FW: FI Evening Grain Comments 02/03/20

PDF attached

 

 

Weather

 

 

MARKET
WEATHER MENTALITY FOR CORN AND SOYBEANS: 

Better
rainfall potentials in Argentina during the next two weeks will improve confidence in the nation’s favorable summer crop outlook. Argentina’s fair to good grain and oilseed output combined with Brazil’s huge soybean crop will likely keep a bearish bias on
for those crops. South Africa weather may improve somewhat this weekend and next week to protect its production potential.

     Australia’s
summer crops will get some additional rainfall in this coming week and India crops will remain in good shape. China still has potential for improving rapeseed production potential once spring arrives due to recent precipitation and improving soil moisture
in parts of southeastern Europe into Kazakhstan may do to the same for those areas in the spring.

      Southeast
Asia weather will trend a little wetter in the coming week restoring favorable soil moisture to many Indonesian and Malaysian crop areas. Rain is needed most in parts of Peninsular Malaysia.

      Overall,
weather today is likely to contribute a bearish bias on market mentality.

 

MARKET
WEATHER MENTALITY FOR WHEAT: 

There
is very little risk of crop threatening cold for small grain crops around the world. Cooling in the U.S. this week will be preceded by snow in the areas where temperatures will get coldest (the west-central high Plains) which should protect crops from damage.
Periods of snow in the west-central high Plains should lead to some improving topsoil moisture for better winter crop establishment in the early days of spring.

      Improving
precipitation in southeastern Europe and the southwestern grain areas of the Commonwealth of Independent states may improve production potentials in the spring. China’s winter crops are still expected to improve in the early spring if there are a few timely
rain events as temperatures trend warmer

     
India is still expecting a huge winter wheat crop and the only thing needed would be a few timely rain events this month and no extreme heat. Some of those conditions will be met in this coming week.

      Rain
in east-central Australia this week will be great enough to bolster topsoil moisture and possibly improve a few water reservoir levels, but much more rain will be needed before autumn planting begins in April. The recent weather trends have looked appealing
with rain falling more frequently easing some of the dryness.

      North
Africa wheat is still a concern with southwestern Morocco production already expected to be down. Timely rain will be needed later this month and in March to support reproduction and filling. Early February will be dry and warm biased.

      Overall,
weather today will likely produce a mixed influence on market weather mentality.

Source:
World Weather Inc. and FI

 

 

Selected
Brazil commodities exports:

Commodity                     
January 2020      December 2019   January 2019

COFFEE(60
KG BAG)              2,724,800         3,161,900         3,033,200

CRUDE
OIL (TNS)                4,292,600         8,721,100         4,980,900

ETHANOL
(LTR)                  78,100,000        146,600,000     104,700,000

SOYBEANS
(TNS)                 1,488,300         3,439,600         2,035,100

IRON
ORE                       26,731,100        24,674,000       33,135,800

FROZEN
ORANGE JUICE (TNS)      27,700            32,100               16,200

NON-FROZEN
ORANGE JUICE (TNS)  131,400           203,000             121,400

SUGAR
RAW (TNS)                1,415,700         1,286,900         1,017,900

 

USDA
inspections versus Reuters trade range                                            

Wheat      
413,984     versus  300000-500000           range

Corn         
562,380     versus  500000-800000           range

Soybeans  
1,355,627  versus  550000-1200000         range

 

Combined
wheat, soybean, corn and sorghum export inspections have been running below this time last year for four consecutive weeks. 

 

 

 

GRAINS
INSPECTED AND/OR WEIGHED FOR EXPORT

                 
REPORTED IN WEEK ENDING JAN 30, 2020

                           
— METRIC TONS —

                                                  
CURRENT     PREVIOUS 

             ———–
WEEK ENDING ———-  MARKET YEAR  MARKET YEAR

 
GRAIN      01/30/2020  01/23/2020  01/31/2019    TO DATE     TO DATE  

 

BARLEY         
1,796         416         196       19,458        6,730 

CORN         
562,380     679,994     912,191   10,724,374   22,496,268 

FLAXSEED         
100           0           0          496          218 

MIXED              
0           0           0            0            0 

OATS             
400         200         200        2,666        1,993 

RYE                
0           0           0            0            0 

SORGHUM        
6,516     142,217      24,157    1,137,491      596,384 

SOYBEANS   
1,355,627   1,058,772   1,092,842   26,594,745   21,577,745 

SUNFLOWER          
0           0           0            0            0 

WHEAT        
413,984     225,825     443,265   16,639,729   14,827,601 

Total      
2,340,803   2,107,424   2,472,851   55,118,959   59,506,939 

CROP
MARKETING YEARS BEGIN JUNE 1 FOR WHEAT, RYE, OATS, BARLEY AND

FLAXSEED; 
SEPTEMBER 1 FOR CORN, SORGHUM, SOYBEANS AND SUNFLOWER SEEDS.

