FI Evening Grain Comments 12/17/21

PDF Attached

 

Private
exporters reported the following activity:

132,000
metric tons of soybeans for delivery to China during the 2021/2022 marketing year

33,000
metric tons of soybean oil for delivery to India during the 2021/2022 marketing year

 

CME
Holiday Schedule

https://www.cmegroup.com/tools-information/holiday-calendar.html

 

Soybeans
rallied in part to fresh record high in nearby rapeseed meal and sharply higher soybean meal. Soybean oil traded lower on product spreading and weakness in US energy markets. Corn ended higher in the nearby contracts and lower in the back months. KC wheat
was higher, Chicago higher in the font months and MN lower.

 

 

Weather

 

World
Weather Inc.

WEATHER
EVENTS AND FEATURES TO WATCH

• Warm
  to hot temperatures in Argentina’s summer crop areas this weekend into early next week will accelerate drying rates and add stress to the driest crops in the central, north and eastern production areas
• The
  European model run today has added moisture to central and southern Argentina for mid- to late week next week, but the north stays dry
• A
  close watch on next week’s precipitation pattern is warranted
• World
  Weather, Inc. looks for some showers and thunderstorms, but the resulting rainfall may not be as great as advertised in as many areas and that could leave a larger part of the nation in need of more rain
• Cooling
  is expected next week in the central and southeast and that will help to reduce some of the crop moisture stress
• The
  best crop conditions in Argentina over the next ten days will remain in Cordoba, southern Santa Fe, northeastern La Pampa and from northwest into central parts of Buenos Aires where soil moisture is most abundant today
• This
  region will also dry down over the next five days, but next week’s showers should slow the decrease in soil moisture and prevent much stress from evolving in these areas
• Brazil’s
  crop moisture stress is mostly confined to western Parana, southern Mato Grosso do Sul, southeastern Paraguay and in a few areas of Rio Grande do Sul today
• These
  areas will continue to receive less than usual rainfall over the next ten days to two weeks, although they will not be completely dry
  
• Crop
  moisture stress will continue, although it will vary with the rainfall
• Some
  warming is expected briefly in southern Brazil this weekend into early next week, but relief is expected during the middle to latter part of next week reducing the higher level of stress that will evolve during the warmer days
• The
  precipitation expected with the cooling trend should lead to much a further reduction in crop stress, but only temporarily
  
• Additional
  drying is expected late this month in southern Brazil keeping the pressure on for some of the corn, late season soybeans and rice.
  
• Center
  west, northern parts of center south and northeastern Brazil crop areas will get frequent rainfall over the next two weeks maintaining good crop development for soybeans, corn, citrus, sugarcane, cotton, coffee and other crops
• There
  is some concern over potential flooding in Tocantins, northern Goias, Bahia and northern northernmost Minas Gerais later this month and the situation will be closely monitored
• The
  biggest threat would be if the wet bias remains in January when harvesting of soybeans is under way
• Cooling
  in eastern Europe and the western CIS over the next couple of weeks is not expected to bring any threat to winter wheat, barley or rye because of adequate snowfall ahead of the colder conditions
• Those
  areas that remain snow free should not see any threatening cold
• Western
  Europe will experience drier biased weather for a while; however Portugal and western Spain may begin to see some needed rain late next week
• Some
  of the rain in southwestern parts of the Iberian Peninsula will expand across a larger part of southern and western Europe in the second week of the forecast benefiting winter crops that are dormant or semi-dormant
• Northern
  Africa will see some needed rain arrive in Morocco late next week
• The
  precipitation should spread to the east across northern Algeria and northern Tunisia in the last week of the this month improving wheat and barley conditions after a relatively dry planting season in western Algeria and parts of Morocco
• India’s
  weather will be relatively quiet for a while, but some showers will develop in the central and north during the second week of the forecast.
  
• The
  precipitation would be welcome and beneficial for all winter crops, although early indications suggest most of the rain will be quite light initially
• China
  weather is expected to be relatively tranquil for a while
• Winter
  crops are dormant or semi-dormant and most are suspected of being favorably established
• Rapeseed
  should be in better shape than either of the past two autumns
• Eastern
  Australia is expected rain to begin ramping up once again.
• Southeastern
  Queensland and northeastern New South Wales will become wettest next week and into the latter days of this month
• Some
  areas in east-central Australia were just beginning to dry out enough to improve crop and field conditions after November’s heavy rainfall
• None
  of the expected rain will have much impact on unharvested winter crops in these areas since most of them were already reduced to feed grain quality
• Southern
  Australia wheat and barley harvesting should be advancing extremely well and little change is likely over the next ten days
• South
  Africa will continue to receive an excellent mix of rain and sunshine over the next two weeks
  
