FI Evening Grain Comments 10/12/22

PDF Attached includes updated US soybean complex S&D’s

 

USDA
report day. Another surprise with a bullish US soybean production estimate. CBOT ag markets ended mixed with corn near unchanged, wheat lower and soybeans higher. Meal gained on soybean oil. After the FOMC minutes were released at 1 pm CT, USD rallied. 50-75
basis point rate increase was indicated for both November and December meetings. US equities were higher and WTI remained under pressure. US PPI released this morning was higher than expected, sending WTI crude oil lower. Private exporters reported sales of
526,000 metric tons of soybeans received in the reporting period for delivery to China during the 2022/2023 marketing year. There were no major changes to the US weather forecast. The Midwest will see light rain across the northeastern and central areas today
& Thursday. Parts of the southern Great Plains will see rain, bias eastern Kansas, eastern Oklahoma today. Additional rain is expected to return to OK and include TX late this weekend. Brazil will see widespread rains this week while Argentina will be dry
over the next week. 

 

 

USDA
released their October S&D report

 

Reaction:
Bullish
soybeans and bearish grains.  Largest
surprise was the US soybean yield/production. Trade was looking for a slightly higher yield but it was lowered 0.7/bu to 49.8 bushels per acre. 2022-23 soybean stocks were 48 million bushels below expectations while US corn and wheat stocks came in 48 and
22 million above trade expectations, respectively. 

 

USDA
NASS briefing

https://www.nass.usda.gov/Newsroom/Executive_Briefings/index.php

USDA
OCE Secretary’s Briefing

https://www.usda.gov/oce/commodity-markets/wasde/secretary-briefing

 

 

The
trade was looking for slightly higher US soybean yield and it was lowered 0.7/bu to 49.8 bushels per acre (at our expectations). 2022-23 soybean ending stocks were 48 million bushels below expectations at 200 million. They lowered US soybean exports by 40
million bushels.

 

There
were a lot of moving parts in today’s USDA October update for the US soybean complex. Looking beyond the production cut in soybeans of 65 million bushels to 4.313 billion, there are many demand factors to think about for 2022-23. USDA in its October update
raised 2022-23 US crush by 10 million bushels. Profitable US crush margins, finance problems in Argentina creating uncertainty for product availability from December beyond, and negative Brazil crush margins could keep the US rate at high levels at least over
the next six months. For exports, USDA took their estimate down by 40 million bushels, a reasonable amount, but at 2.045 billion, still too large, in our opinion. Midwest River barge disruptions could leave October and November Gulf soybean exports short of
average, and with Brazil exports revised higher by 500,000 tons to 89.5 million tons, competing with 2023 NA market (12.5 percent above 2021-22), along with about 3.5 million tons of Argentina soybeans recently sold to China (at a time when US normally sells),
fall quarter US exports (SON) could end up at a very low level. Based on September inspections and slow start for October shipments (pace expected to increase), and expectations for slower than normal November inspections (barge issues), SON US soybean exports
could end up between 475 and 525 million bushels, lowest since either 2018 or 2011 (low end). In 2011-12, exports ended up at 1.328 billion bushels. For 2022-23, we lowered our US soybean export projection to 2.000 billion bushels, 45 million below USDA, and
raised crush to 2.240 billion, about 10 million higher than previous and 5 million above USDA.

 

 

We
are surprised USDA did not increase old crop soybean oil use for biofuel. The also left new-crop unchanged. Soybean oil for biofuel was reported better than expected for the month of July and projected near 945 million pounds for both August and September.
In 2022-23, soybean oil for biofuel demand is projected to rise 1.600 billion pounds from 2021-22. We are more optimist (see S&D). Soybean oil production was increased 120 million pounds, but stocks were only up 20 million pounds due to an increase in 2021-22
SBO use. USDA increased old crop soybean meal production by 100,000 short tons, offset by higher domestic use. For 2022-23, USDA increased meal production by 250,000 short tons, again offset by higher domestic use.

 

Brazil
soybean production was lifted 3MMT to 152MMT, and exports were raised 500,000 tons. There were no changes to the upcoming Argentina soybean production. For old crop, Brazil soybean production was increased 1.0 million tons to 127MMT and Argentina was unchanged
at 44MMT.

 

US
corn production fell a less than expected 49 million bushels from the previous month to 13.895 billion. The yield was 171.9 bushels per acre, 0.1/bu above an average trade guess. What got into the selling in corn futures earlier was US corn ending stocks coming
in 48 million bushels above expectations at 1.172 billion bushels. Imports were raised 25 million bushels to 50 million, and total supply was lowered 172 million bushels (148 lower carryout from 2021-22) to 15.322 billion, about a billion less than total supply
last season. USDA increased corn for feed by 50 million for the current marketing year and lowered ethanol use by 50 (needed). EU corn was lowered 2.6MMT to 56.2, still too high, in our opinion.

