FW: FI Evening Grain Comments 01/31/20

PDF attached

 

Month
to date: (FI
price performance can be found after the text)

·       
Corn down 1.7%

·       
Oats up 4.0%

·       
Soybeans down 7.5%

·       
Soybean meal down 3.0%

·       
Soybean oil down 13.2%

·       
Palm oil down 14.7%

·       
Coffee down 20.9%

·       
WTI down 15.4%

·       
USD/BRL up 6.3%

 

 

Weather

 

MARKET
WEATHER MENTALITY FOR CORN AND SOYBEANS: 

South
America weather still looks mostly good, although a close watch on the rain distribution is warranted in Argentina and far southern Brazil during the next few weeks. Recent forecast model runs have been promoting timely rainfall for these areas, but if precipitation
is missed there could be some greater concern over production potential. For now Brazil is still on target for a huge soybean crop and good early corn crop. Argentina’s corn and soybeans will produce favorably, although not necessarily ideally. Some production
cut has already occurred to early season corn and sunseed in parts of Argentina due to spring dryness.

           
Weather in eastern Australia improved briefly recently due to rain and some additional precipitation is forthcoming this weekend into 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 in China 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. A moisture boost is needed by
spring to support 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 week 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. With that said some unusually warm weather this weekend will be followed by colder conditions next week, but no winterkill is presently expected.
Winter hardiness is weakening in the U.S. southern Plains. 

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

Source:
World Weather Inc. and FI

 

Bloomberg
Ag Calendar

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

MONDAY,
FEB. 3:

• USDA
  weekly corn, soybean, wheat export inspections, 11am
• Australia
  commodity index, 12:30am
• Brazil
  soybean, sugar, corn, coffee exports
• U.S.
  soybean crush, DDGS production, corn for ethanol, 3pm
• EU
  weekly grain, oilseed import and export data
• Honduras,
  Costa Rica January coffee exports
• International
  Cotton Advisory Committee releases monthly report
• Ivory
  Coast cocoa arrivals

TUESDAY,
FEB. 4:

• U.S.
  Agriculture Economy Barometer Index, 9:30am
• New
  Zealand global dairy trade auction

WEDNESDAY,
FEB. 5:

• Statcan
  Canada wheat, soybean, barley, canola and durum stocks, 8.30am
• EIA
  U.S. weekly ethanol inventories, production, 10:30am
• New
  Zealand ANZ Bank Commodity World Price

THURSDAY,
FEB. 6:

• UN’s
  FAO World Food Price Index, 4am
• USDA
  weekly crop net-export sales for corn, soybeans, wheat, 8:30am

FRIDAY,
FEB. 7:

• 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
• Agricultural
  conference organized by consultancy IKAR, Moscow
• Guatemala
  Coffee Exports

Source:
Bloomberg and FI

 

Bloomberg
bull/bear survey taken
Wed.

·        
Soybeans: Bullish: 7 Bearish: 6 Neutral: 12

·        
Corn: Bullish: 8 Bearish: 4 Neutral: 13

·        
Wheat: Bullish: 2 Bearish: 13 Neutral: 10

·        
Raw sugar: Bullish: 5 Bearish: 0 Neutral: 3

·        
White sugar: Bullish: 5 Bearish: 0 Neutral: 3

·        
White-sugar premium: Bullish: 4 Bearish: 0 Neutral: 4

 

CFTC
Commitment of Traders

·        
No major surprises for the week ending January 28.

·        
Traders were more long in corn, soybeans, meal and oil than expected.

·        
Money managers added 38,300 net long contracts in corn. Keep in mind the week change for corn ending Jan 28 was down only 2.5 cents. 

·        
Money managers sold a good amount of soybeans, so unwinding of soybean/corn spreads could have been a feature. 

 

 

 

 

 

 

Macros

US
Personal Income Dec: 0.2% (exp 0.3%; R prev 0.4%)

–         
Personal Spending Dec: 0.3% (exp 0.3%; prev 0.4%)

–         
Real Personal Spending Dec: 0.1% (exp 0.1%; prev 0.3%)

US
PCE Core Deflator (M/M) Dec: 0.2% (exp 0.1%; prev 0.1%)

–         
PCE Core Deflator (Y/Y) Dec: 1.6% (exp 1.6%; R prev 1.5%)

–         
PCE Deflator (M/M) Dec: 0.3% (exp 0.2%; R prev 012%)

–         
PCE Deflator (Y/Y) Dec: 1.6% (exp 1.6%; R prev 1.4%)

US
Employment Cost Index Q4: 0.7% (exp 0.7%; prev 0.7%)

Canadian
GDP (M/M) Nov: 0.1% (exp 0.0%; prev -0.1%)

–         
GDP (Y/Y) Nov: 1.5% (exp 1.4%; prev 1.2%)

Canadian
Industrial Product Price (M/M) Dec: 0.1% (exp 0.0%; R prev -0.1%)

US
Chicago PMI Jan: 42.9 (est 48.9; prev 48.2)

US
Univ. Of Michigan Sentiment Jan F: 99.8 (est 99.1; prev 99.1)

–
Univ. Of Michigan Conditions Jan F: 114.4 (prev 115.8)

–
Univ. Of Michigan Expectations Jan F: 90.5 (prev 88.3)

–
Univ. Of Michigan 1-Year Inflation Jan F: 2.5% (prev 2.5%)

–
Univ. Of Michigan 5-10 Year Inflation Jan F: 2.5% (prev 2.5%)

 

Corn.

