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Inflation, Global Markets, S&D, Markets & Rain Days Update 04/09/2022

Highlights


The UN reports the world’s food prices increased 13% in March alone. The head of Commodity Analytics and Research of Maritime and Trade, S&P Global, spoke yesterday at Singapore Maritime Week’s Baltic Freight and Commodity Forum (ocean freight executives). He sees a “significant deceleration” of the world’s economy. World GDP is forecast at 3.3% for 2022, down from 5.8% in 2021 and with little improvement predicted for 2023. That’s on the back of displacement and destruction – “two massive blocks” – in Ukraine and Russia’s isolation from the world economy “for years to come”. Price inflation will remain high for 2022. Global CPI inflation is expected to pick up from 3.9%-4% in 2021 to a 17-year high of 6.4% in 2022. Inflation kills demand. This will subside to 3.4% in 2023, but we are still expecting 6% global inflation. That is a big number and many countries, many economies haven’t seen that kind of inflation for decades. Real GDP growth, looking at countries that are expected to grow, will be led by Asia Pacific and the Middle East, which is benefiting from high commodity and energy prices. However, we expect relatively sluggish GDP growth in Europe and Latin America. Kapoor was also bearish on China with an expectation that mainland China’s economy is resuming a long term deceleration in economic growth. In our view China’s GDP growth is likely to fall short of the government’s 5.5% target in 2022. And that will have a negative impact on the country’s demand. Kapoor sees commodity prices retreating in the second half of 2022 and 2023 as demand cools and supply recovers. He makes the distinction that the current commodity shock is not being driven by booming global demand. The current shock which we’re seeing is being led by supply constraints and geopolitical instability, so as that goes over, you will see some of those prices retreating back.

 

The Renewable Fuels Association (RFA) reported a record 814 million gallons of E15 gasoline were sold in 2021, a 61% increase over 2020 and nearly double 2019 sales.


Recent light frosts may reduce the Argentine soybean production.


US Gulf corn basis levels yesterday were down a penny for April and first half May. Soybean basis was 2 cents lower for first half April and a penny lower for last half April thru July.

 

From yesterday’s USDA numbers:


China’s soybean imports for the year reduced 3 million mt to 91 million.


The national average price to be paid to US farmers old crop wheat was raised 10 cents to $7.60, despite the carryover being increased from a 123 day supply to 130 day supply for the wheat marketing year ending May 31st. The US soybean carryover was reduced from a 24 to 21 day supply, but there was no change in the price expected to be paid to farmers for this marketing year which ends August 31st.


Brazil’s bean crop was reduced 2 million mt to 125 million and their corn crop was increased by 2 million mt.


Argentina’s corn and bean production numbers were both left unchanged.


Ukraine’s corn exports were cut 4.5 million mt to 23 million. All world corn trade was reduced 2.9 million mt to 197 million mt. Ukraine’s wheat exports were reduced only one million mt to 19 million.


China is said to be having its worst winter wheat crop ever, but USDA did not change China’s wheat production nor imports.


Attached is our simplified version of the USDA wheat, corn and soybean S&D. Note it has the US and world carryout in terms of days’ use from there marketing years. Note the carryout trends for each commodity for the three years.

0422 S&D
.xlsx
Download XLSX • 18KB

 

Market Data


This morning: Crude oil settled at $97.90, up $1.87 The dollar index settled at 99.85, up 0.09 July palm oil settled at 5,739 MYR, up 111. The contract high was made March, 9th at 6,531 MYR. Palm oil owns 36% and soybean oil owns 28% world market share. December cotton settled at $115.48, up $0.79 per cwt. The contract high was made April, 8th at $115.98 per cwt. Cotton competes with soybeans and corn for acres. July natural gas settled at $6.420, down 0.079. The contract high was made April, 8th at $6.678. Natural gas is the primary cost to manufacture nitrogen fertilizer. July ULSD settled at $3.1367 per gallon, up 0.0563. The contract high was made March, 9th at $3.7675. ULSD stands for Ultra Low Sulfur Diesel.


 

Rain Days Update


The Western Corn Belt has 2 less rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 4 less rain days than yesterday.


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