FW: FI Evening Grain Comments 05/23/19

PDF attached does not include funds

 

Weather

·         Through next Tuesday, the US will be active bias eastern Kansas to northern Illinois and southern Wisconsin wettest.  Central Missouri to Kentucky will see the least amount of rain. 

·         U.S. Delta will experience a mix of rain and sunshine over the next week.

·         Eastern Texas Panhandle, most of Oklahoma and central and eastern Kansas will continue to see thunderstorms this week.

·         Recent rains in northern Argentina and southern Brazil have delayed wheat seedings and the outlook over the next week calls for additional rain. Brazil’s Parana and Rio Grande do Sul states may get 2 inches of rain from yesterday (Wed) through Tuesday of next week.

·         Europe will be wet through the end of the month.

·         Western Australia will remain dry through the end of the month. NSW and Queensland will see net drying.

Source: World Weather Inc. and FI

 

7-day

 

 

Bloomberg Ag Calendar

THURSDAY, MAY 23:

• China April trade figures: includes grains, sugar, cotton
• USDA weekly crop net-export sales for corn, soybeans, wheat, 8:30am
• Port of Rouen data on French grain exports
• U.S. issues Atlantic hurricane forecast
• Bloomberg weekly survey of analysts’ expectations on grain, sugar prices
• Nordzucker releases its annual report
• EARNINGS: Sanderson Farms

FRIDAY, MAY 24:

• FranceAgriMer weekly update on French crop conditions
• ICE Futures Europe commitments of traders weekly report on coffee, cocoa, sugar positions, ~1pm (~6pm London)
• U.S. cattle on feed, 3pm
• CFTC commitments of traders weekly report on positions for various U.S. futures and options, 3:30pm

SATURDAY, MAY, 25

• Malaysia May 1-25 palm oil exports from AmSpec and Intertek
• China farm products import by country (tentative)

Source: Bloomberg and FI

 

USDA export sales

·         Pork exports were excellent. China took 31 of the 46k.

·         Soybean export sales were ok for old-crop, new-crop was dismal

·         Soybean meal export sales were ok but SBO were low.

·         Corn export sales were within expectations.

·         All-wheat new-crop were ok.

 

 

 

Macros

·         US DOW was down more than 450 points today

·         US Ag Sec Perdue: Aid Package For US Farmers Wil Be $16Bln

o   US AgriSec. Perdue: Pres. Trump Remains Committed To Reaching ‘Good Deal’ With China

o   – $14.5 Bln Of $16 Bln Farm Aid Package To Be Spent On Direct Payments For Farmers

o   – $1.4 Bln Of $16 Bln Aid Package To Be Spent On Food Purchases

o   – Payments To Farmers Will Be Based On Estimated Trade Damage Per County

o   – Aid Payments To Farmers Will Be In Single Rate Per County Not Per Commodity

o   – First Direct Payment To Farmers In July Or August; 2nd In Late Autumn; 3rd Payment In Early 2020

o   – Not Releasing Per County Payment Rates At This Time

o   – $100 Mln Of $16 Bln Aid Package To Be Spent On Market Development

o   – Calculations For Trade Damages Include US Exports To China, EU & Turkey

o   – Trade Payment Tranches Still Being Discussed With OMB

·         US April Building Permits Revised To 0.2% From 0.6%; Annual Rate Revised To 1.290M From 1.296M

·         US Initial Jobless Claims May-18: 211K (exp 215K; prev 212k)

–          Continuing Claims May-11:1676K (exp 1666K; R prev 1664K)

·         Canadian Wholesale Trade Sales (M/M) Mar: 0.2% (exp 0.9%; R prev 0.2%)

·         US Markit Manufacturing PMI May P: 50.6 (est 52.7; prev 52.6)

– Markit Services PMI May P: 50.9 (est 53.5; prev 53.0)

– Markit Composite PMI May P: 50.9 (prev 53.0)

·         US Business Activity Growth Falters To Three-Year Low – Markit

·         US New Home Sales Change Apr: 673K (est 675K; prev R 723K)

– New Home Sales (M/M) Apr: -6.9% (est -2.5%; prev R 8.1%)

·         US EIA Natural Gas Storage Change (BCF) 17-May: 100 (est 104; prev 106)

 

Corn.

·         CBOT corn snapped an eight straight session winning streak by ending lower on profit taking. Some bull traders were disappointed the US farm aid package does not necessarily promote soybean plantings over corn.

