FW: FI Evening Grain Comments 04//01/20

PDF attached.  Funds were NA at the time this was sent. 

 

Weather

 

MARKET
WEATHER MENTALITY FOR CORN AND SOYBEANS:

Weather
in South America, South Africa and India remains favorable for most oilseed development. India’s rapeseed will benefit from drier weather to help reduce a quality decline because of moisture during crop maturation and harvest season. Improving rainfall in
Southeast Asia will be good for palm oil production and corn planting.

            China’s
recent flooding rainfall in the south and that which is expected this weekend into next week will delay early season coarse grain planting and will keep rapeseed development a little sluggish as well. Dryness is also a concern in Yunnan.

U.S.
early season grain and oilseed areas are facing similar conditions with frequent precipitation and soggy field conditions to limit field progress for a while. Today’s somewhat drier biased outlook does offer a few pockets of drying, but the bottom line will
require much more precipitation.

           
Australia needs greater rain in the south prior to late April and May planting of canola. Rain in New South Wales and neighboring areas the remainder of this workweek will help to moisten some areas but follow up rain will be needed.

Europe’s
drier weather bias in place today will improve field conditions for planting, but warming temperatures are needed before much early corn will be seeded. Winter rapeseed will be breaking dormancy, but no aggressive crop development is expected for a while.
Warming next week will help improve the situation. Timely rain will be needed once seasonal warming becomes a little more significant.

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

 

MARKET
WEATHER MENTALITY FOR WHEAT: 

India’s
drier weather this week will help protect winter crop quality after weekend weather trended a little too wet in the north. China winter crops are in mostly good condition with more aggressive development expected as soon as additional warming kicks in.

            U.S.,
Russia and Europe winter crop conditions vary from fair to very good. Warming is needed in all production areas and there is some need for timely precipitation in the drier areas of western Kansas, eastern Colorado, central Washington, Kazakhstan, eastern
portions of Russia’s Southern Region, the lower Volga River Basin and southeastern Europe. Recent wet weather in Spain was ideal for its winter grains.

            North
Africa and the Middle East will need dry weather soon to promote grain maturation and harvesting. Too much moisture could result in a grain quality decline. Morocco has been too dry this year and will come up quite short on production.

           
Wheat planting prospects for Australia and South Africa are good this year because of recent rain and that which is expected over the next few weeks.

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

Source:
World Weather Inc. and FI

 

Bloomberg
Ag Calendar

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

 

Brazil
selected export data for the month of March:

Commodity                     
March 2020      February 2020   March 2019

COFFEE(60
KG BAG)              3,041,400        2,810,200       3,205,400

CRUDE
OIL (TNS)                6,550,700        6,064,000       4,489,000

ETHANOL
(LTR)                  75,100,000      164,200,000    128,400,000

SOYBEANS
(TNS)                 11,644,300       5,115,700       8,458,700

IRON
ORE                       21,709,400       22,100,200     22,182,500

FROZEN
ORANGE JUICE (TNS)      38,200           29,000             26,600

NON-FROZEN
ORANGE JUICE (TNS)  120,500          115,100           141,700

SUGAR
RAW (TNS)                1,240,400        1,119,700         841,300

Source:
Reuters and FI

 

 

 

Macros

Canadian
MLI Leading Indicator (M/M) Feb: 0.3% (R prev 0.4%)

Canadian
Markit Manufacturing PMI Mar: 46.1 (prev 51.8)

 

Corn.

・        
Corn traded sharply lower along with wheat and soybeans.  US ethanol production is down 22 percent since late February.  Later in the day we heard ADM’s Columbus, NE ethanol plant will shut down.  Corn spreads
were very active.  Early bull spreading was virtually erased as corn prices continued to fall during the afternoon session. 

・        
US spot corn basis at the Gulf firmed 3 cents to 58/60 over the May. 

・        
SK bought US corn for July arrival. 

・        
Traders are still soaking in the large 97 million acres reported by the USDA on Tuesday.  With the change in prices and demand destruction seen in biofuels, we think the area could be closer to 95 million. 
We revised our 2020 US planting area estimates and corn plantings are expected at 94.790 million acres, 2.2 million below USDA’s March
Prospective Plantings.  Attached is our latest table. 

