17 June 2022

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  • HEADLINES: Anxiety over central US weather ahead of a 3-day weekend; Biden considering restricting US diesel/unleaded exports.
  • Chicago grains are mixed at midday with corn firmer while wheat futures sag on the ongoing US harvest. Soybeans are caught in between. The sharp fall in crude oil prices of $7/barrel is producing a bearish tailwind for Chicago heading into a long weekend. Amid record prices at the pump, the Biden Administration is looking for ways to lower prices. Their hope is to push the Saudis to ramp up production. However, this would not solve the lack of US refinery capacity and tightening supplies of diesel/unleaded with spot shortages noted across the US. The crude price fall leans bearish on US grain.
  • The US is seeing wheat interest with Indonesia booking 2 US cargoes yesterday, but market participants are confused by statements out of Turkey and Russia that they will allow Ukraine export corridors. The Russians and Turks continue their war of words that they are not at fault for the looming food crisis across portions of South Asia and Africa. We remain dubious that any Ukraine export corridor will ever be established. The market should be “wising up” to Russia and Turkish corridor comments.
  • The acute weakness of crude oil has been produced by talk that the Biden Administration is talking fuel export limits as US pump prices surge above $5/gallon. Diesel/unleaded export limit talk has picked up in recent days. But we hear that a decision is not imminent. And export controls will hurt US’s allies including the EU. The placing of export limits on US crude oil would have no impact based on the lack of US refinery capacity. The Biden Admin also wants to push renewable fuels to assist bridging the fossil fuel shortage.
  • The US$ fell sharply on news of the Swiss National Bank (SNB) raising rates 0.5% yesterday. However, today the greenback is back advancing with currency volatility rising sharply. World currency valuations are based on how Central Banks fight inflation. Japan has already announced that it will not raise rates substantially, which pounded their currency. It is the inflation fight which will adjust the value of the US$ in the coming months.
  • Chicago brokers estimate that funds have sold 3,300 contracts of wheat, 4,200 contracts of soyoil, and 2,900 contracts of soybeans. They have bought 3,100 contracts of meal and 3,900 contracts of corn, and 12,000 soymeal call options
  • Spot cash corn bids have been soaring as ethanol producers fight with exporters for supply. Reports of elevators and ethanol producers paying $0.60-0.90 over for corn delivered in the next 5 days. The strong cash bids should be monitored as first notice day looms for July Chicago corn futures. We would advise against net short positions in July corn due to the strong cash basis bids.
  • FAS/USDA reported that 105,664 mt of US corn was sold to an unknown destination and 250,571 mt to Costa Rica and an unknown destination. The total daily corn sales announcement was just over 356,000 mt.
  • The midday GFS weather forecast is consistent in projecting intense/expansive high pressure ridging across the Central US for the next 10 days. The forecast is dry for the next 5 days with a few isolated light showers late next week across the Lakes and E Midwest. Heat builds across the Plains this weekend (90s/low 100s) which pushes east across the S Midwest/Delta through most of next week. The ridge then retrogrades west to the Plains and amplifies again next weekend. This produces hot/dry weather through the Plains and the W Midwest/Delta in the last week of June. This is an amplified/expansive high-pressure ridge across the Plains/W Midwest. Our weather concern stays high.
  • It is all about Central US weather come Monday night. These massive and amplified ridges have a history of longevity heading into mid-summer. The EU model has been more correct than the GFS and its bet for ongoing Central US heat and dryness. Any rainfall will be patchy.  It is a 3-day weekend and the weather risks are also higher due to the extra day.
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