FI Evening Grain Comments 06/02/22

PDF Attached

 

WTI
crude oil rallied after EIA reported a more than expected draw in crude oil supplies. The USD was down 70 points by noon CT. US agriculture futures rallied led by soybeans and soybean oil. Doubts are increasing over whether Ukraine grain exports will ship
over the near term. Drier weather is seen over the short-term for the northern US Great Plains. Argentina turns drier through Sunday. Brazil will see favorable corn harvest progress this week before slowing next week from rain.

 

USDA
will release its June Acreage report on Thursday, June 30^th, the last business day of the month. Last year the USDA survey ran for 20 days during from Saturday, May 29 through Thursday, June 17, 2021.  How USDA collects and assembles the data can
be explained on page 4 and 5 of this document. https://www.nass.usda.gov/Education_and_Outreach/Understanding_Statistics/pub1554.pdf

 

 

Weather

 

 

 

World
Weather Inc.

WEATHER
EVENTS AND FEATURES TO WATCH

• Relief
  from dryness is expected in Europe over the next week to ten days with all areas impacted except Spain and Portugal
• The
  greatest relief is expected in France, Germany and the United Kingdom where moisture stress has evolved recently
• Sufficient
  moisture will fall to raise topsoil moisture and support ongoing crop development
• Drying
  is expected to continue in eastern parts of Canada’s Prairies and neighboring areas of North Dakota and northwestern Minnesota during the coming week to improve the potential for improved crop and field conditions
• Temperatures
  will be cooler than usual throughout the next week which will keep drying rates a little slow delaying the onset of more aggressive crop development
• Eastern
  Saskatchewan and much of Manitoba have the greatest need for dry and warm weather
• Some
  showers and drizzle will occur into Friday in Manitoba and a few immediate neighboring areas
• Weather
  conditions will improve greatly this weekend into early next week
• Drought
  relief is expected in central Montana, southern Alberta and a few far southwestern Saskatchewan, Canada locations during the weekend and early next week
• Crop
  conditions will improve where the rain falls, but only a small part of the drought region is expecting rain
• West
  Texas rainfall was missed overnight, but light showers will occur into Saturday with 0.20 to 0.80 inch of moisture resulting and locally more
• The
  precipitation will be welcome, but not nearly as great as advertised earlier this week
• Warm
  to hot temperatures and no rain will occur Sunday into Tuesday of next week before a new round of thunderstorms begins late next week through the following weekend
• Some
  locally strong thunderstorms will be possible late next weeks
• Net
  drying is expected in the lower U.S. Delta and southeastern states for a little while in this coming week
• U.
  S. Pacific  Northwest will experience greater rain frequency and intensity over the coming week to ten days
  
• Some
  of the moisture will help ease long term dryness
• California
  and the southwestern desert region will continue warm and dry biased for the next ten days
• U.S.
  Midwest weather will be favorably mixed over the next ten days keeping the ground adequately to abundantly wet
  
• Temperatures
  will become cooler than usual resulting in slower drying rates and reduced degree day accumulations
• Ontario
  and Quebec weather will continue to be well balanced with periods of rain and sunshine
• Southern
  Florida citrus and sugarcane areas will be impacted by a tropical storm this weekend
  
• Heavy
  rain and windy condition are expected, but very little, if any, damage is expected in agricultural areas
• Local
  flooding and a few strong wind gusts are expected, but the rain will be more welcome than detrimental
• Recent
  heavy rain from the remnants of Hurricane Agatha have produced some flooding in southern Mexico and northern parts of Central America
  