INCLUDES
WATERWAY SHIPMENTS TO CANADA.

 

Macros

·        
US Markit Manufacturing PMI Jan F: 51.9 (est 51.7; prev 51.7)

·        
China’s central bank lowered the interest rates on reverse repurchase agreements by 10 basis points to 2.40% and cut the 14-day tenor to 2.55% from 2.65% previously.

 

 

Corn.

·        
March corn futures traded lower as coronavirus continues to spread. The contract settled 2.50 cents lower at $3.7875.  More than 360 deaths from the virus have been reported. 

·        
Funds were estimated net sellers of 15,000 corn contracts.

·        
USDA US corn export inspections as of January 30, 2020 were 562,380 tons, low end of a range of trade expectations, below 679,994 tons previous week and compares to 912,191 tons year ago. Major countries included
Mexico for 224,111 tons, Japan for 94,050 tons, and Costa Rica for 67,089 tons.

·        
Lower futures early this week could attract additional global export interest, which may limit downside movement in prices over the next few days. 

·        
US hog futures were down about 0.8% around noon CT.  China plans to release frozen pork from state reserves “whenever necessary” due to the virus outbreak.  China also announced they plan to buy more meat
from the international market. 

·        
China culled 18,000 chickens after H5N1 bird flu was discovered in Hunan. 

·        
The Baltic Dry index fell 21 points or 4.3 percent to 466 points. 

 

Illinois
River lock closure update: 
Grain handlers, exporters, feed users, and Chicago Platts spread traders need to monitor forward ECB cash corn prices.  And a handful of ethanol plants located near the Illinois River may feel some pain this summer as the U.S. Army Corps of Engineers released
an updated schedule for “short closure” lock repairs.  Engineers will have to drain selected channel locks, making grain barges impassible for about 60 days, at least 3 of the 5 scheduled for summer 2020 repair, depending on water levels. This may become a
nightmare for several ECB ethanol plants.  Ethanol plants stocking up on corn ahead of the closures may become a reality.  Downtime is another option.  Keep an eye on CBOT May corn deliveries. If the spreads are in good shape, heavy deliveries could be triggered,
indicating the handful of ethanol plants located on or near the river, and other grain end users are stockpiling.  Also done discount large swings in corn basis and barge freight rates located between Chicago and Memphis-Cairo, from now until end of September.
 Corn
shipments up through Canada could increase if Chicago basis weaken to an attractive level.  So far, we have not seen any major divergence in basis. Peoria corn basis for spot was last 6 over the March, and forward April position was 3 over the May.  Two locks
along the Illinois River are scheduled for repair in summer 2023.  See link below for reference. 
https://www.mvr.usace.army.mil/Missions/Navigation/Navigation-Status/

 

Corn
Grind. USDA
NASS reported the December corn for ethanol use at 479 million bushels, 4 million above a Bloomberg trade estimate, 23 million above the 457 million in November and 18 million above 462 million in December 2018.  Sorghum use was 9.5 million bu.  DDGS production
of 1.908 million short tons hit its highest level since August but was below 1.924 million produced in December 2018.  The higher corn use and lower DDGS suggests poor quality corn could have impacted DDGS minimum specifications for use.

 

 

Export
Developments

• None
  reported

 

Updated
1/31/20

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

 

Soybean
complex.

·        
CBOT soybeans
rallied after the open on signs of improving US soybean demand but paired some of the gains after news broke that Chinese officials hope the U.S. will agree on flexibility for purchase commitments from the phase-one trade deal.  It hasn’t been 30 days since
the deal was signed January 15 and now traders again have to weigh in agriculture trade concerns on top of coronavirus concerns.  This comes after China announced they plan to inject $173 billion into their economy. Early Monday they also lowered the interest
rates on reverse repurchase agreements by 10 basis points to 2.40% and cut the 14-day tenor to 2.55% from 2.65% previously. USDA export inspections showed China took just over 550,000 tons of soybeans.  The market traded two-sided by mid-morning but rallied
to close 4 cents higher. 

·        
Funds were estimated net buyers of 4,000 net soybean, net sellers of 2,000 soybean meal, and net buyers of 5,000 bean oil contracts.

·        
Soybean meal saw weakness on product spreading. Soybean oil traded higher despite weakness in China vegetable oils after traders returned from holiday.  The Dalian was down 426 yuan in palm and 434 yuan in
soybean oil.

·        
U.S. producers will start receiving final trade aid payments this week. 

·        
Large SA soybean production prospects may limit gains in soybeans this week, if any, but don’t discount a dead cat bounce as prices appear to be technically oversold. 

• Private
  exporters sold 130,000 tons of soybeans of soybeans to Egypt for 2019-20 delivery.
  