• USDA announced a $16 billion US farm aid package, with $14.5 dedicated to farmers that includes multiple commodities.  The payment will be based on a single county rate multiplied by a farm’s total plantings to those crops in aggregate in 2019. Those per acre payments are not dependent on which of those crops are planted in 2019, so USDA noted this aid package should not affect what producers decide to plant for 2019. Breakeven still suggest corn is more favorable to plant over soybeans.

USDA press release https://www.usda.gov/media/press-releases/2019/05/23/usda-announces-support-farmers-impacted-unjustified-retaliation-and

·         By 9:30 CT, 4000x 450 calls traded between 3&7/8-4.00

·         Flooding closed the Miss River at St. Louis.

·         By May 26, the five-year average for corn plantings is 90 percent. We think it might end up 16 points from the previous week to only 65 percent. If realized, as much as 4.5 million acres of corn acres could be theoretically be lost from March Intentions.

·         China’s April corn imports hit 660,000 tons, up 75 percent from April 2018. January through April corn imports reached 1.65 million tons, also up about 75 percent.

·         China’s beef imports in April were a record 128,920 tons, up 75 percent from April 2018, and compares to 101,440 tons in March 2019, Jan-Apr imports totaled 440,095 tons, up 50 percent from same period a year ago. 

·         China April pork imports were 136,517 tons, up 24 percent from April 2018, and the largest volume since September 2016. China has imported 470,776 tons of pork in the first four months of 2019, up 8.4% compared with last year.

·         French live pork prices have gained 24% since early March due to ASF.

·         Vietnam culled 1.6 million pigs as of May 22, according to the AgMin, which includes 37 provinces and cities.

·         Oats and rice futures on the CBOT have seen a rally amid planting delays.

 

USDA Export Sales Highlights        

·         Corn:  Net sales of 442,100 MT for 2018/2019 were down 20 percent from the previous week and from the prior 4-week average.  Increases were reported for Japan (185,800 MT, including 90,000 MT switched from unknown destinations and decreases of 119,400 MT), unknown destinations (42,600 MT), Colombia (40,900 MT, including 50,000 MT switched from unknown destinations and decreases of 23,700 MT), Costa Rica (30,800 MT), and Guatemala (27,700 MT, including decreases of 800 MT).  For 2019/2020, net sales of 183,900 MT were primarily for Panama (65,000 MT), Costa Rica (33,500 MT), Honduras (24,400 MT), El Salvador (16,000 MT), and Guatemala (12,800 MT).  Exports of 879,300 MT were down 11 percent from the previous week and 26 percent from the prior 4-week average.  The destinations were primarily to Mexico (272,300 MT), Japan (272,200 MT), Colombia (114,100 MT), Taiwan (91,900 MT), and South Korea (72,500 MT).  Optional Origin:   For 2018/2019, new optional origin sales of 50,000 MT were reported for unknown destinations.  The current outstanding balance of 421,000 MT is for South Korea (258,000 MT), unknown destinations (98,000 MT), and Taiwan (65,000 MT).  For 2019/2020, new optional origin sales of 65,000 MT were reported for South Korea.  The current outstanding balance of 250,000 MT is for south Korea (130,000 MT) and unknown destinations (120,000 MT). 

·         Barley:  No net sales for 2018/2019 were reported for the week.  Exports of 800 MT were down 22 percent from the previous week, but up 3 percent from the prior 4-week average.  The destinations were to Japan (600 MT), Taiwan (100 MT), and South Korea (100 MT).

·         Sorghum:    Net sales reductions of 3,800 MT for 2018/2019–a marketing-year low–were down noticeably from the previous week and from the prior 4-week average.  Increases primarily for Mexico (11,500 MT), were partially offset by reductions for Japan (15,300 MT).   Exports of 22,300 MT were down 68 percent from the previous week and 53 percent from the prior 4-week average.  The destinations were to Mexico (11,500 MT), Japan (10,700 MT), and South Korea (100 MT).  Optional Origin: For 2018/2019, the current outstanding balance of 10,000 MT is for unknown destinations.  

·         Beef:   Net sales of 24,400 MT reported for 2019 were up 44 percent from the previous week and 30 percent from the prior 4-week average.  Increases were reported for South Korea (9,100 MT, including decreases of 400 MT), Japan (5,900 MT, including decreases of 1,500 MT), Mexico (2,400 MT, including decreases of 100 MT), Hong Kong (2,200 MT, including decreases of 200 MT), and Canada (1,700 MT, including decreases of 100 MT).  Reductions were reported for Chile (100 MT).  Exports of 17,900 MT were down 2 percent from the previous week, but up 10 percent from the prior 4-week average.  The primary destinations were Japan (7,100 MT), South Korea (5,000 MT), Mexico (1,600 MT), Canada (1,200 MT), and Taiwan (1,200 MT).