• Corn,
  soybeans, sunseed, cotton, rice, groundnuts and sorghum planting should be advancing quite favorably after recent rain and establishment should advance quite well also
  
• Typhoon
  Rai moved through the southern Philippines Thursday and was expected move across Palawan today before reaching the South China Sea
• The
  storm produced torrential rain and excessive wind in the southern Visayan islands and in a few northern Mindanao locations Thursday
  
• At
  0900 GMT today, the center of the storm  was 297 miles south southwest of Manila, Philippines near 10.4 north, 117.8 east moving westerly at 16 mph and producing maximum sustained wind speeds of 104 mph.
• Typhoon
  force wind was occurring out 35 miles from the center of the storm while tropical storm force wind was occurring out 130 miles
• Typhoon
  Rai will move very near to the southern half of the Vietnam central coast this weekend bringing some heavy rain and windy conditions to coastal areas. The storm is expected to turn to the north and eventually to the northeast just before moving inland which
  should spare the nation’s coffee and other crops produced along the central coast
• Very
  little property damage is expected along the coast as long as the storm does not move over the coast
• The
  storm may brush the south coast of Hainan, China early next week before turning to the east and suffering significant  wind shear and weakening due to the strong northeast monsoon flow that is expected at that time
• U.S.
  weather Thursday was relatively quiet
• Light
  precipitation fell in the lower Midwest and northern Delta Thursday with moisture totals less than 0.80 inch
  
• Light
  rain and mountain snow fell in the far western states
• Temperatures
  very warm in the eastern and south=central parts of the nation and quite cold in the north-central states
• Temperatures
  this morning in the far northern Plains were below zero Fahrenheit while high temperatures Thursday in southern Texas, southern Louisiana and Florida were in the 80s.
  
• U.S.
  weather outlook is mostly unchanged from that of Thursday
• Most
  of hard red winter wheat country will be dry for the next ten days to two weeks
• Waves
  of rain and mountain snow will continue periodically in the far western states
• Portions
  of the Delta, Tennessee River Basin, lower and eastern Midwest and southeastern states will receive periodic precipitation maintaining status quo soil conditions
• Northern
  Plains will get some periodic snowfall along with the northern Midwest
• West
  Texas will remain mostly dry
• Bitter
  cold will remain along the Canada border in the northern Plains
• Temperatures
  in the central and southern Plains, Midwest, Delta and eastern states will be warmer than usual during much of the next two weeks, although not nearly as anomalously warm as that of this week
• West-central
  Africa rainfall is expected to be confined to coastal areas only
• Favorable
  crop maturation and harvest conditions will prevail in most coffee, cocoa, sugarcane, rice and cotton production areas
• Ethiopia
  rainfall will be minimal over the next seven days resulting in net drying conditions which are not unusual at this time of year
• Showers
  and thunderstorms will occur routinely in coffee, cocoa, rice and sugarcane areas from Tanzania into Uganda and Kenya through December 26
• Indonesia,
  Malaysia and Philippines rainfall will be widespread over the next two weeks with some heavy amounts and local flooding in western Java and along the upper west coast of Sumatra
• Philippines
  rainfall will lighten up after Typhoon Rai exits the southwest part of the region today
• Mainland
  areas of Southeast Asia will see seasonable drying over the next ten days, although coastal areas of Vietnam will receive frequent rain later this week and into the weekend
• North-central
  and northeastern Mexico will get some precipitation Saturday into Monday
• Resulting
  rainfall will be light
• Today’s
  forecast models reduced additional precipitation from impacting northwestern Mexico in the next two weeks and this change was needed
• Central
  America precipitation will be greatest along the Caribbean Coast , but including a fair amount of Panama and Costa Rica
• Middle
  East weather is a little dry from Syria, Iraq, Israel and Jordan to Iran while portions of Turkey have favorable soil moisture.
  
• Rain
  is expected in northern Iraq and western Iran periodically over the next week improving soil moisture for those areas
• Other
  areas may see a boost in precipitation during the following week
• Western
  Colombia and Venezuela precipitation is expected to occur periodically in coffee, corn, rice and sugarcane production areas during the next ten days,  but no excessive rain is expected
• Tuesday’s
  Southern Oscillational Index was +13.00 and it was expected to move erratically for a while.
  
