FW: FI Evening Grain Comments 03/27/20

PDF attached

 

US
Pres. Trump Signs Coronavirus Stimulus Bill Into Law. 

Russia
plans to limit grain exports. 

 

 

Weather

MARKET
WEATHER MENTALITY FOR CORN AND SOYBEANS:

A
good mix of weather is still anticipated for most of Brazil and Argentina crop areas over the next two weeks resulting in further support for good yields and crop quality. Production losses have occurred in Rio Grande do Sul this year along with some of the
early season corn and sunseed crop in Argentina because of dryness. The bulk of other crops have done favorably in both countries.

            U.S.
planting delays are expected to prevail through the first week of April due to wet field conditions and additional precipitation in the Delta and Tennessee River Basin with areas that are usually planted in early April also being impacted. Less rain and some
warming will occur for a little while in early April, but how significant that drying is remains to be seen.

           
India, China and Australia weather is mostly good for this time of year. Rain will have to fall in southern Australia by May to support autumn canola planting.

            Rain
in southern Europe has been and will continue to be good for early corn planting in Spain, Portugal, Italy and eventually in the southern Balkan Countries, although warming is needed.

            Southeast
Asia oil palm production areas are favorably moist in many areas, but greater rain is needed in parts of the northern and eastern Philippines and in northern Sumatra as well as the Malay Peninsula.

            South
Africa summer crops are developing favorably.

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

 

MARKET
WEATHER MENTALITY FOR WHEAT: 

Winter
crop development prospects are favorable in portions of Europe, the CIS, India and China, although some of these regions did not experience good weather for establishment last autumn and it will be important that ideal weather and soil conditions are present
this spring to induce improvements prior to reproduction. More moisture is needed in the southern CIS, Romania and parts of Spain while less rain is needed to the north and that is exactly what should evolve this week. Kazakhstan and Russia’s Southern Region
will stay too dry for at least another week with some rain potential rising in the April 3-9 period.

           
Recent North Africa rain has been good for late developing wheat and barley, but much of the lost production in Morocco cannot be reversed. Additional rain is expected over the next several days.

           
Australia needs rain to bolster soil moisture prior to planting in late April and May, but there is plenty of time for weather changes to evolve. Some rain is expected in New South Wales next week, but confidence is low on its significance.

           
Middle East wheat areas will soon need drier weather to support grain maturation and the same will be true in northern Africa.

           
U.S. small grain production areas are poised to develop favorably in this early spring, but greater moisture is needed in the west-central high Plains and less rain in the Midwest and Delta. Warming is needed too in some areas.

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

Source:
World Weather Inc. and FI

 

 

Bloomberg
Ag Calendar

FRIDAY,
MARCH 27:

• ICE
  Futures Europe weekly commitments of traders report on coffee, cocoa, sugar positions ~2:30pm (~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

MONDAY,
MARCH 30:

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

TUESDAY,
MARCH 31:

• USDA’s
  annual prospective planting data for crops such as wheat, barley, corn, cotton, rice and soybeans, noon
• U.S.
  agricultural prices paid, received, 3pm
• AmSpec,
  Intertek palm oil export data for March 1-31

WEDNESDAY,
April 1:

• EIA
  U.S. weekly ethanol inventories, production, 10:30am
• Australia
  commodity index
• Brazil
  soybean, sugar, corn, coffee exports
• Honduras,
  Costa Rica monthly coffee exports
• International
  Cotton Advisory Committee releases monthly outlook in Washington
• U.S.
  soybean crush, DDGS production, corn for ethanol, 3pm

THURSDAY,
April 2:

• USDA
  weekly crop net-export sales for corn, soybeans, wheat, cotton, 8:30am
• UN’s
  FAO World Food Price Index, 4am
• Port
  of Rouen data on French grain exports

FRIDAY,
April 3:

• ICE
  Futures Europe weekly commitments of traders report on coffee, cocoa, sugar positions
  
• 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

 

 

 

 

 

 

 

