FW: FI Evening Grain Comments 03/06/20

PDF attached

 

Coronavirus:
100,000+ cases, 4,000+ deaths

 

Another
turbulent week to get behind us.  From a 10+ percent decline in WTI crude oil, sharply lower trade in the USD and 30-year U.S. yields showing off their largest slide since 2009, among other wild swings in markets, traders drove up fear indexes.  One index
worth monitoring is the Markit CDX North America Investment Grade Index (below). 

 

The
Markit CDX North America Investment Grade Index
is composed of 125 equally weighted credit default swaps on investment grade entities, distributed among 6 sub-indices: High Volatility, Consumer, Energy, Financial, Industrial, and Technology, Media & Tele-communications. Markit CDX indices roll every 6 months
in March & September. 

 

Source:
Bloomberg and FI

 

USD

Source:
Reuters

 

Weather

 

MARKET
WEATHER MENTALITY FOR CORN AND SOYBEANS: 

Rain
advertised for central and interior southern Argentina next week will ease dryness and could bring on better crop conditions, although follow up rain will be needed in some areas. Northern Argentina will still have some ongoing dryness issues with the earlies
rainfall occurring after March 15. Argentina will continue to progressively become too dry through Monday, however.

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. Subsoil
moisture remains sufficient to support crops in Brazil. Rain will be needed in much of the south a week from now and it may get some rain after March 15.

           
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 interior 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, but it will not happen in the next couple of weeks.

Overall,
today’s weather will have a mixed influence on market mentality.

 

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 mixed influence on market mentality.

Source:
World Weather Inc. and FI

 

Bloomberg
Ag Calendar

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

MONDAY,
MARCH 9:

• USDA
  weekly corn, soybean, wheat export inspections, 11am
• EU
  weekly grain, oilseed import and export data
• Ivory
  Coast cocoa arrivals

TUESDAY,
MARCH 10:

• USDA’s
  monthly World Agricultural Supply and Demand (WASDE) report, noon
• Brazil
  Conab soybean and corn yield, area and production, 8am
• China
  agriculture ministry (CASDE) supply & demand monthly report
• AmSpec,
  Intertek, SGS release palm oil export data for March 1-10
• Malaysian
  Palm Oil Board data on palm production, exports, stocks
• Ros
  Agro 4Q results

WEDNESDAY,
MARCH 11:

• EIA
  U.S. weekly ethanol inventories, production, 10:30am
• Santander
  and Datagro hold sugar, ethanol conference, Sao Paulo
• FranceAgriMer
  monthly cereals balance sheet

THURSDAY,
MARCH 12:

• USDA
  weekly crop net-export sales for corn, soybeans, wheat, cotton, 8:30am
• Port
  of Rouen data on French grain exports
• New
  Zealand food prices, 5:45pm

FRIDAY,
MARCH 13:

• 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

Source:
Bloomberg and FI

 

 

 

 

 

Deliveries,
registrations, OI & Options

Bunge
was active again cancelling soybean meal registrations.  Wednesday night they cancelled 435.  Thursday evening another 72 were cancelled. 

 

 

CFTC
Commitment of Traders

・        
Big changes for the week ending March 3 for soybeans and corn. Money managers that week bought net 39,400 soybean contracts and 58,800 soybean meal.  Money managed were light net sellers of corn and bought
soybean oil and wheat. 

・        
Funds were much less long in corn than expected by 33,200 contracts, and also much less long in Chicago by 22,500 contracts.  Funds were off 19,800 contracts in their meal position.

 

 

 

 

 

 

 

Macros

・        
Lufthansa Announces Plans To Reduce Flight Capacity By ‘Up To 50%’ On Coronavirus

・        
OPEC Has No Intention To Cut Output Without Russia – RTRS Source (Russia rejected OPEC’s cuts)

・        
WTI was down more than $2.00/barrel before the US day session started. 

・        
Mexico made a deal to imports millions of barrels of Venezuelan crude oil. 

・        
US Non-Farm Payrolls Feb 273K (est 175K; prevR 273K; prev 225K)

-US
Average Earnings (M/M) Feb 0.3% (est 0.3%; prev 0.2%)

-US
Average Earnings (Y/Y) Feb 3.0% (est 3.0%;  prev 3.1%)

-US
Unemployment Rate Feb 3.5% (est 3.6%; prev 3.6%)

・        
US Private Payrolls Feb 228K (est 160K; prevR 222K; prev 206K)

-US
Manufacturing Payrolls Feb 15K (est -3K; prevR -20K; prev -12K)

-US
Average Workweek Hours Feb 34.4 (est 34.3; prev 34.3)

-US
Participation Rate Feb 63.4% (prev 63.4%)

・        
US Trade Balance Jan -$45.3 Bln (est -$46.1 Bln; prev R -$48.6 Bln; prev -$48.9 Bln)

・        
US Wholesale Inventories (M/M) Jan F: -0.4% (est -0.2%; prev -0.2%)

–
Wholesale Trade Sales (M/M) Jan: 1.6% (prev R -0.2%)

・        
Canada Trade Balance Jan -C$1.47 Bln (est -C$0.78 Bln; prevR -C$0.73 Bln; prev -C$0.40 Bln)

・        
Canada Employment Change Feb 30.3K (est 11.0K; prev 34.5K)

-Canada
Unemployment Rate Feb 5.6% (est 5.6%; prev 5.5%)

 

Corn.

