FI Evening Grain Comments 07/06/22

PDF Attached

 

CBOT
ags rallied earlier but many markets traded two-sided by mid-morning on easing inflation fears/recession concerns, sending some prices to fresh multi month lows. Contracts closed well off session lows. Wheat sipped by afternoon trading, in part to USDA reporting
an improvement in US wheat conditions, large prospects for Canadian wheat production, and an upward revision to Ukraine’s grain crop. Recent rains across the Midwest were seen as beneficial for corn and soybeans, but both of those markets closed higher. Soybean
oil was under pressure from weakness in global vegetable prices. Palm oil futures hit a 1-year low before pairing some losses. Soybeans meal ended higher on product spreading. Look for a volatile trade for the remainder of the week.

 

Weather

Last
24-hours

 

 

 

 

7-day

 

World
Weather Inc.

WEATHER
TO WATCH AROUND THE WORLD

• Western
  Europe will be heating up and drying out over the next ten days with a few forecast models suggesting similar conditions for two weeks
• Soil
  moisture is rated favorably today, but it will decline quickly in the next ten days due to warming temperatures and no rain
• Winter
  grains will be rushed to maturation, but protein levels could rise
• Corn,
  sunseed and soybean development will occur aggressively this week, but will be slowed next week and crop stress is expected to increase as the ground dries out
• Unirrigated
  yield potentials could fall if improved rainfall does not occur in the second half of this month
• Temperatures
  will rise into the upper 80s and 90s and possibly over this weekend and especially next week
• Eastern
  Europe benefited from some rain Tuesday, although it was not uniformly distributed
• Temperatures
  were still quite warm to hot in parts of the south
• Greater
  rain is needed and “some” will occur, but not all areas will benefit
• Russia’s
  Southern Region will continue in need of rain, despite a few showers in the next ten days
• Temperatures
  will be warm, but not excessively hot
• China
  will continue to be abundantly to excessively wet
• Crop
  conditions vary widely across the nation
• Some
  crops in the northeast need more sunshine
• Rice
  and other crop damage in southern parts of the nation was significant in June
• Central
  parts of the Yellow River Basin and North China Plain crop have improved with greater rainfall noted earlier this season
  
• China’s
  Xinjiang province continues to experience relatively good weather
• A
  few showers and thunderstorms are expected, but most of the region will be dry with temperatures varying greatly over the week to ten days
• Some
  cooler biased conditions may briefly evolve in northern parts of the region
• India’s
  monsoon will generate waves of rain across the central two-thirds of the nation during the next ten days to two weeks
• The
  region will be plenty wet
• Additional
  rain will reach into Gujarat and Rajasthan while being heavy at times in Madhya Pradesh and Maharashtra
  
• U.S.
  weather today is advertised a little drier in the second week of the outlook and there is some warming advertised briefly for late next week and into the following weekend in the Plains and western Corn Belt
• No
  excessive heat is expected in key crop areas
• Southwestern
  U.S. Corn Belt, northern and western Delta, Texas and Oklahoma as well as a few Kansas crop areas will be driest, although not completely dry, during the next ten days to two weeks
• Most
  of the rain will not counter evaporation very well
• Hot
  temperatures will continue in these areas through Friday with some cooling in the Delta and southwestern Corn Belt during the weekend while the heat continues in the southern Plains
• Thunderstorms
  producing significant rain and some damaging wind occurred Tuesday and early this morning from South Dakota to Ohio and more will occur tonight into Thursday from Nebraska through Iowa to Ohio and Kentucky with a few more storms Thursday night into Friday
  from Nebraska to Kentucky
• Rainfall
  of 1.00 to 3.00 inches is expected
• That
  rain and the rain that occurred overnight will lead to improved soil moisture in many areas
  
• Crop
  development improvement is likely in many areas excepting possibly the southwest
  
• U.S.
  southern Plains will get some scattered showers over the next week to ten days, especially this weekend into next week; however, resulting rainfall will struggle to be enough to counter evaporation rates
• Dryness
  will continue to be an issue in all of Texas and parts of Oklahoma
• U.S.
  southeastern states will see a good mix of rain and sunshine during the next two weeks
• Canada’s
  Prairies weather may lighten up on some of the expected rainfall during the next two weeks
• Southern
  Alberta through western and northern Saskatchewan may see the least amount of rain while areas near the U.S. border and especially in western and northern Alberta will be wettest
  
