Morning Comments – January 17

Beans came back from the 3-day weekend trading sharply higher which helped bring corn and wheat along. In outside markets, the US dollar and equities traded sharply lower while crude oil posted solid gains.

USDA reported a 102,944 MT sale of corn to unknown destinations

Weather over the weekend was a driving catalyst for soybeans as 3 to 5 inches of rain fell in water-soaked areas of Argentina. Flooding resulted in parts of the region resulting in a new risk to some crop areas that either were still flooded from previous heavy rains or just recently experienced improving conditions. Most likely flooding occurred in areas that flooded earlier this summer and new damage to crops may be somewhat limited.

In negative developments, China is said to have cancelled 7 cargos of US ethanol as tariffs start to take effect.  The tariff is expected to rise to 30% from its current level of 5%, essentially imposing a blockade on US shipments.

In export news, Japan was in the market for 117,605 MT of milling wheat with the results expected Thursday. The Philippines were also trying to source 165,000 MT of feed wheat.

The US dollar hit its lowest mark in a month as British Prime Minister May promised a parliamentary vote on Britain’s deal to leave the European Union and stressed it would seek to stay a key European partner. This bolstered the Sterling giving it the biggest jump since the June Brexit vote.

Morning Comments – January 13

Grains resumed their slump overnight following yesterday’s sharp rally in beans and modest bump in wheat prices buoyed by USDA data. In outside markets, crude oil and the US dollar fell in the night session while US equity futures were trying to hold on to slim gains.

USDA caught the trade by surprise yesterday when it trimmed US soy output on lower acres and yield forecasts. The net result was a 54 MB drop in production which cut ending stocks from 480 MB last month to 420 MB this month. USDA also dropped their US corn yield and acres forecast, helping lower production by a slim 78 MB.

However, on the bearish side, the Quarterly stocks report showed bigger than expected corn and wheat inventories, which implied lower feed use than what USDA had been projecting. Dec 1 stocks implied 1st quarter (Sept-Nov) U.S. corn feed/residual usage at 2.280 billion bushels, up just 4.6% from last year’s 2.179 billion. Corn for feed use was dropped by 50 MB to 5,600 which still reflects a 9.1% annual increase over 2015, while Q1 feed use was up only 4.6%.  Wheat feed use was also lowered by 35 MB to 225.

The only bright spot on wheat was the steeper than expected drop in US winter wheat plantings, plunging 3.8 million acres over last year while the trade expected only a 2 million acre cut. This would be the lowest plantings in 107 years. Nonetheless, global supplies continued to mount with world carry-out ballooning to 252 MMT up from 251 MMT last month on increased production in Russia and Argentina.

Going forward, the trade will continue to focus on SA’s growing season. Portions of central Argentina will still be affected by heavy rain this weekend and more flooding is probable. But, Brazil continues to see nearly ideal conditions. Also, with wheat plantings “known” traders will start to conjecture about US spring acres, with farmers believed to be heavily biased towards 4 to 6 million more acres of soybeans in 2017.

Morning Comments – January 12

Grains drifted lower overnight ahead of fresh data from USDA at 11 am CDT. Meanwhile, crude oil moved higher while the US dollar was sharply lower in the night session.

USDA announced a 110,000 MT of of corn to Japan, and another 253,488 MT to unknown destinations.

Following yesterday’s announcement that China would impose high tariffs on US DDGs imports, a think tank there has said it expects purchasing of the feedstuffs to slow. Imports for 2016/17 were previously seen at 2 MMT, said the China National Grain and Oils Information Center. They expect that number to slide to below 1 MMT, but that will likely boost soymeal and soybean demand.

In wheat, the 2017 rally took a hit yesterday as prices slid for a third session on improved weather in the US Plains and Black Sea region. Wheat is being pressured by expectations that weekend storms would help recharge soil moisture in Oklahoma and Kansas, where dry conditions have stressed dormant hard red winter wheat crops. Also, a substantial snow layer has protected Ukrainian and Russian winter crops from severe frosts which came this weekend.

South Korea’s Major Feedmill Group has rejected all offers and made no purchase in an international tender to buy up to 70,000 tonnes of corn from optional origins, sighting prices that were too high. The lowest offer in the tender was $189.95 a tonne c&f on a flat price basis.

The US Dollar hit a 5-week low as President-elect Donald Trump’s first press conference was ambiguous on the direction of new policy initiatives, disappointing the trade on the Trumponomic bullish bet that has been in play since the election.

Weekly Export Sales-

Actual

Expected

Corn

603

500-800

Soybeans

349

500-800

Wheat

391

250-450

Oil rose on Wednesday, lifted by reports of Saudi supply cuts to Asia, but gains were capped by a lack of detail about the reductions and because of signs of rising supplies from other producers. EIA crude stocks data is out later this morning with traders looking for a 1.1 million barrel build from last week.

 

Morning Comments – January 11

Grains moved lower overnight with wheat leading the complex lower while losses in corn and beans were more muted. In outside markets, crude oil moved higher as did the US dollar.

