FW: FI Morning Grain Comments 03/20/20

PDF attached

 

Morning.

 

China
cut rates for loans to banks.  EU bond buying was active.  US traders will be watching the bond markets this week.  USD is higher and US stocks are higher.  VIX remains above 60.  Brent crude hit a 17-year low. Russian wheat export prices surged $10/ton to
$217/ton fob-SovEcon.  China soybean crush margins are higher from Friday. Vietnam bought corn from Ukraine late last week. 

 

 

 

 

Weather

 

 

MARKET
WEATHER MENTALITY FOR CORN AND SOYBEANS:

Weather
in South America, South Africa and India remains favorable for most oilseed development. Improving rainfall in Southeast Asia will be good for palm oil production and corn planting.

            China’s
recent flooding rainfall and that which is expected this week will delay early season coarse grain planting and will keep rapeseed development a little sluggish as well. 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.

            Australia
needs greater rain in the south prior to late April and May planting of canola.

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 may 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 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.

            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 with a bearish bias remaining.

Source:
World Weather Inc. and FI

 

Source:
World Weather Inc. and FI

 

Source:
World Weather Inc. and FI

 

Bloomberg
Ag Calendar

MONDAY,
MARCH 30:

• USDA
  weekly corn, soybean, wheat export inspections, 11am
• EU
  weekly grain, oilseed import and export data
• Ivory
  Coast cocoa arrivals

TUESDAY,
MARCH 31:

• USDA’s
  annual prospective planting data for crops such as wheat, barley, corn, cotton, rice and soybeans, noon
• U.S.
  agricultural prices paid, received, 3pm
• AmSpec,
  Intertek palm oil export data for March 1-31

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

 

 

 

 

 

 

 

CFTC
Commitment of Traders

·        
As of 3/27/20

·        
Managed money traders were busy buying soybean meal and sold some soybean oil. 

·        
Traditional funds bought an estimated net 18,800 futures and options soybean meal contracts, while managed money bought a net 23,000 contracts.

·        
For soybean oil, money managed sold 1,500 soybean oil and traditional funds sold 2,500. 

·        
Managed money and traditional funds were good buyers of soybeans and Chicago wheat.

 

FUTURES
+ OPTS     Managed                 Swaps              Producer

                       
Net        Chg        Net        Chg        Net        Chg

Corn             
-108,549    -16,703    196,099     -8,174   -143,339     29,729

Soybeans           
-2,444     28,203    117,512        119   -149,126    -34,122

Soymeal            
39,099     23,000    
96,573        299   -166,798    -24,281

Soyoil               
-746     -2,458     91,088     -5,270   -105,741      7,874

CBOT
wheat          17,670     23,329    
66,046     -4,253    -76,558    -19,972

KCBT
wheat          -5,356      7,950     51,306      3,456    -46,039    -12,961

MGEX
wheat         -16,307      3,618      2,397        -61      4,381     -4,564

Source:
Reuters and FI

 

 

Macros

German
CPI (M/M) Mar P: 0.1% (exp 0.0%; prev 0.4%)

 

 

Corn.

• Corn
  prices are lower on ongoing US demand destruction and global import interest turning to the Black Sea region.  SK and China are among countries looking around for Black Sea corn and no trades out of the US were heard of as of this morning. 
  
• 5-cent
  option strikes start today for the July position. 
• There
  is talk the US corn area could end up near 90 to 92 million acres rather than the trade average of just over 94 million.  We think the trade might be more interested in the March 1 stocks rather than area number when released by the USDA on Tuesday, unless
  area deviates well off the trade expectations, by several million acres. 
  
• On
  Friday the EPA granted a delay for oil refineries to file by March 31 its 2019 US biofuel mandate compliance.  They also will allow refineries to sell winter gasoline beyond May 1, until at least May 20. Winter stockpiles are high due to rapidly declining
  short-term US gasoline consumption. 

·        
Safras & Mercado estimated the Brazil corn crop at 105.8 million tons, up from 104.7 million tons previously.  USDA is at 101.0 million tons for 2019-20, same as 2018-19.  The difference in Safras and USDA equates to 189 million bushels
for global trade balance consideration. 

• Ukraine
  spring corn plantings began on improved weather.
• Ukraine
  grain exports increased 31 percent to 45.4 million tons since July 1, 2019, according to the Ministry for Development of Economy. 
  

 

Export
Developments

• Last
  week Vietnam bought 140,000 tons of corn from Ukraine for April shipment.  Reuters reported one cargo at $204 to $205/ton c&f. 
  

 

RBOB/Ethanol
chart

 

Soybean
complex.

• CBOT
  soybean
  complex is higher on strong US crush rates and light US export demand.  USDA announced 285,000 tons of soybeans were sold to Mexico under the 24-hour reporting system.  We like owning nearby meal spreads given strong US domestic feed demand and less availability
  of US DDGS. 
• China
  was a small buyer of June/August Brazil soybeans over the weekend with one cargo for each mentioned shipment period.
  