 

US
all-wheat wheat stocks of 576 million bushels were 22 above expectations and 34 million below what was projected last month, despite a 133 million known decline in production. USDA lowered wheat for feed use to a low 50 million and exports were taken down
50 million to 775 million, also a very low level when compared to the last few decades. USDA took Argentina wheat production down 1.5MMT to 17.5 million, still 1.5 million tons above the Attaché that revised their estimate yesterday to 16 million tons.

 

Attached
PDF includes FI snapshot

 

Weather

 

 

 

World
Weather, INC.

MOST
IMPORTANT WEATHER OF THE DAY

• Rain
  is still advertised for the southern U.S. Plains late this weekend into early next week.
  
• The
  moisture in Texas and Oklahoma would be welcome for winter wheat planting, emergence and establishment
  
• Some
  of the rain in West Texas might not be welcome because of the risk to open boll fiber, although the rain should not last long enough to cause a serious threat to the crop
• Tropical 
  Storm Karl was located 170 miles east northeast of Tuxpan, Mexico and 185 miles north northeast of Veracruz, Mexico at 0700 CDT today
  
• This
  position was near 21.5 north, 94.8 west and the system was moving north northwesterly at 6 mph
• Karl
  will slow its forward movement today and briefly stall before turning back to the west southwest and eventually to the south southwest over the next day or two.
  
• Landfall
  is expected in southern Veracruz state late Friday and early Saturday
• The
  storm is unlikely to produce much damaging wind, but some heavy rain and flooding will be possible
• Coffee,
  citrus, rice, sugarcane and many other crops will be vulnerable to the storm, but its weak intensity should spare the region of much production loss
• Tropical
  Cyclones developing in the western Pacific and Bay of Bengal
• One
  storm will evolve in the South China Sea over the next couple of days before moving to southern Vietnam impacting the Central Highlands late Thursday and Friday with rainfall from there along much of the middle two-thirds of the coast ranging from 5.00 to
  15.00 inches
• Another
  storm forms east of the Philippines late this week and may move between Taiwan and Luzon Island during the weekend before possibly impacting Vietnam next week  – confidence is low
• A
  third tropical system may evolve in the Andaman Sea during mid-week next week before moving into the Bay of Bengal later next week and possibly threatening India Oct. 23-24 – confidence is low
• China’s
  Yangtze River Basin will remain drought stricken for the next two weeks
• Recent
  rain near and north of the Yangtze River was welcome, but it was not nearly enough to support long term crop needs
• Rapeseed
  planting is due to begin and it will require significant rainfall to be successful
• Southern
  Yangtze River Basin crop areas are critically dry with no rain in weeks and none likely for the next ten days and probably two weeks
• Argentina
  continues in drought with little precipitation of much meaning during the next ten days
• A
  few showers are expected, but they will likely be too brief and light to have a significant impact on soil moisture
• Winter
  wheat and barley conditions have been deteriorating after a favorable start to the season in Buenos Aires, Entre Rios and parts of eastern Santa Fe
• Wheat
  areas farther west have rarely seen good rainfall and are in the poorest condition
• Sunseed
  and early corn planting has advanced, but emergence and establishment have not gone well because of dryness and this too will prevail until greater rain falls
• U.S.
  far western states continue in a serious multi-year drought with very low water supply and a rising level of concern because of yet another few months of La Nina which usually restricts precipitation
• Irrigation
  restrictions remain in place which may impact the production of many fruits and vegetables
  
• U.S.
  Pacific Northwest remains in drought, although water supply from the Cascade Mountains is still sufficient for crop needs
• The
  biggest concern is over dryland wheat and barley production areas (especially in Oregon) where little to no planting and poor establishment is expected until significant rain falls
• The
  region will continue dry for at least the next ten days
• Canada’s
  central and southwestern Prairies remain in a significant drought with some areas in southwestern Saskatchewan and southern Alberta in a serious multi-year drought
  
