Oil Problems: Storms two days ago knocked off-line two of the three crude oil to ship loading platforms in the Eastern Black Sea. One of the platforms will be out of service for probably many months and the other will have to be replaced. The three loading stations typically load 1.2 million barrels a day.
The initial response of oil market “experts” said this loss of oil availability threatens to cause a "global failure". Scary language, but given the world consumes 97.1 million barrels a day, we do not see the loss of 800,000 barrels as a threat to cause a global economic failure.
More of a concern is 500 union members who work at the Chevron refinery in the San Francisco area went on strike yesterday.
By signing a Russian oil embargo into law, Biden has allowed China and India to buy oil at a 30% discount. Meanwhile, Americans have to pay record high gasoline and diesel prices while China and India get it cheap.
Keep in mind Europe has no such embargo.
Brazil removed its ethanol import tariff through the end of the year to try to curb fuel prices. There have been several of the last 20 years that Brazil was the USA’s largest ethanol importer.
Canada Pacific Railroad and the employee union agreed to binding arbitration; operations have resumed.
IHS Markit (formerly Informa) acreage estimates were pretty routine at:
Corn: 91.4 million
Soybeans: 88.6 million
All Wheat: 47.5 million
Cotton: 11.7 million
Ukraine’s corn plantings this spring are estimated to be about 29% less this year than last year, says UkraGroConsult, who also predicts sunflower acreage will be down 48%.
Argentina is exporting soybean meal and soyoil again after raising the export tax rate 2% to 33%.
USDA announced yesterday morning 240,000 mt of old crop soybeans sold to unknown.
AgRural reports Brazil's soybean harvest is 69% complete and first crop (aka summer) corn harvest is 58% complete. All first crop corn stays home for feed and ethanol.
Winter Wheat Conditions as of Sunday evening, before blessed rain fell:
OK: 24% G/E, down 3% from previous week
KS: 25% G/E, up 2%
TX: 6% G/E, unchanged
CO: 19% G/E, up 1%
The reason we expect to be pricing corn earlier than previously expected is because:
Brazil’s second crop corn got planted early & will be more mature when the dry season begins in early June
Rains have been plentiful from the beginning in the primary corn area of Brazil and with the sandy soil there, plenty of rain makes a lot of grain.
It looks like Brazil will have a lot of corn to begin exporting in July.
We also think the 14 million mt of corn sitting in Ukraine awaiting its fate will either be destroyed soon or held hostage at least for the next two months.
About 5.5 million mt of that Ukrainian corn is booked to China and China cannot wait two more months for corn to be shipped. The USA is the only place to buy corn until Brazil comes on line this midsummer.
A corn bull spread is when one buys the nearby futures month and sells a deferred month. A bear spread is when one sells the nearby contract and buys the deferred.
The spread chart below shows the corn market has turned its concern away from running out of old crop corn this summer to not having enough new crop to last through the summer of 2023. It does not mean the high is in the corn market. It just means new crop will be the leader higher.
This morning: Crude oil is at $109.51, up $0.35 The dollar index is at 98.46, down 0.03 July palm oil is at 5,934 MYR, up 87. 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 is at $108.47, up $0.46 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 $5.245, down 0.071. The contract high was made yesterday at $5.330. Natural gas is the primary cost to manufacture nitrogen fertilizer. July ULSD is at $3.2559 per gallon, up 0.0187. The contract high was made March, 9th at $3.7675. ULSD stands for Ultra Low Sulfur Diesel.
Rain Days Update
Yesterday, in the dry areas of South America: Santa Maria high temperature 82°F with 0 inches rain. Cordoba high temperature 69°F with 0 inches rain. Salto high temperature 70°F with 0 inches rain. Total rainfall and temperatures expected in the next ten days: Santa Maria 4.5 inches, 72 to 86°F. Cordoba 0.19 inches, 71 to 85°F. Salto 1.38 inches, 56 to 82°F.
The Western Corn Belt has 5 less rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 1 less rain days than yesterday.