Morning Comments – June 01

Tariffs on EU, Canada and Mexico Imposed

  • The White House announced on Thursday it would enact tariffs on steel and aluminum against the EU, Mexico and Canada. The tariffs, originally proposed two months ago had been on hold, but the surprise announcement yesterday said they would be enacted today caught the global economy off guard.

  • Canada and Mexico retaliated with levies on billions of dollars of U.S. goods from orange juice to pork and the EU Union was set to tax bourbon whiskey and Harley motorcycles after Washington risked a global trade war by imposing steel and aluminium tariffs.

  • Lean Hog futures plunged 3% yesterday on the news as Mexico buys $1.5 billion in US pork products.

China Bought US Beans

  • China’s state controlled trading firm COFCO was said to have bought US soybeans in recent days, but the future outlook is muddied by rekindled trade issues.

  • Earlier this week the White House announced tariffs on $50 billion of imports from China unless it addressed the issue of theft of American intellectual property.

EU cuts wheat crop forecast

  • European Commission cuts monthly forecast of 2018/19 EU common wheat production to 140.3 MMT from 141.5.

More South Korea Corn Activity

  • The Korea Feed Association (KFA) purchased about 60,000 MT of corn to be sourced from optional origins in a tender which closed on Friday.

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Export Sales

  • A solid week for old-crop corn coming in just below 1 MMT on the week, which was just slightly below the upper end of expectations and seasonally strong for this time of year.

  • OC beans were light, falling below the bottom of trade expectations, but NC was slightly higher than the upper range at 771,600 MT. Nonetheless, we need to see 1 MMT of NC bean sales per week to see biz start to normalize towards historical standards.

Actual

Estimated

Last Week

Wheat-OC

29.5

(-100)-100

112

Wheat-NC

270.9

150-450

340

Corn-OC

993.1

700-1,000

854

Corn-NC

149.3

150-350

273

Soybeans-OC

273.4

300-600

-139

Soybeans-NC

771.6

350-750

6

Soymeal-OC

140.7

100-400

239

Soymeal-NC

2.3

0-50

 

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Brazil still Grappling with Trucker Strike

  • Commodity exporters and processors are still reeling from the effects of last week’s truckers strike. Terminal operators at Santos port said on Wednesday that truckers had not yet resumed loading and unloading goods.

  • Paranaguá port administrators, Brazil’s second busiest hub for exports of commodities like soybeans, estimated 643,000 MT of products had not been shipped during the protests, which started on May 21. The port said 280,000 MT of soybeans and soymeal that should have been loaded onto six vessels during the last days had not arrived at the terminals.

  • Some 63 soy crushing units had ground to a halt as a result of the protests and remained shut pending deliveries of raw materials, said Abiove, the trade group representing processors and grain handlers.

Overnight Tenders

  • South Korea feed group KOCOPIA bought 120,000 MT of corn. The first 60,000 MT load is expected to be sourced from the US while the 2nd load would be optional origin of United States, Eastern Europe, South America or South Africa.

  • South Korea’s MFG feed group bought 139,000 MT of corn. It was thought the exports would originate from South America.

Dry Weather Impacting Ukraine Wheat

  • Ukraine’s 2018 winter wheat harvest is likely to fall to 24 MMT from 25.4 million tonnes in 2017 due to extremely dry weather this spring which will reduce the yield, the head of the state weather forecasting department said on Thursday.

  • The winter wheat yield was likely to fall to 3.8 tonnes per hectare this year compared with 4.1 tonnes in 2017 due to drought in southern regions of the country.

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Morning Comments – May 30

Corn Crop Score

  • In their first corn condition score of the year, USDA rated the corn crop at 79% good-to-excellent. That was well above expectation of 72% by the trade.

  • It is also well above last year’s rating of 65% at this time of the year and a long-run average rating of 70%. Nonetheless, early season ratings can & do change markedly during the growing season, but the trade overnight was weaker on the better than expected scores.