·        
March corn traded much of the day lower as traders study the global economic impact of the coronavirus but rallied to close 1.75 cents higher on late technical buying and spreading against soybeans & wheat. 
US corn is the cheapest in the world and South Korean buyers have been taking advantage of the price dip. 

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

·        
The World Health Organization declared a global health emergency. As of Friday morning, the death toll was up to 213 in China, while confirmed cases jumped to 9,692.

·        
The European Commission raised their 2019-20 European Union corn import projection to 20 million tons from 19 million previously.  Wheat exports were left unchanged 28 million tons.

 

USDA
reported US January 1 cattle heard at 94.4 million head, down from 94.8 million head on January 1, 2019, and 0.1 million head above a Bloomberg trade estimate. 

Other
highlights: https://release.nass.usda.gov/reports/catl0120.txt

 

US
ethanol production in November was 31.358 million barrels, slightly below expectations.  We left our 2019-20 US corn for ethanol usage unchanged at 5.400 billion bushels, 25 million above USDA. 

 

 

 

Export
Developments

• Under
  the 24-hour announcement system, private exporters reported optional origin sales of 134,000 tons of corn for delivery to South Korea during the 2019-20 marketing year.
  

• South
  Korea’s Major Feedmill Group (MFG) bought 69,000 tons of optional origin corn at $214.69 a ton c&f for arrival around May 1.
• South
  Korea’s NOFI bought 68,000 tons of corn at around $213.60 a ton c&f for arrival around May 10.
• South
  Korea’s FLC bought about 65,000 tons of corn at $213.99 a ton c&f for arrival around May 5.
  
• India’s
  MMTC passed on 175,000 tons of GMO-free corn for shipment by Feb. 10. Lowest price offer in the tender was reported to be $226.80 a ton c&f.
  

 

Updated
1/31/20

• CBOT
  March corn is seen in a $3.65 and $3.95 range

 

Soybean
complex.

·        
CBOT soybeans
fell for the ninth consecutive day to end the month down 7.5%.  March soybeans fell 3.75 cents to its lowest contract level since May 2019.  March meal fell to a fresh contract low of $291.00, down $0.50.  March soybean oil broke below its 200-day MA of 30.39,
ending down 69 points to 29.94.  We now think it can go to 29.50. 

·        
South American soybean crop prospects are large.  This week we saw selected upward revisions to the Argentine and Paraguayan crops. 

·        
Funds were estimated net sellers of 4,000 net soybean, net 3,000 soybean meal, and net sellers of 8,000 bean oil contracts.

·        
Global economic worries continue to weigh on the global oilseed markets as many China businesses may stay closed post New Year holiday for all of next week.  We are hearing China is not offloading agriculture
exports because of the risk on spreading the coronavirus.

·        
the Buenos Aires Grain Exchange increased Argentina’s soybean production forecast by 4% to 53.1 million tons. 

·        
Chinese purchases of American soybeans increased to 3.1 million tons in December (well up from year ago), compared with 2.6 million tons the previous month. 

·        
Malaysian palm oil exports fell 7.9 percent to 1.220 million tons from the previous month, according to SGS. 

·        
Malaysian palm markets:
 Malaysia
failed to recoup losses, with January closing down 15%, the most since 2012.

 

Oilseeds
Export Developments

• None
  reported

 

U.S.
production of biodiesel was 127 million gallons in November 2019, 17 million gallons lower than production in October 2019. There was a total of 979 million pounds of feedstocks used to produce biodiesel in November 2019. Soybean oil remained the largest biodiesel
feedstock during November 2019 with 527 million pounds consumed. All feedstock used to make biodiesel was lowest since February 2018. Our soybean oil for biodiesel use off 8.400 billion pounds is 100 million below USDA. 

 

 

 

 

 

Updated
1/31/20

• CBOT
  March soybeans are seen in a $8.60-$8.90 range  
• March
  soybean meal is seen a $280 and $300 range
• March
  soybean oil 29.50-31.70 range   

 

Wheat

·        
Wheat ended lower on widespread commodity selling.  March Chicago finished 6.75 cents lower, below its 30-day MA.  KC and MN wheat were also lower.  

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

·        
March Paris wheat futures ended 1.25 euros lower @ 191.00 euros. 

·        
SovEcon lowered their Russian 2019-20 wheat export estimate to 32.2 million tons. 

·        
IKAR looks for this year’s wheat production to reach 79.5 million tons.

·        
Russia’s AgMin sees the 2020 grain crop reaching 125.3 million tons, up from 120.7MMT in 2019.

·        
Australia 2019-20 wheat production was estimated at a low 15 million tons by FAS.  This would be down from 17.3 million tons year earlier. 
https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Grain%20and%20Feed%20Update_Canberra_Australia_01-16-2020

·        
Ukraine’s 2019 grain production was reported at a record 75.1 million tons versus 70 million tons in 2018, according to latest state statistics service data.  It includes 28.3 million tons of wheat, 35.8 million
tons of corn and 8.9 million tons of barley. 

 

 

Export
Developments.

• Tunisia
  bought 50,000 tons of feed barley.   Earlier the lowest offer was $211.92/ton c&f. 
  
• Results
  awaited: 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. 
  

 

Rice/Other

• Result
  awaited: 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.
  

 

Updated 1/31/20

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

·       
CBOT KC March wheat is seen in a $4.55-$5.00 range

·       
MN March wheat is seen in a $5.25-$5.60 range