trilateral bakery report -...

www.trilatinc.com© 2019 •Trilateral

April 22, 2019

Trilateral Bakery Report

Recommendations

WheatCoverage should be through Q4. We are seeing some companies beginning to extend into 2020.

Edible Oils

Edible oil coverage recom-mended at least through Q3 and begin scaling balance of 2019 on opportunities.

www.trilatinc.com

© 2019 •Trilateral 2

April 22, 2019

Wheat• Major exporter production forecasts increase.• HRS likely to lose acres, but still expected to have multi-

year high ending stocks • US HRW conditions very good• India production forecast to be record levelRead detailed recap

Oils• Global edible markets remain relatively flat/bearish• NOPA SBO stocks below expectations; up m/m but low-

er y/y. • WASDE report increased domestic disappearance for

biodiesel and food use Read detailed recap

MayMayhMarket Highlights


April 22, 2019

WheatGlobal wheat continues to receive bearish news.

Production forecasts for major exporters have grown along with ideas that new infrastructure will facilitate Russia’s exports. Unless one of these countries experiences production adver-sity this year, US wheat will almost surely remain non-compeititve on world markets.

In the US, HRW wheat conditions remain very good early in the season with near drought free conditions. Concerns seems to be abating re-garding HRS planting as conditions outside of southern SD are improving with planting already occurring in southwest ND. Moreover, analysts say that unless planted acres fall more than one million acres below forecasts, there will still be multi-year ending stocks.

As noted in this morning Grain Update, DTN sees the global wheat market will once again coming down to production and exportable surplus in the European Union and the Black Sea. Without a threat to either of those areas, it will be difficult to see a sustainable rally given U.S. and global supplies. Both Russia and Germany are expected to have substantially larger exportable supplies if weather continues to cooperate.

Russia now pegs its expected production at 83.4 mmt, up from last year’s 71 mmt crop. And as noted above, talk of Russian infrastructure im-provements would increase the potential to ex-port a lot more wheat in the coming year.

German analysts say German wheat production will be 20.6% above last year—though one must remember that is 20.6% above a crop that was decimated by severe drought last year.

And finally, Reuters reported, “As if we needed more bearish world wheat news, analysts peg India’s wheat crop to be close to 103-105 mmt compared to last year’s 99.7 mmt, and that would be record large.”

It seems most likely that US ending stocks will re-main in the burdensome 1.1 billion bushel range as the window for export sales is closing. Looking forward to the new crop July-August slot, both Russian and EU offers are holding discounts of $15/mt to U.S. wheat.

See wheat technical, protein premium and millfeed charts and tables

OilsEdible oil market trading last week was once again uneventful with SBO and Canola drifting slightly lower while palm had mixed performance, sup-ported some days by a weakening ringgit and pres-sured lower on other days by weaker than expect-ed exports and tracking weaker overnight soyoil.

Malaysian palm oil futures, in fact, fell to their low-est levels in two weeks during the week as stock-piles remained high and exports came in weaker than forecast. “Stocks still look high,” said a Kuala Lumpur-based trader, adding that inventory lev-els could still rise in April if exports slow. Another trader noted “the weakness in external markets” also effected bearish pressure, while “the weak ringgit capped losses.”

NOPA’s March crush report showed its members processed 170.011 mb, which was the second larg-est for month of March. The trade expected rising overseas competition for soymeal exports to lead to a slowdown in the pace of U.S. soybean crush-ing compared to a year earlier, which in fact was the case, albeit at a higher than expected level.

The combination of slowing meal demand in China, where Dalian meal prices are trading at multi-year lows, and new export competition from Argentina threaten to lower demand for US meal. A drop in the US crushing pace, would of course, equate to lower SBO production.

March SBO stocks rose 0.5% m/m to 1.761 billion pounds, but were 9.5% lower y/y. Stocks were be-low trade expectations of 1.783 billion pounds. Oil

MayMayhMarket Recap


April 22, 2019

yield was high at 11.76 vs 11.69 in Feb and 11.51 last March.

The USDA, in the April WASDE report, included increased domestic disappearance for biodiesel and food use and lowered ending stocks.

See oils charts and tables

MayMayhMarket Recap cont.


April 22, 2019

Technical Outlook

MayMayhWheat Charts and Tables

Money Flow

• We continue to look lower for the current wave, with the wave count extended from last week, but the overall near-term bearish outlook remains in place.

• Critical support is still 4.27. A break below 4.27 would adopt the alternative bearish wave count with 3.86 as the next support level.


April 22, 2019

Protein PremiumsSoft Red Winter: St. Louis-area mill bids for nearby were 35c over Chicago May; new crop 20c over July. Chicago mill had no nearby bid. Toledo mill bids for nearby were 15c over Chicago May; new crop, 10c over July. Elevator bids were 5c under Chicago May; new crop bid, 15c under July. Cincinnati elevator bid was 10c over Chicago May; new crop, 10c over July. Michigan white wheat mill bids ranged from 10c under Chicago May to 20c over; new crop,10c under July to 20c over; soft red wheat mill bids were 15c under Chicago May to 15c over; new crop, 15c under July to 5c under. Gulf bids on soft red winter wheat for April were 85c over Chicago May, up 1c.

