Rather tame start to Thursday row crop trade while wheat sell off continues on heels of Russia Ag Ministry re-stating that there are no plans for wheat export curbs. Additionally, ample offers (12) yesterday on Egypt’s wheat tender (which traded $3.30/ton below last week’s purchase) suggests no shortage of wheat into Q4.
Weather a mixed bag as areas encumbered by excess rains in US swell from 20% to 40%+ by end of week although follow up weather is warm and dry for 10 days in most areas. Largely warm temps continue for entire US during 6-15 day period which will accelerate crop maturation and dry down. No sigh of crop damaging frost in major US production areas for next 3 weeks.
Informa updates 2018 US CN/BN yield forecasts at 10:30 CST today vs. prior estimates of 176 BPA/50 BPA respectively.
Attached chart details strong 15 year seasonal tendency for MWZ to gain on WZ from mid-Sept into mid-Dec. Recall USDA will update final 2018 US HRS production on Friday Sept 28th. USDA cut US HRS production from Aug to Final in only 7 of last 16 years. 2017 Aug to Final HRS production advanced a nominal 15 mb although Aug to Final gains of 35-45 mb were posted in ’03, ’08, ’09 and ’12. Stats Can last week posted 2018 Canadian wheat crop at 29 mmt vs. USDA’s 32.5 mmt August forecast and 30 mmt LY. Look for strong support in in MWZ/WZ on 10 cent breaks to 45 cents vs. yesterday’s close neare 53 cents. We think USDA is underestimating 18/19 US HRS export demand by 25 mb which, if realized, should be supportive to MWZ/WZ.
2nd chart details strong seasoanal tendency for soybeans to erode vs. corn during September although current premium of SX vs. CZ in $4.72 area is already narrow historically, Nonetheless, pending loss of 28 mmt+ of US soy export demand to PRC (equates to nearly 21 mil acres of soy or 47% of total 17/18 US soy exports) will send strong signal that farmers should reduce soy acres and increase corn area next year. Thus in the absence of any substantive progress resolving US/PRC trade battle—we think job of soy market is to further narrow its’s premium to corn in bid to discourage US farmer from planting beans next year.
3rd graphjic details storng seasonal tedency for soybeans to erode vs. meal during September. PRC cut in Q4 soy imports from US in concert with ramped up harvesting of record 2018 US soy crop and feared reduction in S Amercan meal availability amid large Brazil soy exports and smaller Argentine soy crop should support erosion in beans relative to meal. Cash sources report PRC meal firming— ditto for deferred PRC meal inverses.
Suspect row crop markets settling into trading range ahead of next Wednesday’s crop report where trade historically tends to under-estimate USDA Sept CN/BN yields. Wheat market dominated by Russian news which is largely negative amid ample offers on Egyptial tenders at steadily lower prices. Managed fund wheat longs (50K contracts) increasingly vulnerable with another new low for the move posted today in WZ. Soy rallies capped by pending launch of next round of US tariffs on PRC and trade perception that the 2018 US soy yield is edging higher.
Palm Oil: Down 14 ringgits at 2277
Dalian: Beans down 1.25 cents/bu, meal down $2.50/ton, oil down 5 and corn up 1.5 cents/bu
Matif Wheat: Down 0.25 euros at 199.50
Outside Marketsâ€
• (Reuters) – The United States and Canada have made progress in talks to revise the North American Free Trade Agreement, and officials from the two sides will work together into the night to flesh out areas for further discussion. Freeland sounded upbeat as she emerged from a day of talks with top U.S. trade negotiator Robert Lighthizer, although she cautioned that no trade deal was done until the last issue was nailed down. “We sent them (the officials) a number of issues to work on and they will report back to us in the morning, and we will then continue our negotiations,” Freeland told reporters on leaving the U.S. Trade Representative’s office in Washington on Wednesday. Trump sounded a more upbeat note earlier, and said he expected to know whether a deal could be struck to include Canada in the next few days.
