Row crop markets post modest bounce after 4 day decline of -17.75 cents in CZ, -28.75 cents in SX and -38.50 cents in wheat. WZ barely holding Thur low while MWZ posts new lows for the move. Soy rallies will we contained against backdrop of no resolution to US/PRC battle on conclusion of trade talks in DC in addition to near perfect finish to 2018 US soy growing season.
Review of weekly US precip as % of normal (see attached map) suggests US CN/BN rating stable to better than last week’s 68%/65% G/E respectively.
CFTC report after close expected to show managed funds adding to their shorts in soy and corn (soy short larger than corn) while cutting their longs in wheat and soy meal (wheat long thru Thur estimated at +51K—off 16K from last CFTC report).
Weather leans negative with active precip pattern reducting remaining dry pockets to all but extreme NW portion of US growing areas. Soy crop has ample moisture for pod fill while above normal temps into Sept should boost soy oil content. CWG has warmer than nromal temp pattern continuing over next 30 days—accelerating crop development, drydown and early harvest.
Pro Farmer will release their national US CN/BN production forecasts after the close today. Attached summary of 2018 PF state by state CN/BN yields relative to prior year tour results and USDA (complements of RJO Commercial Grain in Des Moines) suggests: o 2018 CN yields exceed year ago by a wide margin except for MN o 2018 soy pod counts above last year by a wide margin o Accelerated crop deveopment this year vs. last year may be contributing to higher yield counts o State by state tour results generally support USDA’s higher than expected Aug forecasts
US Ag Secretary says details of $12 bil fram aid program will be announced Monday. Suspect farm selling of soy dries up until bailout details announced although noteworthy that 14 US soy crush plants reduced basis bids yesterday indicating their expectations for early harvest of a large crop. Trade talk that soy growers will receive $1.65/bu payment.
NAFTA negotiations with Mexico will stretch into next week while Canada sits on the sidelines.
Post August crop report lows (SX $8.40) vulnerable without a prompt pick up in export sales (unlikely with PRC sidelined). Wheat chart a succession of lower lows and lower highs with lots of bull news discounted and corn market on the defensive. Demand will soon push weather and crop size off the main stage.
Palm Oil: Up 1 ringgit at 2219
Dalian: Beans down 13 cents/bu, meal down $4.70/ton, oil up 11 and corn down 4 cents/bu
Matif Wheat: Down 1.75 euros at 202.25
Outside Markets:
• (WSJ) Wall Street is looking for a few good “straders” –Wall Street is redefining what it expects from sales and trading teams, demanding computer-savvy strategists to work as “straders.” “Programming is going from a ‘nice-to-have’ to a ‘must-have,’ ” says Adam Korn of Goldman Sachs.
• (Reuters) – The United States and China concluded two days of discussions on trade on Thursday and discussed “how to achieve fairness, balance, and reciprocity in the economic relationship, including by addressing structural issues in China,” the White House said. “We appreciated the Chinese delegation coming to the United States to participate in these meetings. The U.S. delegation will be briefing their principals on the discussions,†White House spokeswoman Lindsay Walters said in a statement.
• (Bloomberg) U.S.-China trade talks made no progress, setting the stage for further escalation of the trade war. The nations had “constructive, candid” communication, but no further negotiations are scheduled. Trump raised the stakes by taking aim at China’s international postal rates, potentially raising costs for Alibaba. Meanwhile, Canada sits on the sidelines as the U.S. and Mexico try to work out their differences over the Nafta accord.
• (Bloomberg) The Chinese delegation has shown no signs of bringing any significant compromises to the table this week and continues to believe that offering increased purchases of American commodities aimed at reducing the U.S. trade deficit with China is the best tactic, said a person familiar with the discussions. The Chinese don’t seem to have evolved at all in their position, the person said.
• (Reuters Breakingviews) – The U.S.-China trade war is stumbling on the biggest block. Midlevel talks yielded no clear breakthroughs even as President Donald Trump’s administration prepares duties on an additional $200 billion of Chinese goods. The United States wants reforms to industrial policy that would fundamentally alter Beijing’s development model. The Chinese government would struggle to deliver, and is unlikely to try.
• (Wire Services) A person familiar with the discussions said no further talks are scheduled and that Chinese officials raised the possibility that no further negotiations could happen until after the U.S. mid-term elections in November.