  • Corn planting neared competition with 92% in the ground while soybeans are 77%

China Trade War Heats Up Again

  • China hit back at the US on Wednesday at renewed threats from the White House on trade, warning that it was ready to fight back if Washington was looking for a trade war

  • On Tuesday, the White House took an about-face on its tone, saying it would impose tariffs on $50 billion of imports from China unless it addressed the issue of theft of American intellectual property. The trade escalation came after the two sides had agreed during talks in Washington this month to find steps to narrow China’s $375 billion trade surplus.

  • “We urge the United States to keep its promise, and meet China halfway in the spirit of the joint statement,” Chinese Foreign Ministry spokeswoman Hua Chunying told a daily news briefing, adding that China would take “resolute and forceful” measures to protect its interests if Washington insists upon acting in an “arbitrary and reckless manner”.

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Weather Outlook

  • Rain from Alberto will bring needed moisture to IL/IN today. Another system is expected on Fri/Sat in the Northern Plains, Upper Midwest and WCB.

  • Latest model shows no relief from hot, dry conditions in SW Plains.

  • Heat to return to the forecast, especially in the 6 to 10 day period.

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Morning Comments – May 29

Headlines

  • USDA reports 231,248 metric tons of corn for delivery to Unknown destinations, of which 28,048 MT for 2017/2018 delivery and 203,200 MT for 2018/2019

China Strikes Out Finding US Sorghum

  • Chinese buyers have returned to US markets looking to source sorghum after a trade dispute was lifted. But there are limited supplies to be had

  • After US suppliers had diverted much of the early Chinese sorghum deals to other countries, US grain merchants are mostly stocked out of sorghum.

  • Furthermore, US farmers are not willing to sell limited supplies with China returning to the market as they expect prices to increase. The added drought concerns in the Southern Plains is also limiting farmer’s appetite for selling sorghum.

Memorial Day Weather Turns Hot & Dry

  • Temps reached the 90s in the Central Plains this weekend and in the 100s in the Southern Pains, further zapping soil moisture.

  • Subtropical Storm Alberto will bring some partial relief to parts of Illinois and Indiana’s driest areas, That storm will also block rain in the western Corn Belt over the next 5 days.

  • The odds are not high that sufficient rain will fall to counter evaporation during the next two weeks except in the northern Plains and a few upper Midwest locations. The central Plains will see some rainfall, but southern Plains into the southwestern Corn Belt will not likely get enough rain to counter evaporation and further drying is likely.

 

CFTC Shows Cut in Soy Positions

  • Hedge funds and other money managers cut their net long position in CBOT soybean futures and options to 98,228 contracts from 108,061 in the prior week. This is well below the 170,000 to 210,000 contracts that the funds had maintained all throughout March and April.

  • In the week ended May 22, money managers expanded their bullish stance in CBOT corn futures and options to 199,970 contracts from 191,672 in the previous week.

Weekly Commentary – May 25

Cash Commentary-

Soybean basis garnered more upside as export trade winds turned favorable helping bolster US average soy basis by 2.3 cents on average, while corn was fractionally higher on average with a 0.5 cent improvement.

In corn, some of the recent gains due to planting were erased as farmers returned to market grain, which pushed some basis lower at key end users in NE/IA/IL/IN. But in the Upper Midwest where planting is still in full force corn plants were slightly higher to try and meet needs. In the week corn plants were unchanged.

Around the river markets, barge rates have mostly stabilized in recent weeks. Gulf basis for corn was off a penny which kept corn river markets mostly flat to lower, while soy basis at the Gulf was up 7 cents which put upstream river markets higher by a nickel. Soy crush plants continue to hold firm advancing 2.3 cents on the week as May crush margins were the highest for this time of year.

Futures Commentary-

Grains got bullish this week thanks to dry weather in key wheat growing regions and the US-China trade issues normalizing. On the week, beans were up 40, wheat was up 33 and corn tagged along for the ride with a 9-cent advance.

Last weekend US and China agreed to deescalate the trade war and forgo tariffs for the near term while the two countries agreed to work out a broader trade agreement. Both countries said they would keep taking measures that would allow China to import more energy and agricultural commodities from the US. By mid-week there was one cargo of new-crop soybeans sold to a Chinese trade house. But on Friday we had 312,000 MT of new-crop sales to China and another 165,000 of optional origin soybeans sold to China.

