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12 Feb 2019

Morning #Grain #Futures Comments

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-Brazil lowers soybean crop estimate - warns of possibly more to come
-Brazil raises corn area/crop estimates
-EU solidifies deal to allow Argentine biodiesel imports
-EPA pushes to get E15 rule in place - may sacrifice RIN reform
-Algeria tenders for wheat, S. Korea buys corn but unlikely US
Soybeans rebounded a bit overnight following yesterday’s sell-off, being at least partially supported by CONAB’s lowering of the soybean crop. Equities are being supported by an apparent agreement in Congress to prevent another government shutdown, for the time being. Energy markets are firm, as well.
 CONAB lowered their estimate of this year’s Brazilian soybean crop to 115.3 MMT from 118.8 MMT estimated in January and is down from last year’s 119.3 MMT. USDA lowered their estimate to 117.0 MMT in last Friday’s WASDE report. An Ag Ministry official also stated their next estimate in March “could be lower still” as the period of dryness had not ended when the surveying for this month’s estimate was done. CONAB lowered their estimate of this marketing year’s (Feb-Jan) soybean exports to 71.5 MMT from 75.0 MMT previously and would be down solidly from last year’s 83.6 MMT, but is still slightly above the USDA’s current 70.0 MMT estimate. However, if the crop is lowered further, so very well may be the export estimate, as well. CONAB lowered their 1st corn crop estimate to 26.5 MMT from 27.5 MMT previously and would be down marginally from last year’s 26.8 MMT, but they raised their estimate of the 2nd crop (safrinha) planted area to 11.81 million hectares (29.2 mil acres) from 11.55 million hectares (28.5 mil acres) previously and is up from last year’s 11.53 mil hectares (28.5 mil acres). The increase in area prompted a solid increase in their estimate of the safrinha corn crop to 65.2 MMT from 63.7 MMT previously and would be up sharply (21%) from last year’s 54.0 MMT, putting the total corn crop at 91.7 MMT vs 91.2 MMT previously estimated and last year’s 80.8 MMT. USDA is estimating Brazil’s corn crop at 94.5 MMT. With the notable increase in production this year, CONAB sees corn exports rising to 31.0 MMT from 24.8 MMT last year (USDA at 29.0 MMT/24.5 MMT, respectively). 
 USDA reported the sale of 122k tonnes of corn to unknown for 2018/19 delivery this morning. Remember, this Thursday’s Export Sales report will only include data for the week ended 01/03/19. Next week’s report will included combined data for the 6-week period of the weeks ended Jan 10-Feb 14.
 South Korean feedmills bought 203k tonnes of corn overnight for April-May shipment and was priced from $205.74-$206.96/tonne c&f, with ideas it is likely to be South American origin.
 Algeria tendered for an unspecified amount of soft milling wheat for March 16-April 15 shipment. In their last tender for milling wheat, Algeria bought 550k tonnes for Feb-March shipment at $261.50-262.00/tonne c&f. France is typically the largest supplier of wheat to Algeria, but other EU countries, as well Ukraine, are common suppliers, as well. As of the last Export Sales report with data through 12/27/18, the U.S. had sold 105k tonnes of wheat to Algeria vs 400k tonnes at the same time last year. Tunisia is also tendering for 100k tonnes of soft wheat and 92k tonnes of durum, as well.
 The EU has agreed to allow eight Argentine biodiesel producers to export biodiesel to the EU duty free as long as prices are above a set minimum price, which will be linked to an average monthly soybean price quotation by Argentina’s ag ministry. The minimum price is being put in place to prevent price dumping concerns, which led the EU to impose anti-dumping duties in recent years. The EU Commission said they expect the plan will result in the EU importing around 10% of total annual biodiesel consumption annually from Argentina.
 Malaysia said they plan to raise the biodiesel content requirement for the transportation sector to 20% in 2020 from 10% this year, while also raising the mandate for the industrial sector to 10% from the 7% guideline which will go in place in July. Once in place, an estimated 1.3 MMT of palm oil will be used annually to meet Malaysia’s domestic biodiesel demand according to the ag ministry.
 As the EPA continues to push to get the E15 year-round blending allowance rule issued before the summer driving season, sources are saying the expectation of simultaneous RIN credit reforms may be passed up at this time. It was believed the two issues were going to be addressed in the same rule proposal, but as a result of time constraints created by the government shutdown, it appears the RIN reform issue is being separated from the new rule proposal in order to speed up the process for E15 summer allowance. 

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