FI Evening Grain Comments 08/24/22

PDF Attached

 

Chinese
demand for US soybeans amounts to at least 627k this week with USDA sales. We hear they were back in this morning. Private exporters reported sales of 517,000 metric tons of soybeans for delivery to China during the 2022-23 marketing year.

 

IL
and western IA Pro Farmer crop tour results will be out this evening. CBOT agriculture futures started higher after the second day of the Pro Farmer crop tour showed potential corn and soybean yields below average for Nebraska and a lesser extent, Indiana.
Prices sold off and the soybean complex and grain ended mixed. The US weather forecast is starting to suggest drier weather for the west-central growing areas. Minor spring wheat harvesting delays are seen while the Delta will continue to see too much rain
causing concern over crop conditions. China’s Yangtze Valley, bias northwest/east will gradually see an increase in rain, but much more will be needed to end the drought.

 

 

Weather

 

World
Weather Inc.

WEATHER
EVENTS AND FEATURES TO WATCH

• U.S.
  rain since last Friday has been a little excessive delaying early season harvest progress and raising crop quality concerns from West Texas and southern Oklahoma through the lower half of the Delta to Georgia.
  
• Rainfall
  of 3.00 to 7.00 inches occurred generally with local amounts to 15 inches at Dallas, Texas and 11.00 inches in a part of the Delta
• Soybean,
  rice and cotton quality compromises have likely occurred, although drier weather could change the situation
• Additional
  rain is expected periodically over the coming week which may add to the concern over crop conditions
• Most
  of the U.S. Midwest and a large part of the eastern and southern Great Plains will receive rain in this coming week with the greatest amounts likely from Sunday through Wednesday of next week
  
• The
  wetter weather in the Midwest will be great for ensuring a good finish to summer crop development
• The
  Midwest will see drier weather in the second week of the forecast which will improve early season crop maturation conditions and maintain a good environment for late season crop growth
• Northwestern
  U.S. Plains and a part of Canada’s Prairies will get some rainfall in the next week, but resulting amounts in some areas will be a little too light and erratic for a serious change in soil conditions
• Early
  season crop harvest delays should be brief
• Late
  season crops will benefit from whatever rain falls, but more will be needed to support the best possible finish to the growing season
• U.S.
  Pacific Northwest and many areas in the heart of Canada’s Prairies will be dry biased for another ten days favoring crop maturation, but leaving some concern over soil moisture for winter crops and for use next spring
• The
  U.S. Pacific Northwest will have plenty of opportunity to get rain in the next few weeks, but central Canada’s Prairies will need moisture sooner than that to support winter crop planting and improved cover crop conditions
• Ontario
  and Quebec weather remains mostly good for corn and soybeans with little change likely
• Mexico’s
  drought in the northeast continues and will not likely end without the help of a tropical cyclone
• Western
  and southern Mexico rainfall is expected to be sufficient to support crop needs for a while, but summer monsoon has not been as good of a performer as predicted and greater rain is needed to prevent drought from being ongoing into 2023
• Central
  America rainfall has occurred routinely and will continue to do so favoring many crops
• Argentina’s
  two week forecast continues to promote lighter than usual rainfall in the west while eastern areas get a little more routine occurrence of rain to maintain a favorable winter crop outlook
• Southern
  Brazil weather is expected to continue favorably moist over the next two weeks
• Tropical
  waves in the Atlantic Ocean will be closely monitored over the next seven days for signs of tropical cyclone evolution, but no significant development is likely through the weekend.
• Tropical
  Storm Ma-On is approaching the western Guangdong, China coast today and will make landfall Thursday
• Heavy
  rain and some flooding will accompany the storm inland through western Guangdong and from there through Guangxi and southern Yunnan
• Flooding
  could threaten some sugarcane and rice production
• Typhoon
  Tokage is well to the southeast of Japan’s main islands and will stay to the east minimizing its potential impact on any part of eastern Asia through the next several days
• Unusually
  heavy rain will impact Pakistan and eastern parts of Afghanistan over the next two days before diminishing.
  