• (Reuters) – Trump preparing to impose tariffs on $200 bln worth of Chinese imports–Public comment ends at midnight Washington time on Thursday–Beijing seen holding hard line, certain to retaliate. The world’s two biggest economies are locked in an escalating trade war, with no resolution in sight. “The hope is that this (NAFTA) puts a lot of pressure on the Chinas of the world to help us negotiate better reciprocal trade deals,” Kevin Hassett, chair of the White House Council of Economic Advisers, told Reuters. “China seems unable or unwilling to announce major liberalizations that could be termed ‘confidence building measures’ or ‘down payments’ on expected near-term reforms,” Craig Allen, president of the Washington-based U.S.-China Business Council. Washington is demanding Beijing improve market access and intellectual property protections for U.S. companies, cut industrial subsidies and slash a $375 billion trade gap. The Trump administration is ready to move ahead with a next round of tariffs after a public comment period ends at midnight in Washington on Thursday, but the timing is uncertain, people familiar with the administration’s plans told Reuters. The new duties will start to hit consumer products directly, including furniture, lighting products, tires, bicycles and car seats for babies. (Trump said he was not prepared to make a deal with China “that they’d like to make.” “We’ll continue to talk to China,” he said at the White House on Wednesday. “But right now we just can’t make that deal. In the meantime, we’re taking in billions of dollars of taxes coming in from China, with the potential of billions and billions of dollars more taxes coming in.”
• (Bloomberg) This year’s rout in emerging markets has lasted so long that it has taken even the most ardent bears by surprise. Not one of the seven biggest selloffs since the financial crisis—including the so-called taper tantrum—inflicted such pain for so long on the developing world. Some strategists are now saying it has become a full-fledged crisis of confidence for investors in developing nations.
• (Reuters) – The dollar edged down on Thursday after a bounce in European currencies but investors said concerns about U.S. President Donald Trump imposing further tariffs on Chinese imports could lift the greenback. Trump could impose levies on $200 billion more of Chinese imports on Thursday when a public comment period on the new tariffs ends. That would represent a significant ramping up of the trade war between the world’s two largest economies and lift the dollar which has become a principal haven for investors seeking shelter from the conflict
• (Bloomberg) The U.S.-China trade fight may soon kick up a gear. Today is the deadline for public input on tariffs targeting $200 billion of Chinese goods and Trump is said to be ready to act as soon as it passes. Pulling the trigger risks consumer price increases on everyday items. Meanwhile, Trump says we’ll know within days whether Canada will be part of a new North American trade treaty.
• (Bloomberg) Cryptocurrencies dropped sharply for the second time in less than 24 hours, sinking toward a nine-month low amid concern that broader adoption of digital assets will take longer than some anticipated. Bitcoin tumbled as much as 9.8 percent in Hong Kong, and rival coins Ripple, Ether and Litecoin also fell, pulling down the Bloomberg Galaxy Crypto Index.
• (Bloomberg) Things are not going to plan in Trump’s U.S. trade wars. New data out yesterday showed the U.S. trade deficit in July widening at its fastest rate since 2015 as monthly imbalances with China and the European Union both hit new records. Worse yet, signs are emerging that the trade skirmishes are starting to hit economic growth—not just at home but around the world.
• (Reuters) – Argentina’s economy minister sounded upbeat on Wednesday about clinching a new deal with the International Monetary Fund after two days of talks in Washington, and said had sought U.S. support for securing approval from the IMF’s board. The peso ARS=RASL closed 1.38 percent stronger at 38.52 per dollar on Wednesday, marking a rare pause in losses that have shaved more than 50 percent off its value this year, making it one of the worst performing emerging market currencies. Economy Minister Nicolas Dujovne said he believed a deal to release early disbursements from a $50 billion standby loan agreement with the IMF could be put to its board by the end of the month, helping to shore up investor confidence in Latin America’s third-largest economy.
• (Bloomberg) Yesterday we got the latest Johnson Redbook Index of weekly same store sales, and they’re soaring to their highest level since the crisis. The day before we got killer numbers out of Ford for sales of the F-150 and the Ford Mustang. Ford’s U.S. sales chief Mark LaNeve said on the conference call that the right economic conditions are in place to remain optimistic about sales. Meanwhile, consumer confidence is absolutely soaring.
• (Bloomberg) The trauma of the financial crisis hasn’t gone away for young adults, writes Barry Ritholz in Bloomberg Opinion. A study from Vanguard finds that millennial investors are half as likely to hold stock as people who started investing before the crisis, and nearly a fifth of them had no money in equities at all. That means they’ve missed an opportunity to take advantage of the bull market.
• (Reuters) Energy companies and port operators along the U.S. Gulf Coast took steps on Wednesday to resume operations after Tropical Storm Gordon shut more than 9 percent of the region’s oil and gas output. Gordon never became a hurricane as forecast and weakened into a depression on Wednesday, just hours after making landfall near the AlabamaMississippi border, helping to keep production and refining operations running unimpeded at most energy facilities in the Gulf and along the Louisiana coast.