• Too
  much rain may impact a part of northern Alberta
• Ontario
  and Quebec weather has been mostly good, although southwestern Ontario is beginning to dry out and the need for greater rain is rising
• Tropical
  Depression Aere has moved out into the Pacific Ocean today after impacting western Japan the two previous days
• The
  storm poses no additional threat to land
• Argentina
  rainfall will be limited during the next ten days to two weeks
• Some
  showers will occur in this first week of the outlook over eastern parts of the nation benefiting “some” wheat areas, but more will be needed
• Western
  crop areas will be dry in this first week of the outlook
• Week
  two precipitation is not likely to bring much additional opportunity for rain to western crop areas
• Recent
  cold temperatures in Argentina may be limiting winter crop establishment and dryness could be doing the same
• Brazil
  periodic rainfall will be confined to Atlantic coastal areas and from Rio Grande do Sul to Parana and southern Paraguay during the next ten days
• There
  is no risk of crop threatening cold in Brazil grain, coffee, sugarcane or citrus areas for the next two weeks
• Dry
  weather in Safrinha corn and cotton areas of Brazil will be good for maturation and harvest progress
• Central
  and eastern Queensland and parts of New South Wales, Australia received rain as expected during the long weekend with some showers lingering Tuesday
  
• Drier
  weather is now expected for a while
• Southern
  Australia weather will trend a little wetter this week bringing back some welcome moisture to the region after a brief break
• The
  precipitation will be great for winter crop establishment
• South
  Korea rice areas are still dealing with a serious drought, despite some rain that fell last week.
  
• Some
  rain is expected over the next couple of weeks, but resulting amounts will continue lighter than usual at least over the coming week to nearly ten days
• Mexico’s
  monsoonal rainfall will be good in the west, south and north-central parts of the nation during the coming two weeks
• Northeastern
  Mexico drought relief may not occur without the help of a tropical cyclone
• The
  same may be true for far southern Texas
• Southeast
  Asia rainfall will continue abundant in many areas through the next two weeks
• Local
  flooding is possible in the Philippines, New Guinea and Myanmar
• Mainland
  areas of Southeast Asia will continue to get lighter than usual rainfall, but sufficient amounts will occur to support crops
• There
  is need for greater rain to improve water supply later in the year
• Sumatra
  rainfall and parts of peninsular Malaysia will experience lighter than usual precipitation in this coming week to ten days
• East-central
  Africa rainfall will be greatest in central and western Ethiopia and lightest in parts of Uganda.
  
• Tanzania
  is normal dry at this time of year and it should be that way for the next few of weeks
• West-central
  Africa rainfall has been and will continue sufficient to support coffee, cocoa, sugarcane, rice and cotton development normally
• Some
  greater rain would still be welcome in the drier areas of Ivory Coast
• South
  Africa’s crop moisture situation is favorable for winter crop emergence, although some additional rain might be welcome
• Some
  rain will fall in the southwestern crop areas into Wednesday followed by some drying until early next week at which time additional rain is expected
• Winter
  crops will continue to establish well.
• Central
  America rainfall will be abundant during the next ten days
• Today’s
  Southern Oscillation Index was +16.23 and it will move erratically lower during the coming week
• New
  Zealand rainfall will trend wetter this week

Source:
World Weather INC

 

Bloomberg
Ag Calendar

Wednesday,
July 6:

• UN
  annual state of food security report

Thursday,
July 7:

• EIA
  weekly U.S. ethanol inventories, production, 11am
• Vietnam’s
  customs department releases coffee, rice and rubber export data for June
• Brazil’s
  Conab releases data on area, yield and output of corn and soybeans

Friday,
July 8:

• USDA
  weekly net-export sales for corn, soybeans, wheat, cotton, pork and beef, 8:30am

• FAO
  world food price index, grains supply and demand outlook
• ICE
  Futures Europe weekly commitments of traders report
• CFTC
  commitments of traders weekly report on positions for various U.S. futures and options, 3:30pm
• FranceAgriMer
  weekly update on crop conditions

