FW: FI Morning Grain Comments 03/27/20

PDF attached

 

Morning.
Russia
plans to limit grain exports.  US stocks are lower, USD slightly higher and gold lower.  US agriculture markets are mostly higher, with exception of corn. 

 

There
are reports the virus may peak in early to mid-April in the US, but time will tell.  This is for sure something that will be in the history books for children to read in years to come. 

 

 

 

Weather

MARKET
WEATHER MENTALITY FOR CORN AND SOYBEANS:

A
good mix of weather is still anticipated for most of Brazil and Argentina crop areas over the next two weeks resulting in further support for good yields and crop quality. Production losses have occurred in Rio Grande do Sul this year along with some of the
early season corn and sunseed crop in Argentina because of dryness. The bulk of other crops have done favorably in both countries.

            U.S.
planting delays are expected to prevail through the first week of April due to wet field conditions and additional precipitation in the Delta and Tennessee River Basin with areas that are usually planted in early April also being impacted. Less rain and some
warming will occur for a little while in early April, but how significant that drying is remains to be seen.

           
India, China and Australia weather is mostly good for this time of year. Rain will have to fall in southern Australia by May to support autumn canola planting.

            Rain
in southern Europe has been and will continue to be good for early corn planting in Spain, Portugal, Italy and eventually in the southern Balkan Countries, although warming is needed.

            Southeast
Asia oil palm production areas are favorably moist in many areas, but greater rain is needed in parts of the northern and eastern Philippines and in northern Sumatra as well as the Malay Peninsula.

            South
Africa summer crops are developing favorably.

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

 

MARKET
WEATHER MENTALITY FOR WHEAT: 

Winter
crop development prospects are favorable in portions of Europe, the CIS, India and China, although some of these regions did not experience good weather for establishment last autumn and it will be important that ideal weather and soil conditions are present
this spring to induce improvements prior to reproduction. More moisture is needed in the southern CIS, Romania and parts of Spain while less rain is needed to the north and that is exactly what should evolve this week. Kazakhstan and Russia’s Southern Region
will stay too dry for at least another week with some rain potential rising in the April 3-9 period.

           
Recent North Africa rain has been good for late developing wheat and barley, but much of the lost production in Morocco cannot be reversed. Additional rain is expected over the next several days.

           
Australia needs rain to bolster soil moisture prior to planting in late April and May, but there is plenty of time for weather changes to evolve. Some rain is expected in New South Wales next week, but confidence is low on its significance.

           
Middle East wheat areas will soon need drier weather to support grain maturation and the same will be true in northern Africa.

           
U.S. small grain production areas are poised to develop favorably in this early spring, but greater moisture is needed in the west-central high Plains and less rain in the Midwest and Delta. Warming is needed too in some areas.

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

Source:
World Weather Inc. and FI

 

 

Source:
World Weather Inc. and FI

 

Source:
World Weather Inc. and FI

 

 

 

Bloomberg
Ag Calendar

FRIDAY,
MARCH 27:

• ICE
  Futures Europe weekly commitments of traders report on coffee, cocoa, sugar positions ~2:30pm (~6:30pm London)
• CFTC
  commitments of traders weekly report on positions for various U.S. futures and options, 3:30pm
• FranceAgriMer
  weekly update on crop conditions

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

 

 

 

 

 

 

 

 

 

 

 

 

Macros

US
Personal Income Feb: 0.6% (exp 0.4%; prev 0.6%)

–      
   Personal Spending Feb: 0.2% (exp 0.2%; prev 0.2%)

–         
Real Personal Spending Feb: 0.1% (exp 0.2%; prev 0.1%)

–         
PCE Deflator (M/M) Feb: 0.1% (exp 0.1%; prev 0.1%)

–         
PCE Deflator (Y/Y) Feb: 1.8% (exp 1.7%; R prev 1.8%)

–         
PCE Core Deflator (M/M) Feb: 0.2% (exp 0.2%; R prev 0.2%)

–         
PCE Core Deflator (Y/Y) Feb: 1.8% (exp 1.7%; R prev 1.8%)

Bank
Of Canada Lowers Benchmark Overnight Rate To 0.25%

 

 

Corn.

• Corn
  prices lower on ongoing concerns US corn for ethanol will fall way short of USDA’s projection for 2019-20 and 2020-21.    
• Ethanol
  margins are poor. Earlier this week we estimated one could shave off about 250 to 300 million bushels from USDA 5.425-billion-bushel corn for ethanol usage projection for 2019-20.  That number is now at 300 and higher, according to some analysts. 
  A
  Reuters article noted about a fifth of US ethanol production capacity will come offline by the end of the month, according to the Renewable Fuels Association.  Volume may exceed 3 billion gallons (11.4 billion liters) of annual production by the end of March.
• US
  refiners have been a seller of biofuel credits to raise cash.  Global oil demand is expected to fall by 15% to 20% in coming months. D6 fell to a low 12.75 cents last week (around 23 now).  Earlier this week the EPA failed to appeal a court ruling that could
  alter refiner biofuel obligations for 2019 and 2020. 
• But
  the EPA is considering a delay in its compliance deadline for oil refineries to comply with the US biofuel regulation past March 31.  The March 31 deadline applies to 2019 compliance. 
  
• Some
  US ethanol plants seek to change an FDA rule to allow them to produce hand sanitizer.  Problem is ethanol is considered “food-grade ethanol” and does not qualify for strict pharmaceutical guidelines. Meanwhile a small spirits distillery down the street where
  I live in Chicago was approved to switch from alcohol production to make hand sanitizer.
  

·        
China was to sell 20,000 tons of pork from reserves on Friday. 