・        
Agroconsult pegged Brazil’s 2019-20 corn planted area at 13.1 million hectares, up from 13.0 million previously.  They raised the safrinha corn output to 74.7 million tons from 74.0 previously. 

・        
FC Stone left their Brazil corn estimate nearly unchanged at 101.09 million tons. 

・        
Conab will be out with updated Brazil corn and soybean estimates next week. 

・        
Ukraine has been drying down, but the state weather forecaster does not see any threat to the winter crops. But warned that short moisture may hurt recently planted spring crops.  Ukraine is just getting started
with corn plantings.  Second half April looks wet for Ukraine. 

・        
PK-Inform sees Ukraine 2020 grain crop falling to 72.2 million tons from 75 million in 2019. 

・        
USDA’s Broiler Hatchery report showed eggs set in the selected US up 3 percent and chicks placed up 3 percent.  Cumulative placements from the week ending January 4, 2020 through March 28, 2020 for the United
States were 2.48 billion. Cumulative placements were up 4 percent from the same period a year earlier.

・        
The Food and Drug Administration has relaxed regulations on the types of alcohol that can be used to make hand sanitizers during the shortage caused by the coronavirus pandemic-Reuters

 

USDA
NASS corn for ethanol use during the month of February ended up above a Bloomberg average. 

 

 

・        
US ethanol production declined a huge 165,000 barrels to 840,000, versus a Bloomberg poll looking for a 75,000-barrel decrease.  This is the lowest weekly level since September 20, 2013.  Last time production
dipped below 900,000 was 5/1/2015.  The current 840,000 barrels is down just over 22 percent compared with the week ending 2/28/20. 

・        
Ethanol stocks rocketed higher by 1.577 million barrels to a record 25.717 million barrels. 

・        
The corn for ethanol demand destruction was worse than what we thought.  At 840,000 barrels, implied corn use (2.8) is around 4.60 billion bushels, down from 5.908 billion at the end of February.  We will
likely lower our corn for ethanol use for the remainder of the crop-year by 350+ million bushels, and lower next year by 50 to 100 million. 

・        
On ethanol trader mentioned to a FI broker that in order to stop building stocks, ethanol production will need to slow to about 700,000 barrels.  That would imply an annualized figure of about 4.260 billion
corn bushels. 

 

 

 

 

Export
Developments

• South
  Korea’s KOCOPIA bought 55,000 tons of US corn at an estimated $209.65/ton C&F (non-GMO) for arrival in July. 
  
• China
  seeks to auction off 20,000 tons of frozen pork from state reserves on April 2. 
  
• Results
  awaited: Algeria seeks 40,000 tons of corn on April 1 for late April and early May shipment. 
  

 

Updated
3/24/20

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

 

Soybean
complex

• Soybeans
  ended
  sharply lower led by bear spreading.  May was off 23.25 cents and July down 22.25 cents.  We may see a slight rebound on Thursday as the February US daily crush rate shattered January’s record. 
  
• CBOT
  soybean
  complex was today lower in part to large soybean stocks reported by USDA as of March 1.  Soybean meal continues to see bear spreading with the front month May position off about $18/short ton since peaking March 24.  Argentina meal exports, although slow,
  continue to flow.  Lower WTI and lower trade in palm oil for Malaysia and China are all weighing on soybean oil.  We are also picking up Brazil has not slowed agriculture movement like Argentina.  Exports of soybeans during March were robust. 
  
• Cofco
  cancelled 349 bean receipts out of Chicago yesterday, leading the trade to think that the fire in their elevator must have been worse than thought.
• The
  CBOT May crush has taken a hit since peaking on March 24 at $1.4350.  Front month soybeans have been on the defensive as South American soybean flow continues to outpace projections.  Now that more than three quarters of the crop in Brazil had been harvested,
  ports are finding no shortage of the product.  A Bloomberg estimate put Brazil March soybean exports at a large 13 million tons but that was not the case.  Official Brazil soybean exports in March were 11.644 million tons, above 5.116 million in February and
  above 8.459 million tons in March 2019. 
• US
  soybean planted area is estimated by FI at 85.410 million acres, 1.900 million above USDA March. 
  
