FI Morning Grain Comments 08/29/22

 

Good
morning.

 

Some
CBOT commodities rallied late into the overnight session close. WTI crude oil made a leg up around 7:25 am CT and USD turned lower. CBOT corn extended gains on short US crop supply concerns resulting in expectations for USDA to tighten its 2022-23 US stocks
when updated September 12. US wheat futures traded two-sided, ending the overnight session mostly higher in part to a reversal in the USD to the downside. Improving global weather and increasing Ukraine grain export flow are limiting gains. The soybean complex
is mixed with soybeans lower, meal higher, and soybean oil lower. The crop tour reported a larger than expected US soybean yield. Good US domestic demand for soybean meal is supporting meal futures. Malaysia November palm oil was 2 ringgit higher at 4174 per
ton, and cash was up $3.50 at $1021.50/ton. Offshore values were leading SBO 144 lower earlier this morning and meal $11.50 short ton lower.

 

The
early morning weather forecast did not show any major changes from that of Sunday. Statistics Canada will release prosecution estimates this morning (est. below). US equities are lower. There are no major US economic releases today. US jobs report on Friday
will be widely watched (est. +300k nonfarm payrolls). This report may serve as a strong indicator whether a 50 or 75 basis point increase will occur by FMOC at its September meeting. US PMI is due out Tuesday.

 

Global
weather is improving. US weather was about expected over the weekend. IA and southeast MN saw the heaviest out of the several WCB and ECB states that saw rain. Widespread rains fell across the UK, France, western Germany, Italy, northern Spain and selected
western EU countries. Rain this week favor China Yangtze Valley, southern North China Plain, northern NE China. The rain will nowhere end the drought but is welcome. 1-7 day for US precipitation is drier for both belts. The WCB will be mostly dry, and ECB
will see scattered rains. Recall corn was planted late across much of the ECB this year, so current rain events could benefit some of the crop. WCB corn is done, IMO. Any rain event should still favor late soybean development. The good news is that rain will
be much lighter than last week for the lower Delta.  For Texas and surrounding areas, rain will fall on and off over the next ten days, boosting soil moisture for the upcoming winter wheat planting season.

 

 

 

Statistics
Canada model projection for 2022 Canadian production

Overall,
the report was seen supportive for canola and bearish for grains (exception barley). Statistics Canada reported all-wheat production at 34.572 million tons, 572,000 above an average trade guess. Canada corn production was estimated by StatsCan at 14.825 million
tons, 825,000 tons above an average trade guess and above 13.984 million tons a year ago.  Statistics Canada initially reported 2022 canola production at 19.499 million tons, 101,000 tons below an average trade guess.

 

 

 

 

Weather

 

 

US
1-7 day precipitation probabilities

 

World
Weather Inc.

WORLD
WEATHER HIGHLIGHTS FOR AUGUST 29, 2022

• European
  model increased rainfall in the central U.S. Midwest and Delta for Sunday through Wednesday of next week with some 1.00 to 2.00-inch amounts advertise

• The
  GFS model increases rainfall in the same region Thursday and Friday of next week
  
• The
  European model solution is preferred, but it would not be surprising to see both models compromise on the event in future model runs

• Rain
  will slowly ramp up in western Europe starting late this week, but it will not be until next week that France starts getting enough rain to see soil moisture improvements in some of the driest areas
• Canada’s
  Prairies are dry after today for a full week and possibly ten days outside of a few showers in the far northwest

• Good
  crop maturation and harvest conditions are likely

• Cooling
  in western Canada’s Prairies next week will be accompanied by rain in Alberta and northwestern Saskatchewan

• Frost
  and freezes could occur late next week and more likely in the following weekend in Alberta which is not unusual and should not be a serious threat, although some crops may not be fully mature

• U.S.
  Pacific Northwest, northern Plains and California will be dry through the next ten days
• European
  model introduces significant rain in Russia’s Southern Region this weekend and especially next week
  

• Advertised
  amounts are 0.50 to 2.00 inches – which seems overdone
• GFS
  model is not nearly as interested in producing rain in that region

• China’s
  Yangtze River Basin will get a few more showers early this week and then may be dry for a full week as a typhoon to the east of China prevents much rain from falling for a while
• Typhoon
  Hinnamnor was 825 miles east of Okinawa, Japan moving westerly at nearly 22 mph and producing maximum wind speeds of 86 mph

• The
  storm will intensify rapidly over the next two days becoming a super typhoon and reaching near and to the south of the Ryukyu Islands of Japan Wednesday through Friday before turning northward and possibly impacting western Japan and the Korean Peninsula late
  this weekend into early next week with excessive wind, torrential rain and flooding
• This
  storm could become large enough and move far enough to the north to induce a chain reaction in the atmosphere that could greatly increase the potential for a cold surge in North America Sep. 10-15

• Northwest
  India will dry out over the next ten days along with Pakistan
• Western
  Argentina will continue dry biased
• Southern
  Brazil will see rain this weekend and especially next week
• Australia
  winter crops are still expected to get timely rainfall leaving crops poised for an aggressive start to spring growth
• Frost
  is expected in northwestern Russia early next week, but the impact should be minor
• U.S.
  southern Plains will get frequent bouts of rain this week restoring favorable soil moisture in Texas
  
