FW: FI Evening Grain Comments 02/26/20

PDF attached

 

Argentina may increase export taxes on soybeans, meal and oil and leave grains unchanged.  This supported the US soybean meal market today.

 

 

Weather

MARKET WEATHER MENTALITY FOR CORN AND SOYBEANS: 

Concern about Argentina drying and rising crop stress potentials over the next couple of weeks will begin influencing market trade in the next few days. There will also be some concern over flooding rain expected in Minas Gerais, Goias, Rio de Janeiro and northeastern Sao Paulo, Brazil in the next seven days. Some important drying will occur in Brazil before the greater rain falls and that will support second season planting for a while.

            Southeast Asia weather is quite varied. World Weather, Inc. anticipates an erratic shower and thunderstorm pattern in March supporting early season moisture boosting.

            Winter grain and oilseed crops will remain favorably rated and poised for improvement in the spring in China and southeastern Europe. India’s winter crops are expected to perform well this year because of greater than usual rainfall.

            U.S. early season planting may be slow this year in the Delta, southeastern states and possibly the lower Midwest because of frequent rain and wet field conditions.

            South Africa will get some timely rainfall along with parts of Australia to maintain a favorable outlook. With that said, eastern Australia production has not improved much, but some sorghum has received supplemental rainfall recently.

            Overall, weather today will likely produce a neutral to slightly bullish bias.

 

MARKET WEATHER MENTALITY FOR WHEAT: 

Worry over rising temperatures in the central and southern U.S. Plains over the next couple of weeks might have the markets attention. Wheat will be brought out of dormancy in Texas and Oklahoma along with areas to the east. Cold weather may return later in March and/or April to bring back freezes which could place some of the crop at risk. Crops in Kansas, Colorado and Nebraska will lose winter hardiness as well.

            Russia crops are going to come into spring favorably moist except in the far south where greater rain will be needed. Kazakhstan will also need greater rain in the spring while Ukraine already has enough moisture to induce some improvement just as soon as seasonal warming arrives.

            North Africa’s outlook has not changed for Morocco, but there is a little more rain slated for Tunisia and northeastern Algeria over the next two weeks. No general soaking of rain is expected, but any showers would be welcome.

            Australia’s winter small grains will not be planted prior to late April which leaves plenty of time for improved weather and soil conditions.

            India’s wetter outlook over the next two weeks will further ensure a significantly large-sized winter crop.

            France and Spain need to warm up along with Italy to support spring planting and to stimulate early season crop development when weather conditions improve.

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

Source: World Weather Inc. and FI

 

Bloomberg Ag Calendar

WEDNESDAY, FEB. 26:

• EIA U.S. weekly ethanol inventories, production, 10:30am (26 feb 2100)

THURSDAY, FEB. 27:

• USDA weekly crop net-export sales for corn, soybeans, wheat, 8:30am
• Port of Rouen data on French grain exports
• International Grains Council monthly market report

FRIDAY, FEB. 28:

• 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 weekly update on crop conditions
• U.S. agricultural prices paid, received, 3pm
• AmSpec, Intertek, SGS palm oil export data for Feb. 1-28
• EARNINGS: Olam, Golden Agri, Sime Darby

Source: Bloomberg and FI

 

Macros

·         US President Trump To Give A News Conference At 6PM ET On Coronavirus

·         The U.S. Centers for Disease Control and Prevention warned Americans to prepare for an outbreak at home.

·         US DoE Crude Oil Inventories (W/W) 21-Feb: 452K (est 2600K; prev 415K)

– DoE Distillate Inventories (W/W): -2115K (est -1500K; prev -635K)

– DoE Cushing OK Crude Inventories (W/W): 906K (prev -133K)

– DoE Gasoline Inventories (W/W): -2691K (est -2000K; prev -1971K)

– DoE Refinery Utilization (W/W): -1.50% (est -0.70%; prev 1.40%)

 

Corn.

·         May corn ended 2.00 cents lower on soybean/corn spreading despite South Korea picking up another cargo of corn overnight.  We estimate SK bought at least seven cargos of corn so far this week.  One source put purchases this week just under 1.5 million tons.  Lower crude oil added to the negative undertone.  Traders are trying to figure in pricing.

·         Funds sold an estimated net 10,000 contracts.  Over the last six sessions funds sold an estimated net 56,000 contracts. 

·         Crude oil was down about $1.18/barrel as of 3:00 pm CT.  

·         Weekly US ethanol production increased 14,000 barrels to 1.054 million barrels and stocks decreased 63,000 barrels to 24.718 million.  A Bloomberg poll looked production to be up 1,000 stocks to decrease 5,000 barrels.  

·         There is already talk of an interest rate cut for the Eurozone and US (June) due to economic uncertainty from the global trade disruptions caused by the coronavirus.

·         We don’t look for any CBOT corn deliveries on Friday.  Thursday is position day. 

·         South Africa’s CEC initial estimate for corn production was 14.560 million tons, just above a Reuters poll of 14.504 million tons, and up from 11.275 million tons in 2019. 8.287 (7.99 est.) million was estimated for white corn and 6.273 (6.52 est.) million for yellow. 

·         The USDA Broiler Report showed eggs set in the US up 3 percent and chicks placed up 3 percent.  Cumulative placements from the week ending January 4, 2020 through February 22, 2020 for the United States were 1.52 billion. Cumulative placements were up 4 percent from the same period a year earlier.

