FW: FI Evening Grain Comments 02/28/20

PDF attached

 

 

What
a week.  USD tanked late on Friday after Powell commented on using tools to stabilize economy.  COVID-19: 83,000+ infected and 2,800+ deaths. 
More
countries report initial cases.  https://www.bbc.com/news/world-51235105   
Three trillion+ USD has been wiped out of the S&P since the panic started.  2870 is the 50 percent retracement level for the S&P. 

 

 

MARKET
WEATHER MENTALITY FOR CORN AND SOYBEANS: 

Concern
about Argentina drying and rising crop stress potentials over the next couple of weeks may 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 may contribute a neutral to slightly bullish bias, but other world factors will likely have much more influence on the market

 

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

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
• EARNINGS:
  Olam, Golden Agri, Sime Darby

MONDAY,
MARCH 2:

• AmSpec,
  Intertek, SGS palm oil export data for Feb. 1-28
• USDA
  weekly corn, soybean, wheat export inspections, 11am
• EU
  weekly grain, oilseed import and export data
• Ivory
  Coast cocoa arrivals
• Australia
  commodity index, 12:30am
• Brazil
  soybean, sugar, corn and coffee exports, 1:15pm
• USDA
  soybean crush, DDGS output, corn for ethanol, 3pm
• SGS
  palm oil export data for Feb. 1-29

TUESDAY,
MARCH 3:

• Abares
  agriculture outlook conference, Canberra
• Purdue
  Agriculture Sentiment, 9:30am
• BRF
  4Q19 earnings before market open, Sao Paulo

WEDNESDAY,
MARCH 4:

• EIA
  U.S. weekly ethanol inventories, production, 10:30am
• New
  Zealand commodity price
• Abares
  agriculture outlook conference
• CNGOIC’s
  monthly supply/demand report on China soy, corn

THURSDAY,
MARCH 5:

• FAO
  world food price index, 4am
• Day
  1 of three-Day National Coffee Association USA Annual Convention
• Intertek
  Malaysia palm oil export data for March 1-5
• USDA
  weekly crop net-export sales for corn, soybeans, wheat, 8:30am
• Port
  of Rouen data on French grain exports

FRIDAY,
MARCH 6:

• 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

SATURDAY,
MARCH 7:

• China
  soybean import volume data

Source:
Bloomberg and FI

 

 

 

 

CFTC
COT

·        
Managed money futures and options showed soybean meal net short a record 77,112 contracts. 

·        
Traditional funds were just shy of the record net short for soybean meal

 

 

 

 

Macros

·        
US$ Swaps pricing is hinting up to 4 interest US rate cuts by January 2021, according to analysts. 

·        
US Wholesale Inventories M/M (JanP): -0.2% (est 0.1%, prev -0.2%)

·        
US Personal Income (Jan): 0.6% (est 0.4%, prevR 0.1%)

·        
US Personal Spending (Jan): 0.2% (est 0.3%, prevR 0.4%)

·        
US PCE Deflator (M/M) Jan: 0.1% (est 0.2%, prev 0.3%)

US
PCE Deflator (Y/Y) Jan:1.7% (est 1.8%, prev 1.6%)

US
PCE Core Deflator (M/M) Jan: 0.1% (est 0.2%, prev 0.2%)

US
PCE Core Deflator (Y/Y) Jan:  1.6% (est 1.7%, prev 1.6%)

·        
Canada Quarterly GDP Annualized Q4:  0.3% (est 0.3%, prevR 1.1%)

·        
Canada Industrial Product Price (M/M) Jan: -0.3%  (prevR 0.3%)

·        
US Chicago PMI Feb: 49.0 (est 46.0; prev 42.9)

·        
Mexico and Several Other Countries Confirms First Case Of The Coronavirus

 

 

Corn.

·        
CBOT corn futures reached new contract lows on Friday. But
May
corn ended
0.25 cents higher
despite starting the day lower on coronavirus concerns.  Friday positioning led to bull spreading.  With Argentina suspending grain and oilseed registrations, bull traders bought the front end of the corn market.  July corn ended unchanged and September was
down 0.25 cent. 

·        
Crude oil was down more than $2.00/barrel as of 1:31 CT.  

·        
Funds bought an estimated net 5,000 corn contracts.

·        
Farm Futures: US corn area 96.6 million. That would be second largest on record behind 2012. 

·        
China’s NBS reported 2019 pork output fell 21.3 percent from a year earlier. 

·        
CME raised hog futures trading limits to 3.75 cents per pound from 3.00 cents. 

 

Export
Developments

·        
None reported

 

 

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.

• May
  soybeans ended 2.25 cents lower, May meal $2.00 higher, and May soybean oil 51 points lower.
  