USDA/ERS:
U.S.
agricultural exports are projected to total $139.5 billion in fiscal year 2020, while agricultural imports are expected at $132.5 billion, according to the Economic Research Service’s latest outlook for U.S. agricultural trade. The totals represent a $4 billion
increase in exports and $1.6 billion rise in imports over 2019, which would increase the trade surplus by $2.4 billion and reverse the trend of decreasing trade surplus in recent years. Record high pork exports are projected as global demand for U.S. pork
is expected to grow because of declining Asian production stemming from the outbreak of African Swine Fever. Expectations of increased Chinese purchases of U.S. soybeans due to the relaxation of trade barriers further drive up total U.S. projected export growth,
but uncertainty resulting from the COVID-19 outbreak tempers the outlook. Total U.S. imports are increased because of growth demand for horticultural products from the Americas, primarily fresh fruit, coupled with stronger imports of foreign vegetable oils,
and are slightly offset by a reduction in fresh vegetable imports.  Next release of the US Agriculture Trade will be on May 29.  The chart below is from late February. 
https://www.ers.usda.gov/data-products/chart-gallery/gallery/chart-detail/?chartId=98140

 

 

 

 

CFTC
Commitment of Traders

・        
As of 3/27/20

・        
Managed money traders were busy buying soybean meal and sold some soybean oil. 

・        
Traditional funds bought an estimated net 18,800 futures and options soybean meal contracts, while managed money bought a net 23,000 contracts.

・        
For soybean oil, money managed sold 1,500 soybean oil and traditional funds sold 2,500. 

・        
Managed money and traditional funds were good buyers of soybeans and Chicago wheat.

 

FUTURES
+ OPTS     Managed                 Swaps              Producer

                       
Net        Chg        Net        Chg        Net        Chg

Corn             
-108,549    -16,703    196,099     -8,174   -143,339     29,729

Soybeans           
-2,444     28,203    117,512        119   -149,126    -34,122

Soymeal            
39,099     23,000    
96,573        299   -166,798    -24,281

Soyoil               
-746     -2,458     91,088     -5,270   -105,741      7,874

CBOT
wheat          17,670     23,329    
66,046     -4,253    -76,558    -19,972

KCBT
wheat          -5,356      7,950     51,306      3,456    -46,039    -12,961

MGEX
wheat         -16,307      3,618      2,397        -61      4,381     -4,564

Source:
Reuters and FI

 

 

Macros

・        
Bank Of Canada Lowers Benchmark Overnight Rate To 0.25%

・        
US University Of Michigan Sentiment Mar F: 89.1 (exp 90.0; prev 95.9)

・        
US Personal Income Feb: 0.6% (exp 0.4%; prev 0.6%)

–         
Personal Spending Feb: 0.2% (exp 0.2%; prev 0.2%)

–         
Real Personal Spending Feb: 0.1% (exp 0.2%; prev 0.1%)

–         
PCE Deflator (M/M) Feb: 0.1% (exp 0.1%; prev 0.1%)

–         
PCE Deflator (Y/Y) Feb: 1.8% (exp 1.7%; R prev 1.8%)

–         
PCE Core Deflator (M/M) Feb: 0.2% (exp 0.2%; R prev 0.2%)

–         
PCE Core Deflator (Y/Y) Feb: 1.8% (exp 1.7%; R prev 1.8%)

 

Corn.

• Corn
  prices ended 2.50-3.50 cents lower on ongoing concerns US corn for ethanol will fall short of USDA’s projection for 2019-20 and 2020-21.   
  
• Ethanol
  margins are poor. Earlier this week we estimated corn usage could fall short about 250 to 300 million bushels from USDA 5.425-billion-bushel 2019-20 corn for ethanol usage projection.  That cut to demand was thought to be 300 million bushels or higher, according
  to some analysts.  A Reuters article noted about a fifth of US ethanol production capacity will come offline by the end of the month, according to the Renewable Fuels Association.  Volume may exceed 3 billion gallons (11.4 billion liters) of annual production
  by the end of March.  About 15+ billion gallons of ethanol was projected to be used in 2020 annual gasoline consumption.
  
• US
  refiners have been a seller of biofuel credits to raise cash.  Global oil demand is expected to fall by 15% to 20% in coming months. D6 fell to a low 12.75 cents last week (around 23 to 26).  Earlier this week the EPA failed to appeal a court ruling that could
  alter refiner biofuel obligations for 2019 and 2020.  Due to the energy demand destruction, the small biofuel waiver exemption issue might be shelved.
  
