FI Evening Grain Comments 11/30/22 (EPA RVO proposal)

PDF Attached

 

Calls:

Soybeans
10+ lower

Soybean
meal steady to $2.00 lower

Soybean
oil 50-100 lower in front months

Corn
steady to 3 lower (RVO about expected)

Wheat
steady to 4 higher on follow through technical buying

Calls
are based on renewable volume obligations (RVO) headlines

 

Reuters
indicated, from sources, the US EPA may officially announce a small increase in 2023 renewable fuel blending obligations to 20.82 billion from 20.63 billion in 2022. The following year, 2024, was pegged to grow about a billion to 21.87 billion (about in line
with expectations) and 2025 to 22.68 billion. Some may find the 2023 increase on the low side. Many traders were looking for a 1.0-1.5-billion-gallon increase, at least for 2023. Conventional (ethanol) was reported, from sources, to be left at 15 million gallons
in 2023 before rising to 15.25 billion in 2024 and 2025. Advanced was seen at 5.82 billion gallons in 2023, 6.62 billion in 2024 and 7.43 billion in 2025. We question if the selling in soybean oil today was already worked into the market. We think FH 2023
contracts will be at least on the defensive against far back months. Official RVO’s for 2020-2022 below announced in June.

 

 

USDA
reported private exporters reported sales of 136,000 tons of soybeans for delivery to China during the 2022-23 marketing year.

 

 

Weather

The
weather outlook was mostly unchanged for the US than that of yesterday and slightly drier for Argentina. Weather forecaster Maxar noted temperatures in Argentina topped 100 degrees Fahrenheit in recent days and are expected to remain above normal over the
next two weeks. Argentina will see rain this week across Cordoba, northeastern Buenos Aires then Santa Catarina & Entre Rios before drying down over the weekend. Brazil’s northern areas are favorable while net drying is occurring across parts of the southern
and western growing areas. Rain will fall across Brazil’s northern and eastern areas through Friday and expand into central and western areas this weekend. The US Great Plains will be mostly dry this week with exception of weekend event across southern OK
and northern TX. The Midwest will be active over the next few days while the WCB will be mostly dry.

 

 

World
Weather, INC.

MOST
IMPORTANT WEATHER FOR THE COMING WEEK

• Argentina’s
  rainfall overnight was welcome and benefited many crop areas from San Luis and parts of Cordoba through central Buenos Aires
• Rain
  totals ranged from 0.30 to 1.00 most often, but there were a few areas of greater rain in southeastern Cordoba and northwestern Santa Fe where moisture totals of 1.87 to 2.42 inches resulted.
  
• Topsoil
  moisture increased briefly, but most of the rain will prove to be too light for a lasting increase in soil moisture
  

§ 
Follow up rain will be imperative for areas receiving less than 1.00 inch

• Argentina
  temperatures were very warm ahead of the overnight rainfall with highs in the 90s to near 100 Fahrenheit
• Argentina’s
  heat and dryness will be returning this weekend into next week, but some rain will fall in northeastern and central parts of the nation today and early Thursday
• Relief
  from chronic dryness in Santa Fe, Chaco, southeastern Santiago del Estero and western Entre Rios is expected, but only for a short period of time

§ 
Most of the resulting rain through Thursday morning will not be more than 0.60 inch and that will not be enough to counter a single day’s evaporative moisture loss once temperatures return to the 90s Fahrenheit

• Argentina’s
  precipitation outlook for the weekend and next week does not offer any additional relief of significance to dryness
• Any
  and all showers will be welcome, but much more rain will be needed
• Weather
  through early December looks to be challenging for most crop areas in Argentina outside of those receiving significant rain overnight
• Brazil
  weather continued dry in western and far southern parts of the nation Tuesday and early today
• Rain
  did fall in the eastern half of nation’s crop areas and conditions in those areas remained favorable due to abundant soil moisture
• Western
  crop areas in Brazil need rain, but it is coming and will likely become significant soon
• Brazil
  rainfall should begin improving in the west and far south Thursday and rain should occur frequently and significantly enough in the following ten days to lift soil moisture in a favorable manner to maintain or restore very good production potentials
• Only
  a small pocket of center west Brazil has been notably dry biased recently. Most other areas have had timely rainfall, despite some below normal rain amounts
• U.S.
  hard red winter wheat production areas will remain dry biased for the next ten days to two weeks
  
• Areas
  from Nebraska and Colorado through central and western Kansas to the northwestern Texas Panhandle have been driest and will remain that way
• Soil
  temperatures have trended cold enough to push winter crops into dormancy and semi-dormancy which will limit precipitation needs until spring
• Snow
  cover will be needed in times of bitter cold to adequately protect winter crops from the potential of winterkill

