From: Terry Reilly
Sent: Thursday, March 19, 2020 8:08:35 AM (UTC-06:00) Central Time (US & Canada)
Subject: FI Morning Grain Comments 03/19/20

PDF attached

 

Morning.
Green
on the screen this morning driven by soybean meal and high protein wheat.  USD is 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 over the past 6 business days.
Soybean
crush margins are on fire again.  On our analysis, China crush margins are up 10 cents to $1.45 from the previous day, which promotes import business. 

 

We remain
bearish corn based on US demand destruction, bullish meal and bullish high protein wheat. 

 

 

 

 

Weather

 

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

 

Source:
World Weather Inc. and FI

 

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

        
USD is 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

 

 

Corn.

        
Corn prices rallied overnight on short covering after funds sold an estimated net 143,000 contracts over the past six business days. 

        
There were rumors China may have bought four cargoes of US corn.

        
South Korea was active again overnight picking up a couple 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.

        
Last we heard D4 RINs were at 42 cents and D6 at 17 cents.  This was as of Wednesday.  Some western US ethanol plants were pulling corn bids yesterday. 

  • Yesterday
    corn basis fell by 10 cents at Burns Harbor, IN and by 7 cents in Lincoln, NE.  Decatur, Il was down 10 cents at 5 over.  Annawan, IL fell 17 cents to 25 under. 
  • 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.
  • We
    were told IEG Vantage will be out today with updated acreage numbers for the US.  Below is a preview. Note the combined corn, soybeans and wheat area is projected lower than a 5-year 2014 through 2018 average.  That’s because US winter wheat area is projected
    to decline to lowest in more than a century, using USDA’s projection. 

        
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. 

        
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 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. 

        
The USDA Broiler Report showed eggs set in the US up 3 percent and chicks placed up 3 percent.  Cumulative placements from the week ending January 4, 2020 through March 14, 2020 for the United States were 2.10 billion. Cumulative placements
were up 4 percent from the same period a year earlier.

        
Weekly US ethanol production declined 9,000 barrels per day to 1.035 million barrels.  Traders were looking for a 2,000-barrel decline.  Weekly ethanol stocks were up 264,000 barrels to 24.598 million barrels.  Traders were looking for
an 18,000-barrel increase.  We project US weekly ethanol production could drop to around 950,000 barrels by early or mid-April.  That would put weekly corn for ethanol use below 100 million bushels per week, compared to about 109 million this week, assuming
a 2.8 yield.  Corn crop year to date ethanol production is running 0.4 percent above the same period a year ago.  We may lower our corn for ethanol use by as much as 75 million bushels by the end of this week. 

 

 

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.

 

 

Soybean
complex
.

  • CBOT
    soybeans

    are higher led by strength in soybean meal amid slowdown in Argentina meal shipments and good US domestic demand.  Soybean oil is higher led by higher WTI. 

        
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. 

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.”

  • Late
    yesterday the day president of operators group Sopesp told Reuters they plant to keep the Santos port operating at normal levels. 
  • Rosario
    Exchange: March-Feb corn exports projected at 33.5MMT, down from 37.0 in 2019-20.
  • Offshore
    values are leading CBOT soybean oil 20 points lower and meal $6.50 lower.

        
Rotterdam vegetable oils this morning were mixed. Rotterdam meal when imported from SA were mixed. 

        
China:

        
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. 

        
Malaysian palm markets:
 5-month
low.