FW: FI Evening Grain Comments 09/26/18

PDF attached

 

Weather and crop conditions

·         Traders are starting to build a weather premium into the agriculture markets citing harvesting delays in Canada and US.

·         Frequent showers will occur in the Delta this week.

·         The Midwest will also be active which should slow harvesting. The Midwest will not always see rain over the next two weeks. The areas that will be wet will include Eastern South Dakota through central and southern Minnesota and Iowa to northern Illinois and Wisconsin into Michigan.

·         HRW wheat areas will see a mixture of sunshine and rain.

·         Improving weather across Europe and the CIS is bearish for wheat.

·         Wednesday’s forecast was a little wetter for Mato Grosso. Any rain for this region will be important, the October outlook for MG remains on the drier side. Meanwhile, SA weather looks good over the next 1-2 weeks. 

·         Canada is seeing too much precipitation in form of snow and rain, and temperatures will remain cool.

 

SIGNIFICANT CORN AND SOYBEAN BELT PRECIPITATION EVENTS

                                WEST CORN BELT                             EAST CORN BELT              

Tdy-Thu               35% cvg of up to 0.20”                    5-15% daily cvg of up

                                and locally more;                              to 0.20” and locally

                                driest south                                        more each day;

                                                                                                mostly SE

Fri-Sat                   40% cvg of up to 0.60”                    35% cvg of up to 0.35”

                                and local amts to 1.0”;                    and local amts to 0.60”;

                                south Ia. wettest                             north Il. to Mi. wettest

Sun-Mon             70% cvg of up to 0.75”                    30% cvg of up to 0.65”

                                and local amts to 1.50”;                 and local amts to 1.20”;

                                wettest NE                                         north Il. to Mi. wettest

Tue-Oct 3            70% cvg of up to 0.75”                   

                                and local amts to 2.0”;                   

                                driest south 

Tue-Oct 4                                                                            80% cvg of up to 0.75”

                                                                                                and local amts to 1.50”

Oct 4-5                  5-20% daily cvg of up                     

                                to 0.25” and locally                                         

                                more each day                                                                                  

Oct 5-6                                                                                  5-20% daily cvg of up     

                                                                                                to 0.25” and locally                          

                                                                                                more each day

Oct 6-8                  70% cvg of up to 0.75”                   

                                and local amts to 1.50”

Oct 7-9                                                                                  75% cvg of up to 0.75”

                                                                                                and locally more

Oct 9-10               5-20% daily cvg of up                     

                                to 0.30” and locally                                         

                                more each day                                                                                 

 

U.S. DELTA/SOUTHEAST SIGNIFICANT PRECIPITATION EVENTS

                                DELTA                                                   SOUTHEAST

Tdy-Thu                                                                               90% cvg of 0.20-1.20”

                                                                                                and local amts to 2.0”

                                                                                                with lighter rain in a

                                                                                                few locations and

                                                                                                some 2.0-3.50” amts

                                                                                                in the west; driest SE

Thu-Sat                5-20% daily cvg of up

                                to 0.35” and locally

                                more each day;

                                mostly south

Fri-Sun                                                                                  20-40% daily cvg of

                                                                                                up to 0.60” and locally

                                                                                                more each day

Sun-Mon             10-25% daily cvg of

                                up to 0.35” and locally

                                more each day                                  

Mon-Oct 3                                                                          5-20% daily cvg of up

                                                                                                to 0.20” and locally

                                                                                                more each day

Tue                        10% cvg of up to 0.20”

                                and locally more

Oct 3-4                  70% cvg of up to 0.50”                    

                                and local amts to 1.10”                  

Oct 4-5                                                                                  60% cvg of up to 0.35”

                                                                                                and local amts to 0.75”

Oct 5-6                  Up to 20% daily cvg of

                                up to 0.20” and locally

                                more each day

Oct 6-7                                                                                  Up to 20% daily cvg of

                                                                                                up to 0.20” and locally

                                                                                                more each day

Oct 7-9                  60% cvg of up to 0.50”

                                and locally more

Oct 8-10                                                                               60% cvg of up to 0.50”

                                                                                                and locally more

Source: World Weather Inc. and FI

 

 

Bloomberg weekly agenda

THURSDAY, SEPT. 27:

• USDA weekly net-export sales for corn, wheat, soy, cotton, 8:30am
• USDA hogs & pigs inventory for 3Q, 3pm
• USDA agriculture prices received for August, 3pm
• International Grains Council monthly report
• Port of Rouen data on French grain exports
• Buenos Aires Grain Exchange weekly crop report
• Bloomberg weekly survey of analysts’ expectations on grain, sugar prices
• Globoil vegetable oil conference in Mumbai, 2nd day of 3
• EARNINGS: Cargill

FRIDAY, SEPT. 28:

• USDA grain stockpiles for 3Q, including corn, soy, wheat, barley, noon
• USDA wheat production report for September, noon
• Polish crop estimates
• FranceAgriMer weekly updates on French crop conditions
• Globoil vegetable oil conference in Mumbai, final day
• ICE Futures Europe commitments of traders weekly report on coffee, cocoa, sugar positions, ~1:30pm ET (~6:30pm London)
• CFTC commitments of traders weekly report on positions for various U.S. futures and options, 3:30pm

Source: Bloomberg and FI

 

 

 

 

Macros.