• New
  Zealand rainfall will be lighter than usual during the next ten days except along the west coast of South Island where it will be near normal
• Temperatures
  will be seasonable

 

Bloomberg
Ag Calendar

Friday,
Dec. 17:

• ICE
  Futures Europe weekly commitments of traders report (6:30pm London)
• CFTC
  commitments of traders weekly report on positions for various U.S. futures and options, 3:30pm
• USDA
  FAS issues world coffee report, with supply-demand data

Saturday,
Dec. 18:

• China’s
  2nd batch of Nov. trade data, including imports of cotton, corn, wheat, and sugar

Monday,
Dec. 20:

• USDA
  export inspections – corn, soybeans, wheat, 11am
• Malaysia’s
  Dec. 1-20 palm oil exports
• USDA
  total milk production, 3pm
• Ivory
  Coast cocoa arrivals

Tuesday,
Dec. 21:

• EU
  weekly grain, oilseed import and export data
• New
  Zealand global dairy trade auction

Wednesday,
Dec. 22:

• EIA
  weekly U.S. ethanol inventories, production
• U.S.
  cold storage data for poultry, pork and beef; poultry slaughter, 3pm

Thursday,
Dec. 23:

• USDA
  weekly net-export sales for corn, soybeans, wheat, cotton, pork and beef, 8:30am
• Port
  of Rouen data on French grain exports
• U.S.
  cattle on feed, 3pm
• USDA
  hogs & pigs inventory and production, red meat output, 3pm

Friday,
Dec. 24:

• No
  Commitment of Traders reports given holidays in U.S. and U.K. CFTC and ICE releases will be out on Monday, Dec. 27

Source:
Bloomberg and FI

 

 

CFTC
Commitment of Traders

Funds
were more long than estimated for corn and wheat, and less long for soybeans and meal. Oil was near expectations.  We see no price implication from this week’s report, although some trades may see the net long corn position as slightly bullish. 

 

 

 

 

 

 

CFTC
COT Snapshot

 

SUPPLEMENTAL     
Non-Comm               Indexes                  Comm

                       
Net        Chg        Net        Chg        Net        Chg

Corn              
256,397     13,419    426,816      1,035   -648,643    -13,057

Soybeans           
16,920      3,420    177,120     -6,135   -155,806      2,032

Soyoil             
-2,102    -19,571    119,009     -1,633   -119,410     22,996

CBOT
wheat         -26,832     -5,455    114,177     -2,501    -81,571      7,032

KCBT
wheat          27,276     -1,902     57,586     -1,260    -88,013      3,259

 FUTURES
+ OPTS     Managed                 Swaps              Producer

                       
Net        Chg        Net        Chg        Net        Chg

Corn         
     345,980     13,480    268,121         27   -648,338    -13,337

Soybeans           
40,975      3,093    143,619     -2,503   -165,817      2,765

Soymeal            
40,534     12,636     87,400     -1,851   -181,517    -21,056

Soyoil             
44,783    -14,045     94,136     -1,683   -127,247     23,720

CBOT
wheat          -7,303     -8,024     68,172        452    -64,841      5,714

KCBT
wheat          57,164     -2,411     26,717     -1,439    -75,045      4,300

MGEX
wheat          13,210        666      1,035        -21    -27,335        311

Total
wheat         63,071     -9,769     95,924     -1,008   -167,221     10,325

Live
cattle         82,254      2,404     81,977        147   -165,407     -2,274

Feeder
cattle        4,793       -204      3,559        -13       -653        281

Lean
hogs           48,492      1,287     57,617       -648    -97,425     -1,370

 

 

                     
Other             NonReport                  Open

                       
Net        Chg        Net        Chg   Interest        Chg

Corn               
68,806      1,226    -34,569     -1,396  1,757,032     32,849

Soybeans           
19,457     -4,041    -38,234        685    767,185    -24,394

Soymeal            
27,644      9,074     25,939      1,197    434,693     16,542

Soyoil            
-14,175     -6,199      2,502     -1,793    451,435     25,974

CBOT
wheat           9,747        935     -5,774        923    444,225      3,494

KCBT
wheat         -11,989       -355      3,153        -97    239,385     -8,131

MGEX
wheat           8,110        123      4,980     -1,079     79,137       -446

Total
wheat          5,868        703      2,359       -253    762,747     -5,083

Live
cattle         20,335        100    -19,158       -377    354,885      4,725

Feeder
cattle         -300        202     -7,400       -265     46,885       -299

Lean
hogs            8,768        825    -17,452        -93    273,487    -12,297

Source:
Reuters, CFTC and FI

 

 

Macros

UK
Reports Another Record Number Of Daily Covid Cases: 93,045 (prev 88,376)

77
Counterparties Take $1.705 Tln At Fed Reverse Repo Op. (prev $1.658 Tln, 78 Bids)

 

Corn

·        
CBOT corn was lower to start but traded higher following strength in soybeans. The front three month contracts ended higher and back months lower. Strength in soybean meal added to the positive undertone. March corn traded above
its Wednesday high of $5.9650/bu and during the session reached its highest level since March 12. It closed at $5.9325.

