FW: FI Evening Grain Comments 03/04/20

PDF attached

 

Coronavirus live updates: https://www.bbc.com/news/live/world-51734185

94,000+ cases, 60 countries

 

Argentina to Hike Tax on Soy Products With Corn and Wheat Spared  https://www.bloomberg.com/news/articles/2020-03-02/argentina-is-said-to-plan-soy-meal-oil-export-tax-increase

 

Weather

 

 

MARKET WEATHER MENTALITY FOR CORN AND SOYBEANS: 

The South America weather outlook remains of interest today, but if rain falls in central Argentina next week as advertised the impact of recent dry and warm to hot weather will be minimized. Argentina will continue to progressively become too dry through the weekend and areas that do not get rain next week in northeastern and some southern locations will see stress conditions get great enough to harm late season production potentials.

Brazil’s drying in the west and south will be ideal for promoting soybean harvesting and second season crop planting. Wet weather in Minas Gerais and Goias should ease up during the next ten days, although showers and thunderstorms will still occur periodically.

The situation in South America may not be critical enough to move markets in a big manner, but there might be some bullish influence from the weather amidst a huge array of other market concerns that may counter any influence from the weather.

            India’s and China’s winter crop outlooks are still good, and improvement has occurred in recent weeks across parts if Europe. South Africa’s weather has not changed from that of late last week.  The U.S. outlook remains wet for many areas from the lower Midwest into the Delta and southeastern states over the next couple of weeks possibly slowing early season planting potentials. There is plenty of time for the weather to improve for better planting potentials.

 

MARKET WEATHER MENTALITY FOR WHEAT: 

Earlier than usual crop development is expected for many production areas around the world, but as long as there is no threatening cold coming up the situation is not likely to be significant. Huge crops are still expected from India and China will end up with a big crop as well. North Africa production is destined to be low based mostly on dryness in Morocco and northwestern Algeria. Europe winter crops are in mostly good shape, although rain is still needed in the southeast.

            U.S. wheat is expected to remain in favorable shape, but greening and early season development in the southern Plains could be aggressive for a while due to unusually warm weather.

            Overall, weather today may produce a neutral bias on market mentality.

Source: World Weather Inc. and FI

 

Bloomberg Ag Calendar

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

 

 

Macros

·         USD was higher by 27 points as of 7:31 am CT.   

·         US ADP Employment Change Feb 183K (est 170K; prev 291K)

·         Lufthansa To Ground 150 Aircraft Due To The Coronavirus – Company Sources

·         US Markit Services PMI Feb F: 49.4 (est 49.4; prev 49.4)

– Markit Composite PMI Feb F: 49.6 (prev 49.6)

·         US ISM Non-Mfg PMI Feb: 57.3 (est 54.9; prev 55.5)

–  Non-Mfg Biz Activity Feb: 57.8 (est 58.8; prev 60.9)

–  Non-Mfg Employment Feb: 55.6 (prev 53.1)

–  Non-Mfg New Orders Feb: 63.1 (prev 56.2)

–  Non-Mfg Prices Paid Feb: 50.8 (prev 55.5)

·         Bank of Canada cuts 50 bps

·         US DoE Crude Oil Inventories (W/W) 28-Feb: 785K (est 3000K; prev 452K)

– DoE Distillate Inventories: -4008K (est -2000K; prev -2115K)

– DoE Cushing OK Crude Inventories: -1971K (prev 906K)

– DoE Gasoline Inventories: -4339K (est -1871K; prev -2691K)

– DoE Refinery Utilization: -1.00% (est -0.50%; prev -1.50%)

 

 

Corn.

·         CBOT May corn advanced 3.75 cents to $3.85.  Corn futures started the day lower in the non expiring positions on light technical selling.  Bull spreading lifted nearby futures higher after the day session open.  China was rumored to be looking for corn, sorghum and DDG’s on Tuesday.  The USDA 24-hour system reported 110,000 tons of sorghum was sold to China.  This supported nearby corn contracts.  China booked 475,439 tons of US sorghum as of February 21, not including the 324,200 tons USDA reported last week to unknown destinations.  Thursday’s USDA export sales report (and next week) will be interesting to monitor.  Tariff exemptions kick in this week so traders are hoping China will buy corn and DDGS. 

·         WTI crude was up near flat as of 1:20 am CT.  

·         The EPA said they will shortly respond to a court decision over the biofuel waiver program. 

·         CNGOIC warned 2019-20 China corn consumption could drop 3 million tons due to the reduction in chicken inventories.  USDA projects 2019-20 China corn for feed demand at 190 million tons, down 1 million tons from 2018-19.  We will find out next week if USDA adjusts China’s domestic corn demand lower due to less animal units. 

·         The 6-10 day for the US still looks wet.  We have seen an increase in media inquiries regarding US spring planting delays. 

