FW: FI Evening Grain Comments 01/27/20

PDF attached does not include the daily estimate of funds. It will be sent out later.

 

Coronavirus fears drove commodities lower.  Some of the ag markets closed well off session lows.

 

 

Weather

 

MARKET WEATHER MENTALITY FOR CORN AND SOYBEANS: 

There is still not much reason for concern over Brazil summer crop conditions, but Argentina is still a little worry. Argentina is not likely to see failing rainfall over a large enough area to move markets in a big manner especially not with Brazil’s weather so good.

            Weather in eastern Australia improved briefly during the weekend, but this week will trend drier again. South Africa will dry down for a while raising some potential for mild crop stress.

            Southeast Asia rainfall will be well mixed and mostly supportive of palm oil development. Rain in China and India will be typical of this time of year with winter crops poised for improvement as spring approaches because of recent past precipitation.

            Southeastern Europe remains too dry, but there is potential for some rain and mountain snow this week from there into Kazakhstan possibly easing long term dryness in Romania, the lower Danube River Basin and parts of Ukraine. The moisture boost will be important for spring planting and early season winter rapeseed development.

            Overall, weather today will produce a neutral to slightly bearish bias to market mentality.

 

MARKET WEATHER MENTALITY FOR WHEAT:  There is still no risk of winterkill around the world for the next couple of weeks. That will leave winter crop conditions mostly unchanged. China crops will improve in the spring because of recent precipitation. India’s crops are still expected to yield extremely well.

There is still some concern over Morocco weather and the lack of rain in the southwest may harm production. A few other areas in northern Africa will also need some timely rain in February to protect production potentials.

Middle East wheat conditions are rated favorably, but would benefit from some greater rain. Southeastern Europe, Ukraine, southern Russia and Kazakhstan may get some needed precipitation in the next two weeks to improve soil moisture for spring crop development. Warm weather will continue to minimize the risk of winterkill and some areas may become snow free.

U.S. crops are not likely to experience much change in the next two weeks and the same is true for southeastern Canada.

Overall, weather today will have a neutral bias on market mentality.

Source: World Weather Inc. and FI

 

Source: World Weather Inc. and FI

 

Bloomberg Ag Calendar

MONDAY, JAN. 27:

• USDA weekly corn, soybean, wheat export inspections, 11am
• MARS crop bulletin – monthly report on crop conditions in Europe.
• EU weekly grain, oilseed import and export data
• Ivory Coast cocoa arrivals
• HOLIDAY: China, Australia, Hong Kong, Malaysia, Singapore

TUESDAY, JAN. 28:

• AmSpec, Intertek, SGS: Malaysia’s Jan. 1-25 Palm Oil Exports, Kuala Lumpur
• HOLIDAY: China, Hong Kong

WEDNESDAY, JAN. 29:

• EIA U.S. weekly ethanol inventories, production, 10:30am
• HOLIDAY: China

THURSDAY, JAN. 30:

• USDA weekly crop net-export sales for corn, soybeans, wheat, 8:30am
• GUS Polish pig population data, Warsaw
• HOLIDAY: China

FRIDAY, JAN. 31:

• 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. agricultural prices paid and received, cattle inventory
• Paris Grain Day conference. Topics include outlook for Black Sea/Europe grains and challenges facing the oilseed market
• AmSpec, Intertek, SGS: Malaysia’s Jan. 1-31 Palm Oil Exports, Kuala Lumpur

Source: Bloomberg and FI

 

USDA inspections versus Reuters trade range                                            

Wheat       223,994     versus  400000-600000           range

Corn          668,559     versus  500000-900000           range

Soybeans   1,038,840  versus  700000-1300000         range

 

 

 

Corn.

·         Nearby corn futures traded 5.50-6.75 cents lower on fears the coronavirus virus spreading across China will disrupt feed demand.  The back months were 2.50-4.00 cents lower.  The real issue might be a slowdown in China’s GDP. Impact is not known.  We are hearing there are several restaurant cancelations among several businesses closing down, including processing plants. 

·         March corn traded below its 40-day and 50-day MA’s, settling at a 10-day low. 

·         Bear spreading was a feature today. 

·         Funds were net sellers of an estimated 11,000 corn contracts.  

·         USDA US corn export inspections as of January 23, 2020 were 668,559 tons, within a range of trade expectations, above 396,613 tons previous week and compares to 968,585 tons year ago. Major countries included Mexico for 265,282 tons, Colombia for 242,281 tons, and Japan for 88,409 tons.