Source:
Bloomberg and FI

 

Due
out Thursday

 

Macros

96
Counterparties Take $2.168 Tln At Fed Reverse Repo Op (prev $2.138 Tln, 96 Bids)

Large
Crude Unit At Total’s Port Arthur Texas Refinery Restarted – RTRS Sources

POLL:
BoC To Raise Overnight Rate To 3.25% By End-2022 (Vs 2.50% In May Poll) – RTRS

Goldman
Sachs: Oil Selloff Driven By Growing Recession Fears In Face Of Low Trading Liquidity, Exacerbated By Technical

US
ISM Non-Mfg PMI Jun: 55.3 (est 54.3; prev 55.9)

–
Biz. Activity: 56.1 (est 54.0; prev 54.5)

–
Employment: 47.4 (prev 50.2)

–
New Orders: 55.6 (prev 57.6)

–
Prices Paid: 80.1 (prev 82.1)

US
JOLTs Job Openings May: 11.254M (est 11.000M; prev R 11.681M)

 

FOMC:
Fed Officials Saw 50bps Or 75bps Hike At Jul FOMC As Likely – Minutes

–
Officials ‘Highly Attentive’ To Inflation Risks

–
George Was The Only Official Not To Back 75Bps In Jun

–
Most Fed Officials Saw Growth Risks Skewed To Downside

–
Likely To Take Some Time For Inflation To Move Down To 2%

–
Officials Recognized Policy Could Slow Growth For A Time

–
Many Concerned Long-Run Price Expectations Could Drift Up

–
Almost All Officials Backed Raising Rates 75bps At Jun FOMC

–
‘Even More Restrictive’ Policy Possible In Time

–
Many Officials Saw Significant Risk Of Entrenched Inflation

 

Corn

·        
September corn traded tow-sided, touching it lowest level since February 4^th before rallying to close 7.50 cents higher. Technical buying was noted. We heard China was in for US OND corn.

·        
The USD is higher again. WTI crude oil turned lower. Brent crude fell below $100/barrel for the first time since late April.

·        
A Bloomberg poll looks for weekly US ethanol production to be down 4,000 barrels to 1047 thousand (1036-1058 range) from the previous week and stocks up 52,000 barrels to 22.798 million.

·        
We lowered our US corn yield to 179.6 bushels per acre versus 180.1 previously. After adjusting to USDA’s June harvested area, we lowered our production by 93 million bushels to 14.716 billion, 256 million above USDA’s June S&D
estimate.  There is a slight chance USDA could adjust their July US corn yield, but at this point we think they will leave their 177.0 estimate unchanged.  The first NASS survey for the US yield will be the August report. In that report, they may adjust plantings
for MN, ND, and SD. 

 

 

Export
developments.

·        
South Korea’s MFG bought 140,000 tons of corn for November arrival at $321.49 and 321.00 per ton.

 

 

The
2021 Crop Insurance Loss Performance

Schnitkey,
G., C. Zulauf, K. Swanson, N. Paulson and J. Baltz. “The 2021 Crop Insurance Loss Performance.” farmdoc daily (12):100, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, July 5, 2022.

https://farmdocdaily.illinois.edu/2022/07/the-2021-crop-insurance-loss-performance.html

 

Updated
7/1/22

September
corn is seen in a $5.50 and $7.50 range

December
corn is seen in a wide $5.00-$8.00 range (lowered 75 front end and 25 on back end)

 

 

Soybeans

·        
September soybeans closed 7.25 cents higher, September meal $5.20 higher and September soybean oil 106 points lower. The slide in global vegetable oil prices weighted on soybean oil and product spreading supported meal. Soybeans
saw technical buying after closing sharply lower yesterday. Earlier in the day August soybeans hit their lowest level since January 28 and August soybean oil lowest since 1/18. Meal has been stuck in a wide two-sided trading range over the past few weeks.

·        
The US Midwest saw additional rain over the past 24-hours. 

·        
We lowered our US soybean yield by 0.5 bushel to 51.5, same as USDA’s June S&D estimate. With harvested area down, per June Acreage report, our US production estimate is 4.507 billion bushels, 133 million below USDA and 72 million
above year ago. 

