FW: FI Evening Grain Comments 03/18/20

PDF attached

 

Monthly continuation soybean oil chart

Source: Reuters and FI

 

Weather

 

MARKET WEATHER MENTALITY FOR CORN AND SOYBEANS: 

Today’s weather will not provide much bullish support except from the United States where a wet bias will continue in the Delta and Tennessee River Basin as well as in parts of central and eastern crop areas of Texas. South Texas moisture will be welcome and dry conditions in the far southeastern U.S. will support planting.

South America weather is still advertised to be mostly good for Argentina and southern Brazil, although the distribution of rain over the next two weeks will have much to say about second season corn production in Brazil. Argentina has had enough rain in central and southern areas recently that many crops will finish out the growing season without much potential for additional losses.

South Africa rainfall will be good for production and limited rain in eastern Australia will be supportive of early season sorghum and other coarse grain and oilseed crop maturation and harvesting.

India winter crops are still poised for excellence this year and drier weather will be needed in late March and especially April to protect crop quality.         

China’s winter weather has spring planting prospects looking very good. Rain in Spain and Portugal will improve spring planting potentials and support improved winter crop conditions.

Rain is still needed throughout Southeast Asia, but mostly in the mainland areas and in some of the northern palm oil and coconut production areas of Indonesia. Peninsular Malaysia also needs a boost in rain.

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

 

MARKET WEATHER MENTALITY FOR WHEAT: 

Weather conditions around the world have not changed much and will not likely change much for a while. U.S. Plains crop areas have benefited from recent precipitation and will help improve early season crop development, although more rain is needed in the west central parts of hard red winter wheat country. Some areas in the Midwest are too wet.

            Canada’s Prairies are expected to experience a good start to spring planting this year, but May could trend wetter.

            Europe winter crops are quite mixed with some areas in the northwest too wet. Improving soil moisture is expected in southeastern Europe which may improve crops after a poor environment for establishment last autumn. Lower area planted in parts of Europe will still pull down production, but crops that did get planted may perform better than previously expected. That statement also pertains to Ukraine.

            Dryness in Kazakhstan and eastern parts of Russia’s Southern Region will need to be closely monitored.

            China has huge potential for crop improvements this spring. India’s winter crop will be very large as well. Rain is needed in southern Australia to improve planting potentials for late April through June.

            North Africa’s rain and that in Spain will help improve some crops, but Morocco’s production losses because of drought will not be fully recoverable.

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

Source: World Weather Inc. and FI

 

 

Bloomberg Ag Calendar

WEDNESDAY, MARCH 18:

• EIA U.S. weekly ethanol inventories, production, 10:30am

THURSDAY, MARCH 19:

• USDA weekly crop net-export sales for corn, soybeans, wheat, cotton, 8:30am
• Port of Rouen data on French grain exports
• USDA total milk, red meat production, 3pm

FRIDAY, MARCH 20:

• 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
• AmSpec, Intertek, SGS release palm oil export data for March 1-20
• U.S. cattle on feed, 3pm

Source: Bloomberg and FI

 

 

Macros

·         The active strike mkts this AM were July $15 WTI crude puts

·         US Housing Starts Feb: 1599K (est 1500K ; prevR 1624K ; prev 1567K)

o   US Housing Starts (M/M) Feb: -1.5% (est -4.3% ; prevR 1.4% ; prev -3.6%)

·         US Building Permits Feb: 1464K (est 1500K ; prevR 1550K ; prev 1551K)

o   US Building Permits Feb: -5.5% (est -3.2% ; prev 9.2%)

·         Canadian CPI NSA (M/M) Feb: 0.4% (est 0.4% ; prev 0.3%)

o   Canadian CPI (Y/Y) Feb: 2.2% (est 2.1% ; prev 2.4%)

·         Canadian CPI Core – Median (Y/Y) Feb: 2.1% (est 2.2% ; prev 2.2%)

o   Canadian CPI Core – Common (Y/Y) Feb: 1.8% (est 1.8% ; prev 1.8%)

o   Canadian CPI Core – Trim (Y/Y) Feb: 2.0% (est 2.1% ; prev 2.1%)

·         The Sterling dropped to its lowest level against the USD since 1985.

 

Corn.

·         May corn ended 8.75 cents lower at $3.3525 and July down 8.25 cents to $3.4175 on eroding US demand for corn.  Corn prices hit their lowest level since 2016. Port strikes loom in Brazil but have not received conformation they have or will start. 

·         Some eastern plants have gone to spot bids only. Some western US ethanol corn ethanol plants were pulling bids today. 

• Corn basis fell by 10 cents at Burns Harbor, IN and by 7 cents in Lincoln, NE.  Decatur, Il was down 10 cents at 5 over.  Annawan, IL fell 17 cents to 25 under. 

·         One analyst believes US corn plantings will be larger than USDA’s forecast, citing profitability and decline in fertilizer prices.  SX0/CZ0 ratio suggests otherwise. 

·         We were told IEG Vantage will be out on Thursday with updated acreage numbers for the US.  Below is a preview. Note the combined corn, soybeans and wheat area is projected lower than a 5-year 2014 through 2018 average.  That’s because US winter wheat area is projected to decline to lowest in more than a century, using USDA’s projection. 

·         Allendale estimated the corn area at 94.6 million acres and soybean area at 83.7 million acres.  All wheat was pegged at 44.5 million acres. 

