- Row crops, corn and soybeans, are steady today, while wheat has extended its weekly losses as Russian and European fob offers retreat very modestly and as the market debates the potential for rainfall across the W Plains during the final days of March. We would mention that managed funds in Kansas are approaching a net flat position, and the US market’s premium to other origins is narrowing rather quickly.. Exporters this morning sold two cargoes of corn to S Korea for old crop delivery.
- Spot soy oil futures up nearly $.50/lb as the market suspects Trump is less willing to cap RIN values, thus leaving the RFS mandate unchanged. Soy oil stocks have risen sharply in recent months, but as the mandate in 2018 calls for incrementally higher biodiesel blending, some pressure will persist with respect to keeping US biodiesel production elevated. Crude is also up another $1.50/barrel, basis spot, and at midday sits at new six-week highs. Gasoline future have found new 32-month highs when casting aside Hurricane Harvey’s brief influence on energy prices late last summer.
- The EIA’s weekly energy report is also viewed as supportive. Crude stocks (less reserves) fell 2.6 million barrels, which is counter-seasonal as energy stocks in the US tend to increase noticeably into the middle part of April. US crude stocks on Friday totalled 428.3 million barrels, down 2% from a year ago. Motor gas stocks totalled 243 million barrels, down 1.7 million on the prior week and unchanged from last year. Tension between Iran and the US is noted, and new sanctions are possible in early May. US ethanol production through the week ending March 16 totalled 308 million gallons, up 7 Mmillionil on the week. Ethanol stocks fell 22 million gallons despite the boost in production, and it is likely some measure of export demand has returned. Futures-based ethanol blend and production margins have rallied further.
- The S American weather forecast includes just a few light/scattered showers in Cordoba and Santa Fe over the next ten days, and should the forecast verify, precipitation there during the second half of March will rest at just 8-60% of normal, with a large swath of Argentina’s crop belt seeing just 8-15% of normal. The USDA is not yet done lowering Argentine production and exports. There is also some attention being paid to ongoing snowfall in Russia, and abnormally cold temperatures across the whole of Europe and the Black Sea. Early N Hemisphere corn planting would now seem unlikely in 2018.
- The midday GFS weather forecast is wetter in the Western Plains March 30-31, and features widespread rainfall of 0.50-1.25” across OK, KS and CO in the 8-10 day period. This will be a blessing if the forecast verifies, but we await this evening’s run of the EU model before placing much confidence in the GFS solution. All models include some kind of westward expansion in Central US precipitation in late March/early April, but exact locations and amounts will be important with respect to adjusting HRW yield potential. Notice that heavy showers will remain a feature across the S Corn Belt, and there is potential for heavy snowfall in IA, IL, IN and OH on the weekend.
- Wheat futures continue to extract weather premium, and the move has been exacerbated by the lack of US wheat export demand. Otherwise, we caution against turning bearish ahead of a growing season, and as some 65,000 contracts of corn length has been shed since last Tuesday.