• Winter
  wheat plantings will be down once again because of dryness
• Excellent
  summer crop harvest progress has occurred this autumn because of dryness and that trend will continue in the coming ten days, despite some cooling
• Temperatures
  have been unusually warm throughout the past several weeks with a few brief exceptions
• U.S.
  hard red winter wheat production areas are still dealing with poor soil moisture and unfavorable crop emergence and establishment conditions
• The
  situation varies greatly from one region to another
• Not
  much relief is expected through the next ten days, although some computer forecast models have been advertising rain in Texas and a part of Oklahoma for late this weekend and early next week
• Confidence
  is low for generalized soaking rain of significance, but temporary relief from dryness is possible
• Little
  to no relief from dryness is expected in Colorado, Kansas or Nebraska
• Eastern
  Australia has been dealing with frequent bouts of abundant rainfall in recent months and that pattern should not go away in the next few months
• La 
  Nina has brought on some significant rain at times in Queensland, New South Wales and Victoria
• New
  South Wales has been wettest most recently and will continue that way periodically into the end of this growing season
  
• The
  potential is moderately high for excessive rain to return to New South Wales and Queensland again later this season and the situation needs to be closely monitored
• If
  the heavier rain arrives while winter crops are maturing and being harvested there may be a serious decline in crop quality cutting into the amount of quality grain produced by the nation
• Summer
  crop planting (sorghum and cotton in particular) will be delayed if it stays too wet
• Portions
  of Southeast Asia have experienced bouts of heavy rain and flooding in recent months resulting mostly from La Nina and some Madden Julian Oscillation events
• This
  trend will continue over the next few months and a close watch on the situation is warranted.
  
• Flooding
  has impacted portions of Central America in recent weeks
• The
  wet bias has hurt production potentials for many crops
• The
  recent torrential rain and flooding from Tropical Storm Julia  induced damage to crops and property from Nicaragua to Guatemala
  
• Additional
  waves of rain are predicted in the next ten days to keep the region excessively
  
• Much
  of the U.S. Midwest, Delta and southeastern states will experience a good mix of weather during the next two weeks
  
• Harvest
  progress and some winter crop planting should advance favorably
• U.S.
  navigable river levels are still quite low resulting in barge load restrictions resulting in increased freight costs in transporting agricultural products to key ports

 

• Recent
  drying in U.S. cotton areas of the southeastern states has improved fiber quality after being impacted by Hurricane Ian earlier this month
• West
  Texas rainfall is possible late this weekend into early next week possibly raising a little fiber quality concern
  
• Cooler
  weather will slow crop maturation rates over the next couple of weeks
• Ontario
  and Quebec harvest weather will deteriorate as a frequent rainfall pattern occurs while temperatures cool off
  
• Dry
  weather in Canada’s Prairies has supported a fast harvest this year, but dryness is raising worry over winter and spring crops
• Brazil’s
  center west and center south crop areas will see frequent bouts of rain during the next two weeks
• The
  greatest rain will occur from Santa Catarina, Parana and southern Sao Paulo to western Mato Grosso do Sul and some western Mato Grosso crop areas
• No
  excessive rain is expected and fieldwork will advance around the rain
• Argentina
  fieldwork will advance slowly in the next couple of weeks because of dryness limiting seed germination and plant emergence
• Winter
  wheat, early corn and sunseed development will be sluggish because of poor or limited soil moisture
• Central
  and eastern Europe will receive restricted amounts of rain in the next two weeks supporting fieldwork of all kinds
• Westernmost
  Europe will see an increase in rain frequency over the weekend and next week possibly slowing fieldwork, but the moisture will be good for water supply and long term crop development potential
• Western
  Russia, Ukraine, Belarus and Baltic States will experience mild to cool weather and brief periods of rain and some snow in the next ten days
• Winter
  crops will slowly be pushed toward dormancy in the north
• India
  rain will be frequent in central, southern and some eastern crop areas over the next week
• Monsoonal
  precipitation is expected to withdraw from central parts of the nation soon and that will be welcome after recent abundant rain
• Better
  crop maturation and harvest conditions should follow as the region dries out
• Much
  of eastern China will be dry or mostly dry during the next ten days
• Winter
  wheat and rapeseed planting will advance in areas that have good soil moisture and field conditions
• Rain
  must fall in the Yangtze River Basin before much planting can occur
• Xinjiang,
  China harvest weather should be favorable for most of the coming week with limited rainfall and seasonable temperatures
• Southeast
  Asia rainfall is expected to continue frequent and abundant over the next ten days resulting in flooding for some areas
• The
  excessive rain will be sporadic limiting the flooding to small regions
• As
  long as La Nina continues at this strong level the potential for flooding rainfall will continue and that should be for several weeks
  
