From: Terry Reilly
Sent: Monday, February 03, 2020 8:29:35 AM (UTC-06:00) Central Time (US & Canada)
Subject: FI Morning Grain Comments 02/03/20

PDF attached

 

Morning.
China
is back from holiday and vegetable oil futures were down sharply.  US markets are hanging in there. 

 

 

 

Weather

MARKET
WEATHER MENTALITY FOR CORN AND SOYBEANS:
 

Better
rainfall potentials in Argentina during the next two weeks will improve confidence in the nation’s favorable summer crop outlook. Argentina’s fair to good grain and oilseed output combined with Brazil’s huge soybean crop will likely keep a bearish bias on
for those crops. South Africa weather may improve somewhat this weekend and next week to protect its production potential.

     
Australia’s summer crops will get some additional rainfall in this coming week and India crops will remain in good shape. China still has potential for improving rapeseed production potential once spring arrives due to recent precipitation and improving soil
moisture in parts of southeastern Europe into Kazakhstan may do to the same for those areas in the spring.

      Southeast
Asia weather will trend a little wetter in the coming week restoring favorable soil moisture to many Indonesian and Malaysian crop areas. Rain is needed most in parts of Peninsular Malaysia.

      Overall,
weather today is likely to contribute a bearish bias on market mentality.

 

MARKET
WEATHER MENTALITY FOR WHEAT:
 

There
is very little risk of crop threatening cold for small grain crops around the world. Cooling in the U.S. this week will be preceded by snow in the areas where temperatures will get coldest (the west-central high Plains) which should protect crops from damage.
Periods of snow in the west-central high Plains should lead to some improving topsoil moisture for better winter crop establishment in the early days of spring.

      Improving
precipitation in southeastern Europe and the southwestern grain areas of the Commonwealth of Independent states may improve production potentials in the spring. China’s winter crops are still expected to improve in the early spring if there are a few timely
rain events as temperatures trend warmer

     
India is still expecting a huge winter wheat crop and the only thing needed would be a few timely rain events this month and no extreme heat. Some of those conditions will be met in this coming week.

      Rain
in east-central Australia this week will be great enough to bolster topsoil moisture and possibly improve a few water reservoir levels, but much more rain will be needed before autumn planting begins in April. The recent weather trends have looked appealing
with rain falling more frequently easing some of the dryness.

      North
Africa wheat is still a concern with southwestern Morocco production already expected to be down. Timely rain will be needed later this month and in March to support reproduction and filling. Early February will be dry and warm biased.

      Overall,
weather today will likely produce a mixed influence on market weather mentality.

Source:
World Weather Inc. and FI

 

 

Source:
World Weather Inc. and FI

 

Source:
World Weather Inc. and FI

 

Bloomberg
Ag Calendar

MONDAY,
FEB. 3:

  • USDA
    weekly corn, soybean, wheat export inspections, 11am
  • Australia
    commodity index, 12:30am
  • Brazil
    soybean, sugar, corn, coffee exports
  • U.S.
    soybean crush, DDGS production, corn for ethanol, 3pm
  • EU
    weekly grain, oilseed import and export data
  • Honduras,
    Costa Rica January coffee exports
  • International
    Cotton Advisory Committee releases monthly report
  • Ivory
    Coast cocoa arrivals

TUESDAY,
FEB. 4:

  • U.S.
    Agriculture Economy Barometer Index, 9:30am
  • New
    Zealand global dairy trade auction

WEDNESDAY,
FEB. 5:

  • Statcan
    Canada wheat, soybean, barley, canola and durum stocks, 8.30am
  • EIA
    U.S. weekly ethanol inventories, production, 10:30am
  • New
    Zealand ANZ Bank Commodity World Price

THURSDAY,
FEB. 6:

  • UN’s
    FAO World Food Price Index, 4am
  • USDA
    weekly crop net-export sales for corn, soybeans, wheat, 8:30am

FRIDAY,
FEB. 7:

  • 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
  • Agricultural
    conference organized by consultancy IKAR, Moscow
  • Guatemala
    Coffee Exports

Source:
Bloomberg and FI

 

CBOT
registrations

·        
Ethanol up 28 ARGO, IL

 

 

 

CFTC
Commitment of Traders

·        
No major surprises for the week ending January 28.

·        
Traders were more long in corn, soybeans, meal and oil than expected.