• Argentina
  averted a strike after the main crushing union announced to delay it for at least 14 days. The government may raise the soybean export tax to 33% from the current 30% as soon as next week.  There was speculation product taxes could be left unchanged.  This
  allowed soybeans to pair some losses from session lows.  Soybean meal found support over the ongoing Argentina economic situation and the USDA announcement for soybean meal sold to the Philippines.  The meal deliveries didn’t seem to have an impact on the
  market.  Registrations were high anyway.  Soybean oil fell hard by 47-52 points. 
  Malaysian
  palm oil on Friday fell nearly 6 percent and cash was hammered by falling about $30/ton.  Palm oil is a steal, in our opinion.  For the week, crude palm oil when imported into Rotterdam is down around 6.3 percent from the previous week. 
  
• South
  American soybean meal premiums when imported into Rotterdam were up $3-$9/ton on Friday from the previous day. 
  
• Funds
  sold an estimated net 6,000 soybean contracts, bought 5,000 soybean meal and sold 7,000 soybean oil. 
  
• EIA
  reported a very low US soybean oil for biodiesel use figure Friday morning, further pressuring soybean oil futures. 
  

·        
Brazil’s currency made a new record low on Friday. 

·        
Farm Futures: US soybean area 80.6 million acres

·        
Russia’s AgMin proposed increasing sunflower export tariffs, already set at 6.5 percent or not less than 9.75 euros (about $10.60/ton).  Some speculate the tariff could go to 20 percent. 

·        
China cash crush margins as of this morning, using our calculation, were 126 cents per bushel (133 previous day), compared to 159 cents a week ago and negative 12 cents around this time last year. 

 

Oilseeds
Export Developments

• Under
  the 24-hour system, USDA reported 135,000 tons of soybean meal was sold to the Philippines for 2019-20 delivery.
  

 

 

 

U.S.
production of biodiesel
was 133 million gallons in December 2019, 6 million gallons higher than production in November 2019.

• The
  use of soybean oil for biodiesel production is ending up much lower than what we estimated, and December’s figure raises the question whether or not US soybean oil consumption for biodiesel will reach USDA’s 8.200-billion-pound target.  The low use partially
  justifies why NOPA soybean oil stocks were unusually higher than expected at the end of December and January. 
  
• There
  were a total of 1,023 million pounds of feedstocks used to produce biodiesel in December 2019, up from 979 million in November and down from 1283 million for December 2018. We had a working estimate of 1,244 million pounds for December 2019. 
  
• Soybean
  oil remained the largest biodiesel feedstock during December 2019 with 541 million pounds consumed, above 527 million pounds above November and below 768 million pounds for December 2018.  FI was looking for 670 million pounds! 
  
• Soybean
  oil use for the first three months of the crop-year average 52.5 percent of total feedstock versus 57.3 percent year earlier. 
  
• We
  lowered our soybean for biodiesel production to 8.175 billion pounds, 25 million below USDA.  Our tentative 2019-20 US soybean oil carryout is 1.46 billion pounds, below 1.515 billion USDA February S&D.  This will change when NASS updates their US crush.

 

 

 

 

 

Third
month rolling Malaysian palm oil chart

Source:
Reuters and FI

 

 

Updated
2/28/20

• 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 28.00 to 31.00 (lowered 50)

 

Wheat

·        
US wheat traded the day mostly lower on coronavirus concerns. KC and MN ended higher on late short covering. 
May
Chicago was down 2.50 cents, May KC wheat finished 1.50 cents higher and May MN ended 3.50 cents higher. 
Chicago
wheat down for the third session on coronavirus concerns.

·        
USD was lower by 34 points as of 1:40 pm CT.

·        
Funds sold an estimated net 3,000 Chicago wheat contracts. 

·        
French wheat crop ratings were 64 percent as of Feb 24, down one point from the previous week but well below 85 percent year ago. 

·        
May Paris wheat futures were down 2.25 at 184.25 euros.

 

Export
Developments.

• The
  Philippines bought 275,000 tons of feed wheat, optional origin, at $200-$230/ton for May 20-July 22 shipment. 
  
• Jordan
  seeks 120,000 tons of wheat on March 3. 
• Jordan
  seeks 120,000 tons of feed barley on March 4. 
• 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. 
  
• Morocco
  seeks 354,000 tons of US durum wheat on March 5 for arrival by May 31.
• Syria
  seeks 200,000 tons of wheat from Russia by March 23.  No purchase was made that closed on February 17. 
  

 

Rice/Other

• China
  set 2020 rice support prices to between 2420-2600 yuan per ton, and capped purchases to 50 million tons (30 japonica and 20 Indica). 
  
• Indonesia
  looks to import 130,000 tons of sugar from India. 

 

Updated 2/28/20

·       
CBOT Chicago May wheat is seen in a $5.00-$5.60 range

·       
CBOT KC May wheat is seen in a $4.35-$4.85 range

·       
MN May wheat is seen in a $4.95-$5.50 range