FW: FI Morning Grain Comments 07/02/18

PDF attached

 

Weather and crop conditions

 

• Weekend weather for the US was mostly as expected and the hot temperatures across the Midwest posed little threat to the summer crops.
• The US Midwest eastern crop areas will be drier than the western areas. The high pressure aloft will build up across the Plains and Midwest this workweek before shifting to the High Plains region and Rocky Mountain region by Friday. The Midwest in general will see warm temperatures and restricted rainfall during this period. Rainfall will range from 0.25 to 0.75 inch with local totals to 1.00 inch by early next week. Then the ridge of high pressure will shift to the east Friday and then flatten out during the coming weekend and early in the week of July 9. New ridge development will evolve in the western United States later in the week of July 9.
• U.S. Delta and much of the southeastern United States will see a favorable mix of rain and sunshine.
• U.S. hard red winter wheat production areas will see a good mix of weather with net drying most dominant favoring crop maturation and harvest progress.
• The U.S. southern Plains drought will change little over the next 30 days.
• The U.S northern U.S. Plains will receive showers and thunderstorms through mid-week this week and then trend drier for a while.
• Canadian Prairies will see rain in the west, north and far east. The south-central and southwestern areas will be drier than usual.
• China weather improves for the dry areas of Liaoning, Hebei, and Shanxi over the next week.
• Western Australia will get some rain Monday and Tuesday. Victoria and South Australia has an opportunity for rain during mid-week this week.
• Northern Europe will continue to see net drying through at least July 11.
• The southern portions of Russia’s Southern Region will see 0.50” to 1.50” this week.
• Eastern Ukraine to western Kazakhstan will see some showers mid- to late-week.

Source: World Weather Inc. and FI

 

 

 

 

Source: World Weather Inc. and FI

 

Source: World Weather Inc. and FI

 

Source: World Weather Inc. and FI

 

Upcoming

MONDAY, JULY 2:

• Canada on holiday
• International Grains Council publishes its monthly forecasts for grains supply and markets, 8:30am ET (1:30pm London)
• ICE Futures U.S. releases delivery notice for July raw-sugar contract, ~9am
• USDA weekly corn, soybean, wheat export inspections, 11am
• Costa Rican Coffee Institute releases exports for June, 2pm
• USDA soybean crush data for May, 3pm
• USDA weekly crop progress report, 4pm
• International Cotton Advisory Committee releases monthly report on world cotton production, demand and stockpiles, 4pm
• Cargo surveyors Intertek and SGS release their respective data on Malaysia’s June palm oil exports
• Ivory Coast weekly cocoa arrivals

TUESDAY, JULY 3:

• New Zealand dairy auction on Global Dairy Trade online market starts ~7am ET Tuesday (~noon London Tuesday, ~11pm Wellington Tuesday)
• OECD-FAO annual report on agriculture outlook, 9am ET (2pm London)

WEDNESDAY, JULY 4:

• U.S. Independence Day holiday; CBOT grains trading closed

THURSDAY, JULY 5:

• Guatemala coffee exports for June
• AB Foods trading updates, 2am ET (7am London)
• FAO Food Price Index, 4am ET (9am London)
• EIA U.S. weekly ethanol inventories, output, 11am (delayed from Wednesday due to U.S. holiday)
• Andre Pessoa, head of Agroconsult, and executives from Brazil’s grain exporter group Anec speak on nation’s 2018-19 soybean and corn crops
• EU weekly grain, oilseed import and export data
• Port of Rouen data on French grain exports
• Bloomberg weekly survey of analysts’ expectations on grain, sugar prices

FRIDAY, JULY 6:

• China is set to start levying tariffs on agriculture products, in retaliation for U.S. tariffs on imports from China
• USDA weekly crop net-export sales for corn, wheat, soy, cotton, 8:30am (delayed from Thursday due to U.S. holiday)
• ICE Futures Europe commitments of traders weekly report on coffee, cocoa, sugar positions, ~1:30pm ET (~6:30pm London)
• CFTC commitments of traders report will be delayed until Monday July 9
• FranceAgriMer weekly updates on French crop conditions

Source: Bloomberg and FI

 

Registrations

·         No changes

 

 

 

CFTC Commitment of Traders

·         Traditional funds remained net long in corn, soybeans, meal, and Chicago wheat, and net short in soybean oil.