·        
Money managers added 38,300 net long contracts in corn. Keep in mind the week change for corn ending Jan 28 was down only 2.5 cents. 

·        
Money managers sold a good number of soybeans, so unwinding of soybean/corn spreads could have been a feature. 

 

 

 

 

 

 

 

Macros

·        
China’s central bank lowered the interest rates on reverse repurchase agreements by 10 basis points to 2.40% and cut the 14-day tenor to 2.55% from 2.65% previously.

 

 

Corn.

·        
Corn futures
are
lower as coronavirus continues to spread.  More than 350 deaths have been reported. 

·        
Open Interest in corn was up 9,075 contracts on Friday.

·        
Lower futures today could attract additional global export interest, which may limit downside movement in prices over the next few days. 

·        
China plans to release frozen pork from state reserves “whenever necessary” due to the virus outbreak.  China also announced they plan to buy more meat from the international market. 

·        
China culled 18,000 chickens after H5N1 bird flu was discovered in Hunan. 

 

 

Export
Developments

  • None
    reported

 

USDA
reported US January 1 cattle heard at 94.4 million head, down from 94.8 million head on January 1, 2019, and 0.1 million head above a Bloomberg trade estimate. 

Other
highlights:
https://release.nass.usda.gov/reports/catl0120.txt

 

US
ethanol production in November was 31.358 million barrels, slightly below expectations.  We left our 2019-20 US corn for ethanol usage unchanged at 5.400 billion bushels, 25 million above USDA. 

 

 

Soybean
complex
.

·        
CBOT soybean
s
are moderately higher, and products lower as traders soak in stock and commodity movements for China after they returned from holiday.  The Dalian was down 426 yuan in palm and 434 yuan in soybean oil. Very high SA soybean production estimates may limit gains,
if any, for CBOT soybeans.

  • Private
    exporters sold 130,000 tons of soybeans of soybeans to Egypt for 2019-20 delivery.

·        
Open Interest in soybeans was up 12,516 contracts on Friday.

·        
The US$ is higher and the is lower. The Brazilian Real higher at 4.2495.

·        
Ukraine sunflower oil exports surged 59.3% so far in 2019-20 (Sep-Aug crop year), according to APK Inform to 2.025 million tons, up from 1.271 million tons for the same period last season. 

·        
Strategie Grains lowered their EU rapeseed production estimate to 18.05 million tons from 18.46 million previous, 7 percent above last year (16.85MMT).  They lowered the area to 5.55 million hectares. 

·        
Offshore values are leading CBOT soybean oil 48 points higher and meal $2.40 lower. 

·        
Rotterdam vegetable oils this morning were down 10 euros for nearby soybean oil positions and 3 euros lower for rapeseed oil. Rotterdam meal when imported from SA were mixed. 

·        
China is back from holiday and stocks took a hit.  Ag prices:
http://www.dce.com.cn/DCE/Market_Data/Market%20Statistics/index.html

·        
China cash crush margins as of today, using our calculation, improved to 117 cents per bushel, compared to 84 cents more than a week ago and 48 cents around this time last year. 

·        
India raised their crude palm import tax to 44 percent from 37.5 percent.

·        
GAPKI reported 2019 Indonesian biodiesel and oleochemical exports rose 4.2% to 36.18 million tons (34.71MMT in 2018).  Indonesia produced 47.1 million tons of crude palm oil last year and 4.6 million tons
of palm kernel oil.

·        
Malaysian palm markets:
 

  • U.S.
    production of biodiesel was 127 million gallons in November 2019, 17 million gallons lower than production in October 2019. There were a total of 979 million pounds of feedstocks used to produce biodiesel in November 2019. Soybean oil remained the largest
    biodiesel feedstock during November 2019 with 527 million pounds consumed. All feedstock used to make biodiesel was lowest since February 2018. Our soybean oil for biodiesel use off 8.400 billion pounds is 100 million below USDA. 

 

Oilseeds
Export Developments

 

 

U.S.
production of biodiesel was 127 million gallons in November 2019, 17 million gallons lower than production in October 2019. There was a total of 979 million pounds of feedstocks used to produce biodiesel in November 2019. Soybean oil remained the largest biodiesel
feedstock during November 2019 with 527 million pounds consumed. All feedstock used to make biodiesel was lowest since February 2018. Our soybean oil for biodiesel use off 8.400 billion pounds is 100 million below USDA.