FW: FI Evening Grain Comments 02/11/20

PDF attached (funds sent later)

 

USDA
updated their February S&D’s and wheat turned out to be the most price sensitive commodity by late morning trading.  Conab Brazil soybean production fell short of expectations by 1.1MMT. China left their 2019-20 soybean and corn balance sheets unchanged from
the previous month. 

 

USDA
February S&D

Initial
reaction:

Bearish
soybeans with Brazil upward revisions to production and exports weighing on prices, despite USDA increasing their outlook on US soybean exports.  Bearish corn on large South American corn output.  USDA did increase its US corn for ethanol projection but lowered
exports.  Wheat neutral.  We believe unwinding of wheat/corn spreads are pressuring wheat prices despite the 25-million-bushel reduction in USDA US ending stocks.  Fact remains US wheat stocks will remain very high relative to a ten-year average. 

 

USDA
NASS and OCE executive summaries

https://www.nass.usda.gov/Newsroom/Executive_Briefings/index.php

https://www.usda.gov/oce/commodity/wasde/Secretary_Briefing/index.htm

 

 

Soybeans

・        
USDA lowered the 2019-20 US soybean carryout by 50 million bushels to 425 million, 18 million less the average trade guess.  US soybean stocks are down 53.5 percent from 2018-19. 

・        
US 2019-20 soybean STU decreased to 10.5 percent from 11.9% projected in January. 

・        
2019-20 US soybean exports were lifted higher by 50 million (we were looking for 25) to 1.825 billion bushels, above 1.748 billion in 2018-19.  USDA noted “increased imports for China” – something the trade
is still looking for in large quantities. This comes after USDA raised Brazilian soybean exports by 1 million tons to 77 million tons.  All other US soybean demand components were left unchanged. 

 

・        
USDA lowered its 2019-20 US soybean oil yield to 11.54 from 11.60 pounds per bushel.  We were at 11.54 before the report.  US soybean oil production is projected lower by 130 million pounds to 24.290 billion. 
USDA lowered biodiesel by 300 million pounds and food use by 100 million and raised exports by 200 million pounds.  Ending stocks were increased 69 million pounds to 1.515 billion pounds, below 1.775 billion pounds at the end of 2018-19.  Note end of January
soybean oil stocks were reported at 2.094 billion pounds, 148 million above year earlier. It appears USDA is bullish soybean oil demand for second half 2019-20. 

 

・        
The US soybean meal yield was taken down slightly to 47.01 from 47.03.  USDA lowered US soybean meal production by 25,000 short tons and lowered ending stocks by same amount to 375,000 short tons.  We agree
with these changes. 

 

・        
USDA increase global soybean production and stocks by 1.7 and 2.2 million tons.  World ending stocks at 98.9 million tons are projected 11.1% below 2018-19.  USDA boosted Brazil soybean production by 2 million
tons to 125.0 million tons and increased Brazil soybean exports by 1.0 million tons to 77 million tons.  Argentina soybean production was left unchanged at 53.0 million tons.  China soybean imports were upward revised 3.0 million tons to 87.0 million, up nearly
7 percent from 2018-19. 

 

Corn

・        
USDA left its 2019-20 US corn carryout unchanged at 1.892 billion bushels, 28 million greater the average trade guess.  US corn stocks are down 10.5 percent from 2018-19. 

・        
US 2019-20 corn STU was left unchanged at 13.4 percent. 

・        
US corn for ethanol was taken up 50 million bushels to 5.425 billion, above 5.376 billion for 2018-19.  US corn exports were lowered 50 million bushels, a surprise in our opinion.  The large SA crops, and
strong pace of Ukraine corn exports, are expected to gain cut into the US export market program. 

 

・        
World corn stocks were lowered 1 million tons to 296.8 million tons, 7.4% below 2018-19. World corn production was taken up 800,000 tons to 1.112 billion tons, 1 percent below 2018-19.  USDA left Brazil and
Argentina corn production unchanged.  SAf corn production was upward revised 500,000 tons. 