Hard Red Winter: Premiums on hard red winter wheat in Kansas City were unchanged to 12c lower, ex-cept for the low 13s, which were higher. Basis resembles more conventional spreads with 13%-protein wheat quoted 14c higher than 12% protein and 17c higher than 11% protein. Stagnancy at top of protein scale stemmed from lack of supplies to sell for accurate pricing gauge, an industry veteran said, who speculated high-protein basis may de-cline in next few days. Weakened price structure that began Tuesday was linked to falling rail car costs. While they have declined, a trader noted U.P. Railroad single cars still were $500@600 over tariff, though trains may be contracted for tariff or below. Also contributing was mostly full status of pipelines for mills that were forced to double buy but now were re-ceiving contracted wheat more regularly.

Hard Red Spring: Premiums on hard red spring wheat in Minneapolis were mixed last week. U.S.D.A. in weekly Crop Progress report said soil mois-ture profiles in principal hard red spring growing states remained mostly adequate to surplus and were virtually unchanged from prior week. Choice milling hard amber durum as quoted at the Chicago rail gateway for delivery beyond was nominal $7.30 a bu, unchanged. Minneapo-lis price was $7 a bu.

KCBT Wheat Protein Premium ScaleThe following hard red/soft winter wheat scale is in cents per bushel, basis KCBT Mar futures, according to billing and quality. Source: KCBT Cash Grain Committee. 11.0% 138-148 K -12 11.2% 138-148 K -12 11.4% 138-148 K -12 11.6% 138-148 K -12 11.8% 138-148 K -12 12.0% 141-151 K -9 12.2% 150-160 K ..... 12.4% 150-160 K ..... 12.6% 150-160 K ..... 12.8% 150-160 K ..... 13.0% 155-165 K +5 13.2% 155-165 K +5 13.4% 155-165 K +5 13.6% 155-165 K ..... 13.8% 155-165 K ..... 14.0% 155-165 K ..... SRW basis Chicago -20 K .....

As of April 18, 2019

MWE Wheat Protein Premium The basis is for US 1 Milling Quality Only. Milling Quality is defined as 300 or better Falling Numbers; 58 lbs or better test weight; 13.5 Pct or less moisture; 1.5 Pct or less Damage; 1.5 Pct or less Dockage and 2.0 ppm or less vomitoxin. 13.0% 115-115 K ..... 14.0% 115-115 K -10 15.0% 145-145 K +5


April 22, 2019

Protein Premiums cont.


April 22, 2019

Values were mostly unchanged though tone of market strengthened in most regions. Principal cause was poor run-times two days before some mills planned to shut down early on Friday for Easter weekend, which can have a sizable impact on the amount of prod-uct in the marketplace.

Southwest sellers sought to wring last premiums from wheat midds, with little success. Buyer bids were generally $10 lower, and most had luxury of refusing to pay up.

Northeast and Southeast prices were projected to be firmer moving into next week, but effects of holiday downtime were thought to be short-lived “as run-times normalize.”

Northeast, Central states and Carolinas saw mild rallies earlier in week. Missing out was Tennessee- Georgia-Alabama market, which was expected to trade flat into next week after several weeks with heavier feed supply than in other markets.

Millfeed

Kansas CitySpot 70-80M-J 70-80

Chicago WestSpot 92-102M-J 92-102

Pacific NorthwestSpot 100-110M-J 85-95

Southern CaliforniaSpot 125-140M-J 104-119

BuffaloSpot 100-110M-J 80-90

Central StatesSpot 95-105M-J 78-88

MinneapolisSpot 67-77M-J 65-75

ChicagoSpot 83-93M-J 78-88

ChattanoogaSpot 90-100 M-J 90-100


April 22, 2019

In the above charts the center line is the current millfeed price for the respective cities. The upper and lower lines are the range that millfeed prices trade between 80 and 90 percent of the time. One should avoid forward contract-ing millfeed when prices are near the lower boundary and wait to sell millfeed when prices are closer to the upper boundary to achieve the greatest results.

Millfeed cont.

Cont. next page


April 22, 2019MayMayhOils Charts and TablesTechnical Outlook

Cont. next page

• Our outlook for SBO remains intact. We are now calling wave iv complete and are looking for a new low following the breakout below the contracting triangle of wave iv.

Money Flow


April 22, 2019

SBO Basis

This letter is solely for informational purposes. Information coined herein is believed to be complete, accurate, and expressed in good faith. It is not guaranteed. This material is not deemed a prospectus or solicitation for the purchase or sale of any Futures or Options contracts. No specific trading recommendation will be provided. At no time may a reader be justified in inferring that any such advice is intended. Past trading results do not guarantee future profits, nor do they guarantee that losses will not occur. All trading decisions remain the responsibility of the individual making those decisions. Principals, employees, and/or clients of Trilateral Inc. may have positions in the investments mentioned herein, either in accord or discord with market analysis shown.

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