For wheat, dry hot weather continues to plague the US SW Plains, but now concerns are mounting across the global bread basket as well. Some degree of drought is prevalent in major growing regions of Russia, Australia, Canada and China. Russian grain consultancy, IKAR, downgraded the Russian crop to 69.5-77.5 MMT vs a previous forecast of 73 to 90 MMT while SovEcon consultants dropped their forecast by 1.2 MMT to 77 MMT. USDA has factored in a 12 MMT drop in Russia’s crop year-on-year with their 2018 forecast at 72 MMT.

In South America, crop reports there continue to take down the production numbers. Brazil’s AgroConsult pegged the 2nd season corn crop at 57 MMT, down from their previous estimate of 60 MMT based on their ongoing crop tour. If realized it would be a 10 MMT shortfall relative to last year. They also estimate the country will only export 24 MMT of corn, a far cry from USDA’s estimate of 30 MMT. In Argentina, the Ag Ministry lowered their latest old-crop soybean production estimate to 36.6 from 37.2 MMT and off from USDA at 39.0.

For the US, weather looks mostly favorable although as the calendar flips to June meteorologist are pointing to potential heat for the WCB and Southern Plains. The forecast shows little hope for Winter Wheat to get so much needed rains in early June during kernel fill. For corn and soybeans weather should be mostly ideal, but there is enough uncertainty about the extent of the heat to warrant caution.  It is possible that June heat could be more excessive than forecasted and that could set the stage for problems in Jul/Aug. Therefore, if the 2018 corn/soybean crop is to head downhill in a significant manner, it will likely be evident in June. If on the other hand the forecast verifies with favorable weather over at least the eastern Corn Belt, it spells good news for total crop prospects as last season demonstrated.

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Morning Comments – May 25

Headlines

  • Private exporters reported to the U.S. Department of Agriculture export sales of 20,000 metric tons of soybean oil for delivery to unknown destinations during the 2017/2018 marketing year.

Brazil Ends Trucker Strike

  • Brazil’s government struck a deal with truck drivers on Thursday to suspend a four-day protest. Truckers agreed to immediately suspend the strike for 15 days

  • Under the deal, a 10% price cut for diesel will be extended to 30 days. But normalization of trucking & logistics will take weeks to recover because of the magnitude of disruptions across numerous industries.

  • At Paranaguá port, Brazil’s second-largest grain export hub, the protests impeded 1,000 trucks from delivering goods over two days, Brazil’s largest cooperative Coamo Agroindustrial said on Thursday.

South America Crops Continue to Slip

  • Brazil’s AgroConsult pegged the 2nd season corn crop at 57 MMT, down from their previous estimate of 60 MMT based on their ongoing crop tour. If realized it would be a 10 MMT shortfall relative to last year.

  • They also estimate the country will only export 24 MMT of corn, a far cry from USDA’s estimate of 30 MMT.

  • In Argentina, the Ag Ministry lowered their latest old-crop soybean production estimate to 36.6 from 37.2 MMT and off from USDA at 39.0

Argentina Government May Renege on Export Taxes

  • In a political bait-and-switch, Argentina may halt the gradual lowering of soybean export taxes to bail out the government ballooning budget woes.

  • President Macri was elected in 2016 on a populist support from ag by promising to gradually reduce the 35% export tax on soybeans and outright elimination of the tax on corn and wheat. The soybean tax currently stands at 27.5% and was expected to be eliminated by the end of 2019.

  • It’s not clear that the budget coffers would benefit much in the short-run as the country has been crippled from drought creating limited excess supplies to export.

  • Nonetheless, if the tax policies are rolled back it will likely lead to aggressive selling by Argentina farmers to front-run any new enacted taxes

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Morning Comments – May 24th

Headlines

  • Weekly ethanol production declines.

  • Export sales mostly within expectations.

  • Grains continue higher in the overnight.

  • Export sales of 264,000 metric tons of soybeans for delivery to unknown destinations during the 2018/2019 marketing year.

  • Cancellations of export sales of 132,000 metric tons of grain sorghum for delivery to unknown destinations during the 2017/2018 marketing year.

Grains are higher in the Overnight

  • December corn closed above its previous high on Tuesday and is trending.

