Highlights, Urea, Crude Oil, Broilers & Ethanol, Markets & Rain 6/9/22

Wright Team
Jun 10, 2022
4 min read

Highlights

Tomorrow at 10 AM Mountain Time the USDA will issue its monthly S&D with revised world production numbers. Not much is expected other than soybean exports should be increased 25 to 30 million bushels. The USDA will wait until the Quarterly Stocks and Actual Planted Acres Reports on 30 June before making big changes on the July S&D.

India may get the UN nod to export 600,00 mt of wheat. Supposedly a big relief to traders, shippers, importers, and logistics partners.

Russia reported yesterday the mines have been cleared from the port area of Berdyansk, Ukraine. That was a quick six months… But Russia wants some sanction relief before it lets grain leave the port.

The World Bank is going to give Ukraine 1.49 billion US dollars.

Morocco has suspended tariffs on imports of sunflower, soybean, and rapeseed until further notice. Needs more imports.

CONAB raised their estimate of the Brazilian corn crop by 630,000 mt to 115.2 million mt.

Barchart sees the US 2022 corn production at 14.2 billion bu with a yield at 174 bu & soybean production at 4.4 billion bu with yield of 49.5 bu. Barchart’s track record on such predictions is absolutely the worst of anybody making predictions.

US container ship import demand is down about 36% since May 24. Where is that booming economy? Or is this first indications of major recession?

NOLA (New Orleans, Louisiana) urea has dropped to $470 per ton. Lot of global demand is going to be looking at that drop and asking their supplier "why not us as well?" When your supplier calls you suggesting you buy urea for 2023 at a price $280 below the $935 high, ask him the same question.

N prices have dropped so far so fast that merchants are suddenly scared they will get hung with high priced urea while their competition is selling N for $150 to $200 less. Solution: get farmers to price 2023 N now. For our money, don’t do it.

The best cure for high prices is high prices; producers produce more and users use less. The spring of 2023 is ten months away and we have already had 8 months of very high prices and prices are already getting crushed.

Crude oil market has all world producers talking about how terribly tight supplies are and almost all producing countries are already at max production, which is not true. For starters, Libya’s largest oil field is off-line producing 300,000+ barrels per day.

The big talk for crude oil prices is that China’s economy is coming back on-line after COVID shutdown for 20 to 40% of their economy. If that much of China's economy was shuttered, we would be swimming in crude oil. In other words, we don't see a big jump in Chinese crude oil demand. They have and will continue to get a great deal on Russian crude.

The Organization for Economic Co-operation and Development (OECD) cut its 2022 global GDP forecast to 3.0% from a 4.5% estimate in December. That is a 33% cut!

And don’t forget India is buying Russian crude at a 30% discount, blending it 50/50 with non-Russian crude and are legally selling at the world market price. That is a powerful incentive to put a lot of oil on the market.

In the short run: In yesterday's Energy Information Administration’s (EIA) weekly report, gasoline supplies unexpectedly fell 812,000 billion barrels (bbl) versus expectations of a +80,000 bbl build. Also, crude stockpiles at Cushing, OK, the delivery point of West Texas Intermediate (WTI) crude oil futures, fell 1.59 million bbl. Both are fairly small portions of the market’s fabric.

In the longer run: Much more important to the overall market is the big picture: EIA reported crude oil inventories last week rose 2.03 million bbl versus expectations of a draw-down of 2.50 million bbl. That is a 4.5 million barrel swing. The USA uses about 19.8 million barrels a day. Also, EIA distillate (diesel) supplies increased 2.59 million bbl, 2 million barrels more than expected. Gasoline in Urbana, Ohio was $5.099, up $1 in three weeks.

On yesterday’s close, July crude oil had a 9 day Relative Strength Index (RSI) or 80.4. A RSI over 70 is overbought and over 80 is grossly overbought and likely to get hit with a correction.

Broilers & Ethanol Update

Last week:

Broiler egg set was up slightly than the same week a year ago.

Broiler egg hatch was up 2% than the same week a year ago.

Average daily ethanol production:

1,039,000 barrels last week.

1,071,000 barrels the previous week.

1,067,000 barrels the same week a year ago.

837,000 barrels the same week two years ago.

Ethanol inventory was 23.636 million barrels compared to 22.961 million barrels the previous week.

Market Data

This morning:

Crude oil is at $121.75, down $0.36

The dollar index is at 102.55, up 0.01

July palm oil is at 6,403 MYR, down 294. 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 $121.87, down $0.67 per cwt. 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 $8.149, down 0.550. The contract high was made yesterday at $9.664. Natural gas is the primary cost to manufacture nitrogen fertilizer.

July ULSD is at $4.2694 per gallon, down 0.0449. The contract high was made June, 6th at $4.4084. ULSD stands for Ultra Low Sulfur Diesel.

Rain Days Update

The Western Corn Belt has 6 more rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 1 more rain daysthan yesterday.

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