-Soybeans lead the way higher on partial trade deal optimism
-Another Argentine wheat crop estimate lowered
-Exceptionally heavy monsoon rains slashing soybean crop ideas
-France upholds palm oil ban in biodiesel
-Improved South American rains still in forecast – Northern Plains blizzard in full swing
Soybeans moved higher overnight on optimistic rhetoric in the U.S./China trade talks with increasing ideas a partial trade deal on certain topics may be a way to set a positive tone and reduce frictions for continued discussions on the more difficult issues moving forward. Of course, any partial trade deal would include U.S. ag products, hence the strength in soybeans overnight. Ideas seem to revolve around expectations for China to agree to buy 15-25 MMT of soybeans (US soybean exports to China in recent years: 13.3 MMT 18/19, 28.2 MMT 17/18, 36.1 MMT 16/17, 30.6 MMT 15/16, 29.5 MMT 14/15), with some level of pork, wheat and ethanol purchases possible/likely as well. China is also believed to have offered a firm timeline to remove foreign ownership limits in futures, securities and mutual fund companies for the first time, something the U.S. has sought in opening the Chinese financial markets to U.S. interests. On the other side of this renewed optimism in the Chinese situation, though, it is believed China has been an active buyer of Brazilian beans overnight.
President Trump and Chinese Vice Premier Liu He are set to meet later today at the White House. Both sides have expressed optimism over yesterday’s talks, with a U.S. official saying they have been “probably better than expected.” Announcement forthcoming???
The Buenos Aires Grains Exchange lowered their estimate of the Argentine wheat crop to 19.8 MMT from 21.0 MMT previously, in line with yesterday’s Rosario Exchange reduction in the crop to 20.0 MMT. USDA left their estimate unchanged yesterday at 20.5 MMT (19.5 MMT last year). They put corn planting at 24% complete.
The Soybean Processors Association of India said the exceptionally strong monsoon rains this year could sharply reduce the Indian soybean crop to just 9 MMT, down 18% from last year and well below the USDA’s current estimate of 11.0 MMT. Monsoon rains in the largest soybeanproducing state of Madhya Pradesh have been 44% above average. Reduced soybean production could prompt increased vegoil imports.
On that topic, though, there are reports India is considering restricting palm oil imports, among other products, from Malaysia amid the escalating tensions over the Kashmir situation. Increased palm oil imports from Indonesia and other vegoils from Argentina and Ukraine are likely substitutes.
A French court upheld a law that bans palm oil from being used in the country’s biodiesel production, while also eliminating tax advantages of palm oil-based biodiesel, as well. The law banning palm oil-based biodiesel is set to go into effect Jan 1, 2020.
As part of Malaysia’s annual budgetary proposal, they said the plan to increase the country’s biodiesel blend to 20% from 10% currently will take place at the end of 2020 and would increase palm oil usage for biodiesel by roughly 500k tonnes annually. Malaysian palm oil production in 2019 was estimated at 21.0 MMT vs 19.5 MMT last year and rising to 22.2 MMT in 2020, with end 2019 palm oil stocks seen at 2.5 MMT and remaining mostly unchanged by the end of 2020 at 2.4 MMT (3.2 MMT end 2018). Crude palm oil prices were estimated to average near 2,000 ringgit/tonne ($478) for 2019 and 2,100 ringgit/tonne ($502) in 2020.
French wheat planting is 4% complete vs 1% last week and 15% last year, while corn harvest is 14% complete vs 6% last week and last year’s exceptionally fast, drought-impacted 65% completion.
Yesterday’s FSA program reported acreage update reflected virtually no change in Prevent Planting claims this month relative to the September update, as would be expected, as was the case with overall program acreage numbers, as well. Weather The second stage of the blizzard is getting underway across the Dakotas and an additional 8-14” of snow will fall, with areas of 14”+ in ND. Changes to the forecast put snows of 5-12” across the far NW corner of MN in the next 2-3 days. Otherwise, rains will work their way across areas to the east of a line from around St Louis to Chicago in the next day or two. Rainfall totals of .50-1”, with areas of 1”+, will be common in all but the eastern 2/3rd of OH, where totals of generally less than .50” will fall. Drier weather looks to build back in for most of next week. Rains return at the end of next week with The GFS indicating rains of .30-1” to fall across areas mainly NW of a line from Quincy IL to Chicago. The European indicates rains of .50-1.5” to fall in most of IA, WI and far NW IL, with totals of generally less than .20” elsewhere. Average precip and average to below average temps are seen in the 11-16 day period for the Plains and Midwest. Rains of .50-1”+ will fall across most of the Argentine growing areas, with only the far southern sections remaining mostly dry. Similar rains look to fall in the Brazilian states of RGDS, Santa Catarina and Mato Grosso. The 6-10 day period now sees rains of .50-1.5”+ to fall in most of the Argentine and Brazilian growing regions.