·         Pork:   Net sales of 46,300 MT reported for 2019 were up noticeably from the previous week and from the prior 4-week average.  Increases were reported for China (31,400 MT), Mexico (5,700 MT), Japan (2,600 MT), South Korea (2,300 MT), and Canada (1,500 MT).  Exports of 24,100 MT were up 3 percent from the previous week, but down 4 percent from the prior 4-week average.  The primary destinations were Mexico (5,700 MT), China (4,500 MT), South Korea (3,100 MT), Japan (2,800 MT), and Hong Kong (1,800 MT).

 

 

Export Developments

·         China sold 3.62 million tons of 2014 corn or 90.7 percent of what was offered from the 4 million tons, at an average price of 1,639 yuan per ton $237/MT or $6.02/bu). Upwards to 20 million tons could be offered over the next several weeks. Results awaited: China’s Sinograin plans to sell 75,000 tons of 2015-18 corn out of Inner Mongolia on May 22. 

·         The Philippines seek 300,000 tons of corn, subject to the approval of the Department of Finance. The Philippines imposes duties from 5% up to 50% on corn imports, and those duties could be lowered to help replenish supplies. Hog numbers in the Philippines are on the rise amid Chinese demand.

·         India’s MMTC seeks between at least 20,000 tons and a maximum 100,000 tons of corn on June 6 (originally May 8, postponed to May 15 and then to May 22) for shipment between July 1 and July 31.

 

 

Updated 5/17/19

• Corn outlook: July $3.50 and $4.15 range.  December could trade inverse to September if bull spreading continues.
• We like buying corn and selling soybeans, old and new-crop.

 

Soybean complex.

• CBOT soybeans traded tow-sided, ending down 5.75-7.25 cents. Soybean oil was on the defensive on lower global vegetable prices and ended 49-53 points lower.  Soybean meal traded two-sided and ended $0.70-$1.10 lower. Meal/oil spreading and tight US SBM domestic supplies limited losses in meal.   
• USDA’s latest aid package should not persuade a US producer to plant one crop over another.  Breakeven still suggest corn is more favorable to plant over soybeans.
• Soybeans rallied before the USDA announced their farm stimulus package when 3000x $8.20 June soybean puts were sold.
• USDA released their press release, and soybeans and corn sold off after 11 am CT. 
• USDA announced a $16 billion US farm aid package, with $14.5 dedicated to farmers. The payments will vary by counties affected by trade damage.  The payment will be based on a single county rate multiplied by a farm’s total plantings to those crops in aggregate in 2019. Those per acre payments are not dependent on which of those crops are planted in 2019, so USDA noted this aid package should not affect what producers decide to plant for 2019. We agree. Producers want to plant something to make an income, and just like any crop year, when the insurance deadline for crops approaches, producers will have to make a decision whether to take prevented plantings or plant another crop. Note payment trenches from the aid (per county payment rates) will be determined later and prevented planting will not be counted for 2019. 

USDA press release https://www.usda.gov/media/press-releases/2019/05/23/usda-announces-support-farmers-impacted-unjustified-retaliation-and

• The European Union is starting to define their policies on restricting the use of palm oil for biofuel.  On June 10 new rules will be in place that will not allow certain types of biofuels from palm oil that may be counted toward the EU renewable-energy goals and introduce a certification system.
• Although Paraguay had a short crop this year from drought conditions, they are still expected to ship a large number of soybeans to Argentina.  Argentina needs the soybeans to mix with lower protein domestic supplies.  Bloomberg noted the chairman of Paraguay’s grain and oilseed export chamber Capeco, said “crushers are paying a $15 a ton premium for Paraguayan soy that has a higher protein content than local beans.”

