FW: FI Evening Grain Comments 05/22/20

PDF attached

 

US,
UK,
Singapore,
India, Indonesia, Malaysia, Pakistan are all on holiday Monday. 

 

Most
US ag futures were lower on renewed US-Chine tensions. China confirmed on Friday that they intend to bypass Hong Kong’s legislature to launch national security laws.  New protests and lower MSCI index (down 5.5%), among other reactions followed suit.

 

 

Weather

 

We
look for US corn plantings to increase 10 points from the previous week and soybeans to be up 12-15 points. US winter wheat conditions could improve 1-2 points. 

 

MARKET
WEATHER MENTALITY FOR CORN AND SOYBEANS: 

           
Periodic rain delays are expected in U.S. planting during the next week, but some fieldwork is expected. The wettest conditions are expected this weekend into most of next week. Northwestern parts of the Midwest will not see nearly as much frequent rain and
will experience the best field working conditions. A very good environment will remain for emerging and establishing spring and summer crops.

Rain
in western Canada’s Prairies this week has stalled spring fieldwork and that will continue through the weekend while weather in the east will be drier biased and warm favoring spring planting progress.  Some rain will fall in Manitoba this weekend, but Saskatchewan
will only receive a few sporadic showers in the northwest and extreme east.

More
rain in Ontario, Canada today into next week next week will keep fieldwork for corn and soybean areas advancing slowly.

Excessive
rain fell in interior southern Brazil overnight and some additional heavy rain is expected today. Flooding may damage a few crops, but most of the Safrinha corn will not be impacted.

Brazil
and Argentina weather will not change much over the coming ten days and that should translate into ongoing good western Safrinha crop conditions in Brazil while conditions in the east are quite varied leaving many areas in need of rain. Harvesting in Argentina
will dry down until late next week and into the following weekend.

Good
harvest weather is expected in South Africa and India. Crop planting and establishment in China is expected to advance favorably, although the North China Plain and Yellow River Basin will be drying out.

Rain
is expected over the next few days in southeastern Europe brining some additional dryness relief in the Balkan Countries and Ukraine. In the meantime, Western Europe will be drying out with northern France, the United Kingdom, Belgium, Netherlands and Germany
becoming too dry soon.

Rain
in a part of Russia’s Southern region in the coming week will be welcome, but more rain will be needed.

Southeast
Asia still needs greater rain in Thailand and portions of the Philippines while conditions in Indonesia and Malaysia are mostly good.

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

 

MARKET
WEATHER MENTALITY FOR WHEAT:  Russia’s
spring wheat region has been making the news recently with an erratic rainfall distribution in the southeastern New Lands and some very warm to hot temperatures that occurred in the past week. Rainfall will continue sporadic and more warm-biased conditions
are likely next week. The area of concern is near the northeastern border of Kazakhstan.

Dryness
remains in the southwestern U.S. Plains and in some areas near the Black Sea and developing in northern Europe. Dryness was also continuing in Western and South Australia. Rain chances are improving for some of these drier areas with rain in the Balkan Countries
over the next few days, some scattered showers in Russia and Ukraine and some rainfall in the southwestern U.S. Plains.

           
Some showers impacted Queensland and far northern New South Wales, Australia recently, but much more rain will be needed to induce the best autumn planting. Western Australia may receive some rain Sunday and that will be welcome.

           
Canada’s Prairies planting has been advancing favorably, although rain in the west has stopped that process for a while. Wheat development in Quebec and Ontario, Canada is improving due to warmer temperatures.

           
Spring wheat planting in the northern U.S. Plains should be advancing favorably.

           
Rain is needed in Argentina and South Africa to support planting.

           
Overall, weather today is expected to have a mixed influence on market mentality.