• Western
  Australia continues to dry out and may require some timely rain soon to protect yield potentials
• Most
  of the state’s crops are in very good shape and expected to yield very well
• West-central
  Africa rainfall will occur periodically enough to support coffee, cocoa, sugarcane, cotton, rice and other crops during the next couple of weeks
• There
  is some evidence of a southward shift in seasonal rainfall which should help to support maturing cotton in the north
• East-central
  Africa rainfall will be sufficient to support coffee and cocoa as well as a few other crops
• Mexico
  rainfall will be greatest in the south through the weekend and possibly into early next week
  
• Much
  of this will come from the remnants of tropical storm Julia and from a new disturbance that is expected in the Gulf of Campeche in the next couple of days
• Central
  and northern Mexico rainfall will be more restricted
• Central
  America rainfall will become lighter and more sporadic for a while following the demise of Tropical Storm Julia
  
• North
  Africa showers and thunderstorms will continue to improve topsoil moisture for better planting conditions later this month and especially in November.
  
• Rain
  over the coming week could range from 0.30 to 1.00 inch of moisture with a few 1.50 inches
  
• Today’s
  Southern Oscillation Index was +20.33 and it will move erratically over the next few days

Source:
World Weather INC

 

Bloomberg
Ag Calendar

Wednesday,
Oct. 12:

• USDA’s
  monthly World Agricultural Supply and Demand (WASDE) report, 12pm
• China’s
  agriculture ministry (CASDE) releases monthly report on supply and demand for corn and soybeans
• Bursa
  Malaysia Derivatives to host East Malaysia palm oil conference, day 1
• FranceAgriMer
  monthly grains outlook
• HOLIDAY:
  Brazil

Thursday,
Oct. 13:

• US
  CPI
• EIA
  weekly US ethanol inventories, production, 10:30am
• Malaysian
  Cocoa Board releases 3Q grind data
• Bursa
  Malaysia’s East Malaysia palm oil conference, day 2
• New
  Zealand Food Prices
• HOLIDAY:
  Thailand

Friday,
Oct. 14:

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

• China’s
  first batch of Sept. trade data, including soybean, edible oil, rubber and meat imports
• 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
• HOLIDAY:
  Thailand

Source:
Bloomberg and FI

 

 

 

 

Macros

FOMC
Minutes: Officials Favored Reaching Restrictive Rates In Near-Term

–
Officials Saw Need To Move Too, Maintaining Restrictive Policy

–
Stressed Staying The Course Even As Jobless Rose

–
Officials Saw Slowing The Pace Of Hiking At Some Point

–
Many Saw Cost Of Too Little Outweighing Too Much

–
Several Saw Need To Calibrate Fed Tightening To Mitigate Risk

US
MBA Mortgage Applications Oct 7: -2.0% (prev -14.2%)

US
30 Year Mortgage Rate Oct 7: 6.81% (prev 6.75%)

 

Corn

·        
Corn futures traded lower post USDA report but losses were trimmed on higher soybeans and bottom picking during the later afternoon trade. Prices closed unchanged to lower. Lower WTI crude oil weighted on corn.

·        
Funds sold an estimated net 1,000 contracts.

·        
Bloomberg reported during the morning session that China might import Brazil corn as early as December, in effort to replace Ukraine supplies and reduce dependency on US imports. China is expected to import more than 15 million
tons of corn this marketing year. Bloomberg noted 45 facilities located within Brazil are approved to export corn to China, with more to be added by the end of November.

·        
China in their monthly S&D update raised 2021-22 corn imports by 2.00 million tons to 22.00 million. They left 2022-23 imports for corn unchanged at 18 million tons (7.2 MMT import quota for 2023, same as 2022).  China raised
their 2022-23 corn production by 2.75 million tons to 275.31 million, 2.76 or 1% above 2021-22.

·        
Romania reported an outbreak of African Swine Fever at a pig farm (not a wild bour) in the western part of the country.

 

 

Export
developments.

·        
Taiwan’s MFIG bought up to 65,000 tons of corn, optional origin, at $1.89/bu over the March contract for December and early January shipment. Brazil was thought to be the origin.

 

Updated
10/09/22

December
corn is seen in a $6.50-$7.15 range. March $6.50-$7.50 range.

 

Soybeans

·        
The soybean complex started lower in part to US harvest pressure and outside market influence but prices appreciated post USDA report from a surprise US production cut and unchanged carryout from the previous month. Soybean meal
followed soybeans higher. Bulls spreading was noted. Soybean oil lost ground to meal after WTI crude oil traded back below $88 per barrel.

·        
Funds bought an estimated net 8,000 soybean contracts, bought 4,000 meal and were even for soybean oil.

·        
USDA announced 526,000 tons of soybeans to China. While this is supportive, recall China recently secured over three million tons of soybeans from Argentina during a period when they should have been buying US product, and US
soybean inspections to date are running about 23 percent below same period year ago. China’s last 24-H purchase was September 19 and last time of that size May 12, 2022.

