AM Market Report – March 17, 2021
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AM Market Report – March 17, 2021

By Mike Jubinville

DUMBEST CRIMINALS

1. England: A German "tourist," supposedly on a golf holiday, shows up at customs with his golf bag. While making idle chatter about golf, the customs official realizes that the tourist does not know what a "handicap" is. The customs official asks the tourist to demonstrate his swing, which he does...backward! A substantial amount of narcotics was found in the golf bag.

2. Arizona: A company called "Guns for Hire" stages gunfights for Western movies, etc. One day, they received a call from a 47-year-old woman, who wanted to have her husband killed. She got 4-1/2 years in jail.

3. Two men tried to pull the front off a cash machine by running a chain from the machine to the bumper of their pickup truck. Instead of pulling the front panel off the machine, though, they pulled the bumper off their truck. Scared, they left the scene and drove home. With the chain still attached to the machine. With their bumper still attached to the chain. With their vehicle's license plate still attached to the bumper.

GOOD MORNING...HERE IS YOUR MORNING MARKET NEWS

OVERNIGHT GRAIN TRADE

ICE canola futures are continuing to slip from contract highs posted earlier in the week, down $5 to $9/tonne so far this morning. Chicago soybeans are down 7 to 9 cents/bu.

Old-crop corn futures are 1 to 2 cents higher, while new-crop futures have fallen 2 to 3 cents. The market is still abuzz about the latest Chinese corn purchase which will keep pressure on the USDA to tighten US corn carryout further. US wheat futures are mostly 3 to 5 cents lower.

In Other News

- Pedigreed seed supply looks in great shape... Favourable harvest conditions contributed to a high-quality seed crop over much of the Prairies last fall with generally good germination and vigour scores and few disease concerns. During a recent Seed Talk Series event hosted by the Saskatchewan Seed Growers Association, seed analysts from Manitoba, Saskatchewan and Alberta said.

- Fate of Brazil's safrinha corn crop hinges on when rainy season ends...South American crop consultant Dr. Michael Cordonnier maintained his Brazilian soybean crop estimate of 132 MMT and his bias is neutral to lower going forward. The past week was again wet across northern areas and drier to the south, but the forecast is calling for some moderation in both areas. Cordonnier stuck with his Brazilian corn crop forecast of 105 MMT, and his bias is neutral to lower going forward. "The ideal planting window for the safrinha corn closed at the end of February and we are now at the limit of when safrinha corn is normally planted in Brazil," he says. Around 25% of the safrinha crop still hasn't been seeded, but high prices give farmers incentive to continue planting. Cordonnier says, "The eventual yield will be determined by when the rainy season ends." If rains end at the normal time of early May, he says safrinha yields will be disappointing. If rains extend to early June, yields may be "ok."

- Rains this week critical for stabilizing Argentina's crops... Cordonnier stuck with his Argentine soybean crop forecast of 46 MMT and his corn crop projection of 45.5 MMT, and his bias is neutral to lower going forward. Weather last week was hot and dry, coming during a critical time for early planted soybeans, double-crop beans and the country's corn crop. But the forecast is calling for widespread rains this week across much of Argentina. Cordonnier says these rains would help stabilize crops. He details that "they would be most beneficial for the late planted corn that is now starting the critical reproductive phase." He says rains are most needed in northern La Pampa, western Buenos Aires, Entre Rios, and the southern core production area, with dryness in northern Argentina an increasing concern.

- Australian wheat farmers double down after record harvest... Australian wheat farmers are scouring the market for crop-planting machinery, fertiliser and other farm products, weeks out from the country's main wheat planting window as suppliers struggle to keep pace with strong demand. After harvesting their biggest ever wheat crop in 2020, many farmers are betting on back-to-back bumper seasons, buoyed by good moisture levels in some of the country's main grain-growing areas.

- Indonesia's Jan palm oil exports up nearly 20% y/y... Exports of palm oil from the world's top producer Indonesia rose nearly 20% on annual basis in January, the country's biggest palm group said, but output was disrupted by flood and stock fell to a six-month low. Indonesia exported 2.86 MMT of palm oil and its products in January, up 19.6% from the same month last year, data from the Indonesia Palm Oil Association (GAPKI) showed on Wednesday.