• (Bloomberg) Jay Powell makes his debut at the annual Jackson Hole conference today. If history is any guide, it’s unlikely to rattle markets. The Fed chair probably won’t veer from the message that more rate increases are on the way this year and next. Kansas City Fed President Esther George said she favors two more hikes in 2018 and that Trump’s criticism of the central bank won’t influence policy.
• (Bloomberg) The IRS just blocked plans by New York, New Jersey and Connecticut to bypass the GOP tax overhaul’s new cap on state and local tax deductions. Taxpayers who itemize will only be eligible for a federal deduction that’s a small fraction of their charitable donations for property tax payments, under proposed rules. The charitable-contribution strategies in hightax states were created so taxpayers could write off the full donation amount.
• Aug 22 (Reuters) – Federal Reserve officials discussed raising interest rates soon to counter excessive economic strength but also examined how global trade disputes could batter businesses and households, minutes of the U.S. central bank’s last policy meeting showed. The Fed, which released the readout from its July 31-Aug. 1 meeting on Wednesday, has been raising rates gradually since 2015 and is now concerned the economy is so strong that inflation could rise persistently above its 2 percent target. Fed policymakers left rates unchanged at their last meeting, but their discussion made it clear they are considering another rate hike soon. The Fed has raised rates twice this year and is widely expected to tighten policy again next month.
• (Bloomberg Opinion) South Africa’s government and ruling African National Congress are pursuing policies all but certain to put foreign investors on edge and to hurt the very people they are meant to help, writes the editorial board of Bloomberg View. If President Cyril Ramaphosa is serious about attracting the foreign investment his country needs, he has an odd way of showing it.
• (Reuters) China’s Unipec will resume purchases of U.S. crude oil in October after a twomonth halt due to the trade dispute between the world’s two largest economies, three sources with knowledge of the matter said. The decision to start buying crude oil again from the United States comes after Beijing earlier in August excluded it from its import tariff list.
• (Reuters) The market for freight fuels is moving close to balance, after tightening significantly in 2017 and the first quarter of 2018, contributing to the recent stabilisation in crude oil prices. OECD stocks of middle distillate fuels, including road diesel, marine gasoil and jet fuel, totalled 513 million barrels at the end of June, according to the International Energy Agency (“Oil Market Reportâ€, August 2018).
• (JPM on calendar for the week of Mon 8/27) This week should be very quiet owing to the Labor Day holiday but a few events will still be in focus, including some earnings reports (CRM/PVH Wed night and CPB Thurs morning) and eco data (US PCE for Jul Thurs morning and the China NBS PMIs for Aug out Fri morning
Ag Markets:
• Trade today (2 PM CST) looking for Aug 1 COF at 104.5% and placements at 106.3%.
• Pro Farmer pegs IA corn at 188.2 BPA vs. 179.8 LY and 182.7 average. Soy pod count at 1209 vs. 1093 LY and 1179 average.
• Pro Farmer pegs MN corn at 178.7 BPA vs. 191.5 LY and 188.2 average. Soy pod count at 1091 vs. 1020 LY and 1082 average.
• S Korea buys a Jan corn cargo—likely US.
• Funds Thursday sell 18K corn, 7K beans, 4K wheat and 4K meal.
• (Reuters) – Brazil’s Agriculture Minister Blairo Maggi said on Twitter on Friday that he had incorrectly stated a day earlier that a court had lifted an injunction on products containing the popular herbicide glyphosate and that a ruling was still pending
• (Reuters) Russian wheat exports could fall to 31.5 million tonnes in 2018/19 from a record 42 million last season after adverse weather reduced this year’s crop, consultancy Agritel said on Wednesday.
• (Reuters) – Grain stocks in Russia, one of the world’s largest wheat exporters, are expected to hit their lowest level in six years by the end of the 2018/19 marketing season on June 30, the SovEcon consultancy said in a note on Thursday. Russia’s wheat crop has been hit this year as a dry spring and summer ended five years of plenty in many wheat-producing regions and drew down reserves of major exporters to their lowest level since 2007/08, when low stocks contributed to food riots across Africa and Asia.
• (Reuters) – Argentine farmers are expected to plant 9.35 million hectares of corn in the 201819 crop year, compared to 9.1 million hectares last season, the government said on Thursday in its monthly report. Government corn planting figures include commercially used cornfields and non-commercial corn for animal feed. The country’s wheat planting area for the 2018-19 season is now expected at 6.26 million hectares, up from the 6.2 million hectares estimated previously, the report said.