·        
USDA US soybean export inspections as of January 30, 2020 were 1,355,627 tons, above a range of trade expectations, above 1,058,772 tons previous week and compares to 1,092,842 tons year ago. Major countries
included China Main for 552,523 tons, China T for 140,610 tons, and Spain for 118,511 tons.

·        
The US$ was higher and the lower. The Brazilian Real was higher.

·        
Ukraine sunflower oil exports surged 59.3% so far in 2019-20 (Sep-Aug crop year), according to APK Inform to 2.025 million tons, up from 1.271 million tons for the same period last season. 

·        
Strategie Grains lowered their EU rapeseed production estimate to 18.05 million tons from 18.46 million previous, 7 percent above last year (16.85MMT).  They lowered the area to 5.55 million hectares. 

·        
India raised their crude palm import tax to 44 percent from 37.5 percent.

·        
GAPKI reported 2019 Indonesian biodiesel and oleochemical exports rose 4.2% to 36.18 million tons (34.71MMT in 2018).  Indonesia produced 47.1 million tons of crude palm oil last year and 4.6 million tons
of palm kernel oil.

·        
The European Union granted import licenses for 149,000 tons of soybean imports, bringing cumulative 2019-20 soybean imports commitments to 8.07 MMT, down 4 percent from what was committed at this time last
year.  Imports of rapeseed are running at 4.04 million tons, up 51 percent from the same period a year ago.

 

US
NASS Crush.

 

USDA
NASS December soybean crush ended up at 184.7 million bushels, 10 million above the 174.6 million bushels crushed in November and also up from the 183.7 million bushels crushed in December 2018.  It’s the second-largest monthly total on record, in terms of
million bushels used and crushed per day (5.96 versus 6.03 record in October 2018). Bloomberg’s trade average was 185.3 (Actual 0.6 below it) and 185.7 for Reuters.

 

U.S.
soyoil stocks at the end of December increased from the previous month to 2.094 billion pounds (9 lbs above trade guess) from 1.880 billion lbs at the end of November and compares to 1.946 billion pounds at the end of December 2018.  It’s the largest end-of-month
supply since last August. Bloomberg had the average trade estimate at 2.085 billion while Reuters was at 2.128 (43 million difference).  The wide variance in the average trade estimate reflected the large miss in the Jan 15 NOPA report.  NOPA reported end
of December soybean oil stocks at 1.757 billion pounds, 250 million above the average trade guess. That miss in NOPA SBO stocks was tough to explain. In mid-January some speculated a large amount of soybean oil was destined to the Gulf for export. NOPA represents
about 95 percent of the US crush industry. 

 

U.S.
soybean oil production was third highest on record. Soybean meal production on a daily adjusted basis was second largest on record. Soybean meal stocks fell from 467,000 short tons at the end of November to 377,000 short tons at the end of December, lowest
level since May 2019. That compares to 435,000 short tons at the end of December 2018. 

 

 

Oilseeds
Export Developments

• Under
  the 24-hour announcement system, private exporters sold 130,000 tons of soybeans of soybeans to Egypt for 2019-20 delivery.
  

 

 

Paraguay.
Last
week a couple analysts upward revised their Paraguay soybean crop. Timely rain fell in mid-January to benefit the crop, but total precipitation over the last 90 days remains below average.  USDA currently projects the Paraguay soybean crop at 10.2 million
tons, up from 8.850 million tons in 2018-19 and compares to 10.478 million tons in 2017-18.  We are going to maintain our 10.0 million ton estimate for now. 

 

 

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

·        
Chicago wheat traded much of the day lower but paired most losses. Lack of daily US wheat export developments and China demand concerns pressured prices early.  USDA US export inspections were ok. 

·        
March Chicago finished 1.75 cents higher at $555.50.  March KC ended 1.25 cents higher and March MN 0.75 cents lower.

·        
Funds bought an estimated net 2,000 Chicago wheat futures.

·        
March Paris wheat futures settled at 189.50, down 1.00 euro. 

·        
USDA US all-wheat export inspections as of January 30, 2020 were 413,984 tons, within a range of trade expectations, above 225,825 tons previous week and compares to 443,265 tons year ago. Major countries
included Philippines for 132,318 tons, Japan for 68,431 tons, and Korea Rep for 51,975 tons.

·        
News was light.

·        
Russia will see a cold spell this work week and lack of snow coverage in some areas are creating concerns over winterkill. 

·        
The European Union granted export licenses for 180,000 tons of soft wheat exports, bringing cumulative 2019-20 soft wheat export commitments to 16.355 MMT, up from 9.888 million tons committed at this time
last year, a 65 percent increase.  Imports are down 52 percent from year ago at 3.014 million tons.

 

 

Export
Developments.

• 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: 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.
  
• 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

 

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