- German 2021 wheat and rapeseed harvest seen little changed on year...Germany's 2021 wheat crop of all types will increase slightly by 0.9% on the year to 22.34 MMT, the country's association of farm cooperatives said in its first harvest estimate on Tuesday. The association forecast Germany's 2021 winter rapeseed crop will record a small fall of 0.7% from last summer's crop to 3.48 MMT.

- US renewable fuel credits hit multi-year high as oil group urges EPA to act... US renewable fuel credits this week hit fresh multi-year highs, while an oil refining trade group urged the Biden administration to use its authority to help stabilize the market. Prices for so-called Renewable Identification Numbers, or RINs, have climbed all year as costs for feedstocks such as soyoil increase and as market participants bet on reduced exemptions granted to oil refiners that would waive them from US biofuel blending requirements.

- ETG Commodities Inc. acquires Plum Coulee bean processing facility... ETG Commodities Inc. has acquired the bean processing facility and related production assets from Globeways Canada in Plum Coulee, Manitoba. The company says the acquisition further strengthens ETG as a leader in pulse and specialty crops processing and bolsters the company's processing capacity for dry edible beans to facilitate added growth in its key markets. The addition provides ETG North America with processing capacity for dry beans by diversifying its pulses portfolio.

The Plum Coulee facility is capable of sourcing and processing coloured edible beans including: Pinto Beans, Black Beans, Navy Beans, Great Northern Beans, White Kidney Beans, Light Red Kidney Beans, Dark Red Kidney Beans and Cranberry Beans.

Processing facilities located in Saskatchewan include Swift Current, North Battleford, Success and Cut Knife, and the newest facility in Plum Coulee, Manitoba.

- UK declares China in breach of 1984 Hong Kong declaration... Dominic Raab, the United Kingdom's foreign secretary, said radical changes planned by Beijing to restrict participation in Hong Kong elections represented a further clear breach of the legally binding declaration, the Financial Times reported. His comments came ahead of the publication next week of a U.K. foreign and defense policy, which will see Boris Johnson's government set out its strategy for dealing with China.

Outside Markets

The Dow Jones Industrial Average ended 127.51 points lower on Tuesday at 32,825.95. Early Wednesday, the March DJIA futures are up 28 points.

Flat to mixed equity markets this morning...Dow slightly higher, but S&P500 and Nasdaq slightly lower as investors await the latest US Federal Reserve guidance later Wednesday afternoon. Officials are expected to maintain their commitment to ultralow US interest rates and continued bond purchases for the time being.

The June US dollar index is down 0.010 at 91.890.

April crude oil futures are down $0.64 at US $64.16/barrel. The International Energy Agency (IEA) released its updated outlook today and downplayed prospects for a large and sustained rise in oil prices. "Oil's sharp rally to near $70 a barrel has spurred talk of a new supercycle and a looming supply shortfall. Our data and analysis suggest otherwise," IEA said. "For a start, oil inventories still look ample compared with historical levels despite a steady decline ... On top of the stock cushion, a hefty amount of spare production capacity has built up as a result of OPEC+ supply curbs."

While conditions are pointed to a drawdown in supplies in 2021, IEA said there is currently "more than enough" oil to "keep global oil markets adequately supplied." Changes in work patterns linked to the Covid pandemic and actions by governments for low-carbon efforts "have caused a dramatic downward shift in expectations for oil demand over the next six years," IEA said as it lowered its oil demand forecast in 2025 by 2.5 million barrels per day (bpd). It now expects demand to return to pre-pandemic 2019 levels by 2023.

Grain Markets

Chicago soybeans are down 7 to 9 cents/bu this morning. Bean futures gained 1 to almost 4 cents on Tuesday, supported by tight US domestic and global supplies. Data suggests the US national average soybean basis continued tightening and was firmer by 5 cents since the beginning of the month. Soymeal futures are lower again this morning...continuing a worrying trend since peaking in mid-January. Soyoil futures are up 3 points on the nearby May contract, but 19 to 40 points lower on the other contracts this morning after losing 8 to 40 points yesterday.