 

Wheat

・        
USDA lowered the 2019-20 US all-wheat carryout by 25 million bushels to 940 million, 14 million less the average trade guess.  US all-wheat stocks are down 13.0 percent from 2018-19. 

・        
US 2019-20 all-wheat STU decreased to 43.4 percent from 45.1% projected in January. 

・        
USDA lifted US all-wheat exports by 25 million bushels to 1.0 billion bushels, above 936 recorded for 2018-19. 

・        
By class, USDA reduced US HSW stocks by 15 million bushels. 

 

 

・        
World wheat production was lowered 0.4MMT to 764.0 million (4.4% above 2018) and global stocks were down slightly from January estimate.  USDA left production estimates unchanged for Brazil, Australia, Argentina,
Canada, EU and Russia. 

 

Weather

MARKET
WEATHER MENTALITY FOR CORN AND SOYBEANS: 

Not
much has changed overnight. Favorable soil moisture is present in Argentina, Brazil, South Africa, India and some eastern Australia locations which should support crop development.  There is still some concern over harvest conditions in early season soybean
areas of Brazil which may lead to more delay in second season corn planting.

More
rain will fall this week in northern and eastern Europe and from there to Ukraine and that will improve early season crop development potentials for areas that were too dry last autumn.

China’s
winter crops are still rated favorably with a big potential for improving rapeseed conditions in the early weeks of spring after recent weeks of rain.

India’s
winter crops are still poised to perform quite favorably, despite a drier biased outlook for the next ten days.

Southeast
Asia crops are still rated well, despite erratically distributed rainfall in recent weeks.

Eastern
Australia sorghum conditions have improved, but drought remains in key production areas and much more rain will be needed before winter planting of canola begins in late April. Summer crop development has improved, but it will still be a very small crop.

South
Africa crop conditions are still rated quite favorably with little change likely, despite some net drying for a while.

            Today’s
weather will have a mixed influence on market mentality.

 

MARKET
WEATHER MENTALITY FOR WHEAT: 

Many
of the winter crop areas in the world that experienced poor crop establishment because of dryness last autumn have seen some timely precipitation in recent weeks. The moisture should help improve winter crop establishment prior to reproduction this spring.
There has also been very little winterkill this year and that should be supporting larger crops.

            The
biggest dry concern today is in North Africa and in particular southwestern Morocco where durum wheat and barley production has been cut. There is potential for larger small grain losses from North Africa if improved rainfall does not occur soon. Spain and
Portugal are also drying out but have adequate subsoil moisture for now.

           
Overall, despite market performance of late, there is still no good weather related reason for futures price appreciation and some caution is warranted there.

Today’s
weather will maintain a low impact on market mentality.

Source:
World Weather Inc. and FI

 

Source:
World Weather Inc. and FI

 

 

Bloomberg
Ag Calendar

TUESDAY,
FEB. 11:

• USDA’s
  monthly World Agricultural Supply and Demand (Wasde) report, noon
• France
  agriculture ministry gives estimate for 2020 winter grain and rapeseed plantings
• China
  agriculture ministry’s (CASDE) supply, demand monthly report
• Brazil
  Conab soybean and corn yield, area and production
• Sao
  Martinho Earnings Conference Call, Sao Paulo
• HOLIDAY:
  Japan

WEDNESDAY,
FEB. 12:

• EIA
  U.S. weekly ethanol inventories, production, 10:30am
• FranceAgriMer
  monthly cereals balance sheet

THURSDAY,
FEB. 13:

• USDA
  weekly crop net-export sales for corn, soybeans, wheat, 8:30am
• Giant
  pulp maker Suzano holds investor day in Sao Paulo
• Brazil’s
  grain exporter group Anec holds conference on 2019-20 crop outlook

FRIDAY,
FEB. 14:

• 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
• FranceAgriMer
  crop conditions – French crops office expected to resume crop-conditions reports after winter break
• New
  Zealand food prices
• Biosev
  holds analyst conference call to discuss 4Q earnings.

