Markets Update & Rain Days 03/02/2022

Yesterday morning, USDA announced 264,000 mt of new crop soybeans were sold to China.

The U.S. Ag Attache lowered his estimate of Argentina’s soybean production to 41 million mt. USDA is currently 45 million.

Total US soybean crush in January was 194 million bushels, slightly above the 193.7 million bushels expected by the market. The soy oil produced in January was 2.28 billion pounds, down 2% from December and down 1% from January last year. Less oil from more beans crushed means the oil content of the 2021 beans is less than 2020 soybeans; another bullish tidbit for vegetable oil.

Pakistan announced late yesterday it will import 2 million mt of Russian wheat and buy Russian natural gas.

EU feed buyers are scrambling to buy replacement supplies to offset previously purchased, but unavailable Ukrainian feed stocks. Feed millers north and south of Mediterranean Sea are all looking buy feed at any price from anywhere. To say they are desperate is an understatement. The animals will soon be hungry.

Anxious Indian buyers, with no access to sunflower oil from Ukraine, are turning to palm oil from Malaysia to meet demand before the month-long Ramadan shuts down palm oil production in early April. Make a note that perhaps vegetable oil demand will not be strong in April due to the current panic buying. Last month, 500,000 mt of sunflower oil was expected to leave Ukraine, but only 450,000 mt got shipped. Another 450,000 mts are scheduled to be shipped this month from Ukraine, which is not going to happen. India buys about 250,000 mt of veg oil every month. India eliminated its tariff on US soyoil several months ago and bought 66,000 mt of US soyoil within a month. Now with sunflower from Ukraine unavailable, it is reasonable to expect more soyoil from USA will be going to India soon, very soon.

The Suez Canal may be closed to Russian shipping. If so, that would take China and Southeast Asia out of the Black Sea markets. China has to be nervous about the Suez situation.

Ukraine has exported 18.7 million mt of corn, leaving about 14, maybe 15 million mt of corn in Ukraine unexpectedly unavailable to the world market place. That would be about 600 million bushels, which is 39% of the USA projected corn carryover on August 31st. US corn basis surged at the Gulf and the Pacific Northwest after the world’s grain buyers turned to the USA for feed grain. Don’t be selling any more corn for a day or two or three. Ukraine and Russia officials will meet today to discuss a truce.

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Vincent Lee is an international grain buyer located in Seoul, South Korea. He was a CBOT futures trader from 2000 to 2015 for the largest feed maker in Korea, which imported about 4 million mts every year. Vincent has many friends who are Corn Belt farmers. We are pleased he is one of our clients. In 2015, he started his own feed company. Vincent sent me this message Monday:

Hello Roger,

As you know, South Korea is a purely importing country of grain both human food and animal feed.

We are being affected very seriously from Russia-Ukraine war.

Giant trading companies such as ADM, COFCO are declaring Force Majeur for corn sales contracts due to war which were intended to be sourced from Black Sea area.

Buyers are turning eyes to alternative origins in order to find corn supply other than Black Sea. The best alternative option is US PNW considering of voyage time and expense. However, the ports just do not have the capacity to offer, even with very high prices.

South Korea imports about 10 million mts of corn every year (2 million human food industry and 8 million animal feed use). The country normally has a one-month supply of strategic stocks.

If Black Sea disruption keeps going for a month or more, South Korea will face a huge feed grain problem.

In case of wheat, we are free a little from Black Sea. We import human consumption wheat from US, Canada and Australia. We are nowadays importing feed wheat from Australia and India.

Good day,

Vincent

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The fertilizer market thinks US famers are much more likely to get the limited supplies of fertilizer than their competition.

Kansas wheat is rated 25% good or excellent this week, down 1% from the previous week. Texas wheat is rated 8% g or e, down 2%.

We are no longer going into great detail of the weather for the Rondonópolis, Mato Grosso, which is in the heart of Brazil’s most productive soybean and corn producing state. The soybean crop is made, more than half of it has been harvested and the ideal planting window for second crop of corn closed February 20th and planting corn after March 1st in Mato Grosso is like planting corn in Iowa on June 15th. We will continue to report the number of rain days in the ten day forecast on our Rain Days chart below. Keep an eye on that to get a handle on how the soybean harvest may be delayed by rain, but also keep in mind the second crop corn greatly benefits from plentiful rain in the sandy soil. The dry season begins in late May and it is a mad dog rush to get the corn as mature as possible before then.

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Market Data

This morning: Crude oil is at $109.53, up $6.12 The dollar index is at 97.62, up 0.21 July palm oil is at 5,949 MYR, up 9. The contract high was made today at 5,993 MYR. Palm oil owns 36% and soybean oil owns 28% world market share. December cotton is at $102.91, down 12 cents per cwt. The contract high was made February, 10th at $106.36 per cwt. Cotton competes with soybeans and corn for acres. July natural gas is at $4.834, up 0.143. The contract high was $5.121 at February, 2nd. Natural gas is the primary cost to manufacture nitrogen fertilizer. July ULSD is at $2.9619 per gallon, up 0.1045. The contract high was made today at $1.0105. ULSD stands for Ultra Low Sulfur Diesel.

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Rain Days Update

Yesterday, in the dry areas of South America: Santa Maria high temperature 85°F with 0.1 inches rain. Cordoba high temperature 85°F with 0 inches rain. Salto high temperature 85°F with 0 inches rain. Total rainfall and temperatures expected in the next ten days: Santa Maria 2.14 inches, 85 to 94°F. Cordoba 2.15 inches, 78 to 91°F. Salto 1.54 inches, 80 to 91°F. The Western Corn Belt has 2 less rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 1 more rain days than yesterday.

Explanation of Rain Days