From: Terry Reilly
Sent: Tuesday, February 04, 2020 8:36:31 AM (UTC-06:00) Central Time (US & Canada)
Subject: FI Morning Grain Comments 02/04/20

PDF attached

 

Morning.

 

 

 

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

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

        
No changes

 

 

 

 

 

Selected
Brazil commodities exports:

Commodity                     
January 2020      December 2019   January 2019

COFFEE(60
KG BAG)              2,724,800         3,161,900         3,033,200

CRUDE
OIL (TNS)                4,292,600         8,721,100         4,980,900

ETHANOL
(LTR)                  78,100,000        146,600,000     104,700,000

SOYBEANS
(TNS)                 1,488,300         3,439,600         2,035,100

IRON
ORE                       26,731,100        24,674,000       33,135,800

FROZEN
ORANGE JUICE (TNS)      27,700            32,100               16,200

NON-FROZEN
ORANGE JUICE (TNS)  131,400           203,000             121,400

SUGAR
RAW (TNS)                1,415,700         1,286,900         1,017,900

 

USDA
inspections versus Reuters trade range                                            

Wheat      
413,984     versus  300000-500000           range

Corn         
562,380     versus  500000-800000           range

Soybeans  
1,355,627  versus  550000-1200000         range

 

Combined
wheat, soybean, corn and sorghum export inspections have been running below this time last year for four consecutive weeks. 

 

Macros

 

 

Corn.

        
Corn futures
are
higher on technical buying and stronger crude oil. China corn futures closed higher despite virus concerns.  More than 425 deaths and 20,500 cases have been reported. 

        
Open Interest in corn was up 7,401 contracts.

        
Brazil’s Mato Grosso Institute increased its 2019-20 second crop corn production to 32.44 million tons, up 0.82 million tons from the previous forecast, and compares to 32.3 million in 2018-19.

        
INTL FC Stone estimated Brazil’s first corn crop at 25.9MMT, up slightly from 25.75 million tons previous.  They left unchanged their second corn crop at 72.0 million tons.  This brings the total corn crop
to 97.9 million.  USDA is at 101 million tons. 

        
USDA US corn export inspections as of January 30, 2020 were 562,380 tons, low end of a range of trade expectations, below 679,994 tons previous week and compares to 912,191 tons year ago. Major countries included
Mexico for 224,111 tons, Japan for 94,050 tons, and Costa Rica for 67,089 tons.

        
Illinois River lock closure update: 
https://www.mvr.usace.army.mil/Missions/Navigation/Navigation-Status/

 

Export
Developments

  • None
    reported

 

 

Corn
Grind.
USDA
NASS reported the December corn for ethanol use at 479 million bushels, 4 million above a Bloomberg trade estimate, 23 million above the 457 million in November and 18 million above 462 million in December 2018.  Sorghum use was 9.5 million bu.  DDGS production
of 1.908 million short tons hit its highest level since August but was below 1.924 million produced in December 2018.  The higher corn use and lower DDGS suggests poor quality corn could have impacted DDGS minimum specifications for use.

 

 

Soybean
complex
.

        
CBOT soybean
s
and soybean oil are on the rebound with SBO the leader. The March soybean oil contract held a 29.83 support level on Monday.  Many markets outside the US traded higher overnight.  Outside commodity markets such as WTI crude oil and US equities are lending
strength. 

        
Open Interest in soybeans was up 14,977 contracts .

        
Argentina rain will increase today across Cordoba, eastern La Pampa, Santa Fe, and Buenos Aires, lasting through Feb. 7.

        
Very high SA soybean production estimates continue to roll in.

        
INTL FC Stone estimated Brazil’s soybean crop at 124 million ton, up 1.9% from January’s forecast of 121.1MMT.  That would be up from the government’s forecast of 115 million tons last year.  USDA is at 123
million tons. 

        
Soybean and Corn Advisory increased their Brazil and Argentina soybean crop estimates.  For Brazil, they increased it by 1 million tons to 123 million tons.  The Argentina crop was increased 1 million tons
to 53 million tons. 

