Highlights
The G7 will cap the price of Russian crude oil effective December 5th and the EU will ban Russian crude oil imports from the same date. That means the EU will lose 2.5 million barrels per day of Russian crude oil. The ban will be expanded to include oil products on February 5th, which will be tough for the already-tight diesel fuel market in Europe.
The G7 has yet to come up with its maximum price allowed under the cap, and EU regulations necessary to navigate the post-December 5 oil markets have yet to be crafted and finalized.
Brazil’s government has ordered banks to freeze the bank accounts of those who support the protests against the election results, just as Canada did last summer for the protestors. This coming week will be the end of the protests or a massive expansion.
The US government will do the same sometime in the next two to three years.
Tidbits
Ukraine Ag Ministry reports grain harvest in 2022 will be 50 to 52 million mt, down from a record high 86 million mts in 2021. War and lower yields he cause.
China imported 15% fewer soybeans from Brazil in October than they did a year ago while US soybean imports were unchanged from October a year ago. China’s overall soybean imports in October were the lowest for any month since 2014.
Managing The Basis to Maximize Cash Price
The first principle of marketing grain is to separate the day one locks-in the basis from the day one locks-in the futures price. Why? Generally, the basis weakens as futures price rises & vice versa.
As a grain producer, do not be thinking you need to sell corn, beans, milo, wheat, canola, etc. Your mind-set needs to be selling the basis for each of those commodities and selling the futures for each of those commodities. In order to maximize marketing profit, you have two markets to monitor for each commodity you sell or buy, namely basis and futures.
It matters not which one of those two markets you lock-in first. Your final cash price will be set when both the basis and futures are locked-in.
Since basis is a function of local supply and demand, you are the one who must record the basis.
If you are not already doing so, start now recording the basis the same time every week the rest of your life for every commodity you buy or sell. This history is valuable information for you.
You will find the basis trend is quite predictable every year and the magnitude of the basis is impacted year to year mostly by deviation from normal production quantities and transportation costs. Here is the seasonal chart for corn basis in West Central Illinois. All locations east of the Rocky Mountains have the same trend. The actual basis varies greatly, but the trend is the same.
Note the labels for each of the green circles as they state the reason for the seasonal trend peak or valley. If the first winter storm or unusually cold weather happens the second or third week in December when merchandisers are trying to book grain for the holidays so they can visit their mother-in-law, that mid-December basis can get so firm, it may be your best opportunity to maximize your return to storage and cost of storage. During the winter, keep an eye on the weather forecast. Colder weather means firmer basis; warmer weather means weaker basis.
The attachment is a printer friendly version of the above Managing The Basis to Maximize Cash Price
Market Data
This morning:
Crude oil is at $79.50, down $0.58
The dollar index is at 107.61, up 0.68
December palm oil is at 3,843 MYR, up 52. The contract high was made April, 29th at 6,384 MYR. Palm oil owns 36% and soybean oil owns 28% world market share.
December cotton is at $83.47, down $1.69 per cwt. The contract high was made May, 17th at $133.79 per cwt. Cotton competes with soybeans and corn for acres.
December natural gas is at $6.281, down 0.022. The contract high was made August, 23rd at $10.119. Natural gas is the primary cost to manufacture nitrogen fertilizer.
December ULSD is at $3.4856 per gallon, down 0.0325. The contract high was made June, 17th at $4.0719. ULSD stands for Ultra Low Sulfur Diesel.
December Dow Futures is at 33,666, down 109. The lifetime high is 36,832 on January 5th, 2022.
Rain Days Update
The 6 to 10 day forecast updated every day at: https://www.cpc.ncep.noaa.gov/products/predictions/610day/
Explanation of Rain Days