• On
  Friday the EPA granted a delay for oil refineries to file by March 31 its 2019 US biofuel mandate compliance.  They also will allow refineries to sell winter gasoline beyond May 1, until at least May 20. Winter stockpiles are high due to rapidly declining
  short-term US gasoline consumption. 
• Concurrently,
  some US ethanol plants seek to change an FDA rule to allow them to produce hand sanitizer.  Problem is ethanol made from corn and sorghum is considered “food-grade ethanol” and does not qualify for the strict pharmaceutical guidelines imposed by the FDA. 
  Unlike similar transitions that are occurring in Europe, an executive order in the US could help push this along. 
  

・        
Safras & Mercado estimated the Brazil corn crop at 105.8 million tons, up from 104.7 million tons previously.  USDA is at 101.0 million tons for 2019-20, same as 2018-19.  The difference in Safras and USDA
equates to 189 million bushels for global trade balance consideration. 

・        
A few Brazilian corn for ethanol plants are starting to sell corn inventory back to the domestic market as demand for conventional gasoline demand erode and domestic prices rise.  We never thought we would
see this coming due to the recent Brazilian biofuel boom over the past three years.  One factor for the increase in Brazil domestic corn prices relate to latest forecasts for the first corn crop to fall short of previous indications.

• The
  USDA will allow US parents living in designated areas to pick up free meals without having their kids with them, an issue that deflected some families to take advantage of the program due to social distancing. 
  
• With
  all the talk of meat supply security this week, we note on Friday the Canadian Food Inspection Agency shut down packing plant Harmony Beef, in Alberta, due to COVID-19 concerns.

 

University
of Illinois: Irwin, S. and T. Hubbs. "The Coronavirus and Ethanol Demand Destruction."
farmdoc daily (10):56,  Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, March 26, 2020. 
https://farmdocdaily.illinois.edu/2020/03/the-coronavirus-and-ethanol-demand-destruction.html?utm_source=farmdoc+daily+and+Farm+Policy+News+Updates&utm_campaign=8f5962f0f7-FDD_RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_2caf2f9764-8f5962f0f7-173649469

 

USDA
Attaché: South Africa: Grain and Feed Annual

South
Africa may export 2.2 million tons of corn in 2019-20, below USDA official of 2.5 million tons, despite a 16-million-ton production estimate, above 11.8 million tons in 2018-19. 

https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Grain%20and%20Feed%20Annual_Pretoria_South%20Africa%20-%20Republic%20of_03-19-2020

 

Export
Developments

• South
  Korea’s KOCOPIA group tendered for non-GMO corn for July 20 delivery. Results are awaited. 
  
• Under
  the 24-hour reporting system, private exporters reported to the U.S. Department of Agriculture export sales of 114,048 tons of corn for delivery to unknown destinations during the 2019/2020 marketing year.
• Vietnam
  bought 140,000 tons of corn from Ukraine for April shipment.  AgriCensus noted this was a rare move and may reflect short supplies of NA and SA soybean meal and DDGS.  We agree.
  

 

 

Updated
3/24/20

• CBOT
  May is seen in a $3.10 and $3.70 range.  July could touch $3.00 if we see a major reduction in US ethanol production.  December is seen in a $2.85-$3.95 range.   
  

 

Soybean
complex.

• CBOT
  May soybeans
  ended
  1.25 cents higher, July up 0.50, and August unchanged.  The bull spreading reflected ongoing buying in nearby meal against the back months.  May soybean meal ended up $0.20 and July down $0.60.  Soybean oil rallied 35-38 points from unwinding of meal/oil spreads. 
  The May soybean crush was up 1.75 cents to 1.2350.  Soybean basis for barge shipment to the US Gulf firmed on Friday due to slow US producer sales and increase in corn movement along the Midwestern and Delta rivers after China snapped up a large amount of
  US corn a week ago. 

・        
Higher wheat supported soybeans early but both markets settled well off session highs. 

・        
There is great uncertainty over agriculture domestic and export flows for Argentina.  Lack of producer sales and logistical problems are slowing crush and export rates.  Granted, just over 5 percent of the
2019-20 (2020-21 local) soybean crop had been harvested.  The Rosario Grains Exchange said the supply of soybean deliveries to Argentina crushing plants is down about half due to logistical problems.  In the first week of March, 28,033 trucks hauling soy,
corn and other agricultural commodities arrived at Rosario ports. That number was down to 13,267 in the first five days of this week (Reuters).  Late yesterday official data showed Argentina producer grain and oilseed sales last week were 1.4 million tons,
down from 1.9 million tons week earlier and compares to 3.8 million during the same period a year ago.  Soybean sales slipped to 322,000 tons versus 792,000 tons previous week (AgriCensus).  Late this week a labor union in Argentina requested to suspend exports
for 15 days.  The union represent inspectors crucial in the export process.

