Friday and again Sunday into Monday
· SW Canada Prairies, northwestern U.S. Plains and U.S. Pacific Northwest will stay drier and warmer biased through the next week
Source: World Weather Inc. and FI
- Corn closed higher today following global wheat markets which saw technical buying and a limit up move in SRW.
- After the close we saw positive news from the meeting between EU’s Juncker and US President Trump on tariffs. They agreed to suspend new tariffs and the EU pledged to expand imports US LNG and soybeans.
- Funds bought an estimated net 19,000 corn contracts.
- It will remain hot in the US southwest and Midwest will see normal to below normal temperatures. While this may advance growth and lower the potential yield in the southwest, any crop losses should be more than offset by above trend yields in larger Midwestern producing states than have seen normal or mild overnight temperatures.
- There are repairs underway to a lock near St. Louis, slowing Mississippi River vessel traffic. The U.S. Army Corps of Engineers closed the Melvin Price Locks near Alton, IL, to make repairs last week.
· US producer selling is slow but that will change with futures appreciating this week. Export interest increased out of the Lakes over the past week.
· Central China could see net drying and warm temperatures that may stress the crop.
- South Africa’s CEC is due to update their 2018 corn production on Thursday and traders are looking for a slight increase to 13.305 million tons form 13.207 million previously. USDA is at 13.8 million tons, down from 17.55 million in 2017.
- EPA’s acting administrator Andrew Wheeler said he would consider following through with overhauling biofuel policy, including counting ethanol exports toward annual biofuels quotas.
- The weekly DOE report showed ethanol production up 10,000 barrels per day (est. -11k) and stocks off 115,000 barrels (est. +51k). The report is friendly corn. Stocks are running at their lowest level since mid-June. US ethanol production is at its highest level since December 22, 2017. At 1.074 million barrels per day, ethanol production is 34k below the weekly record of 1.108 million for the week ending December 1, 2017. Ethanol futures are up 5 percent year-to-date.
· China sold about 55.6 million tons of corn out of reserves this season.
7/21/18. September corn may trade in a $3.25-$3.80 range. December corn is seen in a $3.00-4.50 range. Our working 2018-19 corn crop-year average is $3.55, subject to change.
· The major market-moving news came after the close as details were released from the meeting between US President Trump and European Commission President Juncker talked about working towards “zero tariffs”.
· The EU also said they would step up soybean purchases immediately, which has lifted the overnight session by over 18 cents in SX8. Some see the EU increase as inevitable since China will be pulling soybeans out of EU’s normal buyer, South America.
· Good demand for US domestic end users and surge in exports to countries other than China continue to underpin prices, even as the US crop is expected to be reported larger by USDA in August from their early summer estimate.
· Soybean business in Canada and upper Midwest has increased this month. By the end of the month, don’t be surprised to see all the soybeans stored around the Lakes to be sold and shipped.
· Funds were net buyers of 4,000 soybean, 2,000 soymeal, and 3,000 soybean oil contracts.
· Argentina economic woes are renewing. The economy shrank 5.8 percent in May from a year ago, second consecutive monthly decline. This was largest decline since July 2009. Farming activity shrank 35 percent year-over-year.
· Delays to unload soybeans in China are holding up the unloading of two US soybean cargos near Dalian.
· Before closing higher, palm oil hit a 3-year low. October Malaysian palm was 11 higher at MYR2163.
· Malaysian palm exports improved over the last 5 days. Cargo surveyor SGS reported July 1-25 Malaysian palm exports at 910,774 tons, up 50,557 tons or 6% from the same period a month ago but down 133,682 tons from the same period a year ago (13% decrease). AmSpec reported palm exports at 902,979 tons, up 5 percent from the previous period last month.
· Regarding US providing producer & trade aid of $12 billion paid through direct assistance, a food purchase and distribution program, and a trade promotion program, the Chinese are not happy with the announcement, calling it “vicious”.
· Meanwhile, China plans to allocate emergency funds to help producers battle flooding. $147.8 million will go to local governments.
· China sold 59,079 tons of soybeans out of reserves at an average price of 2997 yuan per ton ($440.90/ton), nearly 12 percent of what was offered. China sold 1.031 million tons of soybeans out of reserves so far, this season.
- China sold 800 tons of soybean oil out of reserves at an average price of 5,000 yuan per ton ($736.25/ton), nearly 2 percent of what was offered.
- South Korea seeks 1,500 tons of non-GMO soybeans on July 25 for September-December delivery.
- Iran seeks 30,000 tons of sunflower oil on September 24.
- Iran seeks 30,000 tons of soybean oil on August 1.