China has increased punitive tariffs on imports of a US DDGs from levels first proposed last year. In a final ruling, the Commerce Ministry said on Wednesday that anti-dumping duties will range from 42.2 percent to 53.7 percent, up from 33.8 percent in its preliminary decision in September. Anti-subsidy tariffs will range from 11.2 percent to 12 percent, up from 10 percent to 10.7 percent.

Markets are mostly in a wait-and-see stance ahead of tomorrow’s flurry of new crop estimates. Quarterly stocks will be a key report to watch with USDA factoring in heavy feed use for wheat and corn in their demand estimates. USDA has a 9% increase in corn used for feed meanwhile cattle on feed was flat for the last quarter compared to the previous year, while hogs & poultry were up only 3% year on year.

Dry conditions are in the cards for Argentina over the next few days before widespread rains return the middle of next week. Slight improvement in wettest 1/3 of Arg. corn/soy next 10 days, but very wet 11-30 day suggests ongoing concerns. In Brazil, next 10 days will bring rains to help ease corn/soy stress in Northeast.

Oil rose on Wednesday, lifted by reports of Saudi supply cuts to Asia, but gains were capped by a lack of detail about the reductions and because of signs of rising supplies from other producers. EIA crude stocks data is out later this morning with traders looking for a 1.1 million barrel build from last week.

 

Morning Comments – January 10

Grain futures were lower overnight with soybeans leading the decline on a 7 cent loss, giving up much of yesterday’s 10-cent advance. In outside markets, crude oil tried to stabilize after yesterday’s $2 a barrel slide while US equity futures and the dollar were eaking out small gains to start the day.

USDA announced a 130,000 MT sale of corn to Taiwan, and a 241,600 MT sale of corn to Unknown of which 91,300 MT is for 2016/2017 delivery and  150,300 for 2017/2018.

This morning Brazil’s forecasting agency Conab pegged the bean crop to a record large 103.8 MB, up from their previous forecast of 102.45. They also boosted their corn forecast to 84.5 MB from their last estimate of 83.8 MB.

Crush margins in China have started to erode sharply and are now at their lowest point since September. Soybean crushers in China have slowed bean buying as profits are cut and stockpiles have surged. With the Chinese New Year at the end of this month, there is growing beliefs that China will curb its buying and turn to South America after the week-long Lunar New Year.

USDA will release their own forecasts on Thursday for US & global grains. Traders look for a modest drop in US corn and bean carry-outs with corn expected to fall to 2,385 MB from last month’s forecast of 2,403, and soybeans are expected to fall to 468 MB from 480 in December. The Quarterly Stocks report will shed some light on corn for feed demand in the 1st quarter of the marketing year. USDA has a 9% increase in feed use year on year which seems like a stretch. Cattle on Feed numbers for Q1 were essentially unchanged vs last year, while hogs and broiler numbers were up roughly 3% for the quarter vs last year.

US Southern Plains are expected to see some beneficial rains on the horizon. Argentina continues to be aggressive players in the wheat markets as their export prices have stayed flat in response to the CBT rally in recent weeks. In the past week export prices for corn have risen in foreign countries relative to the US, while SA bean prices have gotten cheaper relative to the US.

US Export Prices Relative to Foreign Competitors (in USD/MT)

This Week

Last Week

Corn-ARG

$23.40

$22.48

Corn-BRZ

$16.90

$15.34

Corn-EUR

$5.05

$3.81

Beans-ARG

-$14.10

-$8.16

Beans-BRZ

$2.70

$3.22

Morning Comments – January 09

Wheat and corn started the week in positive territory while beans were flat in overnight trade. In outside markets, crude oil gave up a $1 a barrel in overnight trade while the US dollar and equities were mostly quiet in the night session.

Argentina weekend rain was most significant from Cordoba and San Luis to northeastern Buenos Aires where 0.60 to 1.59 inches were recorded. Heavy rains are expected Monday across the interior north. But conditions across the nation’s crop areas will likely improve over time this week and next week.

Brazil remains very good for the bulk of its production region. A few areas of dryness will continue, but they will eventually receive rain and subsoil moisture should be sufficient to carry on normal crop development until better rain evolves. Rain in Tocantins, northeastern Goias and western Bahia later this week will bring some much needed relief to drying, but follow up rain will be very important to continue the improving trend.

On Friday, CFTC data showed managed funds cut corn short by 17K to -96K, soy long down 13K to +94K, wheat short down 5K to -104K. Thursday marks the next USDA crop report with wheat acres being of special interest. Analysts expect US winter wheat plantings to be off 2 million acres from 2016.

Oil fell by $1 a barrel on Monday as growing U.S. production outweighed optimism that many other producers were sticking to a deal to cut supplies in a bid to bolster the market. On Friday, Baker Hughes data showed an 8th week in a row of rising US rig counts.Rising exports from Iran also added to bearish sentiment. Iran has sold more than 13 million barrels of oil held on tankers at sea, capitalizing on its exemption from a global deal to cut production in order to regain market share and court new buyers.

