FW: FI Evening Grain Comments 01/22/20

PDF attached

 

 

Weather

Mid-January update: Climate Prediction Center/NCEP/NWS and the International Research Institute for Climate and Society mentioned there is no active ENSO for the Northern Hemisphere spring 2020 (~60% chance), continuing through summer 2020 (~50% chance).

 

 

MARKET WEATHER MENTALITY FOR CORN AND SOYBEANS: 

Rain is expected to fall more erratically in Brazil and Argentina over the next two weeks which may lead to a few areas of flooding in Minas Gerais and while a few areas in southern Brazil and Argentina become a little drier biased. Timely rain will be needed in the drier areas to prevent dryness from becoming a widespread significant problem.

            In the meantime, South Africa rainfall will be erratic for a while with eastern areas more favored for rain than the west. A greater need for moisture will soon evolve in the western production areas.

            Recent rain in eastern Australia improved some of the irrigated summer crops and more rain is expected in eastern and northern Queensland and northeastern New South Wales through Saturday before the region dries out and heats up again.

            India’s winter oilseed crop is suspected of being in better than usual condition and China will see improved establishment in the spring when seasonal warming occurs. China’s winter crops were not well established last autumn, but have experienced improved precipitation in recent weeks that will be of use to establishment when it warms up once again.

            Overall, weather today may provide a bearish bias to market mentality.

 

MARKET WEATHER MENTALITY FOR WHEAT: 

Little to no winterkill has likely occurred in key wheat production areas in the Northern Hemisphere so far this winter, although a few crops in Montana might have been negatively impacted by recent cold weather.

            In the meantime, India is poised to have a high yielding crop this year. Crops in the Middle East are expected to yield relatively well and China weather has improved in recent weeks and that should translate into better crop establishment during the spring. Hebei, China still needs moisture.

            Southeastern Europe crops are not as well established as they should be, but winter weather has been mild leaving very little threat of crop damage thus far. Much of Russia has snow on the ground, but temperatures are well above average and expected to stay warm minimizing the threat of winterkill. Some snowmelt is expected in Russia, however.

            Overall, weather today will likely have a neutral to slightly bearish bias on market mentality.

Source: World Weather Inc. and FI

 

 

Bloomberg Ag Calendar

WEDNESDAY, JAN. 22:

• USDA monthly cold storage – pork, beef, poultry, 3pm
• EARNINGS: Barry Callebaut 1Q results

THURSDAY, JAN. 23:

• USDA total milk, red meat production, 3pm

FRIDAY, JAN. 24:

• USDA weekly crop net-export sales for corn, soybeans, wheat, 8:30am
• ICE Futures Europe weekly commitments of traders report on coffee, cocoa, sugar positions ~1:30pm (~6:30pm London)
• CFTC commitments of traders weekly report on positions for various U.S. futures and options, 3:30pm
• U.S. poultry slaughter, cattle on feed (25 jan 1.30 am)
• HOLIDAY: China

Source: Bloomberg and FI

 

Macros

·         US Chicago Fed National Activity Index (Dec): -0.35  (est 0.13, prevR 0.41)

·         Canada New Housing Price Index (M/M) Dec: 0.2% (est 0.0%, prev -0.1%)

·         Canada New Housing Price Index (Y/Y) Dec: 0.1% (est -0.1%, prevR -0.1%)

·         Canada CPI NSA (M/M) Dec: 0.0% (est 0.0%, prev -0.1%)

·         US Inventory Of Homes For Sale Dec: 1.40M Units, 3.0 Months’ Worth

– National Median Home Price For Existing Homes (USD) Dec: 274.5K or +7.8% From Dec 2018

 

Corn.

·         Corn futures ended 1.25 cents higher in March, 0.75 cent higher in May, unchanged in July and slightly lowered in the deferred months. South Korean buying interest and talk of Egypt in for corn underpinned nearby corn.  South Korea NOFI group bought 134,000 tons. They were in for three cargos.  It was for optional origin, but some traders noted it could have been from the US as they are cheapest in the world.

·         Funds were net buyers of an estimated 5,000 corn contracts.  

·         This week US ethanol producers in the western Corn Belt are paying as much as $4.00/bu on lack of producer selling.  Dayton, OH went up 9 cents on their corn bids. Others in the eastern Corn Belt went up 3-9 cents.

·         The Baltic Dry Index fell 66 points or 9.6% to 623 points.  The capesize index slipped 170 points, or 34.3%, to 325.

·         Italian tax police confiscated an illegal shipment of pork imported from China.  9.5 tons of pork as destroyed after authorities found the meat hidden under a shipment of vegetables in a storage facility near Padua (Northern Italy’s Veneto region).  African swine fever virus is still showing up at local (China) slaughterhouse samples.

·         The German AgMin confirmed a case of African swine fever was discovered in Poland in a wild boar, only 12 kilometers (7.4 miles) from the German border.

·         The USDA Broiler report showed eggs set in the US up 4 percent and chicks placed up 4 percent.  Cumulative placements from the week ending January 4, 2020 through January 18, 2020 for the United States were 571 million, up 4 percent from the same period a year earlier. 

·         A Bloomberg poll looks for weekly US ethanol production to be down 17,000 at 1.078 million barrels from the previous week and stocks to increase 224,000 barrels to 23.230 million.