·         The net “fund” corn position, as reported in the Index report broke out, reversed from net long to net short.

·         Still trade estimates were well off when trying to predict the daily changes in fund positions. Funds were 72,600 contracts more short in the net long position for the traditional funds in corn. They were also 30,900 contracts less long for the fund position in soybeans.

·         The traditional funds for futures only soybeans were net long 1,300 contracts as of Tuesday, down from 58,200 contracts net long from the previous week.

·         The managed money position for soybeans has extended its short position over a short period of time.

 

 

 

 

 

Macros.

·         USD is higher, WTI crude lower, and gold lower, at the time this was written.

·         US jobs report is due out Friday.

·         ICE: Winner Of Mexican Presidential Election Lopez Obrador: Majority Of Cabinet Designated During Campaign Will Take Their Posts

– Will Seek To Continue NAFTA Trade Pact With United States, Canada

·         US Markit Manufacturing PMI Jun F: 55.4 (est 54.7; prev 54.6)

·         US ISM Manufacturing Jun: 60.2 (est 58.5; prev 58.7)

–          – ISM Employment Jun: 56.0 (prev 56.3)

–          – ISM Prices Paid Jun: 76.8 (est 74.8; prev 79.5)

–          – ISM New Orders Jun: 63.5 (prev 63.7)

·         US Construction Spending (M/M) May: 0.4% (est 0.5%; prev R 0.9%)

 

Corn.

• New month but another day of selling in corn and soybeans. Basically, the US weather over the weekend was about as expected, and the forecast this week does not look threatening for US summer crops. Crop downgrades for summer crops in the Eastern EU and Black Sea regions should limit losses this week, if any, in CBOT grains.
• Baltic Dry Index was up 37 points to 1,422, or 2.7%.
• The International Grains Council (IGC) cut its 2018-19 global corn production by three million tons to 1.052 billion tons, citing Russia and the European Union.

·         Parana’s AgMin, Deral, estimated the winter corn crop in Brazil’s state at 9.4 million tons, down 600,000 tons from previous.

·         AgRural reported 9.5 percent of the total second corn crop in Brazil was harvested, below 16% last year and 13% average.

·         Ghana reported two outbreaks of highly pathogenic H5 bird flu.

·         Romania reported a case African swine fever.

 

Export Developments

·         China plans to auction off 8 million tons of corn on July 5 and 6.

 

 

The monthly US EIA ethanol report shower ethanol production less than expected at 30.532 (31.185 FI working estimate) million barrels, down from 32.216 million in March and compares to 29.500 million in April 2017. US ethanol export remained robust during April.

 

 

Soybean complex.

·         US soybean complex is lower on ongoing China/US trade concerns and as expected US weekend weather.

·         US soybean acres are higher than corn for the first time since 1983.

·         Canada announced a new set of import tariffs against the US over the weekend.

·         Strategie Grains further lowered its 2018 EU rapeseed production to 21.1 million ton from 21.4 million tons. They were at 22.2 million two months earlier.

·         We last heard IL crude soybean oil was nominally 100 to125 under, East 50 under, West 150 under and Gulf 200 over. Argentine degummed oil was around 200 over, fob, and Brazilian oil 235 over, fob.

·         Brazil will release trade data early this week. We are looking for 10 million tons for soybean exports.

·         China September soybean meal futures hit a two-month high and soybeans are near a one-month high.