Morning Comments – January 06

Corn and wheat continued to add to their gains of 2017 while soybeans was firmly in negative territory for much of the night session. In outside markets crude oil was higher while equities and the US dollar were little unchanged.

Wheat continues to find strength from poor US winter wheat conditions and concerns about winter kill in Ukraine. An expected sharp fall in temperatures in Ukraine could damage the country’s winter grain crops because of a lack of snow cover on the fields, analyst UkrAgroConsult said on Thursday. Meteorologists forecast a cold snap starting on Jan. 6 and predict that air temperatures will fall on average to 13-17 degrees Celsius below zero, perhaps even to minus 20 degrees.

In South America, rains continue to plague the last of the Argentine planting season. Estimates put overall soy planting at 90% done while corn is said to be only 80% planted. Argentina showers return through Monday and the latest models increased the rain coverage. More rains are also expected next Thu./Fri. & two more in 11-15 day, which keeps wetness concerns in place across Argentina corn/soy. In Northern Brazil, 6-10 day rains aid moisture for corn/soy/coffee/sugar, limits dryness to no more than NE 10% corn/soy.

The dollar clawed back ground on Friday but was heading for a second straight weekly loss, having tumbled the previous day on a rare piece of poor U.S. data and apparent action by Chinese authorities to shore up the yuan.

Weekly export sales were disastrous with soybeans coming in with a cargo and a half of new business at only 87,500 MT.

Weekly Export Sales-

Actual

Expected

Corn

429.3

650-950

Soybeans

87.5

800-1,200

Wheat

183.6

200-500

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Morning Comments – January 05

Grains were lower as beans came under pressure and wheat and corn were fractionally weaker. In outside markets, the US Dollar was weaker while crude oil was in positive territory going into the morning trade.

Weather models are showing rains are expected to hit northern Brazil in the coming 10 days with 65% coverage expected. Also, Argentina is not expected to be as wet. However, it is still very wet and rains will be prominent into the weekend. Rains are expected to hamper some late season planting in Argentina.

The latest Drought Monitor conditions in the US showed dry conditions eased in the SE US in the last week, but intensified in OK. Little change was noted in other areas of the US Plains.

Stocks of soybeans at Chinese ports are reportedly down. Soy crush demand is still robust with crush margins still seasonally high, but import shipments have been slowed a bit by logistics issues.

Crude oil will get fresh news this morning from EIA on crude oil inventories. Expectations are for a 2.15 million barrel decline in stocks versus last week. However, the past two weeks have seen oil inventories build, contrary to expectations which have been for inventory draw-downs.

 

Morning Comments – January 04

Grains were modestly higher overnight with beans showing a modest boost and corn and wheat trading fractionally higher. In outside markets, the USD backed off its 14-year high from yesterday and oil rebounded from yesterday’s sell-off.

Monthly crush data from USDA showed November soy crush at 170.7 MB, slightly below trade estimates of 170.9 MB. USDA pegged corn used for fuel alcohol at 451.9 MB in November, and that’s up from 433.9 MB a year ago.

China’s soybean crush continues to be strong. Year-to-date weekly crush figures show soybean crushing up 4.4%. That would suggest China needs to import 87 to 88 MMT vs USDA’s estimate of 86 MMT.

Winter wheat ratings in KS & OK slipped substantially in the monthly state reports. USDA said OK monthly wheat ratings showed only 25% of the crop good to excellent versus 53% at the end of November. KS also fell from 52% to 44%.

Oil rose on Wednesday, with top exporter Saudi Arabia expected to increase prices for its crude as part of planned supply cuts, although a strong dollar and moderate economic growth prospects restricted gains.

 

Morning Comments – January 03

The first trade day of the new year saw a continuation of last year’s trend with equities, the US dollar, and crude oil shooting higher, while grains languished and soybeans moved lower.

Soybeans at one time was as much as 8 cents higher before turning lower going into the break.  Brazil is likely to see some rains to help limit dryness in Brazil, while Argentina has seen widespread rains. More rain is expected in Argentina for the next week to add to the 10 inches of rain that has fallen in the last two weeks. Argentina still has some acres not planted which may put those acres at risk.

In Asia, palm oil, and China soy and meal futures were off sharply overnight. Argentina will start cutting its soybean export tax by 0.5 percentage point every month for two years starting in January 2018, resulting in a 12-point reduction to 18 percent by the end of 2019, the government said in a decree on Monday. When free-market proponent Mauricio Macri became president in December 2015, he cut the tax to 30 percent from 35 percent. He promised at the time that he would keep chopping the levy by 5 percentage points per year every year of his administration. But budget concerns have put that plan on hold.

Taiwan’s MFIG purchasing group has issued an international tender to buy 40,000 to 65,000 tonnes of corn which can be sourced from the United States, Argentina, Brazil or South Africa. Algeria’s state grains agency OAIC has issued an international tender to buy optional-origin soft milling wheat.
The tender sought a nominal 50,000 tonnes but Algeria often buys considerably more in its tenders than the nominal volume sought.

Global equity markets were up sharply which helped push US equity futures. Chinese PMI was up better than expected suggesting manufacturing was running strong.