 

Source:
World Weather Inc. and FI

 

UNITED
STATES

• No
  major theme changes are advertised out over the next ten days
• Most
  models bring some cooler air into the eastern United States during the latter part of next week and into the second weekend of the outlook
• GFS
  model run is quick to bring a high-pressure ridge into the middle of the U.S. following the cool surge in the first days of June
  • This
    advancing ridge and ridge intensity seems too great; a weaker ridge that comes a little slower would make more sense
• Rain
  falls frequently in the Midwest through the end of next week with drier conditions expected after the cool air arrives in the second weekend of the two-week outlook
• A
  reinforcing shot of cool air brings some showers back to the Great Lakes region and lower eastern Midwest June 2-3
• All
  of this is very similar to the scenario presented Thursday
• 06z
  GFS model run has reduced rainfall in the west-central high Plains for this first week of the outlook and the change was needed
• The
  GFS brings a tropical cycle into the Gulf of Mexico June 4-6 with a threat to the southeastern states June 7
  • This
    feature is not expected to verify

 

Overall,
fieldwork will not advance very well over the coming week across the Midwest because of frequent showers and thunderstorms, although some progress is expected. Cooling in the second week will only be temporary, but it will bring a break from the wet bias and
provide an opportunity for improved field working conditions. Rain will also fall in the central and southern Plains during the coming week and that will bring some needed moisture to parts of hard red winter wheat country and West Texas cotton, corn and sorghum
areas, but the high Plains region may not do as well as areas a little farther east with expected rainfall.  A good mix of sun and rain will occur in the northern Plains, Delta and southeastern states as well as parts of Canada’s Prairies. Alberta will remain
too wet, but some of the drier areas in southwestern Manitoba may get some needed rain.

 

SOUTH
AMERICA

• Greater
  rain has been suggested for today and Saturday for Sao Paulo and some immediate neighboring areas of Parana and Mato Grosso do Sul
  
  • Some
    of this increase was needed because of the excessive rain event that occurred overnight and was still under way this morning
• Rain
  in the May 31-June 2 period in interior southern Brazil was increased and that may not verify very well
  • The
    model was too wet
• Argentina
  rainfall for late next week and into the following weekend was reduced this morning
  • This
    change was badly needed

 

Overall,
flooding rain in interior southern Brazil was a surprise this morning and the heavier rainfall will continue for a while today while lifting to the north; however, the precipitation should diminish quickly tonight and Saturday and some of the increased rainfall
in Sao Paulo may be overblown.  A welcome return of showers to parts of Argentina late next week and into the following weekend will be very important for wheat planting and it will be closely monitored.

 

EUROPE/BLACK
SEA

• Both
  the GFS and European models are in good agreement across Europe and the Black Sea region for the coming ten days
  • Brief
    periods of rain and thunderstorms are expected in most areas, although some areas in Ukraine and a few in northwestern Russia may not get good amounts of moisture, but no critically dry conditions are expected
  • Beneficial
    rainfall should impact the Balkan Countries portions of Ukraine and portions of Russia’s Southern Region resulting in greater soil moisture and improved crop conditions
• No
  serious changes were noted overnight, although the 06z GFS model did increase rain in parts of southwestern Russia and eastern Ukraine while reducing it in central Ukraine
  
  • Most
    of these changes occur at the end of next week and into the following weekend
    
• The
  GFS model run ends with a deepening low-pressure trough aloft over western Europe that results in cooler and wetter conditions in central and western Europe which is not likely to verify
• The
  changes in western Europe also force a ridge of high pressure over the western CIS which ends rainfall over those areas and starts a more notable warming trend.
  
  • These
    feature changes are all exaggerated and unlikely to verify
• The
  European model brings a high-pressure ridge to central Europe limiting rainfall in western Europe to the United Kingdom and northwestern France while drying out some of the eastern parts of Europe and the westernmost parts of the western CIS
  • This
    solution is much more likely to verify than that of the GFS

 

The
bottom line is still one of improvement for the Black Sea region over the coming week to nearly ten days. However, drying will come to eastern Europe and areas from western Ukraine into far northwestern Russia in the first week of June. Temperatures will be
a little warmer at that time, but not excessively warm. Crop development and fieldwork will advance better with less cloudiness, less showers and less coolness during this period of time. Western Europe, in the meantime, is still a worry because of developing
dryness in France, the United Kingdom, Germany, Belgium and Netherlands and those areas will be closely monitored with little rain and mild to warm weather expected for the next ten days.

