Final day of shortened trading week starts out with renewed selling pressure overnight with wheat posting another new low amid ongoing downward pressure on Russian wheat driven in part by stepped up farmer selling sparked by eroding ruble. Post-biscuit trade sparks most buying in corn and soy whiich are largely marking time awaiting Sept crop report. Wheat in full fledged liquidation mode in bid to inflict pain on remaining managed fund longs. After 3 days of trade CZ up 1.25 cents/bu, SX down 4.25 cents/ and wheat down 31.75 cents/bu.
Reuters trade estimates for USDA Sept CN/BN yields at 177.8 BPA/52.2 PA respectively vs. USDA Aug forecasts of 178.4 BPA/51.6 BPA and Informa’s 178.8 BPA/52.9 BPA forecasts.
CWG yesterday ups 2018 US soy yield 0.7 BPA vs. prior estimate to 51.0 BPA—0.6 BPA belwo USDA Aug and 1.9 BPA below Informa’s 52.9 BPA forecast. CWG believes excess late summer rains will temper corn Midwest soy yields but notes that soy yield could advance another 0.5-1.5 BPA if impact from wet weather is limited. CWG Sept soy yield forecast underestimated USDA final soy yield in 5 of last 6 years.
Overnight Brophy yield reports indicated highly varialbe corn yields across MO (no surprise given latest Drought Monitor –see attached–) and largely excellent soy yields. Il corn yields–so far— mostly below LY.
Weather a mixed bag with 4-8 inch soaker slated from central Midwest into Sunday followed by 8-9 days of dry/warm weather. E Australia and Russia slated for 10 days of dry weather while Canada harvest weather largely open with most areas safe from frost.
Thoughts on upcoming September crop report:
o USDA Sept corn yield exceeded average trade guess in 8 of last 12 years o USDA Sept soy yield exceeded average trade guess in 7 of last 12 years (including 5 of last 5 o Sept to Final yields for both corn and soy each up 6 of last 9 years o Final US corn demand exceeded prior year USDA Sept forecast in 7 of last 10 years (LY by 650 mb) o Final US soybean demand exceeded prior year USDA Sept forecast in 7 of last 10 years (17/18 soy demand 45 mb below. Sept 2017 forecast). o USDA Aug crop report indicated only 50 mb cut in 18/19 US soy exports vs. LY despite loss of PRC which purchased over 1 bil bu of 17/18 US soybeans o There is a risk on Sept crop report that combo of higher soy yield and lower 18/19 US soy export demand may catapult 9/19 US soy stocks well abover WASDE’s 785 mb Aug forecast
AM Grain Notes 9 7 18
Feltes Ag Report lc@ccstrade.com
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o Aug crop report upped 18/19 US corn exorts 125 mb vs. July to 2.350 bil bu—50 mil bu less than 17/18 exports. (USDA may be understating 18/19 US corn exports by 200 mb given 23.5 mmt (940 mb) cut in 2018 S American corn crop.
Bottom line on Sept crop report—more potential trap-doors than springboards on next Wednesday’s 2018/19 US supply update. USDA may be underestimting 18/19 US export demand for corn and wheat while overstating 18/19 soy demand but those changes are more likley to be reported in follow up crop reports.
N/C corn sales at 1.033 mmt exceed expectaions while soy sales of .673 mmt in line with trade estimates—ditto for wheat at 0.379 tmt.
Friday AM soy bulls at risk if While House today launches next round of tarifffs on PRC imports.
Some traders view 178 BPA as inflection point for corn next Wed with a higher yield signaling more selling while a lower yield triggering more selling. Kudow in AM interview says “so far US asks of PRC have not been satisfiedâ€.
Bottom line—wheat market price action driven primary of Russia developments which are largely negative withl row crops chop awaiting Sept crop report.
Palm Oil: Down 11 ringgits at 2266 for weekly gain of 18
Dalian: Beans up 12 cents/bu, meal up $1.80/ton, oil up 1 and corn down 2.25 cents/bu.
