FW: FI Morning Grain Comments 08/27/18

PDF attached

 

Weather and crop conditions

·         Eastern Australia’s saw as expected rain over the weekend.

·         Western Australia could see rain Tuesday and Wednesday.

·         Argentina was dry. 

·         Argentina will receive rain Wednesday into Friday of this week.

·         Frost possible in northwestern U.S. Plains and southwestern Canada’s Prairies Tuesday.

·         Central Missouri, parts of TN, northern MI and northern Minnesota are still in need of rain.

·         The Delta will see rain this week.

·         The two-week outlook calls for favorable weather across the US.

·         West Texas will experience net drying over the coming week.

·         Eastern China will see net drying through at least August 29.

·         Canada’s Prairies will see badly needed rain today.

·         Indonesia and Malaysia rainfall are slowing and some attribute the below normal rainfall to El Nino.

Source: World Weather and FI

 

 

Source: World Weather Inc.

 

Bloomberg weekly agenda

MONDAY, AUG. 27:

• U.K. summer bank holiday
• SGS data for Malaysia’s Aug. 1-25 palm oil exports, 3am ET (3pm Kuala Lumpur)
• EU’s monthly Monitoring Agricultural Resources (MARS) bulletin on crop progress and weather conditions in Europe, 7am ET (noon London)
• EU weekly grain, oilseed import and export data, 10am ET (3pm London)
• USDA weekly corn, soybean, wheat export inspections, 11am
• USDA weekly crop progress report, 4pm
• Ivory Coast weekly cocoa arrivals

TUESDAY, AUG. 28:

• Palm Oil Trade Fair & Seminar in Kuala Lumpur, Aug. 28-29. Speakers include Oil World Executive Director Thomas Mielke, LMC Intl Chairman James Fry and Godrej Director Dorab Mistry

WEDNESDAY, AUG. 29:

• EIA U.S. weekly ethanol inventories, output, 10:30am

THURSDAY, AUG. 30:

• USDA weekly net-export sales for corn, wheat, soy, cotton, 8:30am
• 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

FRIDAY, AUG. 31:

• Malaysia on holiday; No palm oil futures trading on Bursa Malaysia Derivatives
• Statistics Canada’s domestic crop production report for July, 8:30am ET
• FranceAgriMer weekly updates on French crop conditions
• 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

 

Registrations

• No changes

 

 

 

The CFTC report showed no records for the major commodities in traditional funds or managed money. There were some positions very close to record. Traditional funds bought more than expected corn, wheat and soybean meal, and sold a less than expected number of soybeans. Traditional funds sold a little more soybean oil than the trade guessed.  For the week ending 8/21, money managers were busy buying soybeans and corn, although much of that occurred early on. 

 

 

 

 

 

Macros.

·         US stocks are higher, USD lower, WTI crude higher, and gold mostly lower, at the time this was written.

 

Corn.

• Corn futures are weaker. December contract hit its lowest level in five-weeks overnight.
• Mexico said it’s close on reaching a trade deal with the US that are holding back NAFTA talks. A deal could be reached as early as today.
• Canada may come back to the table soon.
• The EU and US may reach a trade deal before May 2019.
• ProFarmer estimated the US corn crop at 14.501 billion bushels, below USDA’s August estimate of 14.586 billion. With a yield of 177.3, below 178.4 bu/ac for USDA August, we agree.  Corn yields are variable across a wide part of the WCB unlike soybeans which for the most part look good. The ProFarmer implied harvested area is about in line with USDA’s August estimate, and based on recent FSA data, we also agree with their findings. 
• Purdue University Extension school in a report indicated U.S. farm income, on average, for 2018 could end up near early 2000’s levels, and 35% to 40% lower than average income during the 2011 through 2014 years.

·         The European Union crop monitoring service, MARS, lower the EU rapeseed yield to 2.87 tons/hectare from 2.89 last month.