Source:
Bloomberg and FI

 

China
CASDE:  They
left unchanged their 2019-20 balance sheets for major ag commodities but did mention coronavirus did have a short-term impact on crop supplies.  Corn sales had been significantly slower, according to the Ministry of Agriculture and Rural Affairs.  Edible oils
production was adjusted for 2018-19, down 3.5 million tons to 21.92 million tons. 

 

 

 

 

Corn.

・        
Corn futures ended 1.50-2.50 cents lower on ongoing demand concerns for China and large Brazil corn production prospects.  South Korea was in for corn. 

・        
USDA’s S&D report did little to draw buying interest

・        
China left their 2019-20 soybean and corn balance sheets unchanged from the previous month. 

・        
Conab estimated Brazil’s corn production 1.8 million tons higher from last month, but 0.3MMT below a Bloomberg trade guess.  They are at 100.5 million tons versus 100.0 million tons year ago. 

・        
1000+ deaths and more than 43,000 cases of coronavirus was recorded. 
https://www.bbc.com/news/world-asia-china-51453848

・        
UkrAgroConsult pegged Ukraine 2019-20 corn exports at 29.8 million tons, up 500,000 from previous estimate.  USDA is at 30.5 million tons.

・        
Brazil internal corn prices are near a 4-year high due to strong demand by feed end users, good export demand and higher consumption for industrial use.  FAS Attaché updated their Brazil corn S&D (link below). 
Earlier today USDA left their Brazil corn production estimate unchanged at 101.0 million tons but increased domestic feed use by 0.5MMT to 56.5 million, up from 55.4 million tons in 2018-19. 

 

Export
Developments

• South
  Korea’s Major Feedmill Group (MFG) seeks up to 140,000 tons of corn for May arrival. We heard they got offers between $211.50 to $221/ton.  Reuters noted lowest offer was $212.95/ton.  Details of the tender are as follows:

   
TONNES(M/T)        ARRIVAL/PORT

   
55,000-70,000      May 19/ Pyeongtaek and Gunsan

   
55,000-70,000      May 27/ Pyeongtaek and Gunsan

 

 

 

USDA
FAS: Brazil: Grain and Feed Update  
101-million-ton corn crop, same as USDA January update

https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Grain%20and%20Feed%20Update_Brasilia_Brazil_01-16-2020

 

Updated
2/11/20

• CBOT
  March corn is seen in a $3.75 and $3.90 range

 

Soybean
complex.

・        
Soybeans were unchanged to slightly higher on Tuesday.  The USDA report was viewed as bearish after Brazil soybean production and exports were upward revised from the previous month (see page one).  The products
traded two-sided. Palm oil futures were down 2 percent and cash slipped $14.50. 

・        
CBOT March soybeans finished 0.50 cent higher at $8.8475, March meal down $0.60 at $290.80 and March soybean oil up 10 points at 30.72 points. Prior to the USDA report, March SBO held its 200-day MA of 30.42. 
USDA lowered its estimate for the US soybean oil yield which prompted some short covering.

・        
Conab estimated Brazil’s soybean crop 1.0 million tons higher from previous month at 123.3 million tons, 1.1 million tons below a Bloomberg trade guess and above 115.0 million tons produced last year. 

・        
Cordonnier increased his Brazil 2019-20 soybean crop estimate by 1 million tons to 124 million tons.  Last week FC Stone projected 124 million tons.  FI is using 124.3 million tons. 

・        
China left their 2019-20 soybean and corn balance sheets unchanged from the previous month. 

・        
China pork prices are near a record high on tight inventories.  Pork prices in January are up 116% from a year earlier, according to data from the National Bureau of Statistics.

 

Oilseeds
Export Developments

• Results
  awaited: South Korea’s Nonghyup Feed Inc. (NOFI) seeks up to 13,000 tons of palm kernel meal expellers, 14,000 tons of copra meal and 8,000 tons of corn gluten feed, on Feb. 11 for arrival in South Korea in March and April.
  