·         China looks to sell 20,000 tons of pork from reserves on February 27. 

·         Vietnam culled over 100,000 birds since January 1 after discovering cases of H5N1 and H5N6 bird flu.

 

A headline during the trade said US President Trump will pare biofuel waivers for oil refineries. Assuming this is for 2019 biofuel waiver applications, one estimate stated the cut could go from 1.43 billion gallons, waived in 2018, to about 400 million for 2019, but if all big refineries are cut out.  This would be bullish soybean oil and more so corn since the bulk of the RFS is composed of conventional biofuel.  We heard by early afternoon, D4 traded up to 53 from 47 and D6  was nearly 43, up from 33 yesterday.  Link below to brush up.  From 10/25/19…EPA refinery exemptions reduced renewable fuel blending requirements in 2018 www.eia.gov/todayinenergy/detail.php?id=41794  

 

Export Developments

·         Under the 24-hour announcement system, USDA reported 123,000 tons of corn was sold to South Korea for 2019-20 delivery.

·         South Korea’s NOFI group bought 67,000 tons of corn from South America at around $212.48 a ton c&f for arrival in South Korea around June 20.  Yesterday they paid $208.95 for June 30 arrival. 

 

Weekly US ethanol production increased 14,000 barrels to 1.054 million barrels and stocks decreased 63,000 barrels to 24.718 million.  A Bloomberg poll looked production to be up 1,000 stocks to decrease 5,000 barrels.  

 

 

 

 

Updated 2/24/20

• CBOT May is seen in a $3.50 and $3.90 range.  If corn trades below $3.60, we see this as a buying opportunity.    

 

Soybean complex.

• Speculation Argentina will increase export taxes on oilseeds, leave grains unchanged and lower meat exports, created a rally in soybean meal that spilled over to soybeans.  The 3 percent point increase to the current 30 percent in the oilseed complex was rumored in the market yesterday. But then today after the long four-day holiday weekend, Argentina’s AgMin announced they suspended agriculture export registrations until further notice.  They may have to done this as a layup before increasing export taxes to avoid a potential rush in last minute export registrations.   US interior soybean meal basis surged at several locations. Claypool, IN, was up $10/short ton.  Importers tend to shift product business to the US when Argentina crushing either slows or economic distress increases. 
• May-July meal spread narrowed $0.80 to $5.50 short ton. It was near full carry and now declined to around 60%. 
• May soybeans ended 3.75 cents higher, May meal $5.30 higher, and May soybean oil 17 points lower.  The lower trade in soybean oil was sort of a surprise after President Trump indicated the Administration would pare back on granting biofuel waivers to oil refineries.  We thought this announcement would help soybean oil and more so corn futures. 
• Funds bought an estimated net 6,000 soybean contracts, bought 6,000 soybean meal and sold 4,000 soybean oil. 

·         FND soybean deliveries are estimated between zero to 75 contracts with a bias of zero, soybean meal 250-600, and soybean oil 900-1500. 

·         Brazil’s currency made a new record low on Wednesday.  It was last 4.4481 at the time this was written. 

·         Southern Brazil will see much needed rain during the balance of this week. 

·         China was reportedly looking around for 2020 May/June soybeans. 

·         Heilongjiang will provide subsidies to local soy processors. The program will last for three years. 

·         Indonesia looks to increase its palm oil export tax to boost domestic biodiesel production and consumption.  The tax is currently set at $50 percent ton. 

 

Oilseeds Export Developments

• None reported

 

 

 

Updated 2/24/20

• May soybeans are seen in a wide $8.65-$9.15 range.
• May meal is seen in a $280 to $3.05 range
• May soybean oil range is 28.50 to 31.50 (lowered 50 & 75)

 

Wheat

·         US wheat ended mostly lower in Chicago and KC while mostly moderately higher in MN.  The USD was higher.  

·         May Chicago was down 1.25 cents, May KC wheat finished 2.75 cents lower and May MN ended 0.25 cent higher. 

·         USD was higher by 14 points earlier as of 3:14 pm CT.

·         Funds sold an estimated net 4,000 Chicago wheat contracts. 

·         We look for FND Chicago wheat deliveries to be zero. 

·         Ukraine grain exports topped 40 million tons so far this marketing year, up 23 percent from same period year ago.  

·         May Paris wheat futures were up 0.50 at 189.00 euros.

 

Export Developments.

• Jordan bought 60,000 tons of feed barley at $198/ton for June-July shipment. 

• Syria seeks 200,000 tons of wheat from Russia by March 23.  No purchase was made that closed on February 17. 
• South Korean flour millers bought around 85,000 tons of US milling wheat for shipment between May 1-31.
• Tunisia seeks 75,000 tons of feed barley on Thursday, Feb. 27, in three 25,000-ton consignments for shipment between April 1 and May 5, depending on origin. 
• Japan in an SBS import tender received no offers for 120,000 tons of feed wheat and 200,000 tons of feed barley for arrival in Japan by July 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 March 4. 
• Bangladesh seeks 50,000 tons of wheat by February 27. 
• Morocco seeks 354,000 tons of US durum wheat on March 5 for arrival by May 31.

 

Rice/Other

• None reported. 

 

Updated 2/24/20

·        CBOT Chicago May wheat is seen in a $5.15-$5.80 range

·        CBOT KC May wheat is seen in a $4.45-$4.95 range

·        MN May wheat is seen in a $5.05-$5.55 range