Brazilian soybean harvest continues to plug along, estimated at 46% complete vs 34% last week and 55% average. Mato Grosso is up to 80% harvested vs 88% average. Most forecasts have more harvest delays in parts of Brazil against welcome rain in Argentina and other areas of Brazil.

Chicago corn futures are 1 to 2 cents higher on the front months, but 2 to 3 cents lower this morning on new crop deferreds this morning after also closing mixed on Tuesday. Old crop corn futures were 4 cents higher on Tuesday, but new crop corn futures closed fractionally weaker.

The main feature in the market this week has been China's purchase of US corn (1.156 MMT) which has been widely rumored since last week. Trade pundits are suggesting the purchase took place last week, but the announcement was delayed till yesterday. This latest purchase by China takes their total known commitments of US corn to 19.859 MMT, although most believe at least half of the 5.639 MMT sitting in the unknown category also belongs to them. Even with the weakness in Chinese Dalian futures during January and early March, Chinese corn prices are still north of US $10.50/bu, offering plenty of incentive to take the cheaper priced US supply.

Brazil continues to catch-up to average on second crop corn planting which is now estimated at 72% complete vs 50% last week and 90% average. But remaining plantings will take place outside the ideal window.

US wheat markets are softer this morning, winter wheats down 4 to 5 cents, while spring wheat futures are off 1 to 4 cents. Yesterday, Minnie spring wheat ended a penny lower.

Additional moisture is falling across the central and southern US Plains today. The recent moisture led to an improvement in winter wheat conditions with Kansas, Oklahoma, Texas and Colorado. We would expect steady improvements in the HRW crop the next several weeks if the moisture outlook lives up to its billing.

Aside from all other storylines present, wheat prices will have difficulty holding up if moisture remains in the forecast.

Still dry conditions for northern US Plains and into the southern Canadian Prairies ahead of spring wheat planting, but the market doesn't seem to be paying attention. North American spring wheat acres will likely be lower in 2021, as growers lean to other cropping options. Could be some rebound potential near-term, but overall bias may remain choppy/lower for now.

Global crop conditions are generally good (EU and FSU) and the global supply outlook is viewed as net bearish.

CANADIAN GRAIN MARKET

ICE canola futures ended mixed on Tuesday, with declines in the old-crop months while the more deferred positions were steady to higher. Losses in comparable world edible oils pressured the nearby contracts. However, tightening supplies underpinned other contracts.

Traders are continuing to monitor the weather as spring planting nears for Northern Hemisphere crops. Parts of the US central Plains were hit with storms over the weekend, while much of the Prairies continue to remain dry. In South America, Brazil is wrestling with overly wet conditions in northern areas, while Argentina is too dry.

May canola fell $7.60 yesterday to $795.30/tonne, July was down $6.10 at $744.20 and November added 40 cents to $633.

For today... canola futures are trading $5 to $9/tonne lower this morning, dropping further off contract highs seen Tuesday. Nearby May canola is down $9.50 at $785.80/tonne. Seems a flush of spec fund long liquidation at work, though remains a matter of corrective action I would expect, rather than a new trend lower. Could be further near-term downside ahead of spring seeding, though the market cannot encourage any fresh demand given limited old crop cash supply. Chart support seen at the 20-day moving average ($770).

CBOT soy complex futures are lower this morning. Traders watching soyoil closely, though no clear sign of a peak there as yet.

Malaysian palm oil futures steadied and recovered a bit overnight from yesterday's decline, as traders weighed forecasts of an improvement in production against robust exports outlook.

EU rapeseed futures are slightly lower this morning, though still holding up near contract highs.

Weather Watch

You just need to draw in the lines to see what the 8-14 day forecast for precipitation is for Western Canada. Below normal precipitation and above normal temperatures looks to be the forecast to the end of March. The warm temperatures this month, if the forecast is correct, will be one of the ten warmest on record. The spring is starting off on the dry side.