§ 
There is no risk of damaging cold in the next ten days

• Interior
  southeastern U.S. reported moderate to heavy rain Tuesday and early today
• Rain
  totals for 2.00 to 5.57 inches occurred from central Mississippi through central and northern Alabama to northern Georgia and southeastern Tennessee
  

§ 
Some local flooding resulted

• This
  region will receive additional bouts of rain periodically over the next two weeks maintaining wet field conditions
• Florida,
  southern Georgia, South Carolina and southeastern Alabama will experience limited precipitation and low soil moisture over the next ten days to two weeks
  
• California
  and western portions of Oregon and Washington will receive frequent precipitation during the next ten days bolstering topsoil moisture
  
• Canada’s
  Prairies and the northern U.S. Plains will experience bouts of bitter cold during the next ten days
• The
  impact will be low
• Frequent
  bouts of snow and rain will impact Quebec and Ontario, Canada over the next ten days impacting travel, but ensuring good soil moisture for use in the spring
• Europe
  weather changed little overnight
• Cooler
  temperatures will evolve in the northern part of the continent during the next week to ten days raising some heating fuel demand
• Southern
  Europe will experience more frequent bouts of rain and mountain snowfall

§ 
The moisture boost in Spain, southern France, Italy and the southern Balkan Countries will be welcome and good for crops in the spring

• Western
  CIS weather will be cool in the north and mild in the south with brief bouts of light precipitation during the next ten days
• The
  environment will leave dormant winter crops in mostly good shape
• There
  is need for increased snow cover in eastern Ukraine and Russia’s Southern Region, but there is not imminent threat of damaging cold minimizing any concern for now
• Eastern
  China was quite cold this morning and it will continue cold for another day or two before warming this weekend and next week
• There
  was no threat of winterkill, and none is expected
• The
  cold is pushing winter crops in the northern production areas into dormancy which is normal for this time of year
• Southeastern
  China will continue to experience waves of precipitation over the next two weeks maintaining moisture abundance in the Yangtze River Basin and southeastern coastal provinces.
  
• The
  moisture will be good for future rapeseed development and early season rice planting – which begins in late February and March in the far south
• North
  Africa will get rain periodically over the next ten days, although it may not be well distributed in some areas
• Greater
  rain will soon be needed in parts of Morocco and northwestern Algeria which have been driest recently
• The
  moisture will be well timed and good for wheat and barley emergence and establishment after recent dryness
• East-central
  and southern Australia will experience favorable drying conditions during the coming week
  
• Totally
  dry weather is not likely, but the resulting precipitation should be light enough to allow crop development and fieldwork to advance relatively well
• Eastern
  and northern Queensland is experiencing a boost in rainfall that will be good for sugarcane and eastern cotton production areas
• Drying
  in interior Queensland and New South Wales will be ideal for advancing winter crop maturation and harvest progress, although much of the harvest in Queensland should be complete
• Western
  Australia crop weather remains very good for the normal maturation of winter crops and their harvest with little change likely for the next couple of weeks

§ 
Any rain that evolves will only briefly disrupt field progress

• India
  weather will be fine for summer crop harvesting and winter crop planting, although periods of rain will fall in the far south of India periodically which is not unusual at this time of year
• South
  Africa’s summer crop areas will continue to experience alternating periods of rain and sunshine during the next two weeks favoring normal planting and early season crop development
  
• Southeast
  Asia will continue to experience an active weather pattern with nearly all crop areas from Thailand and Vietnam to Indonesia, and the Philippines receiving rain
• Some
  of the precipitation may be heavy at times resulting in local flooding
• A
  tropical disturbance may develop near the southern Philippines this week before moving to the northern Malay Peninsula this weekend and into the Bay of Bengal next week
  
• Mexico’s
  rains have largely diminished for the season and good crop maturation and harvest weather is expected for a while, but there is potential for a boost in southern and eastern Mexico rainfall later this week into the weekend
  
• The
  moisture will be good for winter rice and citrus, but may disrupt some farming activity
• Central
  America precipitation is expected to continue periodically during the next ten days, but no large region of excessive rain is expected this week
• Panama,
  Costa Rica and portions of southern and eastern Nicaragua will be wettest with rain totals rising above normal
• Nicaragua
  and Honduras will experience lighter than usual precipitation
• West-central
  Africa rainfall should be mostly confined to southernmost coffee and cocoa production areas
• The
  precipitation will be greatest near the coast
• Some
  of the precipitation may drift northward this weekend and next week
• East-central
  Africa rainfall will be sufficient to support coffee and cocoa as well as a few other crops
• Rain
  will fall abundantly in Tanzania, southwestern Kenya and Uganda while it is more sporadic and light in Ethiopia
• Today’s
  Southern Oscillation Index was +4.77 and it will move higher over the next few days