 

EASTERN
RUSSIA NEW LANDS

• Not
  much change has been made to the general weather pattern over the next ten days
  • A
    ridge of high pressure builds through Kazakhstan this weekend and into parts of eastern Russia’s New Lands
  • This
    will squelch rainfall and bring on warmer temperatures
  • The
    ridge breaks down gradually next week as two frontal systems move over the top of the system. Not much rain comes from these frontal systems C at least not according to the European model
  • The
    GFS model, however, does bring some rain to the drier areas of the southeastern New lands during the second weekend of the outlook with additional showers through the week of June
    • This
      precipitation seems to be a little overdone and not likely to verify
    • Some
      showers are expected, but with limited impact on the region’s dryness

 

Concern
about the southeastern CIS New Lands will continue for a while and crop and field conditions will deteriorate. There may be some expansion of dryness to the northwest over the coming week, as well.  The breakdown of the high-pressure ridge will bring some
cooler temperatures and a little shower activity, but not enough rain is expected to make a big difference.

Source:
World Weather Inc. and FI

 

 

 

 

 

 

 

 

 

 

Seven-day
outlook:

 

Bloomberg
Ag Calendar

FRIDAY,
May 22:

• 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
• U.S.
  cattle on feed, poultry slaughter, 3 pm
• Shanghai
  exchange’s weekly commodities inventory, 15.30
• EARNINGS:
  Sime Darby Plantation

SATURDAY,
May 23:

• China
  May trade data, including agricultural imports

MONDAY,
May 25:

• China
  April trade data, including country breakdowns for commodities (tentative)
• EU
  weekly grain, oilseed import and export data
• HOLIDAY:
  U.S., U.K., Singapore, India, Indonesia, Malaysia, Pakistan

TUESDAY,
May 26:

• USDA
  weekly corn, soybean, wheat export inspections, 11am
• U.S.
  crop progress — corn, soybean plantings, winter wheat conditions, 4pm
• Ivory
  Coast cocoa arrivals
• HOLIDAY:
  Malaysia, Pakistan, Bangladesh

WEDNESDAY,
May 27:

• AmSpec,
  Intertek release Malaysia’s palm oil export data for May 1-25
• EARNINGS:
  Nordzucker, IOI Corp
• HOLIDAY:
  Pakistan

THURSDAY,
May 28:

• EIA
  U.S. weekly ethanol inventories, production, 11:00am
• International
  Grains Council monthly report
• Port
  of Rouen data on French grain exports
• Poland
  crop plantings report
• EARNINGS:
  Sanderson Farms

FRIDAY,
May 29:

• 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
• USDA
  weekly crop net-export sales for corn, soybeans, wheat, cotton, 8:30am
• U.S.
  Agricultural prices paid, received, 3pm
• Vietnam’s
  General Statistics Office releases data on coffee, rice, rubber exports in May
• Shanghai
  exchange’s weekly commodities inventory

Source:
Bloomberg and FI

 

 

CFTC
Commitment of Traders

 

 

 

 

 

 

 

Macros

Canadian
Retail Sales (M/M) Mar: -10.0% (exp -10.5%; prev 0.3%)

–         
Retail Sales Ex-Auto (M/M) Mar: -0.4% (exp -4.8%; prev 0.0%)

 

Corn.

・        
Corn futures ended mostly lower on Friday on increasing US-China tensions and improving weather across the US.  Parts of the northern Great Plains and Canadian corn growing areas are still too wet to plant,
but there is plenty of time to get the remaining corn in. 

・        
Funds were even today in corn. 

・        
China’s AgMin mentioned they don’t see a big rise in pork prices despite expectations for ASF to remain a threat.  He added China will not have a grain supply crisis.

・        
China plans to draft a food security plan and urge private firms to increase inventories.  This initiative appears to favor grains, and as a result, China soybean futures surged overnight.  China will keep
the total crop acreage and grain output stable in 2020. They will also add rewards to major grain producing counties and raise the minimum purchase price of rice. 

・        
See our China corn comment on reserve sales below.

・        
Ukraine 2020 spring plantings are 96 percent complete.

・        
Some sections of the northern IL river are closed due to flooding, and this is driving business to the OH and Miss rivers.

