Wheat market bounces following 2 day plunge while soy sell-off continues on better than expected US soy rating and further confirmation that US/PRC trade talks “aren’t happeningâ€. Corn overnight trades inside Monday range although bottom pickers cautious following stable US corn rating update yesterday (vs. strong seasonal tendency for corn ratings to decline late August).
USDA reports 199 tmt meal to Mexico (147 tmt 18/19 and 57 tmt 19/20).
Weather leans negative with continuation of warm/wet finish to US growing season. Additionally, US HRW slated for additional beneficial pre-plant moisture early Sept. Australia dryness limited to SE ¼ of belt. 1/3 of EU, half of Ukraine and most of Russia unfavorable dry ahead of fall winter wheat seeding.
Are we close to putting in lows? Perhaps but evidence suggests more downside pressure given:
o Seasonal lows for both corn and soy typically late Sept/early Oct o CN/BN basis levels still eroding signaling adequate commercial ownership for autumn commitments o Full impact of distressed selling of 2018 corn still ahead as farmer prepares to store as much 2019 crop as possible. o 2018 CN/BN yield estimates edging higher amid near ideal growing season finish o Soy market, facing 9/19 US carryover estimates in excess of 900 mil bu, prone to error on the downside in bid to stimulate demand o Modest managed fund CN/BN shorts have ample room to expand—especially against backdrop of record 2019 S American soy area & potential surge in 2019 US corn area o Trump statement yesterday “it’s not the right time to talk to China about trade†suggests that blockage in US soy export flow to PRC may persist into yearend— narrowing the window that the US can ship soy to China before 2019 Brazil soy becomes available. o Chart watchers indicated next support at $8.00 SX and $300 SMZ.
Attached Oct/Dec meal spread details strong seasonal tendency for widening from late Aug into late Sept. Oct/Dec meal yesterday widens only modestly but is staged for further weakness given:
o Attractive crush margins in the US/PRC/EU o More US crush plants resuming operations following summer downtime o No sign of sustainable recovery in US meal basis o Argentine FOB meal continues to erode o Mounting concern over impact of PRC’s ASF problem on meal demand o O.W. looking for slower growth in 18/19 global meal offtake
o No reason for meal end users to extend coverage until size of 2018 soy crop defined and SX lows in
2nd chart details strong tendency from wheat to erode vs. corn into early Sept. Wheat bulls void of talking points with Australia crop stabilizing, aggressive Russian wheat offers/export loadings and vulnerability of large managed fund wheat long. Trade Friday looking for Stats Can to report 2018 wheat crop at 30.6 mt vs. USDA at 32.5 mmt and IGC’s 31 mmt forecast.
Post biscuit soy plunge, driven by lower meal, dragging corn lower while trimming overnight gain in wheat. Late August typically void of major events that alter prevailing price trend which is lower across CNBN/WHT markets. Ag markets, lacking confidence, appear to be seeking levels that will ignite stepped up demand.
Palm Oil: Up 33 ringgits at 2232
Dalian: Beans up 6.5 cents/bu, meal down $2.80/ton, oil down 9 and corn up 0.75 cents/bu
Matif Wheat: Up 1.50 euros at 198.50
Outside Markets:
• (Bloomberg) The new trade deal struck between the U.S. and Mexico removes a major sticking point between the two countries. Now, the challenge is to figure out Canada’s role and to get the agreement past Congress. President Trump and Canadian PM Justin Trudeau have discussed trade in a call and agreed to continue “productive conversations.” Mexico notes that the deal in no way pays for a border wall.
• (Bloomberg) U.S.-China trade negotiations aren’t happening. Trump said he is rejecting overtures from Beijing, decrying “one-sided” trade policy. “It’s just not the right time to talk right now,” he said. Don’t expect Washington’s openness to a deal with Mexico to change that, UBS warns. Amid the escalating rhetoric, Europe is trying to stave off crisis by buttressing the World Trade Organization.
• (Reuters) U.S. President Donald Trump spoke by telephone with German Chancellor Angela Merkel on Monday and the two leaders “strongly supported ongoing discussions between Washington and Brussels to remove barriers to a deeper trading relationship,” the White House said in a statement.
• (Bloomberg) Trump is giving many businesses an unexpected benefit on top of lower taxes and regulatory relief: He’s helping to restore their pricing power. By pouring hundreds of billions of dollars of tax cuts and extra government spending into an already stretched economy, Trump is allowing companies to raise prices because demand for their products is strong.
• (Reuters) – The U.S. Commerce Department said on Monday it had made a preliminary determination that imports of certain steel wheels from China were subsidized at rates ranging from 58.75 percent to 172.51 percent, and it would impose duties on the product. “As a result of today’s decision, Commerce will instruct U.S. Customs and Border Protection to collect cash deposits from importers of certain steel wheels from China based on these preliminary rates,” the department said in a statement. It estimated the value of U.S. imports of steel wheels from China in 2017 at $388 million,
• (Reuters) An OPEC and non-OPEC monitoring committee found that oil producers participating in a supply-reduction agreement cut output in July by 9 percent more than called for in their pact, two sources familiar with the matter said on Monday. The findings for last month compare with a compliance level of 120 percent for June and 147 percent for May, meaning participants have been steadily increasing production.