• Oklahoma,
  southwestern Kansas and southeastern Colorado will not get much rain this week which may restrict winter wheat planting and establishment until greater rain returns

• A
  few showers are expected, but no general soaking of rain

• A
  couple of tropical cyclones will evolve in the Atlantic Ocean this week the first will pass to the northeast of the Leeward Islands, the Greater Antilles and Bahamas

• The
  second tropical system may be much further out to see

Source:
World Weather INC

 

Bloomberg
Ag Calendar

Monday,
Aug. 29:

• USDA
  export inspections – corn, soybeans, wheat, 11am
• US
  crop conditions for corn, soybeans and cotton; spring wheat harvesting, 4pm
• EU
  weekly grain, oilseed import and export data
• Canada’s
  Statcan publishes data on production of wheat, canola and barley
• Vietnam’s
  general statistics department releases coffee, rice and rubber export data for August
• HOLIDAY:
  UK

Tuesday,
Aug. 30:

• No
  major event scheduled

Wednesday,
Aug. 31:

• EIA
  weekly US ethanol inventories, production, 10:30am
• Malaysia’s
  August palm oil export data
• US
  agricultural prices paid, received, 3pm
• HOLIDAY:
  India, Malaysia

Thursday,
Sept. 1:

• USDA
  weekly net-export sales for corn, soybeans, wheat, cotton, pork and beef, 8:30am
• Cocoa
  Association of Asia hosts International Cocoa Conference, day 1
• Australia
  Commodity Index
• USDA
  soybean crush, DDGS production, corn for ethanol
• HOLIDAY:
  Vietnam

Friday,
Sept. 2:

• 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 US futures and options, 3:30pm
• FranceAgriMer
  weekly update on crop conditions
• Cocoa
  Association of Asia hosts International Cocoa Conference, day 2

Source:
Bloomberg and FI

 

 

 

 

CFTC
Commitment of Traders

 

 

 

 

Macros

livesquawk
We expect 75bp at the meeting next week – Danske

–
In light of the numerous hawkish comments and sources stories during the weekend, we now change our ECB rate call. 

–
We now expect ECB to hike 75bp next week, which will be followed by 50bp in October and 25bp in December, but acknowledge the increased uncertainty on the two latter hike size expectations. This is +25bp for our previous rate hike expectations at both the
September and the October meetings, respectively, and we now see the endpoint of the ECB deposit rate at 1.5%.

 

 

Corn

·        
CBOT corn extended gains on short US crop supply concerns resulting in expectations for USDA to tighten its 2022-23 US stocks when updated September 12. Gains are limited on increasing Ukraine grain shipments and ongoing economic
concerns.

·        
Coming into harvest it’s always tough for US corn futures to rally.

·        
We look for a one point decline in US corn conditions this afternoon. Rains over the weekend for the WCB were as expected but much of the crop is already made.

·        
USD is lower and WTI crude oil higher.

·        
Canada corn production was estimated by StatsCan at 14.825 million tons, 825,000 tons above an average trade guess and above 13.984 million tons a year ago. 

·        
Pro Farmer crop tour reported the US corn yield at 168.1, well below USDA’s 175.4 bu/ac. Production was pegged at 13.759 billion, below USDA’s 14.359 billion and compares to 15.115 billion a year ago.

·        
Money managers have plenty of room to add long positions to corn and soybeans. For wheat we think they are still net short.

·        
There were 730 CBOT September 640 corn puts abandoned and 106 short September 665 corn puts abandoned. Out of the money exercises included 2,635 September 670 calls, 248 September 680 calls, 413 short dated September 665 calls,
and 9 short September 670 calls.  Out of the money exercises also included 291 September Chicago wheat 750 calls and 878 September 790 calls.  See attached for full report. Gary Sandlund mentioned there will be at least 3500 corn that will be bot to cover
these options. 

·        
China plans to sell pork reserves from state reserves from September onward to ensure pork supplies.

·        
China halted some meat imports from a Tyson plant after some pig trotters from the producer failed inspection.

·        
The Rosario Grain Exchange estimated Argentina’s 2022-23 corn plantings at 1.66 million acres, below their previous estimate, and down about 10 percent from 2021-22.

·        
CBOT corn deliveries are expected to be low, if any, on FND August 31 (Wednesday). Registrations stand at zero.

 

Export
developments.

·        
None reported

 

Trade
News Service

 

Soybeans

·        
The soybean complex is mixed, with soybeans lower after the crop tour reported a larger than expected US yield. Soybean meal found support on concerns over tight nearby supplies. Soybean oil trimmed losses after WTI rallied around
7:30 am CT.

·        
Statistics Canada initially reported 2022 canola production at 19.499 million tons, 101,000 tons below an average trade guess.

·        
After CBOT meal registrations were cancelled Thursday, there were 24 soybean oil canceled on Friday.

·        
We look for no FND deliveries for soybeans and meal. Soybean oil are expected to be zero to 100.

