- HEADLINES: Soyoil soars on fund buying and record large domestic demand; HRW wheat futures trade Plains weather; Brazil to produce green diesel. Poland and Ukraine reach deal on transiting grain through Poland as cargoes to be sealed; Russia’s Prime Minister Lavrov to meet with UN Chief next week on grain corridor extension; Brazil’s President Lula signs $12 billion green diesel deal with Saudis.
- Chicago futures are mixed at midday with soyoil futures sharply higher on renewable diesel demand, while wheat/soybeans sag on rain prospects for the Central Plains and profit taking. May corn futures reached initial upside chart targets at $6.80-6.90 while May soybeans tested the old highs above $15.30. The May/July corn/soybean spreads have also endured weakness on profit taking. However, cash basis bids are unchanged with Central IL bidding $0.60 over July for spot cash corn and $0.65 over July for spot cash soybeans. Farmers have not shown a willingness to sell amid cold/unsettled weather forecasts. Most farmers will wait until after their crops are seeded to shed additional old crop supply. We look for a mixed close, but we doubt that either May corn or soybeans or May/July corn/soybean spreads have scored their final highs. Such highs would require an increase in old crop cash grain movement which has not been detected today.
- Chicago brokers estimate that fund managers have bought 1,700 contracts of soybeans, while selling 3,500 contracts of corn and 2,900 contracts of Chicago wheat. In the products, funds have bought 3,600 contracts of soyoil while selling 3,900 contracts of soymeal.
- Brazilian President Lula has signed a green diesel deal with Saudi Arabia for an investment amount of $2.4 billion dollars starting in 2024 to produce green (renewable) diesel and jet fuel. The investment is due over 10 years with the construction of a new refinery plant to begin in early 2024 in Bahia. The new plant will have the capacity to produce 1 billion litres (20,000 barrels) per day with production to start in late 2025 or early 2026. Initially, soyoil will be the main feedstock due to the sheer size of the plant which could use up to 900,000 mt annually. Longer term, it is hoped that 100-150,000 mt of cornoil and animal fats will also be converted. The project is the first bioenergy investment by the Saudis and are being trumpeted as aiding Brazilian agriculture by the Lula Administration.
- Poland and Ukraine have verbally committed to a deal that Ukraine grain will be sealed at the border to be transited through Poland and then exported. This export blueprint is expected to be followed by other Eastern European countries that border with Ukraine for the protection of local farm profitability. Ukraine grain may be monitored throughout EU until it is consumed.
- Russian Prime Minister Lavrov will meet with UN Head Gutierrez late next week to discuss why Russia is not allowing Ukraine grain vessels to be inspected for export. A push will also be made for an extension of the Black Sea Corridor Initiative beyond May 18. We are currently pessimistic that the West will curtail or end economic sanctions as requested by Russia for its ag sector. Lavrov appears less favourable on the grain corridor extension.
- There is a risk of a frost/freeze for Parana and Northern RGDS in coming mornings. The freeze would catch corn in its early growth stages. Watch S American temperatures closely in the next few days with the coldest morning looking like April 21.
- The midday GFS weather forecast is more like the EU model overnight with improved rain chances for Kansas late in the forecast period. The moisture this week is too far to the east to benefit HRW wheat with extreme heat felt again today. More cold/snow will be flying across the N Plains and the N Midwest into April 26. The chill retards seed germination/emergence and the pace of seeding. the midday run stays chilly into May.
- Soyoil futures should continue in a bullish trend due to record large US domestic demand and slowing monthly crush. Plains weather keys HRW wheat, while corn could be the sleeper as 2023/24 world stocks/use ratio declines to a potentially record low level.