• Some
  flooding is expected
• This
  has been one of the wettest monsoon years in Pakistan’s recent history and drier weather is needed soon to protect early season rice and cotton that should be maturing
  
• India’s
  weather has improved with less rain falling Tuesday in a big part of central India
• Limited
  rainfall will continue from Odisha and West Bengal to Rajasthan and Gujarat during the coming week and that should end flooding and slowly begin to improve crop and field conditions after weeks of frequent and sometimes excessive rain
• Southern
  India rainfall is expected to increase during the next ten days and that should prove beneficial for many crops after recent drier than usual conditions
• Russia’s
  grain and oilseed production region has been drying out recently and that trend will continue for the next week to ten days, despite a few showers
• The
  drying trend is good for harvest progress and crop maturation
• The
  drying trend is not as welcome for late season oilseed and vegetable crops that need more rain to finish most favorably
• Dryness
  is a concern for some of the region’s wheat emergence and establishment
• Winter
  wheat planting is under way and greater rain will soon be needed to support that process
• Europe
  weather has not changed today relative to that advertised Tuesday
• Drought
  will prevail, although some rain is expected in parts of the continent
• Recent
  rain from Macedonia and western Bulgaria to western Poland and eastern Germany has improved topsoil moisture and additional rain is expected
• Showers
  in Western Europe during the coming ten days will be greatest this weekend and next week, but resulting rainfall may not be enough to bolster soil moisture in northern France, Germany or Belgium
  
• Northeastern
  China is expecting some welcome drier weather over the next week to ten days except in Heilongjiang where additional rain is expected
• The
  drier weather will be good for spring wheat, sugarbeets, corn and soybeans after a long, wet, summer
• China’s
  southern Yellow River Basin area may receive a little too much rain in the coming week, but the impact should be low as long as there is some follow up dry weather
• Drought
  in China’s Yangtze River Basin remains serious and the impact on rice, and other crops produced in the region is a growing concern
• Excessive
  heat and high humidity has likely taken a toll on livestock in the region
• Some
  showers and thunderstorms will evolve later this week and continue into next week, but Hunan and Hubei as well as neighboring areas will likely stay in a serious drought with more heat and dryness likely
• Other
  areas in the basin will experience gradual relief from heat and dryness as scattered showers evolve, but greater rain will still be needed
• China’s
  rice production has been most impacted by weather adversity this year
• Most
  coarse grain and oilseed crops have not been as seriously impacted by hot and dry conditions
• Xinjiang,
  China precipitation is expected to continue mostly in the mountains and temperatures will trend a little warmer.
  
• Rain
  in Australia is expected to become more limited for a while, but favoring the southeastern part of the nation
• Western
  Australia will be driest for ten days and then showers will develop later in the second week of the outlook
• The
  bottom line still looks very good for most of the nation’s crops even though Western Australia will experience net drying for the next ten days
• Temperatures
  will be seasonable
• Southeast
  Asia rainfall is expected to be frequent and significant during the next ten days to two weeks
  
• All
  areas are expected to be impacted and sufficient rain is expected to bolster soil moisture for long term crop development need
  
• South
  Africa will receive periodic showers of limited significance in the south, west and east leaving north-central areas dry
• Most
  of the resulting rain is not likely to be great enough for a serious impact on soil moisture, but some southern areas will get enough to maintain favorable early spring crop development potential
• Central
  Africa showers and thunderstorms will continue most frequent and significant in the northern coffee, cocoa and cotton production areas, but over time the rainy pattern should shift to the south
  
• Southern
  coffee and cocoa areas are not likely to get significant rain for a while especially not in Ivory Coast or Ghana
• North
  Africa precipitation over the next two weeks will be sporadic and light having little to no impact on soil moisture
  
• Today’s
  Southern Oscillation Index was +9.98 and it will move erratically over the next few days

Source:
World Weather INC

 

Bloomberg
Ag Calendar

Wednesday,
Aug. 24:

• EIA
  weekly US ethanol inventories, production, 10:30am
• Brazil’s
  Unica may release cane crush, sugar production data (tentative)
• US
  poultry slaughter

Thursday,
Aug. 25:

• USDA
  weekly net-export sales for corn, soybeans, wheat, cotton, pork and beef, 8:30am
• Malaysia’s
  Aug. 1-25 palm oil export data
• USDA
  red meat production

Friday,
Aug. 26:

• ICE
  Futures Europe weekly commitments of traders report
• CFTC
  commitments of traders weekly report on positions for various US futures and options, 3:30pm
• FranceAgriMer
  weekly update on crop conditions

Source:
Bloomberg and FI

 

 

On
Thursday USDA will be making some changes to the way they report export sales.

https://apps.fas.usda.gov/export-sales/esrd1.html

 

U
of I: Projected Wheat Double-Crop Soybean Profitability in 2023

Schnitkey,
G., C. Zulauf, K. Swanson, N. Paulson, J. Baltz and J. Coppess. “Projected Wheat Double-Crop Soybean Profitability in 2023.” farmdoc daily (12):126, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, August 23, 2022.

https://farmdocdaily.illinois.edu/2022/08/projected-wheat-double-crop-soybean-profitability-in-2023.html

 

Macros

Mortgage
applications to purchase a home fell 1% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 21% lower than the same week one year ago. (CNBC)

Durable
Goods came 0% month over month, est. +0.6%.