Matif Wheat: Down 1.5 euros at 196.75
Outside Markets
• (Bloomberg) Investors are awaiting the next move in the trade war. President Trump can pull the trigger on tariffs targeting $200 billion of Chinese imports any time after last night’s deadline for public comment passed. Businesses made a last-minute push to convince him to reverse course. Beijing stands ready to retaliate.
• (Reuters) – U.S. job growth accelerated in August, with wages notching their largest annual increase in nine years, strengthening views the economy was so far weathering the Trump administration’s escalating trade war with China. Nonfarm payrolls surged by 201,000 jobs last month, boosted by hiring at construction sites, wholesalers and professional and business services, the Labor Department said on Friday. Average hourly earnings increased 0.4 percent, or 10 cents in August after rising 0.3 percent in July. That raised the annual increase in wages to 2.9 percent in August, the largest increase since June 2009, from 2.7 percent in July. The unemployment rate was unchanged at 3.9 percent in August.
• (Bloomberg) A Nafta deal is unlikely this week, a Canadian government official said. It could be because urgency has subsided. The next deadline comes at the end of the month, when the U.S. needs to publish the text of an agreement to sign it before Mexico’s president-elect takes office Dec. Last night Trump said Canada probably will be part of a newly renegotiated deal. Freeland, speaking to reporters as she entered the afternoon session of talks with U.S. chief negotiator Robert Lighthizer, said that American tariffs on steel and aluminum imports should not be part of the NAFTA negotiations. “These tariffs are unjustified and illegal,†Freeland said.
• (Reuters) – U.S. and Canadian negotiators pushed ahead in grinding talks to rescue the North American Free Trade Agreement on Thursday, but a few stubborn issues stood in the way of
• (Reuters) – U.S. and Canadian negotiators pushed ahead in grinding talks to rescue the North American Free Trade Agreement on Thursday, but a few stubborn issues stood in the way of lc@ccstrade.com
222 S Riverside Plaza, Suite 900, Chicago, IL 60606 (800)621-0757 www.rjobrien.com
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a deal, including dairy quotas, protection for Canadian media companies, and how to resolve future trade disputes. A U.S. source familiar with the discussions in Washington said it was still unclear whether the two sides could bridge the gaps or whether President Donald Trump will opt for a Mexico-only bilateral trade deal. “We’re down to three issues: Chapter 19, the cultural issues and dairy. We’ve created leverage and driven Canada to the table,” the source said. “Part of our problem is that Canada has been backsliding on its commitments (on dairy).”
• (Bloomberg Opinion) One of the paradoxes of this year’s trade tensions is that in many parts of the world, it doesn’t yet feel like a crisis, writes David Fickling in Bloomberg Opinion. It’s tempting to think the global economy is riding out the turmoil. Tempting, but mistaken. Look closely: The slowdown has begun. Trade volumes are falling as global supply chains are starting to seize up.
• (Reuters) Washington will consider waivers for Iranian oil buyers such as India but they must eventually halt imports as sanctions are imposed on Tehran, U.S. Secretary of State Mike Pompeo said on Thursday. Pompeo, who is in Delhi with U.S. Defense Secretary Jim Mattis for talks with their Indian counterparts, told reporters some buyers of Iranian oil would take a “a litle bit of time” to unwind their trade with Iran.
• (Reuters) U.S. imports of crude oil from Saudi Arabia in August and September are poised to reach the highest two-month level since early 2017, as refiners take advantage of relatively cheaper prices, Thomson Reuters trade flow data show. Discounts for Saudi Arabia and other OPEC producers have encouraged flows, with OPEC’s daily basket on Thursday more than $2 per barrel cheaper than Brent. U.S. demand for crude also is rising on strong refining margins and high utilization rates.