• (Reuters) China’s independent refiners have ramped up their foreign oil buying after returning from prolonged summer maintenance to gear up for rising winter fuel demand, a sign that the financial pain from taxes and higher crude prices have ebbed for now. The pickup in imports by private refiners, often called “teapots”, has boosted the physical prices of Middle Eastern and Russian oil to their highest in months.
• Wednesday eco releases include Q2 US GDP revision at 7:30 AM CST and pending home sales for July at 9:00 AM CST
Ag Markets:
• US corn rating unched at 68% G/E vs. 62% LY and 67.4% average with 10% of crop mature vs. 5% average and 61% dented vs. 42% average..
• Soy crop rating up 1% to 66% G/E vs. 61% LY and 65% average with 7% dropping leaves vs. 4% average
• US HRS harvest up 17% to 77% complete vs. 61% average.
• (Reuters) – The lowest offer at an international purchase tender for wheat held by Egypt’s state-buyer GASC on Tuesday was at $221.51 per tonne for 55,000 tonnes of Russian wheat, traders said.
• Weekly US grain inspections yesterday (all at high end of expectations) suggest that USDA’s O/C US CN/BN export forecasts are on the mark with only 1 week remaining in 2017/18 shipping season.
• Aug 27 (Reuters) – Canadian Foreign Minister Chrystia Freeland will travel to Washington on Tuesday to continue trade negotiations, her spokesman said on Monday, amid news that Mexico and the United States have reached a trade agreement. We will only sign a new NAFTA that is good for Canada and good for the middle class. Canada’s signature is required,” spokesman Adam Austen said in an emailed statement.
• (ERS) Cumulative PRC soy imports for October 2017 to July 2018 virtually matched the yearearlier level at 77 million tons, and imports are expected to total 96 million tons by September, a modest increase from the previous year. In 2018/19, the volume of soybeans imported to China are expected to decline relative to a year earlier, totaling 95 million tons. This would be the first annual decline in Chinese soybean imports since 2003/04.
• Aug 27 (Reuters) – Russian wheat export prices fell last week with the global benchmark in Chicago and because of a weaker rouble, analysts said on Monday By Aug. 22, Russia had exported 7.8 million tonnes of grain since the July 1 start of the 2018/19 season, up 42 percent compared to the same period the previous year. This included 6.4 million tonnes of wheat, the Agriculture Ministry said. Some Russian farmers are holding back on their sales of high-quality wheat amid the rouble’s weakening and high demand from exporters, SovEcon said.
• (Reuters) The Crop Watch corn and soybean yield expectations are now the most elevated of the season as timely rains and the lack of extreme August heat have provided good finishing weather for the subject fields. For the most part, crops are a week or two ahead of normal development pace, meaning that the harvest will start earlier than usual this year in many locations across the country.
• (Reuters) Malaysia’s palm oil production is expected to dip in 2018 due to lower yields, analyst Thomas Mielke said at a Kuala Lumpur industry event on Tuesday. Output from Malaysia, the world’s second-biggest palm oil producer, will fall to 19.8 million tonnes this year from 19.92 million tonnes last year, Mielke said. He had earlier forecast annual production would rise to 20.2 million tonnes
• Aug 27 (Reuters) – The Ukrainian agriculture ministry has no immediate plan to review a memorandum agreed with traders this month allowing for the export of 8 million tonnes of milling wheat this season, a senior ministry official said on Monday. There are reports that the portion of feed wheat had jumped to more than 70 percent in northern regions. The ministry has said that at least 13 million tonnes of harvested wheat is milling quality. Ukraine consumes around 5 million tonnes of milling wheat annually. The country has already exported 2.3 million tonnes of wheat so far this season.
• Aug 27 (Reuters) – China’s Shandong province said it has banned live hogs and related products from areas of high risk for African swine fever (ASF) from entering the province, in a bid to stop the spread of the deadly disease across the world’s largest herd. The move comes after China discovered another outbreak of the highly contagious disease on Thursday, its fourth since the country’s first ever outbreak was reported on Aug. 3.
• Aug 27 (Reuters) – Brazilian exporters are facing delays shipping goods transported in containers, including coffee and cotton, due to overbooking, the world’s largest container shipping company, A.P. Moller-Maersk A/S MAERSKb.CO, said on Monday. In a report on its operations in Brazil, Maersk said exports fell for the second quarter in a row, citing the practice of some exporters reserving more space in ships than they need, leaving other companies failing to find room for their cargo. “Exporters are hurting each other when they book space they end up not using.
• Aug 27 (Reuters) – The U.S. Department of Agriculture said on Monday its $12 billion farm aid package would include $4.7 billion in direct payments to farmers to help offset losses from retaliatory tariffs on American exports this season. The bulk of the payments, $3.6 billion, would be made to soybean farmers. That amounts to $1.65 per bushel multiplied by 50 percent of production. The aid package, originally announced in July, also includes payments for sorghum of 86 cents per bushel multiplied by 50 percent of production, 1 cent per bushel of corn, 14 cents per bushel of wheat, and 6 cents per pound of cotton. Payments for hog farmers will be $8 per pig multiplied by 50 percent of Aug. 1 production while for dairy farmers they are worth 12 cents per hundred weight, Northey said. Agriculture Secretary Sonny Perdue said the program would begin on Sept. 4.Farmers will need to present production evidence to collect payments and payments are capped at $125,000 per person.