 

Corn

·        
Corn traded two-sided, ending higher for the Sep-May contracts (bull spreading). All 2022 & 2023 contracts started higher, for the sixth consecutive day, on US yield concerns and follow through technical buying. By mid-morning
fund buying dried and selling set in.

·        
Funds were even in corn.

·        
Early crop tour field reports for one leg of the IL crop tour did indicate yields looked good (+225 vs. 183.6 average), but another for western IA suggested 198 for eight stops (210 for same stops last year).

·        
December corn has the potential to trade up into the $6.90-$7.00 area by the end of this week unless we see better than expected yield results during the remainder of the crop tour.

·        
China, EU, and US corn crop prospects have steadily deteriorated over the past month and with the investment funds shedding their long position mid-summer over global economic fears, they are likely going to add over the next
few weeks, led by corn, if government estimates start to lower production.

·        
Brazil’s Conab released 2022-23 crop estimates today and they see the corn crop at 125.5 million tons, up from 114.69 reported for 2021-22. The total grain crop was seen at 308 million tons. Conab broke out 2022-23 first corn
crop at 28.98 MMT and second at 94.53 MMT. The second corn crop, if realized, would be up 8.2% from 2021-22. Note USDA is at 126 MMT for Brazil’s total 2022-23 corn crop.

·        
The US 2021-22 corn and soybean crop cycle ends a week from today. After reviewing ethanol production, we lowered our US corn for ethanol use estimate for 2021-22, boosting stocks to 1.545 billion bushels, 15 million above USDA. 
Our new-crop stocks will likely be lowered early next week if US corn crop conditions continue to decline. We are at 1.187 billion for 2022-23, below USDA’s current 1.389 billion. 

·        
Heavy rain across the US Delta is seen delaying corn harvest progress and fieldwork activity for the balance of the week.

·        
Texas ranchers are apparently increasing slaughter rates for their cows as more than 93 percent of the state is experiencing some type of drought. Cattle slaughter is high nationwide, and they may drive prices higher later this
year.

·        
Highly pathogenic avian influenza (HPAI) was reported in California (August 22) at a commercial broiler breeder flock, located in Fresno County. 33,900 chickens were noted but cull numbers were not available.

·        
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 8, 2022, through August 20, 2022, for the United States were 6.20 billion. Cumulative
placements were up 1 percent from the same period a year earlier.

 

United
States and Canadian Cattle Inventory Down 2 Percent

• All
  cattle and calves in the United States and Canada combined totaled 111 million head on July 1, 2022, down 2 percent from the 113 million head on July 1, 2021. All cows and heifers that have calved, at 44.5 million head, were down 2 percent from a year ago.
• All
  cattle and calves in the United States as of July 1, 2022, totaled 98.8 million head, down 2 percent from July 1, 2021. All cows and heifers that have calved, at 39.8 million head, were down 2 percent from a year ago.
• All
  cattle and calves in Canada as of July 1, 2022, totaled 12.3 million head, down 3 percent from the 12.6 million head on July 1, 2021. All cows and heifers that have calved, at 4.69 million head, were down 1 percent from a year ago

 

Weekly
US ethanol production
increased 4,000 barrels to 987 million (trade was looking for up 7k) and stocks increased 361,000 barrels to 23.807 million (trade estimated a 177,000 barrel decline).  Stocks are largest since May 6, 2022. Production was second lowest since May 13, 2022.
Seasonal downtime should be noted. We lowered our 2021-22 corn for ethanol use to 5.330 billion bushels, 20 million below USDA. For new-crop USDA is at 5.375 billion (up 25 million from current). US gasoline demand dropped 914,000 barrels to 8.434 million.
Gasoline stocks fell 27,000 barrels to 215.7 million.  The percentage of ethanol blended into finished motor gasoline was 92.5%, up from 91.5% previous week.

 

 

 

Export
developments.

·        
South Korea’s KOCOPIA group bought two non-GMO corn cargoes from the Black Sea at $378 and $379.40/ton c&f for FH November arrival.

 

 

Updated
8/23/22

December
corn is seen in a $6.00-$7.00 range

 

Soybeans

·        
Soybeans
started higher with Chinese demand for US soybeans but ended lower on technical selling, indicating decent pod counts for western IA and IL. September soybeans hit their largest premium over November earlier. Spot US soybean inventories are tight. Decatur,
IL, soybean basis was up 35 cents to +260X.

·        
Funds sold 4,000 soybeans, were even in meal and sold 3,000 soybean oil.