 

 

·        
Outside vegetable oil markets were weaker. Palm oil futures hit a 1-year low before pairing some losses. The Southern Peninsula Palm Oil Millers’ Association (SPPOMA) reported that July 1-5 production fell nearly 16% from the
month before.

·        
Cash soybean oil prices in Rotterdam were down 65-85 euros from yesterday morning.

·        
September Malaysian palm oil futures were down 119MYR and cash was down $55 to $1,045.

·        
Indonesia issued 2.49 million tons of palm oil export permits.

·        
Trade sources told Reuters they expect India palm oil imports in July could end up to 700,000 to 800,000 tons, highest in 10 months (Sep 2021).

·        
Egypt’s vegetable oil reserves are sufficient enough for 6 months.

·        
We are hearing some vegetable oil business picked up this week in Europe as margins improved on the biodiesel side.

·        
Argentina crushing rates during June fell to 3.8 MMT from 4.1 MMT previous months, a seven percent decrease.

 

Source:
Reuters and FI

 

Export
Developments

·        
Egypt’s GASC bought 15,000 tons of soybean oil in a local import tender at 27,295 Egyptian pounds a ton ($1441.89). They were also in for local sunflower oil, but no results were provided. 

·        
China looks to sell a half a million tons of soybeans out of reserves on July 8.

 

Updated
7/6/22

Soybeans
– August $13.90-$16.00

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

Soybean
meal – August $360-$440

Soybean
oil – August 57.00-61.00

 

Wheat

·        
US wheat futures traded two-sided, ending lower from an improvement in US crop conditions, higher prospects for a Ukraine grain crop, and large Canadian wheat planted area as reported by StatsCan on Tuesday.  September Chicago,
KC, and MN hit their lowest level since February 17, 18^th and 17^th, respectively.

·        
Russia export passage uncertainties for Ukraine grains are increasing again after a Ukraine diplomat doubted a breakthrough in talks.

·        
Ukraine exports started 2022-23 on a poor note, running 69% below same period last season. In 2021-22 Ukraine exported 48.5 million tons.

·        
Ukraine may see a 50 million ton grain crop, better than expected, but down from a record 86 million in 2021, according to the AgMin.

·        
Ukraine’s grain traders union UGA estimated the combined grain and oilseed harvest at 69.4 million tons from the previous 66.5 million, well below the 2021 level of 106 million tons.

·        
Russia’s AgMin plans to buy 1 million tons of wheat and 90,000 tons of sugar for the state stockpile program for the domestic market.

·        
We heard China might have been interested in US spring wheat.

·        
Egypt’s wheat reserves are sufficient enough for 7 months.

 

Export
Developments.

·        
Jordan bought 60,000 tons of barley at $360.50/ton c&f for FH Oct shipment.

·        
South Korea’s NOFI bought 65,000 tons of feed wheat at $398.98/ton for July 17 and Aug 7. Origin could be European.

·        
Another group of South Korean millers bought 50,000 tons of wheat from the US (Sep shipment @ $338-$348/ton) and 100,000 tons from Australia (Nov shipment $380/ton).

·        
AgriCensus noted Pakistan bought 110,000 tons of wheat from offers of about 1 million tons, at $439.40/ton. They were initially looking for 500k. Reuters noted they have yet to buy any wheat.

·        
Japan seeks 70,000 tons of feed wheat and 40,000 tons of barley on July 13 for arrival by December 22.

·        
Jordan issued a new import tender for  120,000 tons of wheat, set to close July 13.

·        
Egypt’s GASC seeks wheat in a private tender for September / October shipment. We heard about 444,000 tons of wheat was secured, a large amount given their import dependency of about 11 million tons for the 2022-23 season. Russia
and the EU were thought to be the origin.

·        
Japan seeks 122,420 tons of food wheat later this week for September loading.

 

Rice/Other

·        
None reported

 

Updated
7/1/22

Chicago – September $7.75
to $9.50 range, December $8.00-$11.00

KC – September $8.00 to
$10.50 range, December $8.50-$12.00

MN – September $8.50‐$11.00, December $8.00-$12.50