FW: FI Evening Grain Comments 06/26/18

PDF attached

Corn.

• CBOT corn was higher early on Tuesday but gains eroded after soybeans broke, but ended higher on late buying. Higher crude oil and unwinding of soybean/corn spreads underpinned prices. Corn demand is also good. South Korea again bought corn overnight, increasing June purchases to a level 2.1 times their average monthly consumption. There was also US commercial buying in corn overnight.
• The current US weather outlook is not threatening. The ridge developing across the Midwest is only expected to produce about three days of hot temperatures.
• Funds bought an estimated net 5,000 corn contracts, according to Reuters.
• China reported an outbreak of H5N1, a highly pathogenic form of bird flu at a broiler chicken farm.
• The EPA finalized their proposed biofuel mandates for 2019 and 2020 Biomass-based diesel. Nothing was changed from what came out on Friday. Any increase in requirement from 2018 may be dismissed anyway if the EPA continues to issue a large amount of waivers to small refiners next year.

https://www.epa.gov/renewable-fuel-standard-program/proposed-volume-standards-2019-and-biomass-based-diesel-volume-2020

• Reuters: “Brazilian center-south mills produced 1.44 billion liters of hydrous ethanol in the first half of June, the highest volume for the two-week period since August 2010”, according to Reuters. “Unica said mills used 63 percent of available cane to produce ethanol in the first half of June versus 50 percent at this time last year.”  We don’t look for Brazil to import a large amount of US ethanol anytime soon.
• Brazil’s MG is 13 percent complete on second corn harvesting, according to IMEA, down from 20 percent a year earlier.
• Brazil’s grain/oilseed movement remains slow from grain handlers reluctant to pay for high freight prices. The Brazil Supreme Court is said to rule on the government’s recent “price fix” for freight rates.
• Agroconsult estimated the 2017-18 Brazil second corn crop at 55 million tons, down 2 million tons from their May estimate. The second corn crop fell 3 percent this season to 11.6 million hectares. Total corn production is seen at 82 million tons versus 99 million tons last season.
• A general strike in Argentina launched on Monday is already affecting shipping.
• Ukraine is on track to export more corn than wheat for the marketing year ending June 30. 17.6 million tons of corn have been exported since July 1, 2018, greater than 17 million tons of wheat. All grain exports total 39 million tons, down from 43 million a year ago.
• After this week’s USDA crop progress, we left our US corn yield estimate unchanged at 181.0 bu/ac. USDA working estimate is at 174.0. Soybean and Corn Advisory increased his US corn yield estimate by 2 bu/ac to 178.0.

 

Export Developments

• South Korea’s MFG bought 69,000 tons of optional origin corn at $207.89/ton c&f for arrival in South Korea around Dec. 5 and Dec. 14
• South Korea’s NOFI group bought 138,000 tons corn at $207.89 a ton c&f for arrival in South Korea around November 25 and December 5.
• South Korea in June alone bought about 1.7 million tons of corn, or 2.1 times their average monthly consumption.
• China sold an estimated 46.9 million tons of corn out of reserves since April 12.

 

Soybean complex.

·         Soybean price fell by late morning. The midday weather models confirmed the ridging later this week will bring about 3 days of hot temperatures across the Midwest, and the second week of the outlook hinted an increase in rainfall across the northern Great Plains and far western Corn Belt.

·         The July/August traded at an inverse today. About a week ago it was a $2.20 carry. The Argentina strike and anticipation of light July soybean meal deliveries could be reason for these spreads to tighten up.

·         US soybean oil domestic basis firmed up this week after business picked up. Dec, IL soybean oil went from 150 under to even as of today.

·         Funds sold 9,000 soybeans, sold 4,000 soybean meal, and sold 3,000 soybean oil.

• After USDA’s weekly crop progress, we left our US soybean yield estimate unchanged at 49.6 bu/ac. USDA working estimate is at 48.5. Soybean and Corn Advisory increased his US soybean yield estimate by 1 bu/ac to 51.0.
• Yesterday Sonny Perdue in a USDA press release stated the US is prepared to support American producers if there is a downturn in commodity markets resulting from a trade dispute by China. One of the tools that could be used is the CCC program, once heavily used in the 1970’s and 80’s. Then later in the day, the USDA Secretary confirmed the government CCC program was one of those tools available, and will have a plan in place by (US) autumn.

https://content.govdelivery.com/accounts/USDAOC/bulletins/1f9e80a

• Agroconsult estimated Brazil’s soybean export forecast could top 73.5 million tons in 2018 if China duties on US exports follow through on July 6.
• Brazil June soy bean exports are on track to end up near 10 million tons.
• Argentina imported about 2.43 million tons of soybeans during the Jan-May period, up from 0.940 million a year earlier.

