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Crude Oil, Fertilizers, Inflation, Put Options, Markets & Rain Days Update 5/11/22

Highlights


One year ago yesterday, 85% of North Dakota was in a severe drought (rated D3). This week, North Dakota is rated 4% very short, 16% short, 54% adequate, 26% surplus topsoil moisture.

The soybean basis in North America’s soybean crush capital, Decatur, Illinois is 53 over the July. On the river in St. Louis, the basis is 75 over the July. Both were 2 cents firmer yesterday. With the soybean crush margin $2 a bushel more profitable than a year ago and the new crop soybean export book the largest ever by a very wide margin, we will have a basis bidding war like never before for soybeans deep into harvest. Corn will have a more mild bidding war. Note that the firm basis is why there have been no deliveries on the May corn and beans. With a positive basis, one actually would be paid a lower cash price for a commodity delivered on a futures contract. There were 50 meal, 2 KC wheat, 33 CBOT wheat delivery notices this morning.

JPMorgan says Russia's economy is stronger than expected and will only suffer a shallow recession despite sanctions. Some financial “experts” say inflation in Russia is running 20% this year. That is absolutely not true based upon our direct contacts in Russia.

 

The president and CEO of fertilizer giant, Mosaic, is Joe O’Rourke said he expects fertilizer prices in the second quarter will be $40 to $60 per ton higher than prices in the first quarter.

We are actively increasing productive capacity in our potash business. We're already running at a 10.8 million tonnes run rate per year. We have project teams working on two additional mines.

Updated Fertilizer Price on Barges at New Orleans:


NOLA urea

March 25 - $935

May 4 - $620

Down $315 or 34%


NOLA DAP

March 28 - $1,000

Sep paper - $790

Down $210 or 21%


NOLA Potash

April 1 - $835

Today - $790

Down $45 or 5%

 

The US Energy Information Administration (EIA) forecasts US crude oil production at 11.9 million barrels per day in 2022 and 12.8 million bpd for 2023. The 2019, when the US was a net exporter of crude oil, US daily crude production was 12.3 million.


Brent crude oil is from the North Sea, which is northeast of England and south of Norway. Brent crude oil runs about $5 to $8 per barrel more than West Texas Intermediate Crude (WTI), which is what is produced in North America. The EIA said yesterday they expect Brent crude prices to remain above $100/barrel for the rest of 2022. If so, it means WTI will stay above $90.


Natural gas futures settled 4% higher yesterday after trading 5% lower overnight in follow through selling after Monday’s big losses.


From January 1st through April 2nd, 2022, Tyson reported it increased beef prices by 23.8%, chicken by 14.4%, and pork by 10.8%.


The World Bank is throwing money around to save the world from starvation. Lebanon will get a $150 million loan to import wheat. Who thinks they will pay it back? Where do you think the World Bank gets most of their money?


Sri Lanka went to 100% organic agriculture 6 months ago. With riots over food shortages the past month, the government tells its farmers to go back to fertilizer, pest control chemicals and GMO grains.


According to the Ukrainian officials last evening, Russia’s military has been pounding the Port of Odessa in southwest Ukraine, the number one grain export port for all of the Black Sea.


Some weather people say it will be 94F (34.5C) in Des Moines tomorrow.


For a look at the future of world trade volume, the massive shipbuilding Xinyangzi Shipbuilding Co in the Chinese state of Jiangsu reported today orders on the books for new ocean freighters is more than any time the past twenty years. Even more encouraging for solid growth of world trade, 90% of the construction orders are from non-Chinese companies around the world.

 

Wheat Put Discussion

After the Close Tuesday May 10th.

September 2022 CBOT wheat futures settled at $10.96½, up 1 cent. All puts should have decreased in value since the futures price was higher. One cent up probably will not hurt the put values as much as losing a day's worth of time value.

The $10 put lost 2 cents while the $9.00 put was unchanged.

A short futures short position lost $50.

The $10 put lost $100.

The $9 put was unchanged.

The wheat in the field or bin gained about $50, because cash price = futures plus basis.


 


ENSO Update


The ENSO update was issued two days ago. The water temperature declined a bit last week.

To learn about ENSO, La Nina and El Nino, go to:

https://www.wrightonthemarket.com/post/cause-and-effect-of-el-ni%C3%B1o-and-la-ni%C3%B1a-episodes-part-1

 

Market Data


This morning:

Crude oil is at $101.92, up $2.16

The dollar index is at 103.77, down 0.15

July palm oil is at 6,434 MYR, up 121. The contract high was made April, 29th at 7,229 MYR. Palm oil owns 36% and soybean oil owns 28% world market share.

December cotton is at $123.40, down $0.77 per cwt. The contract high was made May, 4th at $129.91 per cwt. Cotton competes with soybeans and corn for acres.

July natural gas is at $7.588, up 0.121. The contract high was made May, 6th at $9.052. Natural gas is the primary cost to manufacture nitrogen fertilizer.

July ULSD is at $3.7557 per gallon, up 0.0764. The contract high was made May, 5th at $3.9282. ULSD stands for Ultra Low Sulfur Diesel.


 

Rain Days Update


The Western Corn Belt has 3 more rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 2 more rain days than yesterday.

The 6 to 10 day forecast updated every day at: https://www.cpc.ncep.noaa.gov/products/predictions/610day/

Explanation of Rain Days


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