·         FOMC Raises Benchmark Interest Rate; Target Range Stands At 2.00-2.25% vs 1.75-2.00%

 

Corn.

• Corn saw a two-sided trade, ending slightly lower, snapping a 5-day winning streak.  Gains in corn today were limited on soybean/corn spreading.
• Funds sold an estimated 3,000 corn contracts.
• News for corn was light.
• The US weekly EIA ethanol data was viewed neutral for US corn futures and slightly bullish for US ethanol futures. 
• South Africa’s CEC updated their corn production (final estimate of the year) to 12.9 million tons for 2018, slightly below a Reuters poll (13.002MMT), and down from 13.2 million tons in August.  It comprises of 6.801 million tons of white corn and 6.129 million tons of yellow. In 2017 SAf produced 16.82 million tons of corn.
• The Argentina BA Grains Exchange estimated corn production at 43 million tons for the 2018-19 season, up from 31.7MMT in 2017-18.
• The USDA Broiler Report showed broiler type eggs set in the United States up slightly and chicks placed up slightly from a year ago. Cumulative placements from the week ending January 6, 2018 through September 22, 2018 for the United States were 6.99 billion. Cumulative placements were up 1 percent from the same period a year earlier.

 

Export Developments

·         China will sell 8 million tons of corn for the week ending September 28.

·         China sold about 83 million tons of corn out of reserves this season and some are predicting up to 100 million tons will be sold by the end of the marketing season.

 

Ethanol update

• The US weekly EIA ethanol data was viewed neutral for US corn futures and slightly bullish for US ethanol futures. 
• Production decreased 15,000 barrels per day to 1.036 million barrels per day (bbl) and stocks decreased 117,000 to 22.629 million.
• A Bloomberg poll called for US ethanol production to decrease 24,000 million/day and stocks to decrease 46,000 barrels. 
• US ethanol production of 1.036 million barrels per day is about 4.0% higher from about the same time a year ago but 3.2% below 4-weeks ago.
• Padd2 production was 949,000 barrels, down 9,000 from a week earlier.
• Early September 2018 to date US ethanol production is running 1% above the same period a year ago.
• There were no imports reported this week.
• Ethanol stocks of 22.629 million barrels are down 1.9% from four weeks ago and up 9.1% from a year ago.
• Ethanol stocks are lowest since July 27, 2018.
• Days of inventory of 22.0 compared to 21.7 a month ago and 21.2 during comparable period a year ago.
• Weekly ending stocks of total gasoline were up 1.53 million barrels to 235.68 million barrels.
• The net blender input of fuel ethanol was down 27,000 from the previous week at 901,000 bpd, below its 4-week average of 935,000 bpd.
• Net production of finished reformulated and conventional motor gasoline with ethanol, decreased 208,000 to 8.957 million barrels, or 90.9 percent of the net production of all finished motor gasoline, up from down from 91.6 percent for the previous week.
• Our 2018-19 crop-year corn for ethanol usage is 5.725 billion bushels, 75 million above USDA’s current estimate of 5.650 and compares to our working projection of 5.604 billion for 2016-17 (USDA 5.600).
• We look for the 2018-19 September – August weekly ethanol production to average 1.064 million barrels. The average for the first three weeks of the year is 1.036 million barrels.

 

 

 

 

 

 

Soybean complex.

·         The soybean complex traded higher in large part on higher China values and strong US soybean sales to Mexico of 671,934 tons-largest one day sales in US history.  If there are no cancelations for the week ending 9/27, then weekly sales should top the record 334,491 tons for the week ending 2/22/18.

·         November soybeans settled at the top end of our $7.80-$8.50 trading range. We lifted our outlook for November prices higher by 20 cents.

·         Funds bought an estimated 3,000 soybean contracts, bought 3,000 soybean meal and bought 3,000 soybean oil.

·         Traders are slowly building a weather premium into the agriculture markets as wet weather later this week into all next week should slow US harvest progress.

·         The global shift in the soybean trade balance continues. Canada may export soybeans to China and replace them with US soybeans. But some hold off on speculation China may still turn to the US for soybeans as Brazil and Argentina may soon run out of supplies for export. 

·         China soybean meal futures were up sharply early on Tuesday.

·         There is no evidence of soybean meal rationing in China, yet. China is on pace to crush about 7.4 million tons of soybeans in September, down from roughly 7.53 million tons in September 2017, or produce 5.8MMT of soybean meal versus 6.0 million in September 2017. According to the CNGOIC, China soybean meal inventories fell 70,000 tons from the previous week to 890,000 tons.

·         Next week China is on a week-long holiday.

·         Strong Malaysian palm oil exports are countering with rising palm production.