• (Reuters) U.S. crude oil exports eased slightly to 2.1 million barrels per day (bpd) in July from a record 2.2 million bpd in June, foreign trade data from the U.S. Census Bureau showed on Wednesday. The United States lifted a 40-year ban on crude oil exports in late 2015 and since then tankers filled with U.S. oil have landed in more than 30 countries.
• (Reuters) Saudi Aramco has raised the European price for its Arab Light crude grade for October, the state oil producer said on Wednesday, as Russian Urals prices rally and European refiners seek to replace Iranian oil supplies ahead of the November U.S. sanctions deadline. Aramco has raised the official selling price (OSP) to Northwest Europe by $1.45 a barrel from the previous month, putting it at a discount of $1.80 per barrel to ICE Brent.
• (Reuters) World oil consumption will reach 100 million barrels per day (bpd) later this year, hitting that level much sooner than previously forecast, OPEC’s secretary-general said on Wednesday. Mohammad Barkindo also told an energy conference in South Africa’s Cape Town that a stable environment was needed to encourage oil industry investment to meet the rising demand
• (Reuters) New oil refining capacity and an increase in the number of ships adding cleaning systems to their smokestacks will help marine fuel markets find balance once new sulphur regulations kick in, Goldman Sachs said. To combat air pollution, the United Nations’ shipping agency has set global regulations to cap sulphur content in marine fuel at 0.5 percent from 2020, down from 3.5 percent now.
Ag Markets:
• Russian Ag Ministry early Thursday says no plans to impose wheat export tax.
• 4 new cases of AFS reported in PRC.
• PRC sells 2.9 mmt of reserve corn—75% of total offered.
• Stats Canada July 31 2018 All Wheat Stocks: 6.180 mln mt vs. expected 6.2 mln mt and yr 6.835 mln mt YA. July 31 2018 Canola Stocks: 2.391 mln mt vs. expected 2.5 mln mt and 1.348 mln mt YA.
• Brazil’s crush Assn, after upping 2018 Brazil soy export forecast another 2.6 mmt to 76.1 mmt, trims end Brazil soy stocks another 2.4 mmt to 1.465 mmt.
• US weekly export sales delayed until Friday.
• Funds Wed sell 7K corn, 3K beans, 4K wheat, 2K meal and 2K oil.
• Allendale pegs 2018 US CN/BN yields at 177.7 BPA/52.2 BPA respectively vs. USDA’s 178.4 BPA/51.6 BPA respectively. • (Reuters) – Brazil’s transportation regulator on Wednesday raised minimum truck freight rates by 5 percent on average, a move that an exporters group estimated would cost the country’s grain sector 3.4 billion reais ($818 million). The adjustment will weigh on the grains sector, where exporter profit margins are only about 1 percent, said Sergio Mendes, directorgeneral of grain exporters group Anec. “Margins are extremely narrow, anything additional you add cannot be passed on. You have to swallow the additional cost,”
• (Reuters) President Donald Trump said on Wednesday the final agriculture bill that the U.S. Congress sends to him to sign into law should include work requirements for people receiving food stamps, the grocery subsidies officially called “SNAP.” “#FarmBill with SNAP work requirements will bolster farmers and get America back to work. Pass the Farm Bill with SNAP work requirements!” Trump tweeted, as the two chambers of Congress begin reconciling separate bills that they recently passed into a single piece of legislation for him to sign.
• (Reuters) The United States has been the best source for thrifty corn and soybean buyers in recent months, and the low prices-ample supply combination allowed U.S. exporters to continue their string of record months in July. Going forward, the outlook is bright for corn shippers as U.S. supply is the cheapest and most plentiful.
• (RJO Commercial Grain Division) DDG exports in July were 1.1 mmt, up 7% from last month and 10% from last July. Cumulative DDG exports total 6.77 mmt, up 4% YoY. Largest buyers for the month in tmt were: Turkey 191, Mexico 190, South Korea 105, and Thailand 97. July Ethanol exports were 104 mil gal, down 31% from June and 11% from last July. Cumulative ethanol exports total 1.032 bil gal, up 28% from a year ago. Largest buyers for the month of July in mil gal were as follows: Canada 37, Brazil 19, India 12, and South Korea
• Abare updates Australian wheat crop next Tuesday (USDA at 22 mmt).