  • November soybeans are at the high side of the trading range and may test the April high today. If soybeans close through $10.60 prices, it could impulse higher as short positions established due to trade war concerns are covered.

Ethanol Production

  • Weekly ethanol production declined to 1.028 million bpd from 1.058 million bpd LW.

  • Weekly production was 1.8% ahead of LY pace during the same week.

  • Ethanol production is still on pace to meet USDA expectations.

  • Ethanol stocks rebounded last week to 929 million gallons from 903 million gallons the week before.

  • Ethanol stocks have been trending lower since mid-March, and will likely return to that trend as we move through the summer driving season.

U.S. seeks better access for GMO crops in China

  • According to a Thomson Reuters article this morning, the United States is looking for better access to import GMO crops into China as a part of the trade deal under discussion.

Brazil oil company Petrobras temporarily cuts diesel prices

  • Petrobras cut diesel prices by 10 percent in an effort to resolve the trucker strike that is disrupting the movement of newly harvested grains to export facilities.

  • The cut in diesel prices will only be in effect for 15 days, and the government has struggled to reach a lasting solution.

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Export Sales

  • Export sales were on the low side of expectations for soybeans this week with the large 894,500 MT cancellation announced last week showing up in the report.

  • Despite the net cancellations in soybeans it is a positive development that China’s Sinograin is back in the U.S. market and that the first cargo of U.S. soybeans was purchased by a Chinese importer yesterday.

  • Corn sales were down 13 percent from last week but above the 4 week moving average.

  • Wheat sales were up 78% from last week and were on the high side of expectations for both old and new crop.

Actual

Estimated

Last Week

Wheat-OC

112

(-100)-100

63

Wheat-NC

340

100-400

131

Corn-OC

854

700-1,100

985

Corn-NC

273

100-250

129

Soybeans-OC

-139

(-200)-400

281

Soybeans-NC

6

200-400

224

Soymeal-OC

239

100-400

376

Soymeal-NC

0-100

45

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Morning Comments – May 23

Headlines

China looking at U.S. soybeans again. Trucker protests in Brazil expand.  Optional origin sales of 140,000 metric tons of corn for delivery to Saudi Arabia.  Of the total 70,000 metric tons is for delivery during the 2017/2018 marketing year and 70,000 metric tons is for delivery during the 2018/2019 marketing year.  An optional origin contract provides that the origin of the commodity may be the U.S. or one or more other exporting countries.

Trump Says “Not Satisfied” with U.S. China Trade Talks

On Tuesday, President Trump said that he was “not satisfied” with how trade talks went with China. The president’s remarks triggered selling in the U.S. equities market toward the end of the session on Tuesday. The comment was made during an Oval Office meeting with South Korean President Moon Jae-in and contrasts sharply from his message on Monday.

Is China Back Buying Soybeans from the U.S.?

Chinese state grain buyer Sinograin has inquired about soybean prices in the U.S. for old and new crop. Sinograin has not purchased U.S. soybeans since April. The interest in U.S. soybean prices is a positive sign and comes after last week’s trade negotiations between the U.S. and China. No sales to China have been confirmed.

Brazil Trucker Strike Day 3

Truck drivers in Brazil will extend the protest a third day after the Government’s proposal to cut a fuel tax was seen as unsatisfactory. On Tuesday the Government proposed to eliminate the CIDE fuel tax, and put additional revenue from payroll taxes to reducing fuel prices. The trucking group ABCAM said that the CIDE accounted for only a fraction of the taxes on diesel fuel. On Wednesday, the Brazilian government proposed a reduction of the PIS/Cofins tax on diesel in an effort to end the trucker strike. Diesel prices have risen nearly 50% in less than a year. Thousands of trucks were obstructing major roadways used to ship soybeans in Mato Grosso. The protest has grown to include 23 states and around 300,000 drivers on Tuesday. Pork and chicken producer Aurora said on Tuesday that it will halt work in fifteen plants across four states due to the disruption in road transportation and a lack of storage space.

Argentina Dock Worker Strike

Dock workers in Argentina are planning a 24 hour strike on Thursday, demanding better working conditions. The strike is also to protest government talks with the International Monetary Fund.

