Ag markets erode to new lows (for the move) on favorable US weather, mounting concern over AFS induced decline in PRC meal demand, prospects for large gain in 9/19 US soy stocks and declining Russian wheat offers.
Upcoming Moore research seasonals include: WZ/SX from 8/28-10/2—winner 13 or 15 years SMK 19/SMU 18 from 8/29 to 9/19—winner 14 of 15 years Sell BOZ from 8/30-9/28—winner 12 of 15 years SN 19/SX 18 from 9/3-10/3—winner 14 of 15 years
Bear spreading meal and beans should be attractive risk/reward trades given increasing US soy supply and OW’s assessment that growth rate in global meal demand will slow. WZ/SX also merits consideration given prospects for large increase in 9/19 US soy stocks fueled by increasing estimates of 2018 US soy yields.
Weather leans negative with warm US temps, 75% 5 day Midwest precip coverage and largely favorable weather for Delta harvest. NE Australia benefits for weekend rains although pattern set to resume.
Highlights of weekly crop roundup include:
• Likely crop rating slippage today most states due to seasonal decline rather than yield prospects which are improving—especially soybeans • Corn & soy basis below normal: further erosion likely—cash beans to Dakota farmer under $7.00/bu • Pending government soy payment will boost farmer cash flow (and pick-up truck sales) but reduce harvest selling • Heightened farmer interest in commercial storage rates, DP, bag storage systems & new bins • Several commentators (especially IN) noted preference for transition to drier finishing weather following generous mid-August rains • Southern Delta corn yields “record high†while soy yields “excellent†• IL CN/BN yield potential record but not as high as NASS • Corn harvest starts in S IL this week: most areas look for corn harvest 1 week or more ahead of normal • Above average N/C soy sold ahead: O/C corn moving to make space for N/C. Watch for stepped up hedge pressure late week as DP contracts mature.
Prospects for early US harvest, improving US CN/BN yields, US/PRC trade stalemate, shrinking dry pockets in US and negative chart action collectively exerting downward pressure following C/B/W
loses last week of 16/37/47 cents respectively. Managed fund longs in wheat and meal are vulnerable while shorts in corn and soy encouraged to add to existing positions.
Palm Oil: Down 20 ringgits at 2199
Dalian: Beans down 19.25 cents./bu, meal down $7.40/ton, oil down 39 and cornup 1.75 cents/bu
Matif Wheat: Dowdown 3.25 euros at 197.50
Outside Markets:
• (Bloomberg) A U.S.-Mexico Nafta deal is imminent. The two sides may wrap up bilateral talks with an agreement as soon as today, people familiar said, clearing the way for the possible return of Canada to the negotiating table.
• (Bloomberg) The U.S.’s trade war with China is about to get uglier. The hawks in Trump’s administration have gained the upper hand — and they’re set to unleash a fall offensive. Talks in Washington between the nations yielded little progress. Looming instead are new tariffs that Trump has threatened to impose, and Beijing’s promise to retaliate. “We’re facing an escalating trade war over the next few months,” says David Dollar of the Brookings Institution.
• (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) Hedge funds and other money managers cut their bullish wagers on U.S. crude futures to the lowest level since mid-June, as the market grappled with uncertainty about trade tensions between the United States and China. The speculator group cut its combined futures and options position in New York and London by 15,723 contracts to 341,132 in the week to Aug. 21, the U.S.
• (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).
• (Wire Services) China Jul industrial profits rose +16.2% y/y, the smallest increase in 4months.
• (Wire Services) Asian markets also garnered support on Friday’s comments from Fed Chair Powell that the Fed would maintain its gradual pace of interest-rate increases.
Ag Markets:
• For the week, CZ down 15.75 cents, SX down 38.25 cents/bu, WU down 47 cents, SMZ down $16.30 and BOZ down 6 points.
• Funds Friday buy 8K corn, 2K beans and 3K oil while selling 5K wheat and 2K meal.
