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Trades & Bans, Soybeans Shortage, Options, Export Inspections, Markets & Rain Days Update 5/10/22

Highlights


Some planters in the fields pressured prices Monday, but the bigger news was the $7.38 drop in cash crude oil prices due to the idea the EU would not ban importing Russian crude oil. We had previously mentioned Hungary and Slovakia said they would not support an EU ban on Russian crude oil. The EU charter requires all members to agree to any import ban or export ban. The EU brain trust in Brussels is scurrying to find a loophole or an excuse to allow some EU members to import Russian crude while the remaining members officially ban Russian crude.


If no Russian crude was imported, the EU would have to find another source for crude oil and that would raise the price of oil. The expected import ban is why cash crude oil price was up $6.21 and June futures were up $5.68 last week. Monday, the need for the EU to find a new source of crude oil appeared to be a non-issue and crude oil and natural gas dropped like a rock.


Crude was also hurt by the news that China’s crude oil imports the first four months of 2022 were 4.8% less than a year ago. The bullish news is that despite the four months of crude imports declined, April crude oil imports were actually up 6.6% over a year ago to 10.51 million barrels per day. Now that is bullish!

 

Planting progress for corn and beans was 2% less than expected. Winter Wheat Condition 27% good or excellent, up 2% from last week, but way down from 49% year ago.

AgRurul reduced their estimate of Brazil's corn crop 5 million mt to 112.3 million. USDA is at 116 million mt.


China imported a record high 8.1 million mt of soybeans in April. You may recall a few days ago, we reported Brazil exported fewer beans in April than March for the first time ever.


The Chinese soybean import pace has them buying 95.5 million mt for this marketing year; USDA has them at 91 million.


US soybean exports averaged 8.5 million bushels per week May through August the past five years. Since Brazil has 22 million mt fewer soybeans this year than last, it is highly likely the 8.5 million bushel average will be easily met this year. If so, USDA will have to raise the soybean exports by 150 million bushel, which will reduce the carryout from a 21 day supply on hand August 31st to just a 9 day supply. How many soybeans will be harvested the first nine days of September? The job of the market is to make sure we do not run out of soybeans. It does that with higher prices to reduce consumption.


Yesterday, the Indonesian Navy seized a ship carrying palm oil out of the country. Indonesia, produces 60% of the world’s palm oil, recently prohibited exports of refined palm oil to rein in skyrocketing domestic prices and shortages.


In April, there were 114 ships arriving in Europe loaded with Liquefied Natural Gas (LNG) with 20% more LNG than the March imports.


US natural gas prices last week were the highest since 2008 as strong demand for LNG from Europe and Asia has reduced world inventories. On May 6th, front-month futures for natural gas were trading three times higher than a year ago at almost $9 per million BTUs. Natural gas declined 13% yesterday, following crude... or was crude following natural gas?

 

Wheat Put Discussion

After the Close Monday May 9th.

September 2022 CBOT wheat futures settled at $10.95¾, down 14 cents. All puts should have increased in value since the futures price was lower.

The $10 put gained 4¼ cents while the $9.00 put gained 2 cents.

A short futures position made $700.

The $10 put made $212.50.

The $9 put gained $100.00.

The wheat in the field or bin lost about $700, because cash price = futures plus basis.

The old and new crop corn carryovers are within a few days’ supply for the USA and world as they were one year ago this week.

EarthDaily Agro reported Mato Grosso’s April rainfall was the least for an April in 17 years at 1.2 inches (30 mm), down 70% compared to the average over the last decade.

The number of rain days predicted in the ten day forecast for Rondonópolis the first nine days of May a year ago was one (1). Take a look at the rain day chart below to see how many rain days were predicted this year for the Rondonópolis area the first 9 days of May.

On Thursday, 10 AM Mountain time, the USDA will release its monthly S&D. May is the first month the USDA includes the new crop production and demand. For the year's crop production, they almost always take the March intended planted acres minus corn silage and abandoned acres times trend yield, which, this year, is 49.1 wheat, 181.0 for corn, and 51.5 for beans. What we do not know is what will the USDA do with all the other countries of the world 2022 production and new crop domestic and world demand.

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

 

Export Inspections Update



 

Market Data


This morning: Crude oil is at $102.08, down $1.01 The dollar index is at 103.58, down 0.07 July palm oil is at 6,311 MYR, down 98. 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 $123.59, down $0.04 per cwt. The contract high was made May, 4th at $129.91 per cwt. Cotton competes with soybeans and corn for acres. July natural gas is at $7.189, up 0.083. The contract high was made May, 6th at $9.052. Natural gas is the primary cost to manufacture nitrogen fertilizer. July ULSD is at $3.6234 per gallon, down 0.0305. The contract high was made May, 5th at $3.9282. ULSD stands for Ultra Low Sulfur Diesel.


 

Rain Days Update


The Western Corn Belt has 4 less rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 1 less rain days than yesterday.

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

Explanation of Rain Days


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