Source:
World Weather INC

 

Bloomberg
Ag Calendar

Wednesday,
Nov. 30:

• EIA
  weekly US ethanol inventories, production, 10:30am
• Malaysia’s
  November palm oil exports
• US
  agricultural prices paid, received, 3pm

Thursday,
Dec. 1:

• USDA
  weekly net-export sales for corn, soybeans, wheat, cotton, pork and beef, 8:30am
• Port
  of Rouen data on French grain exports
• Australia
  commodity index
• USDA
  soybean crush, DDGS production, corn for ethanol, 3pm

Friday,
Dec. 2:

• FAO
  World Food Price Index
• Canada’s
  StatCan to release wheat, canola and barley production data, 8:30am
• ICE
  Futures Europe weekly commitments of traders report
• CFTC
  commitments of traders weekly report on positions for various US futures and options
• FranceAgriMer
  weekly update on crop conditions

Source:
Bloomberg and FI

 

 

 

First
Notice Day Deliveries (based on Tuesday evening)

 

 

Macros

102
Counterparties Take $2.116 Tln At Fed Reverse Repo Op (Prev $2.064 Tln, 91 Bids)

US
House Speaker Pelosi: House To Vote On Paid Sick Leave For Rail Workers Wednesday

US
GDP Annualized (Q/Q) Q3 S: 2.9% (est 2.8%; prev 2.6%)

US
Personal Consumption Q3 S: 1.7% (est 1.6%; prev 1.4%)

US
GDP Price Index Q3 S: 4.3% (est 4.1%; prev 4.1%)

US
Core PCE (Q/Q) Q3 S: 4.6% (est 4.5%; prev 4.5%)

US
Wholesale Inventories (M/M) Oct P: 0.8% (est 0.5%; prev 0.6%)

US
Retail Inventories (M/M) Oct: -0.2% (est 0.5%; prevR -0.1%)

US
Advance Goods Trade Balance Oct: -$99.0B (est -$90.6B; prevR -$91.9B)

US
ADP Employment Change Nov: 127K (est 200K; prev 239K)

US
Pending Home Sales (M/M) Oct: -4.6% (est -5.3%; prev R -8.7%)

–
Pending Home Sales NSA (Y/Y): -36.7% (est -35.2%; prev R -29.3%)

 

US
DoE Crude Oil Inventories (W/W) 25-Nov: -12.581M (est -3.123M; prev -3.691M)

–
Distillate: +3.547M (est +1.492M; prev +1.718M)

–
Cushing: -415K (prev -887K)

–
Gasoline: +2.770M (est +2.250M; prev +3.058M)

–
Refinery Utilization: +1.3% (est +0.45%; prev +1.0%)

 

OPEC
Nov Oil Output Drops 710,000 Bpd From October To 29.10 Million Bpd After OPEC+ Cut Decision – Reuters Survey

 – 
Quota-Bound Members Comply With 163% Of Pledged Cuts In November

– 
Quota-Bound Members Underproduce Nov Output Target By 800,000 Bpd Vs 1.36 Million Bpd Shortfall In Oct

 

Corn

·        
Corn futures opened
higher this morning on widespread commodity buying but closed lower on technical selling and soybean/corn spreading. Gains were limited on South American competition and Argentina corn production concerns.

·        
US RVO headlines for conventional biofuel of 15 billion for 2023 and modest increase for 2024 was in line with projections.

·        
First Notice Day deliveries for December corn were 308.

·        
China’s Ministry of Agriculture and Rural Affairs reported the sow herd increased by 0.4% in October from September to 43.79 million sows, 0.7% larger than a year ago.

·        
Kenya will temporarily drop their import duty on 900,000 tons of corn to boost stocks.

·        
The weekly Broiler Report showed eggs set in the US down 2 percent and chicks placed down 1 percent from a year ago. Cumulative placements from the week ending January 8, 2022, through November 26, 2022, for the United States
were 8.84 billion. Cumulative placements were up 2 percent from the same period a year earlier.

 

Weekly
ethanol production fell 23,000 barrels per day to 1.018 million and stocks increased 105,000 barrels to 22.934 million. A Bloomberg poll looked for weekly US ethanol production to be down 3,000 thousand and stocks down 100,000 barrels to 22.729 million. The
four week average for ethanol production is down 6,000 barrels per day.  Early September to date ethanol production is running 4.5% below the same period year ago, and 2.1% below pracademic 2019 level. US gasoline stocks increased for the third consecutive
week, by 2.770 million barrels to 213.8 million and US gasoline demand slipped for the third consecutive week, by 10,000 barrels to 8.317 million barrels. The 4-week average US implied gasoline demand is running about 5% below the same period year ago and
about 9.5% below same period in 2019 before covid impacted the United States. For the week ending 11/25, US ethanol blended into finished motor gasoline ran at 91% of finished motor gasoline, up from 90.1% previous week.