・        
Corn futures ended lower by 5.75 cents basis May and 4.50 for the July position.  Lower energy products dragged corn futures lower on Friday despite USDA corn 24-hour announcements and sharply lower USD. 
At $3.7600 for the May contract, many believe corn could see another leg down in the market.  May corn ended 2.1 lower for the week. 

・        
WTI crude was down $4.29 at $41.62, or 9.35% (as of 3:00 pm CT).  It’s down 32 percent year-to-date.  The US energy complex fell more than 5 percent today. 

・        
Flow was good FH Friday.  Futures and options volume was little heavier than normal by mid-session, bias spreads  CK 379 STOP 5000X TO 376.5 3000 MORE 376.25-375.75.  For the afternoon session, it was quiet
for most of the ag markets. 

・        
In a barter transaction, Mexico will supply Venezuela with corn and water trucks in exchange for millions of barrels of crude oil.  

・        
D4 and D6 RIN prices traded lower early on Friday on uncertainty whether or not there will be a reduction in small refinery waivers for 2019. Several US biofuel groups are slamming the Administration

 

Export
Developments

• South
  Korea’s KFA bought 65,000 tons of corn from South America at around 207.95/ton c&f for June 1-30 shipment. 
  
• Under
  the 24-hour announcement system, private exporters reported to the U.S. Department of Agriculture:

–Export
sales of 211,336 tons of corn for to delivery to unknown destinations during the 2019/2020 marketing year.

–Export
sales of 234,688 tons of corn for delivery to Japan during the 2019/2020 marketing year.

 

 

 

The
USDA Attaché updated their China corn S&D
and they look for corn imports in 2019-20 to end up near 6 million tons.  China took more than 2.0 million tons of Ukrainian corn during the September through mid-February period. In 2018-19 China bought 3.84 million tons of corn from Ukraine.  It’s hard to
see China buying more than 3.0 million tons of corn from the United States for the 2019-20 marketing year even if US prices become competitive.

 

https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Grain%20and%20Feed%20Update_Beijing_China%20-%20Peoples%20Republic%20of_01-16-2020

 

 

 

Updated
3/4/20

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

 

Soybean
complex.

• CBOT
  soybeans
  ended 3-5.75 cents lower on weakness in the Brazilian real, widespread commodity selling and lack of Chinese soybean buying from the United States.  The Brazilian real has grinded lower all week which erased early gains in soybean earlier this week. May soybeans
  ended only down 0.2% for the week.   Soybean meal ended $1.00-$1.50y higher in the non expiring contracts on product spreading and expectations for a slowdown in Argentina soybean meal exports. 
  
• CBOT
  soybean oil was on the defensive, ending 60-65 points lower from sinking energy prices and weaker offshore values.  WTI crude oil was down more than 10 percent late on Friday.  Malaysian palm fell 2.9 percent or 73 MRY and cash slipped $15.00/ton.  ITS yesterday
  reported March 1-5 palm oil shipments down 38 percent from the first five days of February.  China vegetable oils were also under pressure overnight. 
  
• USD
  was down 100 points earlier this morning and off 82 points Friday afternoon.  The Brazilian real hit a fresh record low, reaching 4.6710. 
  
• Safras
  reported 2019-20 soybean sales are 61 percent complete, up from 50 percent month earlier and 46 percent for the 5-year average. 
  
• Late
  yesterday we heard all four main Argentina producer groups agreed to go on a 4-day strike starting Monday. 
  
• Yesterday
  China granted exemptions to some crushers to buy US soybeans for one year.  We heard China bought around 40 cargos of 2020 and 2021 soybeans this week. Origin was thought to be South America.  Brazil’s shipping lineup is large. According to Williams data,
  an estimated 10 million tons of soybeans was scheduled to sail during March. 
  
• Offshore
  values are leading CBOT soybean oil 16 points lower (69 points higher for the week to date) and meal $0.60 higher ($3.80 higher for the week).
  

・        
China cash crush margins as of this morning, using our calculation, were 136 cents per bushel, down 7 cents from the previous day, and compares to 126 cents a week ago and negative 35 cents around this time
last year. 

 

 

Oilseeds
Export Developments

None
reported

 

 

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

・        
A lower trade in Chicago wheat (2.75-5.25 cents) and higher trade in MN wheat (2.75-4.00 cents) led to an unchanged July and September trade in KC wheat futures.  A sharply lower USD created a two-sided trade. 
Out of all the main agriculture markets, the wheat markets appeared to be the closest when trading fundamentals.  Chicago May wheat ended 1.8 percent lower for the week. 

• Ukraine’s
  grain exports were 41.7 million tons so far in the July 2019 to June 2020 season, up 24%, according to the Ministry for Development of Economy, Trade and Agriculture. For 2010-21 grain production they projected 65-70 million tons and exports at 40 million
  tons. 
• The
  Russian Federal Center of Quality & Safety Assurance for Grain & Grain Products reported grain exports are down 13 percent to 25.9 million tons. 
  

・        
May Paris wheat futures were down 2.50 at 181.75 euros, reaching a 3-1/2 month low.

・        
France crop progress. 

o  
Spring barley plantings 33% complete by March 2, up from 32% a week earlier and below 88% year ago.

o  
Soft wheat condition unchanged at 64%, below 86% last year.

o  
Winter barley condition down 1 point to 65% from previous week, below 80% year ago. 

 

Export
Developments.

• None
  reported.
• Jordan
  seeks 120,000 tons of wheat on March 10.  Sep-Oct shipment. 
• Jordan
  seeks 120,000 tons of feed barley on March 11.  June-FH Aug. shipment. 
• 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. 
  
• 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

• Sugar
  futures dropped 7.9 percent this week.

 

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