• Aug 23 (Reuters) – China’s grain imports plunged in July after Beijing imposed hefty tariffs on shipments from the United States as part of its trade conflict and as rising international prices curbed buying. China brought in 220,000 tonnes of sorghum in July, down 62.5 percent from 588,364 tonnes a year ago. Thursday’s data also showed China took in 330,000 tonnes of corn in July, down 63.7 percent from last year. “Two factors were at play. On one hand, international prices have jumped as major producers were expecting lower output,” said Cherry Zhang, analyst with Shanghai JC Intelligence Co. Ltd. “On the other hand, the SinoU.S. trade war curbed buying grains from the U.S.,” Zhang said.
• (Reuters) Brazil’s meat-packing sector is facing a grim year as trade embargos, stricter client demands and domestic transport disruptions weighed on the world’s top chicken and fourthbiggest pork exporter. According to projections by industry group ABPA released on Thursday, Brazil’s chicken exports could fall to around 4.20 million tonnes in 2018, from 4.32 million tonnes last year, due to a European Union ban on the Brazilian product in April.
• (Reuters) – Soybean plants in central and west-central Illinois, the top growing U.S. soy state, had abundant pods that pointed to a bumper harvest, scouts on an annual crop tour found on Wednesday. The corn crop in this part of Illinois, which trails only Iowa in corn production, also was above average although some fields showed signs of stress from dry growing conditions. “It’s a heavily podded soy crop,†said Brian Grete, the eastern director of the Pro Farmer Midwest Crop Tour. “They’re beautiful-looking soybeans … and they got moisture. Many of these areas had rains recently and again this week.â€
• (Reuters) – The International Grains Council on Thursday raised its forecast for world corn (maize) production in the 2018/19 season largely driven by an improved crop outlook in the United States. The inter-governmental body, in a monthly update, put world corn production in 2018/19 at 1.064 billion tonnes, up 12 million from its previous projection. “Because of tighter supplies, use of wheat and barley are seen falling, likely transferring some demand to maize (corn), particularly in the livestock sector,” the IGC said. The IGC also reduced its forecast for world wheat production in 2018/19 by 5 million tonnes to 716 million tonnes while consumption was also cut by 5 million tonnes to 734 million. The IGC also raised its forecast for global soybean production in 2018/19 by seven million tonnes to 366 million, “reflecting an upgraded outlook for U.S. yields.”
• (AgriCensus) Wet weather during a crucial development stage compounded the impact of this year’s droughts, with the proportion of French wheat harvested this year with a minimum 12% protein content falling to less than half, initial crop results from Franceagrimer showed Thursday. France was hit by heavy storms and rains in June, which had a negative effect on protein development during a key growing month for wheat in the northern hemisphere, followed by a drought which cut the crop’s size by 5% year-on-year to 33-35 million mt. Last year, almost three-quarters of the French crop had a protein content above 12%, while 9% this year’s crop has a protein content below 11.5% – down from just 4% last year
• (Reuters) Reuters) – China is battling to control the rapid spread of deadly African swine fever (ASF) across the world’s largest hog herd after four outbreaks in three weeks, stoking worries the disease could spread to Southeast Asia. The discovery of ASF in China, which accounts for nearly half the world’s pork production and is the world’s highest per capita consumer of the meat, marks a new front in the disease’s spread from Europe through Russia. “The swine industry has never seen an ASF outbreak in such a production landscape, and control measures are untested,” warned the Swine Health Information Center, a U.S. research body. From 2007 to July 2017, there were 5,445 cases in continental Europe, including 903 in Russia. China’s large population of wild boar, which can harbour the disease without showing symptoms, is estimated to total around 33.5 million, according to Reuters calculations based on FAO data. Pigs may also have access to untreated or uncooked food waste and swill. All successful eradication programmes have involved the rapid diagnosis, slaughter and disposal of animals on infected premises, thorough cleaning and disinfection, removal of insects such as ticks, movement controls and surveillance, according to the OIE.
• (Reuters) – Unfavourable spring and summer weather has worsened the quality of Ukrainian wheat in the 2018 harvest and the share of milling wheat does not exceed 45 percent, traders said on Wednesday. An extremely dry spring and torrential rains during the threshing period have affected quality and the portion of feed wheat has jumped to more than 70 percent in northern Ukrainian regions. “There is around 40 percent (of milling wheat) for sure. There is too much non-class wheat this year due to rains,” one trader said.