·        
Funds bought an estimated net 3,000 corn contracts. 

·        
WTI was down $2.09 at $70.29/barrel.  

·        
China November corn imports fell to their lowest level in 19 months after taking in 790,000 tons, down 36% from year earlier.  But year to date imports of 27 million tons are up nearly 200 percent from same period in 2020. 

·        
Argentina’s government on Friday capped the volume of corn and wheat exports for the 2021-22 crop year.  The corn export limit was set at 41.6 million tons and wheat at 12.5 million tons. These limits are high and not eventful,
in our opinion. Last season Argentina had registered exports of 39.8 million tons of corn and 11.2 million tons of wheat. Argentina registered 15.5 million tons of 2021/22 corn exports and 9.1 million tons of wheat. This season Argentina is expected to see
a record wheat production of at least 21 million tons and corn output around 57 million tons.

·        
AgRural: Brazil corn production 114.4 million tons, down 1.1 million form previous and well below USDA’s current 118 MMT estimate. 

·        
IHS Markit: Brazil first crop corn 28.3 million tons, down from 29.5 MMT previous.

·        
February CME lean hogs gained against the April position amid market expectations for tightening hog supplies when updated by USDA in the quarterly Hogs and Pigs report, due for release on Dec. 23.

·        
Bulgaria reported an outbreak of bird flu at a duck farm in the southern village of Malak Dol .

 

Export
developments.

·        
None reported

 

Updated
12/9/21

March
corn is seen in a $5.50 to $6.20 range

 

Soybeans

·        
Soybeans ended higher from a rally in canola & rapeseed prices, and strength in soybean meal.  Soybean oil ended lower on weakness in US exports prices despite India buying another 33,000 tons of SBO. 

·        
Funds bought an estimated net 4,000 soybeans, bought 5,000 soybean meal and sold an estimated 4,000 soybean oil. 

·        
January soybean oil short term support is seen at 51 cents. Today it closed 77 points lower at 53.88 cents.

·        
Paris rapeseed traded 7.00 euros higher to a new record of 729 euros. This supported ICE canola.  Most-active March canola jumped $17 to close at $1,002.70 per ton.

·        
IHS Markit: Brazil soybean crop 145 million tons, unchanged from previous.

·        
China crush margins on our analysis was last $1.87/bu ($1.79 previous) versus $1.95 at the end of last week and compares to $1.23 a year ago.

 

The
renewable biofuel situation
is gaining attention and there are a lot of unknowns when it comes to US prices and the balance sheets. We think the markets will eventually get hairy for a while until several issues are sorted out.

 

The
trade should start to see a highly noticeable shift in soybean oil supply (soybean area expansion) and demand in 2023. Many of the larger renewable fuel plants will go online during the 2023-2024 period.  Marathon Petroleum’s refinery in Martinez, California,
plans to start producing renewable diesel in 2022 and could reach its full production capacity of 730 million gal/y (48,000 b/d) in 2023. Phillips 66’s Rodeo Renewed project in San Francisco, California, plans to produce 800 million gal/y (52,000 b/d) of renewable
fuels when completely converted in 2024. If realized, this project would be the world’s largest facility of its kind (EIA).

 

When
all the US renewable biodiesel expansion is complete, some traders are concerned the US will not have enough fats and vegetable oils for food and biofuel consumption, or US total domestic use. Speculating long term US supply and demand is going to get harder.
So, to help better understand what changes may come, we look at what happened in the past.

 

The
US ethanol boom, around 2007 resulted in corn acres increasing from 78.3 million acres in 2006 to 93.5million in 2007, and ever since then the US planted area remained above 85 million acres. US corn plantings in the 1990’s average 77 million acres. Feed use
initially eroded. Corn for feed use eroded for 5 consecutive years starting with the 2008-09 season until 2012-13. Since then, it has recovered but never reached back to the record 6.135 billion used for feed during the 2004-15 season. This crop year we project
5.650 billion bushels.  Exports also eroded, from 2.436 billion in 2007-08, and stayed under that level until it recovered by 2017-18. China demand over the past five years has kept a firm undertone in US corn exports.  The point I’m making is that it took
3-5 years for the demand categories to sort out total domestic use. 