・        
USDA’s Chicken and Eggs report showed April egg production down 3 percent, egg-type chicks hatched up 1 percent and broiler type chicks hatched down 6 percent. 

・        
There were no major surprises in USDA’s Cattle on Feed report

 

 

China
plans to sell 4 million tons of corn from state reserves on May 28.  This would be the first auction of the season.  Are China corn stocks low?  We think they are, relative to where they were 4-5 years ago. But it remains a mystery.  China’s first sale of
2020 includes 2015 crop.  Last year they were active in selling 2014 & 2015 corn.  With China kicking off the 2020 state reserve selling with 2015 corn, we wonder if reserve sales this season will be low like last year.  China’s 2019 corn auctions ended October
17, and from May to October, 21 auctions offered 80.6 million tons of corn, down 137.4 million tons from 2018.  However, 21.9 million tons of corn were sold in 2019 (27% offered), down from 78.2 million tons in 2018 (57% offered). China has been selling its
corn reserves since 2014. Is it time to restock?  On April 23 a story ran that China planned to boost state reserves for corn of 20 million tons.  As of Q1 2020, the “trade” estimated 58 million tons of temporary state corn reserves, of which 56 million are
2015 crop corn, according to a USDA Attaché report.  We think they are closer to 50-52 million tons. 

 

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

 

Corn
Export Developments

• Syria
  seeks 50,000 tons of soymeal and 50,000 tons of corn on May 24, for delivery within four months of purchase. 
  

・        
China plans to sell 4 million tons of corn from state reserves on May 28.  This would be the first auction of the season.  3.66 million tons of corn is from 2015. 

 

 

 

Updated
5/21/20

• July
  corn is seen in a $3.00 ($2.90 previously) and $3.35 range.  December lows could reach $2.90 if US weather cooperates. 
  

 

Soybean
complex

• Soybeans
  traded two-sided. They were initially lower part of the Friday session on renewed US-China tensions despite China back in buying soybeans.  Higher meal supported soybeans, but selling pressure allowed for a lower close for the oilseed. 
  Offshore
  values this morning were leading CBOT soybean oil 46 points lower (52 lower for the week to date) and meal $1.30 higher ($4.70 higher for the week).  Unwinding of oil/meal spreads pressured soybean oil. 
  
• Funds
  sold an estimated net 2,000 soybeans, bought 2,000 soybean meal and sold an estimated net 4,000 soybean oil.
  
• July
  soybeans hit sell stops around 11:56 at $8.32-$8.2950. On Friday July reached a one-month low.
  
• We
  heard that China state-owned crushers bought 2-4 US soybean cargoes out of the PNW for Oct-Nov shipment early Thursday.  On Friday China bought at least 2 new-crop Brazil soybean cargoes for March and July 2021 shipment. 
  
• Nearby
  month Brazil soybean basis was firm early Friday on higher freight rates, Covid-19 concerns affecting Brazil port loading, and strong real. 
  
• Heavy
  rain in southern Brazil Thursday into Friday was likely too late for the second corn crop, but a boost in water levels for the rivers that feed into Argentina will be welcome.  Possible we could see an uptick in Argentina soybean movement by the end of next
  week. 
• Argentina
  April soybean crush increased 3.3 percent from March to 3.66 million tons, but was below expectations. Year on year its down 4.2 percent from year ago. 
  
• China
  is rapidly putting together a plan to boost food security.

・        
China cash crush margins as of this morning, using our calculation, were 68 cents per bushel (72 previous), lowest since early August 2019, and compares to 77 cents a week ago and 75 cents around this time
last year.  Early
April crush margins were over $2.00. 

・        
Indonesia will increase its export tax on palm oil by $5/ton in June.

・        
Malaysian palm:
Up 3 percent for the week.  Malaysia will be on holiday Monday and Tuesday. 

 

 

Oilseeds
Export Developments

• Syria
  seeks 50,000 tons of soymeal and 50,000 tons of corn on May 24, for delivery within four months of purchase.

 

Updated
5/21/20

• July
  soybeans are seen in a $8.15-$8.65 range. 
• July
  soybean meal is seen in a $270 to $305 range. 
• July
  soybean oil range is now seen in a 26.00 to 28.50 range. 