·        
We lowered our US soybean export forecast. See USDA recap above and attached balance sheet.

·        
NOPA is due out on Monday the 17^th (15^th falls on a weekend) and we look for the crush rate during the month of September to decline slightly on a daily adjusted basis from August to 159.9 million bushels,
up from 153.8 million year earlier. Soybeans were hard to source FH September across parts of the ECB, so that figure could end up on the high side of expectations when trade estimates are released.

·        
In its monthly S&D update, China their old and new crop soybean balance unchanged and slightly adjusted various vegetable oil imports (lower) for 2021-22. Table attached

·        
The USDA Attaché lowered 2022-23 Argentina soybean production to 49MMT and is now 2MMT below USDA’s official October estimate, up from 44MMT last year.

https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Oilseeds%20and%20Products%20Update_Buenos%20Aires_Argentina_AR2022-0016

·        
The weekly USDA Broiler report showed eggs set in the US up 3 percent and chicks placed up 5 percent. Cumulative placements from the week ending January 8, 2022 through October 8, 2022 for the United States were 7.54 billion.
Cumulative placements were up 1 percent from the same period a year earlier.

 

Export
Developments

·        
China plans to auction off 500,000 tons of soybeans from reserves on October 14, consisting of the 2019, 2020, and 2021 crop years.

·        
Under the 24-hour announcement system, USDA reported 526,000 tons of soybeans received for delivery to China for the 2022-23 marketing year.

 

 

 

Updated
10/09/22

Soybeans
– November is seen in a $13.00-$14.50 range, January $13.25-$15.00

Soybean
meal – December $375-$440, January $360-$475

Soybean
oil – December 63.00-75.00, January wide 60.00-73.00 range

 

Wheat

·        
US wheat futures ended lower from a bearish USDA report and follow through technical selling after prices ripped higher on Monday. USDA surprised the trade by cutting US demand by a more than expected 80 million bushels, partially
offsetting the 114 million decline in total US supply. On the global stage, 2022-23 world ending stocks fell by only 1 million tons to 267.5 million. EU wheat production was raised 2.7 million tons and Brazil by 0.5 million tons. See US comments in the USDA
recap section above.

·        
Funds sold an estimated net 6,000 Chicago wheat contracts. 

·        
The Argentina Rosario exchange lowered Argentina wheat production to 16 million tons from 16.5 million previous. USDA official is at 17.5 million tons after revising it down 1.5 today.

·        
Paris December wheat was off 3.00 euros at 353.25 per ton.

·        
FranceAgriMer increased its forecast for French soft wheat exports outside the EU for the 2022-23 season to 10.1 million tons from 10.0 million last month, a 15% increase from 2021-22. Within the EU they estimate exports at 7.07
million tons versus 7.13 million previously, 12% below 2021-22.

 

Export
Developments.

·        
Yesterday Algeria bought an estimated 510,000 tons of soft milling wheat for November shipment at an estimated $380-$385/ton c&f. Russia, Romania, Bulgaria and France (one cargo) was thought to be origin.

·        
Japan in a SBS import tender seeks 70,000 tons of feed wheat and 40,000 tons of barley on October 19 for arrival by February 24.

·        
Jordan saw two participants for 120,000 tons of barley for March and April shipment but passed.

·        
Jordan opened another import tender for 120,000 tons of feed barley, set to close October 19.

·        
Japan seeks 94,140 tons of food wheat from the US, Canada and Australia later this week for arrival by January 31.

·        
China plans to sell 40,000 tons of wheat from reserves on October 12, from the 2014-2017 crops.

·        
Mauritius seeks 25,800 tons of wheat flour, optional origin, on October 28 for January through September 30, 2023, shipment.

 

Rice/Other

·        
Sugar prices hit a 12-month high. Heavy rain across parts of India are delaying sugarcane processing.

·        
South Korea plans to buy 450,000 tons of rice for reserves this year October 20 through December to stabilize domestic prices. This would be up from 350,000 tons last year.

·        
South Korea seeks 90,100 tons of rice from the US, Vietnam and other origins on October 19 for arrival between Jan 20 and Apr 30.

·        
Mauritius seeks 6,000 tons of rice on October 20, optional origin, for Jan-Mar shipment.

 

Updated 10/7/22

Chicago – December $8.16-$10.00, March $8.00 to $10.25

KC – December $9.25-$10.50, March 8.50-$10.50

MN – December $9.25-$10.50, March $9.00 to $10.50