• US
  Gulf soybean basis was mixed.   Brazil soybean basis was a little weaker, meal down about 1 to unchanged and Brazil soybean oil fell 60 points in the nearby position. 
  
• US
  soybean meal basis was unchanged to down $6/short ton for selected rail locations. 
  
• FC
  Stone lowered their estimate for Brazil soybeans to 210.1 million tons from 124.216 million last month.  This large drop reflects smaller yields in the southern growing areas with ongoing drought conditions.
  
• South
  American soymeal when imported into Rotterdam was mostly offered between unchanged and $7 a ton lower, according to Reuters.  EU rapemeal was mostly quoted between unchanged and two euros per ton lower,
• USDA
  NASS February soybean crush was record on a daily adjusted basis.  At 6.26 million bushels per day, that would put annualized crush at 2.285 billion bushels, with capacity somewhere around 2.29-2.33 billion.  The February crush of 181.6 million bushels ended
  up 5 million above an average traded guess. Soybean oil stocks of 2.420 billion pounds are up from 2.351 billion last month and above 2.149 billion year earlier. 
  

 

 

 

Oilseeds
Export Developments

• Egypt
  seeks 3,000 tons of soybean oil and 2,000 tons of sunflower oil on April 5 for May 1-25 delivery. 
  

 

Updated
4/1/20 (top end of range lowered)

• May
  soybeans are seen in a $8.40-$9.00 range.
• May
  meal is seen in a $305 to $340 range
• May
  soybean oil range is 24.50 to 27.50

 

Wheat

• US
  wheat futures tanked
  on coronavirus concerns and technical selling.  Global import demand is starting to slow but top importers like Algeria and Tunisia were in earlier this week.  Algeria later today announced they are back in for wheat.  Separately, USDA Attaché estimated Algeria’s
  2020-21 wheat imports at 5.0 million tons, down from 6.5 million in 2019-20 and 7.515 million in 2018-19. 
  
• April
  fools!  After the close Egypt announced they are in for wheat on Thursday for May 5-20 shipment, then cancelled it a couple hours later.
  
• Egypt’s
  GASC will require the supplier of wheat to bear the burden in freight difference if the origin changes.  Uncertainty for port loadings from coronavirus concerns is starting to spook traders.  This isn’t an unreasonable request, but we will soon find out if
  some participants back off from making offers.  But we have to wait beyond April 2.
  
• US
  HRW wheat area will see precipitation through early next week bias east and north. 
  
• US
  producer sales in Oklahoma were slow for hard red winter wheat. 
• Paris
  May milling wheat futures settled 2.75 euros, or 1.4%, lower at 193.50 euros ($210.95) a ton.
• The
  European Commission increased its 2019-20 soft wheat export forecast to 30 million tons from 28 million month ago. 
  

 

Export
Developments.

• In
  its third import tender in weeks, Algeria seeks wheat on Friday. 
• After
  the close Egypt announced they are in for wheat on Thursday for May 5-20 shipment, then cancelled it a couple hours later.
  
• Jordan
  seeks 120,000 tons of feed barley on April 7 for September through October shipment. 
  
• Tunisia
  bought 75,000 tons of durum wheat at around $338.50-$342.19/ton for April 15-May 10 shipment. They last paid $326/ton C&F on March 17. 
  
• Algeria
  bought 240,000 tons of soft wheat yesterday.  Shipment was for May and/or June, depending on origin. 
  
• Passed:
  The Philippines were in for 50,000 tons of feed wheat and milling wheat, 30,000 and 20,000 tons, respectively, optional origin.  Prices were too high. 
  
• In
  an SBS import tender, Japan seeks 80,000 tons of feed wheat and 100,000 tons of barley on April 8 for arrival in Japan by July 31. 
  
• 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

• The
  Philippines seek 300,000 tons of rice from Thailand and Vietnam.
• Cambodia
  will ban rice exports on April 5. 

 

Updated 4/1/20

• 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 $5.00-$5.50 range