·        
Argentina’s BAGE reported combined good and excellent corn conditions at 32 percent, down from 35 percent last week and compares to 54 percent year ago.  Two weeks ago, they were at 38 percent.  They left their Argentina corn crop production
unchanged at 50 million tons. 

• The
  quarterly USDA hogs and pigs report was viewed at slightly bearish in that there were more all hogs as of March 1.  Hog inventories expanded 4 percent from 2019, one percentage point above expectations.  Kept for breeding was up 0.4 percent from the previous
  year, 1.7 points below expectations, and kept for market expanded 4.3 percent, 1.2 points above expectations.  This report could confirm a pause in the recent rally.  Hogs ended lower on the CME today. 
  
• The
  USDA will allow parents to pick up free meals without having their kids with them.  School districts have been distribute meals this week amid multi city lockdowns. 
  

 

University
of Illinois: Irwin, S. and T. Hubbs. "The Coronavirus and Ethanol Demand Destruction."
farmdoc daily (10):56,  Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, March 26, 2020. 
https://farmdocdaily.illinois.edu/2020/03/the-coronavirus-and-ethanol-demand-destruction.html?utm_source=farmdoc+daily+and+Farm+Policy+News+Updates&utm_campaign=8f5962f0f7-FDD_RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_2caf2f9764-8f5962f0f7-173649469

 

Export
Developments

• South
  Korea’s KOCOPIA group tendered for non-GMO corn for July 20 delivery and results are awaited. 
  
• Under
  the 24-hour reporting system, private exporters reported to the U.S. Department of Agriculture export sales of 114,048 tons of corn for delivery to unknown destinations during the 2019/2020 marketing year.

 

 

Soybean
complex.

• CBOT
  soybean
  complex is getting a lift this morning on technical buying and higher wheat, but don’t discount profit taking ahead of the weekend.  Meal market turned around overnight in part to China. Spreads are firmer. Argentina had a meeting yesterday on worker leave
  for 15 days.

·        
China cash crush margins are strong as meal prices increase on tighter meal stocks. However, China buying slowed this week to about 18-22 cargos (6-8 Friday), less than half of what they bought last week. 
They slowed purchases of 2021 deliver, but at least one cargo for new crop out of Brazil traded on Friday.  Separately, China pledged to boost vegetable oil output, but no details were provided.

• Offshore
  values are leading CBOT soybean oil 2 points lower (79 lower for the week to date) and meal $3.20 higher ($5.60 higher for the week to date).
  

·        
Rotterdam vegetable oils this morning were about 10 euros lower for soybean oil from this time yesterday morning and rapeseed oil was down 5 euros from earlier this week.  Rotterdam meal when imported from
SA were unchanged to 14 euros higher.  Argentina premiums have been very choppy this week.

·        
China: 

·        
India’s lockdown for three weeks that just started is already yielding social unrest.

·        
China cash crush margins as of this morning, using our calculation, were 184 cents per bushel (177 previous), and compares to 168 cents a week ago and negative 60 cents around this time last year. 

·        
Indonesia will lower its 3 percent palm export tax to zero percent in April. 

·        
Malaysian palm markets:
 nearly
4 percent higher for the week.  Higher on slowing production, higher energies and higher soybean oil.

• A
  labor union in Argentina requested to suspend exports for 15 days.  The union represent inspectors crucial in the export process. 
  

·        
Argentina’s BAGE reported soybean conditions for the combined good and excellent categories at 34 percent, down from 35 percent last week and compares to 51 percent year ago.  Two weeks ago, they were at 50 percent.  They left their soybean
production estimate unchanged at 52 million tons. 

• Brazil
  soybean crop commitments are running at nearly 27 million tons, about 6 million tons above this time last season. 
  
• 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. 
  

 

Oilseeds
Export Developments

• Under
  the 24-hour reporting system, private exporters reported to the U.S. Department of Agriculture export sales of 163,290 tons of soybeans for delivery to Mexico during the 2019/2020 marketing year. 
  

 

Wheat

• US
  wheat futures are higher after Russia announced they want to limit grain exports during the April through June period, threating crop-year exports to reach around 39-40 million tons from 45 million tons projected by the AgMin earlier this month. 
  

·        
May Paris wheat was up 3.50 at 197 euros a ton earlier this morning.

• Russia is looking at setting the grain export quota at 7 million tons for the April through June period.  They exported nearly 31 million tons of grain as of March 12, so 7
  million tons could fit with some current estimates for the crop-year, but well below 45 million tons projected by the AgMin, including 36MMT wheat projected earlier this month.  Corn exports are on track to reach analysts estimates but wheat could fall short.
  
• The Russian Grain union is urging wheat and processed grain producers not to raise prices before May 15. 
  
• The Russian AgMin expects grain prices to stabilize in the near futures, citing ample inventories to meet domestic demand. 
  
• 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. 
• US southern Plains will see rain through Saturday.
  

·        
French soft wheat conditions for the G/E categories were unchanged from the previous week as of March 23 at 63 percent, down from 85 percent year ago.  The winter barley G/E rating increased slightly to 63% from 62%, below 81% year ago. 
Spring barley plantings jumped to 72 percent versus 40 percent week ago. 

 

Export
Developments.

• Taiwan
  bought 99,450 tons of various class US milling wheat for shipment between May 13 through May 27, and May 29 through June 12. 
  
• Turkey’s
  TMO bought 175,000 tons of red milling wheat for shipment during April 7-27 on March 27. Lowest price was thought to be $237/ton c&f.   
  
• 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.
  
• Results
  awaited: Syria
  seeks 200,000 tons of wheat from Russia by March 23.  No purchase was made that closed on February 17. 
  
• 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 looks to stockpile 270,000 tons of rice for reserves, after halting
  new rice export contracts through March 28. 
• Malaysia has enough rice stocks to last 2.5 months. 
  
• The Philippines seeks 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.