 

 

 

 

 

 

 

The
US will need to expand the soybean area, in our opinion, for the 2023 growing season. For soybean oil, consumption will obviously increase. On the demand side, we think the increase for feedstock will hit the US soybean oil export market first, followed by
an increase in Canadian canola oil imports. For this year we are forecasting soybean oil export below USDA in part to a rise in industrial demand.

 

 

 

Back
in 2006-07 when biodiesel production started to increase, food users expanded to other oils, canola especially and changed all their labels to vegetable oils vs specific oil.  One major brand canola, another candy company adopted palm oil. 

 

When
renewable biodiesel increases here in the US, we look for canola acres to expand in Canada and US imports of Canadian canola will increase.  For the 2023-2026 period, we look for the US soybean oil market to become a totally domestic market. China may have
to go elsewhere for soybeans. Ukraine may likely be the spot for expansion and other countries in the Black Sea region. Brazil will keep expanding their soybean crop, so we don’t see any major deficiencies over the next 3-5 years for soybeans, just a major
shift in global trade flows.  Keep in mind soybean oil will not be the on only feedstock for renewable biodiesel production.  The US makes an abundant amount of corn oil, and some ethanol plants have the capability to increase corn oil production by upgrading
facilities.  Forecasting the major fats and oils use for renewable will be difficult at first, but after a couple years we think the industry will figure it out. 

 

Oil
Share 2003-present

 

Monthly
Oil Share…2008-2013 was a wild ride

 

2004-2008
also a rocky period of user transition

 

Interesting
article on soybeans and biodiesel below.  

Marrying
Soybeans and Renewable Diesel

https://www.dtnpf.com/agriculture/web/ag/news/business-inputs/article/2021/12/16/renewable-diesel-plans-outstrip-soy

 

Export
Developments

·        
USDA reported private exporters sold 33,000 tons of soybean oil to India for 2021-22 delivery and 132,000 tons of soybeans to China for 2021-22. 

 

 

 

Updated
12/14/21

Soybeans
– January $12.35 to $13.05 range, March $11.75-$13.50

Soybean
meal – January $350 to $400, March $330-$415

Soybean
oil – January 49.50 to 57.00, March 50.00-59.00

 

Wheat

·        
US wheat saw follow through buying led by high protein contracts after harsh US weather occurred earlier this week across the Great Plains.  Taiwan seeking US wheat added support.

·        
Funds bought an estimated net 2,000 soft red winter wheat contracts. 

·        
Paris March wheat futures was 2.00 euros higher at 278.50/ton.

·        
China is back buying French wheat and barley after global prices eased. Reuters noted about 10 large vessels were booked for both commodities. Some put it at 4-6 feed wheat and 4-5 barley cargoes.  Shipment was thought to be for
Q1 2022. China may have also bought Argentine barley. Prior to these deals China bought about 2 million tons of French wheat.

·        
Russian Agriculture Ministry’s will propose to set its wheat export quota at 8 million tons for the February through June 30 period.  Barley will be set at 3 million tons. 

·        
Russian Agriculture Ministry’s will increase its wheat export tax to $94/ton next week from $91.  For comparison they started with $28 from June 2.

·        
Australian feed wheat prices have been on the defensive this month on large production prospects.

 

Agricultural
Industry Market Information System (AIMIS)

 

Export
Developments.

·        
Taiwan Flour Millers’ Association seeks 110,000 tons of grade 1 milling wheat to be sourced from the United States on Dec. 23 for shipment between Feb 1-15 and the second between Feb. 8-22 and second cargo for shipment for some
time in 2022.

·        
Turkey seeks about 320,000 tons of 12.5% and 13.5% protein content milling wheat on December 21 for shipment between February 1 and February 28.

·        
Jordan seeks 120,000 tons of feed barley on December 23 for shipment sometime between June 16-30, July 1-15, July 16-31 and Aug. 1-15.

 

Rice/Other

·        
Results awaited: South Korean Agro-Fisheries & Food Trade Corp. seeks 22,000 tons of rice from the US, set to close Dec 16.

 

Updated
12/9/21

Chicago
March $7.40 to $8.60 range

KC
March $7.55 to $9.00 range

MN
March $9.50‐$11.00