FOMC Minutes Released Today

FOMC minutes will show the policy meeting in May. Traders will be looking for any hint on the pace of U.S. monetary tightening and look for confirmation for a rate hike in June.

The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a Branch of Foremost Trading LLC (NFA ID: 0307930)

 

Morning Comments – May 22

Headlines

Planting Progress Speeds Along

Weather Expected to Turn Hot and Dry

Brazil FOB Prices Mixed Relative to US

Brazil Truck Strike

 

USDA Planting Progress

Corn was 81% planted vs 62% last week and 81% on the 5-year avg.

Soybeans jumped 21% on the week hitting 56% and well above the 44% 5-YR AVG.

Both MN & SD had big jumps in corn planting getting to 77% and 66% respectively. So the threat of a late planting is waning.

Early crop condition ratings in some states show a solid start to the crop. IL was rated at 88% good-to-excellent and IN at 83%. MO fared slightly worse with 71% rated good-to-excellent.

 

 

Weather Models Point to Hot/Dry Conditions

Latest GFS weather model shows temps rising into the upper 80s/low 90s for much of the US Plains over the next 10 days.

Major portions of the grain belt from IA to the East should see more moderate temps in the 80s.

Major rain events stay mostly in the Southeast over the next 10 days.

 

Brazil Beans Weaken Relative to US

Brazil’s soybean prices continue to erode relative to US soy export prices

Latest quotes show Brazil at an $11/MT discount relative to the US versus $7/MT discount mid last week.

However, in corn Brazil prices moved higher on Monday to be on par with US FOB values, after trading at a $5 discount last week.

 

Brazil Trucker Strike

Brazil truckers blocked major roadways in the largest grain state, Parana, to protest rising fuel costs.

Santos Port Authority says protests have slowed loading and unloading at export terminals.

 Weather Images

may 22 5 day precip snip may 22 10 day precip may 22 5 day temp May 22 10 day temp

Morning Comments – May 21

Highlights

  • Grains higher on positive developments in U.S./China trade negotiations.

  • Precipitation expected across Midwest in 1-5 day forecast.

Grains Higher with Trade War “on Hold”

  • U.S. Secretary Steven Mnuchin said that the trade war with China is “on Hold” while the two countries work out a wider trade agreement.

  • On Saturday, both countries said they would keep taking measures that would allow China to import more energy and agricultural commodities from the U.S.

  • The U.S. will send a team to China to work out the details for increasing Ag and Energy exports.

  • On Monday, U.S. President Donald Trump said China had pledged to buy “massive amounts” of American agricultural products.

  • The grains rallied higher in the evening session with Dec ‘18 corn touching a high at $4.24 ¾ and November soybeans reaching 10.29 ¾.

U.S Weather

  • Strong precipitation is expected across eastern NE, IA, S. MN and IL this week with the heaviest precipitation expected in IA.

  • 6-10 day forecast brings moisture into the eastern corn belt where precipitation is needed.

  • Temperatures are expected to be in the 80’s through the majority of the corn belt.

South America Weather

  • Argentina farmers have returned to the fields to assess the damage from excessive moisture. Harvest pace has been slow and is now 71% complete for soybeans and 34% complete for corn.

  • Rains next week are expected in northeastern Argentina which will continue to slow harvest, but drier conditions are expected in the 11-30 day forecast.

  • Weekend showers benefited Brazil’s 2nd crop corn over the weekend.

Commitment of Traders Report- Week ending May 15th

  • Bullish bets declined for corn and soybeans for Managed Money (MM)  in the latest Commitment of Traders report.

  • MM net long positions in corn declined 20,220 contracts to 191,672.

  • MM net long positions in soybeans declined 18,980 to 108,061.

  • MM CBOT wheat declined 9,848 to a net short position of 5,522.

  • MM KCBT wheat also declined, slipping 4,440 to a net long position of 44,190.

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Soy Crush Plant Strike in Argentina

  • A strike by crush plant workers started on Thursday to protest layoffs earlier this year.

  • On Friday, the labor ministry ordered a “mandatory reconciliation” that would end the strike. Crush plant workers said they would obey a government order to end the strike.

The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a Branch of Foremost Trading LLC (NFA ID: 0307930)