FW: FI Evening Grain Comments 01/29/20

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Coronavirus continues to weigh on commodities and raises doubts China will reach trade deal buying.   Malaysian palm oil market rebounded sharply on Wednesday. 

 

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. More showers are expected next week. South Africa will dry down for a while this week raising some potential for mild crop stress especially in western production areas.

            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

 

Bloomberg Ag Calendar

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

Export Sales Survey  All estimates are quoted in tons. The marketing year starts on June 1 for wheat, Sept. 1 for corn and soybeans and Oct. 1 for soymeal and soyoil.

	Trade estimates for 2019-20	Trade estimates for 2020-21
Wheat	300,000-700,000	0-50,000
Corn	600,000-1,200,000	30,000-100,000
Soybeans	400,000-1,000,000	0-100,000
Soymeal	200,000-500,000	0
Soyoil	8,000-40,000	0

 

	USDA week-ago data for 2019-20	USDA week-ago data for 2020-21
Wheat	695,983	46,000
Corn	1,006,873	2,000
Soybeans	790,006	120,743
Soymeal	641,919	0
Soyoil	55,588	0

Source: Reuters and FI

 

Corn.

·         Corn fell on profit-taking and concerns China may not be able to reach the trade deal numbers due to the thought of coronavirus slowing the Chinese economy. 

·         Technical buying and strong export demand underpinned the corn market.

·         Regarding demand, we are not seeing it fade in the US as Brazil is running low on supplies and Argentina’s higher prices.  The US will enjoy a 2 to 3-month window steady exports.  The active 24-hour window has seen reported corn sales for a sixth day in a row. 

·         DOE reported ethanol stocks up nearly 1% to 24.244 million barrels, in-line with expectations while plant production at 1.029 million barrels per day was at the low-end of the expected range.

·         President Trump is signed  the USMCA on Wednesday but since it was expected the market has already priced that in.

·         Funds were an estimated net seller of 7,000 corn contracts.

·         American Farm Bureau Federation reported farm bankruptcies hit a 9-year high of 590 in 2019, up almost 100 from 2018.

·         The US has developed a vaccine against African swine fever which has proven 100% effective according to the American Society for Microbiology.  This news and bearish technicals sent hog futures almost 3.5% lower today.

 

Export Developments

• South Korea’s MFG bought 68,000 tons of optional-origin corn at $214.99/ton cnf plus $1.25/ton port charge for February 27 to March 27 shipment.
• South Korea’s FLC bought 65,000 tons of optional-origin corn at $216.74/ton cnf plus $1.25/ton port charge for February 20 to March 11 shipment.

 

Soybean complex.

·         CBOT soybeans dropped for a seventh straight session as there has been no Chinese soybean purchases reported on the USDA 24-hour window since the trade deal was signed on January 15.

·         Now with the coronavirus spreading, the doubts about China purchasing the targeted amounts are growing.  

·         Palm oil rebounded 5.9% today following yesterday’s steepest drop in 12 years of 10%.  Burma Malaysia reported record daily volume on a day which palm oil rose the most since 2010.

·         SGS reported January 1-25 palm oil exports down 4.8% to 1,015,226 metric tons.

·         Indonesia to implement an $18/ton export tax on CPO for February. 

·         Meal settled lower following soybeans and grains while soybean oil rose after Malaysian palm oil rebounded. 

·         Funds were an estimated net seller of 4,000 net soybean, 2,000 net soybean meal, and a net buyer of 2,000 bean oil contracts.

·         China is on holiday through Sunday but most normal business will not return until February 10.

 

Oilseeds Export Developments

• Algeria seeks 35,000 tons of soybean meal on Wednesday for shipment by March 15. 

 

 

Wheat

·         US wheat futures were lower on global food demand fears, yet world import tenders continue to flourish. 

·         Traders see the pullback as needed to increase competitiveness of US wheat following China and MENA purchasing European, Black Sea, and Australian origins.

·         March Paris wheat futures ended 2.00 euros lower @ 192.50 euros. 

·         Funds were net sellers of an estimated net 5,000 wheat futures.

·         Russia plans to set annual quotas for grain exports according to Interfax. The market took note of this but will not matter until next year as no future quota amounts were given and as they already have sought to impose a quota for this season which are in-line with export forecasts.  Quotas will be determined based on the domestic crop size and domestic demand.

·         Tunisia warned about French grain shipments with the ongoing strikes.

·         Yesterday Egypt said they enough wheat reserves through the end of June, so almost like clockwork the next day they tendered for nearby wheat shipments. 

 

Export Developments.

• Egypt’s GASC seeks 55,000 – 60,000 tons of wheat on Thursday for March 11-25 shipment.
• Japan received no offers on it’s 120,000 tons of feed wheat and 200,000 tons of feed barley tender today for arrival by March 19. 
• Algeria seeks 50,000 tons of feed barley on Thursday, valid until Friday, for Feb 16-29 shipment. 
• Jordan seeks 120,000 tons of wheat on February 4 for August – September shipment. 
• Syria seeks 200,000 tons of wheat from Russia on February 17 for shipment within 60 days of contract signing.