• South Africa’s CEC on August 28 will update their corn production next week and a Reuters poll calls for 13.11 million tons, down 0.7 percent from the 13.207 million tons in July.
• African Swine Fever was discovered in Romania, at a large pig farm where 140,000 animals will be culled.
• South Korea increased food safety controls after African swine fever was discovered in China.
• China’s swine fever has prompted Shandong banned live hogs and products from entering the province.

 

 

Export Developments

·         Another 4 million tons of China corn reserves will be offered on Thursday and Friday.

·         China sold about 65.4 million tons of corn out of reserves this season.

 

The USDA Cattle on Feed report showed inventories at the end of August at a record 11.093 million head, 4.6 percent higher than last year and in line with expectations. Placements were higher than expected and highest for the month of July since 2012.  Marketings were slightly above a trade guess and highest since 2013. US cattle inventories are high and it will take a while for the numbers to decline. This has driven tallow and grease prices lower, making the feedstock more attractive for biodiesel producer. Yellow grease in the east is about $600/ton, down $105/ton from a year ago.

 

 

Soybean complex.

·         The soybean complex is weaker led by meal and soybeans after ProFarmer crop tour pegged the soybean yield above USDA’s August estimate. Technicals are bearish. USD is higher and US weather forecast remains favorable for the most part.  Eastern Australia saw rain over the weekend.

·         November soybeans hit a mid-July low. December meal hit its lowest level since September 14. December soybean oil remains in a narrow two-sided trading range.

• Mexico said it’s close on reaching a trade deal with the US that are holding back NAFTA talks. A deal could be reach as early as today.
• Note First Notice Deliveries are on Friday. There are only 12 soybean registrations, zero meal and 3,719 soybean oil.

·         Today the USDA may unveil its $12 billion producer, stockpiling, and agriculture chain assistance program. Agri-Pulse via a DJ story mentioned the payment rate for soybean farmers has been preliminarily proposed at $1.65 per bushel and 1 cent per bushel for corn farmers.

·         The European Union crop monitoring service, MARS, lower the EU corn yield to 7.57 tons/hectare from 7.64 last month.

·         Cargo surveyor SGS reported month to date August 25 Malaysian palm exports at 786,947 tons, 123,827 tons below the same period a month ago or down 14%, and 169,600 tons below the same period a year ago or down 18%.

·         AmSpec reported August 1-25 Malaysian palm exports at 821,485 tons, down 9 percent from the same period a month ago.

·         ITS reported August 1-25 Malaysian palm exports at 835,134 tons, down 9.4 percent from the same period a month ago.

·         November Malaysian palm decreased 20MYR to 2199, a one-week low, and leading SBO 27 points lower. Cash was off $3.75/ton or 0.7%.

·         Rotterdam oils were lower and SA soybean meal when imported into Rotterdam $6.00-$7.00/short ton lower. 

·         China cash margins were last 73 cents/bu on our analysis, down 84 cents late last week, and 96 cents last year.

·         China soybean meal was down about 3% last week in large part to African swine fever.

·         On Monday China soybean meal futures hit a 6-week low.

·         China has been increasing hog slaughter while replacement piglets are slowing.

·         China’s soybean complex traded sharply lower. Soybeans were down 48 yuan or 1.3%, soybean meal down 1.8%, soybean oil down 1.0% and palm decreased 1.1%.

·         Offshore values were suggesting a lower lead for US soybean meal by $6.00 and lower lead for soybean oil by 30 points. 

·         Last we heard IL crude now 25 under, East 25 over, Southeast 25 to 50 over and West nominal 50 under. Gulf basis steady around 250 over for crude degummed soybean oil. SA was mixed this week with Argentina 100 over degummed, and Brazil 140 over.

·         FC Stone is due out with US production estimates on August 30. FI will release ours early this week.

·         The ProFarmer crop tour pegged the US soybean yield at a high 53.0 bushels per acre, which reflected a 4.683-billion-bushel crop.  This means the implied US soybean harvested area is about 515,000 acres below USDA.  Based on FSA acres, we look for USDA to trim the US soybean harvest area, but not by that much of an amount.  The ProFarmer yield is higher than USDA’s 51.6 bu/ac, despite recent declines in crop conditions. At 4.683 billion, that would be a record US soybean crop. 