· August soybean meal $310-350 range; December $280-$400 range.
· August soybean oil 28.00-28.90 range; December 27.00-30.50 range.
· September Chicago and KC broke above our top end of predicted trading ranges of $5.30 and $5.25, respectively. We now look for the top end for both commodities to be around $5.60 and $5.70, respectively. Note our KC premium over Chicago of ten cents. September KW gained over Chicago recently, and KC should regain a premium over Chicago soon as quality wheat is sought. KWZ and WZ spread is expected to continue to widen if the rally continues.
· September MN wheat is still seen in a $5.30-$5.70 range.
· Wheat/Corn spread for December rose to $1.91/bu, levels not seen since June 2017, on the wheat rally and lack of movement in corn. We can continue higher here off of the problems with EU and Black Sea wheat, but others think that the widening of the spread will attract feed demand for corn, and less for wheat which will weigh on the spread.
· The world wheat STU, using USDA data, is 35 percent and suggests a 2018-19 crop year average of 4.20/bu.
· The world wheat STU, using USDA data, and REMOVING CHINA, is 20 percent and suggests a 2018-19 crop year average of nearly $6.00/bu.
· Day 1 HRS wheat crop tour showed the yield below average. Another crop tour in Saskatchewan shows dry areas are affecting summer grain production.
· Day 2 HRW wheat crop averaged 41.3 bu/acre compared to 35.8 bu/acre last year and below the 5-yr average of 44.7 bu/acre.
· An end user estimates the Alberta wheat crop could be down 5-10 percent due to dryness. But protein levels are good.
· December Paris wheat futures closed 5.50 euros higher at 202.50 euros.
· Strategie Grains lowered its estimate for the EU soft wheat crop to about 130 million tons versus 132.4 in early July and compares to 141.8 million in 2017. They have Germany at 20.7 million tons, down from 22.8 million estimated in early July, and France at 33.2 million tons, unchanged from earlier.
- The Wheat Quality Council’s U.S. spring wheat crop in North Dakota began yesterday. Day one calculated 38.9 bu/ac for HRS for 135 fields (138 overall), up from 37.9 year ago and 44.7 average. Final results for all three days are due out Thursday.
· Black Sea barley prices are back above wheat.
- Bangladesh’s lowest offer was $270.89/ton c&f for 50,000 tons of optional origin milling wheat for shipment within 40 days of contract signing.
- Japan in a SBS import tender bought 3,500 tons of feed wheat and passed on barley for arrival by December 28.
- Japan in a SBS import tender seeks 120,000 tons of feed wheat and 200,000 tons of barley on August 1 for arrival by January 31.
- China sold 9,946 tons of 2013 wheat out of auction at an average price of 2,217 yuan per ton ($326.92/ton), 0.6 percent of what was offered.
· Jordan seeks 120,000 tons of barley on July 31.
· Jordan seeks 120,000 tons of wheat on July 26.
· Iraq seeks 50,000 tons of US, Canadian, and/or Australian wheat on July 29, valid until August 2.
- Results awaited: Bahrain Flour Mills seeks 17,000 tons of semi-hard wheat and 8,000 tons of hard wheat, on July 24, valid until July 25, for shipment in late Aug/early Sept. Origins include Australia, Baltics, & Canada.
- Results awaited: Thailand seeks to sell 120,000 tons of raw sugar on July 18.
· Results awaited: Mauritius seeks 6,000 tons of white rice for Sep 1-Nov 30 shipment.
- September Chicago is seen in a $5.20-$5.60 trading range.
- September KC is seen in a $5.20-$5.70 range.
- September MN wheat is still seen in a $5.30-$5.70 range.
Senior Commodity Analyst – Grain and Oilseeds
Futures International │190 S LaSalle St., Suite 410│Chicago, IL 60603
ICE IM: treilly1
Trading of futures, options, swaps and other derivatives is risky and is not suitable for all persons. All of these investment products are leveraged, and you can lose more than your initial deposit. Each investment product is offered only to and from jurisdictions where solicitation and sale are lawful, and in accordance with applicable laws and regulations in such jurisdiction. The information provided here should not be relied upon as a substitute for independent research before making your investment decisions. Futures International, LLC is merely providing this information for your general information and the information does not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision. The contents of this communication and any attachments are for informational purposes only and under no circumstances should they be construed as an offer to buy or sell, or a solicitation to buy or sell any future, option, swap or other derivative. The sources for the information and any opinions in this communication are believed to be reliable, but Futures International, LLC does not warrant or guarantee the accuracy of such information or opinions. Futures International, LLC and its principals and employees may take positions different from any positions described in this communication. Past results are not necessarily indicative of future results.