• Corn plantings are underway across the far southern US.  Texas was 12 percent planted for corn as of the end of February, up from 7 percent year ago and 6 percent for the 5-year average.   Heavy rains across the Delta and Southeast this week will likely delay fieldwork activity.  But for the overall picture, the bulk of production for corn and soybeans is in the Midwest, where plantings don’t get underway until April.  In our opinion, there is plenty of time for the wet/soggy fields to dry down some for the key “I” states.  One thing we have to monitor is wrapping up the corn harvest (from 2019) that was left in the fields across the upper Midwest and far northwestern Corn Belt.  If producers are delayed in pulling the crop out and treating their fields before plantings, this could impact crop decisions where more wheat, other grains, and soybeans could chip away at intended corn acreage.  Too early to speculate and still look for a large soybean and corn area for 2020. 
• The USDA Broiler Report showed eggs set in the US up 4 percent from a year ago and chicks placed up 4 percent.  Cumulative placements from the week ending January 4, 2020 through February 29, 2020 for the United States were 1.71 billion. Cumulative placements were up 4 percent from the same period a year earlier.

 

Weekly US ethanol production increased 25,000 barrels to 1.079 million barrels, highest in a month.  A Bloomberg poll was looking for it to be down 8,000 barrels.  Stocks were up 246,000 barrels to 24.964 million, a weekly record. A poll was looking for an increase of 89,000 barrels. Corn crop year to date ethanol production is now running 0.1 percent above the same period a year ago.  As of early January, it was running 1.6 percent below the year ago pace. 

 

 

 

 

U of I

Sherrick, B. and G. Schnitkey. "Crop Insurance Decisions for 2020." farmdoc daily (10):39,  Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, March 3, 2020. https://farmdocdaily.illinois.edu/2020/03/crop-insurance-decisions-for-2020.html

 

Export Developments

• The USDA 24-hour system reported 110,000 tons of sorghum was sold to China for the 2019-20 marketing year.  It’s rare to see 24-hour sorghum sale announcements.

 

Updated 3/4/20

• CBOT May is seen in a $3.65 and $4.00 range. 

 

Soybean complex.

• CBOT soybeans and soybean oil were up on Wednesday on bargain buying.  Soybeans and soybean oil also saw support from reports Argentina will increase export taxes on soybeans, meal and oil.  Egypt bought a combined 76,000 tons of vegetable oils.  Palm oil was firm overnight.  Crush basis May is just below $1.00. Meal traded mixed on light bull spreading.
• May soybeans ended 3.75 cents higher, May meal $1.20 lower, and May soybean oil 58 points higher. Bull spreading was a large feature in soybeans and meal.   

·         USDA announced they think China will come into the US market in late spring and summer to buy US soybeans-AgMin.  Meanwhile Vietnam pledged to buy more farm products from Nebraska to counter tariff threats.

• Brazil’s real and Argentina’s peso made new lows. 
• Brazil’s Senate approved a law that expands financing for farmers.  The President is expected to sign it into law. 
• Argentina will not be completely dry over the next two weeks. The central areas have an opportunity for rain Monday through mid-next week. 

·         Solvent Extractors’ Association of India (SEA) estimated India rapeseed production at 7.8 million tons versus 7.5MMT year earlier.  USDA is at 7.7 million tons for 2019-20. 

 

As of close:

 

Oilseeds Export Developments

• Egypt bought 60k of soybean oil and 16k of sunflower oil on Wed. for arrival around March 1-20. 

30,000 tons of soyoil at $720.00 c&f

30,000 tons of soyoil at $720.00 c&f

16,000 tons of sunflower oil at $734.00 c&f

 

Updated 3/04/20

• May soybeans are seen in a wide $8.80-$9.30 range.
• May meal is seen in a $300 to $330 range
• May soybean oil range is 28.30 to 32.40

 

Wheat

·         US wheat futures were lower on technical selling and slow US export developments despite the increase in global tender announcements. CBOT May Chicago wheat ended down 8.75 cents, May KC 4.75 cents lower and May MN 4.50 cents lower. 

·         USD was higher by about 26 points as of 1:30 pm CT.

·         May Paris wheat futures were down 0.25 at 184.25 euros.

 

Export Developments.

• Tunisia seeks 117,000 tons of optional origin soft wheat and 50,000 tons of feed barley on March 5 for shipment during March-May and May-June, respectively. 
• 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 Aug 7. 
• Japan bought 117,389 tons of food wheat late Wednesday. 

• 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 Aug 27, on March 11. 
• Jordan bought 60,000 tons of feed barley at $198.75/ton c&f for LH July shipment. 
• Jordan seeks 120,000 tons of wheat on March 10.  Sep-Oct shipment. 
• Morocco seeks 354,000 tons of US durum wheat on March 5 for arrival by May 31.
• Turkey seeks 305,000 tons of wheat on March 11 for late March and/or early shipment. 
• Syria seeks 200,000 tons of wheat from Russia by March 23.  No purchase was made that closed on February 17. 
• Ethiopia seeks 400,000 tons of wheat on April 7.  IN a separate tender, they seek 200,000 tons of wheat on April 1.  Both are optional origin. 

 

Rice/Other

• None reported

 

Updated 3/4/20

·        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 $5.05-$5.50 range