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Futures Notes, Russia-Ukraine, Ethanol, Market Data & Rain Days 02/25/2022

First Notice Day for delivery assignments on March futures is Monday, February 28. Any long (buy) March CBOT contract could be assigned a delivery on Monday, meaning one’s long March futures position could be replaced by cash grain bushels in a CBOT approved grain warehouse (elevator) most likely on the Illinois or Mississippi River. Therefore, your futures broker and your cash grain merchandiser wants you to liquidate your March futures or basis contract today before the close of business. You can cash out or roll to a deferred month.

If you roll, the March futures will be sold and the destination month will be bought. If the March sell is above the buying price of the deferred month, you will make money.

Inverted markets are more bullish than markets with carry because the markets are saying, “Deliver your grain now! We are not going to pay you to store it. In fact, we are going to charge you to store your own grain.”

I was surprised to learn yesterday that some folks thought that once a market traded limit up, all trading ceased and that market had to settle limit up.

Limit up markets can trade at the limit up price if there is someone willing to sell at that price. If no one is willing to sell at the limit up price, then there will be no trading. It is impossible to buy something no one is willing to sell. If no one is willing to sell, that is called, “locked limit up”. However, as the day progresses, there are usually some traders who want to take profit on their long positions, some brave souls will want to short the market and some farmers will want sell some grain to their merchandiser. Those would all be futures market sellers and the thousands of wannabe buyers will fight like mad dogs to buy the few contracts offered for sale. A little bit of selling will encourage other longs to take profit by selling and that often starts an avalanche of selling as greed turns to fear. That is what happened yesterday in the wheat and the corn and to a lesser extent in the beans even though beans were not limit up.

Pay attention: Even if your broker or merchandiser will allow you to stay long a March contract into next week, be advised there is no daily trading limit during the delivery period. In other words, all March futures contracts on Monday have no limit as to how much money could be made or lost.

Our longer term price outlook is more bullish now than before the Russian attack.

Bloomberg reported that in the 24 hours after Putin recognized two breakaway Ukrainian republics, the US and its allies bought $700 million in Russian oil, gas and commodities.

The international bank to bank money transfer system, SWIFT, was not revoked by the USA on Russian banks.

Meanwhile, at least two ship loads of Ukrainian corn were sold to Vietnam Tuesday. Not only is Ukrainian corn the cheapest corn (US$286 per mt) available for export now, it is a lot closer to Vietnam than the #1 corn exporter (USA, $295 per mt), the #2 corn exporter (Brazil, $308) and the #3 corn exporter (Argentina, $295 per mt with the export tax included).

Insurance companies do not insure ships and their cargoes in war zones. You can bet the farm those insurance people know more about what is going on between Russia and Ukraine the than Putin himself. You can also bet the farm no one would buy 110,000 mt of corn if they could not insure the cargo and the ships. Those vessels are to be loaded for immediate shipment.

 

A poll of 14 analysts reports US corn acres be 91.8 million acres with a range from 90.4 million to 93.5 million. Assuming average yields of 179.2 bushels per acre, that would produce 15.053 billion bushels. The last three years produced 15.115, 14.111, and 13.621 billion bushels. The same folks predict soybean acres will be 89.5 million with a range of 87.5 to 92.4 million acres. An average yield of 51.5 bushels per acre would produce 4.556 billion bushels of beans compared to 4.435 last year, 4.216 the year before and 3.552 billion in 2019. USDA says 26% of the Kansas winter wheat crop is rated good-to-excellent as of February 20th. That’s down 4% from a month ago. Only 9% of Oklahoma’s wheat crop is in good-to-excellent condition, down 5% from last month. The monthly Cattle On Feed report will be released today after the close. The average estimates are: On Feed 100.7% of a year ago. Placements 99.2%. Marketings 97.3%.

 

USDA confirmed another case of bird flu was detected at a commercial poultry operation in the state of Delaware. There is a huge number of chickens concentrated on the Delmarva Peninsula.

 

Get your big grain truck to the nearest Walmart and load it up with shelled corn and take it to your grain merchandiser and pick-up a quick $1 per bushel or so. Check out the photo:


 

Ethanol Inventory Update


Average daily ethanol production:


1024,000 barrels last week.

1009,000 barrels the previous week.

658,000 barrels the same week a year ago.

1054,000 barrels the same week two years ago.


 

Market Data


This morning: Crude oil is at $93.88, up 1.08 The dollar index is at 97.11, down 0.02 July palm oil is at 5624 MYR, down 309. The contract high was made yesterday at 5,931 MYR. Palm oil owns 32% and soybean oil owns 28% world market share. December cotton is at $99.16, down 2.11. The contract high was made February, 10th at $106.36 per cwt. Cotton competes with soybeans and corn for acres. July natural gas is at $4.626, down 0.123. The contract high was $5.121 at February, 2nd, 2022. Natural gas is the primary cost to manufacture nitrogen fertilizer. July ULSD is at $2.7385 per gallon, up 0.0314. The contract high was made yesterday at $2.8475. ULSD stands for Ultra Low Sulfur Diesel.


 

Rain Days Update


Rondonópolis, Mato Grosso, in the heart of Brazil's most productive soybean area, received 0.4 inches of rain yesterday; 0.1 inches a year ago and 0.4 inches two years ago (one inch = 24.5 mm). Yesterday's high temperature was 87°F. Day time highs the next ten days will range from 88 to 94°F (100°F = 38°C). Yesterday, in the dry areas of South America: Santa Maria high temperature 103°F with 0.1 inches rain. Cordoba high temperature 88°F with 0.4 inches rain. Salto high temperature 84°F with 1.4 inches rain. Total rainfall and temperatures expected in the next ten days: Santa Maria 2.45 inches, 80 to 98°F. Cordoba 1.73 inches, 77 to 86°F. Salto 2.62 inches, 78 to 88°F. The Western Corn Belt has 5 more rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 3 more rain days than yesterday.


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