·         Govindbhai Patel estimated India will need to import a record 15.2 million tons of edible vegetable oils during the November 2018-October 2019 period, based on several elements including a 2.1% increase in domestic consumption and 9 percent shortfall in normal rainfall.

·         The European Commission apparently ruled they will not put in place provisional import duties on Argentina biodiesel imports during the current anti-dumping investigation. In mid-March the duties were dropped after the European Court of Justice (ECJ) earlier ruled against them. 

·         The BA Grains Exchange sees Argentina’s soy crop at 53 million tons in 2018-19, up from 35.1 million tons last season.  The Exchange estimated soybean exports at 15.4 million tons in 2018-19.

·         China added US vegetable oils and selected meals to list of tariffs. https://gain.fas.usda.gov/Recent%20GAIN%20Publications/China%20Implements%20Supplemental%20Imports%20Tariffs%20on%20U.S.%20Products_Beijing_China%20-%20Peoples%20Republic%20of_9-25-2018.pdf

 

 

Export Developments

• Under the 24-hour announcement system, US exporters sold 671,934 tons (not previously reported 650,387) of soybeans for delivery to Mexico during the 2018-19 marketing year.
• China sold 600 tons of 2011 imported soyoil from auction of state reserves at an average price of 5,000 yuan ($727.45) per ton, 2.05 percent of total soyoil available at the auction.
• China sold 100,642 tons of 2013 soybeans at auction of state reserves at average price of 3,051 yuan ($443.89) per ton, 100 percent of total 2013 soybean available for the auction.
• China sold about 2.5MMT of soybean out of reserves this season.
• China will offer 100,000 tons of soybeans out of reserves on October 10.
• Results awaited: Iran seeks 30,000 tons of sunflower oil on September 24.
• Yesterday Egypt’s GASC bought 30,000 tons of soyoil and 21,500 tons of sunflower oil for arrival between Oct. 25 and Nov. Soybean oil was bought at $698.70/ton. Sunflower oil was bought at $719/ton.

 

Wheat. 

·         US wheat struggled higher as global import demand continues to improve, but all three markets ended mostly lower. The Russian “tightening export controls” topic resurfaced.

• Funds sold 3,000 SRW wheat contracts.

·         EU December wheat closed up 0.25 at 201.25.

• Ukraine will keep its export caps on for milling and feed wheat at 8 million tons, each.
• Ukraine planted about 40 percent of their planned 7.2-million-hectare winter grain area. For comparison, Ukraine as of October 4, 2017, sowed 64 percent of their planned area. Winter rapeseed plantings are complete.
• The Argentina BA Grains Exchange estimated wheat production at record 19.7 million tons for the 2018-19 season and compares to 17.8MMT in 2017-18.

 

Export Developments.

·         Iraq confirmed they bought 50,000 tons of US wheat and 50,000 tons of Australian wheat. Iraq is also seeking another 50,000 tons of wheat. Canadian wheat is the lowest offer in that separate import tender at $337/ton (offers valid until September 27).  Iraq needs wheat for four after Turkey restricted flour shipments.

·         Turkey bought 252,000 tons of red milling wheat at $232.90/ton c&f for October 2-22 loading.

• Jordan retendered for another 100,000 tons of feed barley on October 3.
• Jordan passed on 120,000 tons of barley.
• Jordan seeks 120,000 tons of feed wheat, optional origin, on September 27.
• Japan in a SBS import tender passed on 120,000 tons of feed wheat and 200,000 tons of barley for arrival by late February. 
• Japan in a SBS import tender seeks 120,000 tons of feed wheat and 200,000 tons of barley on October 10 for arrival by late February. 
• Japan seeks 109,150 tons of food wheat on Thursday. Original details as follows.

·         China sold 1,787 tons of imported 2013 wheat at auction of state reserves at an average price of 2,144 yuan ($311.93) per ton, 0.19 percent of total wheat available at the auction.

·         China sold 126,652 tons of wheat at auction of state reserves at an average price of 2,409 yuan ($350.63) per ton, 6.31 percent of total wheat available at the auction.

• Results awaited: UAE seeks 60,000 tons of wheat on September 24 for Oct/Nov shipment.
• Results awaited: Ethiopia seeks 200,000 tons of milling wheat for shipment two months after contract signing. Ethiopia got offers from 7 firms. Lowest offer was for 100,000 tons at $272.05/ton, c&f.
• Morocco seeks 336,364 tons of US durum wheat on September 28 for arrival by December 31.
• Bahrain seeks 25,000 tons of wheat on October 2 for Nov shipment.
• Taiwan seeks 110,000 tons of US wheat on October 2 for Nov-Dec shipment.
• Bangladesh seeks 50,000 tons of 12.5 percent wheat on October 9, optional origin.

 

Rice/Other

·         Iraq bought at least 60,000 tons of rice from Vietnam at $577/ton c&f.

·         Thailand sold rice to China for the first time in six years.

·         Mauritius seeks 9,000 tons of rice for delivery between Nov. 15, 2018, and March 31, 2019, set to close is Sept. 27.

·         Thailand seeks to sell 120,000 tons of sugar on October 3.