·        
Brazil’s Conab estimated 2022-23 soybean production at a record 150.36 million tons, well up from 124.05 million for 2021-22. USDA is at 149 MMT for Brazil’s new crop.

·        
Soybean meal finished mostly higher and soybean oil ended lower.

·        
Early IL pod counts and SW IA are both below 2021, according to Bloomberg headlines. Pro Farmer pod counts are suggesting USDA is too high for their US soybean yield. The ECB legs of the tour so far have been a little disappointing.

·        
Argentina soybean sales slowed last week, and 2021-22 sales are running 20 percent below year ago. Argentina new crop soybean sales reached just over 1 million tons, down 33 percent from year ago. (AgriCensus)

·        
Germany on Wednesday prioritized the transportations of energy products on most of its railways.

·        
Indonesia extended its palm oil export waiver until October 31, that has been in place since mid-July.

·        
USDA yesterday announced they will begin accepting applications for $100 million in grants to support higher blending for ethanol and biodiesel (biofuel), aimed for transportation and distribution facilities through the Higher
Blends Infrastructure Incentive Program. Back in April they announced $5.6 million would be available for selected states.

·        
The EIA released its annual US biofuel capacity report. It showed as of Jan 1, 2022, that 21 billion gallons could be produced per year. Ethanol production capacity was 17.4 billion gallons per year (192 producers), a small decrease
from 2021. Biodiesel was 2.3 gallons per year (72 plants). Renewable fuel was 1.8 billion gallons (11 renewable producers), about double from the previous year. Ethanol Producer Magazine covers additional info. 
https://ethanolproducer.com/articles/19543/eia-total-us-biofuel-capacity-at-21-billion-gallons-per-year   
EIA report: https://www.eia.gov/biofuels/biodiesel/capacity/

 

Export
Developments

·        
Private exporters reported sales of 517,000 tons of soybeans for delivery to China during the 2022-23 marketing year.

·        
This comes after they bought 110,000 tons earlier this week.

·        
USDA this week seeks 1,500 tons of vegetable oil for the AMS/CCC to use in export programs. Shipment was set for Oct 1-31, later if from plants at the port.

 

 

We
predict new crop (2022-23) soybean sales at the end of this month will end up near 18.5 million tons, down from 21 million tons for Sep 1, 2021 (2021-22 crop year).

 

Updated
8/23/22

Soybeans
– November is seen in a $13.75-$16.00 range

Soybean
meal – December $390-$445

Soybean
oil – December 63.00-71.00

 

Wheat

·        
US wheat
futures ended higher following strength in corn and technical buying. China’s drought situation has been adding to the bullish undertone but at this time we don’t know the extent of the damage.

·        
Funds bought an estimated net 4,000 Chicago wheat contracts. 

·        
Paris December wheat was down 2.75 euros at 332 per ton. The contract hit a mid-August high earlier.

·        
China bought French wheat cargoes last week but that was likely already priced in the market. Three to four 60,000 ton cargoes were bought. Some estimate upwards to 500,000 tons.

·        
Romania’s wheat crop was estimated at 9 million tons, a decline from 11.3 million tons for 2021.  Despite the lower crop, they expect to remain a net exporter.

·        
APK-Inform: Ukraine 2022 grain crop seen at 52.5 to 55.4 million tons, down from a record 86 million last year.

·        
Ukraine celebrated its 31^st year of Independence. Hopefully peace will achieve sooner than later.

·        
Russia is experiencing warm and dry weather, good for harvest, but rain will be needed prior to winter grain plantings.

 

Export
Developments.

·        
Jordan bought 120,000 tons of barley at $328.00 per ton c&f.

·        
Jordan also announced they seek 120,000 tons of wheat on August 30.

·        
Iraq passed on US wheat that was to close earlier this month (no prices were provided).

·        
South Korea bought 50,000 tons of US wheat on Friday for November shipment at $331-$333 per ton (soft white).

·        
Japan seeks 118,881 tons of food wheat from the United States, Canada and Australia, on Thursday.

·        
Taiwan Flour Millers’ Association seek 34,025 tons of grade 1 milling wheat from the United States on August 25 for shipment out of the PNW between October 12 and October 26.

·        
Bangladesh seeks 50,000 tons of milling wheat on September 1, optional origin, for shipment within 40 days of contract signing.

 

Rice/Other

·        
Bangladesh seeks 50,000 tons of rice on September 6.

·        
We read that China’s drought situation has had the largest impact on rice production.

 

Updated
8/23/22

Chicago – December $7.25-$10.00

KC – December $8.00-$11.00

MN – December $8.00-$12.00