 

USDA Export Sales Highlights        

·         Soybeans:  Net sales of 535,800 MT for 2018/2019 were up 45 percent from the previous week and up noticeably from the prior 4-week average.  Increases were reported for unknown destinations (255,500 MT), Indonesia (78,000 MT, including 55,000 MT switched from unknown destinations), China (71,000 MT, including 66,000 MT switched from unknown destinations and decreases of 1,600 MT), Egypt (55,000 MT), and Japan (15,900 MT, including 19,700 MT switched from unknown destinations and decreases of 10,900 MT).  Reductions were reported for Barbados (700 MT) and South Korea (100 MT).  For 2019/2020, net sales of 5,100 MT were for Thailand (2,500 MT), Japan (1,800 MT), the Philippines (500 MT), and Malaysia (300 MT).  Exports of 570,800 MT were down 7 percent from the previous week, but up 11 percent from the prior 4-week average.  The destinations were primarily to China (272,100 MT), Mexico (100,600 MT), Indonesia (76,100 MT), Japan (42,500 MT), and Costa Rica (15,400 MT). Optional Origin: For 2018/2019, the current outstanding balance of 116,000 MT is for unknown destinations.  For 2019/2020, the current outstanding balance is 10,000 MT, all unknown destinations. Exports for Own Account:  For 2018/2019, the current exports for own account outstanding balance is 12,100 MT, all Canada.

·         Soybean Cake and Meal:    Net sales of 188,000 MT for 2018/2019 were down 4 percent from the previous week, but unchanged from the prior 4-week average.  Increases were reported for Mexico (39,400 MT), Honduras (23,800 MT, including 3,000 MT switched from Panama and decreases of 400 MT), Guatemala (23,200 MT), El Salvador (21,900 MT), and Morocco (14,800 MT).  For 2019/2020, net sales of 112,000 MT were primarily for Mexico (63,000 MT), Panama (18,000 MT), the Dominican Republic (9,600 MT), Guatemala (9,000 MT), and El Salvador (9,000 MT).   Reductions were reported for Jamaica (8,000 MT).  Exports of 208,000 MT were down 2 percent from the previous week and 17 percent from the prior 4-week average.  The destinations were primarily to the Philippines (52,500 MT), Morocco (32,800 MT), Mexico (31,200 MT), Colombia (29,000 MT), and Israel (18,500 MT).  

·         Soybean Oil:    Net sales of 9,100 MT for 2018/2019 were down 16 percent from the previous week and 33 percent from the prior 4-week average.  Increases reported for South Korea (5,000 MT), El Salvador (1,500 MT), the Dominican Republic (1,400 MT), Mexico (1,000 MT), and Canada (200 MT), were partially offset by reductions for Colombia (100 MT).  Exports of 25,300 MT were up 43 percent from the previous week and 32 percent from the prior 4-week average.  The destinations were primarily to South Korea (23,500 MT), Mexico (1,400 MT), and Canada (300 MT).  

 

 

Oilseeds Export Developments

• None reported

 

Updated 5/17/19

• Soybeans: July $7.90-8.60 range.
• Soybean meal: July $280-$315 range.
• Soybean oil: July 26.75-28.25
• We like owning oil share. Changes in crush prices will heavily depend on fluctuations in soybean meal. 

 

Wheat

·         Chicago wheat ended mostly lower, KC lower led by the nearby contracts, and MN lower.  The downturn in corn and soybeans pressured the markets. Prices were initially higher on weather forecasts calling for heavy rain across the heart of US wheat country over the next seven days.

·         Included in this comment is our updated US wheat balance

·         China’s April wheat imports hit 220,000 tons, down 41 percent from April 2018. January through April wheat imports reached 1.25 million tons, up 23 percent.

·         Recent rains in northern Argentina and southern Brazil have delayed wheat seedings and the outlook over the next week calls for additional rain. Brazil’s Parana and Rio Grande do Sul states may get 2 inches of rain from yesterday (Wed) through Tuesday of next week.

·         ProZerno estimates the Russia wheat crop will increase 14 percent to 82.3MMT in 2019-20. This compares to USDA’s 77MMT and the AgMin’s 75MMT. 

·         Russia’s AgMin cut their wheat export forecast for 2019-20 by one million tons to 37 million tons due to rising domestic demand.  Russia grain exports are projected at 45 million tons in 2019-20, including 36 million tons of wheat.  For 2018-19, the AgMin calls for grain exports at 44 million tons, including 37 million tons of wheat.

·         The Russian AgMin left their 2019 grain production forecast unchanged at 118 million tons, including 75 million tons of wheat. 

·         Morocco plans to increase the import duty on soft wheat on June 1 to 135 percent from 30 percent. Morocco has enough domestic wheat

·         September Paris wheat was 0.50 euro higher at 175.50 euros.