• Pro Farmer after close Friday pegs 2018 US corn yield at 177.3 BPA (-1.1 BPA vs. USDA) and corn crop at 14.501 bil bu (-85 mb vs. USDA). Soy yield pegged at 53 BPA (+1.4 BPA vs. USDA) and soy crop at 4.683 bil bu (+97 mb vs. USDA) assuming 0.5 ma cut in soy area.
• New crop corn sales 9.9 mmt vs. 6.1 mmt LY, new crop soy sales at 12.6 mmt vs. 9.9 mmt LY while wheat sales at 8.6 mmt vs. 11.6 mmt LY.
• Look for crop ratings Monday to be stable vs. prior week’s 68% G/E in corn (-2% vs. prior week) and 65% in beans (-1% vs. prior week). Remember that crop ratings late summer typically decline.
• Oil World, who pegs 18/19 PRC soy imports at 93 mmt vs. USDA’s 95 mmt), says 18/19 world soy production will “sharply exceed†consumption and that global growth in world production and exports of meal will hit a new record high but at a slower rate of growth than recent years.
• USDA Friday reports COF Aug 1 at 105% (estimated 104.5%) and placements at 107.9% (estimated 106.3%).
• (PRC Global Times) “An escalation in the US-China trade war is becoming obviousâ€. Other news reports indicate that China “did not offer anything new†at recent trade talks in DC.
• (Reuters) Trump Saturday says “big trade agreement†with Mexico coming soon.
• CRB last week up 11 points to 464 with crude oil up $3.00 t0 $69/barrel. US oil rig count down 9 to 860 with weekly US crude oil production reported at record 11 mil BPD vs. 10.9 mil BPD last week. Gold up $29/oz in latest week while the dollar rallied to highest level since mid-2017.
• Estimated $1.65/bu soy payments to US farmers, to be announced this week, expected to be paid Sept-Nov.
• Trade on Friday 8/31 looking for 2018 Canadian wheat crop at 30.6 mmt (30 mmt LY) and canola at 20.1 mmt (21.3 mmt LY).
Highlights of Friday RJO Radio interview with N IN IB: o Corn yields across N tier of IN/OH counties in addition to S MI will be well below LY but no disaster o Soy crop looks exceptional across entire eastern belt—record yield potential o Merchants fear further pressure on already low soy basis as big soy carryover, large 2018 crop and low export demand converge o Far more N/C corn sold ahead than YA while amount of O/C corn unpriced in commercial hands well below last 2 years o 2 wheat seed dealers sold out—gain in 2019 SRW acres virtually assured. o Farmer has large N/C soy book on but will do everything possible to store unpriced harvest beans amid historically low autumn basis o Look for corn harvest 2 weeks ahead of normal; some MO clients already shelling corn • (Reuters) The Agriculture Ministry forecast on Friday that Germany’s 2018 winter wheat harvest would fall 19.1 percent from the 2017 level to 19.4 million tonnes after crops suffered from drought and hot weather. The ministry also forecast Germany’s 2018 grains harvest would be 34.5 million tonnes, down 15.8 percent on the year.
• (Reuters) China’s soybean and soymeal futures fell in early trade on Monday, hit by concerns that outbreaks of African swine fever in China may reduce demand for feed, along with forecasts for a record U.S. crop. China’s soybean futures fell 1.7 percent to 3,594 yuan ($522.84) per tonne, their lowest levels in almost 10 years.
• (Reuters) Romania has confirmed an outbreak of deadly African swine fever at the country’s largest pig breeding farm and all 140,000 animals will be culled, the national food safety authority ANSVSA’s office in the affected region said on Saturday. The farm complex, which consists of three adjoining properties and is located in the southern county of Braila, is owned by Romanian company TEBU Consult.
• (Reuters) The Chinese city of Tianjin will replace gasoline with ethanol at 10 gas stations on Saturday, Xinhua News Agency reported, the first outlets to do so in a wider push to get vehicles in the city to switch to the biofuel. Tianjin will later replace ordinary gasoline with ethanol at other stations in October