·         China’s CNGOIC reported cash crush margins in China have improved on higher product values, and the crush last week amounted to 1.91 million tons, up 120,000 tons from the previous week.

·         China September soybean futures increased 38 yuan per ton or 1.0%, September meal was up 33 or 1.1%, China soybean oil up 6 (0.1) and China September palm unchanged at 4856 yuan/ton.

·         September China cash crush margins were last running at 78 cents, and compares to 78 cents last week and 67 a year ago.

·         Rotterdam vegetable oils were 3-4 euros higher and SA soybean meal when delivered into Rotterdam were higher as of early morning CT time.

·         Cargo surveyor SGS reported June Malaysian palm exports at 1,058,832 tons, down 141,044 tons or 12% from the same period a month ago and down 151,527 tons from the same period a year ago (12.5% decrease).     SGS June palm exports were lowest since 2007.

·         AmSpec reported June palm oil exports for Malaysia at 1.073 million tons, a ten percent decrease from 1.197 million tons in May.

·         September Malaysian palm was 3 higher at MYR2329 and unchanged at $600.00. 

·         Offshore values were leading the soybean oil 4 points lower and soybean meal $2.90 higher.

• Brazil’s Supreme Court Justice Fux said freight rates will stand until hearings take place in late August.

 

 

Export Developments

·         China plans to sell another 500,000 tons of soybeans and 50,000 tons of soybean oil out of reserves on Wednesday. China sold 376,965 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.

 

 

US biodiesel production was 140 million gallons in April, 7 million gallons lower than production in March 2018.  There was a total of 1,078 million pounds of feedstocks used to produce biodiesel in April 2018. This was lower than expected. Soybean oil remained the largest biodiesel feedstock during April 2018 with 520 million pounds consumed, below our working estimate of 565 million pounds and compares to 550 million in March and 422 million in April 2017. 48.2 percent of the total feedstock used to make biodiesel consisted of soybean oil, compared to 55.9% in March and 44.9% in April. We lowered our 2017-18 US soybean oil for biodiesel use to 7.105 billion pounds. USDA is at 6.900 billion.

 

 

Wheat. 

• Wheat was higher on ongoing concerns over crop in France and Russia. Prices sold off after the day session open from spillover weakness in soybeans and corn. Last week FranceAgriMer soft wheat conditions were rated 74 percent as of June 25, down a point from the previous week. Strategie Grains reportedly cut its French wheat crop by little more than 4 million tons to 33.2 million tons, but this was not confirmed. Also reported last week was SovEcon lowering its 2018 Russian wheat production projection to 72.5 million tons from 73.1 million tons, down from their forecast of 85.8 million tons in 2017. 
• December Paris wheat futures are 3.25 euros higher.
• The International Grains Council (IGC) cut its 2018-19 global wheat production by five million tons to 737 million tons, citing Russia and the European Union.
• Russian export prices for wheat out of the Black Sea increased $1.00/ton to $2.00/ton, fob, according to IKAR. SovEcon reported $197/ton.
• Russia’s state weather forecaster estimated Russia’s grain crop down 10-15 percent to 121.9-115.1 million tons from their 2017 forecast of 135.4 million tons. This would be below a 5-year average.
• Egypt said they confiscated 45,000 tons of “spoiled” Russian wheat near Alexandria.
• Plains Grains reported the average protein level from the first 166 samples of HRW wheat was 12.7 percent, up from 12.6 percent a week earlier and above 11.4 percent in 2017.

 

 

Export Developments.

• Algeria seeks optional origin milling wheat on Tuesday for September shipment.
• Iraq’s lowest offer for 50,000 tons of wheat from the US, Australia and/or Canada on July 2, valid until July 8, was $295/ton from Canada. Lowest offer for Australia was $306.75 and US was $318.49/ton.

·         Jordan seeks 120,000 tons of barley on July 4 for Oct-Nov shipment.