• BRL
  remains weak at around 5.10.
• Argentina
  extended their mandatory quarantine until mid-April.  There is uncertainty on Argentina truck movement amid coronavirus concerns.  US social distance was extended through April. 
  
• Strategie
  Grains estimated the EU rapeseed crop at 17.59 million tons for this year from 17.85 million tons previous and compares to 16.89 million tons last year (13-year low). 
  
• Ukraine
  sunflower exports are up 72 percent since August to 2.94 million tons from 1.712 million tons during the same period last season. 
  
• IL
  crude soybean oil at the end of last week was steady at nominal 25 over, East nominal 50 over and the West nominal 25 under. Gulf degummed oil was around 200 over, fob.  Argentina was nominally at 150 over and Brazilian degummed oil 120 over. 
  

·        
Offshore values are leading CBOT soybean oil 17 points higher and meal $4.80 higher.

·        
Rotterdam vegetable oils this morning were about unchanged for soybean oil from this time for the previous session and rapeseed oil was around 20 euros.  Rotterdam meal when imported from SA were mixed but
mostly higher. 

·        
China: 

·        
China cash crush margins are strong as meal prices increase on tighter meal stocks.

·        
China cash crush margins as of this morning, using our calculation, were 213 cents per bushel and compares to 184 cents a week ago and negative 52 cents around this time last year. 

·        
Malaysian palm markets:
 Palm
operations are slowing or shuttering. 

• India
  imported 197,131 tons of Argentina soybean oil in February, down from 330,000 tons in January and 289,000 tons a year ago. 
  
• Oil
  World in their weekly update lowered their projection for South American soybean crush production by 2.2 million tons for the January through September period.  This obviously will reduce soybean oil and meal supplies.
  
• Safras
  & Mercado lowered their estimate for the Brazil soybean crop to 124.2 million tons from 124.2 million tons.  USDA projected 2019-20 Brazil soybean production at 126.0 million tons, up from 117.0 million in 2018-19. 
  
• Brazilian
  crusher association Abiove noted Brazilian crushers could be faced with increasing trucking prices. Part of the reason is that drivers demanding higher fees for long hull routes amid fears over the spread of the coronavirus.  The Brazilian government issued
  an order to allow truck gas stations and diners stay open during the lockdown.  Soybean movement in Brazil depends on trucks (61%), rail (21%), waterways (14%), and other means (4%).—Reuters via National Transport Confederation.   We wonder what the “other”
  components include.  Before reading this, we thought the truck market share was much higher for Brazil.  Infrastructure in rail continues to grow in Brazil. 
  

 

Oilseeds
Export Developments

• USDA
  under its PL480 program on April 7seeks a total of 9,190 tons of vegetable oil, including 60 tons of sunflower oil, for the education export programs.  9,130 tons are sought in either 4 liter can or 4-liter plastic bottles. Shipment was scheduled for May 16
  to June 15 (May 23-Jly 13 for plants located at ports).
• Under
  the 24-hour reporting system, private exporters reported to the U.S. Department of Agriculture export sales of 285,000 tons of soybeans for delivery to Mexico during the 2020-21 marketing year.

 

Wheat

• US
  wheat futures are higher on strong global import demand and Black Sea export restrictions on flour and wheat.  The race to import rice is also a factor. 
  
• Ukraine
  exporters agreed to limit wheat exports to 20.2 million tons for 2019-20, but this should already be in the market. 
  
• Russia
  is on holiday this week. Traders are still assessing the global trade balance after Russia announced they will limit grain exports at 7 million tons for the April through June period. 
  
• Russian
  12.5% protein wheat from Black Sea surged by $10 to $217 a ton free on board (FOB) at the end of last week-SovEcon. 
  
• Russia
  exported 2.1 million tons of wheat in January, down from 2.417 million tons in January 2019. 
  
• The
  UAE approved a law to organize strategic food stock reserves.  Basically, this might be a move to extend government control over food stocks in emergency cases.
  

·        
May Paris wheat was up 2.25 at 197.25 euros a ton earlier this morning.

• Ukraine spring 2020 grain plantings are running at 7 percent complete, or 1 million hectares out of the 7 million projected hectares.  15.26 million hectares
  are estimated for combined winter and spring. 

 

Export
Developments.

• Algeria
  seeks 50,000 tons of soft wheat on Tuesday.  Shipment was for May and/or June, depending on origin. 
  
• Postponed:
  Last week the Philippines were thought to pass on 50,000 tons of feed wheat and milling wheat, 30,000 and 20,000 tons, respectively, optional origin.  Prices were too high. 
  
• 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

• Vietnam has temporarily halted new rice export sales. Vietnam looks to stockpile
  270,000 tons of rice for reserves, after halting new rice export contracts through March 28. 
  
• Cambodia will ban rice exports on April 5. 
  
• The Philippines seek 300,000 tons of rice from Thailand and Vietnam.
  
• Results awaited:
  South
  Korea seeks 20,000 tons of rice from China on March 25 for arrival around July 30. 
  
• Results awaited:
  South
  Korea seeks 73,664 tons of rice on March 25 for arrival around end of Sep. to Oct 31.