• Egypt
  seeks at least 3,000 tons of soybean oil and 2,000 tons of sunflower oil on Thursday for March 24-April 15 arrival. 
  

 

 

Updated
2/11/20

• CBOT
  March soybeans are seen in a $8.70-$8.95 range  
• March
  soybean meal is seen a $285 and $300 range
• March
  soybean oil 30.10-31.90 range   

 

Wheat

・        
US wheat futures led the price volatility for the US agriculture commodities, trending lower on lack of US export participation in this week’s global sales highlights.  USDA’s S&D update was viewed neutral
for fundamentals (see page one). 

・        
Algeria, Egypt, and Jordan are/were in for wheat and there is talk Saudi Arabia might be in soon for wheat.  Lack of offers for US wheat in (most) these import tenders was seen negative for US wheat futures.
Paris wheat declined after no French offers showed up in Egypt’s GASC import tender. Egypt ended up buying 360,000 tons of Romanian and Russian wheat for March 21-31 shipment. 

・        
March Paris wheat futures were down 2.25 at 192.50 euros.

・        
UkrAgroConsult estimated Russia will produce 80.2 million tons of wheat in 2020-21 versus 74.6 million ton estimate for 2018-19. 

・        
Southeast Queensland and northeastern New South Wales in Australia are expected to get additional rain this week after seeing rain last week. 

・        
France’s AgMin lowered its estimate for the soft wheat area to 4.70 million hectares from 4.73 million hectares, down 5.6% from the 2019 area.  For last year, they increased its soft wheat production by 112,000
tons to 39.58 million tons. 

 

Export
Developments.

・        
Egypt’s GASC bought 360,000 tons of Romanian (180k) and Russian (180k) wheat for March 21-31 shipment. Details of the import tender were released as follows:

o  
60,000 tons of Romanian wheat at $227.90 plus $11.60 freight, equating to $239.50

o  
60,000 tons of Romanian wheat at $227.90 plus $11.60 freight, equating to $239.50

o  
60,000 tons of Romanian wheat at $227.90 plus $11.60 freight, equating to $239.50

o  
60,000 tons of Russian wheat at $227.80 plus $11.75 freight, equating to $239.55

o  
60,000 tons of Russian wheat at $227.50 plus $11.75 freight, equating to $239.35

o  
60,000 tons of Russian wheat at $227.50 plus $11.75 freight, equating to $239.35

・        
Algeria bought up to 660,000 tons of soft milling wheat for April and/or March shipment at about $237.50 and $237.75 a ton c&f.

• Jordan
  bought 60,000 tons of optional origin wheat at $224/ton for LH Aug shipment.  
  

• Jordan
  seeks 120,000 tons of optional origin animal feed barley on Feb. 12, at various shipment periods thought to be May 1-15, May 16-31, June 1-15 and June 16-30.
• Japan
  in an SBS import tender seeks 120,000 tons of feed wheat and 200,000 tons of feed barley for arrival in Japan by July 30, on Feb. 12. 
  
• Syria
  seeks 200,000 tons of wheat from Russia on February 17 for shipment within 60 days of contract signing. 
  
• Turkey’s
  TMO seeks around 250,000 tons of wheat and 50,000 tons of durum on Feb. 18 for March shipment.
  
• The
  Philippines might be in for wheat soon.
• Saudi
  Arabia might be in for wheat soon.

 

Rice/Other

・        
Results awaited: Mauritius has delayed the deadline for to buy up to 6,000 tons of long grain white rice to Feb. 10, for delivery between May 1 and July 31.

・        
Turkey’s TMO seeks 20,000 tons of rice on Feb. 12 for shipment between Feb. 19 and April 6.

 

Updated 2/11/20

・       
CBOT Chicago March wheat is seen in a $5.30-$5.65 range

・       
CBOT KC March wheat is seen in a $4.55-$4.80 range

・       
MN March wheat is seen in a $5.20-$5.45 range