・        
Note Oil World in their weekly update lowered their projection for South American soybean crush production by 2.2 million tons for the January through September period.  This obviously will reduce soybean
oil and meal supplies.

・        
The growing question is if SA meal supplies erode, and US DDGS production declines, what will this do to the US soybean crush and corn for feed demand?  We can’t answer that, other than expect US monthly crush
rates to break records.  US domestic users prefer meal over corn, but there is also plenty of inventory for minor feedgrains and feed wheat for domestic and international end users.  The US hogs and pigs report that showed a 4 percent increase from the previous
year is one example of the large US animal unit population.  Vietnam bought Ukraine corn in a rare import tender, a hint a shortage in DDGS is shifting global trade flow to alternative sources for feedgrains.   Meanwhile, EU meal inventories are tight in part
to slowing local rapeseed crush rates.  It’s difficult to justify the EU could ramp up canola imports from Canada as that GM crop is primarily used for the biodiesel industry.  

• Canada’s
  Weekly Grain Statistics report showed Canadian canola exports for the crop-year stood at 6.114 million tons, up from 6.034 million for the same period a year ago. 
  

・        
Next month can prove difficult to trade CBOT soybean meal futures.  Spreads could get out of hand if there is an influx of business shifted from South America to the United States. 

・        
Domestic US soybean meal basis was mostly steady on Friday for the exception of a few locations.  Council Bluff, IA, was up $15 short ton to option and Mankato, MN, eased $22/ton to $15 under (both truck values).   
Deliveries in a month could be interesting.

・        
China cash crush margins were strong all week as domestic meal prices increased on tighter meal stocks. However, China soybean buying slowed this week to about 18-22 cargos (6-8 Friday), less than half of
what they bought last week.  Much of the soybeans originated from Brazil.  They slowed purchases of 2021 delivery, but at least one cargo for new crop out of Brazil traded on Friday.  Separately, China pledged to boost vegetable oil output, but no details
were provided. China cash crush margins as of this morning, using our calculation, were 184 cents per bushel (177 previous), and compares to 168 cents a week ago and negative 60 cents around this time last year. 

• Safras
  & Mercado lowered their estimate for the Brazil soybean crop to 124.2 million tons from 124.2 million tons.  USDA projected 2019-20 Brazil soybean production at 126.0 million tons, up from 117.0 million in 2018-19. 
  
• Brazilian
  crusher association Abiove noted Brazilian crushers could be faced with increasing trucking prices. Part of the reason is that drivers demanding higher fees for long hull routes amid fears over the spread of the coronavirus.  The Brazilian government issued
  an order to allow truck gas stations and diners stay open during the lockdown.  Soybean movement in Brazil depends on trucks (61%), rail (21%), waterways (14%), and other means (4%).―Reuters via National Transport Confederation.   We wonder what the “other”
  components include.  Before reading this, we thought the truck market share was much higher for Brazil.  Infrastructure in rail continues to grow in Brazil. 
  

・        
India imported 197,131 tons of Argentina soybean oil in February, down from 330,000 tons in January and 289,000 tons a year ago.  There is growing concern India vegetable oil supplies are short, but they should
have plenty of the product to satisfy domestic consumption after factoring in domestic production for a few months. 
India’s lockdown for three weeks that just started is already yielding social unrest.
Wet weather in selected areas is creating anxiety for producers. 

・        
Indonesia will lower its 3 percent palm export tax to zero percent in April. 

・        
Malaysian palm market settled the week nearly
4
percent higher.

 

Oilseeds
Export Developments

• Under
  the 24-hour reporting system, private exporters reported to the U.S. Department of Agriculture export sales of 163,290 tons of soybeans for delivery to Mexico during the 2019/2020 marketing year. 
  