·         University of Illinois: Schnitkey, G., C. Zulauf, K. Swanson, J. Coppess and N. Paulson. "2020 Planting Decisions in the Face of COVID-19." farmdoc daily (10):49,  Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, March 17, 2020.  https://farmdocdaily.illinois.edu/2020/03/2020-planting-decisions-in-the-face-of-covid-19.html?utm_source=farmdoc+daily+and+Farm+Policy+News+Updates&utm_campaign=55d1136c8a-FDD_RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_2caf2f9764-55d1136c8a-173649469

·         South Korea was active again overnight picking up a couple cargos. 

·         China looks to auction off 20,000 tons of pork from state reserves on March 20.  They released 210,000 tons of pork from reserves since December.  It’s not a large amount compared to daily consumption rates but is a positive indicator the country continues to move agriculture goods. 

·         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 March 14, 2020 for the United States were 2.10 billion. Cumulative placements were up 4 percent from the same period a year earlier.

 

Weekly US ethanol production declined 9,000 barrels per day to 1.035 million barrels.  Traders were looking for a 2,000-barrel decline.  Weekly ethanol stocks were up 264,000 barrels to 24.598 million barrels.  Traders were looking for an 18,000-barrel increase.  We project US weekly ethanol production could drop to around 950,000 barrels by early or mid-April.  That would put weekly corn for ethanol use below 100 million bushels per week, compared to about 109 million this week, assuming a 2.8 yield.  Corn crop year to date ethanol production is running 0.4 percent above the same period a year ago.  We may lower our corn for ethanol use by as much as 75 million bushels by the end of this week.  

 

 

 

Export Developments

• Algeria seeks 40,000 tons of corn from Argentina on March 19 for FL April shipment.
• We heard Vietnam bought corn for May-July arrival. 
• South Korea’s KOCOPIA bought 60,000 tons of corn at $206.98/ton c&f for June 10 arrival. 
• South Korea’s MFG bought 69,000 tons of corn at $1929.99/ton c&f for August 21 arrival. 
• Yesterday South Korea’s NOFI bought 60,000 tons of corn at $190.23/ton c&f for August 15 arrival. 
• Yesterday South Korea’s FLC bought 66,000 tons of corn at $199.98/ton c&f for July 15 arrival. 

 

 

Updated 3/18/20

• CBOT May is seen in a $2.95 and $3.50 range.  December $2.75-$3.45.   

 

Soybean complex.

• CBOT soybeans traded higher led by strength in soybean meal but ended well off their lows.  Declining DDGS output could give a medium-term boost to US soybean meal demand.  This and a slowdown in Argentina meal shipments have rallied board crush. Meal registrations continue to get cancelled.  Soybean oil is trading sharply lower following declines in WTI crude oil, which traded below $22.
• 6 cargos of Brazilian soybeans were booked by China on Tuesday, mostly for July.  
• Later in the day president of operators group Sopesp told Reuters they plant to keep the Santos port operating at normal levels. 
• Rain will increase this week across southern Brazil and Paraguay, temporally boosting soil moistures.  The rain will not end the drought conditions but should improve yields.  Paraguay and southern Brazil will turn dry again Monday through Thursday next week.  Argentina will see rain across much of its growing regions through today. 
• (Bloomberg) — The port of Fuzhou in eastern China is restricting vessels arriving from nine countries including the U.S. and Singapore in efforts to limit the spread of coronavirus by visiting ships and their crew. Vessels arriving from Japan, South Korea, Iran, France, Germany, Spain, Italy, the U.S., and Singapore won’t be allowed entry into the port until they’ve completed a mandatory 14-day quarantine, said people with knowledge of the terminal’s decision. 

·         Indonesia cancelled their rule to require national ships for palm oil exports.

·         Malaysia exempted palm plantations from the shutdown order. 

 

Oilseeds Export Developments

• South Korea’s NOFI group bought 60,000 tons of soybean meal from South America for arrival around September 5.  No prices were provided. 
• Egypt seeks 30,000 tons of soybean oil and 10,000 tons of sunflower oil for May 20/June 10 and June 15/July 5 arrival. 

 

 

Updated 3/16/20

• May soybeans are seen in a wide $7.75-$8.50 range.
• May meal is seen in a $280 to $315 range
• May soybean oil range is 24.00 to 28.00

 

Wheat

·         Chicago and KC wheat trade higher on bottom picking and the recent increase in global import demand.  Mn settled unchanged to 1.50 cents lower.  KC was up 14.25 cents in the nearby contracts and Chicago rallied 8.50-9.0 cents.  This was the second day in a row KC gain over Chicago.  Funds are showing up short positions in KC by spreading against Chicago.  On comment made was that with people home due to the coronavirus, the demand for higher protein wheat is high for bread making.  Flour mill demand for high protein wheat is strong, as reflected in US domestic basis. 

·         May Paris wheat futures were up 4.00 euros to 183.25 euros.

·         Rain is need for the Black Sea region. 

 

 

Export Developments.

• Algeria bought about 400,000 tons of durum wheat at $333-$355/ton c&f for April shipment.  NA was thought to origin. 
• South Korea’s MFG bought 70,000 tons of feed wheat at $206.99/ton c&f for September 20 arrival. 
• South Korea seeks 136,700 tons of milling wheat from the United States. 
• Jordan bought 120,000 tons of feed barley, optional origin, at $195/ton c&f, for second half August and first half September shipment.  Second lowest offer was $198.50/ton. 
• 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 27. 
• Japan seeks 90,311 tons of food wheat from the US and Canada on Thursday.

• 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

• South Korea seeks 73,664 tons of rice on March 25 for arrival around end of Sep. to Oct 31. 

 

Updated 3/18/20 – revised higher for KC and MN

·        CBOT Chicago May wheat is seen in a $4.85-$5.40 range

·        CBOT KC May wheat is seen in a $4.25-$4.80 range

·        MN May wheat is seen in a $4.90-$5.55 range