·         US cattle inventories are high and it will take a while for the numbers to decline. This has driven tallow and grease prices lower, making the feedstock more attractive for biodiesel producer. Yellow grease in the east is about $600/ton, down $105/ton from a year ago.

 

 

Export Developments

·         Egypt’s GASC seeks at least 30,000 tons of soyoil and 10,000 tons of sunflower oil on Wednesday for arrival Oct 1-15.

·         South Korea seeks 15,000 tons of non-GMO soybeans on September 4 for Nov/Dec arrival.

·         The CCC seeks 15,610 tons of crude degummed soybean oil on August 29 for export to Pakistan. Shipment was for Sep 27 to Oct 7.

• USDA seeks 5,000 tons of refined oil for the export program on September 5 for October shipment.
• During the week ending August 31, China plans to sell 301,200 tons of 2013 soybeans, 60,100 tons of 2011-2013 rapeseed oil, and 53,800 tons of imported 2011 soybean oil.
• China sold nearly 1.3MMT of soybeans out of reserves this season.
• Iran seeks 30,000 tons of sunflower oil on September 24.

 

Wheat. 

·         US wheat futures are lower after eastern Australia saw rain over the weekend. USD is higher and US weather forecast remains favorable.

·         China announced they will release wheat out of reserves. China summer wheat production fell 2.4 percent to 128.35 million tons.

·         Chicago December wheat hit its lowest level since July 24, KC December reached its lowest level since July 25 and December Minneapolis July 25 low.

·         The European Union crop monitoring service, MARS, lower the EU soft wheat yield to 5.70 tons/hectare from 5.82 last month.

·         EU December wheat was 3.00 euros lower at 199.75 euros, at the time this was written. It dipped below 200 for the first time since July 27.

• Russia wheat export prices softened last week on harvest pressure. IKAR reported 12.5% at $225.00/ton fob, down $5/ton from previous week. SovEcon reported $225/ton, down $2.
• Ukraine does not have any plans to revisit the export cap of 8 million tons of milling wheat for the current crop-year.
• On Friday we lowered out short-term outlook on wheat given the recent developments in currency fluctuations and slow US demand. Global weather problems are starting to abate, and wheat no long looks like the sleeping giant in the agriculture space if a bull run would develop. 

 

Export Developments.

·         China sold 5,631 tons of 2013 imported wheat at 2,379 yuan per ton ($346.09/ton), 0.35 percent of what was offered.

·         Jordan seeks 120,000 tons of feed barley on August 28.

·         Jordan seeks 120,000 tons of hard milling wheat on Aug 29 for Nov/Dec shipment.

• Japan in a SBS import tender seeks 120,000 tons of feed wheat and 200,000 tons of barley on August 29 for arrival by January 31. 

·         Taiwan seeks 110,500 tons of US milling wheat from the US on August 31 fir October/November shipment.

 

Rice/Other

·         China sold 51,873 tons of rice from reserves at 2,653 yuan per ton ($385.95/ton), 6 percent of what was offered.

·         The Philippines will imports 132,000 tons of rice soon.

·         South Korea seeks 92,783 tons of rice on Aug. 31 for Nov/Dec arrival.

    TONNES(M/T)    GRAIN TYPE      ARRIVAL/PORT

    10,000         Brown medium    Nov 30/Gwangyang

    10,000         Brown medium    Dec 31/Busan

    20,000         Brown medium    Dec 31/Gunsan

    20,000         Brown medium    Dec 31/Mokpo

    20,000         Brown medium    Dec 31/Donghae

    12,783         Brown long      Nov 30/Masan

·         Results awaited: Egypt’s ESIIC seeks 100,000 tons (150k previously) of raw sugar for shipment within the first half of September and two 50,000-ton shipments from September 15-Oct 15.

·         Results awaited: Thailand plans to sell 120k tons of raw sugar on Aug. 22.