• Some
  drying would now be welcome and should evolve
• Western
  Argentina wheat areas still need a boost in precipitation to induce the best planting, germination and emergence conditions
• Argentina’s
  main wheat production areas and areas all of the late season sorghum, soybeans, corn and peanuts produced in the nation are cool and moist enough to support crop needs through the harvest
• Southern
  Brazil has been and will continue to be a little too wet for a while
• Drying
  is needed to protect immature late season summer crops and to reduce flood potentials in wheat areas
• Southeastern
  Europe is getting enough rain to ease its recent dryness, but more is needed
• Southwestern
  Europe will have some ongoing needs for rain
• Russia’s
  Southern Region, southeastern Ukraine and western Kazakhstan will dry down through the weekend raising the need for timely rain later this month
• Today’s
  forecast model runs are offering rain to some of this region during the week next week
  
• Western
  and northern Russia will continue in an active weather pattern bringing waves of rain and milder than usual weather periodically
• Some
  of the wetter and milder biased weather will also occur in Belarus, the Baltic States and northwestern Ukraine
• Xinjiang,
  China will experience some periodic rainfall in the northeast while most other areas away from the mountains are left mostly dry
• Corn
  and cotton planting are advancing well
• North
  China Plain dryness is not likely to go away anytime soon, despite the potential for a few showers in the coming week to ten days
• Unirrigated
  crop moisture stress has begun, although wheat has not been seriously impacted since it is largely irrigated
• Three
  wave of light rain will fall in the next ten days that may whittle back some of the dryness, but more rain will be necessary
• Southern
  China is bracing for additional excessive rainfall late this week and next week
• Flooding
  has already been a problem south of the Yangtze River recently and even though the rain is taking a short term break there is much more coming
• Damage
  to sugarcane and rice is possible
• Southern
  India monsoonal rainfall is expected to be lighter than usual over the next ten days
• The
  impact will be low for now, but greater rain will be needed in time
• Australia
  soil moisture is rated mostly well, but there will be need for rain in Western and South Australia this month especially in northern crop areas to restore favorable soil moisture
  
• New
  South Wales and many areas in southeastern Queensland have favorable soil moisture for autumn planting and establishment of wheat, barley and canola
• Rain
  is expected in the dry areas of Western Australia next week
• South
  Africa weather is expected to be mostly dry for a while
• Both
  the harvest of summer crops and the planting of winter grains will advance well in the drier weather this week
• Temperatures
  will be near to above normal this week
• All
  of Southeast Asia will get rain at one time or another over the next couple of weeks.
• The
  precipitation will be good for most crop needs; however, it will be heavy along the Myanmar lower coast and in parts of both Laos and Vietnam into Cambodia
• Northwestern
  Luzon Island, Philippines and Taiwan will also be wet
• Thailand
  may not be included in the heavier rainfall that other Southeast Asia nations will experience for a while, but scattered showers and thunderstorms are still expected
• West-central
  Africa rainfall during the next ten days will be favorable for coffee, cocoa, sugarcane, rice and cotton
  
• East-central
  Africa rainfall will be most significant in Ethiopia, southwestern Kenya and Uganda during the next ten days while Tanzania’s Pare region dries down seasonably
• North
  Africa rainfall will be limited in the next two weeks, although some rain is expected very lightly
• Most
  wheat and barley in the region is maturing and being harvested keeping the need for rain very low
• Most
  of the rain expected will be limited and should not adversely impact crop conditions or field progress
• Turkey
  crop areas will be the only ones in the Middle East to get significant rainfall during the next week to ten days
• A
  boost in rain is needed in many areas, but this is the beginning of the dry season
  
• These
  areas may have experienced a decline in wheat, rice and cotton production this year – at least in unirrigated areas
• Mexico
  rainfall is expected to slowly increase in central and southern parts of the nation during the next ten days to two weeks with next week wettest
• The
  moisture will be welcome and should be a part of the developing monsoon season
• Central
  America will see periodic rain in the coming ten days with some of it to become heavy this weekend and next week from Costa Rica into Panama.
  
• Today’s
  Southern Oscillation Index was +17.94 and it will steadily decline over the next few weeks
• New
  Zealand rainfall will be trending wetter over the next week
  

Source:
World Weather Inc.