·         President Trump is expected to sign the USMCA on Wednesday. 

·         The Baltic Dry Index fell 11 points or 2.0 percent to 546, more than a 3-year low. 

·         USDA updated their 2020 food inflation projections for the US and pork prices are expected to increase 2.0-3.0 percent and all food up 1.5-2.5 percent.  Attached after the comment is the full table. 

·         CME hog futures for the April position fell by limit by late morning, trading at its lowest level since October. Meanwhile volatility in that market fell its lowest level since June.  The coronavirus appears to be a problem for many markets. 

 

Export Developments

• Under the 24-hour reporting system, private exporters sold 111,252 tons of corn for delivery to Japan during the 2020-21 marketing year.

 

Soybean complex.

·         CBOT soybean complex traded lower on coronavirus fears.  Prices closed well off session lows.  Nearly 3000 cases and 80+ perished, as of Monday morning.  China extended their holiday by three days to Sunday.  Several cities remain on lockdown.  Soybeans fell 5 straight days. 

·         March soybeans fell below $9.00/bu at $8.9725.  Nearby soybean meal fell $0.10-$0.50. The back months were unchanged to moderately higher. Soybean oil gave up 40-50 points.  March soybean oil traded below its 100-day MA.  Chart looks bearish. 

·         USDA US soybean export inspections as of January 23, 2020 were 1,038,840 tons, within a range of trade expectations, below 1,206,140 tons previous week and compares to 944,680 tons year ago. Major countries included China Main for 486,416 tons, Japan for 108,950 tons, and Spain for 71,506 tons.

·         Traders should start to monitor the Argentina weather over the next couple of weeks as the weather is expected to turn dry. 

·         AgRural reported Brazil soybean harvesting at 4.2 percent, below 13 percent at this time year ago.  The slow harvest pace is related to late plantings.  They see a record soybean production of 123.9 million tons. 

·         Ukraine sunflower exports were up 60 percent so far this season to nearly 2.0 million tons, according to APK-Inform. 

·         The US Court of Appeals for the 10^th Circuit will force the EPA to reconsider 3 refinery biofuel waivers for small oil refineries.  This will be important as it can impact future waivers for small refineries later this year.  The court mentioned the EPA overstepped its authority to grant selected waivers. 

·         Egypt said they have enough vegetable oil reserves until at least May.  Egypt has been a large buyer of sunflower and soybean oil over the recent month. 

·         Malaysian palm markets:  Holiday – no trade

·         ITS reported palm exports during the Jan 1-25 period at 1.022 million tons, down 1.3 percent from the previous period a month earlier. 

·         There are reports that India palm oil imports from Malaysia for the month of January could hit a 9-year low. 

 

Oilseeds Export Developments

• None reported

 

 

 

 

Wheat

·         In a risk off session, US and Paris wheat futures traded lower but prices paired losses in the US markets.   March Chicago was down 1.25 cents, March KC 0.50 cent higher and March Minneapolis down 1.75 cents.  USDA wheat inspections were poor. 

·         Selected US states should release updated winter wheat crop ratings over the couple of days. 

·         USDA US all-wheat export inspections as of January 23, 2020 were 223,994 tons, below a range of trade expectations, below 516,309 tons previous week and compares to 367,604 tons year ago. Major countries included Japan for 81,805 tons, Ecuador for 54,617 tons, and Mexico for 39,908 tons.

·         March Paris wheat futures traded 1.25 euros lower to 194.25 euros. 

·         Last week China bought 150,000 tons of wheat from Australia, which was a surprise to many traders. 

·         Egypt said they enough wheat reserves through the end of June. 

 

Export Developments.

·         Saudi Arabia’s Saudi Grains Organization (SAGO) bought 900,000 tons of animal feed barley at an average price of $224.45/ton.

• Jordan seeks 120,000 tons of wheat on January 28. 
• Japan seeks 120,000 tons of feed wheat and 200,000 tons of feed barley on January 29 for arrival by March 19. 

 

Rice/Other

• South Korea seeks 77,778 tons of non-glutinous brown rice for arrival between March and May, on Jan. 30.  Details of the tender are as follows:

    TONNES(M/T)  GRAIN TYPE    ORIGIN    ARRIVAL/PORT

        20,000   Brown Short   China     March 15-31/Gunsan

        20,000   Brown Short   China     April 30/Masan

        15,556   Brown Short   China     May 31/Donghae

        22,222   Brown Medium  U.S.      May 31/Incheon

• 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.