        
The harvest pace in Brazil will be slow this week as rain will fall across several parts of the major growing regions.  AgRural reported 9 percent of the soybean crop had been harvested, up from 4% last week
and compares to 19% last year but in line with the 5-year average. 

        
JCI reported China’s soybean crush is running at about half of where it should be around this time of year after local governments extended holidays to prevent the spread of coronavirus.

        
Bloomberg reported logistical constraints at some Chinese ports (Zhoushan and Shanghai) are holding up agriculture goods such as oilseeds and vegoils.  Coronavirus is to blame. 

        
The US$ is higher and the is lower. The Brazilian Real higher at 4.2276.

        
Offshore values are leading CBOT soybean oil 8 points lower and meal $3.80 higher. 

        
Rotterdam vegetable oils this morning were up 6-7 euros for nearby soybean oil positions and 5 euros higher for rapeseed oil. Rotterdam meal when imported from SA were mostly unchanged. 

        
China:

        
China cash crush margins as of today, using our calculation, was 120 cents per bushel (117 previous), compared to 84 cents more than a week ago and 48 cents around this time last year. 

        
Indonesia plans to stop food and beverage imports from China to protect itself from the coronavirus.  This seems a little extreme, in our opinion. 

        
Malaysia issued a statement that the cut back on palm oil buying from India is temporary. They also said the implementation of B20 starting this month will keep CPO prices at high levels. Recently India raised
their crude palm import tax to 44 percent from 37.5 percent.

        
The Malaysia palm industry group estimated 2019 CPO prices to average 2,817 ringgit.

        
Pakistan said they will buy more palm oil from Malaysia.  Pakistan bought 1.1 million tons of palm oil from Malaysia in 2019. In comparison India bought 4.4 million tons. 

        
Malaysian palm markets:
 

        
The European Union granted import licenses for 149,000 tons of soybean imports, bringing cumulative 2019-20 soybean imports commitments to 8.07 MMT, down 4 percent from what was committed at this time last
year.  Imports of rapeseed are running at 4.04 million tons, up 51 percent from the same period a year ago.

        
USDA US soybean export inspections as of January 30, 2020 were 1,355,627 tons, above a range of trade expectations, above 1,058,772 tons previous week and compares to 1,092,842 tons year ago. Major countries
included China Main for 552,523 tons, China T for 140,610 tons, and Spain for 118,511 tons.

 

Oilseeds
Export Developments

 

US
NASS Crush.

 

USDA
NASS December soybean crush ended up at 184.7 million bushels, 10 million above the 174.6 million bushels crushed in November and also up from the 183.7 million bushels crushed in December 2018.  It’s the second-largest monthly total on record, in terms of
million bushels used and crushed per day (5.96 versus 6.03 record in October 2018). Bloomberg’s trade average was 185.3 (Actual 0.6 below it) and 185.7 for Reuters.

 

U.S.
soyoil stocks at the end of December increased from the previous month to 2.094 billion pounds (9 lbs above trade guess) from 1.880 billion lbs at the end of November and compares to 1.946 billion pounds at the end of December 2018.  It’s the largest end-of-month
supply since last August. Bloomberg had the average trade estimate at 2.085 billion while Reuters was at 2.128 (43 million difference).  The wide variance in the average trade estimate reflected the large miss in the Jan 15 NOPA report.  NOPA reported end
of December soybean oil stocks at 1.757 billion pounds, 250 million above the average trade guess. That miss in NOPA SBO stocks was tough to explain. In mid-January some speculated a large amount of soybean oil was destined to the Gulf for export. NOPA represents
about 95 percent of the US crush industry. 

 

U.S.
soybean oil production was third highest on record. Soybean meal production on a daily adjusted basis was second largest on record. Soybean meal stocks fell from 467,000 short tons at the end of November to 377,000 short tons at the end of December, lowest
level since May 2019. That compares to 435,000 short tons at the end of December 2018. 

 

Wheat

        
US wheat futures are seeing a follow through rally from late Monday with technical buying a feature. 
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