·         Ukraine’s 2018 rapeseed crop was projected by UkrAgroConsult at 2.518 million tons from 2.302 million tons in 2017. 2018-19 rapeseed exports were estimated at 2.28 million tons compared with 2.12 million tons last season.

• China announced they will remove import tariffs effective from July 1 on five Asian countries for soybeans (currently set at 3 percent), soymeal (5 percent) and rapeseed (2 percent).  Countries included are Bangladesh, India, Laos, South Korea and Sri Lanka. If Chinese crushers allow it, India could benefit by importing oilseeds and send meal to China. But China will need to scramble to change phytosanitary agreements with these countries. Traders are viewing this move by China as a “statement” and sees little impact on global oilseed and oilmeal trade.

·         China’s Ministry of Agriculture and Rural Affairs estimated the summer grain acreage at 408 million mu (27.2 million hectares), down slightly from last year. They didn’t get into many details, but noted the some of the corn area was in bad shape bias northeast due to drought.

 

Export Developments

·         Today the CCC was in for 12,500 tons of soybean meal for Honduras for Sep 1-10 shipment.

·         Egypt seeks 30,000 tons of soybean oil and 10,000 tons of sunflower on June 28 for arrival around Aug 15-31. GASC will also accept offers for at least 10,000 tons of soyoil and 5,000 tons of sunflower oil in Egyptian pounds. (Reuters)

·         China plans to offer to sell 500,000 tons of soybeans and 50,000 tons of soybean oil from state reserves on June 27. China sold 270,106 tons of soybeans out of reserves so far, this season.

• Iran seeks 30,000 tons of sunflower oil on July 10.
• Iran seeks 30,000 tons of palm olein oils on July 10. 
• Iran seeks 30,000 tons of soybean oil on August 1.

 

Wheat. 

• US wheat futures were lower for the third consecutive day on US harvesting pressure, long liquidation, and improving Australian weather. Eastern Australia will receive needed rain today and Wednesday. Totals will vary from 0.15 to 0.85”, locally 1.00 to 2.00”. 4-day precipitation map below.

• The USD traded higher on Tuesday after falling the previous three days.
• US exports remain sluggish.
• Egypt bought two cargos of Russian wheat.
• Russia said the wheat export tax of zero was extended to July 2019.

• Funds in Chicago were sellers of an estimated net 6,000 SRW wheat futures, according to Reuters. 
• September Chicago wheat is trading at a premium over KC wheat.
• Minneapolis September made another contract low.
• South Korea lifted their GMO suspension on Canada wheat after tests concluded there was no GMO found in samples.
• Manitoba (Canada) weekly crop progress showed crops advanced quickly and dry conditions continues throughout the province.
• The CME will add options to Black Sea wheat futures on July 16. The open interest in futures recently amounted to 1.1 million tons.

·         China’s Ministry of Agriculture and Rural Affairs estimated the summer grain acreage at 408 million mu (27.2 million hectares), down slightly from last year. The China wheat yield was estimated lower from rain and low temperature in early April. China’s quality wheat acreage in its overall wheat acreage rose 2.5 percent to 30 percent this year.

 

 

 

Export Developments.

• Egypt bought 120,000 tons of Russian wheat for August 11-20 shipment. Two 60,000-ton cargoes traded at $201.95 fob, plus $15.55 freight total $217.50 c&f.
• Taiwan bought 95,350 tons of milling wheat from the United States in two consignments for shipment from the U.S. Pacific North West coast. The first consignment for shipment between Aug. 8-22 involved 25,450 tons of U.S. dark northern spring wheat of 14.5 percent protein content was purchased at $257.84 a ton fob. Second was for 15,350 tons of hard red winter wheat of 12.5 percent protein content was bought at $244.75 a ton fob and 7,775 tons of soft white wheat with 9 percent protein was bought at $224.54 a ton fob.
• Tunisia seeks 142,000 tons of optional origin soft milling wheat and 100,000 tons of feed barley on June 27.
• China sold 2,500 tons of imported wheat out of reserves or 0.14% of what was offered at an average price of 2,298 yuan per ton ($350.53/ton).
• Jordan passed on 120,000 tons of barley.
• Jordan seeks 120,000 tons of wheat on June 27.
• Japan in a SBS import tender seeks 120,000 tons of feed wheat and 200,000 tons of barley on June 27. 
• Syria seeks 200,000 tons of wheat on July 2 for Aug 1-Sep 30 shipment. Origins include Russian, Romania and/or Bulgaria.
• Iraq seeks 50,000 tons of wheat from the US, Australia and/or Canada on July 2, valid until July 8.
• Bangladesh seeks 50,000 tons of wheat on July 3 for shipment within 40 days of contract signing.