 

 

Updated
3/23/20

• May
  soybeans are seen in a $8.40-$9.10 range.
• May
  meal is seen in a $305 to $360 range
• May
  soybean oil range is 24.25 to 28

 

Wheat

• US
  wheat futures ended mostly higher, well off session highs.  The rally during much of the trade related to Russia’s news that they joined a growing list of Black Sea exporters banning or limiting grain or grain product exports.  Russia announced they want to
  scale back on grain exports during the April through June period.  This suggests crop-year exports could reach around 39-40 million tons from 45 million tons projected by the AgMin earlier this month, a bullish indicator for wheat.  Russia is looking at setting
  the grain export quota at 7 million tons for the April through June period.  They exported nearly 31 million tons of grain as of March 12, so 7 million tons could fit with some current estimates for the crop-year, but well below 45 million tons projected by
  the AgMin, including 36MMT wheat projected earlier this month.  Russian corn exports are on track to reach analysts estimates but wheat could fall short. 
  
• Recently
  Kazakhstan suspended exports of wheat flour and sunflower oil.  Ukraine backed off a plan to reduce vegetable oil exports but mentioned they are monitoring wheat exports. 
  
• Meanwhile
  the Russian Grain union is urging wheat and processed grain producers not to raise prices before May 15.  Uncertainty over Black Sea exports is seen supportive US and EU wheat futures, in our opinion. 
  

・        
May Paris wheat ended up 1.50 at 195.00 euros a ton. It traded at a high of 197.50 during the session.  US futures backed way off from session highs on Friday, ending mostly slightly higher from Friday. But
the strong futures pressured US soft wheat basis bids in a few locations across the Midwest. Chicago wheat elevators posted a 15-cent decline in soft wheat basis by midday to 5 cents over the May.  Toledo SRW wheat declined 10 cents to 10 under the May.  Regarding
the May CBOT delivery process, we are under the impression good quality soft wheat supplies are tight across the upper Midwest as flour plants try to maintain production at full capacity.  CBOT registrations are only at 11 contracts.  We expect very little
deliveries.  For this reason, the spreads, like soybean meal, could fluctuate a good amount next month ahead of first notice delivery. 

・        
Morocco will suspend its import duty on soft wheat, durum and grains for another 45 days to June 15.  That’s is now official. 

• Ukraine
  spring 2020 grain plantings are running at 7 percent complete, or 1 million hectares out of the 7 million projected hectares.  15.26 million hectares are estimated for combined winter and spring. 
  
• Ukraine
  sold 128,000 tons of wheat flour on the local market to tame domestic prices.  Meanwhile the government said they agreed with traders to cap wheat exports, if it comes to it, at 20.2 million tons for the crop year ending June 30.  Ukraine already exported
  17.73 million tons according to APK-Inform.
• Canada’s
  Weekly Grain Statistics report showed Canadian all-wheat exports for the crop-year that started August 2019 stood at 9.7 million tons, down from 11.4 million for the same period a year ago.  For the week ending March 22, all-wheat exports were 317 thousand
  tons, up from 296 thousand tons a week earlier.  Durum wheat exports are running above the year ago pace at 3.145 million tons versus 2.708 million year earlier. 
  

・        
French soft wheat conditions for the G/E categories were unchanged from the previous week as of March 23 at 63 percent, down from 85 percent year ago.  The winter barley G/E rating increased slightly to 63%
from 62%, below 81% year ago.  Spring barley plantings jumped to 72 percent versus 40 percent week ago. 

 

Export
Developments.

• Taiwan
  bought 99,450 tons of various class US milling wheat for shipment between May 13 through May 27, and May 29 through June 12. 
  
• Turkey’s
  TMO bought 175,000 tons of red milling wheat for shipment during April 7-27 on March 27. Lowest price was thought to be $237/ton c&f.   
  
• The
  Philippines were thought to pass on 50,000 tons of feed wheat and milling wheat, 30,000 and 20,000 tons, respectively, optional origin.  Prices were too high.
  
• Results
  awaited: 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

• Vietnam
  looks to stockpile 270,000 tons of rice for reserves, after halting new rice export contracts through March 28. 
  
• Malaysia
  has enough rice stocks to last 2.5 months. 
• The
  Philippines seeks rice from Thailand and Vietnam.
• Results
  awaited: South
  Korea seeks 20,000 tons of rice from China on March 25 for arrival around July 30. 
  
• Results
  awaited: South
  Korea seeks 73,664 tons of rice on March 25 for arrival around end of Sep. to Oct 31. 
  

 

Updated 3/23/20

• CBOT Chicago May wheat is seen in a $5.20-$5.80 range
  

・       
CBOT KC May wheat is seen in a $4.45-$5.25 range

・       
MN May wheat is seen in a $5.10-$5.60 range