 

 

 

Export
developments.

·        
South Korea’s MFG bought 69,000 tons of South America corn for Jan 10-Feb 8 shipment. 50% was bought at an outright price of $336 a ton c&f and 50% at $1.8423/bushel c&f over the March.

·        
South Korea’s FLC bought 65,000 tons of South America corn at an estimated $335.95 a ton c&f for shipment from South America in 2023 between Jan. 1 and Jan 20

 

 

 

Updated
11/30/22

March
corn $6.10-$7.15 range.

 

Soybeans

·        
CBOT soybeans
hit their highest levels since September on follow through rumors China will ease covid restrictions and Argentina weather concerns. A rebound in soybean meal lent strength. Soybean oil traded in a wide range. SBO was sharply higher earlier then plunged mid-morning
on sell stops. Some noted rumors over RVO’s mandates could be announced on the low side, but that was quickly diffused after the EPA announced biofuel mandates will be released later this week. Soybean oil futures never recovered for the remainder of the session.

·        
Then later Wednesday afternoon, Reuters reported the US EPA will officially announce a small increase in 2023 renewable fuel blending obligations to 20.82 billion from 20.63 billion in 2022. The following year, 2024, was pegged
to grow about a billion to 21.87 billion and 2025 to 22.68 billion. Traders were looking for 2023 to increase 1.0-1.5 billion gallons.  We think this is initially bearish soybean oil but long term bullish.

·        
Soybean meal rallied on talk of rising US Gulf premiums and good interior demand.

·        
Weather forecaster Maxar noted temperatures in Argentina topped 100 degrees Fahrenheit in recent days and are expected to remain above normal over the next two weeks. Brazil’s northern areas are favorable while net drying is occurring
across parts of the southern and western growing areas.

·        
Indonesia set their reference price for crude palm oil at $824.32 per ton for December 1-15 shipment, using a reference price at $33 per ton and levy at $85 per ton, unchanged from the November 16-30 period.

·        
India raised the base import prices of crude palm oil and soybean oil.

·        
Good Malaysian palm oil export supported palm futures overnight. AmSpec reported November palm oil exports at 1.499 million tons versus s1.475 million during October. ITS reported a 5.6% increase to 1.580 million tons from 1.496
million during October.

·        
EIA reported 934 million pounds of SBO was used during September for biofuel production, very close to USDA’s projection. USDA was only off 2 million pounds from their biofuel estimate. 10.348 billion is the final 2021-22 use,
up from 8.920 billion in 2020-21.

 

 

Export
Developments

·        
USDA reported private exporters reported sales of 136,000 tons of soybeans for delivery to China during the 2022-23 marketing year.

 

 

 

January
oil share – RVO headline going to take it back down to 45 percent?

Source:
Reuters and FI

 

Updated
11/30/22

Soybeans
– January $14.00-$15.15

Soybean
meal – January $380-$450

Soybean
oil – January 68.00-74.00 range

 

Wheat

·        
US wheat futures rebounded after trading at or near three-month lows. Fundamental news was light.

·        
Russian wheat export duties will increase 1.9% to 2,788 rubles per ton as of November 30 from 2,735.2 rubles per ton week before.

·        
US winter wheat crop conditions improved from the previous week but remain well below average ahead of dormancy.

·        
Paris March wheat was higher by 3.50 euros 316 euros a ton.

 

Export
Developments.

·        
Pakistan started getting offers for 500,000 tons of wheat. The lowest price offered was believed to be $372.00 a ton c&f for Russian origin.

·        
Algeria seeks 50,000 tons of optional origin soft milling wheat, valid until December 1, for January shipment.

·        
China plans to auction off 40,000 tons of wheat from reserves mid this week. 

·        
China plans to auction off 40,000 tons of wheat from reserves on December 7. 

·        
Turkey seeks 495,000 tons of feed barley on December 1 for Jan through Feb shipment.

 

Rice/Other

·        
Results awaited: Turkey seeks 40,000 tons of rice on November 25 for Dec 5-Feb 15 shipment.

·        
India ended their ban on rice exports after imposing it three months ago on exports of organic non-basmati rice and broken rice.

 

Updated
11/30/22

Chicago
– March $7.65 to $9.50

KC
– March 8.50-$10.25

MN
– March $7.75 to $10.25