 

Export Developments

·         SK’s NOFI group bought 134,000 tons of corn. They were in for three cargos. It was for optional origin, but some traders noted it could have been from the US.  One cargo was bought at $219.55 a ton c&f for arrival around April 20.  Second cargo of 65,000 tons was bought at $218.88 a ton c&f for arrival around May 1.  This cargo for arrival around May 10 was rejected.  Either over the weekend or on Monday South Korea’s MFG bought 69,000 tons of corn at $217.90 a ton c&f for shipment by April 10. Last week KFA paid $216.30/ton c&f for arrival around April 20. 

• Algeria seeks 20,000 tons of corn and 30,000 tons of soybean meal on January 23 for March 1-15 and February 10-25 shipment, respectively. 

 

 

 

Updated 1/10/20

• CBOT March corn is seen in a $3.70 and $4.05 range

 

Soybean complex.

·         CBOT soybeans traded two-sided, ending 1.0-2.25 cents lower.  Meal fell $2.20-1.80 short ton lower.  Soybean oil finished 25-27 points higher following strength in Malaysian palm oil.  Fears of the spread of 2019-nCov could limited early gains in soybeans.  The coronavirus is renewing fears China may restrict transportation of live birds and seafood.  We heard an employee at a large China soybean crusher (Shanghai) was quarantined due to illness and the rest of the office was sent home. 

·         Funds sold an estimated net 6,000 soybeans, sold 4,000 soybean meal and bought 4,000 soybean oil.   

·         With China going on holiday Friday, and lack of buying interest, we caution bulls.

·         By early afternoon trading, someone sold 7,000 SH 960 calls at 1.75-1.25. 

·         Brazilian real was stronger at 4.1769. 

·         China was looking around for April/May Brazil soybeans, but we didn’t hear of any trades. 

·         Malaysian palm markets surged on Wednesday.  Malaysia’s central bank cut rates by 0.25%.  Bloomberg noted Production in Peninsular Malaysia slipped more than 15%, while it dropped 18.5% in Sabah and about 23% in Sarawak. 

·         Planalytics Brazil soybean yield was lowered to 3.31 tons/hectare from 3.34.  Parana 3.50 vs 3.51, Goias 3.32 vs 3.33, Mato Grosso 3.31 vs 3.37. 

 

Oilseeds Export Developments

• Egypt’s GASC bought 60,000 tons of soybean oil and 41,000 tons of sunflower oil for March 3-17 arrival.  Reuters provided the following details:
  • 30,000 tons soyoil at $878.69 a ton c&f. 
  • 12,000 tons sunflower oil at $806.00 a ton c&f. 
  • 30,000 tons soyoil at $878.69 a ton c&f. 
  • 18,000 tons sunflower oil at $802.00 a ton c&f. 
  • 11,000 tons of sunflower oil at $806 a ton c&f. 

There was speculation some of the soybean oil originated from the US.  February shipment from the US earlier was $788/ton fob versus $800/ton fob out of Argentina.  Sunflower oil prices originating from the Black Sea region are down roughly $25-30/ton since peaking at the beginning of the year.  On December 30, Egypt’s GASC bought 10,500 tons of sunflower oil at $857/ton and on December 29, Egypt’s GASC bought 34,450 tons of local soybean oil at $796.26/ton.  Back in October, Egypt paid less than $700/ton for soybean oil and sunflower oil.    

• Algeria seeks 20,000 tons of corn and 30,000 tons of soybean meal on January 23 for March 1-15 and February 10-25 shipment, respectively. 

 

Updated 1/15/20

• CBOT March soybeans are seen in a $9.00-$9.50 range
• March soybean meal is seen a $285 and $305 range
• March soybean oil 32.15-34.50 range

 

Wheat

·         Strong global export demand driving up world wheat prices continued supported US wheat futures early, but technical selling pulled prices quickly lower.  Traders were citing the rapid rise in prices was overdone.  This was also the case in Paris wheat.  March Paris wheat futures settled 2.50 euros lower, at 195.75 euros.  March Chicago wheat remained a premium over May. 

·         Algeria bought about 400,000 tons of wheat.

·         Funds sold an estimated net 5,000 Chicago wheat. 

·         Egypt is mulling over adding India to their country import list for wheat

 

Export Developments.

·         Algeria’s OAIC bought around 400,000 tons of milling wheat at about $245 a ton c&f. Other prices ranged between $244 and $246 a ton c&f.  Originally the tender called for shipment in two periods, March 1-15 and March 16-31, or earlier if from SA.  They paid $223-$228/ton back in Nov/Dec.  

·         Japan received no offers for 120,000 tons of feed wheat and 200,000 tons of feed barley for arrival by March 19. 

·         Japan seeks 120,000 tons of feed wheat and 200,000 tons of feed barley on January 29 for arrival by March 19. 

·         Jordan seeks 120,000 tons of wheat on January 28. 

·         Japan’s Ministry of Agriculture seeks 108,296 tons of food-quality wheat on Thursday from the United States and Canada.

 

Rice/Other

• Iraq bought 304,000 tons of local rice this season.
• Mauritius seeks up to 6,000 tons of long grain white rice on Feb. 3, optional origin, for delivery between May 1 and July 31.

 

Updated 1/10/20

·        CBOT Chicago March wheat is seen in a $5.40-$5.90 range

·        CBOT KC March wheat is seen in a $4.70-$5.30 range

·        MN March wheat is seen in a $5.40-$5.85 range