• Japan in a SBS import tender seeks 120,000 tons of feed wheat and 200,000 tons of barley on July 4 for arrival by December 28. 
• Syria seeks 200,000 tons of wheat on July 2 for Aug 1-Sep 30 shipment. Origins include Russian, Romania and/or Bulgaria.
• Bangladesh seeks 50,000 tons of wheat on July 3 for shipment within 40 days of contract signing.

·         Jordan seeks 120,000 tons of wheat on July 8 for Oct-Nov shipment.

 

Rice/Other

• China sold 31,602 tons of rice from state reserves at auction at an average price of 2689 yuan/per ton or $405.47/ton, 3.14 percent of what was offered.
• Results awaited: South Korea seeks 102,800 tons of rice for September-February arrival on June 27.

    TONNES(M/T)    GRAIN TYPE      ARRIVAL/PORT

    20,000         Brown Short     Sept. 15, 2018/Incheon

    20,000         Brown Short     Sept. 15, 2018/Ulsan

    20,000         Brown Short     Sept. 15, 2018/Masan

    10,000         Brown long      Sept. 30, 2018/Mokpo

    10,000         Brown long      Sept. 30, 2018/Donghae

     2,800         Milled Medium   Dec. 1-31, 2018/Busan

    10,000         Milled Medium   Feb. 28, 2019/Busan

    10,000         Milled Medium   Feb. 28, 2019/Busan

• Results awaited: Iran seeks 50,000 tons of rice from Thailand on July 3.

 

USDA Announces Sugar TRQs for Fiscal Year 2019

WASHINGTON, July 2, 2018 – The U.S. Department of Agriculture (USDA) today announced the fiscal year 2019 tariff-rate quotas (TRQs) for raw cane and refined sugars.

USDA is establishing the FY 2019 TRQ for raw cane sugar at 1,231,497 short tons raw value (STRV) (1,117,195 MTRV*), the minimum to which the United States is committed under the World Trade Organization Uruguay Round Agreement on Agriculture. Pursuant to Additional U.S. Note 5 to Chapter 17 of the U.S. Harmonized Tariff Schedule and Section 359k of the Agricultural Adjustment Act of 1938, as amended, USDA published this decision in the Federal Register.

Raw cane sugar under this TRQ must be accompanied by a certificate of quota eligibility and may enter the United States until September 30, 2019. The Office of the U.S. Trade Representative (USTR) will allocate this TRQ among supplying countries and customs areas.

USDA is establishing the FY 2019 refined sugar TRQ at 211,644 STRV (192,000 MTRV). Of this quantity, 187,393 STRV (170,000 MTRV) is reserved for the importation of specialty sugars as defined by the USTR. The total refined sugar TRQ includes the 24,251 STRV (22,000 MTRV) minimum to which the United States is committed under Uruguay Round Agreement on Agriculture, of which 1,825 STRV (1,656 MTRV) is reserved for specialty sugar.

Because the specialty sugar TRQ is administered on a first-come, first-served basis, USDA will release it in tranches to allow for orderly marketing throughout the year. The FY 2019 specialty sugar TRQ will be opened in five tranches. The first tranche, totaling 1,825 STRV (1,656 MTRV), will open October 1, 2018. All specialty sugars are eligible for entry under this tranche.

The second, third, fourth, and fifth tranches will be reserved for organic sugar and other specialty sugars not currently produced commercially in the United States or reasonably available from domestic sources. The second tranche of 55,116 STRV (50,000 MTRV) will open on October 10, 2018. The third tranche of 55,116 STRV (50,000 MTRV) will open on January 23, 2019. The fourth and fifth tranches, both of 38,581 STRV (35,000 MTRV), will open on April 17, 2019, and July 17, 2019, respectively.

The USTR will allocate the refined sugar TRQ, other than the amount reserved for specialty sugar, among supplying countries and customs areas.

* Conversion factor: 1 metric ton = 1.10231125 short tons.