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Grains Productions, Energy Prices, Put Options, Markets & Rain Days Update 04/30/2022

Highlights


Wheat, especially KC wheat, was thumped Friday because European weather model predicts heavy showers for hard red winter wheat area.


Russia’s central bank cut their key interest rate from 17% to 14% yesterday, which was a considerably larger cut than expected. The Russian ruble continues to rally as it gains on all other currencies.

Eurozone (countries using the euro currency, which are NOT all the EU countries) inflation hit 7.5% in April, up from 7.4% in March and the sixth consecutive month with a new all-time high inflation range. First quarter GDP is estimated at a lowly 0.2% increase.


May soybeans on China’s Dalian Exchange are the equivalent of $21.83 per bushel. Here is a summary of the major commodity price changes in China this past week. Note red colored numbers are the percent increase and green colored numbers are the percent price decrease. Note what palm oil price did:

 

The Buenos Aires Grains Exchange (BAGE) reports the Argentine corn harvest is 24.6% complete this week, up less than 2% from last week as growers are doing soybeans, which are 46.4% harvested, up 15.2% from last week. BAGE estimates the corn crop at 49 million mt; the USDA is at 53 million mt. BAGE estimates the bean production at 42 million with USDA at 43 million mt. That means we can reasonably expect USDA to reduce the world corn carryout (perhaps also beans) in the coming months. The next USDA Supply and Demand Report will be released at 11 AM Central Time Thursday, May 12th. It will be the first S&D with the “official” first 2022 crops Supply and Demand Numbers. The key questions the market wants answered, as always, what will the new crop carryovers be?


The EU Commission cut their soft wheat production estimate 1.2 million mt to 130.1 million, but left exports unchanged at 40 million, which is more wheat exports from the EU than ever before.


Morocco’s wheat crop is estimated to be a 60% loss as result of the driest weather since 1982. The country expects to import 4 to 4.5 million mt of wheat this coming year, up 2 million from this year.


According to World Bank analysts, the price of energy in 2022 will increase more than 50%, and all other goods by almost 20%. They see commodity prices will begin to fall the last half of 2022, but the cost of raw materials will be above the average values for the next 5 years.


They say the recent increase in energy prices was the strongest since the October 1973 oil embargo. The rise in prices for food products and fertilizers were the most since 2008. The report states that under the condition of a more protracted conflict and sanctions against Russia, the situation may worsen. Prices can be even higher and fluctuate even more.


According to the World Bank experts, under the new price and sanction conditions, the replacement of fossil fuels with clean energy sources is delayed. The "experts" explained this delay by the rise in prices for aluminum, plus 37% and nickel, plus 51%, necessary for alternative energy - in 2022 they will rise in price by 37% and 51%, respectively. Green energy construction costs have increased enough, the World Bank analysts think the green energy stampede will be slowed.


 

Wheat Put Update 29 April 2022


September wheat futures contract was down 5 cents yesterday, so all puts should have increased in value. The $10 put settled at 51 5/8, up 2 1/8 cents. The $9.00 put settled at 20¼, up 2¾ cents.

A September wheat futures hedge made $250, the $10 put made $106.25, and the $9 put made $137.50. Normally, the $10 put would increase in value more than the $9 put, but nothing is 100% in this business.

Wheat Put Update 30 April 2022

September CBOT wheat futures price was down 15¾ cents yesterday. A futures hedge made $787.50.

The $10 September put premium increased 10 cents, which is $500.

The $9 September put premium increased 5 cents, which is $250.

Note the chart of puts below.

About how much did the value per bushel of the cash wheat growing in the field change?


 

Market Data


This morning:

Crude oil settled at $104.11, down $1.25

The dollar index settled at 103.21, down 0.41

July palm oil settled at 7,104 MYR, up 190. The contract high was made yesterday at 7,229 MYR. Palm oil owns 36% and soybean oil owns 28% world market share.

December cotton settled at $122.07, down $2.93 per cwt. The contract high was made yesterday at $126.15 per cwt. Cotton competes with soybeans and corn for acres.

July natural gas settled at $7.355, up 0.361. The contract high was made April, 18th at $8.279. Natural gas is the primary cost to manufacture nitrogen fertilizer.

July ULSD settled at $3.6975 per gallon, down 0.0164. The contract high was made yesterday at $3.8129. ULSD stands for Ultra Low Sulfur Diesel.


 

Rain Days Update


The Western Corn Belt has 12 less rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 12 less rain daysthan yesterday.


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