 

 

Macros

97
Counterparties Take $1.985 Tln At Fed Reverse Repo Op (prev $1.965 Tln, 93 Bids)

US
DoE Crude Oil Inventories (W/W) 27-May: -5068K

–
Distillate Inventories: -529K

–
Cushing OK Crude Inventories: 256K

–
Gasoline Inventories: -711K

–
Refinery Utilization: -0.60%

US
EIA Natural Gas Storage Change (BCF) 27-May: +90 (est +88; prev +80)

–
Salt Dome Cavern NatGas Stocks (BCF): -3 (prev 0)

US
ADP Employment Change May: 128K (est 300K; prev 247K)

US
Initial Jobless Claims May 28: 200K (est 210K ; prev 210K; prevR 211K)

–
US Continuing Claims May 21: 1.309M (est 1.325M; prev 1.346M; prevR 1.343M)

US
Nonfarm Productivity (Q1 F): -7.3% (est -7.5%; prev -7.5%)

–
US Unit Labor Costs (Q1 F): 12.6% (est 11.6%; prev 11.6%)

Canadian
Building Permits (M/M) Apr: -0.6% (est 0.8%; prev -9.3%)

 

Corn

·        
US corn futures ended lower in July and higher back months. They were much higher earlier on technical buying and Black Sea export uncertainty.
EIA numbers were supportive WTI crude oil and corn futures. Futures were pressured during afternoon trade from soy/corn and wheat/corn spreading coupled with lack of US export interest.

·        
Funds were even today.

·        
The USD was 74 points lower as of 1:20 pm CT.

·        
Doubts are increasing over whether Ukraine grain exports will ship over the near term. Russia is looking for some sanctions to be lifted, including food, but there are no deals on the table. Russia did remove some quotas (set
for July-December period) on some fertilizers.

·        
Today China planned to buy 40,000 tons of frozen pork for reserves, tenth round of procurement.

·        
EIA numbers were supportive WTI crude oil and corn futures. Weekly US ethanol production increased a large 57,000 barrels to 1.071 million, largest increase since October 15, 2021, and well above trade expectations calling for
a modest 3,000 barrel increase. At 1.071 million barrels for the week ending May 27, this is the highest level since December 10, 2021. It does not change our perspective US corn use will fall short of USDA’s 2021-22 projection unless ethanol production can
average 1.042 million barrels per day during the June through August period (assuming about needs of 1.38 billion bushels June-August). Earlier this week, we lowered our US corn for ethanol use for the 2021-22 crop year by 35 million bushels to 5.340 billion,
and compares to USDA’s estimate of 5.375 billion, and 5.033 billion for 2020-21. US ethanol stocks were down a large 741,000 barrels, third consecutive weekly decline and at 22.961 million barrels, stocks are lowest since January 7^th.

 

US
DoE Crude Oil Inventories (W/W) 27-May: -5068K

–
Distillate Inventories: -529K

–
Cushing OK Crude Inventories: 256K

–
Gasoline Inventories: -711K

–
Refinery Utilization: -0.60%

 

 

 

 

Export
developments.

·        
South Korea’s KFA bought 66,000 tons of corn from South America at $391.95/ton c&f for LH July through early August shipment. Early May they paid $382/ton.

 

Updated
6/1/22

July
corn is seen in a $6.75 and $8.00 range

December
corn is seen in a wide $5.50-$8.00 range

 

Soybeans

·        
CBOT soybeans
saw a strong rally on follow through buying, good planting progress favoring corn before soybeans, and lower USD. Concerns MN and the Dakota’s could lose some soybean acres due to slow planting progress added to the strength. USDA reported 352,000 tons of
a mix of old and new-crop soybeans was sold to Pakistan. Traders perceived this to be bullish as it’s rare to see Pakistan in for 24-hour announcements, but breaking it down, it included only 55,000 tons old crop which is routine. Pakistan last crop year ranked
12^th for US soybean export destinations (see table below the export section).

