Friday, September 25, 2020

Closing Markets: Corn +2. Beans +2. Wheat -5.


Market Recap:


Corn ended the week on a firmer note with CZ rising 1 ¾ cents and CH up 1 cent as corn finished higher for the first time in five sessions. This week, CZ fell 13 ¼ cents and CH was 14 ¼ cents lower. Commodity fund buying helped support today’s trade as funds purchased an estimated 5500 corn contracts as of midday. Harvest pressure in front of the weekend was light as most producers are just getting started or have yet to begin. Traders expect Monday’s crop conditions report to estimate that 15% of U.S. corn harvest is complete with most of the progress in the southern states. Corn also found light technical support today with CZ closing above the 20-day moving average of $3.64. There was some commercial pricing as the week ended, which was thought to be tied to Chinese buying. China will observe the autumn festival holiday from October 1 – 7. Argentine farmers have begun planting their 2021 corn crop. The Buenos Aires Grain Exchange estimated that 11% of intended acres have been seeded. The average trade guess of September 1st corn stocks in next Wednesday’s quarterly grain stocks report is 2.250 billion bu., or nearly the same as the 2019/20 ending stocks estimate of 2.253 billion bu. in the September WASDE report.

After closing lower, the past four sessions, soybeans reversed course and settled higher to finish the week. SX was 2 ½ cents firmer and SF added 3 cents. This week, SX and SF each lost 41 cents. Commodity funds were back on the buy side of the ledger today with midsession purchases estimated at 4700 soybean contracts. Additional support came from talk that China was buying U.S. soybeans again today, although amounts were not thought to be large. FAS this morning flashed sales of 100,000 MTs of U.S. soymeal to unknown destinations. There was a report that a large Brazilian crusher was importing beans from Uruguay to keep its plants running. Brazil has already imported an estimated 70,000 MTs of Argentine soybeans – it typically only imports about 20,000 MTs a year. At least seven Brazilian soy plants are said to be taking extended downtime in November due to a lack of domestic soybeans. The average trade guess for September 1 soybean stocks in next Wednesday’s quarterly stocks report is 576 million bu., vs. the 575 million bu. 2019/20 ending stocks estimate in the September WASDE report.

Funds Daily
C +63,000 (-); S +140,000 (-); W -25,000 (-5,000); SM +62,000 (+5,000); BO +64,000 (+5,000)

Have a great evening!!!!


Chelsey White
Emery Manager & Originator:: Topflight Grain Cooperative, Inc.
593 Emery Rd :: Maroa, IL 61756
Phone:: 217-794-2240
E-Mail:: cwhite@tfgrain.com
Web:: www.topflightgrain.com

This material should be construed as market commentary, merely observing economic, political and/or market conditions, and not intended to refer to any particular trading strategy, promotional element or quality of service provided by Topflight Grain Cooperative, Inc. Topflight Grain is not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material. Information contained herein was obtained from sources believed to be reliable but is not guaranteed as to its accuracy. Contact Topflight Grains designated personnel for specific trading advice to meet your trading preferences. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by Topflight Grain Cooperative, Inc. ... See MoreSee Less

1 day ago

Friday, September 25, 2020



Morning Markets: Corn +1. Beans Even. Wheat -4.



MARKET SUMMARY:

Futures were hit hard yesterday as the long streak of flash sales to China came to an end. This does not mean that China is totally done buying, and in fact there will be considerable interest in today's flash sales report to see if the break attracted buyers. If not, we could see the whole mindset of the soy complex change, even if just temporarily. This lack of sales combined with elevated harvest pressure to weigh on futures, especially with technicals breaking down. Most of the today's session will be spent with traders starting to shore up positions ahead of next week. Several factors will influence trade next week, with month end and quarter end being primary ones. We will also receive the quarterly stocks data, giving us grain inventory totals as of September 1st. In effect, these will be the old crop ending stocks figures on corn and soybeans. It would not be surprising to see elevated market activity today as some analysts will shore up positions now and simply exit the market until this data is released. We may also see some pre-hedging today as country terminals position themselves for the upcoming weekend harvest activity.



Crude Oil is down $0.51 at $39.80.

US Dollar is up $0.241 at $94.595.

Global Equities: Japan +0.5%, China -0.3%, and Europe -1.5%.

Dow futures is down 256 points at 26,459.

EU MATIF Exchange: Corn -0.1%, and Wheat +0.1%.

Malaysian Palm Oil: +2.4%.

Dalian: Corn no change, Soybeans +0.2%, Meal -0.7%.



WEATHER:

The forecast for the Midwest has rains moving across the region early next week although totals will be light with around 80% coverage. Things quiet down the rest of next week and the following weekend with below average temps and mostly dry conditions.




OTHER HEADLINES:

The average trade estimate for next week’s stocks report has corn stocks as of September 1st pegged at 2.250 billion bu. soybean stocks are estimated at 576 million bu. and wheat stocks are pegged at 2.242 billion bu.
The International Grains Council lowered its global corn production by 6mmt to a still record high of 1.16 billion tons. The reduced production was due to reductions in the US, China and the EU which outweighed upward revisions in Argentina and Brazil.
The average trade estimate for today’s Cattle on Feed Report has the number of cattle on fees as of Sept 1st at 103.3% of a year ago. Placements in August are estimated at 105.8%. Marketing’s in August are estimated at 96.6% of a year ago.
WEEKLY EXPORT SALES: Corn: 2,139,000 mt vs trade estimates of 1,100 – 1,800,000; sold 38% of USDA
estimate vs 25%. Soybeans: 3,195,000 mt vs trade estimate of 2,000 – 3,000,000; sold 62% of USDA estimate vs 36%.


