Highlights, ENSO, Ukrainian NG & Oil, Markets & Rain Days Update 6/21/22

Wright Team
Jun 21, 2022
3 min read

Highlights

CBOT corn and beans opened lower last night probably because a bit more rain in the 8 to 14 day forecast. There is a lot of hot and dry weather between now and then with two crop progress reports, the first one this afternoon. People in a position (business and government) to know what they are talking about say gasoline prices will be down to $4.75 within a month or less. Some of the more intelligent Democrats realize if gasoline prices do not decline sharply before November, there will not be many political jobs for Democrats in 2023. Since the Black Sea Area (The Bread Basket of the World), will be the site for a war for possibly two more springs, we need to rethink those wheat puts. In any case, if you have wheat puts, keep them for now, but do not add to them. Economists estimate that the probability of the United States entering a recession is at “44% in the next 12 months, a level usually seen only on the brink of or during actual recessions,” according to a survey from The Wall Street Journal released over the weekend. Germany announced it is restarting coal fired generating plants to reduce natural gas consumption.

It has been known by “everyone” for 100 years that Eastern Ukraine had a lot of coal and some crude oil.

One of our long-time clients had an unexpected conversation with a private government contractor at a wedding in Virginia. The contractor has done work for the US Government all over the world, but he would reveal very little information about his work or his employer. But he did say British Petroleum (BP) began exploring for oil in Eastern Ukraine in 2012 and they found a very large oil and gas field. The contractor said that oil and gas is what the Ukraine and Russia fighting is all about and the war will continue for 18 to 24 months.

We did some research and found that in 2013 there was proven to be 900 billion cubic meters of natural gas in Eastern Ukraine. BP also found enough coal to generate all the electricity for all of Europe for 400 years, that would be 5 billion mts of coal. What about crude oil? In 2013, BP found 12.8 million mts of crude oil and a lot more since then. Note that Russia made its first military move into Eastern Ukraine and Crimea in 2014. The first war in Europe in 75 years makes sense now. Russia wants to keep its control over Western Europe by supplying most of their natural gas and much of their crude oil. Eastern Ukraine’s untapped gas and oil fields reportedly have enough gas to meet the needs of Western Europe for a couple hundred years. If Russia cannot control those Ukrainian fossil fuels to Europe, it will be a major loss of influence for Russia. Thanks to Rick for that BP information. China’s Russian crude oil imports are averaging 1.98 million barrels a day so far this month and June will most likely be an all-time record monthly high for China imports of Russian crude.

In 2021, December corn made its contract high at $6.38 on May 7th. Retraced to $5.00 May 26th Rallied to $6.28 June 10th Retraced to $5.14 on June 24th Rallied to $6.11 on July 2. December 2021 corn lost $1.30 the last three weeks of July in 2021, then down to $4.97 on September 10th. In 2022, December corn contract high was $7.66 May 16th. Fell back to $6.82 on June 1st Rallied to $7.49¼ June 17th Another run to the contract high is to be expected before the last half July sell-off

Below is yesterday's ENSO updated chart. You can read all about ENSO, El Nino and La Nina at: 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 $109.64, up $1.65

The dollar index is at 104.15, down 0.55

July palm oil is at 5,150 MYR, down 111. 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 $116.21, down $2.08 per cw. The contract high was made May, 17th at $133.79 per cwt. Cotton competes with soybeans and corn for acres.

July natural gas is at $6.681, down 0.263. The contract high was made June, 8th at $9.664. Natural gas is the primary cost to manufacture nitrogen fertilizer.

July ULSD is at $4.4627 per gallon, up 0.1229. The contract high was made June, 17th at $4.6444. ULSD stands for Ultra Low Sulfur Diesel.

Rain Days Update

The Western Corn Belt has 1 more rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 4 more rain daysthan yesterday.

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