·        
Pro Farmer crop tour reported the US soybean yield at 51.7, below USDA’s 51.9 bu/ac. Production was pegged at 4.535 billion, slightly above USDA’s 4.531 billion and compares to 4.435 billion a year ago. This implies a crop tour
harvested area well above USDA.

·        
Two US Navy warships entered the Taiwan Strait, renewing concerns over China/US trade relations.

·        
Malaysian palm oil futures rallied overnight but settled moderately higher. 

·        
Indonesia increased their allocation for biodiesel blend rate B30 to 11.03 million kiloliters from 10.15 million. Indonesia also increased its CPO export tax to $124/ton from $74/ton (reference price for Sep 1-15 set at $903.02/ton).

·        
Malaysia November palm oil was 2 ringgit higher at 4174 per ton, and cash was up $3.50 at $1021.50/ton.

·        
China soybean futures were up 0.1 percent, meal 0.2% lower, soybean oil down 0.2%, and palm 0.7% lower.

·        
Rotterdam vegetable oils were
5-7.50 euros lower, and meal 7-11 higher for the positions we follow, from this time Friday morning.

·        
Offshore values were leading SBO 144 lower earlier this morning and meal $11.50 short ton
lower.

 

Export
Developments

·        
South Korea’s Agro-Fisheries & Food Trade Corp. seeks 30,000 tons of GMO-free soybeans on September 6 for arrival in SK between November 12 and Dec 12, and another arrival period of October 30 and November 30.

·        
USDA’s AMS CCC seeks to sell 3,150 tons of vegetable oil on September 7 for shipment for Oct 1-31 (Oct 16 to Nov 15 for plants at ports).

·        
For China’s 14^th weekly soybean auction set for September 2, they look for sell 500,000 tons.

 

 

Wheat

·        
US wheat
futures traded two-sided and nearby wheat is currently higher in part to a reversal in the USD. The USD was higher earlier,  near its highest level since 2002, but tuned lower by 7:30 am CT. Improving global weather and increasing Ukraine grain export flow
are limiting gains.

·        
Statistics Canada reported all-wheat production at 34.572 million tons, 572,000 above an average trade guess.

·        
Paris December wheat was up 0.50 euros at 319.75 per ton as of 7:40 am CT.

·        
Weather forecast is improving ahead of US winter wheat plantings. Parts of HRW wheat country will see rain on and off bias the southwestern areas over the next 7 days. Not all areas will see rain. NE, CO, and surrounding areas
may see little or no precipitation.

·        
Bangladesh will buy 500,000 tons of Russian wheat after India banned wheat exports and Ukraine exports slowed.
Bangladesh
can pay in dollars. Bangladesh depends on India wheat but is scrambling to find alternative supplies. Last crop season, 5.4 million tons of wheat was imported, with 24% coming from India, 21% from Russia and 17% from Ukraine.

·        
Ukraine grain/food exports are around 1.2 million tons as of early Monday. 

·        
SovEcon increased their 2022-23 Russia wheat export projection by 0.2 million tons to 43.1 million.

·        
(Bloomberg) — IKON Commodities raised its forecast for Australia’s 2022-23 wheat crop to 35.8 million tons as favorable conditions boost prospects across major growing regions in both the eastern and western grain belts. Production
outlook raised by 6.6%, or 2.2m tons, from a May forecast, and the nation is on track for third consecutive bumper harvest.

 

Export
Developments.

·        
Algeria seeks at least 50,000 tons of wheat on Tuesday for LH Sep through Oct 31 shipment.

·        
Bangladesh will import 500,000 tons of wheat from Russia at $430/ton in a government-to-government deal.

·        
Jordan seeks 120,000 tons of wheat on August 30.

·        
Jordan seeks 120,000 tons of barley on August 31 for Dec-Feb shipment. 

·        
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.

 

 

Terry Reilly

Senior Commodity Analyst – Grain and Oilseeds

Futures International
One Lincoln Center
18 W 140 Butterfield Rd.

Oakbrook Terrace, Il. 60181

W: 312.604.1366

treilly@futures-int.com

ICE IM: 
treilly1

Skype: fi.treilly

 

 

Trading of futures, options, swaps and other derivatives is risky and is not suitable for all persons.  All of these investment products are leveraged, and you can lose more than your initial deposit.  Each investment product is offered
only to and from jurisdictions where solicitation and sale are lawful, and in accordance with applicable laws and regulations in such jurisdiction.  The information provided here should not be relied upon as a substitute for independent research before making
your investment decisions.  Futures International, LLC is merely providing this information for your general information and the information does not take into account any particular individual’s investment objectives, financial situation, or needs.  All investors
should obtain advice based on their unique situation before making any investment decision.  The contents of this communication and any attachments are for informational purposes only and under no circumstances should they be construed as an offer to buy or
sell, or a solicitation to buy or sell any future, option, swap or other derivative.  The sources for the information and any opinions in this communication are believed to be reliable, but Futures International, LLC does not warrant or guarantee the accuracy
of such information or opinions.  Futures International, LLC and its principals and employees may take positions different from any positions described in this communication.  Past results are not necessarily indicative of future results.