- HEADLINES: Soy complex leads morning rally; Crude stays firm amid tightening US stocks.
- Chicago futures are mixed at midday with wheat in the red and row crops steady to higher amid surging global crude prices. Breaking news is absent, FAS failed to report new US export demand, but every day that conflict continues in Ukraine is another day of potential major infrastructure damage/disruption, while energy markets in the Western Hemisphere are beginning to exclude Russian supplies from balance sheets. Spot WTI crude at midday is up $5.50/barrel at $115 and the US crude market will find support based on its own tightening supplies. Volume in Chicago wheat remains somewhat weak.
- The soy complex has been the leader on Wednesday as the Canadian canola markets scores a new all-time high. Spot Paris rapeseed is down €35/mt on profit taking, but only after reaching €1,022/mt ($1,124/mt, vs. spot Chicago soybeans at $631, nearly an 80% premium). Additionally, while S American corn fob basis retreats, Brazilian fob soy basis remains firm at $1.70-1.80, level money with US Gulf soy offers. Brazilian soy exports will be accelerating in the Apr-Jul period, but importers will continue to piecemeal demand needs with US origin indefinitely.
- Spot cotton, too, has reached newer highs at $1.31/lb. Dec cotton this morning sits at $1.09, a new contract high. Along with rising oat and rapeseed prices, finding enough arable land globally to alleviate balance sheets will be impossible in the 2022/23 crop year. But it is each crop’s share of the pie in the US that remains difficult to forecast, which elevates near-term market risk ahead of and just after next week’s stocks and seedings release.
- Weekly EIA energy data this morning leans broadly supportive, with ethanol production through the week ending March 18 totalled 306 million gallons, vs. 302 million the previous week and slightly above the pace needed to meet the USDA’s forecast. US ethanol stocks continue to build, and at 1,098 million gallons are record large for mid-March. However, gasoline use/miles driven will begin its seasonal rise in late spring. Brazilian ethanol prices have rallied sharply in the last 10 days. Improved US ethanol export demand lies ahead. A rapid drawdown in current lofty US ethanol stocks is due in spring and summer.
- US crude stocks less strategic reserve on March 10 totalled 413 million barrels, vs. 416 million the prior week and down a sizable 18% from last year. There is no doubt conflict premium is built into WTI futures, but it is just tough to be bearish energy until there is confirmation that production can exceed consumption on a lasting basis. This confirmation is not available today.
- APK Inform, a widely followed Black Sea news source, has estimated 2022/23 Ukrainian corn exports at 19 million mt, vs. pre-war 2021/22 estimates of 33-34 million.
- New crop wheat exports are projected at 10 million mt, vs. 20 million in 2021/22. APK Inform knows no more than the rest of the trade, but the reality of Black Sea surplus availability will stay priority number one in determining fair value in the long run. Expect additional and wide-ranging Ukrainian crop/export estimates in the weeks ahead. There is hope that real clarity emerges by June.
- The midday GFS weather forecast is again consistent with the morning run. The eastern Plains, Midwest and Delta will be open to wet/cool air, with a steady flow of moderate to heavy showers projected into April 1. The next chance of widespread/meaningful precipitation occurs next Wed-Fri. Accumulation of 1-3” will favour E KS E NE, IA, MI and much of IL.
- The outlook stays bullish, but markets today exist near fair value with what is known today (old crop export disruptions) in the Black Sea region. NASS stocks/seedings data will provide a benchmark from which to measure the need for short, and long-term supply rationing.