·        
Funds bought an estimated net 15,000 soybeans, bought 2,000 soybean oil and bought 10,000 soybean oil.

·        
For MN, the final planting date for soybeans is June 10. The late planting period runs from May 26 to June 19 for corn and June 11 to July 5 for soybeans. North Dakota, for most counties, the final planting date for soybeans is
June 10.

·        
CBOT soybean oil basis July was up a whopping 333 points. That’s hard to justify, IMO, but WTI did rebound to close higher. A good amount of soybean oil/soybean meal spreading could have also underpinned process. Meal ended $0.10
to $2.20 higher.

·        
Argentina’s Buenos Aires Grains Exchange sees 2021-22 soybean production at 43.3 million tons, 1.3 MMT up from the 42 million tons previously.

·        
Morocco suspended import duties on oilseeds as of June 3 to ease inflation on cooking oils.

·        
CNGOIC noted the China soybean crush was 1.88 million tons last week, down  slightly from the previous week and about 200,000 tons below year ago.

·        
Indonesia has issued 160 palm oil export permits for 18 companies, but it covers only 179,464 tons.

·        
SGS reported May Malaysian palm exports increased 20.5 percent from April to 1.329 MMT.

·        
There is some uncertainty over upcoming Malaysian palm oil production.

 

Export
Developments

·        
Private exporters reported sales of 352,000 metric tons of soybeans for delivery to Pakistan.  Of the total, 55,000 metric tons is for delivery during the 2021/2022 marketing year and 297,000 metric tons is for delivery during
the 2022/2023 marketing year.

·        
China will offer another 500,000 tons of soybeans out of reserves on June 10.

 

 

 

 

Updated
6/1/22

Soybeans
– July $15.75-$18.00

Soybeans
– November is seen in a wide $12.75-$16.50 range

Soybean
meal – July $375-$465

Soybean
oil – July 76-81

 

 

 

Wheat

·        
Wheat futures were higher led by Chicago and KC type wheat on improving global import demand interest and technical buying (correction) after futures plunged yesterday.  Funds bought an estimated net 7,000 Chicago wheat contracts.

·        
Tunisia is the latest country to adjust wheat import quality restrictions to make it easier to source the product. Egypt relaxed on wheat moisture content rules last week.

·        
Argentina’s Buenos Aires Grains Exchange sees 2022-23 wheat plantings at 6.5 million hectares, down from 6.6 million hectares previous.

·        
India granted export permits for some wheat. About 470,000 tons has allowed to be shipped since the ban but another 1.7 million tons of wheat is still stuck at ports.

·        
A Reuters article noted traders are looking for Australia’s wheat production to end up between 30 and 35 million tons, just below the record 36 million tons collected for the 2021-22 crop year.

·        
Drier weather is seen over the short-term for the northern US Great Plains.

·        
September EU wheat futures were up 2.00 euros per ton at 382.50 euros.

 

Export
Developments.

·        
Yesterday Algeria bought about 90,000 to 100,000 tons of wheat at $480/ton c&f. Shipment was originally
for
July/August shipment

·        
Yesterday Egypt bought 465,000 tons of wheat consisting of 175,000 tons of Russian, 240,000 tons Romanian, and 50,000 tons of Bulgarian origin. Prices were thought to be $480/ton, C&f. Shipping will be from August 1-20.

·        
The Philippines bought 110,000 tons of Australian feed wheat at around $430 to $439/ton c&f for July 15 through September 27 shipment.

 

Rice/Other

·        
Indonesia rice production target for 2023 was set at 55.39 MMT, below 56.08 target set in March. 54.42 million tons was produced in 2021.

·        
We heard the International Cotton Advisory Council will temporarily pause their monthly price forecast of cotton until volatility subsides.

 

 

Updated
6/1/22

Chicago
– July $9.50 to $12.00 range, December $8.50-$12.50

KC
– July $10.50 to $12.75 range, December $8.75-$13.50

MN
– July $10.75‐$13.00, December $9.00-$14.00