 

USDA Export Sales Highlights        

·         Wheat:  Net sales of 48,400 metric tons for delivery in the 2018/2019–a marketing-year low–were down 58 percent from the previous week and 74 percent from the prior 4-week average.  Increases primarily for Indonesia (129,900 MT, including 120,000 MT switched from unknown destinations), Taiwan (56,700 MT, including 54,700 MT switched from unknown destinations and decreases of 100 MT), Kenya (30,700 MT, including 29,000 MT switched from unknown destinations), Canada (25,000 MT), and Ecuador (23,300 MT, including 25,000 MT switched from unknown destination and decreases of 1,700 MT), were more than offset by reductions for unknown destinations (249,000 MT), Haiti (25,000 MT), and Jamaica (3,000 MT).  For 2019/2020, net sales of 344,900 MT were primarily for unknown destinations (196,000 MT), Japan (62,000 MT), Mexico (39,300 MT), and Thailand (25,000 MT).  Exports of 882,100 MT were up 6 percent from the previous week and 24 percent from the prior 4-week average.  The destinations were primarily to Indonesia (129,900 MT), the Philippines (118,200 MT), Taiwan (112,700 MT), Nigeria (105,600 MT), and Japan (87,600 MT).  

 

 

Export Developments.

• Japan’s AgMin bought 122,844 tons of food wheat on Thursday. Original tender as follows:

• Jordan seeks 120,000 tons of optional origin wheat on May 28.
• Qatar seeks 105,000 tons of barley and 90,000 tons of wheat bran on June 16.

 

Rice/Other

·         Oats and rice futures on the CBOT have seen a rally amid planting delays.

·         Bangladesh has raised import duty on rice to 55% from 28% to support its farmers.

• Results awaited: Iraq seeks at least 30,000 tons of rice, including United States, on May 23.

 

USDA Export Sales Highlights        

·         Rice:    Net sales of 11,000 MT for 2018/2019 were down 86 percent from the previous week and 77 percent from the prior 4-week average.  Increases were reported for Honduras (2,600 MT), Guatemala (1,800 MT), Mexico (1,700 MT), Canada (1,400 MT), and South Korea (1,200 MT).  Reductions were reported for Haiti (100 MT).  Exports of 84,600 MT were down 13 percent from the previous week and 1 percent from the prior 4-week average.  The destinations were to South Korea (22,600 MT), Nicaragua (18,000 MT), Haiti (15,200 MT), Honduras (7,600 MT), and El Salvador (5,500 MT).  Export for Own Account:    For 2018/2019, the current exports for own account outstanding balance of 200 MT is for Canada.

·         Cotton:  Net sales of 381,400 RB for 2018/2019 were up 68 percent from the previous week and 80 percent from the prior 4-week average.  Increases were reported for India (98,500 RB), Turkey (93,200 RB), Bangladesh (57,600 RB), and Vietnam (50,900 RB, including 24,600 RB switched from China and decreases of 100 RB).   Reductions were for China (25,100 RB).  For 2019/2020, net sales of 241,500 RB were primarily for Vietnam (79,000 RB), El Salvador (65,800 RB), Honduras (21,100 RB), China (19,800 RB), and India (15,800 RB).  Exports of 348,600 RB were down 4 percent from the previous week, but up 3 percent from the prior 4-week average.  Exports were primarily to Vietnam (79,800 RB), Pakistan (53,300 RB), Turkey (46,300 RB), China (42,200 RB), and India (30,600 RB).  Net sales reductions of Pima totaling 2,100 RB were down noticeably from the previous week and from the prior 4-week average.  Increases primarily for India (400 RB), Taiwan (400 RB), Bangladesh (300 RB), Germany (300 RB), and Turkey (300 RB), were partially offset by reductions for Indonesia (4,100 MT).  For 2019/2020, net sales of 4,500 MT were reported for Indonesia (4,100 RB) and India (400 RB).  Exports of 13,000 RB were down 43 percent from the previous week and 15 percent from the prior 4-week average.  The destinations were India (4,600 RB), China (3,100 RB), Vietnam (2,200 MT), Peru (1,300 RB), and Pakistan (1,000 RB). Export of own account:   For 2018/2019, new exports for own account totaling 600 RB were to Vietnam.  Exports for own account to Vietnam totaling 2,600 RB were applied to new or outstanding sales.  The current exports for own account outstanding balance of 5,100 RB is for China (2,300 RB), Vietnam (2,000 RB), Taiwan (500 RB), and Thailand (300 RB).

 

Price outlook updated 5/17/19

·        Chicago July $4.45-$4.95 range.

·        KC July is seen in a $3.95-$4.65 range.

·        MN July is seen in a $4.90-$5.55 range.