EXPORT NEWS:


Export sales of 100,000 metric tons of soybean meal for delivery to unknown destinations during the 2020/2021 marketing year.




Here is a tidbit from our merchandiser Jeremy on corn stocks



On Wednesday Sep 30th, NASS will give us their corn stocks. Since we really know most of the moving parts, most of what we learn is what the Feeding rate was for the last quarter.



I’m assuming a 5,727 feed for 19/20 with a 2,105 Sep 1 stocks number. The WASDE’s at 5,600 feed and 2,253 carryout stocks.



I think the market will likely be in that 2200 – 2300 range for carryout stocks, but haven’t seen the average analyst estimates yet.





Since March 2019, the quarterly stocks numbers have implied near nonsense in feeding. They’ve tried to fix it – smooth out numbers and reduce the total demand, but I’m keeping their original numbers in my balance sheet.



FWIW, I’m including the actual surveys that NASS sends out so you all can read them too. They clearly don’t ask about “in transit” bushels. I can’t find anyone here who fills them out which begs the question, they claim to ask every “off farm” operator for their stocks… but we don’t get asked. So maybe their survey isn’t as complete as they’d like to think.







Here’s SON feeding implied through 2018/19: Nothing to see here… (note the drop, back in the tight ethanol expansion years where DDGS were coming on the scene and displacing corn feed)

Image



Mar 2019, avg analyst estimate was about 5.3bbu (I remember thinking 5.0 was possible) and we got… 5.6. Off Farm stocks were down from 3.89 the year before to 3.47 (market seemed tight)… while ON farm stocks were up from 5.0 to 5.1. Tighter commercial, more on farm.



I did a reasonably large analysis back then showing that the on farm stocks, state by state, were way out of line with history. Meaning, farmers in March of 2019 were hoarding historically large amounts on farm if you believed NASS, which I didn’t.



That March 2019 stocks number stuck out like a sore thumb and I doubt farmers were actually hoarding that much.



Here’s what it did to implied DJF feeding: … oh look, it’s at least 300mbu smaller than what any rational human would’ve assumed given animal number growth and maxed out DDGS inclusions.

Image





Shocker… you find back about 200 of it the next quarter:

Image



After that… oh geeze. Market thought the Sep 2019 stocks number would be: about 2.4bbu, NASS came out with 2.1

Image



SON feeding seemed not crazy.

DJF feeding seemed easily 300mbu small

MAM feeding seemed about 200 too big

JJA feeding seemed at 2 – 400 out of line, let’s assume 300.



Net net, that comes back to about 200mbu over-estimation of feed when looked at on a quarterly basis though I’d argue +200mbu for the year isn’t so bad if you look at the next graphic… so the NASS guys went back, increased Sep 1 stocks, decreased production to come out with a feed restatement from 5,650 annual to 5,429.



Fwiw: here’s what the original looked like: NASS thought this feeding rate needed fixing so they cut 200mbu off of it… como se dice, “shake my head”

Image









I wanted to start with that to give a flavor of how I’m looking at the market now. I’m keeping their old production and stocks numbers. It’s better for me, as a merchandiser and analyst to know, you can’t trust NASS… and also, I think they were wrong to make their changes given what we’ve seen so far this year it only reinforces my belief.



Here’s through 19/20 SON: The weird thing is, NASS had this data point when they cut last year’s feed (Jan of 2020 – they cut 200 or so off of the 18/19 annual)

Image



So, this makes you think, maybe that Dec 1 2019 stocks number was too small (it is making the SON feed look too big and the DJF feed look too small)… Market assumed 11.5 stocks, NASS was 11.3 (NASS was a smaller stocks number than the market by 170mbu).



Image



So now, let’s look at first half feeding…

Image



This year’s really not so far out of line with a trend growth post ddgs max inclusion by 13/14 (assuming you’re using the old NASS numbers).





Now, here’s MAM implied feeding: Once again, shocker from NASS, market thought June 1, 2020 stocks would be 4.95 and they came out with 5.22 (tiny feed)

Image



And the first 3 quarters all together:

SONDJFMAM: no growth from 16/17 and 17/18?

Image





The main thing that spooks me for corn feed is how many people simply look at the 4th quarter history and don’t look at the cohesive whole.





If the MAM quarter was understated (see two graphics above) I’d expect a decent portion of that to pop back into the 4th quarter feeding.



By itself, this looks like it could be too much feeding for the 4th quarter… (remember NASS messed with last year’s 4th quarter lower – yellow line is smaller on government balance sheets now)

Image



But as a whole, it leaves the LH just fine in terms of growth

Image



Result is how I said above, an annual 5,727 feed with a 2,105 carryout.

Image









The bigger deal is what that means for 20/21. I’m assuming 5,925 while WASDE uses 5,825. We’ll see, but remember, ethanol’s DDGS inclusion is finished and has been since probably about 12/13. Meal demand was up 5% in 19/20. The era of competing feeds is over and we’re back to feeding growth coming from the only residual/surplus supply, which is corn.

Image





Have a great day!!!!




Chelsey White
Emery Manager & Originator:: Topflight Grain Cooperative, Inc.
593 Emery Rd :: Maroa, IL 61756
Phone:: 217-794-2240
E-Mail:: cwhite@tfgrain.com
Web:: www.topflightgrain.com
Image

This material should be construed as market commentary, merely observing economic, political and/or market conditions, and not intended to refer to any particular trading strategy, promotional element or quality of service provided by Topflight Grain Cooperative, Inc. Topflight Grain is not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material. Information contained herein was obtained from sources believed to be reliable but is not guaranteed as to its accuracy. Contact Topflight Grains designated personnel for specific trading advice to meet your trading preferences. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by Topflight Grain Cooperative, Inc. ... See MoreSee Less

1 day ago