• (Reuters) U.S. crude stockpiles fell more than expected last week, while gasoline and distillate inventories rose, the Energy Information Administration said on Thursday. Crude inventories fell 4.3 million barrels in the week to Aug. 31, compared with analysts’ expectations for a decrease of 1.3 million barrels. The decline brought stockpiles to 401.49 million barrels, the lowest levels since February 2015.
• (Reuters) Mexican President-elect Andres Manuel Lopez Obrador said on Thursday his government would launch tenders for drilling oil wells from early December as part of a plan to quickly increase the nation’s crude output. Lopez Obrador has long criticized the outgoing government’s policy of opening the oil industry to private capital and promises an new approach aimed at strengthening state oil company Petróleos Mexicanos, known as Pemex, and refining more crude in Mexico
Ag Markets:
• UNFAO says PRC ASF is here to stay and almost certain to reach other Asian countries.
• Funds Thursday buys 6K corn, 2K beans, 5K meal and 1K oil while selling 4K wheat.
• (Reuters) – China will almost entirely replace its soybean imports from the United States with Brazilian beans and other origins in the upcoming season, but may run out of the oilseed in early 2019, said an executive with a top crusher on Tuesday. Imports from the United States will plunge further in the 2018/19 season starting this month to just 700,000 tonnes, said Guo Yanchao, deputy chairman of Jiusan Group. That compares with 27.85 million tonnes of U.S. soybeans imported in the prior year. Overall, China’s imports of soybeans for the year will drop to 84.67 million tonnes, down 10.79 million tonnes from last year’s purchases, Guo told an industry conference. That would include 71.06 million tonnes from Brazil, 7.5 million from Argentina, and the rest from Canada, Russia and other countries, he said.
• (Reuters) – China will start allowing soybean imports from Ethiopia, customs authorities said on Friday, as the world’s top importer seeks to reduce its reliance on supplies of the oilseed from the United States amid a trade row with Washington. The move would diversify soybean imports origins for China. (Note—only small tonnage available)
• (Reuters) Western Australia, the country’s biggest wheat exporting state, is poised for nearrecord harvests of the crop this year after rains in the region in August, even as the eastern grain belt grapples with its second year of punishing drought. Wheat yields in the state, a key supplier to the world’s biggest importer Indonesia, are expected to be better than average in most areas, analysts and traders said.
• (Reuters) Private analytics firm Informa Economics revised its forecast for the U.S. 2018 corn yield upward to 178.8 bushels per acre (bpa) from 176.0 bpa previously, and raised its U.S. soybean yield forecast to 52.9 bpa from 50.0 bpa, trade sources said on Thursday. Informa projected U.S. 2018 corn production at 14.621 billion bushels and soybean production at 4.698 billion bushels.
• (Reuters) – Russian exports of wheat increased to 23.1 million tonnes in the first seven months of 2018 from 12.8 million tonnes a year ago, official customs data showed.
• (Reuters) Brazil’s policy of setting minimum freight rates is reducing the volume of cargo at Brazilian ports as farmers and agricultural exporters have difficulty arranging transportation at higher cost, according to the head of a Brazilian ports association. The country instituted minimum rates for freight above the previous market rate as part of a deal to end a truckers’ strike over high diesel prices in May
• (Reuters) Soymeal demand in China remained strong last week, pushing stock levels lower to 1.22 million mt as market seasonality overshadows the impact of the swine flu outbreak, the China National Grain and Oil Information Centre (CNGOIC) said Thursday. CNGOIC is optimistic that the swine flu outbreak will have only “limited impact” on soymeal demand, despite nine outbreaks confirmed and a number of pigs slaughtered as the authorities look to contain further infections. “On the contrary, as pig farming recovers seasonally, soymeal demand picks up accordinglyâ€, the CNGOIC said. Meanwhile, the country’s soybean stocks moved higher to 9.61 million mt this week, up 310,000 mt from last week, as several large vessel arrivals coincided with lower crush rates. Stocks are 500,000 mt higher than at the same time last month and 2.47 million mt higher than the same point of 2017.