 

Wheat

• CBOT
  July Chicago, July KC and July MN wheat ended lower on profit taking ahead of the long holiday weekend and improving French soft wheat crop ratings.
  
• Funds
  sold an estimated net 5,000 Chicago wheat contracts. 
• The
  Kansas crop tour showed the KS yield at 44.5 bu/ac vs. USDA May 47.0. Production 284.4 million bushels versus USDA May of 305.5 million. 
  
• FranceAgrimer
  reported 57 percent of France’s soft-wheat crop was rated in good or very good condition as of May 18, up from 55% in the prior week, and below 79 percent last year.  This is the lowest for this time in at least nine years. 
  
• Ukraine
  wheat exports as of May 22 reached 19.925 million tons, 275,000 tons below the government cap for the July 1-June 30 season.  Ukraine corn exports to date are 28 million tons. 
  
• Russian
  wheat export prices increased about $5/ton to $225/ton C&F.  On Thursday IKAR lowered Russian wheat production to 76.2 million tons from 77.2 million. 
  
• Western
  Europe will dry down over the next week to ten days.  Eastern Europe will see a good mix of rain and sunshine.  Warmer weather is needed for parts of southern Russia and Ukraine were cool air is expected to continue into next week.  The western CIS will see
  a mix of erratic rain and sunshine through the middle of next week. 
• Harvesting
  of winter wheat across TX and OK is expected to slow in the coming days from rain showers. 
  
• Canada
  saw a storm across Alberta and western Saskatchewan Wednesday into Thursday that will further delay spring planting progress.
  
• Paris
  December wheat futures were down 1.50 euro to 190.00 euros.

 

2020
Kansas Wheat Tour

• The
  Kansas Wheat Commission, the Kansas State University extension and the Kansas Department of Agriculture crop tour showed the KS yield at 44.5 bu/ac vs. USDA May 47.0.
  
• Production
  284.4 million bushels versus USDA May of 305.5 million. 
• The
  latest weekly U.S. Drought Monitor showed moderate drought across 27% of the state as of May 19, mostly across western Kansas.
  
• The
  Oklahoma Wheat Commission believes the wheat crop will be closer to 85-90 million bushels rather than the 96.5 million projected on May 5.  USDA is at 102.6 million bu.
  
• http://kswheat.com/harvest/hrw-virtual-wheat-tour
      #wheattour20

 

Export
Developments.

• The
  Philippines bought 56,000 tons out of 168,000 tons sough of feed wheat for July-September shipment. Price was just below $215/ton c&f.
  
• Jordan
  seeks 120,000 tons of wheat on May 25 for October through November shipment. 
  
• South
  Korea’s Kofmia bought 35,000 tons of US wheat at an average price of $225.14/ton and Daehan Flour passed on the remaining 54,000 tons of US milling wheat for August and September arrival. 
  
• Syria
  looks to sell 100,000 tons of feed barley.  Offers are due June 23. 

• Results
  awaited: Syria seeks 200,000 tons of soft wheat on May 20.
• Japan
  seeks 80,000 tons of feed wheat and 100,000 tons of feed barley to be loaded by August 31 and arrive in Japan by October 29, in its weekly (SBS) tender system, on May 27.

 

Rice/Other

• Egypt
  said rice reserves are sufficient until October and wheat reserves for more than 5.3 months. 
  
• India
  rice exports in 2020-21 was projected to increase 15 percent from 9 million tons in 2019-20. The crop year began April 1. 
  
• Thailand
  forecast output of about 16 million tons from its main rice crop during the 2020/21 season, slightly more than the previous year, benefiting from higher expected rainfall C Reuters
• China’s
  AgMin noted producers plan to plant 70 million mu (4.6 million hectares or 11.4 million acres) of early rice this year, up by more than 3 million mu from a year ago.
• China
  will also ensure supply of seed, fertilizer, pesticide and farming machinery. 
  

 

Updated 5/21/20

• Chicago July is seen in a $5.00-$5.31 range
• KC July $4.40-$4.70
• MN July $5.05-$5.30